Calendar No. 539

103D CONGRESS

2D SESSION S. 2351

[Report No. 103–323]

A BILL

To achieve universal health insurance coverage, and

for other purposes.

AUGUST 2 (legislative day, JULY 20), 1994

Placed on the calendar
II

Calendar No. 539

103D CONGRESS

2D SESSION S. 2351

[Report No. 103–323]

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

IN THE SENATE OF THE UNITED STATES

AUGUST 2 (legislative day, JULY 20), 1994

Mr. MOYNIHAN, from the Committee on Finance, reported the following

original bill; which was read twice and placed on the calendar

A BILL

To achieve universal health insurance coverage, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; PURPOSE; TABLE OF CONTENTS.

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

5 ‘‘Health Security Act’’.

6 (b) UNIVERSAL COVERAGE AS PURPOSE.—It is the

7 purpose of this Act to achieve universal health insurance

8 coverage through—
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1 (1) subsidies for the purchase of health insur2 ance;

3 (2) affordable standardized health insurance;

4 (3) elimination of exclusionary practices by

5 health insurance companies;

6 (4) a permanent National Health Commission

7 which, beginning in 1996, will make recommenda8 tions every two years to the Congress on how to in9 crease the number of people covered by health insur10 ance;

11 (5) reduction of health costs through more open

12 competitive markets and continued advances in med13 ical education and research; and

14 (6) health care provided under the medicare

15 and medicaid programs and health programs of the

16 Department of Defense, Department of Veterans Af17 fairs, and Indian Health Service.

18 (c) TABLE OF CONTENTS.—The table of contents of

19 this Act is as follows:

Sec. 1. Short title; national goal; table of contents.

TITLE I—HEALTH INSURANCE AND DELIVERY SYSTEMS REFORM

Subtitle A—Federal Standards for State Regulatory Programs

Sec. 101. State plan for certification and regulation of health insurance and delivery systems.

Subtitle B—Coordination With Other Provisions of Law

Sec. 111. McCarran-Ferguson reform.

Sec. 112. Office of Rural Health Policy.

Sec. 113. Amendments to the Employee Retirement Income Security Act of

1974.
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TITLE II—COVERAGE

Sec. 201. Coverage.

TITLE III—PREMIUM AND COST-SHARING ASSISTANCE

Sec. 301. Premium and cost-sharing assistance.

TITLE IV—ADMINISTRATIVE SIMPLIFICATION AND PRIVACY

Sec. 401. Administrative simplification.

Sec. 402. Privacy of health information.

TITLE V—MALPRACTICE AND FRAUD

Subtitle A—Federal Tort Reform

Sec. 501. Federal tort reform.

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

Affecting Federal Outlay Programs

PART I—IMPROVED ENFORCEMENT

Sec. 511. Health care fraud and abuse affecting Federal outlay programs.

Sec. 512. Definition of Federal health care offense.

Sec. 513. Use of funds by inspector general.

Sec. 514. Rewards for information leading to prosecution and conviction.

PART II—CIVIL PENALTIES AND RIGHTS OF ACTION

Sec. 521. Civil monetary penalties.

Sec. 522. Permitting parties to bring actions on own behalf.

Sec. 523. Exclusion from program participation.

PART III—AMENDMENTS TO CRIMINAL LAW

Sec. 531. Health care fraud.

Sec. 532. Theft or embezzlement.

Sec. 533. False statements.

Sec. 534. Bribery and graft.

Sec. 535. Injunctive relief relating to health care offenses.

Sec. 536. Grand jury disclosure.

Sec. 537. Forfeitures for violations of fraud statutes.

PART IV—AMENDMENTS TO CIVIL FALSE CLAIMS ACT

Sec. 541. Amendments to Civil False Claims Act.

PART V—EFFECTIVE DATE

Sec. 551. Effective date.

TITLE VI—MEDICARE, MEDICAL EDUCATION, AND MEDICAID

Sec. 600. References to Social Security Act.

Subtitle A—Medicare

PART I—RISK CONTRACTING ENTITIES
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Sec. 601. Individual election to remain in certain health plans.

Sec. 602. Improvements of risk contracts.

PART II—PROVISIONS RELATED TO PART A

Sec. 611. Inpatient hospital services update for PPS hospitals.

Sec. 612. Reduction in payments for capital-related costs for inpatient hospital

services.

Sec. 613. Reductions in disproportionate share payments.

Sec. 614. Revised payment methodology for rehabilitation and long-term care

hospitals.

Sec. 615. Moratorium on designation of new long-term hospitals.

Sec. 616. Extension of freeze on updates to routine service cost limits for

skilled nursing facilities.

Sec. 617. Payments for sole community hospitals with teaching programs and

multihospital campuses.

Sec. 618. Medicare-dependent, small rural hospitals.

Sec. 619. Provisions relating to rural health transition grant program.

Sec. 620. Limited service hospital program.

Sec. 621. Termination of indirect medical education payments.

Sec. 622. Subacute care study.

PART III—PROVISIONS RELATING TO PART B

Sec. 631. Updates for physicians’ services.

Sec. 632. Substitution of real GDP to adjust for volume and intensity; repeal

of restriction on maximum reduction permitted in default update.

Sec. 633. Payment for physicians’ services relating to inpatient stays in certain

hospitals.

Sec. 634. Changes in underserved area bonus payments.

Sec. 635. Development and implementation of resource-based methodology for

practice expenses.

Sec. 636. Demonstration projects for medicare State-based performance standard rate of increase.

Sec. 637. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 638. Eye or eye and ear hospitals.

Sec. 639. Imposition of coinsurance on laboratory services.

Sec. 640. Application of competitive acquisition process for part B items and

services.

Sec. 641. Application of competitive acquisition procedures for laboratory services.

Sec. 642. Expanded coverage for physician assistants and nurse practitioners.

Sec. 643. General part B premium.

PART IV—PROVISIONS RELATED TO PARTS A AND B

Sec. 651. Medicare secondary payer changes.

Sec. 652. Modification to physician referral exception.

Sec. 653. Expansion of centers of excellence.

Sec. 654. Medicare select.

Sec. 655. Medigap.

Sec. 656. Reduction in routine cost limits for home health services.

Sec. 657. Termination of graduate medical education payments.

Sec. 658. Extension of social health maintenance organization demonstrations.
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Sec. 659. Study on medicare spending.

Sec. 660. Streamlined processing systems.

Subtitle B—Medical Education

Sec. 665. Medical education.

Subtitle C—Home and Community-Based Services

Sec. 667. State programs for home and community-based services for individuals with disabilities.

Subtitle D—Medicaid Program

PART I—INTEGRATION OF CERTAIN MEDICAID ELIGIBLES INTO REFORMED

HEALTH CARE SYSTEM

Sec. 671. Limiting coverage under medicaid of items and services covered under

standard benefit package.

PART II—COORDINATED CARE SERVICES FOR DISABLED MEDICAID

ELIGIBLES

Sec. 672. Coordinated care services for disabled medicaid eligibles.

PART III—PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

Sec. 673. Replacement of DSH payment provisions with provisions relating to

payments to hospitals serving vulnerable populations.

PART IV—MEDICAID LONG-TERM CARE PROVISIONS

Sec. 674. Payments for home or community-based care, personal care services,

and frail elderly services.

Sec. 675. Increased resource disregard for individuals receiving certain services.

Sec. 676. Frail elderly demonstration project waivers.

Sec. 677. Elimination of requirement of prior institutionalization with respect

to habilitation services furnished under a waiver for home or

community-based services.

Sec. 678. Elimination of rule regarding availability of beds in certain institutions.

PART V—MISCELLANEOUS

Sec. 679. Medicaid coverage of all certified nurse practitioner and clinical nurse

specialist services.

TITLE VII—REVENUE PROVISIONS

Sec. 700. Amendment of 1986 Code.

Subtitle A—Financing Provisions

PART I—INCREASE IN TAX ON TOBACCO PRODUCTS

Sec. 701. Increase in excise taxes on tobacco products.

Sec. 702. Modifications of certain tobacco tax provisions.

Sec. 703. Imposition of excise tax on manufacture or importation of roll-yourown tobacco.
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PART II—HEALTH RELATED ASSESSMENTS

Sec. 705. Assessments on insured and self-insured health plans.

Sec. 706. Tax on high cost health plans.

PART III—RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

Sec. 711. Recapture of certain health care subsidies received by high-income individuals.

PART IV—OTHER PROVISIONS

Sec. 715. Increase in tax on certain hollow point and large caliber handgun ammunition.

Sec. 716. Modification to self-employment tax treatment of certain S corporation shareholders and partners.

Sec. 717. 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

Sec. 721. Tax treatment of voluntary employer health care contributions.

Sec. 722. Elimination of exclusion of health benefits provided through a flexible

spending arrangement.

Sec. 723. 2-year extension of deduction for health insurance costs of self-employed individuals.

Sec. 724. Limitation on prepayment of medical insurance premiums.

Subtitle C—Deduction for Individuals Purchasing Own Health Insurance

Sec. 731. Deduction for health insurance costs of individuals.

Subtitle D—Exempt Organizations

PART I—HEALTH CARE ORGANIZATIONS

Sec. 741. Qualification and disclosure requirements for nonprofit health care

organizations.

Sec. 742. Excise taxes for private inurement by tax-exempt health care organizations.

Sec. 743. Treatment of health maintenance organizations, parent organizations,

and health insurance purchasing cooperatives.

Sec. 744. Tax treatment of taxable organizations providing health insurance

and other prepaid health care services.

Sec. 745. Organizations subject to section 833.

Sec. 746. Tax exemption for high-risk insurance pools.

Part II—Tax Treatment of Section 501(c)(3) Bonds

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

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

Sec. 751. Qualified long-term care services treated as medical care.

Sec. 752. Treatment of long-term care insurance.

Sec. 753. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 754. Tax treatment of companies issuing qualified accelerated death benefit riders.
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Subtitle F—Health Care Trust Funds

Sec. 761. Establishment of health care trust funds.

Subtitle G—Other Revenue Provisions

PART I—EMPLOYMENT STATUS PROVISIONS

Sec. 771. Employment status proposal required from Department of the Treasury.

Sec. 772. Increase in services reporting penalties.

PART II—TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

Sec. 775. Nonrefundable credit for certain primary health services providers.

Sec. 776. Expensing of medical equipment.

PART III—MISCELLANEOUS PROVISIONS

Sec. 781. Post-retirement medical and life insurance reserves.

Sec. 782. Coordination with health care continuation provisions.

Sec. 783. Credit for cost of personal assistance services required by employed

individuals.

Sec. 784. Disclosure of return information for administration of certain programs under the Health Security Act.

Sec. 785. Special rule for deferred compensation plans of group medical practices.

Subtitle H—Ensuring Health Care Financing

Sec. 791. Ensuring health care financing.

1 TITLE I—HEALTH INSURANCE

2 AND DELIVERY SYSTEMS RE3 FORM

4 Subtitle A—Federal Standards for

5 State Regulatory Programs

6 SEC. 101. STATE PLAN FOR CERTIFICATION AND REGULA7 TION OF HEALTH INSURANCE AND DELIVERY

8 SYSTEMS.

9 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

10 1902(a) of the Social Security Act (42 U.S.C. 1396a(a))

11 is amended by striking ‘‘and’’ at the end of paragraph

12 (61), by striking the period at the end of paragraph (62)
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1 and inserting ‘‘; and’’, and by inserting after paragraph

2 (62) the following new paragraph:

3 ‘‘(63) provide that the State is a participating

4 State under title XXI.’’

5 (b) PARTICIPATING STATE PLAN FOR CERTIFI6 CATION AND REGULATION OF HEALTH INSURANCE AND

7 DELIVERY SYSTEMS.—The Social Security Act is amend8 ed by adding at the end the following new title:

9 ‘‘TITLE XXI—STATE PLAN FOR

10 CERTIFICATION AND REGU11 LATION OF HEALTH INSUR12 ANCE AND DELIVERY SYS13 TEMS

‘‘TABLE OF CONTENTS

‘‘Subtitle A—Participating State Program

‘‘PART I—GENERAL RESPONSIBILITIES

‘‘SUBPART A—ACCESS TO COVERAGE

‘‘Sec. 21001. Establishment of participating State programs.

‘‘Sec. 21002. Access to standardized health care coverage.

‘‘Sec. 21003. Other State program responsibilities.

‘‘Sec. 21004. General definitions relating to health plans.

‘‘SUBPART B—ACCREDITATION, CERTIFICATION, ENFORCEMENT, AND

INFORMATION

‘‘Sec. 21011. Accreditation and certification of health plans and long-term care

policies.

‘‘Sec. 21012. Certification enforcement.

‘‘Sec. 21013. Consumer information program.

‘‘SUBPART C—OTHER STATE RESPONSIBILITIES

‘‘Sec. 21021. Establishment of community rating areas.

‘‘Sec. 21022. Designation of health plan service areas.

‘‘Sec. 21023. Reinsurance and risk adjustment program.

‘‘Sec. 21024. Specification of annual general enrollment period.

‘‘Sec. 21025. Premium approval process for long-term care policies.

‘‘Sec. 21026. Requirements relating to possessions of the United States.
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‘‘PART II—REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

‘‘Sec. 21031. Single-payer system described.

‘‘Sec. 21032. General requirements for single-payer systems.

‘‘Sec. 21033. Special rules for States operating Statewide single-payer system.

‘‘Sec. 21034. Special rules for community rating area-specific single-payer systems.

‘‘PART III—TREATMENT OF CERTAIN STATE LAWS

‘‘Sec. 21041. Preemption of State law restrictions on network plans.

‘‘Sec. 21042. State law restrictions on health professional licensure.

‘‘Sec. 21043. Preemption from State benefit mandates.

‘‘Sec. 21044. Preemption of State law regulating utilization management and

review.

‘‘PART IV—FEDERAL RESPONSIBILITIES

‘‘Sec. 21051. Federal role with respect to multistate health plans.

‘‘Sec. 21052. Establishment of residency rules.

‘‘Sec. 21053. Workplace wellness program.

‘‘Sec. 21054. Employee leasing rules.

‘‘Sec. 21055. Approval of private accreditation programs.

‘‘PART V—DEFINITIONS AND RULES

‘‘Sec. 21100. Definitions and rules of general application.

‘‘Subtitle B—Standards for Reform

‘‘PART I—ESTABLISHMENT AND APPLICATION OF STANDARDS

‘‘Sec. 21101. Certified standard health plans.

‘‘Sec. 21102. Certified supplemental health benefits plans.

‘‘Sec. 21103. Certified long-term care policies.

‘‘Sec. 21104. General rules.

‘‘PART II—STANDARDS APPLICABLE TO STANDARD HEALTH PLANS

‘‘SUBPART A—INSURANCE STANDARDS

‘‘Sec. 21111. Guaranteed issue and renewal.

‘‘Sec. 21112. Enrollment.

‘‘Sec. 21113. Rating limitations for community-rated market.

‘‘Sec. 21114. Rating practices and payment of premiums.

‘‘Sec. 21115. Nondiscrimination based on health status.

‘‘Sec. 21116. Benefits offered.

‘‘SUBPART B—DELIVERY SYSTEM STANDARDS

‘‘Sec. 21121. Reinsurance and risk adjustment.

‘‘Sec. 21122. Capital requirements.

‘‘Sec. 21123. Collection and provision of standardized information.

‘‘Sec. 21124. Quality improvement and assurance.

‘‘Sec. 21125. Patient protections and provider selection.

‘‘Sec. 21126. Alternative dispute resolution procedures relating to malpractice

claims.

‘‘Sec. 21127. Access to essential community providers.

‘‘Sec. 21128. Health plan service area capacity.
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‘‘Sec. 21129. Access to specialized services.

‘‘Sec. 21130. Participating physician program.

‘‘Sec. 21131. Out-of-area coverage.

‘‘PART III—STANDARDS APPLICABLE TO SUPPLEMENTAL HEALTH BENEFITS

PLANS

‘‘Sec. 21141. Imposition of requirements on supplemental health benefits plans.

‘‘Sec. 21142. Standards for supplemental services plans.

‘‘Sec. 21143. Standards for cost-sharing plans.

‘‘Sec. 21144. Prohibition on offering of multiple packages to individual.

‘‘PART IV—STANDARDS APPLICABLE TO LONG-TERM CARE POLICIES

‘‘Sec. 21151. Regulation of sales practices.

‘‘Sec. 21152. Additional responsibilities for carriers.

‘‘Sec. 21153. Renewal standards for issuance, and basis for cancellation of policies.

‘‘Sec. 21154. Benefit standards.

‘‘Sec. 21155. Nonforfeiture.

‘‘Sec. 21156. Limit of period of contestability and right to return.

‘‘Sec. 21157. Civil money penalty and private actions.

‘‘Sec. 21158. Long-term care policy defined.

‘‘Subtitle C—Benefits and Cost-Sharing

‘‘PART I—STANDARD BENEFITS PACKAGES

‘‘Sec. 21201. General description of standard benefits packages.

‘‘Sec. 21202. Description of categories of items and services.

‘‘Sec. 21203. Cost-sharing.

‘‘PART II—NATIONAL HEALTH BENEFITS BOARD

‘‘Sec. 21211. Creation of National Health Benefits Board; membership.

‘‘Sec. 21212. Qualifications of Board members.

‘‘Sec. 21213. General duties and responsibilities.

‘‘Sec. 21214. Powers.

‘‘Sec. 21215. Funding.

‘‘Sec. 21216. Applicability of Federal Advisory Committee Act.

‘‘Sec. 21217. Congressional consideration of Board recommendations.

‘‘PART III—PROVISIONS RELATING TO ABORTION AND RELIGIOUS BELIEFS

‘‘Sec. 21221. Regulation of abortion by the States.

‘‘Sec. 21222. No requirement to create or maintain abortion clinics and providers.

‘‘Sec. 21223. Provisions relating to religious belief or moral conviction.

‘‘Subtitle D—Expanded Access to Health Plans

‘‘PART I—ACCESS THROUGH EMPLOYERS

‘‘Sec. 21401. General employer responsibilities.

‘‘Sec. 21402. Maintenance of effort for coverage of children.

‘‘Sec. 21403. Development of large employer purchasing groups.

‘‘Sec. 21404. Enforcement.
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‘‘PART II—ACCESS THROUGH HEALTH INSURANCE PURCHASING

COOPERATIVES

‘‘SUBPART A—FUNCTIONS OF PURCHASING COOPERATIVES

‘‘Sec. 21411. Enrollment of community-rated individuals in certified standard

health plans.

‘‘Sec. 21412. Duties of purchasing cooperatives.

‘‘Sec. 21413. Agreements with certified standard health plans.

‘‘Sec. 21414. Provision of information.

‘‘Sec. 21415. Administrative fees.

‘‘SUBPART B—ORGANIZATION AND OPERATION OF PURCHASING COOPERATIVES

‘‘Sec. 21417. Establishment.

‘‘Sec. 21418. Board of directors.

‘‘Sec. 21419. Prohibition against self-dealing and conflicts of interest.

‘‘Sec. 21420. Coordination among purchasing cooperatives.

‘‘PART III—ACCESS THROUGH ASSOCIATION PLANS

‘‘SUBPART A—QUALIFIED ASSOCIATION PLANS

‘‘Sec. 21431. Treatment of qualified association plans.

‘‘Sec. 21432. Modifications of standards applicable to qualified association

plans.

‘‘Sec. 21433. Qualified association plan defined.

‘‘SUBPART B—SPECIAL RULE FOR CHURCH AND MULTIEMPLOYER PLANS

‘‘Sec. 21435. Special rule for church and multiemployer plans.

‘‘Subtitle E—Implementation of Consumer Information Programs and Quality

Research

‘‘Sec. 21501. Consumer information programs.

‘‘Sec. 21502. Health services and quality improvement research.

‘‘Sec. 21503. Implementing quality improvement research.

‘‘Sec. 21504. Annual reports.

‘‘Subtitle F—Programs to Improve Access To Underserved Areas

‘‘PART I—GRANTS FOR THE DEVELOPMENT AND OPERATION OF COMMUNITY

HEALTH GROUPS AND FOR CAPITAL ASSISTANCE

‘‘Sec. 21601. Designation of rural and urban underserved areas.

‘‘Sec. 21602. Community health group; certified community health plan; community health network; eligible entities; isolated rural facilities.

‘‘SUBPART A—GRANTS FOR THE DEVELOPMENT AND OPERATION OF

COMMUNITY HEALTH GROUPS

‘‘Sec. 21611. Grants and contracts for development of plans and networks.

‘‘Sec. 21612. Grants and contracts for operation of plans and networks.

‘‘SUBPART B—CAPITAL ASSISTANCE

‘‘Sec. 21613. Loans, loan guarantees, and grants for capital investment.
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‘‘PART II—DEMONSTRATION PROJECTS TO PROMOTE TELEMEDICINE AND

OTHER USES OF THE TELECOMMUNICATIONS NETWORK IN RURAL AREAS

‘‘Sec. 21621. Demonstration projects to promote telemedicine and other uses of

the network.

‘‘Sec. 21622. Federal interagency task force.

‘‘PART III—INSUFFICIENT AMOUNTS IN THE TRUST FUND

‘‘Sec. 21631. Insufficient amounts in the trust fund account.

‘‘Subtitle G—Automobile Insurance Coordination

‘‘Sec. 21701. Definitions.

‘‘PART I—REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE MEDICAL

SERVICES

‘‘Sec. 21711. Provision of automobile insurance medical services through health

plans.

‘‘Sec. 21712. Payment for automobile insurance medical services.

‘‘PART II—ADMINISTRATION

‘‘Sec. 21721. Payment facilitation.

‘‘Subtitle H—Remedies and Enforcement

‘‘PART I—REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED

INDIVIDUALS

‘‘SUBPART A—GENERAL RULES

‘‘Sec. 21801. Health plan claims procedure.

‘‘Sec. 21802. Review in area complaint review offices of grievances based on

acts or practices by health plans.

‘‘Sec. 21803. Initial proceedings in complaint review offices.

‘‘Sec. 21804. Hearings before hearing officers in complaint review offices.

‘‘Sec. 21805. Review by State Health Plan Review Board.

‘‘Sec. 21806. Civil money penalties.

‘‘SUBPART B—EARLY RESOLUTION PROGRAMS

‘‘Sec. 21811. Establishment of Early Resolution Programs in complaint review

offices.

‘‘Sec. 21812. Initiation of participation in mediation proceedings.

‘‘Sec. 21813. Mediation proceedings.

‘‘Sec. 21814. Legal effect of participation in mediation proceedings.

‘‘Sec. 21815. Enforcement of settlement agreements.

‘‘SUBPART C—FUNDING

‘‘Sec. 21816. Availability of trust fund amounts.

‘‘PART II—ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

‘‘Sec. 21821. Civil enforcement.

‘‘Sec. 21822. Facial constitutional challenges.

‘‘Sec. 21823. Treatment of plans as parties in civil actions.

‘‘Sec. 21824. General nonpreemption of rights and remedies.
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‘‘Sec. 21825. Nondiscrimination in federally assisted programs.

1 ‘‘Subtitle A—Participating State

2 Program

3 ‘‘PART I—GENERAL RESPONSIBILITIES

4 ‘‘Subpart A—Access to Coverage

5 ‘‘SEC. 21001. ESTABLISHMENT OF PARTICIPATING STATE

6 PROGRAMS.

7 ‘‘A State shall be a participating State for purposes

8 of this title if such State establishes an accreditation, cer9 tification, enforcement, and information program (in this

10 title referred to as a ‘State program’) to carry out partici11 pating State responsibilities specified in this title.

12 ‘‘SEC. 21002. ACCESS TO STANDARDIZED HEALTH CARE

13 COVERAGE.

14 ‘‘(a) ACCESS TO STANDARDIZED COVERAGE.—

15 ‘‘(1) IN GENERAL.—A State program shall re16 quire that each health plan (whether insured or self17 insured) or long-term care policy issued, sold, of18 fered for sale, or operated in the State shall be cer19 tified by the appropriate certifying authority as one

20 of the following:

21 ‘‘(A) A certified standard health plan.

22 ‘‘(B) A certified supplemental health bene23 fits plan.

24 ‘‘(C) A certified long-term care policy.

25 ‘‘(D) A certified nonstandard health plan.
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1 ‘‘(2) FEDERAL CERTIFICATION OF MULTISTATE

2 SELF-INSURED PLANS.—For Federal certification of

3 multistate self-insured health plans, see section

4 21051.

5 ‘‘(3) TAX QUALIFICATION.—For favorable Fed6 eral income tax treatment which is available only to

7 certified health plans, see sections 213(f) and 4521

8 of the Internal Revenue Code of 1986.

9 ‘‘(b) ACCESS TO AFFORDABLE COVERAGE.—A State

10 program shall require the following:

11 ‘‘(1) COMMUNITY RATING.—

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

13 subparagraph (B), all health plans shall be

14 community-rated health plans which cover only

15 community-rated individuals.

16 ‘‘(B) EXPERIENCE-RATED HEALTH

17 PLANS.—Subparagraph (A) shall not apply to

18 any health plan which—

19 ‘‘(i) is a self-insured health plan of an

20 experience-rated employer, or

21 ‘‘(ii) is an insured health plan which

22 is experience-rated,

23 but any such plan may cover only experience24 rated individuals.
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1 ‘‘(C) RESTRICTION ON SELF-INSURED

2 HEALTH PLANS.—A self-insured health plan

3 may be established or maintained only by an ex4 perience-rated employer.

5 ‘‘(2) SUBSIDIZED COVERAGE.—Individuals shall

6 be entitled to such premium and cost-sharing assist7 ance as is provided under the program described in

8 part B of title XIX.

9 ‘‘(c) ACCESS THROUGH EMPLOYERS AND PURCHAS10 ING COOPERATIVES.—

11 ‘‘(1) EMPLOYERS.—

12 ‘‘(A) IN GENERAL.—Subject to the re13 quirements of part I of subtitle D, a State pro14 gram shall require each employer—

15 ‘‘(i) to make available to each em16 ployee of the employer the opportunity to

17 enroll through the employer in one of at

18 least three certified standard health plans

19 which provide the standard benefits pack20 age established under subtitle C, including,

21 if available, a fee-for-service plan and a

22 health plan with a point-of-service option,

23 and

24 ‘‘(ii) to provide, upon request, payroll

25 withholding of the employee’s premiums.
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1 ‘‘(B) SPECIAL RULES.—

2 ‘‘(i) PURCHASING COOPERATIVE.—An

3 employer other than an experience-rated

4 employer may meet the requirements of

5 subparagraph (A)(i) through a purchasing

6 cooperative.

7 ‘‘(ii) EXPERIENCE-RATED EM8 PLOYER.—An experience-rated employer

9 shall meet the requirements of subpara10 graph (A)(i) only through offering self-in11 sured or experience-rated health plans.

12 ‘‘(2) PURCHASING COOPERATIVES.—A partici13 pating State shall meet the requirements of part II

14 of subtitle D with respect to the establishment or

15 sponsorship of purchasing cooperatives.

16 ‘‘(d) ACCESS TO ENROLLMENT OPTIONS.—A State

17 program shall require that all certified standard and non18 standard health plans and certified supplemental health

19 benefits plans offer the classes of enrollment described in

20 section 21113(b)(2)(B)(ii).

21 ‘‘SEC. 21003. OTHER STATE PROGRAM RESPONSIBILITIES.

22 ‘‘(a) SUMMARY OF RESPONSIBILITIES.—The partici23 pating State responsibilities under this title include—

24 ‘‘(1) the accreditation and certification of

25 standard health plans and nonstandard health plans,
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1 including the enforcement of the insurance and de2 livery system reform standards for such plans under

3 part II of subtitle B;

4 ‘‘(2) the accreditation and certification of sup5 plemental health benefits plans, including the en6 forcement of standards for such plans under part III

7 of subtitle B;

8 ‘‘(3) the accreditation and certification of long9 term care policies, including the enforcement of

10 standards for such policies under part IV of subtitle

11 B;

12 ‘‘(4) providing for the collection and provision

13 of consumer information regarding health plans as

14 specified under section 21013;

15 ‘‘(5) the establishment of community rating

16 areas under section 21021 and State service areas

17 under section 21022;

18 ‘‘(6) providing under section 21023 for—

19 ‘‘(A) reinsurance pools,

20 ‘‘(B) a risk adjustment program, and

21 ‘‘(C) a cost-sharing adjustment program;

22 ‘‘(7) the specification of an annual general en23 rollment period under section 21024;

24 ‘‘(8) providing for a premium approval process

25 for long-term care policies under section 21025;
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1 ‘‘(9) providing for the certification of workplace

2 wellness programs in accordance with rules estab3 lished by the Secretary under section 21053, includ4 ing the receipt of employer self-certification forms,

5 enforcement of compliance, and dispute resolution;

6 ‘‘(10) enforcing employer responsibilities under

7 part I of subtitle D;

8 ‘‘(11) the oversight of purchasing cooperatives

9 under part II of subtitle D;

10 ‘‘(12) supporting the program quality assur11 ances under subtitle E;

12 ‘‘(13) supporting the development of community

13 health networks and plans to the extent required

14 under subtitle F;

15 ‘‘(14) providing coordination between health

16 plans and automobile medical liability policies under

17 subtitle G;

18 ‘‘(15) the development of program remedies and

19 enforcement described under subtitle H; and

20 ‘‘(16) conforming State laws and procedures to

21 the rules regarding fraud and medical malpractice

22 under title XI.

23 ‘‘(b) DEADLINES.—

24 ‘‘(1) IN GENERAL.—Except as provided in para25 graphs (2) and (3), each participating State shall es-
19

•S 2351 PCS

1 tablish a State program under this section by not

2 later than January 1, 1996.

3 ‘‘(2) SUPPLEMENTAL INSURANCE.—Each par4 ticipating State shall establish such State program

5 with regard to supplemental health benefits plans by

6 not later than January 1, 1997.

7 ‘‘(3) LONG-TERM CARE INSURANCE.—Each par8 ticipating State shall establish such State program

9 with regard to long-term care policies by not later

10 than April 1, 1997.

11 ‘‘(c) SECRETARIAL APPROVAL, PERIODIC REVIEW,

12 AND FUNDING OF STATE PROGRAMS.—

13 ‘‘(1) IN GENERAL.—The Secretary—

14 ‘‘(A) shall initially determine and approve

15 the compliance of State programs with the Fed16 eral guidelines under this title; and

17 ‘‘(B) shall periodically review such State

18 programs to determine if such programs con19 tinue to comply with such guidelines.

20 ‘‘(2) REPORTING REQUIREMENTS OF STATES.—

21 For purposes of paragraph (1), each participating

22 State shall submit to the Secretary, at intervals es23 tablished by the Secretary, a report on the compli24 ance of the State with the Federal guidelines under

25 this title.
20

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1 ‘‘(3) FUNDING.—

2 ‘‘(A) AVAILABILITY OF TRUST FUND

3 AMOUNTS.—There shall be available to the Sec4 retary, from the Health Security Trust Fund

5 established under section 9551 of the Internal

6 Revenue Code of 1986, $100,000,000 in fiscal

7 1995 and $300,000,000 in each of the fiscal

8 years 1996 through 2004 to support participat9 ing States that have submitted applications in

10 accordance with subparagraph (C) to develop

11 State programs. The Secretary shall develop a

12 formula for determining the appropriate award13 ing of funds to participating States submitting

14 such applications.

15 ‘‘(B) PAYMENTS FOR INDEPENDENT RE16 VIEW.—The Secretary shall develop a supple17 mental payment schedule for participating

18 States that establish independent review com19 mittees to provide recommendations concerning

20 health plans that fail certification.

21 ‘‘(C) APPLICATION.—For purposes of sub22 paragraph (A), an application is in accordance

23 with this subparagraph if the applicant submits

24 the application to the Secretary at such time, in

25 such manner, and containing such information
21

•S 2351 PCS

1 and assurances as the Secretary may reason2 ably require.

3 ‘‘SEC. 21004. GENERAL DEFINITIONS RELATING TO HEALTH

4 PLANS.

5 ‘‘(a) HEALTH PLAN.—For purposes of this title—

6 ‘‘(1) IN GENERAL.—The term ‘health plan’

7 means any plan or arrangement which provides, or

8 pays the cost of, health benefits. Such term does not

9 include the following, or any combination thereof:

10 ‘‘(A) Coverage only for accidental death or

11 dismemberment.

12 ‘‘(B) Coverage providing wages or pay13 ments in lieu of wages for any period during

14 which the employee is absent from work on ac15 count of sickness or injury.

16 ‘‘(C) A medicare supplemental policy (as

17 defined in section 1882(g)(1)).

18 ‘‘(D) Coverage issued as a supplement to

19 liability insurance.

20 ‘‘(E) Worker’s compensation or similar in21 surance.

22 ‘‘(F) Automobile medical-payment insur23 ance.

24 ‘‘(G) A long-term care policy, including a

25 nursing home fixed indemnity policy (unless the
22

•S 2351 PCS

1 Secretary determines that such a policy pro2 vides sufficiently comprehensive coverage of a

3 benefit so that it should be treated as a health

4 plan).

5 ‘‘(H) An equivalent health care program.

6 ‘‘(I) Such other plan or arrangement as

7 the Secretary determines is not a health plan.

8 Such term includes any plan or arrangement not de9 scribed in any preceding subparagraph which pro10 vides for benefit payments, on a periodic basis, for

11 a specified disease or illness or period of hospitaliza12 tion without regard to the costs incurred or services

13 rendered during the period to which the payments

14 relate.

15 ‘‘(2) INSURED HEALTH PLAN.—

16 ‘‘(A) IN GENERAL.—The term ‘insured

17 health plan’ means any health plan which is a

18 hospital or medical service policy or certificate,

19 hospital or medical service plan contract, or

20 health maintenance organization group contract

21 offered by an insurer.

22 ‘‘(B) INSURER.—The term ‘insurer’

23 means—

24 ‘‘(i) a licensed insurance company,
23

•S 2351 PCS

1 ‘‘(ii) a prepaid hospital or medical

2 service plan,

3 ‘‘(iii) a health maintenance organiza4 tion, or

5 ‘‘(iv) any other similar entity,

6 which is engaged in the business of providing a

7 plan of health insurance or health benefits or

8 services.

9 ‘‘(3) SELF-INSURED HEALTH PLAN.—The term

10 ‘self-insured health plan’ means an employee welfare

11 benefit plan, church plan, government plan, or other

12 arrangement which—

13 ‘‘(A) provides health benefits funded in a

14 manner other than through the purchase of one

15 or more insured health plans, but

16 ‘‘(B) does not include any coverage or in17 surance described in subparagraphs (A)

18 through (I) of paragraph (1).

19 ‘‘(b) STANDARD HEALTH PLAN.—For purposes of

20 this title, the term ‘standard health plan’ means a health

21 plan which provides for the standard benefits package or

22 the alternative standard benefits package established

23 under subtitle C.

24 ‘‘(c) SUPPLEMENTAL HEALTH BENEFITS PLAN.—

25 For purposes of this title, the term ‘supplemental health
24

•S 2351 PCS

1 benefits plan’ means an insured or self-insured health plan

2 which provides health benefits which consist of supple3 mental services or cost-sharing described in part IV of

4 subtitle B. Such term does not include a plan which pro5 vides for benefit payments, on a periodic basis, for a speci6 fied disease or illness or period of hospitalization without

7 regard to the costs incurred or services rendered during

8 the period to which the payments relate.

9 ‘‘(d) LONG-TERM CARE POLICY.—For purposes of

10 this title, the term ‘long-term care policy’ has the meaning

11 given such term by section 21158.

12 ‘‘(e) TERMS AND RULES RELATING TO COMMUNITY

13 AND EXPERIENCE RATING.—For purposes of this title—

14 ‘‘(1) COMMUNITY-RATED HEALTH PLAN.—The

15 term ‘community-rated health plan’ means a health

16 plan which meets the requirements of section 21113.

17 ‘‘(2) COMMUNITY-RATED INDIVIDUAL.—The

18 term ‘community-rated individual’ means an individ19 ual—

20 ‘‘(A) who is not an experience-rated indi21 vidual, or

22 ‘‘(B) who is an experience-rated individual

23 (determined without regard to this subpara24 graph) who is not a full-time employee of an ex25 perience-rated employer and who does not enroll
25

•S 2351 PCS

1 in a certified standard health plan offered by

2 the employer.

3 ‘‘(3) EXPERIENCE-RATED INDIVIDUAL.—The

4 term ‘experience-rated individual’ means an individ5 ual who is an employee of an experience-rated em6 ployer.

7 ‘‘(4) EXPERIENCE-RATED EMPLOYER.—

8 ‘‘(A) IN GENERAL.—The term ‘experience9 rated employer’ means, with respect to any cal10 endar year, any employer if, on each of 20 days

11 during the preceding calendar year (each day

12 being in a different week), such employer (or

13 any predecessor) employed 100 or more full14 time employees for some portion of the day.

15 ‘‘(B) SPECIAL RULE FOR LEASING BUSI16 NESSES.—In the case of an employer the pri17 mary trade or business of which is employee

18 leasing—

19 ‘‘(i) all of the employees which such

20 employer leases to other employers shall be

21 treated as community-rated individuals un22 less treated as employees of an experience23 rated employer other than the leasing

24 trade or business, and
26

•S 2351 PCS

1 ‘‘(ii) this title shall be applied sepa2 rately with respect to its other employees.

3 ‘‘(5) FULL-TIME EMPLOYEE.—The term ‘full4 time employee’ means, with respect to any month,

5 an employee who normally performs at least 24

6 hours of service per week for an employer in the

7 month (not including the month which includes the

8 hiring date of such employee).

9 ‘‘(6) SPECIAL RULE FOR SPOUSES AND DE10 PENDENTS.—If any individual is offered coverage

11 under a health plan as the spouse or a dependent of

12 a primary enrollee of such plan, such individual shall

13 have the status of such enrollee unless such individ14 ual is eligible to elect other coverage and so elects.

15 ‘‘Subpart B—Accreditation, Certification,

16 Enforcement, and Information

17 ‘‘SEC. 21011. ACCREDITATION AND CERTIFICATION OF

18 HEALTH PLANS AND LONG-TERM CARE POLI19 CIES.

20 ‘‘(a) CERTIFIED HEALTH PLANS.—

21 ‘‘(1) IN GENERAL.—Each State program shall

22 provide for the accreditation and certification of

23 health plans as certified standard health plans, cer24 tified nonstandard health plans, and certified supple25 mental health benefits plans.
27

•S 2351 PCS

1 ‘‘(2) CERTIFIED STANDARD HEALTH PLAN.—

2 For purposes of this title, the term ‘certified stand3 ard health plan’ means a health plan which—

4 ‘‘(A) provides for the standard benefits

5 package or the alternative standard benefits

6 package established under subtitle C, and

7 ‘‘(B) is certified by the appropriate certify8 ing authority as meeting the other applicable

9 requirements of this title.

10 A standard health plan shall not fail to be treated

11 as a certified standard health plan if such plan of12 fers a medicare-eligible benefits package to medicare

13 beneficiaries under a medicare risk contract entered

14 into with the Secretary under section 1876.

15 ‘‘(3) CERTIFIED NONSTANDARD HEALTH

16 PLAN.—For purposes of this title, the term ‘certified

17 nonstandard health plan’ means a health plan

18 which—

19 ‘‘(A) is certified by the appropriate certify20 ing authority as meeting the applicable require21 ments of this title for a standard health plan,

22 except that a plan does not provide the benefits

23 packages established under subtitle C; and

24 ‘‘(B) is not a certified supplemental health

25 benefits plan.
28

•S 2351 PCS

1 ‘‘(4) CERTIFIED SUPPLEMENTAL HEALTH BEN2 EFITS PLAN.—For purposes of this title, the term

3 ‘certified supplemental health benefits plan’ means a

4 health plan which is certified by the appropriate cer5 tifying authority as meeting the applicable require6 ments of part III of subtitle B.

7 ‘‘(b) CERTIFIED LONG-TERM CARE POLICIES.—

8 ‘‘(1) IN GENERAL.—Each State program shall

9 provide for the accreditation and certification of

10 long-term care policies as certified long-term care

11 policies.

12 ‘‘(2) CERTIFIED LONG-TERM CARE POLICY.—

13 For purposes of this title, the term ‘certified long14 term care policy’ means a long-term care policy

15 which is certified by the applicable certifying author16 ity as meeting the applicable requirements of part

17 IV of subtitle B.

18 ‘‘(c) USE OF PRIVATE ACCREDITATION ENTITIES.—

19 A State program may provide for the use of private ac20 creditation entities in carrying out all or part of the duties

21 under subsection (a) or (b).

22 ‘‘(d) CERTIFICATION FEES.—A State program may

23 impose appropriate certification fees on health plans and

24 long-term care policies seeking certification.
29

•S 2351 PCS

1 ‘‘SEC. 21012. CERTIFICATION ENFORCEMENT.

2 ‘‘(a) IN GENERAL.—A State program shall provide

3 for the monitoring and enforcement of the certification of

4 health plans and long-term care policies.

5 ‘‘(b) COMPLAINT PROCESS.—

6 ‘‘(1) IN GENERAL.—A State program shall pro7 vide for—

8 ‘‘(A) procedures for individuals and enti9 ties to file written, signed complaints with the

10 appropriate certifying authority respecting al11 leged violations of the standards; and

12 ‘‘(B) responding to and investigating such

13 complaints within 90 days.

14 ‘‘(2) CONSUMER ACCESS TO COMPLIANCE IN15 FORMATION.—

16 ‘‘(A) IN GENERAL.—A State program shall

17 provide for consumer access to complaints filed

18 with the appropriate certifying authority with

19 respect to health plans and long-term care poli20 cies.

21 ‘‘(B) CONFIDENTIALITY.—The access pro22 vided under subparagraph (A) shall be limited

23 to the extent required to protect the confiden24 tiality of individual enrollees and policyholders.

25 ‘‘(c) ENFORCEMENT RESPONSE.—
30

•S 2351 PCS

1 ‘‘(1) IN GENERAL.—In the case of any health

2 plan or long-term care policy which fails, in whole or

3 in part, to maintain its certified status, the State

4 program may provide for—

5 ‘‘(A) the imposition of a corrective pro6 gram;

7 ‘‘(B) State operation of the plan or policy

8 to provide transitional access;

9 ‘‘(C) the suspension of new enrollment of

10 individuals;

11 ‘‘(D) the penalty-free withdrawal of enroll12 ees or policyholders from the plan or policy;

13 ‘‘(E) other intermediate sanctions; and

14 ‘‘(F) withdrawal of certification after the

15 plan or policy has been given a reasonable op16 portunity to make corrections.

17 ‘‘(2) ENFORCEMENT THROUGH CIVIL MONEY

18 PENALTIES.—In the case of any supplemental health

19 benefits plan or long-term care policy which fails, in

20 whole or in part, to maintain its certified status, the

21 State program shall impose a civil money penalty of

22 not more than 50 percent of gross premiums re23 ceived for the sale of such plan or policy. The State

24 program shall include rules similar to the rules of

25 section 1128A (other than subsections (a) and (b))
31

•S 2351 PCS

1 which shall apply to civil money penalties under this

2 subsection in the same manner as such provisions

3 apply to a penalty or proceeding under section

4 1128A(a).

5 ‘‘SEC. 21013. CONSUMER INFORMATION PROGRAM.

6 ‘‘(a) ESTABLISHMENT OF PROGRAM.—

7 ‘‘(1) IN GENERAL.—Each State program shall

8 establish and operate a consumer information pro9 gram to provide consumers in the State with com10 parative value information on the performance of all

11 health plans in each community rating area in the

12 State.

13 ‘‘(2) FUNCTIONS DESCRIBED.—The consumer

14 information program established under paragraph

15 (1) shall conduct annual surveys described in sub16 section (b)(1), annually publish comparative value

17 information described in subsection (b)(2), and per18 form the additional functions described in subsection

19 (b)(3).

20 ‘‘(b) FUNCTIONS.—

21 ‘‘(1) ANNUAL SURVEYS.—The consumer infor22 mation program shall conduct annual surveys (in ac23 cordance with a national standard survey design and

24 sampling strategy to be determined by the Secretary

25 under subtitle E) of health care consumers in the
32

•S 2351 PCS

1 participating State concerning access to care, use of

2 health services, health outcomes, patient satisfaction,

3 and other quality measures of local interest that a

4 State may designate.

5 ‘‘(2) PUBLICATION OF COMPARATIVE VALUE IN6 FORMATION.—

7 ‘‘(A) IN GENERAL.—The consumer infor8 mation program shall annually publish the fol9 lowing comparative value information collected

10 pursuant to section 21123 on all health plans

11 offered in the participating State, listed by com12 munity rating area, in a standard format to be

13 determined by the Secretary:

14 ‘‘(i) Descriptive data, including—

15 ‘‘(I) the certification status of the

16 plan;

17 ‘‘(II) benefits offered under the

18 plan;

19 ‘‘(III) premiums, cost-sharing,

20 and administrative charges under the

21 plan;

22 ‘‘(IV) risk and referral arrange23 ments under the plan;

24 ‘‘(V) health care providers used

25 under the plan;
33

•S 2351 PCS

1 ‘‘(VI) the enrollee complaint and

2 appeals process used under the plan;

3 and

4 ‘‘(VII) other appropriate infor5 mation as determined by the Sec6 retary.

7 ‘‘(ii) Data regarding the national

8 measures of quality performance developed

9 under section 21501(b) and adjusted for

10 case-mix (as the Secretary determines ap11 propriate).

12 ‘‘(iii) Data from the annual surveys

13 described in paragraph (1).

14 ‘‘(iv) A subset of quality measures for

15 each health care provider.

16 ‘‘(B) INTERSTATE COMPARATIVE VALUE

17 INFORMATION.—The participating State may

18 join with one or more other State programs to

19 prepare comparative value information for a ge20 ographic area approved by the Secretary that

21 includes adjoining portions of contiguous par22 ticipating States.

23 ‘‘(C) DISTRIBUTION OF COMPARATIVE

24 VALUE INFORMATION.—Comparative value in25 formation prepared by the consumer informa-
34

•S 2351 PCS

1 tion program shall be distributed by the pro2 gram in a manner that ensures access to such

3 information by health care consumers and that

4 is in accordance with standards established by

5 the Secretary. The program shall distribute the

6 comparative value information through various

7 entities, including employers.

8 ‘‘(3) ADDITIONAL FUNCTIONS.—The consumer

9 information program shall—

10 ‘‘(A) educate consumers about comparabil11 ity of health plan characteristics and quality;

12 ‘‘(B) provide information and make refer13 rals to assist in health plan enrollment and re14 ceipt of subsidies, including the availability and

15 specific eligibility schedules regarding pregnant

16 women and children;

17 ‘‘(C) conduct outreach to underserved and

18 at-risk populations to educate such populations

19 on consumer responsibilities and rights to en20 sure full participation of such populations in

21 the health care system; and

22 ‘‘(D) receive and seek to resolve com23 plaints, and have appropriate access to relevant

24 information to resolve the complaints.
35

•S 2351 PCS

1 ‘‘(c) USE OF NONPROFIT ORGANIZATIONS.—A State

2 program may operate the consumer information program

3 through a contract with a nonprofit organization selected

4 by the State in a competitive process.

5 ‘‘(d) ADDITIONAL REQUIREMENTS.—Each State pro6 gram shall meet the requirements specified under subtitles

7 B and C of title XI with respect to certified health plans.

8 ‘‘Subpart C—Other State Responsibilities

9 ‘‘SEC. 21021. ESTABLISHMENT OF COMMUNITY RATING

10 AREAS.

11 ‘‘(a) ESTABLISHMENT.—Each participating State

12 under the State program shall, by not later than January

13 1, 1996, provide for the inclusion of all areas of the State

14 into 1 or more community rating areas. The program may

15 revise the boundaries of such areas from time to time con16 sistent with this section.

17 ‘‘(b) MULTIPLE AREAS.—With respect to a commu18 nity rating area—

19 ‘‘(1) no metropolitan statistical area or primary

20 metropolitan statistical area in a State may be di21 vided into more than 1 community rating area in

22 such State;

23 ‘‘(2) the number of individuals residing within

24 a community rating area may not be less than

25 250,000; and
36

•S 2351 PCS

1 ‘‘(3) no area incorporated into a community

2 rating area may be incorporated into another com3 munity rating area.

4 ‘‘(c) BOUNDARIES.—In establishing boundaries for

5 community rating areas, a participating State may not

6 discriminate on the basis of, or otherwise take into ac7 count, disability, health status, or perceived need for

8 health services of a particular population. Such restric9 tions shall not prohibit participating States from establish10 ing such boundaries to ensure that underserved and vul11 nerable populations are better served.

12 ‘‘(d) INTERSTATE AREAS.—Two or more contiguous

13 participating States may provide for the establishment of

14 a community rating area that includes adjoining areas of

15 the States so long as all areas of any metropolitan statis16 tical area or primary metropolitan statistical area within

17 such States are within the same community rating area.

18 ‘‘SEC. 21022. DESIGNATION OF HEALTH PLAN SERVICE

19 AREAS.

20 ‘‘(a) STATE SERVICE AREAS.—Pursuant to guide21 lines developed under subsection (b), each participating

22 State under the State program shall designate, by not

23 later than January 1, 1996, health plan service areas for

24 purposes of sections 21127 and 21128 and subtitle F.
37

•S 2351 PCS

1 ‘‘(b) GUIDELINES.—The Secretary shall establish

2 guidelines for the designation of health plan service

3 areas—

4 ‘‘(1) which prevent the isolation of low-income

5 and vulnerable populations by preventing the divi6 sion of governmental boundaries of counties, towns,

7 or cities; and

8 ‘‘(2) which include adjacent designat ed urban

9 or rural underserved areas.

10 ‘‘SEC. 21023. REINSURANCE AND RISK ADJUSTMENT PRO11 GRAM.

12 ‘‘Each State program under this part shall provide

13 for—

14 ‘‘(1) a reinsurance pool for community-rated

15 standard health plans and a reinsurance pool for

16 self-insured standard health plans (other than

17 multistate self-insured health plans) by January 1,

18 1996;

19 ‘‘(2) a risk adjustment program for community20 rated standard health plans by January 1, 1997;

21 and

22 ‘‘(3) a cost-sharing adjustment program for all

23 standard health plans, except multistate self-insured

24 health plans, by January 1, 1997,
38

•S 2351 PCS

1 which meet the standards developed by the Secretary

2 under section 21101(b)(2).

3 ‘‘SEC. 21024. SPECIFICATION OF ANNUAL GENERAL EN4 ROLLMENT PERIOD.

5 ‘‘Each participating State under the State program

6 shall specify for the State (or for each community rating

7 area) an annual period, of not less than 30 days, during

8 which individuals in the State (or area) may enroll in

9 health plans or change the health plans in which the indi10 vidual is enrolled.

11 ‘‘SEC. 21025. PREMIUM APPROVAL PROCESS FOR LONG12 TERM CARE POLICIES.

13 ‘‘(a) IN GENERAL.—Each State program shall pro14 vide for a process for approving or disapproving proposed

15 premium increases or decreases with respect to long-term

16 care policies.

17 ‘‘(b) APPLICATION.—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), this section shall not apply to a group

20 long-term care policy issued to a group described in

21 section 4(E)(1) of the NAIC Long Term Care Insur22 ance Model Act (effective January 1991), except

23 that such group policy shall, pursuant to guidelines

24 developed by the Secretary, in consultation with the

25 NAIC, provide notice to policyholders and certificate
39

•S 2351 PCS

1 holders of any premium change under such group

2 policy.

3 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

4 apply to—

5 ‘‘(A) group conversion policies;

6 ‘‘(B) the group continuation feature of a

7 group policy if the carrier separately rates em8 ployee and continuation coverages; and

9 ‘‘(C) group policies where the function of

10 the employer is limited solely to collecting pre11 miums (through payroll deductions or dues

12 checkoff) and remitting such premiums to the

13 carrier.

14 ‘‘(c) CONSTRUCTION.—Nothing in this section shall

15 be construed as preventing the NAIC from promulgating

16 standards, or a State from enacting and enforcing laws,

17 with respect to premium rates or loss ratios for all, includ18 ing group, long-term care policies.

19 ‘‘(d) ACCESS TO OTHER INFORMATION.—The State

20 program shall provide for consumer access to actuarial

21 memoranda, including financial information, provided

22 under this section.
40

•S 2351 PCS

1 ‘‘SEC. 21026. REQUIREMENTS RELATING TO POSSESSIONS

2 OF THE UNITED STATES.

3 ‘‘(a) IN GENERAL.—A possession of the United

4 States shall be a participating State meeting the require5 ments of this title only if there is an agreement in effect

6 between the United States and such possession pursuant

7 to which—

8 ‘‘(1) the laws of such possession impose a part

9 B premium recapture assessment (as defined in sub10 section (b));

11 ‘‘(2) nothing in any provision of law, including

12 the law of such possession, permits such possession

13 to reduce or remit in any way, directly or indirectly,

14 any liability to such possession by reason of such as15 sessment;

16 ‘‘(3) any amount received in the Treasury of

17 such possession by reason of such assessment shall

18 be paid (at such time and in such manner as the

19 Secretary of the Treasury shall prescribe) to the

20 Federal Supplementary Medical Insurance Trust

21 Fund;

22 ‘‘(4) such assessment is coordinated with the

23 assessment imposed by section 59B of the Internal

24 Revenue Code of 1986 such that, for any period, an

25 individual would be required to pay (in the aggre-
41

•S 2351 PCS

1 gate) not more than the applicable amount for such

2 period; and

3 ‘‘(5) the possession complies with such other re4 quirements as may be prescribed by the Secretary

5 and the Secretary of the Treasury to carry out the

6 purposes of this paragraph, including requirements

7 prescribing the information individuals to whom

8 such assessment may apply shall furnish to the Sec9 retary and the Secretary of the Treasury.

10 ‘‘(b) QUALIFIED PART B PREMIUM RECAPTURE AS11 SESSMENT.—In subsection (a), the term ‘qualified medi12 care part B premium recapture assessment’ means an as13 sessment imposed and collected by such a possession that

14 is—

15 ‘‘(1) equivalent to the assessment imposed

16 under section 59B of the Internal Revenue Code of

17 1986; and

18 ‘‘(2) imposed on all individuals who are bona

19 fide residents of the possession, to the extent such

20 individuals have not paid the assessment imposed

21 under such section 59B to the United States by rea22 son of subsection (d)(5) of such section.
42

•S 2351 PCS

1 ‘‘PART II—REQUIREMENTS FOR STATE SINGLE2 PAYER SYSTEMS

3 ‘‘SEC. 21031. SINGLE-PAYER SYSTEM DESCRIBED.

4 ‘‘The Secretary shall approve an application of a

5 State to operate a single-payer system if the Secretary

6 finds that the system—

7 ‘‘(1) meets the requirements of section 21032;

8 and

9 ‘‘(2)(A) in the case of a system offered through10 out a State, meets the requirements for a Statewide

11 single-payer system under section 21033; or

12 ‘‘(B) in the case of a system offered in a single

13 community rating area of a State, meets the require14 ments for an area specific single-payer system under

15 section 21034.

16 ‘‘SEC. 21032. GENERAL REQUIREMENTS FOR SINGLE-PAYER

17 SYSTEMS.

18 ‘‘Each single-payer system shall meet the following

19 requirements:

20 ‘‘(1) ESTABLISHMENT BY STATE.—The system

21 is established under State law, and State law pro22 vides for mechanisms to enforce the requirements of

23 the system.

24 ‘‘(2) OPERATION BY STATE.—The system is op25 erated by the State or a designated agency of the

26 State.
43

•S 2351 PCS

1 ‘‘(3) ENROLLMENT OF INDIVIDUALS.—

2 ‘‘(A) MANDATORY ENROLLMENT OF ALL

3 COMMUNITY-RATED INDIVIDUALS.—The system

4 shall provide for the enrollment of all commu5 nity-rated individuals residing in the State (or,

6 in the case of an area-specific single-payer sys7 tem, in the community rating area) who are not

8 medicare-eligible individuals.

9 ‘‘(B) OPTIONAL ENROLLMENT OF MEDI10 CARE-ELIGIBLE INDIVIDUALS.—At the option of

11 the State and if the Secretary has approved an

12 application submitted by the State, the system

13 may provide for the enrollment of medicare-eli14 gible individuals residing in the State (or, in the

15 case of an area-specific single-payer system, in

16 the community rating area).

17 ‘‘(C) OPTIONAL ENROLLMENT OF EXPERI18 ENCE-RATED INDIVIDUALS.—

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in clause (ii), at the option of the

21 State, a single-payer system may provide

22 for the enrollment of experience-rated indi23 viduals residing in the State (or,

24 in the case of an area-specific single-payer

25 system, in the community rating area).
44

•S 2351 PCS

1 ‘‘(ii) PARTICIPATION BY CERTAIN

2 MULTISTATE PLANS.—The system shall

3 not require participation by any experi4 ence-rated individual who is enrolled in a

5 certified multistate self-insured standard

6 health plan which is a multiemployer plan

7 described in section 21435(c)(2), or which

8 is sponsored by an experience-rated em9 ployer sponsor with at least 5,000 full-time

10 employees.

11 ‘‘(4) DIRECT PAYMENT TO PROVIDERS.—

12 ‘‘(A) IN GENERAL.—With respect to pro13 viders who furnish items and services included

14 in the standard benefits package established

15 under subtitle C to individuals enrolled in the

16 system, the State shall make payments directly,

17 or through fiscal intermediaries, to such provid18 ers and assume (subject to subparagraph (B))

19 all financial risk associated with making such

20 payments.

21 ‘‘(B) CAPITATED PAYMENTS PER22 MITTED.—Nothing in subparagraph (A) shall

23 be construed to prohibit providers furnishing

24 items and services under the system from re-
45

•S 2351 PCS

1 ceiving payments on a capitated, at-risk basis

2 based on prospectively determined rates.

3 ‘‘(5) PROVISION OF STANDARD BENEFITS PACK4 AGE.—

5 ‘‘(A) IN GENERAL.—The system shall pro6 vide for coverage of the standard benefits pack7 age established under subtitle C, including the

8 cost-sharing provided under the package (sub9 ject to subparagraph (B)), to all individuals en10 rolled in the system.

11 ‘‘(B) IMPOSITION OF REDUCED COST12 SHARING.—The system may decrease the cost13 sharing otherwise provided in the standard ben14 efits package established under subtitle C with

15 respect to any individuals enrolled in the system

16 or any class of services included in the package,

17 so long as the system does not increase the

18 cost-sharing otherwise imposed with respect to

19 any other individuals or services.

20 ‘‘(6) FEDERAL PAYMENTS.—The system shall

21 provide for mechanisms to ensure, in a manner sat22 isfactory to the Secretary, that Federal payments to

23 a single-payer State or community rating area shall

24 be limited to the payments that would have been
46

•S 2351 PCS

1 made in the absence of the implementation of the

2 single-payer system.

3 ‘‘(7) INCREASED COVERAGE OR IMPROVED COST

4 CONTAINMENT.—The system, when fully imple5 mented, shall be expected by the State to—

6 ‘‘(A) reduce the number of residents of the

7 State (or, in the case of an area-specific single8 payer system, the community rating area) who

9 are without health insurance coverage (as de10 fined in section 2202(b)(2)) by at least 10 per11 cent, or

12 ‘‘(B) decrease the rate of growth of per

13 capita health care spending in the State (or, in

14 the case of an area-specific single-payer system,

15 the community rating area),

16 compared to baseline projections developed by the

17 State on the basis of the most recent data, including

18 data provided by the National Health Care Commis19 sion established under section 2201.

20 ‘‘(8) REQUIREMENTS GENERALLY APPLICABLE

21 TO STANDARD HEALTH PLANS.—The system shall

22 meet the requirements applicable to a standard

23 health plan, except that—

24 ‘‘(A) the system does not have the author25 ity provided to standard health plans under sec-
47

•S 2351 PCS

1 tion 21111(e) (relating to permissible limita2 tions on the enrollment of community-rated eli3 gible individuals on the basis of limits on the

4 plan’s capacity); and

5 ‘‘(B) the system is not required to meet

6 the requirements of sections 21113 (relating to

7 rating limitations for community-rated market)

8 and 21122 (relating to capital requirements).

9 ‘‘SEC. 21033. SPECIAL RULES FOR STATES OPERATING

10 STATEWIDE SINGLE-PAYER SYSTEM.

11 ‘‘(a) IN GENERAL.—In the case of a State operating

12 a Statewide single-payer system—

13 ‘‘(1) the State shall operate the system

14 throughout the State; and

15 ‘‘(2) except as provided in subsection (b), the

16 State shall meet the requirements for participating

17 States under part I.

18 ‘‘(b) EXCEPTIONS TO CERTAIN REQUIREMENTS FOR

19 PARTICIPATING STATES.—In the case of a State operating

20 a Statewide single-payer system, the State is not required

21 to meet the following requirements otherwise applicable to

22 participating States under part I:

23 ‘‘(1) ESTABLISHMENT OF COMMUNITY RATING

24 AND SERVICE AREAS.—The requirements of sections

25 21021 (relating to the establishment of community
48

•S 2351 PCS

1 rating areas) and 21022 (relating to the designation

2 of health plan service areas).

3 ‘‘(2) OTHER REFERENCES INAPPLICABLE.—

4 Any requirement which the Secretary determines is

5 not appropriate to apply to a State single-payer sys6 tem.

7 ‘‘(c) SINGLE-PAYER STATE DEFINED.—In this title,

8 the term ‘single-payer State’ means a State with a State9 wide single-payer system in effect that has been approved

10 by the Secretary in accordance with this part.

11 ‘‘SEC. 21034. SPECIAL RULES FOR COMMUNITY RATING

12 AREA-SPECIFIC SINGLE-PAYER SYSTEMS.

13 ‘‘(a) IN GENERAL.—In the case of a State operating

14 a community rating area specific single-payer system—

15 ‘‘(1) except as provided in subsection (b), the

16 State shall meet the requirements for participating

17 States under part I; and

18 ‘‘(2) the community rating area in which the

19 system is operated shall meet the requirements of

20 subsection (c).

21 ‘‘(b) OTHER REFERENCES INAPPLICABLE.—Any re22 quirement which the Secretary determines is not appro23 priate to apply to a community rating area specific single24 payer system.
49

•S 2351 PCS

1 ‘‘(c) REQUIREMENTS FOR COMMUNITY RATING AREA

2 IN WHICH SYSTEM OPERATES.—A community rating area

3 in which an area-specific single-payer system is operated

4 shall meet the requirements applicable to community rat5 ing areas under section 21021.

6 ‘‘PART III—TREATMENT OF CERTAIN STATE

7 LAWS

8 ‘‘SEC. 21041. PREEMPTION OF STATE LAW RESTRICTIONS

9 ON NETWORK PLANS.

10 ‘‘(a) LIMITATION ON RESTRICTIONS ON NETWORK

11 PLANS.—Effective as of January 1, 1996—

12 ‘‘(1) a State may not prohibit or limit a net13 work plan from including incentives for enrollees to

14 use the services of participating providers;

15 ‘‘(2) a State may not prohibit or limit a net16 work plan from requiring enrollees to obtain care

17 from participating providers;

18 ‘‘(3) a State may not prohibit or limit a net19 work plan from requiring enrollees to obtain refer20 rals for specialty treatment;

21 ‘‘(4) a State may not prohibit or limit the es22 tablishment of different payment rates for network

23 and non-network providers;
50

•S 2351 PCS

1 ‘‘(5) a State may not prohibit or limit a net2 work plan from limiting the number and types of

3 participating providers;

4 ‘‘(6) a State may not prohibit or limit a net5 work plan from using single source suppliers for

6 pharmacy services, medical equipment, and other

7 supplies and services; and

8 ‘‘(7) a State may not prohibit or limit the cor9 porate practice of medicine.

10 ‘‘(b) DEFINITIONS.—In this section:

11 ‘‘(1) NETWORK PLAN.—The term ‘network

12 plan’ means a health plan—

13 ‘‘(A) which—

14 ‘‘(i) limits coverage of covered items

15 and services to those provided by partici16 pating providers, or

17 ‘‘(ii) provides, with respect to such

18 items and services provided by persons who

19 are not participating providers, for cost20 sharing which is greater than that per21 mitted under the standard benefits pack22 age established under subtitle C for par23 ticipating providers;
51

•S 2351 PCS

1 ‘‘(B) which has a sufficient number and

2 distribution of participating providers to assure

3 that the standard benefits package—

4 ‘‘(i) is available and accessible to each

5 enrollee, within the area served by the

6 plan, with reasonable promptness and in a

7 manner which assures continuity, and

8 ‘‘(ii) when medically necessary, is

9 available and accessible twenty-four hours

10 a day and seven days a week;

11 ‘‘(C) which provides benefits for covered

12 items and services not furnished by participat13 ing providers if the services are medically nec14 essary and immediately required because of an

15 unforeseen illness, injury, or condition; and

16 ‘‘(D) which provides out-of-area coverage.

17 ‘‘(2) PARTICIPATING PROVIDER.—The term

18 ‘participating provider’ means an entity or individual

19 which provides, sells, or leases health care services

20 under a contract with a network plan, which con21 tract does not permit—

22 ‘‘(A) cost-sharing in excess of the cost23 sharing permitted under a standard benefits

24 package established under subtitle C; and
52

•S 2351 PCS

1 ‘‘(B) any enrollee charges (for covered

2 items or services) in excess of such cost-shar3 ing.

4 ‘‘SEC. 21042. STATE LAW RESTRICTIONS ON HEALTH PRO5 FESSIONAL LICENSURE.

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

7 this section, nothing in this title shall be construed as lim8 iting any State’s authority to enact and enforce laws with

9 respect to the licensure or certification of any class of

10 health professional or the provision of any class of health

11 professional services.

12 ‘‘(b) SCOPE OF PRACTICE.—Effective as of January

13 1, 1996, a State may not restrict through licensure or oth14 erwise the practice of any class of health professionals be15 yond what is justified by the skills and training of such

16 professionals.

17 ‘‘(c) ACADEMIC DEGREE.—Effective as of January 1,

18 1996, a State may not restrict the participation, reim19 bursement, or indemnification of a health professional

20 solely on the basis of the academic degree of such profes21 sional if the professional is acting within the scope of the

22 professional’s license under applicable State law.
53

•S 2351 PCS

1 ‘‘SEC. 21043. PREEMPTION FROM STATE BENEFIT MAN2 DATES.

3 ‘‘Effective as of January 1, 1996, no State shall es4 tablish or enforce any law or regulation that requires any

5 standard health plan to cover items and services that are

6 different from the items and services specified pursuant

7 to subtitle C.

8 ‘‘SEC. 21044. PREEMPTION OF STATE LAW REGULATING

9 UTILIZATION MANAGEMENT AND REVIEW.

10 ‘‘Effective as of January 1, 1996, a State may not

11 regulate utilization management and review programs of

12 any health plan to the extent not provided by this title.

13 ‘‘PART IV—FEDERAL RESPONSIBILITIES

14 ‘‘SEC. 21051. FEDERAL ROLE WITH RESPECT TO

15 MULTISTATE SELF-INSURED HEALTH PLANS.

16 ‘‘(a) IN GENERAL.—In the case of a multistate self17 insured health plan or a multistate self-insured supple18 mental health benefits plan, the Secretary of Labor shall

19 carry out activities under this title in the same manner

20 as a participating State program would carry out activities

21 under part I with respect to a health plan subject to such

22 part.

23 ‘‘(b) DETERMINATION OF MULTISTATE STATUS.—

24 For purposes of this title, a self-insured health plan or

25 a self-insured supplemental health benefits plan shall be

26 considered a multistate health plan if established or main-
54

•S 2351 PCS

1 tained by an experience-rated employer which has a sub2 stantial number of employees enrolled in such plan in each

3 of 2 or more States (as determined by the Secretary of

4 Labor).

5 ‘‘(c) APPLICABILITY OF ERISA ENFORCEMENT

6 MECHANISMS.—The provisions of sections 502 (relating

7 to civil enforcement), 504 (relating to investigative author8 ity), and 506 (relating to criminal enforcement) of the

9 Employee Retirement Income Security Act of 1974 shall

10 apply to enforcement by the Secretary of Labor of the ap11 plicable requirements for experience-rated employers de12 scribed in subsection (b) in the same manner and to the

13 same extent as such provisions apply to enforcement of

14 title I of such Act.

15 ‘‘SEC. 21052. ESTABLISHMENT OF RESIDENCY RULES.

16 ‘‘The Secretary shall establish rules relating to identi17 fying the State (and community rating area) in which indi18 viduals reside. Such rules shall be based on the principal

19 residence of such an individual.

20 ‘‘SEC. 21053. WORKPLACE WELLNESS PROGRAM.

21 ‘‘(a) IN GENERAL.—The Secretary shall develop cer22 tification criteria for workplace wellness programs.

23 ‘‘(b) APPLICATION OF SECTION.—Any health plan

24 may offer a uniform premium discount, not to exceed 10
55

•S 2351 PCS

1 percent, to employers maintaining certified workplace

2 wellness programs.

3 ‘‘SEC. 21054. EMPLOYEE LEASING RULES.

4 ‘‘The Secretary of Labor shall promulgate such regu5 lations as may be necessary to prevent the avoidance of

6 any requirements of this title through the use of employee

7 leasing businesses.

8 ‘‘SEC. 21055. APPROVAL OF PRIVATE ACCREDITATION PRO9 GRAMS.

10 ‘‘The Secretary shall certify the private accreditation

11 entities described under section 21011(c).

12 ‘‘PART V—DEFINITIONS AND RULES

13 ‘‘SEC. 21100. DEFINITIONS AND RULES OF GENERAL APPLI14 CATION.

15 ‘‘Except as otherwise specifically provided, in this

16 title the following definitions and rules apply:

17 ‘‘(1) APPROPRIATE CERTIFYING AUTHORITY.—

18 The term ‘appropriate certifying authority’ means—

19 ‘‘(A) except as provided in subparagraph

20 (B), in the case of a standard or nonstandard

21 health plan, a supplemental health benefits

22 plan, or a long-term care policy, the State com23 missioner or superintendent of insurance or

24 other State authority in the participating State;

25 or
56

•S 2351 PCS

1 ‘‘(B) in the case of a multistate self-in2 sured health plan or a multistate self-insured

3 supplemental health benefits plan, the Secretary

4 of Labor.

5 ‘‘(2) COVERED ITEMS AND SERVICES.—The

6 term ‘covered items and services’ means items and

7 services included in benefit packages established

8 under subtitle C.

9 ‘‘(3) DELIVERY SYSTEM.—The term ‘delivery

10 system’ with respect to a health plan includes a fee11 for-service, use of preferred providers, staff or group

12 model health maintenance organizations, and such

13 other arrangements as the Secretary may recognize.

14 ‘‘(4) DEPENDENT.—The term ‘dependent’

15 means, with respect to any individual, any person—

16 ‘‘(A) who is a child (within the meaning of

17 section 151(c)(3) of the Internal Revenue Code

18 of 1986) of the individual; and

19 ‘‘(B) who is—

20 ‘‘(i) under 25 years of age and un21 married, or

22 ‘‘(ii) permanently and totally disabled

23 (within the meaning of section

24 151(c)(5)(C) of such Code).
57

•S 2351 PCS

1 ‘‘(5) EMPLOYER, EMPLOYEE, EMPLOYMENT,

2 AND WAGES DEFINED.—

3 ‘‘(A) IN GENERAL.—Except as otherwise

4 provided in this subtitle—

5 ‘‘(i) the terms ‘wages’ and ‘employ6 ment’ have the meanings given such terms

7 under section 3121 of the Internal Reve8 nue Code of 1986,

9 ‘‘(ii) the term ‘employee’ has the

10 meaning given such term under section

11 3121 of such Code, subject to the provi12 sions of chapter 25 of such Code, and

13 ‘‘(iii) the term ‘employer’ has the

14 same meaning as the term ‘‘employer’’ as

15 used in such section 3121.

16 ‘‘(B) EXCEPTIONS.—For purposes of sub17 paragraph (A)—

18 ‘‘(i) EMPLOYMENT.—

19 ‘‘(I) EMPLOYMENT INCLUDED.—

20 Paragraphs (1), (2), (5), (7) (other

21 than clauses (i) through (iv) of sub22 paragraph (C) and clauses (i) through

23 (v) of subparagraph (F)), (8), (9),

24 (10), (11), (13), (15), (18), and (19)
58

•S 2351 PCS

1 of section 3121(b) of the Internal

2 Revenue Code of 1986 shall not apply.

3 ‘‘(II) EXCLUSION OF INMATES AS

4 EMPLOYEES.—Employment shall not

5 include services performed in a penal

6 institution by an inmate thereof or in

7 a hospital or other health care institu8 tion by a patient thereof.

9 ‘‘(III) EXCLUSION OF PART-TIME

10 DOMESTIC SERVICE.—Employment

11 shall not include domestic service in a

12 private home of the employer (within

13 the meaning section 3121(a)(7)(B),

14 determined without dollar limitation)

15 by an individual who is not a full-time

16 employee.

17 ‘‘(IV) EXCLUSION OF SEASONAL

18 OR TEMPORARY.—Employment shall

19 not include seasonal or temporary

20 services performed for an employer for

21 less than 6 months in a calendar year.

22 ‘‘(V) CONSIDERATION OF INDUS23 TRY PRACTICE.—As provided under

24 regulation by the Secretary of Labor,

25 an employee shall be considered to be
59

•S 2351 PCS

1 employed on a full-time basis by an

2 employer (and to be a full-time em3 ployee of an employer) for a month

4 (or for all months in a 12-month pe5 riod) if the employee is employed by

6 that employer on a continuing basis

7 that, taking into account the structure

8 or nature of employment in the indus9 try, represents full-time employment

10 in that industry.

11 ‘‘(ii) WAGES.—

12 ‘‘(I) IN GENERAL.—Paragraph

13 (1) of section 3121(a) of the Internal

14 Revenue Code of 1986 shall not apply.

15 ‘‘(II) TIPS NOT INCLUDED.—The

16 term ‘wages’ does not include cash

17 tips.

18 ‘‘(iii) EMPLOYEES.—

19 ‘‘(I) TREATMENT OF SELF-EM20 PLOYED.—The term ‘employee’ in21 cludes a self-employed individual.

22 ‘‘(II) EXCLUSION OF CERTAIN

23 FOREIGN EMPLOYMENT.—The term

24 ‘employee’ does not include an individ25 ual with respect to service, if the indi-
60

•S 2351 PCS

1 vidual is not a citizen or resident of

2 the United States and the service is

3 performed outside the United States.

4 ‘‘(C) AGGREGATION RULES FOR EMPLOY5 ERS.—For purposes of this title—

6 ‘‘(i) all employers treated as a single

7 employer under subsection (a) or (b) of

8 section 52 of the Internal Revenue Code of

9 1986 shall be treated as a single employer,

10 and

11 ‘‘(ii) under regulations of the Sec12 retary of the Treasury, all employees of or13 ganizations which are under common con14 trol with one or more organizations which

15 are exempt from income tax under subtitle

16 A of the Internal Revenue Code of 1986

17 shall be treated as employed by a single

18 employer.

19 The regulations prescribed under clause (ii)

20 shall be based on principles similar to the prin21 ciples which apply to taxable organizations

22 under clause (i).

23 ‘‘(6) EQUIVALENT HEALTH CARE PROGRAM.—

24 The term ‘equivalent health care program’ means—
61

•S 2351 PCS

1 ‘‘(A) part A or part B of the medicare pro2 gram under title XVIII of the Social Security

3 Act,

4 ‘‘(B) the medicaid program under title

5 XIX of the Social Security Act,

6 ‘‘(C) the health care program for active

7 military personnel under title 10, United States

8 Code,

9 ‘‘(D) the veterans health care program

10 under chapter 17 of title 38, United States

11 Code,

12 ‘‘(E) the Civilian Health and Medical Pro13 gram of the Uniformed Services (CHAMPUS),

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

15 States Code,

16 ‘‘(F) the Indian health service program

17 under the Indian Health Care Improvement Act

18 (25 U.S.C. 1601 et seq.), and

19 ‘‘(G) a State single-payer system approved

20 by the Secretary under section 21031.

21 ‘‘(7) FAMILY.—The term ‘family’ includes an

22 individual, the individual’s spouse, and the individ23 ual’s dependents (if any), as defined in paragraph

24 (4).
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•S 2351 PCS

1 ‘‘(8) HEALTH PLAN SPONSOR.—The term

2 ‘health plan sponsor’ means, with respect to—

3 ‘‘(A) an insured health plan, the insurer,

4 and

5 ‘‘(B) a self-insured health plan, the experi6 ence-rated employer sponsor.

7 ‘‘(9) HEALTH PROFESSIONAL.—The term

8 ‘health professional’ means an individual who is le9 gally authorized to provide services in the State in

10 which such services are provided.

11 ‘‘(10) LEGALLY AUTHORIZED.—The term ‘le12 gally authorized’ means, with respect to a provider,

13 authorization under licensing or certification laws of

14 a State.

15 ‘‘(11) NAIC.—The term ‘NAIC’ means the Na16 tional Association of Insurance Commissioners.

17 ‘‘(12) PARTICIPATING STATE.—The term ‘par18 ticipating State’ means a State establishing a State

19 program under this title.

20 ‘‘(13) PROVIDER.—The term ‘provider’ includes

21 a health professional.

22 ‘‘(14) PURCHASING COOPERATIVE.—The term

23 ‘purchasing cooperative’ means a health insurance

24 purchasing cooperative established under section

25 21411.
63

•S 2351 PCS

1 ‘‘(15) SECRETARY.—The term ‘Secretary’

2 means the Secretary of Health and Human Services

3 or the Secretary’s delegate.

4 ‘‘(16) STATE.—The term ‘State’ means each of

5 the several States, the District of Columbia, the

6 Commonwealth of Puerto Rico, the United States

7 Virgin Islands, Guam, American Samoa, and the

8 Commonwealth of the Northern Mariana Islands.

9 ‘‘Subtitle B—Standards for Reform

10 ‘‘PART I—ESTABLISHMENT AND APPLICATION OF

11 STANDARDS

12 ‘‘SEC. 21101. CERTIFIED STANDARD HEALTH PLANS.

13 ‘‘(a) IN GENERAL.—A standard health plan shall

14 meet the applicable reform standards established under

15 subsection (b).

16 ‘‘(b) REFORM STANDARDS.—

17 ‘‘(1) ESTABLISHMENT OF GENERAL STAND18 ARDS.—

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

20 this paragraph and paragraphs (2), (3), and

21 (4), the Secretary, in consultation with the Na22 tional Health Plan Standards and Quality Advi23 sory Committee, shall develop and publish spe24 cific standards and evaluation criteria to imple25 ment the standards specified in part II and
64

•S 2351 PCS

1 guidelines for an accreditation, certification, en2 forcement, and information program for partici3 pating States by not later than July 1, 1995.

4 ‘‘(B) ADAPTATION TO DELIVERY SYS5 TEMS.—The Secretary shall adapt the stand6 ards specified in subpart B of part II with re7 spect to each particular delivery system.

8 ‘‘(C) ESTABLISHMENT OF PROVISIONAL

9 STANDARDS.—With respect to any health plan

10 operating in an underserved area (as designated

11 by the State or the Secretary under section

12 21601), the Secretary may adopt provisional

13 standards for use for not more than 3 years in

14 lieu of the standards specified in subpart B of

15 part II.

16 ‘‘(2) ESTABLISHMENT OF STANDARDS FOR RE17 INSURANCE AND RISK ADJUSTMENT PROGRAMS.—

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

19 develop standards under subparagraphs (B),

20 (C), and (D), for participating States to provide

21 reinsurance pools, risk adjustment programs,

22 and subsidy adjustment programs under section

23 21023 for participation by standard health

24 plans as provided in section 21121.
65

•S 2351 PCS

1 ‘‘(B) MANDATORY REINSURANCE POOLS.—

2 The standards developed by the Secretary

3 under this subparagraph shall include a system

4 of mandatory reinsurance which—

5 ‘‘(i) specifies the manner of creation,

6 structure, and operation of the system, in7 cluding—

8 ‘‘(I) the manner (which may be

9 prospective or retrospective) in which

10 community-rated and self-insured

11 standard health plans make payments

12 to their respective systems, and

13 ‘‘(II) the type and level of rein14 surance coverage provided;

15 ‘‘(ii) provides for such health plans to

16 make payments to the State-established re17 insurance program for the purpose of

18 eliminating incentives for plans to discrimi19 nate against individuals on the basis of

20 their expected utilization of health services;

21 and

22 ‘‘(iii) provides such health plans with

23 incentives to manage the care and health

24 care costs of individuals with above-aver-
66

•S 2351 PCS

1 age needs (or expected needs) for health

2 care services.

3 ‘‘(C) RISK ADJUSTMENT PROGRAM.—

4 ‘‘(i) IN GENERAL.—The standards de5 veloped by the Secretary under this sub6 paragraph shall include a risk adjustment

7 program which—

8 ‘‘(I) assures that payments to

9 community-rated standard health

10 plans reflect the expected relative uti11 lization and expenditures for health

12 care services by each plan’s enrollees

13 compared to the average utilization

14 and expenditures for community-rated

15 individuals; and

16 ‘‘(II) protects plans that enroll a

17 disproportionate share of such individ18 uals with respect to whom expected

19 utilization of health care services and

20 expected health care expenditures for

21 such services are greater than the av22 erage utilization and expenditures for

23 such eligible individuals.

24 ‘‘(ii) FACTORS TO BE CONSIDERED.—

25 In developing the standards for a risk ad-
67

•S 2351 PCS

1 justment program, the Secretary may take

2 into account the following factors with re3 spect to enrollees:

4 ‘‘(I) Demographic characteristics.

5 ‘‘(II) Health status.

6 ‘‘(III) Socio-economic status.

7 ‘‘(IV) Subsidy status.

8 ‘‘(V) Other factors determined

9 appropriate by the Secretary.

10 ‘‘(iii) ZERO SUM.—The standards for

11 the risk adjustment program methodology

12 shall assure that the total payments to all

13 community-rated standard health plans

14 after application of the methodology are

15 the same as the amount of payments that

16 would have been made without application

17 of the methodology.

18 ‘‘(D) COST-SHARING ADJUSTMENT PRO19 GRAM.—The standards developed by the Sec20 retary under this subparagraph shall include a

21 cost-sharing adjustment program which redis22 tributes losses among all standard health plans,

23 except multistate self-insured health plans, re24 sulting from the reduced cost-sharing obliga25 tions of individuals receiving assistance as is
68

•S 2351 PCS

1 provided under the program described in part B

2 of title XIX.

3 ‘‘(3) ESTABLISHMENT OF CAPITAL STAND4 ARDS.—

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

6 develop, in consultation with the NAIC, by not

7 later than July 1, 1995, a risk-based capital

8 standards formula for health plans under sec9 tion 21122.

10 ‘‘(B) NO PREEMPTION.—Nothing in this

11 title shall preclude or preempt State law on, or

12 regulation of, health plan deposit reserve re13 quirements.

14 ‘‘(4) CONSULTATION WITH SECRETARY OF

15 LABOR.—

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

17 subparagraph (B), in the case of multistate

18 self-insured health plans, the Secretary, in con19 sultation with the Secretary of Labor, shall de20 velop and publish the standards for such plans.

21 ‘‘(B) REINSURANCE PROGRAM.—The Sec22 retary of Labor shall develop, by not later than

23 July 1, 1995, standards for a reinsurance pro24 gram for multistate self-insured health plans

25 under section 21121.
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•S 2351 PCS

1 ‘‘(c) NATIONAL HEALTH PLAN STANDARDS AND

2 QUALITY ADVISORY COMMITTEE.—

3 ‘‘(1) ESTABLISHMENT.—The Secretary shall es4 tablish a National Health Plan Standards and Qual5 ity Advisory Committee (hereafter referred to in this

6 subsection as the ‘Committee’) by March 1, 1995, to

7 advise the Secretary on—

8 ‘‘(A) standards and evaluation criteria to

9 be used in the certification of all plans;

10 ‘‘(B) the use and accountability of funds

11 from the Health Security Trust Fund to sup12 port State establishment of accreditation, cer13 tification, enforcement, and information pro14 grams; and

15 ‘‘(C) national measures of quality perform16 ance, comparative value information criteria,

17 population health status measures, and other

18 aspects of quality and consumer information.

19 ‘‘(2) NUMBER AND APPOINTMENT.—The Com20 mittee shall be composed of the Administrator of the

21 Agency for Health Care Policy and Research, the

22 Administrator of the Health Care Financing Admin23 istration, and 11 members appointed by the Sec24 retary. The appointed members shall be broadly rep-
70

•S 2351 PCS

1 resentative of the population of the United States

2 and shall include—

3 ‘‘(A) a representative of State insurance

4 commissioners or State health departments;

5 ‘‘(B) a representative of health plans;

6 ‘‘(C) a representative of employers pur7 chasing health care;

8 ‘‘(D) a representative of health care pro9 viders;

10 ‘‘(E) a representative of consumers of

11 health care;

12 ‘‘(F) a representative of associations of

13 private accreditation entities; and

14 ‘‘(G) individuals distinguished in the fields

15 of law, medicine, economics, public health, and

16 health services research.

17 ‘‘(3) TERMS.—

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

19 subparagraph (B), the appointed members of

20 the Committee shall serve for a term of 4 years.

21 ‘‘(B) STAGGERED ROTATION.—Of the

22 members first appointed to the Committee

23 under paragraph (2), the Secretary shall ap24 point 4 members to serve for a term of 4 years,
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1 4 members to serve for a term of 3 years, 3

2 members to serve for a term of 2 years.

3 ‘‘(C) SERVICE BEYOND TERM.—An ap4 pointed member of the Committee may continue

5 to serve after the expiration of the term of the

6 member until a successor is appointed.

7 ‘‘(4) VACANCIES.—If an appointed member of

8 the Committee does not serve the full term applica9 ble under paragraph (3), the individual appointed to

10 fill the resulting vacancy shall be appointed for the

11 remainder of the term of the predecessor of the indi12 vidual.

13 ‘‘(5) CHAIR.—The Secretary shall designate an

14 individual to serve as the chair of the Committee.

15 ‘‘(6) MEETINGS.—The Committee shall meet

16 not less than once during each 4-month period and

17 shall otherwise meet at the call of the Secretary or

18 the chair.

19 ‘‘(7) COMPENSATION AND REIMBURSEMENT OF

20 EXPENSES.—Members of the Committee shall re21 ceive compensation for each day (including travel

22 time) engaged in carrying out the duties of the Com23 mittee. Such compensation may not be in an amount

24 in excess of the maximum rate of basic pay payable
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•S 2351 PCS

1 for level IV of the Executive Schedule under section

2 5315 of title 5, United States Code.

3 ‘‘(8) STAFF.—The Secretary shall provide to

4 the Committee such staff, information, and other as5 sistance as may be necessary to carry out the duties

6 of the Committee.

7 ‘‘(9) FACA NOT APPLICABLE.—The Federal

8 Advisory Committee Act (5 U.S.C. App.) shall not

9 apply to the Committee.

10 ‘‘(d) TAX QUALIFICATION.—For favorable Federal

11 income tax treatment which is available only to certified

12 standard health plans, see sections 213(f) and 4521 of the

13 Internal Revenue Code of 1986.

14 ‘‘SEC. 21102. CERTIFIED SUPPLEMENTAL HEALTH BENE15 FITS PLANS.

16 ‘‘(a) IN GENERAL.—A supplemental health benefits

17 plan shall meet the applicable reform standards estab18 lished under subsection (b).

19 ‘‘(b) ESTABLISHMENT OF STANDARDS.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the Secretary shall develop and publish

22 specific standards to implement the standards speci23 fied in part III by not later than January 1, 1996.

24 ‘‘(2) CONSULTATION WITH SECRETARY OF

25 LABOR.—In the case of multistate self-insured sup-
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•S 2351 PCS

1 plemental health benefits plans, the Secretary, in

2 consultation with the Secretary of Labor, shall de3 velop and publish the standards described in para4 graph (1).

5 ‘‘(c) TAX QUALIFICATION.—For favorable Federal

6 income tax treatment which is available only to certified

7 supplemental health benefits plans, see section 4521 of the

8 Internal Revenue Code of 1986.

9 ‘‘SEC. 21103. CERTIFIED LONG-TERM CARE POLICIES.

10 ‘‘(a) IN GENERAL.—A long-term care policy shall

11 meet the applicable reform standards established under

12 subsection (b).

13 ‘‘(b) ESTABLISHMENT OF STANDARDS.—

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), the Secretary, in consultation with the

16 NAIC, shall develop and publish specific standards

17 to implement the standards specified in part IV by

18 not later than September 1, 1996.

19 ‘‘(2) STATE STANDARDS.—Nothing in this title

20 shall be construed as preventing a participating

21 State from applying standards that provide greater

22 protection to insured individuals under long-term

23 care policies than the standards promulgated under

24 this section, except that such State standards may
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•S 2351 PCS

1 not be inconsistent with any of the standards speci2 fied in part IV.

3 ‘‘(c) TAX QUALIFICATION.—For favorable Federal

4 income tax treatment which is available only to certified

5 long-term care policies, see section 7702B of the Internal

6 Revenue Code of 1986.

7 ‘‘SEC. 21104. GENERAL RULES.

8 ‘‘(a) CONSTRUCTION.—Whenever in this subtitle a

9 requirement or standard is imposed on a health plan, sup10 plemental health benefits plan, or long-term care policy,

11 the requirement or standard is deemed to have been im12 posed on the insurer or sponsor of the plan or policy in

13 relation to that plan or policy.

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

15 order to permit the timely implementation of the provi16 sions of this title, the Secretary and the Secretary of

17 Labor are each authorized to issue regulations under this

18 title on an interim basis that become final on the date

19 of publication, subject to change based on subsequent pub20 lic comment.

21 ‘‘(c) REFERENCE TO REFORM STANDARDS.—For

22 purposes of this title, the term ‘reform standards’ means

23 the standards developed under this subtitle and applicable

24 under parts II, III, and IV.
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1 ‘‘PART II—STANDARDS APPLICABLE TO

2 STANDARD HEALTH PLANS

3 ‘‘Subpart A—Insurance Standards

4 ‘‘SEC. 21111. GUARANTEED ISSUE AND RENEWAL.

5 ‘‘(a) ISSUE.—

6 ‘‘(1) IN GENERAL.—Except as otherwise pro7 vided in this section, a standard health plan spon8 sor—

9 ‘‘(A) offering a community-rated health

10 plan shall offer such plan to any community11 rated individual applying for coverage; and

12 ‘‘(B) offering an experience-rated health

13 plan or a self-insured health plan shall offer

14 such plan to any experience-rated individual eli15 gible for coverage under the plan through the

16 individual’s experience-rated employer.

17 ‘‘(2) AVAILABILITY.—

18 ‘‘(A) IN GENERAL.—A community-rated

19 standard health plan shall be made available

20 throughout the entire community rating area in

21 which such plan is offered, including through

22 any purchasing cooperative choosing to offer

23 such plan.

24 ‘‘(B) GEOGRAPHIC LIMITATIONS.—A com25 munity-rated standard health plan may deny

26 coverage under the plan to a community-rated
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•S 2351 PCS

1 individual who resides outside the community

2 rating area in which such plan is offered, but

3 only if such denial is applied uniformly, without

4 regard to health status or insurability of indi5 viduals.

6 ‘‘(3) APPLICATION OF CAPACITY LIMITS.—

7 ‘‘(A) IN GENERAL.—Subject to subpara8 graph (B), an insured standard health plan

9 may apply to the appropriate certifying author10 ity to cease enrolling individuals under the plan

11 if—

12 ‘‘(i) the plan ceases to enroll any new

13 individuals; and

14 ‘‘(ii) the plan can demonstrate to the

15 applicable certifying authority that its fi16 nancial or provider capacity to serve pre17 viously covered groups or individuals (and

18 additional individuals who will be expected

19 to enroll because of affiliation with such

20 previously covered groups or individuals)

21 will be impaired if it is required to enroll

22 other individuals.

23 ‘‘(B) FIRST-COME-FIRST-SERVED.—An in24 sured standard health plan is only eligible to ex25 ercise the limitations provided for in subpara-
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1 graph (A) if such plan provides for enrollment

2 of individuals on a first-come-first-served basis

3 (except in the case of additional individuals de4 scribed in subparagraph (A)(ii)).

5 ‘‘(b) RENEWAL.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), a standard health plan that is issued to

8 an individual shall be renewed at the option of the

9 individual.

10 ‘‘(2) GROUNDS FOR REFUSAL TO RENEW.—A

11 health plan sponsor may refuse to renew, or may

12 terminate, a standard health plan under this title

13 only for—

14 ‘‘(A) nonpayment of premiums;

15 ‘‘(B) fraud on the part of the individual; or

16 ‘‘(C) misrepresentation of material facts on

17 the part of the individual relating to an applica18 tion for coverage or claim for benefits.

19 ‘‘(c) FEHBP PLANS.—Any standard health plan

20 sponsor participating in the Federal Employees Health

21 Benefits Program, and operating a standard health plan

22 within a community rating area, shall offer a community23 rated standard health plan in such area, except that this

24 requirement shall not apply to nationwide plans under
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1 paragraphs (1), (2), and (3) of section 8903 of title 5,

2 United States Code.

3 ‘‘(d) CERTAIN EXCLUDED PLANS.—The provisions of

4 this section, other than subsections (b) and (e)(2)(B),

5 shall not apply to any religious fraternal benefit society

6 in existence as of September 1993, which bears the risk

7 of providing insurance to its members, and which is an

8 organization described in section 501(c)(8) of the Internal

9 Revenue Code of 1986 which is exempt from taxation

10 under section 501(a) of such Code.

11 ‘‘(e) APPLICATION OF INTERIM STANDARDS.—

12 ‘‘(1) IN GENERAL.—During the interim stand13 ards application period, a health plan sponsor may

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

15 the standards specified in paragraph (2).

16 ‘‘(2) SPECIFIED STANDARDS.—

17 ‘‘(A) ISSUE.—The standards specified in

18 subsection (a) with respect to self-insured

19 health plans.

20 ‘‘(B) RENEWAL.—The standards specified

21 in subsection (b).

22 ‘‘(C) EXIT FROM MARKET.—

23 ‘‘(i) IN GENERAL.—An insurer shall

24 renew an insured health plan through a

25 particular type of delivery system (as de-
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•S 2351 PCS

1 fined in section 21100) with respect to a

2 community-rated individual, unless such

3 insurer—

4 ‘‘(I) elects not to renew all of its

5 insured health plans using such deliv6 ery system issued to all such individ7 uals in a State; and

8 ‘‘(II) provides notice to the ap9 propriate certifying authority and to

10 each such individual covered under

11 the plan of such termination at least

12 180 days before the date of expiration

13 of the plan.

14 ‘‘(ii) PROHIBITION ON MARKET RE15 ENTRY.—In the case of such a termi16 nation, such insurer may not provide for

17 the issuance of any insured health plan

18 using such a delivery system to a commu19 nity-rated individual in such State during

20 the 5-year period beginning on the date of

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

23 ‘‘(3) INTERIM STANDARDS APPLICATION PERI24 ODS.—The interim standards application period is—
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1 ‘‘(A) in the case of the standard specified

2 in paragraph (2)(A), on or after January 1,

3 1995, and before January 1, 1996;

4 ‘‘(B) in the case of the standards specified

5 in paragraph (2)(B), on or after June 28,

6 1994, and before January 1, 1996; and

7 ‘‘(C) in the case of the standard specified

8 in paragraph (2)(C), on or after the date of the

9 enactment of this title, and before January 1,

10 1996.

11 ‘‘(4) PREEMPTION.—The requirements of this

12 subsection do not preempt any State law unless

13 State law directly conflicts with such requirements.

14 The provision of additional protections under State

15 law shall not be considered to directly conflict with

16 such requirements. The Secretary may issue letter

17 determinations with respect to whether this sub18 section preempts a provision of State law.

19 ‘‘(5) CONSTRUCTION.—The provisions of this

20 subsection shall be construed in a manner that

21 assures, to the greatest extent practicable, continuity

22 of health benefits under health plans in effect on the

23 effective date of this title.

24 ‘‘(6) SPECIAL RULES FOR ACQUISITIONS AND

25 TRANSFERS.—The Secretary may issue regulations
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•S 2351 PCS

1 regarding the application of this subsection in the

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

3 are transferred from one health plan sponsor to an4 other sponsor through assumption, acquisition, or

5 otherwise.

6 ‘‘SEC. 21112. ENROLLMENT.

7 ‘‘(a) ENROLLMENT PROCESS.—

8 ‘‘(1) IN GENERAL.—A standard health plan

9 shall establish an enrollment process consistent with

10 this subsection.

11 ‘‘(2) INITIAL ENROLLMENT PERIOD.—Each in12 dividual shall have an initial enrollment period in

13 which to enroll in a standard health plan—

14 ‘‘(A) except as provided in subparagraph

15 (B), beginning on January 1, 1996, and ending

16 on March 31, 1996,

17 ‘‘(B) with respect to premium subsidy eli18 gible individuals described in section

19 1952(a)(2)(A)(i) in States which have not es20 tablished a premium subsidy program in 1996,

21 beginning on January 1, 1997, and ending on

22 March 31, 1997.

23 ‘‘(3) GENERAL ENROLLMENT PERIOD.—Each

24 standard health plan shall permit eligible individuals

25 to enroll (or change enrollment) in the plan during
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1 each general annual enrollment period specified by

2 the appropriate certifying authority under section

3 21024.

4 ‘‘(4) SPECIAL ENROLLMENT PERIODS.—In the

5 case of an individual who—

6 ‘‘(A) through marriage, separation, di7 vorce, birth or adoption of a child, death, or

8 similar circumstances, experiences a change in

9 family composition;

10 ‘‘(B) experiences a change in employment

11 status (including a significant change in the

12 terms and conditions of employment) or in con13 tinuation coverage;

14 ‘‘(C) changes residence to another commu15 nity rating area;

16 ‘‘(D) disenrolls for cause from a standard

17 health plan; or

18 ‘‘(E) is subject to the decertification of a

19 standard health plan under section 21012,

20 each standard health plan shall provide for a special

21 enrollment period in which the employee or individ22 ual is permitted to change the individual or family

23 basis of coverage or the plan in which the employee

24 or individual is enrolled. The circumstances under

25 which such special enrollment periods are required
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1 and the duration of such periods shall be specified

2 in the reform standards.

3 ‘‘(b) COMMENCEMENT OF COVERAGE.—

4 ‘‘(1) IN GENERAL.—In the case of an individual

5 who enrolls with a standard health plan during an

6 enrollment period, coverage under the plan shall

7 begin on such date (not later than the first day of

8 the first month that begins at least 15 days after

9 the date of enrollment) as the reform standards

10 specify.

11 ‘‘(2) NEWBORNS.—In the event of the birth or

12 adoption of a child of an enrollee, coverage of such

13 child under such enrollee’s standard health plan (re14 gardless of the class of enrollment) shall begin on

15 the date of such birth or adoption and shall con16 tinue, in the absence of any enrollment of such child

17 during a special enrollment period provided under

18 subsection (a)(4), for at least 45 days.

19 ‘‘SEC. 21113. RATING LIMITATIONS FOR COMMUNITY-RATED

20 MARKET.

21 ‘‘(a) STANDARD PREMIUMS WITH RESPECT TO COM22 MUNITY-RATED ELIGIBLE INDIVIDUALS.—Each standard

23 health plan which covers community-rated individuals

24 shall establish within each community rating area in which
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1 the plan is to be offered a standard premium for individual

2 enrollment for—

3 ‘‘(1) the standard benefits package established

4 under subtitle C, and

5 ‘‘(2) the alternative standard benefits package

6 established under subtitle C.

7 ‘‘(b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT8 ING AREAS.—

9 ‘‘(1) IN GENERAL.—Subject to paragraphs (2)

10 and (3), the standard premium for each package de11 scribed in subsection (a) for all community-rated in12 dividuals within a community rating area shall be

13 the same and shall not include the costs of premium

14 processing, enrollment, and marketing that would

15 vary depending on whether the method of enrollment

16 is through a purchasing cooperative, or directly

17 through a health plan, an employer, or a broker.

18 ‘‘(2) APPLICATION TO ENROLLEES.—

19 ‘‘(A) IN GENERAL.—The premium charged

20 for coverage in a standard health plan which

21 covers community-rated individuals shall be the

22 product of—

23 ‘‘(i) the standard premium (estab24 lished under paragraph (1));
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1 ‘‘(ii) in the case of enrollment other

2 than individual enrollment, the family ad3 justment factor specified under subpara4 graph (B); and

5 ‘‘(iii) the age adjustment factor (spec6 ified under subparagraph (C)).

7 ‘‘(B) FAMILY ADJUSTMENT FACTOR.—

8 ‘‘(i) IN GENERAL.—The reform stand9 ards shall specify family adjustment fac10 tors that reflect the relative actuarial costs

11 of benefit packages based on family classes

12 of enrollment (as compared with such costs

13 for individual enrollment).

14 ‘‘(ii) CLASSES OF ENROLLMENT.—For

15 purposes of this title, there are 6 classes of

16 enrollment:

17 ‘‘(I) Coverage only of an individ18 ual (other than an individual de19 scribed in subclause (II)) (referred to

20 in this title as the ‘individual’ enroll21 ment or class of enrollment).

22 ‘‘(II) Coverage only of an individ23 ual who has not attained age 18 (re24 ferred to in this title as the ‘single
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•S 2351 PCS

1 child’ enrollment or class of enroll2 ment).

3 ‘‘(III) Coverage only of two or

4 more children (referred to in this title

5 as the ‘multiple children’ enrollment

6 or class of enrollment).

7 ‘‘(IV) Coverage of a married cou8 ple without children (referred to in

9 this title as the ‘couple-only’ enroll10 ment or class of enrollment).

11 ‘‘(V) Coverage of an individual

12 and one or more children (referred to

13 in this title as the ‘single parent’ en14 rollment or class of enrollment).

15 ‘‘(VI) Coverage of a married cou16 ple and one or more children (referred

17 to in this title as the ‘dual parent’ en18 rollment or class of enrollment).

19 ‘‘(iii) REFERENCES TO FAMILY AND

20 COUPLE CLASSES OF ENROLLMENT.—In

21 this title:

22 ‘‘(I) FAMILY.—The terms ‘family

23 enrollment’ and ‘family class of enroll24 ment’ refer to enrollment in a class of

25 enrollment described in any subclause
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•S 2351 PCS

1 of clause (ii) (other than subclause

2 (I)).

3 ‘‘(II) COUPLE.—The term ‘couple

4 class of enrollment’ refers to enroll5 ment in a class of enrollment de6 scribed in subclause (IV) or (VI) of

7 clause (ii).

8 ‘‘(iv) SPOUSE; MARRIED; COUPLE.—

9 ‘‘(I) IN GENERAL.—In this title,

10 the terms ‘spouse’ and ‘married’

11 mean, with respect to an individual,

12 another individual who is the spouse

13 of, or is married to, the individual, as

14 determined under applicable State

15 law.

16 ‘‘(II) COUPLE.—The term ‘cou17 ple’ means an individual and the indi18 vidual’s spouse.

19 ‘‘(C) AGE ADJUSTMENT FACTOR.—The

20 Secretary, in consultation with the NAIC, shall

21 specify uniform age categories and rating incre22 ments for age adjustment factors that reflect

23 the relative actuarial costs of benefit packages

24 among enrollees. For individuals who have at25 tained age 18 but not age 65, the highest age
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•S 2351 PCS

1 adjustment factor may not exceed twice the

2 lowest age adjustment factor.

3 ‘‘(3) ADMINISTRATIVE CHARGES.—

4 ‘‘(A) IN GENERAL.—In accordance with

5 the reform standards, a standard health plan

6 which covers community-rated individuals may

7 add a separately-stated administrative charge

8 which is based on identifiable differences in

9 marketing and other legitimate administrative

10 costs which vary by size of the enrolling group

11 and method of enrollment, including enrollment

12 directly through a health plan, an employer, or

13 a broker (as defined in such standards).

14 ‘‘(B) APPLICATION.—The administrative

15 charge for any plan described in subparagraph

16 (A) shall be applied uniformly with respect to

17 group size and method of enrollment and the

18 Secretary shall specify the permitted variation

19 in the administrative charge of a plan.

20 ‘‘(C) DISALLOWANCE OF SEPARATE

21 CHARGE ON COOPERATIVE.—No standard

22 health plan which covers community-rated indi23 viduals may impose a separately-stated adminis24 trative charge for enrollment through any pur25 chasing cooperative.
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•S 2351 PCS

1 ‘‘(c) TREATMENT OF NEGOTIATED RATE AS COMMU2 NITY RATE.—Notwithstanding any other provision of this

3 section, a standard health plan which covers community4 rated individuals in a community rating area may only

5 charge a premium for any coverage which is the same as

6 the premium for such coverage when it is offered through

7 a purchasing cooperative in such area.

8 ‘‘SEC. 21114. RATING PRACTICES AND PAYMENT OF PRE9 MIUMS.

10 ‘‘(a) FULL DISCLOSURE OF RATING PRACTICES.—

11 ‘‘(1) IN GENERAL.—At the time a health plan

12 sponsor offers a standard health plan, such sponsor

13 shall fully disclose rating practices for such plan to

14 the appropriate certifying authority.

15 ‘‘(2) NOTICE ON EXPIRATION.—A health plan

16 sponsor providing a standard health plan shall pro17 vide for notice, at least 60 days before the date of

18 expiration of the plan, of the terms for renewal of

19 the plan.

20 ‘‘(3) ACTUARIAL CERTIFICATION.—Each health

21 plan sponsor shall file annually with the appropriate

22 certifying authority a written statement by a mem23 ber of the American Academy of Actuaries (or other

24 individual acceptable to such authority) certifying

25 that, based upon an examination by the individual
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•S 2351 PCS

1 which includes a review of the appropriate records

2 and of the actuarial assumptions of such sponsor

3 and methods used by such sponsor in establishing

4 premium rates for insured standard health plans—

5 ‘‘(A) such sponsor is in compliance with

6 the applicable provisions of this section; and

7 ‘‘(B) the rating methods are actuarially

8 sound.

9 Each such sponsor shall retain a copy of such state10 ment at its principal place of business for examina11 tion by any individual.

12 ‘‘(b) PAYMENT OF PREMIUMS.—

13 ‘‘(1) IN GENERAL.—With respect to a new en14 rollee in a standard health plan, the plan may re15 quire advanced payment of an amount equal to the

16 monthly applicable premium for the plan at the time

17 such individual is enrolled.

18 ‘‘(2) NOTIFICATION OF FAILURE TO RECEIVE

19 PREMIUM.—If a standard health plan fails to receive

20 payment on a premium due with respect to an indi21 vidual covered under the plan, the plan shall provide

22 notice of such failure to the individual within the 20-

23 day period after the date on which such premium

24 payment was due.
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1 ‘‘SEC. 21115. NONDISCRIMINATION BASED ON HEALTH STA2 TUS.

3 ‘‘(a) IN GENERAL.—Except as provided under sub4 section (b), a standard health plan may not—

5 ‘‘(1) deny, limit, or condition the coverage

6 under (or benefits of) the plan;

7 ‘‘(2) engage, directly or through contractual ar8 rangements, in any activity, including the selection

9 of a service area; and

10 ‘‘(3) in the case of a self-insured standard

11 health plan, vary the premium,

12 based on the health status, medical condition, claims expe13 rience, receipt of health care, medical history, anticipated

14 need for health care expenses, disability, or lack of evi15 dence of insurability, of an individual.

16 ‘‘(b) TREATMENT OF PREEXISTING CONDITION EX17 CLUSIONS FOR ALL SERVICES.—

18 ‘‘(1) IN GENERAL.—Subject to paragraph (4), a

19 standard health plan may impose a limitation or ex20 clusion of benefits relating to treatment of a condi21 tion based on the fact that the condition preexisted

22 the effective date of the plan with respect to an indi23 vidual only if—

24 ‘‘(A) the condition was diagnosed or treat25 ed during the 3-month period ending on the day

26 before the date of enrollment under the plan;
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•S 2351 PCS

1 ‘‘(B) the limitation or exclusion extends for

2 a period not more than 6 months after the date

3 of enrollment under the plan;

4 ‘‘(C) the limitation or exclusion does not

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

6 birth, was covered under the plan; or

7 ‘‘(D) the limitation or exclusion does not

8 apply to pregnancy.

9 ‘‘(2) CREDITING OF PREVIOUS COVERAGE.—A

10 standard health plan shall provide that if an individ11 ual under such plan is in a period of continuous cov12 erage as of the date of enrollment under such plan,

13 any period of exclusion of coverage with respect to

14 a preexisting condition shall be reduced by 1 month

15 for each month in the period of continuous coverage.

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

17 ‘‘(A) PERIOD OF CONTINUOUS COV18 ERAGE.—The term ‘period of continuous cov19 erage’ means the period beginning on the date

20 an individual is enrolled under a health plan or

21 health care program which provides benefits

22 equivalent to those provided by the plan in

23 which the individual is seeking to enroll with re24 spect to coverage of a preexisting condition and

25 ends on the date the individual is not so en-
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•S 2351 PCS

1 rolled for a continuous period of more than 3

2 months.

3 ‘‘(B) PREEXISTING CONDITION.—The term

4 ‘preexisting condition’ means, with respect to

5 coverage under a standard health plan, a condi6 tion which was diagnosed, or which was treated,

7 within the 3-month period ending on the day

8 before the date of enrollment (without regard to

9 any waiting period).

10 ‘‘(4) SPECIAL RULE FOR 1996.—This subsection

11 shall be applied for calendar year 1996 by substitut12 ing ‘6-month’ for ‘3-month’ in paragraph (1)(A).

13 ‘‘(5) PROHIBITION ON PREEXISTING CONDITION

14 EXCLUSION DURING AMNESTY PERIOD.—This sub15 section shall not apply during an initial enrollment

16 period described in section 21112(a)(2).

17 ‘‘(c) APPLICATION OF INTERIM STANDARDS.—

18 ‘‘(1) IN GENERAL.—During the interim stand19 ards application period, a health plan sponsor may

20 only offer a self-insured health plan in a State if

21 such plan meets the standards specified in para22 graph (2).

23 ‘‘(2) SPECIFIED STANDARDS.—
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•S 2351 PCS

1 ‘‘(A) ISSUE.—The standards specified in

2 subsection (a) with respect to self-insured

3 health plans.

4 ‘‘(B) COVERAGE.—A self-insured health

5 plan may not reduce or limit coverage of any

6 condition or course of treatment that is ex7 pected to cost not less than $5,000 during any

8 12-month period.

9 ‘‘(3) INTERIM STANDARDS APPLICATION PERI10 ODS.—The interim standards application period is—

11 ‘‘(A) in the case of the standard specified

12 in paragraph (2)(A), on or after January 1,

13 1995, and before January 1, 1996; and

14 ‘‘(B) in the case of the standards specified

15 in paragraph (2)(B), on or after June 28,

16 1994, and before January 1, 1996.

17 ‘‘(4) APPLICATION OF RULES.—Paragraphs (4),

18 (5), and (6) of section 21111(e) shall apply to this

19 subsection.

20 ‘‘SEC. 21116. BENEFITS OFFERED.

21 ‘‘A standard health plan shall offer to all enrollees

22 in the plan the standard benefits package or the alter23 native standard benefits package established under sub24 title C.
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1 ‘‘Subpart B—Delivery System Standards

2 ‘‘SEC. 21121. REINSURANCE, RISK ADJUSTMENT, AND COST3 SHARING ADJUSTMENT.

4 ‘‘(a) COMMUNITY-RATED PLANS.—Each community5 rated standard health plan shall participate in a reinsur6 ance pool, risk adjustment program, and cost-sharing ad7 justment program of the State described in section

8 21101(b)(2).

9 ‘‘(b) EXPERIENCE-RATED PLANS.—Each experience10 rated health plan shall participate in a cost-sharing ad11 justment program described in section 21101(b)(2).

12 ‘‘(c) SELF-INSURED PLANS.—

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), each self-insured standard health plan

15 shall participate in a reinsurance pool and the cost16 sharing adjustment program of the State described

17 in section 21101(b)(2).

18 ‘‘(2) MULTISTATE PLANS.—Each multistate

19 self-insured standard health plan shall participate in

20 a reinsurance program developed under section

21 21101(b)(4)(B).

22 ‘‘(d) HOLD-HARMLESS PROTECTIONS.—Each stand23 ard health plan shall hold individual providers harmless

24 from the effects of the cost-sharing assistance program

25 under section 1953(b).
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1 ‘‘SEC. 21122. CAPITAL REQUIREMENTS.

2 ‘‘Each standard health plan shall meet the risk-based

3 capital standards formula applicable to such plan under

4 the standards established under section 21101(b)(3).

5 ‘‘SEC. 21123. COLLECTION AND PROVISION OF STANDARD6 IZED INFORMATION.

7 ‘‘(a) HEALTH PLANS REQUIRED TO SUBMIT INFOR8 MATION TO PROGRAM.—Each standard health plan of9 fered or operated in a State shall submit to the consumer

10 information program of such State established under sec11 tion 21013 the program descriptive information regard12 ing—

13 ‘‘(1) certification status of the plan;

14 ‘‘(2) benefits offered under the plan;

15 ‘‘(3) premiums, cost-sharing, and administra16 tive charges under the plan;

17 ‘‘(4) risk and referral arrangements under the

18 plan;

19 ‘‘(5) health care providers used under the plan

20 and the availability of such providers;

21 ‘‘(6) the enrollee complaint and appeals process

22 used under the plan; and

23 ‘‘(7) other appropriate information as deter24 mined by the Secretary.
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•S 2351 PCS

1 The submission of such information shall be in the form

2 of nonidentifiable health information (as defined in section

3 11702(7)).

4 ‘‘(b) ADDITIONAL REQUIREMENTS.—Each standard

5 health plan shall meet the requirements specified under

6 subtitles B and C of title XI with respect to such plans.

7 ‘‘SEC. 21124. QUALITY IMPROVEMENT AND ASSURANCE.

8 ‘‘(a) IN GENERAL.—Each standard health plan

9 shall—

10 ‘‘(1) develop and implement an internal quality

11 improvement program designed to measure, assess,

12 and improve enrollee health status, enrollee out13 comes, enrollee processes of care, and enrollee satis14 faction;

15 ‘‘(2) develop and implement quality improve16 ment goals based on the results of population health

17 status measurements conducted under subtitle E;

18 and

19 ‘‘(3) maintain a program to assure that the

20 quality of health care services furnished to enrollees

21 meets minimum standards of safety and clinical

22 practice.

23 ‘‘(b) UTILIZATION MANAGEMENT.—

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

25 shall provide that all review determinations shall be
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•S 2351 PCS

1 made by licensed or certified health professionals

2 with appropriate clinical training.

3 ‘‘(2) ADDITIONAL STANDARDS.—Each standard

4 health plan shall base utilization management on

5 current scientific knowledge, stress the efficient de6 livery of health care and outcomes, rely primarily on

7 evaluating and comparing practice patterns rather

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

9 and timely in application.

10 ‘‘(3) NO FINANCIAL INCENTIVES.—Utilization

11 management by each standard health plan may not

12 create direct financial incentives for reviewers to re13 duce or limit medically necessary or appropriate

14 services.

15 ‘‘(4) CONSUMER DISCLOSURE.—Each standard

16 health plan shall disclose, upon request, to enrollees

17 (and prospective enrollees) and to participating pro18 viders (and prospective providers) the utilization re19 view protocols used by the plan, while protecting

20 proprietary business information to the extent speci21 fied by the Secretary in the reform standards.

22 ‘‘(c) CREDENTIALING.—Each standard health plan

23 shall—

24 ‘‘(1) credential participating physicians and

25 practitioners; and
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•S 2351 PCS

1 ‘‘(2) ensure that participating providers and fa2 cilities are appropriately accredited, certified, and li3 censed.

4 ‘‘(d) CONTINUITY OF CARE.—Each standard health

5 plan shall develop and implement mechanisms for coordi6 nating the delivery of care across provider settings.

7 ‘‘(e) MEDICAL RECORDKEEPING.—Each standard

8 health plan shall assure that pertinent information is read9 ily available to appropriate professionals.

10 ‘‘SEC. 21125. PATIENT PROTECTIONS AND PROVIDER SE11 LECTION.

12 ‘‘(a) PATIENT INFORMATION.—Each standard health

13 plan shall provide to enrollees clear descriptive information

14 about the rights and responsibilities of enrollees.

15 ‘‘(b) INFORMATION REGARDING A PATIENT’S RIGHT

16 TO SELF-DETERMINATION IN HEALTH CARE SERV17 ICES.—Each standard health plan shall—

18 ‘‘(1) provide written information to each indi19 vidual enrolling in such plan of—

20 ‘‘(A) such individual’s right under State

21 law (whether statutory or as recognized by the

22 courts of the State) to make decisions concern23 ing medical care, including the right to accept

24 or refuse medical treatment and the right to
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•S 2351 PCS

1 formulate advance directives (as defined in sec2 tion 1866(f)(3)), and

3 ‘‘(B) the written policies of the plan with

4 respect to such right;

5 ‘‘(2) provide for educational activities for pa6 tients and participating providers; and

7 ‘‘(3) require participating primary care physi8 cians to include in their patients’ charts the wishes

9 of the patient concerning advance directives.

10 ‘‘(c) CONFIDENTIALITY OF PATIENT RECORDS.—

11 Each standard health plan shall have explicit procedures

12 to protect the confidentiality of individual patient informa13 tion consistent with the rules established under subtitle

14 C of title XI.

15 ‘‘(d) MARKETING.—No insurer may engage in selec16 tive marketing that would have the effect of avoiding high17 risk subscribers within a community rating area. Market18 ing materials may not contain false or materially mislead19 ing information.

20 ‘‘(e) NO PATIENT LIABILITY FOR UNPAID PLAN OB21 LIGATIONS.—Each standard health plan shall hold enroll22 ees harmless with respect to any plan obligations for pay23 ment to providers.

24 ‘‘(f) REMEDIES AND ENFORCEMENT.—
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•S 2351 PCS

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

2 shall comply with the remedies and enforcement re3 quirements described in subtitle H.

4 ‘‘(2) GRIEVANCE PROCESS.—Each standard

5 health plan shall establish a grievance process for

6 enrollees dissatisfied with matters other than the de7 nial of payment or provision of benefits by the plan.

8 ‘‘(g) PROVIDER SELECTION.—

9 ‘‘(1) IN GENERAL.—In selecting among provid10 ers of health services for membership in a provider

11 network, or in establishing the terms and conditions

12 of such membership, a standard health plan may not

13 engage in any practice that discriminates against a

14 provider based on the health status of a patient of

15 the provider.

16 ‘‘(2) NO DISCRIMINATION BASED ON ACADEMIC

17 DEGREE.—No standard health plan may discrimi18 nate in participation, reimbursement, or indemnifica19 tion against a health professional solely on the basis

20 of the academic degree of such professional if the

21 professional is acting within the scope of the profes22 sional’s license under applicable State law.

23 ‘‘(3) NUMBER AND TYPE.—Nothing in this title

24 shall—
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•S 2351 PCS

1 ‘‘(A) prevent a standard health plan from

2 matching the number and type of health care

3 providers to the needs of the plan members;

4 ‘‘(B) require any such plan to contract

5 with any type of provider legally authorized to

6 provide services in the State in which such serv7 ices are provided; or

8 ‘‘(C) except as specifically provided in this

9 title, establish any other measure designed to

10 maintain quality or to control costs.

11 ‘‘(h) PHYSICIAN INCENTIVE PLANS.—A standard

12 health plan may not operate a physician incentive plan un13 less such incentive plan meets the requirements of section

14 1876(i)(8)(A).

15 ‘‘(i) PHYSICIAN PARTICIPATION.—

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

17 shall establish mechanisms through which physicians

18 have input into matters affecting patient care and

19 through which patients have the ability to choose

20 any primary care physician from available practition21 ers.

22 ‘‘(2) CONTRACT PROCEDURES.—Each standard

23 health plan shall provide not less than 30 days noti24 fication to physicians of decisions to cancel or deny

25 renewal of contracts and shall establish an informal,
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•S 2351 PCS

1 non-binding, and advisory review process for ap2 peals.

3 ‘‘(j) ETHICAL BUSINESS CONDUCT.—Each standard

4 health plan shall develop and implement a code of ethical

5 business conduct for its activities, including those of its

6 components, and assure proficient management and plan7 ning functions.

8 ‘‘(k) ENROLLMENT.—A standard health plan may

9 not knowingly accept the enrollment of an individual who

10 is enrolled in another standard health plan.

11 ‘‘SEC. 21126. ALTERNATIVE DISPUTE RESOLUTION PROCE12 DURES RELATING TO MALPRACTICE CLAIMS.

13 ‘‘Each standard health plan shall establish and main14 tain an alternative dispute resolution procedures program

15 that complies with the standards developed under section

16 1129.

17 ‘‘SEC. 21127. ACCESS TO ESSENTIAL COMMUNITY PROVID18 ERS.

19 ‘‘(a) IN GENERAL.—Each standard health plan spon20 sor shall, with respect to at least one of each category of

21 essential community provider (as defined in subsection

22 (c)) located within health plan service areas designated

23 under section 21022, offer to enter into a written provider

24 participation agreement (described in subsection (b)) with

25 the provider covering the 5-year period beginning on Janu-
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•S 2351 PCS

1 ary 1, 1996. The Secretary may require participation

2 agreements to be offered to more than one essential com3 munity provider in each category if the Secretary deter4 mines extra capacity is required to serve the needs of en5 rollees in a particular health plan service area.

6 ‘‘(b) PARTICIPATION AGREEMENT.—A participation

7 agreement between a standard health plan sponsor and

8 an essential community provider under this subsection

9 shall provide that the plan agrees to treat the provider

10 in accordance with terms and conditions at least as favor11 able as those that are applicable to other providers with

12 a participation agreement with the plan with respect to

13 the scope of services and the basis for which payment is

14 made by the plan to the provider.

15 ‘‘(c) ESSENTIAL COMMUNITY PROVIDERS DE16 SCRIBED.—In this section, an ‘essential community pro17 vider’ means any of the following entities certified by the

18 Secretary:

19 ‘‘(1) MIGRANT HEALTH CENTERS.—A recipient

20 or subrecipient of a grant under section 329 of the

21 Public Health Service Act.

22 ‘‘(2) COMMUNITY HEALTH CENTERS.—A recipi23 ent or subrecipient of a grant under section 330 of

24 such Act.
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•S 2351 PCS

1 ‘‘(3) HOMELESS PROGRAM PROVIDERS.—A re2 cipient or subrecipient of a grant under section 340

3 of such Act.

4 ‘‘(4) PUBLIC HOUSING PROVIDERS.—A recipi5 ent or subrecipient of a grant under section 340A of

6 such Act.

7 ‘‘(5) FAMILY PLANNING CLINICS.—A recipient

8 or subrecipient of a grant under title X of such Act.

9 ‘‘(6) INDIAN HEALTH PROGRAMS.—A service

10 unit of the Indian Health Service, a tribal organiza11 tion, or an urban Indian program, as defined in the

12 Indian Health Care Improvement Act.

13 ‘‘(7) HIV PROVIDERS UNDER RYAN WHITE

14 ACT.—A public or private nonprofit health care pro15 vider that is a recipient or subrecipient of a grant

16 under title XXVI of the Public Health Service Act.

17 ‘‘(8) MATERNAL AND CHILD HEALTH PROVID18 ERS.—A public or private nonprofit entity that pro19 vides prenatal care, pediatric care, or ambulatory

20 services to children, including children with special

21 health care needs, and that receives funding for such

22 care or services under title V of the Social Security

23 Act.

24 ‘‘(9) FEDERALLY QUALIFIED HEALTH CEN25 TERS.—A Federally qualified health center (as de-
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•S 2351 PCS

1 fined in section 1861(aa)(4)) or an entity that would

2 be such a center but for its failure to meet the re3 quirement described in section 329(f)(2)(G)(i) of the

4 Public Health Service Act or the requirement de5 scribed in section 330(e)(3)(G)(i) of such Act (relat6 ing to the composition of the entity’s governing

7 board).

8 ‘‘(10) RURAL HEALTH CLINICS.—A rural health

9 clinic (as defined in section 1861(aa)(2)).

10 ‘‘(11) PROVIDER OF SCHOOL HEALTH SERV11 ICES.—A provider of school health services.

12 ‘‘(12) COMMUNITY NETWORKS.—A community

13 network receiving development funding in designated

14 urban or rural underserved areas under subtitle F.

15 ‘‘(13) CERTAIN HOSPITALS.—A public hospital

16 or non-profit hospital meeting the criteria for public

17 hospitals which are covered entities under section

18 340B of the Public Health Service Act, with a dis19 proportionate patient percentage (as defined in sec20 tion 1886(d)(5)(F)(vi)) greater than 11.75 percent.

21 ‘‘(14) CHILDREN’S HOSPITALS.—A children’s

22 hospital meeting criteria comparable to paragraph

23 (13) as determined appropriate by the Secretary.

24 During the 5-year period described in subsection (a), the

25 reform standards may be modified for the designation of
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•S 2351 PCS

1 additional health professionals and institutions as essen2 tial community providers to the extent the Secretary deter3 mines that standard health plans would not be able to as4 sure adequate access to the standard benefits package es5 tablished under subtitle C in a health plan service area

6 without such designation.

7 ‘‘(d) SUBRECIPIENT DEFINED.—In this section, the

8 term ‘subrecipient’ means, with respect to a recipient of

9 a grant under a particular authority, an entity that—

10 ‘‘(1) is receiving funding from such a grant

11 under a contract with the principal recipient of such

12 a grant, and

13 ‘‘(2) meets the requirements established to be a

14 recipient of such a grant.

15 ‘‘(e) STUDY.—During the 5-year period described in

16 subsection (a), the Office of Technology Assessment shall

17 conduct a continuing study on improving access in under18 served areas.

19 ‘‘SEC. 21128. HEALTH PLAN SERVICE AREA CAPACITY.

20 ‘‘(a) AVAILABILITY OF SERVICES IN ENTIRE

21 HEALTH PLAN SERVICE AREA.—On and after January

22 1, 2001, each standard health plan shall have the capacity

23 within the plan’s network, or through contracts with a suf24 ficient number, distribution, and variety of providers, to

25 deliver to all parts of any health plan service area (des-
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•S 2351 PCS

1 ignated under section 21022) in which such plan is of2 fered, with reasonable promptness and in a manner which

3 assures continuity, the standard benefits package estab4 lished under subtitle C and any benefits offered by such

5 sponsor through certified supplemental health benefits

6 plans. Such capacity shall include the provision of emer7 gency services 24 hours a day, 7 days a week.

8 ‘‘(b) CAPABILITY.—Each standard health plan shall

9 make available and accessible translation, case manage10 ment, and transportation services, if necessary, to deliver

11 the benefits and services described in subsection (a).

12 ‘‘(c) DIVERSITY.—Each standard health plan shall

13 ensure that criteria for the selection of participating pro14 viders take into account the needs of diverse populations

15 within a health plan service area served by the plan.

16 ‘‘(d) APPLICATION OF STANDARDS TO SELF-IN17 SURED PLANS.—The standards specified in this section

18 shall apply to self-insured standard health plans, but only

19 to the extent necessary to deliver services to individuals

20 enrolled in such plans.

21 ‘‘SEC. 21129. ACCESS TO SPECIALIZED SERVICES.

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

23 have within the plan’s network, or contract with, a suffi24 cient number, distribution, and variety of providers of spe25 cialized services to assure that such services are available
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•S 2351 PCS

1 and accessible to adults, infants, children, and persons

2 with disabilities.

3 ‘‘(b) CENTERS OF EXCELLENCE.—

4 ‘‘(1) IN GENERAL.—A standard health plan

5 may satisfy the standard under subsection (a) by

6 contracting with, and demonstrating sufficient refer7 rals (as determined by standards set by the Sec8 retary) of, adults, infants, children, and persons with

9 disabilities requiring specialized services to centers

10 of excellence designated by the Secretary under sub11 section (a). For children, such specialized treatment

12 expertise shall be in pediatrics.

13 ‘‘(2) REQUIREMENTS FOR CENTERS.—The Sec14 retary shall designate centers of excellence in the

15 field of institutional care that meet evaluation cri16 teria established by the Secretary for the delivery of

17 care for complex cases requiring specialized treat18 ment and also meet 2 or more of the following re19 quirements:

20 ‘‘(A) Provide specialized education and

21 training through approved graduate medical

22 education programs with multi-specialty, multi23 disciplinary teaching and services in both inpa24 tient and outpatient settings, with medical staff
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•S 2351 PCS

1 with faculty appointments at an affiliated medi2 cal school.

3 ‘‘(B) Attract patients from outside the cen4 ter’s local geographic region.

5 ‘‘(C) Either sponsor or participate in, or

6 have medical staff who participate in, peer-re7 viewed research.

8 ‘‘(c) OTHER EVALUATION CRITERIA FOR SPECIAL9 IZED SERVICES STANDARDS.—Reform standards shall in10 clude evaluation criteria determined by the Secretary for

11 the standard under subsection (a) for standard health

12 plans which choose to provide specialized services within

13 a network setting, including requirements for staff creden14 tials and experience, and requirements for measured out15 comes in the diagnosis and treatment of patients. For chil16 dren, such specialized treatment expertise shall be in pedi17 atrics.

18 ‘‘(d) OUTCOMES CRITERIA.—The Secretary shall de19 velop evaluation criteria for outcomes of specialized serv20 ices as research findings become available.

21 ‘‘SEC. 21130. PARTICIPATING PHYSICIAN PROGRAM.

22 ‘‘Each standard health plan shall establish a program

23 under which participating physicians shall agree to accept

24 the plan’s payment schedule as payment in full, and agree

25 not to charge patients more than the co-insurance re-
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•S 2351 PCS

1 quired by such plan. Each such plan shall make available

2 the list of participating physicians to enrollees. Each plan

3 shall have an appropriate number of physicians in each

4 specialty as participating physicians.

5 ‘‘SEC. 21131. OUT-OF-AREA COVERAGE.

6 ‘‘Each standard health plan shall provide for urgent

7 and emergency out-of-area coverage for enrollees of the

8 plan.

9 ‘‘PART III—STANDARDS APPLICABLE TO

10 SUPPLEMENTAL HEALTH BENEFITS PLANS

11 ‘‘SEC. 21141. IMPOSITION OF REQUIREMENTS ON SUPPLE12 MENTAL HEALTH BENEFITS PLANS.

13 ‘‘(a) IN GENERAL.—In the case of a supplemental

14 health benefits plan—

15 ‘‘(1) which is a supplemental services plan (as

16 defined in subsection (b)(2)), the requirements of

17 section 21142 shall be met with respect to the plan;

18 and

19 ‘‘(2) which is a cost-sharing plan (as defined in

20 subsection (b)(3)), the requirements of section

21 21143 shall be met with respect to the plan.

22 ‘‘(b) PLANS DEFINED.—In this title:

23 ‘‘(1) SUPPLEMENTAL HEALTH BENEFITS

24 PLAN.—The term ‘supplemental health benefits plan’
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•S 2351 PCS

1 means a supplemental services plan or a cost-sharing

2 plan.

3 ‘‘(2) SUPPLEMENTAL SERVICES PLAN.—The

4 term ‘supplemental services plan’ means a health

5 plan which provides—

6 ‘‘(A) coverage for services and items not

7 included in the standard benefits package estab8 lished under subtitle C,

9 ‘‘(B) coverage for items and services in10 cluded in such package but not covered because

11 of a limitation in amount, duration, or scope of

12 benefits, or

13 ‘‘(C) both.

14 ‘‘(3) COST-SHARING PLAN.—The term ‘cost15 sharing plan’ means a health plan which provides

16 coverage for deductibles, coinsurance, and

17 copayments imposed as part of the standard benefits

18 package established under subtitle C.

19 ‘‘SEC. 21142. STANDARDS FOR SUPPLEMENTAL SERVICES

20 PLANS.

21 ‘‘(a) APPLICATION OF CERTAIN HEALTH PLAN

22 STANDARDS.—

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (3), the standards specified in paragraph (2)

25 shall apply with respect to each supplemental serv-
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•S 2351 PCS

1 ices plan in the same manner as such standards

2 apply with respect to a certified standard health

3 plan.

4 ‘‘(2) SPECIFIED STANDARDS.—The standards

5 specified in this paragraph are as follows:

6 ‘‘(A) Section 21111 (relating to guaran7 teed issue and renewal).

8 ‘‘(B) Section 21112 (relating to enroll9 ment).

10 ‘‘(C) Section 21113 (relating to rating lim11 itations for community-rated market).

12 ‘‘(D) Section 21114 (relating to rating

13 practices and payment of premiums).

14 ‘‘(E) Section 21115 (relating to non15 discrimination based on health status).

16 ‘‘(F) Section 21123 (relating to collection

17 and provision of standardized information).

18 ‘‘(G) Section 21124 (relating to quality im19 provement and assurance).

20 ‘‘(H) Section 21125 (relating to patient

21 protections and provider selection).

22 ‘‘(b) PROHIBITING DUPLICATION OF COVERAGE.—

23 No health plan sponsor or any other person may offer to

24 any medicare-eligible individual a supplemental services
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•S 2351 PCS

1 plan that duplicates any coverage provided under the med2 icare program under title XVIII.

3 ‘‘(c) RESTRICTIONS ON MARKETING ABUSES.—Not

4 later than January 1, 1996, the Secretary shall develop

5 (in consultation with the States) minimum standards that

6 prohibit marketing practices by entities offering supple7 mental services plans that involve—

8 ‘‘(1) providing monetary incentives for, or tying

9 or otherwise conditioning, the sale of the plan to en10 rollees in a certified standard health plan of the en11 tity;

12 ‘‘(2) using or disclosing to any party informa13 tion about the health status or claims experience of

14 participants in a certified standard health plan for

15 the purpose of marketing a supplemental services

16 plan; and

17 ‘‘(3) providing a supplemental services plan by

18 a managed care plan to an individual not enrolled in

19 such managed care plan.

20 ‘‘SEC. 21143. STANDARDS FOR COST-SHARING PLANS.

21 ‘‘(a) RULES FOR OFFERING OF PLANS.—A cost-shar22 ing plan may be offered to an individual only if—

23 ‘‘(1) the plan is offered by a certified standard

24 health plan with a standard benefits package in

25 which the individual is enrolled;
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•S 2351 PCS

1 ‘‘(2) the certified standard health plan offers

2 the cost-sharing plan to all individuals enrolled in

3 the certified standard health plan and only such in4 dividuals; and

5 ‘‘(3) the cost-sharing plan is offered only during

6 an enrollment period for the applicable certified

7 standard health plan.

8 Nothing in this subsection shall be construed to require

9 an individual to obtain a cost-sharing plan or a certified

10 standard health plan to provide a cost-sharing plan.

11 ‘‘(b) EQUIVALENT COVERAGE FOR ALL SERVICES.—

12 Each cost-sharing plan shall provide coverage for items

13 and services in the standard benefits package established

14 under subtitle C to the same extent as the applicable cer15 tified standard health plan provides coverage for all items

16 and services in such package.

17 ‘‘(c) REQUIREMENTS FOR PRICING.—The price of

18 any cost-sharing plan shall—

19 ‘‘(1) be the same for each individual to whom

20 the plan is offered; and

21 ‘‘(2) take into account any expected increase in

22 utilization resulting from the purchase of the plan

23 by individuals enrolled in the applicable certified

24 standard health plan.
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•S 2351 PCS

1 ‘‘SEC. 21144. PROHIBITION ON OFFERING OF MULTIPLE

2 PACKAGES TO INDIVIDUAL.

3 ‘‘A supplemental health benefits plan may not be of4 fered to an individual who is covered under another such

5 plan, unless the individual’s coverage under the new plan

6 begins only after the individual’s coverage under the origi7 nal plan is terminated.

8 ‘‘PART IV—STANDARDS APPLICABLE TO LONG9 TERM CARE POLICIES

10 ‘‘SEC. 21151. REGULATION OF SALES PRACTICES.

11 ‘‘(a) DUTY OF GOOD FAITH AND FAIR DEALING.—

12 ‘‘(1) IN GENERAL.—Each carrier that is selling

13 or offering for sale a long-term care policy has the

14 duty of good faith and fair dealing to the purchaser

15 or potential purchaser of such a policy.

16 ‘‘(2) POLICY REPLACEMENT FORM.—With re17 spect to any individual who elects to replace or effect

18 a change in a long-term care policy, the carrier that

19 is selling such policy shall ensure that such individ20 ual completes a policy replacement form developed

21 as part of the reform standards. A copy of such

22 form shall be provided to such individual and addi23 tional copies shall be delivered by the carrier to the

24 old policy carrier and kept on file by the new carrier

25 for inspection by the appropriate certifying author26 ity.
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•S 2351 PCS

1 ‘‘(3) PROHIBITED PRACTICES.—A carrier is

2 considered to have violated paragraph (1) if the car3 rier engages in any of the following practices:

4 ‘‘(A) MISLEADING REPRESENTATION.—

5 Knowingly making any misleading representa6 tion (including the inaccurate completion of

7 medical histories) or incomplete or fraudulent

8 comparison of any long-term care policy or in9 surers for the purpose of inducing, or tending

10 to induce, any person to retain or effect a

11 change with respect to a long-term care policy.

12 ‘‘(B) UNDUE PRESSURE.—Employing any

13 method of marketing having the effect of, or in14 tending to, induce the purchase of long-term

15 care policy through force, fright, threat or

16 undue pressure, whether explicit or implicit.

17 ‘‘(C) MISLEADING MARKETING.—Making

18 use directly or indirectly of any method of mar19 keting which fails to disclose in a conspicuous

20 manner that a purpose of the method of mar21 keting is solicitation of insurance and that con22 tact will be made by an insurance agent or in23 surance company.
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•S 2351 PCS

1 ‘‘(D) OTHERS.—Engaging in such other

2 practices determined inappropriate under the

3 reform standards.

4 ‘‘(b) FINANCIAL NEEDS STANDARDS.—The reform

5 standards shall include minimum financial needs stand6 ards (including both income and asset criteria) for the

7 purpose of advising individuals as to the costs and

8 amounts of insurance needed when considering the pur9 chase of a long-term care policy.

10 ‘‘(c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC11 AID BENEFICIARIES.—A carrier may not knowingly sell

12 or issue a long-term care policy to an individual who is

13 eligible for medical assistance under title XIX.

14 ‘‘(d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI15 CATE SERVICE-BENEFIT POLICIES.—A carrier may not

16 sell or issue a service-benefit long-term care policy to an

17 individual—

18 ‘‘(1) knowing that the policy provides for cov19 erage that duplicates coverage already provided in

20 another service-benefit long-term care policy held by

21 such individual (unless the policy is intended to re22 place such other policy); or

23 ‘‘(2) for the benefit of an individual unless the

24 individual (or a representative of the individual) pro-
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•S 2351 PCS

1 vides a written statement to the effect that the cov2 erage—

3 ‘‘(A) does not duplicate other coverage in

4 effect under a service-benefit long-term care

5 policy; or

6 ‘‘(B) will replace another service-benefit

7 long-term care policy.

8 In this subsection, the term ‘service-benefit long-term care

9 policy’ means a long-term care policy which provides for

10 benefits based on the type and amount of services fur11 nished.

12 ‘‘(e) PROHIBITION BASED ON ELIGIBILITY FOR

13 OTHER BENEFITS.—A carrier may not sell or issue a

14 long-term care policy that reduces, limits, or coordinates

15 the benefits provided under the policy on the basis that

16 the policyholder has or is eligible for other long-term care

17 coverage or benefits.

18 ‘‘(f) PROVISION OF OUTLINE OF COVERAGE.—No

19 carrier may sell or offer for sale a long-term care policy

20 without providing to every individual purchaser or poten21 tial purchaser (or representative) an outline of coverage

22 that complies with the reform standards.

23 ‘‘(g) AGENT TRAINING AND CERTIFICATION RE24 QUIREMENTS.—The reform standards shall include re-
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•S 2351 PCS

1 quirements for long-term care insurance agent training

2 and certification that—

3 ‘‘(1) specify requirements for training insurance

4 agents who desire to sell or offer for sale long-term

5 care policies; and

6 ‘‘(2) specify procedures for certifying and

7 recertifying agents who have completed such train8 ing and who are qualified to sell or offer for sale

9 long-term care policies.

10 ‘‘SEC. 21152. ADDITIONAL RESPONSIBILITIES FOR CAR11 RIERS.

12 ‘‘(a) REFUND OF PREMIUMS.—If an application for

13 a long-term care policy (or for a certificate under a group

14 long-term care policy) is denied or an applicant returns

15 a policy or certificate within 30 days of the date of its

16 issuance pursuant to subsection 21156, the carrier shall,

17 not later than 30 days after the date of the denial or re18 turn, refund directly to the applicant, or in the case of

19 an employer to whomever remits the premium, any pre20 miums paid with respect to such a policy (or certificate).

21 Any such refund shall not be made by delivery by the car22 rier.

23 ‘‘(b) MAILING OF POLICY.—If an application for a

24 long-term care policy (or for a certificate under a group

25 long-term care policy) is approved, the carrier shall pro-
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•S 2351 PCS

1 vide each individual applicant the policy (or certificate) of

2 insurance and outline of coverage not later than 30 days

3 after the date of the approval.

4 ‘‘(c) INFORMATION ON DENIALS OF CLAIMS.—If a

5 claim under a long-term care policy is denied, the carrier

6 shall, within 15 days of the date of a written request by

7 the policyholder or certificate holder (or representative)—

8 ‘‘(1) provide a written explanation of the rea9 sons for the denial;

10 ‘‘(2) make available all medical and patient

11 records directly relating to such denial; and

12 ‘‘(3) provide a written explanation of the man13 ner in which to appeal the denial.

14 Except as provided in subsection (e) of section 21154, no

15 claim under such a policy may be denied on the basis of

16 a failure to disclose a condition at the time of issuance

17 of the policy if the application for the policy failed to re18 quest information respecting the condition.

19 ‘‘(d) REPORTING OF INFORMATION.—A carrier that

20 issues one or more long-term care policies shall periodi21 cally (not less often than annually) report, in a form and

22 in a manner specified by the reform standards, to the ap23 propriate certifying authority for the State in which the

24 policy is delivered, and shall make available to the Sec-
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•S 2351 PCS

1 retary, upon request, information in a form and manner

2 so specified concerning—

3 ‘‘(1) the long-term care policies of the carrier

4 that are in force;

5 ‘‘(2) the most recent premiums for such policies

6 and the premiums imposed for such policies since

7 the initial issuance of such policies;

8 ‘‘(3) the lapse rate, replacement rate, and re9 scission rates by policy; and

10 ‘‘(4) the claims denied (expressed as a number

11 and as a percentage of claims submitted) by policy.

12 For purposes of paragraph (3), there shall be included

13 (but reported separately) data concerning lapses due to

14 the death of the policyholder. For purposes of paragraph

15 (4), there shall not be included as a claim any claim that

16 is denied solely because of the failure to meet a deductible,

17 waiting period, or exclusionary period.

18 ‘‘(e) STANDARDS ON COMPENSATION FOR SALE OF

19 POLICIES.—

20 ‘‘(1) IN GENERAL.—Until the Secretary, in con21 sultation with the NAIC, promulgates mandatory

22 standards concerning compensation for the sale of

23 long-term care policies, a carrier that issues one or

24 more long-term care policies may provide a commis25 sion or other compensation to an agent or other rep-
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•S 2351 PCS

1 resentative for the sale of such a policy only if the

2 first year commission or other first year compensa3 tion to be paid does not exceed the greater of—

4 ‘‘(A) 200 percent of the commission or

5 other compensation paid for selling or servicing

6 the policy in the second year, or

7 ‘‘(B) 50 percent of the premium paid on

8 the first year policy.

9 ‘‘(2) SUBSEQUENT YEARS.—The commission or

10 other compensation provided for the sale of long11 term care policies to an individual during each of the

12 years during the 5-year period subsequent to the

13 first year of the policy shall be the same as that pro14 vided in the second subsequent year.

15 ‘‘(3) LIMITATION.—No carrier shall provide

16 compensation to its agents for the sale of a long17 term care policy which replaces an existing policy,

18 and no agent shall receive compensation for such

19 sale greater than the renewal compensation payable

20 by the replacing carrier on renewal policies.

21 ‘‘(4) COMPENSATION DEFINED.—As used in

22 this subsection, the term ‘compensation’ includes pe23 cuniary or nonpecuniary remuneration of any kind

24 relating to the sale or renewal of the policy, includ-
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•S 2351 PCS

1 ing, but not limited to, deferred compensation, bo2 nuses, gifts, prizes, awards, and finders’ fees.

3 ‘‘SEC. 21153. RENEWAL STANDARDS FOR ISSUANCE, AND

4 BASIS FOR CANCELLATION OF POLICIES.

5 ‘‘(a) IN GENERAL.—No long-term care policy may be

6 canceled or nonrenewed for any reason other than

7 nonpayment of premium, material misrepresentation, or

8 fraud.

9 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

10 GROUP POLICIES.—

11 ‘‘(1) IN GENERAL.—Each group long-term care

12 policy shall provide covered individuals with a basis

13 for continuation or conversion in accordance with

14 this subsection.

15 ‘‘(2) BASIS FOR CONTINUATION.—For purposes

16 of paragraph (1), a policy provides a basis for con17 tinuation of coverage if the policy maintains cov18 erage under the existing group policy when such cov19 erage would otherwise terminate and which is sub20 ject only to the continued timely payment of pre21 miums when due. A group policy which restricts pro22 vision of benefits and services to, or contains incen23 tives to use certain providers or facility, may provide

24 continuation benefits which are substantially equiva25 lent to the benefits of the existing group policy.
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•S 2351 PCS

1 ‘‘(3) BASIS FOR CONVERSION.—For purposes of

2 paragraph (1), a policy provides a basis for conver3 sion of coverage if the policy entitles each individ4 ual—

5 ‘‘(A) whose coverage under the group pol6 icy would otherwise be terminated for any rea7 son; and

8 ‘‘(B) who has been continuously insured

9 under the policy (or group policy which was re10 placed) for at least 6 months before the date of

11 the termination;

12 to issuance of a policy providing benefits not less

13 than, substantially equivalent to, or in excess of,

14 those of the policy being terminated, without evi15 dence of insurability.

16 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA17 LENCE.—In determining under this subsection

18 whether benefits are substantially equivalent, consid19 eration should be given to the difference between

20 managed care and non-managed care plans.

21 ‘‘(5) GROUP REPLACEMENT OF POLICIES.—If a

22 group long-term care policy is replaced by another

23 long-term care policy purchased by the same policy24 holder, the succeeding issuer shall offer coverage to

25 all persons covered under the old group policy on its
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•S 2351 PCS

1 date of termination. Coverage under the new group

2 policy shall not result in any exclusion for preexist3 ing conditions that would have been covered under

4 the group policy being replaced.

5 ‘‘(c) STANDARDS FOR ISSUANCE.—

6 ‘‘(1) IN GENERAL.—

7 ‘‘(A) GUARANTEE.—A carrier that sells or

8 issues long-term care policies shall guarantee

9 that such policies shall be sold or issued to an

10 individual, or eligible individual in the case of a

11 group plan, if such individual meets the mini12 mum medical underwriting requirements of

13 such policy.

14 ‘‘(B) PREMIUM FOR CONVERTED POL15 ICY.—If the group policy from which conversion

16 is made replaced previous group coverage, the

17 premium for the converted policy shall be cal18 culated on the basis of the insured’s age at in19 ception of coverage under the group policy.

20 ‘‘(2) UPGRADE FOR CURRENT POLICIES.—The

21 reform standards shall specify standards, including

22 those providing guidance on medical underwriting

23 and age rating, with respect to the access of individ24 uals to policies offering upgraded benefits.
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•S 2351 PCS

1 ‘‘(3) RATE STABILIZATION.—The reform stand2 ards shall specify standards for premium rate sta3 bilization.

4 ‘‘(d) EFFECT OF INCAPACITATION.—

5 ‘‘(1) IN GENERAL.—

6 ‘‘(A) PROHIBITION.—Except as provided

7 in paragraph (2), a long-term care policy in ef8 fect as of the effective date of the reform stand9 ards may not be canceled for nonpayment if the

10 policy holder is determined by a long-term care

11 provider, physician or other health care provider

12 (independent of the issuer of the policy), to be

13 cognitively or mentally incapacitated so as to

14 not make payments in a timely manner.

15 ‘‘(B) REINSTATEMENT.—A long-term care

16 policy shall include a provision that provides for

17 the reinstatement of such coverage, in the event

18 of lapse, if the carrier is provided with proof of

19 cognitive or mental incapacitation. Such rein20 statement option shall remain available for a

21 period of not less than 5 months after termi22 nation and shall allow for the collection of past

23 due premium.
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•S 2351 PCS

1 ‘‘(2) PERMITTED CANCELLATION.—A long-term

2 care policy may be canceled under paragraph (1) for

3 nonpayment if—

4 ‘‘(A) the period of such nonpayment is in

5 excess of 30 days; and

6 ‘‘(B) notice of intent to cancel is provided

7 to the policyholder or designated representative

8 of the policy holder not less than 30 days prior

9 to such cancellation, except that notice may not

10 be provided until the expiration of 30 days after

11 a premium is due and unpaid.

12 Notice under this paragraph shall be deemed to have

13 been given as of 5 days after the mailing date.

14 ‘‘SEC. 21154. BENEFIT STANDARDS.

15 ‘‘(a) USE OF STANDARD DEFINITIONS AND TERMI16 NOLOGY, UNIFORM FORMAT, AND STANDARD BENE17 FITS.—Pursuant to the reform standards, each long-term

18 care policy shall, with respect to services, providers or fa19 cilities—

20 ‘‘(1) use uniform language and definitions, ex21 cept that such language and definitions may take

22 into account the differences between States with re23 spect to definitions and terminology used for long24 term care services and providers; and
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•S 2351 PCS

1 ‘‘(2) use a uniform format for presenting the

2 outline of coverage under such a policy.

3 ‘‘(b) DISCLOSURE.—

4 ‘‘(1) OUTLINE OF COVERAGE.—

5 ‘‘(A) REQUIREMENT.—Each carrier that

6 sells or offers for sale a long-term care policy

7 shall provide in a uniform format an outline of

8 coverage to each individual policyholder under

9 such policy that meets the reform standards

10 and complies with the requirements of subpara11 graph (B).

12 ‘‘(B) CONTENTS.—The outline of coverage

13 for each long-term care policy shall substan14 tially and accurately reflect the contents of the

15 policy or the master policy and shall include at

16 least the following:

17 ‘‘(i) A description of the benefits and

18 coverage under the policy.

19 ‘‘(ii) A statement of the exclusions, re20 ductions, and limitations contained in the

21 policy.

22 ‘‘(iii) A statement of the terms under

23 which the policy (or certificate) may be

24 continued in force or discontinued, the

25 terms for continuation or conversion, and
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•S 2351 PCS

1 any reservation in the policy of a right to

2 change premiums.

3 ‘‘(iv) Consumer protection informa4 tion, including the manner in which to file

5 a claim and to register complaints.

6 ‘‘(v) A statement, in bold face type on

7 the face of the document in language that

8 is understandable to an average individual,

9 that the outline of coverage is a summary

10 only and not a contract of insurance, and

11 that the policy (or master policy) contains

12 the contractual provisions that govern.

13 ‘‘(vi) A description of the terms, speci14 fied in section 21156, under which a policy

15 or certificate may be returned and pre16 mium refunded.

17 ‘‘(vii) Information on—

18 ‘‘(I) national average costs for

19 nursing facility and home health care

20 and information (in graph form) on

21 the relationship of the value of the

22 benefits provided under the policy to

23 such national average costs and State

24 average costs; and
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•S 2351 PCS

1 ‘‘(II) other public and private

2 long-term care products and long-term

3 care programs made available by the

4 Federal Government or by a State

5 government.

6 ‘‘(viii) A statement of the percentage

7 limit on annual premium increases that is

8 provided under the policy pursuant to this

9 section.

10 ‘‘(2) CERTIFICATES.—A certificate issued pur11 suant to a group long-term care policy shall in12 clude—

13 ‘‘(A) a description of the principal benefits

14 and coverage provided in the policy;

15 ‘‘(B) a statement of the principal exclu16 sions, reductions, and limitations contained in

17 the policy; and

18 ‘‘(C) a statement that the group master

19 policy determines governing contractual provi20 sions.

21 ‘‘(3) LONG-TERM CARE AS PART OF LIFE IN22 SURANCE.—In the case of a long-term care policy is23 sued as a part of, or a rider on, a life insurance pol24 icy, at the time of policy delivery there shall be pro25 vided a policy summary that includes—
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•S 2351 PCS

1 ‘‘(A) an explanation of how the long-term

2 care benefits interact with other components of

3 the policy (including deductions from death

4 benefits);

5 ‘‘(B) an illustration of the amount of bene6 fits, the length of benefits, and the guaranteed

7 lifetime benefits (if any) for each covered per8 son; and

9 ‘‘(C) any exclusions, reductions, and limi10 tations on benefits of long-term care.

11 ‘‘(c) LIMITING CONDITIONS ON BENEFITS; MINIMUM

12 BENEFITS.—

13 ‘‘(1) IN GENERAL.—A long-term care policy

14 may not condition or limit eligibility—

15 ‘‘(A) for benefits for a type of services to

16 the need for or receipt of any other services;

17 ‘‘(B) for any benefit on the medical neces18 sity for such benefit;

19 ‘‘(C) for benefits furnished by licensed or

20 certified providers in compliance with conditions

21 which are in addition to those required for li22 censure or certification under State law, or if

23 no State licensure or certification laws exists, to

24 those developed by the Secretary, in consulta25 tion with the NAIC; or
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•S 2351 PCS

1 ‘‘(D) for residential care (if covered under

2 the policy) only—

3 ‘‘(i) to care provided in facilities

4 which provide a higher level of care; or

5 ‘‘(ii) to care provided in facilities

6 which provide for 24-hour or other nursing

7 care not required in order to be licensed by

8 the State.

9 ‘‘(2) HOME HEALTH CARE OR COMMUNITY10 BASED SERVICES.—If a long-term care policy pro11 vides benefits for the payment of specified home

12 health care or community-based services, the pol13 icy—

14 ‘‘(A) may not limit such benefits to serv15 ices provided by registered nurses or licensed

16 practical nurses;

17 ‘‘(B) may not require benefits for such

18 services to be provided by a nurse or therapist

19 that can be provided by a home health aide or

20 a home care worker who is licensed or certified;

21 ‘‘(C) may not limit such benefits to serv22 ices provided by agencies or providers certified

23 under title XVIII of the Social Security Act;

24 and
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•S 2351 PCS

1 ‘‘(D) shall provide, at a minimum, benefits

2 for personal care services (including home

3 health aide) and adult day care.

4 ‘‘(3) NURSING FACILITY SERVICES.—If a long5 term care policy provides benefits for the payment of

6 specified nursing facility services, the policy shall

7 provide such benefits with respect to all nursing fa8 cilities in the State. Except as provided in the re9 form standards establishing uniform language and

10 definitions under section 21154(a)(1)), the term

11 ‘nursing facilities’ has the meaning given such term

12 by section 1919(a).

13 ‘‘(4) PER DIEM POLICIES.—

14 ‘‘(A) DEFINITION.—For purposes of this

15 part, the term ‘per diem long-term care policy’

16 means a long-term care policy (or certificate

17 under a group long-term care policy) that pro18 vides for benefit payments on a periodic basis

19 due to cognitive impairment or loss of func20 tional capacity without regard to the expenses

21 incurred or services rendered during the period

22 to which the payments relate.

23 ‘‘(B) LIMITATION.—No per diem long-term

24 care policy (or certificate) may condition, limit

25 or otherwise exclude benefit payments based on
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•S 2351 PCS

1 the receipt of any type services from any type

2 providers of long-term care service providers.

3 ‘‘(d) PROHIBITION OF DISCRIMINATION.—A long4 term care policy may not, with respect to benefits under

5 the policy, treat an individual with Alzheimer’s disease,

6 with any related progressive degenerative dementia of an

7 organic origin, with any organic or inorganic mental ill8 ness, or with mental retardation or any other cognitive or

9 mental impairment, differently from an individual having

10 a functional impairment for which such benefits may be

11 made available.

12 ‘‘(e) LIMITATION ON USE OF PREEXISTING CONDI13 TION LIMITS.—

14 ‘‘(1) INITIAL ISSUANCE.—

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B), a long-term care policy may not ex17 clude or condition benefits based on a medical

18 condition for which the policyholder received

19 treatment or was otherwise diagnosed before

20 the issuance of the policy.

21 ‘‘(B) 6-MONTH LIMIT.—A long-term care

22 policy or certificate issued under this part may

23 impose a limitation or exclusion of benefits re24 lating to treatment of a condition based on the

25 fact that the condition preexisted the effective
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•S 2351 PCS

1 date of the policy or certificate with respect to

2 an individual if—

3 ‘‘(i) a condition that was diagnosed or

4 treated during the 6-month period ending

5 on the day before the first date of coverage

6 under the policy or certificate; and

7 ‘‘(ii) the limitation or exclusion ex8 tends for a period not more than 6 months

9 after the date of coverage under the policy

10 or certificate.

11 ‘‘(2) REPLACEMENT POLICIES.—If a long-term

12 care policy replaces another long-term care policy,

13 the issuer of the replacing policy shall waive any

14 time periods applicable to preexisting conditions,

15 waiting periods, elimination periods, and probation16 ary periods in the new policy for similar benefits to

17 the extent such time was spent under the original

18 policy.

19 ‘‘(f) ELIGIBILITY FOR BENEFITS.—

20 ‘‘(1) LONG-TERM CARE POLICIES.—Each long21 term care policy shall—

22 ‘‘(A) describe the level of benefits available

23 under the policy; and

24 ‘‘(B) specify in clear, understandable

25 terms, the level (or levels) of physical, cognitive,
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•S 2351 PCS

1 or mental impairment required in order to re2 ceive benefits under the policy.

3 ‘‘(2) FUNCTIONAL ASSESSMENT.—In order to

4 be determined eligible for benefits under any long5 term care policy, each claimant shall have a profes6 sional functional assessment of the claimant’s func7 tional or cognitive abilities. Such initial assessment

8 shall be conducted by an individual or entity, meet9 ing the qualifications established by the Secretary.

10 The individual or entity conducting such assessment

11 may not control, or be controlled by, the issuer of

12 the policy.

13 ‘‘(3) CLAIMS REVIEW.—Except as provided in

14 paragraph (4), each long-term care policy shall be

15 subject to final claims review by the carrier pursuant

16 to the terms of the long-term care policy.

17 ‘‘(4) APPEALS PROCESS.—

18 ‘‘(A) IN GENERAL.—Each long-term care

19 policy shall provide for a timely and independ20 ent appeals process, meeting the requirements

21 of sections 21802 through 21815, for individ22 uals who dispute the results of the claims re23 view conducted under paragraph (3) or the pol24 icyholder’s functional assessment conducted

25 under paragraph (2).
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•S 2351 PCS

1 ‘‘(B) INDEPENDENT ASSESSMENT.—An

2 appeals process under this paragraph shall in3 clude, at the request of the claimant, an inde4 pendent assessment of the claimant’s functional

5 or cognitive abilities.

6 ‘‘(C) CONDUCT.—An independent assess7 ment under subparagraph (B) shall be con8 ducted by an individual or entity meeting the

9 qualifications established by the Secretary to

10 assure the professional competence and credibil11 ity of such individual or entity and any applica12 ble State licensure and certification require13 ments and may not be conducted—

14 ‘‘(i) by an individual who has a direct

15 or indirect significant or controlling inter16 est in, or direct affiliation or relationship

17 with, the issuer of the policy;

18 ‘‘(ii) by an entity that provides serv19 ices to the policyholder or certificate holder

20 for which benefits are available under the

21 long-term care policy; or

22 ‘‘(iii) by an individual or entity con23 trolled by the issuer of the policy.

24 ‘‘(5) CONTROL DEFINED.—For purposes of

25 paragraphs (2) and (4), the term ‘control’ means the
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•S 2351 PCS

1 direct or indirect possession of the power to direct

2 the management and policies of a person. Control is

3 presumed to exist if any person directly or indirectly

4 owns, controls, holds with the power to vote, or

5 holds proxies representing at least 10 percent of the

6 voting securities of another person.

7 ‘‘(g) INFLATION PROTECTION.—

8 ‘‘(1) OPTION TO PURCHASE.—A carrier may

9 not offer a long-term care policy unless the carrier

10 also offers to the proposed policyholder, including

11 each group policyholder, the option to purchase a

12 long-term care policy that provides for increases in

13 benefit levels, with benefit maximums or reasonable

14 durations that are meaningful, to account for rea15 sonably anticipated increases in the costs of long16 term care services covered by the policy. A carrier

17 may not offer to a policyholder an inflation protec18 tion feature that is less favorable to the policyholder

19 than one of the following:

20 ‘‘(A) With respect to policies that provide

21 for automatic periodic increases in benefits, the

22 policy provides for an annual increase in bene23 fits in a manner so that such increases are

24 computed annually at a rate of not less than 5

25 percent.
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•S 2351 PCS

1 ‘‘(B) With respect to policies that provide

2 for periodic opportunities to elect an increase in

3 benefits, the policy guarantees that the insured

4 individual will have the right to periodically in5 crease the benefit levels under the policy with6 out providing evidence of insurability or health

7 status so long as the option for the previous pe8 riod was not declined. The amount of any such

9 additional benefit may not be less than the dif10 ference between—

11 ‘‘(i) the existing policy benefit; and

12 ‘‘(ii) such existing benefit compounded

13 annually at a rate of at least 5 percent for

14 the period beginning on the date on which

15 the existing benefit is purchased and ex16 tending until the year in which the offer of

17 increase is made.

18 ‘‘(C) With respect to service-benefit long19 term care policies, the policy covers a specified

20 percentage of the actual or reasonable charges

21 and does not include a maximum specified in22 demnity amount or limit.

23 ‘‘(2) EXCEPTION.—The requirements of para24 graph (1) shall not apply to life insurance policies or

25 riders containing accelerated long-term care benefits.
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•S 2351 PCS

1 ‘‘(3) REQUIRED INFORMATION.—Carriers shall

2 include the following information in or together with

3 the outline of coverage provided under this part:

4 ‘‘(A) A comparison (shown as a graph) of

5 the benefit levels of a policy that increases ben6 efits over the policy period with a policy that

7 does not increase benefits. Such comparison

8 shall show benefit levels over not less than a

9 20-year period.

10 ‘‘(B) Any expected premium increases or

11 additional premiums required to pay for any

12 automatic or optional benefit increases, whether

13 the individual who purchases the policy obtains

14 the inflation protection initially or whether such

15 individual delays purchasing such protection

16 until a future time.

17 ‘‘(4) CONTINUATION OF PROTECTION.—Benefit

18 increases under a policy described in paragraph (1)

19 shall continue without regard to an insured’s age,

20 claim status or claim history, or the length of time

21 the individual has been insured under the policy.

22 ‘‘(5) CONSTANT PREMIUM.—A policy described

23 in paragraph (1) that provides for automatic benefit

24 increases shall include an offer of a premium that

25 the carrier expects to remain constant. Such offer
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•S 2351 PCS

1 shall disclose in a conspicuous manner that the pre2 mium may change in the future unless the premium

3 is guaranteed to remain constant.

4 ‘‘(6) REJECTION.—Inflation protection under

5 this subsection shall be included in a long-term care

6 policy unless a carrier obtains a written rejection of

7 such protection signed by the policyholder.

8 ‘‘SEC. 21155. NONFORFEITURE.

9 ‘‘(a) IN GENERAL.—Each long-term care policy (or

10 certificate) shall provide that if the policy lapses after the

11 policy has been in effect for a minimum period as specified

12 under the reform standards, the policy will provide, with13 out payment of any additional premiums, nonforfeiture

14 benefits as determined appropriate by such standards.

15 ‘‘(b) ESTABLISHMENT OF STANDARDS.—The reform

16 standards shall provide that the percentage or amount of

17 benefits under subsection (a) shall increase based upon the

18 policyholder’s equity in the policy.

19 ‘‘SEC. 21156. LIMIT OF PERIOD OF CONTESTABILITY AND

20 RIGHT TO RETURN.

21 ‘‘(a) CONTESTABILITY.—A carrier may not cancel or

22 renew a long-term care policy or deny a claim under the

23 policy based on fraud or intentional misrepresentation re24 lating to the issuance of the policy unless notice of such
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•S 2351 PCS

1 fraud or misrepresentation is provided within a time pe2 riod to be determined by the reform standards.

3 ‘‘(b) RIGHT TO RETURN.—Each applicant for a long4 term care policy shall have the right to return the policy

5 (or certificates) within 30 days of the date of its delivery

6 (and to have the premium refunded) if, after examination

7 of the policy or certificate, the applicant is not satisfied

8 for any reason.

9 ‘‘SEC. 21157. CIVIL MONEY PENALTY AND PRIVATE

10 ACTIONS.

11 ‘‘(a) CARRIER.—Any carrier that sells, or offers for

12 sale, or issues a long-term care policy and that—

13 ‘‘(1) violates any sales practice under section

14 21151;

15 ‘‘(2) fails to make a refund in accordance with

16 section 21152(a);

17 ‘‘(3) fails to transmit a policy in accordance

18 with section 21152(b);

19 ‘‘(4) provides a commission or compensation in

20 violation of section 21152(e);

21 ‘‘(5) fails to provide an outline of coverage in

22 violation of section 21154(b)(1); or

23 ‘‘(6) issues a policy without obtaining certain

24 information in violation of section 21154(f);
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•S 2351 PCS

1 is subject to a civil money penalty of not to exceed $25,000

2 for each such violation.

3 ‘‘(b) AGENTS.—Any agent that sells or offers for sale

4 a long-term care policy and that—

5 ‘‘(1) violates any sales practice under section

6 21151;

7 ‘‘(2) fails to make a refund in accordance with

8 section 21152(a);

9 ‘‘(3) fails to transmit a policy in accordance

10 with section 21152(b);

11 ‘‘(4) fails to provide an outline of coverage in

12 violation of section 21154(b)(1); or

13 ‘‘(5) issues a policy without obtaining certain

14 information in violation of section 21154(f);

15 is subject to a civil money penalty of not to exceed $15,000

16 for each such violation.

17 ‘‘(c) EFFECT ON STATE LAW.—Nothing in this sec18 tion shall be construed as preempting or otherwise limiting

19 stricter penalties that may be imposed by a State for the

20 types of conduct described in this section.

21 ‘‘(d) PRIVATE ACTIONS.—An individual may com22 mence a civil action in an appropriate State or United

23 States district court to enforce the provisions of this title

24 with respect to long-term care policies and may be award25 ed appropriate relief and reasonable attorney’s fees.
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•S 2351 PCS

1 ‘‘SEC. 21158. LONG-TERM CARE POLICY DEFINED.

2 ‘‘(a) IN GENERAL.—As used in this part, the term

3 ‘long-term care policy’ means any insurance policy, rider,

4 or certificate advertised, marketed, offered, or designed to

5 provide coverage for not less than 12 consecutive months

6 for each covered person on an expense incurred, indemnity

7 prepaid or other basis, for one or more necessary diag8 nostic, preventive, therapeutic, rehabilitative, maintenance

9 or personal care services, provided in a setting other than

10 an acute care unit of a hospital. Such term includes—

11 ‘‘(1) group and individual annuities and life in12 surance policies, riders, or certificates that provide

13 directly, or that supplement, long-term care insur14 ance; and

15 ‘‘(2) a policy, rider, or certificates that provides

16 for payment of benefits based on cognitive impair17 ment or the loss of functional capacity.

18 ‘‘(b) ISSUANCE.—

19 ‘‘(1) IN GENERAL.—Long-term care policies

20 may be issued by any carrier.

21 ‘‘(2) CARRIER.—As used in this part, the term

22 ‘carrier’ means—

23 ‘‘(A) an insurer;

24 ‘‘(B) a fraternal benefit society;

25 ‘‘(C) a nonprofit health, hospital, or medi26 cal service corporation;
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•S 2351 PCS

1 ‘‘(D) a prepaid health plan;

2 ‘‘(E) a health maintenance organization; or

3 ‘‘(F) any similar organization to the extent

4 such organization is otherwise authorized to

5 issue life or health insurance.

6 ‘‘(c) POLICIES EXCLUDED.—The term ‘long-term

7 care policy’ shall not include any insurance policy, rider,

8 or certificate that is offered primarily to provide basic

9 medicare supplement coverage, basic hospital expense cov10 erage, basic medical-surgical expense coverage, hospital

11 confinement indemnity coverage, major medical expense

12 coverage, disability income or related asset-protection cov13 erage, accident only coverage, specified disease or specified

14 accident coverage, or limited benefit health coverage. With

15 respect to life insurance, such term shall not include life

16 insurance policies, riders, or certificates—

17 ‘‘(1) that accelerate the death benefit specifi18 cally for one or more of the qualifying events of ter19 minal illness, medical conditions requiring extraor20 dinary medical intervention, or permanent institu21 tional confinement,

22 ‘‘(2) that provide the option of a lump-sum pay23 ment for those benefits, or
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1 ‘‘(3) with respect to which neither the benefits

2 nor the eligibility for the benefits is conditioned

3 upon the receipt of long-term care.

4 ‘‘(d) APPLICATIONS.—Notwithstanding any other

5 provision of this part, this part shall apply to any product

6 advertised, marketed, or offered as a long-term insurance

7 policy, rider or certificate.

8 ‘‘Subtitle C—Benefits and Cost9 Sharing

10 ‘‘PART I—STANDARD BENEFITS PACKAGES

11 ‘‘SEC. 21201. GENERAL DESCRIPTION OF STANDARD BENE12 FITS PACKAGES.

13 ‘‘(a) STANDARD BENEFITS PACKAGE.—For purposes

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

15 package that—

16 ‘‘(1)(A) provides all of the items and services

17 under the categories of health care items and serv18 ices described in section 21202 as determined by the

19 Board under section 21213(b)(4); and

20 ‘‘(B) provides for a cost-sharing schedule de21 scribed in section 21203(a)(1); and

22 ‘‘(2) has an actuarial value that is equivalent to

23 the actuarial value of the benefits package provided

24 by the Blue Cross/Blue Shield Standard Option

25 under the Federal Employees Health Benefits Pro-
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1 gram, adjusted for an average population and ad2 justed for the particular cost-sharing schedule pro3 vided for in the package (as determined by the Na4 tional Health Benefits Board established under sec5 tion 21211 (referred to in this part as the ‘Board’)).

6 ‘‘(b) ALTERNATIVE STANDARD BENEFITS PACK7 AGE.—For purposes of this title, an alternative standard

8 benefits package is a benefits package that—

9 ‘‘(1)(A) provides such items and services under

10 the categories of health care items and services de11 scribed in section 21202 as determined by the Board

12 under section 21213(b)(5); and

13 ‘‘(B) the cost-sharing schedule described in

14 section 21203(a)(2); and

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

16 actuarial value of the benefits package provided by

17 the Blue Cross/Blue Shield Standard Option under

18 the Federal Employees Health Benefits Program,

19 adjusted for an average population (as determined

20 by the Board).

21 ‘‘SEC. 21202. DESCRIPTION OF CATEGORIES OF ITEMS AND

22 SERVICES.

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

24 items and services described in this section are the

25 following:
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1 ‘‘(1) Inpatient and outpatient care, including

2 hospital and health professional services (as defined

3 in subsection (c)).

4 ‘‘(2) Emergency services, including appropriate

5 transport services.

6 ‘‘(3) Clinical preventive services, including serv7 ices for high risk populations, immunizations, tests,

8 and clinician visits.

9 ‘‘(4) Mental illness and substance abuse serv10 ices.

11 ‘‘(5) Family planning services and services for

12 pregnant women.

13 ‘‘(6) Prescription drugs and biologicals.

14 ‘‘(7) Hospice care services.

15 ‘‘(8) Home health care services.

16 ‘‘(9) Outpatient laboratory, radiology, and diag17 nostic services and medical equipment.

18 ‘‘(10) Outpatient rehabilitation services.

19 ‘‘(11) Vision care, dental care, and hearing aids

20 for individuals under 22 years of age.

21 ‘‘(12) Patient care costs associated with inves22 tigational treatments (excluding the direct costs of

23 an investigational treatment) that are part of a peer24 reviewed and approved research program (as defined

25 by the Secretary) or research trials approved by the
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1 Secretary, the Directors of the National Institutes of

2 Health, the Commissioner of the Food and Drug

3 Administration, the Secretary of Veterans Affairs,

4 the Secretary of Defense, or a qualified nongovern5 mental research entity as defined in guidelines of the

6 National Institutes of Health, including guidelines

7 for cancer center support grants designated by the

8 National Cancer Institute.

9 ‘‘(b) LIMITATION.—

10 ‘‘(1) IN GENERAL.—Items and services under

11 the categories described in subsection (a) shall be

12 furnished to health plan enrollees only when medi13 cally necessary or appropriate.

14 ‘‘(2) CLINICAL PREVENTIVE SERVICES.—For

15 purposes of paragraph (1), any clinical preventive

16 service furnished in accordance with a periodicity

17 schedule established by the Board under section

18 21213(b)(2)(B) shall be medically necessary or ap19 propriate.

20 ‘‘(3) EMERGENCY SERVICES.—For purposes of

21 paragraph (1), any emergency service furnished to

22 an individual with an emergency medical condition

23 (as defined in section 1867(e)(1)) shall be medically

24 necessary or appropriate.
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1 ‘‘(c) DEFINITION OF HEALTH PROFESSIONAL SERV2 ICES.—For purposes of this subtitle, the term ‘health pro3 fessional services’ means professional services that are

4 lawfully provided by a physician or another health profes5 sional who is legally authorized to provide such services

6 in the State in which the services are provided.

7 ‘‘(d) DEFINITION OF MEDICALLY NECESSARY OR AP8 PROPRIATE.—For purposes of this subtitle, an item or

9 service is medically necessary or appropriate—

10 ‘‘(1) with respect to an enrollee who is 22 years

11 of age or older, if the item or service is—

12 ‘‘(A) for the treatment or diagnosis of a

13 health condition;

14 ‘‘(B) generally regarded as being safe and

15 effective;

16 ‘‘(C) indicated for the enrollee; and

17 ‘‘(D) intended to maintain or improve the

18 biological, psychological, or functional condition

19 of the enrollee or to prevent or mitigate an ad20 verse health outcome or limitation in functional

21 capacity for the enrollee; and

22 ‘‘(2) with respect to an enrollee under 22 years

23 of age, if the item or service—

24 ‘‘(A) is appropriate for the age and health

25 status of the enrollee;
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1 ‘‘(B) will prevent or ameliorate the effects

2 of a condition, illness, injury, or disorder;

3 ‘‘(C) will aid the overall physical and men4 tal growth and development of the enrollee; or

5 ‘‘(D) will assist in achieving or maintaining

6 maximum functional capacity in performing

7 daily activities.

8 ‘‘SEC. 21203. COST-SHARING.

9 ‘‘(a) IN GENERAL.—

10 ‘‘(1) STANDARD BENEFITS PACKAGE.—Except

11 as provided in paragraph (3), each standard benefits

12 package shall include a cost-sharing schedule devel13 oped by the Board for such package under section

14 21213(c).

15 ‘‘(2) ALTERNATIVE STANDARD BENEFITS PACK16 AGE.—Except as provided in paragraph (3), each al17 ternative standard benefits package shall include the

18 cost-sharing schedule developed by the Board for

19 such package under section 21213(c).

20 ‘‘(3) INCREASES IN OUT-OF-POCKET LIMITS

21 BASED ON HEALTH SPENDING.—In the case of any

22 calendar year for which an increase in the out-of23 pocket limits under any cost-sharing schedule devel24 oped by the Board for a benefits package is required

25 under section 801 of the Health Security Act, the
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1 out-of-pocket limits under such schedule shall be as

2 specified in the Executive Order issued pursuant to

3 section 801(d) of such Act.

4 ‘‘(b) DEDUCTIBLES, COST-SHARING, AND OUT-OF5 POCKET LIMITS ON COST-SHARING.—

6 ‘‘(1) APPLICATION ON AN ANNUAL BASIS.—The

7 deductibles and out-of-pocket limits on cost-sharing

8 for a year under the schedules referred to in sub9 section (a) shall be applied based upon expenses in10 curred for items and services furnished in the year.

11 ‘‘(2) INDIVIDUAL AND FAMILY GENERAL

12 DEDUCTIBLES.—

13 ‘‘(A) INDIVIDUAL.—Subject to subpara14 graph (B), with respect to an individual en15 rolled under a health plan (regardless of the

16 class of enrollment), any individual general de17 ductible in the cost-sharing schedule offered by

18 the plan represents the amount of countable ex19 penses (as defined in subparagraph (C)) that

20 the individual may be required to incur in a

21 year before the plan incurs liability for expenses

22 for such items and services furnished to the in23 dividual.

24 ‘‘(B) FAMILY.—In the case of an individ25 ual enrolled under a health plan under a family
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1 class of enrollment (as defined in section

2 21113(b)(2)(B)(iii)(I)), the individual general

3 deductible under subparagraph (A) shall not

4 apply to countable expenses incurred by the in5 dividual or any member of the individual’s fam6 ily in a year at such time as the family has in7 curred, in the aggregate, countable expenses in

8 the amount of the family general deductible for

9 the year.

10 ‘‘(C) COUNTABLE EXPENSE.—In this para11 graph, the term ‘countable expense’ means,

12 with respect to an individual for a year, an ex13 pense for an item or service covered by the

14 standard benefit package that is subject to the

15 general deductible and for which, but for such

16 deductible and any other cost-sharing under

17 this subtitle, a health plan is liable for payment.

18 The amount of countable expenses for an indi19 vidual for a year under this paragraph shall not

20 exceed the individual general deductible for the

21 year.

22 ‘‘(3) COINSURANCE AND COPAYMENTS.—After

23 a general or separate deductible that applies to an

24 item or service covered by the standard benefit pack25 age has been satisfied for a year, subject to para-
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•S 2351 PCS

1 graph (4), coinsurance and copayments are amounts

2 (expressed as a percentage of an amount otherwise

3 payable or as a dollar amount, respectively) that an

4 individual may be required to pay with respect to the

5 item or service.

6 ‘‘(4) INDIVIDUAL AND FAMILY LIMITS ON COST7 SHARING.—

8 ‘‘(A) INDIVIDUAL.—Subject to subpara9 graph (B), with respect to an individual en10 rolled under a health plan (regardless of the

11 class of enrollment), the individual out-of-pock12 et limit on cost-sharing in the cost-sharing

13 schedule offered by the plan represents the

14 amount of expenses that the individual may be

15 required to incur under the plan in a year be16 cause of a general deductible, separate

17 deductibles, copayments, and coinsurance before

18 the plan may no longer impose any cost-sharing

19 with respect to items or services covered by the

20 standard benefit package that are provided to

21 the individual.

22 ‘‘(B) FAMILY.—In the case of an individ23 ual enrolled under a health plan under a family

24 class of enrollment (as defined in section

25 21113(b)(2)(B)(iii)(I)), the family out-of-pocket
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•S 2351 PCS

1 limit on cost-sharing in the cost-sharing sched2 ule offered by the plan represents the amount

3 of expenses that members of the individual’s

4 family, in the aggregate, may be required to

5 incur under the plan in a year because of a gen6 eral deductible, separate deductibles,

7 copayments, and coinsurance before the plan

8 may no longer impose any cost-sharing with re9 spect to items or services covered by the stand10 ard benefit package that are provided to any

11 member of the individual’s family.

12 ‘‘PART II—NATIONAL HEALTH BENEFITS BOARD

13 ‘‘SEC. 21211. CREATION OF NATIONAL HEALTH BENEFITS

14 BOARD; MEMBERSHIP.

15 ‘‘(a) IN GENERAL.—There is hereby established in

16 the Department of Health and Human Services a National

17 Health Benefits Board.

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

19 members appointed by the President, by and with the ad20 vice and consent of the Senate. No more than 4 members

21 of the Board may be affiliated with the same political

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

23 after the date of the enactment of this title.

24 ‘‘(c) CHAIR.—The President shall designate one of

25 the members of the Board as chair.
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1 ‘‘(d) TERMS.—

2 ‘‘(1) IN GENERAL.—Except as provided in para3 graph (2), the term of each member of the Board

4 is 6 years and begins when the term of the prede5 cessor of that member ends.

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

7 members of the Board first taking office after the

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

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

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

11 end of six years.

12 ‘‘(3) CONTINUATION IN OFFICE.—Upon the ex13 piration of a term of office, a member shall continue

14 to serve until a successor is appointed and qualified.

15 ‘‘(e) VACANCIES.—

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

17 than by expiration of term, a successor shall be ap18 pointed by the President, by and with the consent of

19 the Senate, to fill such vacancy. The appointment

20 shall be for the remainder of the term of the prede21 cessor.

22 ‘‘(2) NO IMPAIRMENT OF FUNCTION.—A va23 cancy in the membership of the Board does not im24 pair the authority of the remaining members to exer25 cise all of the powers of the Board.
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•S 2351 PCS

1 ‘‘(3) ACTING CHAIR.—The Board may des2 ignate a member to act as chair during any period

3 in which there is no chair designated by the Presi4 dent.

5 ‘‘(f) MEETINGS; QUORUM.—

6 ‘‘(1) MEETINGS.—The chair shall preside at

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

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

9 pro tempore.

10 ‘‘(2) QUORUM.—Four members of the Board

11 shall constitute a quorum thereof.

12 ‘‘SEC. 21212. QUALIFICATIONS OF BOARD MEMBERS.

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

14 be a citizen of the United States.

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

16 selected on the basis of their experience and expertise in

17 relevant subjects, including the practice of medicine, nurs18 ing, or other clinical practices, health care financing and

19 delivery, State health systems, consumer protection, busi20 ness, law, and delivery of care to vulnerable populations.

21 ‘‘(c) EXCLUSIVE EMPLOYMENT.—During the term of

22 appointment, Board members shall serve as employees of

23 the Federal Government and shall hold no other employ24 ment.
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•S 2351 PCS

1 ‘‘(d) PROHIBITION OF CONFLICT OF INTEREST.—

2 During the period in which an individual is a member of

3 the Board, such individual may not have a pecuniary inter4 est in or hold an official relation to any health plan, health

5 care provider, insurance company, pharmaceutical com6 pany, medical equipment company, or other affected in7 dustry. Before entering upon the duties as a member of

8 the Board, the member shall certify under oath compliance

9 with this requirement.

10 ‘‘(e) COMPENSATION OF BOARD MEMBERS.—Each

11 member of the Board (other than the chair) shall receive

12 an annual salary at the annual rate payable from time

13 to time for level IV of the Executive Schedule. The chair

14 of the Board, during the period of service as chair, shall

15 receive an annual salary at the annual rate payable from

16 time to time for level III of the Executive Schedule.

17 ‘‘SEC. 21213. GENERAL DUTIES AND RESPONSIBILITIES.

18 ‘‘(a) CRITERIA FOR DETERMINING MEDICAL NECES19 SITY OR APPROPRIATENESS.—The Board shall define the

20 standards to be used by a health plan in determining

21 whether an item or service under the categories of health

22 care items and services described in section 21202 is medi23 cally necessary or appropriate for an enrollee in the plan.

24 ‘‘(b) CLARIFICATION AND REFINEMENT OF ITEMS

25 AND SERVICES.—
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1 ‘‘(1) IN GENERAL.—The Board shall promul2 gate such regulations or establish such guidelines as

3 may be necessary to clarify and refine the items and

4 services under the categories of health care items

5 and services described in section 21202 in accord6 ance with standards of medical necessity or appro7 priateness. In performing its duties under the pre8 ceding sentence, the Board shall—

9 ‘‘(A) develop interim coverage decisions in

10 limited circumstances;

11 ‘‘(B) clarify and refine the items and serv12 ices in the categories of health care items and

13 services in a manner that prevents adverse risk

14 selection;

15 ‘‘(C) not specify types of providers;

16 ‘‘(D) not specify particular procedures or

17 treatments or classes of procedures or treat18 ments; and

19 ‘‘(E) give priority to—

20 ‘‘(i)(I) parity for mental illness and

21 substance abuse services with other medi22 cal services using the standards of medical

23 necessity or appropriateness for the en24 rollee receiving the services in order to en25 sure that arbitrary day or visit limits or
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1 cost-sharing requirements applied to men2 tal illness and substance abuse services

3 that are not different from those applied to

4 medical health services, and

5 ‘‘(II) encouraging the use of out6 patient treatments in delivering mental ill7 ness and substance abuse services to the

8 greatest extent possible;

9 ‘‘(ii) the needs of children and vulner10 able populations (including rural and un11 derserved individuals); and

12 ‘‘(iii) improving the health of individ13 uals through prevention.

14 ‘‘(2) SCHEDULES FOR ITEMS AND SERVICES.—

15 ‘‘(A) IN GENERAL.—The Board shall es16 tablish and update periodicity schedules for the

17 items and services in the categories of health

18 care items and services described in section

19 21202.

20 ‘‘(B) SPECIAL RULE WITH RESPECT TO

21 CLINICAL PREVENTIVE SERVICES.—With re22 spect to clinical preventive services, the

23 Board—

24 ‘‘(i) shall specify and define specific

25 items and services as clinical preventive
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1 services for high risk populations and shall

2 establish and update a periodicity schedule

3 for such items and services;

4 ‘‘(ii) shall establish and update the

5 periodicity schedules for the age-appro6 priate immunizations, tests, and clinician

7 visits;

8 ‘‘(iii) shall establish rules with respect

9 to coverage for an immunization, test, or

10 clinician visit that is not provided to an in11 dividual during the age range for such im12 munization, test, or clinician visit that is

13 specified under clause (ii); and

14 ‘‘(iv) may otherwise modify clinical

15 preventive services taking into account age

16 and other risk factors.

17 ‘‘(3) INVESTIGATIONAL TREATMENTS.—The

18 Board shall refine policies regarding coverage of pa19 tient care costs associated with investigational treat20 ments that are part of approved research trials.

21 ‘‘(4) ITEMS AND SERVICES PROVIDED BY

22 STANDARD BENEFITS PACKAGE.—The regulations

23 promulgated by the Board under this subsection

24 shall provide that each standard benefits package

25 shall provide for the same items and services in the
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•S 2351 PCS

1 categories of health care items and services de2 scribed in section 21202, as clarified and refined

3 under this subsection, and provide for such items

4 and services in the same amount, duration, or scope.

5 ‘‘(5) ITEMS AND SERVICES PROVIDED BY AL6 TERNATIVE STANDARD BENEFITS PACKAGE.—The

7 regulations promulgated by the Board under this

8 subsection shall specify the items and services in the

9 categories of health care items and services de10 scribed in section 21202 that an alternative stand11 ard benefits package must provide.

12 ‘‘(c) COST-SHARING.—The Board shall establish

13 cost-sharing schedules to be provided by a standard bene14 fits package or an alternative standard benefits package.

15 In establishing such cost-sharing schedules, the Board

16 shall meet the following requirements:

17 ‘‘(1) ANNUAL BASIS.—The Board shall estab18 lish cost sharing schedules on an annual basis.

19 ‘‘(2) OUT-OF-POCKET LIMITS.—Each cost shar20 ing schedule developed by the Board shall include

21 out-of-pocket limits.

22 ‘‘(3) LIFETIME LIMITS.—No cost-sharing

23 schedule established by the Board may include life24 time limits.
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1 ‘‘(4) STANDARD BENEFITS PACKAGE.—In es2 tablishing cost sharing schedules for standard bene3 fits packages, the Board shall ensure that the sched4 ules permit a variety of delivery systems. A standard

5 benefit package that provides for the cost sharing

6 schedule established by the Board under this para7 graph that has the lowest actuarial value relative to

8 the actuarial values of all other cost sharing sched9 ules established by the Board under this paragraph,

10 shall have an actuarial value that is equivalent to

11 the actuarial value of the benefits package provided

12 by the Blue Cross/Blue Shield Standard Option

13 under the Federal Employees Health Benefits Pro14 gram, adjusted for an average population (as deter15 mined by the Board).

16 ‘‘(5) ALTERNATIVE STANDARD BENEFITS PACK17 AGE.—The Board shall establish only one cost shar18 ing schedule for the alternative standard benefits

19 package. Such cost sharing schedule shall provide

20 for a higher deductible than any deductible under a

21 schedule established by the Board for a standard

22 benefits package.

23 ‘‘(6) CLINICAL PREVENTIVE SERVICES.—No

24 cost sharing schedule established by the Board may

25 include cost sharing for clinical preventive services.
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•S 2351 PCS

1 ‘‘(7) COST SHARING RULES.—The cost sharing

2 schedules developed under this subsection shall be

3 consistent with the provisions of section 21203(b).

4 ‘‘(d) COST-SHARING ASSISTANCE.—

5 ‘‘(1) IN GENERAL.—For purposes of providing

6 cost-sharing assistance under section 1953, the

7 Board shall determine an appropriate reduction in

8 the cost-sharing applicable to cost-sharing subsidy

9 eligible individuals (as defined in section 1953(a)(2))

10 under certified standard health plans.

11 ‘‘(2) CONSIDERATIONS.—The Board shall as12 sure that reductions in cost-sharing are determined

13 under paragraph (1) in a manner that reflects—

14 ‘‘(A) the extent to which an individual’s

15 family income is below the poverty line (as de16 fined in section 1958(5)); and

17 ‘‘(B) whether an individual may enroll in a

18 low-cost-sharing plan.

19 ‘‘(e) LEGISLATIVE RECOMMENDATIONS.—

20 ‘‘(1) IN GENERAL.—The Board may submit

21 recommendations to Congress for such modifications

22 to the provisions of this subtitle as the Board deter23 mines appropriate in accordance with section

24 21217(a)(1).
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•S 2351 PCS

1 ‘‘(2) CONSULTATIONS.—In performing its du2 ties under this subsection, the Board shall consult

3 with the President and Congress.

4 ‘‘(f) OTHER REQUIREMENTS.—The Board shall sat5 isfy any other requirements imposed on the Board under

6 this title.

7 ‘‘SEC. 21214. POWERS.

8 ‘‘(a) STAFF; CONTRACT AUTHORITY.—The Board

9 shall have authority, subject to the provisions of the civil10 service laws and chapter 51 and subchapter III of chapter

11 53 of title 5, United States Code, to appoint such officers

12 and employees as are necessary to carry out its functions.

13 The Board may contract with any person (including an

14 agency of the Federal Government) for studies and analy15 sis as required to execute its functions. Any employee of

16 the Executive Branch may be detailed to the Board to as17 sist the Board in carrying out its duties.

18 ‘‘(b) CONSULTATIONS WITH EXPERTS.—The Board

19 may consult with any outside expert individuals or groups

20 that the Board determines appropriate in performing its

21 duties under section 21213. The Board may establish ad22 visory committees.

23 ‘‘(c) ACCESS TO INFORMATION.—The Board may se24 cure directly from any department or agency of the United

25 States information necessary to enable it to carry out its
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1 functions, to the extent such information is otherwise

2 available to a department or agency of the United States.

3 Upon request of the chair, the head of that department

4 or agency shall furnish that information to the Board.

5 ‘‘(d) DELEGATION OF AUTHORITY.—Except as other6 wise provided, the Board may delegate any function to

7 such officers and employees as the Board may designate

8 and may authorize such successive redelegations of such

9 functions with the Board as the Board deems to be nec10 essary or appropriate. No delegation of functions by the

11 Board shall relieve the Board of responsibility for the ad12 ministration of such functions.

13 ‘‘(e) RULEMAKING.—The National Health Board is

14 authorized to establish such rules as may be necessary to

15 carry out this subtitle.

16 ‘‘SEC. 21215. FUNDING.

17 ‘‘(a) AUTHORIZATION OF APPROPRIATIONS.—There

18 are authorized to be appropriated to the Board such sums

19 as may be necessary to carry out the purposes of this part.

20 ‘‘(b) SUBMISSION OF BUDGET.—Under the proce21 dures of chapter 11 of title 31, United States Code, the

22 budget for the Board for a fiscal year shall be reviewed

23 by the Director of the Office of Management and Budget

24 and submitted to the Congress as part of the President’s
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1 submission of the Budget of the United States for the fis2 cal year.

3 ‘‘SEC. 21216. APPLICABILITY OF FEDERAL ADVISORY COM4 MITTEE ACT.

5 ‘‘The Federal Advisory Committee Act (5 U.S.C.

6 App.) shall not apply to the Board.

7 ‘‘SEC. 21217. CONGRESSIONAL CONSIDERATION OF BOARD

8 RECOMMENDATIONS.

9 ‘‘(a) IN GENERAL.—

10 ‘‘(1) TIMING FOR SUBMISSION.—The Board

11 shall submit any recommendations to Congress

12 under section 21213(e) by not later than March 1

13 of any year.

14 ‘‘(2) EFFECTIVENESS.—Except as provided in

15 subsection (c), the recommendations submitted

16 under paragraph (1) shall take effect unless by Sep17 tember 15 of the year in which such recommenda18 tions are submitted Congress enacts a joint resolu19 tion disapproving such recommendations in accord20 ance with subsection (b).

21 ‘‘(b) CONGRESSIONAL DISAPPROVAL PROCE22 DURES.—

23 ‘‘(1) CONTENTS OF RESOLUTION.—For pur24 poses of subsection (a), ‘joint resolution’ means only

25 a joint resolution introduced after the date on which
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1 the recommendations of the Board are received by

2 Congress the matter after the resolving clause of

3 which is as follows: ‘That Congress disapproves the

4 recommendations of the National Health Benefits

5 Board submitted to the Congress on llllll.’

6 (the blank space being appropriately filled in).

7 ‘‘(2) REFERRAL TO COMMITTEE.—A resolution

8 described in paragraph (1) introduced in the House

9 of Representatives shall be referred to the Commit10 tee on Ways and Means of the House of Representa11 tives. A resolution described in paragraph (1) intro12 duced in the Senate shall be referred to the Commit13 tee on Finance of the Senate.

14 ‘‘(3) DISCHARGE OF COMMITTEE.—If the com15 mittee to which is referred a resolution described in

16 paragraph (1) has not reported such resolution (or

17 an identical resolution) by July 1, such committee

18 shall be deemed to be discharged from further con19 sideration of such resolution and such resolution

20 shall be placed on the appropriate calendar of the

21 House involved.

22 ‘‘(4) FLOOR CONSIDERATION.—

23 ‘‘(A) IN GENERAL.—When the committee

24 to which a resolution is referred has reported,

25 or has been deemed to be discharged (under
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1 paragraph (3)) from further consideration of, a

2 resolution described in paragraph (1), it is at

3 any time thereafter in order (even though a

4 previous motion to the same effect has been dis5 agreed to) for any Member of the respective

6 House to move to proceed to the consideration

7 of the resolution, and all points of order against

8 the resolution (and against consideration of the

9 resolution) are waived. The motion is highly

10 privileged in the House of Representatives and

11 is privileged in the Senate and is not debatable.

12 The motion is not subject to amendment, or to

13 a motion to postpone, or to a motion to proceed

14 to the consideration of other business. A motion

15 to reconsider the vote by which the motion is

16 agreed to or disagreed to shall not be in order.

17 If a motion to proceed to the consideration of

18 the resolution is agreed to, the respective House

19 shall immediately proceed to consideration of

20 the joint resolution without intervening motion,

21 order, or other business, and the resolution

22 shall remain the unfinished business of the re23 spective House until disposed of.

24 ‘‘(B) DEBATE.—Debate on the resolution,

25 and on all debatable motions and appeals in
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1 connection therewith, shall be limited to not

2 more than 2 hours, which shall be divided

3 equally between those favoring and those oppos4 ing the resolution. A motion further to limit de5 bate is in order and not debatable. An amend6 ment to, or a motion to postpone, or a motion

7 to proceed to the consideration of other busi8 ness, or a motion to recommit the resolution is

9 not in order. A motion to reconsider the vote by

10 which the resolution is agreed to or disagreed to

11 is not in order.

12 ‘‘(C) VOTE ON FINAL PASSAGE.—Imme13 diately following the conclusion of the debate on

14 a resolution described in paragraph (1), and a

15 single quorum call at the conclusion of the de16 bate if requested in accordance with the rules of

17 the appropriate House, the vote on final pas18 sage of the resolution shall occur.

19 ‘‘(D) RULINGS OF THE CHAIR ON PROCE20 DURE.—Appeals from the decisions of the Chair

21 relating to the application of the rules of the

22 Senate or the House of Representatives, as the

23 case may be, to the procedure relating to a res24 olution described in paragraph (1) shall be de25 cided without debate.
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1 ‘‘(5) COORDINATION WITH ACTION BY OTHER

2 HOUSE.—

3 ‘‘(A) IN GENERAL.—If, before the passage

4 by one House of a resolution of that House de5 scribed in paragraph (1), that House receives

6 from the other House a resolution described in

7 paragraph (1), then the following procedures

8 shall apply:

9 ‘‘(i) The resolution of the other House

10 shall not be referred to a committee except

11 in the case of final passage as provided in

12 clause (ii)(II).

13 ‘‘(ii) With respect to a resolution de14 scribed in paragraph (1) of the House re15 ceiving the resolution—

16 ‘‘(I) the procedure in that House

17 shall be the same as if no resolution

18 had been received from the other

19 House; but

20 ‘‘(II) the vote on final passage

21 shall be on the resolution of the other

22 House.

23 ‘‘(B) DISPOSITION.—Upon disposition of

24 the resolution received from the other House, it
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1 shall no longer be in order to consider the reso2 lution that originated in the receiving House.

3 ‘‘(6) RULES OF HOUSE OF REPRESENTATIVES

4 AND SENATE.—This subsection is enacted by Con5 gress—

6 ‘‘(A) as an exercise of the rulemaking

7 power of the Senate and House of Representa8 tives, respectively, and as such it is deemed a

9 part of the rules of each House, respectively,

10 but applicable only with respect to the proce11 dure to be followed in that House in the case

12 of a resolution described in paragraph (1), and

13 it supersedes other rules only to the extent that

14 it is inconsistent with such rules; and

15 ‘‘(B) with full recognition of the constitu16 tional right of either House to change the rules

17 (so far as relating to the procedure of that

18 House) at any time, in the same manner, and

19 to the same extent as in the case of any other

20 rule of that House.

21 ‘‘(c) RECOMMENDATIONS IN 2002.—Subsection

22 (a)(2) shall not apply to any recommendations submitted

23 to Congress by the Board during 2002.
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1 ‘‘PART III—PROVISIONS RELATING TO ABORTION

2 AND RELIGIOUS BELIEFS

3 ‘‘SEC. 21221. REGULATION OF ABORTION BY THE STATES.

4 ‘‘Nothing in this title shall be construed to conflict

5 with any constitutionally permissible regulation of abor6 tion by a State.

7 ‘‘SEC. 21222. NO REQUIREMENT TO CREATE OR MAINTAIN

8 ABORTION CLINICS AND PROVIDERS.

9 ‘‘Nothing in this title shall be construed to—

10 ‘‘(1) require the creation or maintenance of

11 abortion clinics or other abortion providers within a

12 State or any region of a State; or

13 ‘‘(2) authorize any Federal agency or State

14 to—

15 ‘‘(A) require the creation or maintenance

16 of abortion clinics or other abortion providers;

17 or

18 ‘‘(B) deny certification, or any other bene19 fit granted by this title, to a health plan based

20 on the number of, or the presence or absence

21 of, abortion clinics or other abortion providers

22 in or affiliated with the plan.

23 ‘‘SEC. 21223. PROVISIONS RELATING TO RELIGIOUS BELIEF

24 OR MORAL CONVICTION.

25 ‘‘Nothing in this title shall be construed to—
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1 ‘‘(1) prevent any individual from purchasing a

2 standard benefits package which excludes coverage

3 of abortion services, if the individual objects to abor4 tion on the basis of a religious belief or moral con5 viction;

6 ‘‘(2) prevent any employer from contributing to

7 the purchase of a standard benefits package which

8 excludes coverage of abortion or other services, if the

9 employer objects to such services on the basis of a

10 religious belief or moral conviction;

11 ‘‘(3) require any health professional or health

12 facility to perform or assist in the performance of

13 any health care service, if the health professional or

14 facility objects to performing or assisting in the per15 formance of such a service on the basis of a religious

16 belief or moral conviction; and

17 ‘‘(4) require any commercial insurance com18 pany, Blue Cross plan, integrated health plan, or

19 any other organization that assumes health insur20 ance risk to offer a package including abortion or

21 other services, if the health plan sponsor objects to

22 covering such services on the basis of a religious be23 lief or moral conviction.
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1 ‘‘Subtitle D—Expanded Access to

2 Health Plans

3 ‘‘PART I—ACCESS THROUGH EMPLOYERS

4 ‘‘SEC. 21401. GENERAL EMPLOYER RESPONSIBILITIES.

5 ‘‘(a) AVAILABILITY OF COVERAGE.—

6 ‘‘(1) IN GENERAL.—Each employer shall meet

7 the requirement under section 21002(c)(1)(A)(i) to

8 make available to each employee of the employer the

9 opportunity to enroll through the employer in any of

10 the certified standard health plans described in such

11 section.

12 ‘‘(2) WAIVER OF ACCESS REQUIREMENT.—If

13 the Governor of a participating State waives the re14 quirement under section 21413(a)(2) that a pur15 chasing cooperative offer at least 3 certified plans in

16 certain rural areas of the State, any employer lo17 cated in such rural area shall not be required to

18 offer 3 certified standard health plans in such area.

19 ‘‘(b) FORWARDING OF INFORMATION.—

20 ‘‘(1) INFORMATION REGARDING PLANS.—An

21 employer must provide each employee of such em22 ployer—

23 ‘‘(A) with information provided by the

24 State under section 21013 regarding all cer25 tified standard health plans offered in the com-
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1 munity rating area in which the employer is lo2 cated, and

3 ‘‘(B) if the employer knows that an em4 ployee resides in another community rating

5 area, information regarding how to obtain infor6 mation on certified standard health plans of7 fered to residents of such other community rat8 ing area.

9 ‘‘(2) INFORMATION REGARDING EMPLOYEES.—

10 An employer shall forward the name and address

11 (and any other necessary identifying information

12 specified by the Secretary) of each employee enroll13 ing through the employer—

14 ‘‘(A) to the certified standard health plan

15 in which such employee is enrolling, or

16 ‘‘(B) to the purchasing cooperative (if any)

17 through which such employee is enrolling.

18 ‘‘(c) PAYROLL DEDUCTION.—

19 ‘‘(1) IN GENERAL.—If—

20 ‘‘(A) a certified standard plan, or purchas21 ing cooperative on behalf of such a plan, re22 quests an employer under this section to with23 hold premiums with respect to any employee en24 rolled in the plan, or
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1 ‘‘(B) an employee requests an employer to

2 withhold premiums to a certified standard

3 health plan in which the employee is enrolled or

4 enrolling,

5 the employer shall deduct and withhold such pre6 miums (less any employer contribution) through

7 payroll deduction and pay the amounts deducted and

8 withheld to the plan or to the purchasing coopera9 tive.

10 ‘‘(2) PAYROLL DEDUCTIONS.—

11 ‘‘(A) FREQUENCY.—In the case of an em12 ployee who is paid wages or other compensa13 tion—

14 ‘‘(i) on a monthly or more frequent

15 basis, the employer shall deduct and with16 hold, and pay, such premiums at the same

17 time as the payment of such wages or

18 other compensation, or

19 ‘‘(ii) less frequently than monthly, the

20 employer shall pay such premiums on a

21 monthly basis.

22 ‘‘(B) EMPLOYEE PROTECTIONS.—

23 ‘‘(i) WITHHOLDING CONSTITUTES

24 SATISFACTION OF OBLIGATION.—If an em25 ployee notifies the health plan sponsor that
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1 the employee has requested the employer

2 withholding of a certain amount, the with3 holding of such an amount by the employer

4 under subparagraph (A) shall constitute

5 satisfaction of the employee’s obligation to

6 pay the standard health plan with respect

7 to such amount.

8 ‘‘(ii) DIRECT PAYMENT ALLOWED IN

9 CASE OF NONPAYMENT.—In the case of

10 the nonpayment to a standard health plan

11 of any amount withheld by an employer,

12 the plan shall notify such employee of such

13 nonpayment and shall allow the employee

14 to make direct payments to the plan effec15 tive with the next succeeding payment pe16 riod.

17 ‘‘(3) AUTHORITY TO CHARGE ADMINISTRATIVE

18 FEE.—Any employer providing a payroll deduction

19 for a premium with respect to a health plan may

20 charge a nominal administrative fee to cover the

21 marginal costs of processing such deduction, except

22 that this paragraph shall not apply to any plan of23 fered through the employer (including any plan of24 fered through a purchasing cooperative on behalf of

25 the employer).
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1 ‘‘(d) TIME PERIOD FOR EMPLOYERS.—An employer

2 shall meet the requirements of this section with respect

3 to any new employee within the 30-day period beginning

4 on the date of hire.

5 ‘‘SEC. 21402. MAINTENANCE OF EFFORT FOR COVERAGE OF

6 CHILDREN.

7 ‘‘Each employer making an employer contribution to8 ward the coverage of the children of the employees of such

9 employer as of July 1, 1994, shall continue such contribu10 tion to the certified standard health plan offering the

11 standard benefits package chosen by the employee.

12 ‘‘SEC. 21403. DEVELOPMENT OF LARGE EMPLOYER PUR13 CHASING GROUPS.

14 ‘‘(a) IN GENERAL.—Nothing in this title shall be con15 strued as prohibiting 2 or more experience-rated employ16 ers from joining together to purchase insurance for their

17 employees, except that each such employer shall be respon18 sible for meeting the employer’s requirements under this

19 title with respect to its employees.

20 ‘‘(b) NO USE OF PURCHASING COOPERATIVES.—An

21 experience-rated employer shall be ineligible to purchase

22 health insurance through a purchasing cooperative.

23 ‘‘SEC. 21404. ENFORCEMENT.

24 ‘‘A State program shall provide for the monitoring

25 and enforcement of the requirements of this part. In the
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•S 2351 PCS

1 case of any employer which fails to meet any requirement

2 under this part with respect to any employee, the State

3 program shall impose a civil money penalty on such em4 ployer in an amount not more than 25 percent of the

5 wages of such employee during the period of such failure.

6 The State program shall provide that provisions similar

7 to the provisions of section 1128A (other than subsections

8 (a) and (b)) shall apply to civil money penalties imposed

9 under this section in the same manner as they apply to

10 a penalty or proceeding under section 1128A(a).

11 ‘‘PART II—ACCESS THROUGH HEALTH

12 INSURANCE PURCHASING COOPERATIVES

13 ‘‘Subpart A—Functions of Purchasing Cooperatives

14 ‘‘SEC. 21411. ENROLLMENT OF COMMUNITY-RATED INDIVID15 UALS IN CERTIFIED STANDARD HEALTH

16 PLANS.

17 ‘‘(a) IN GENERAL.—A purchasing cooperative shall

18 offer, on behalf of all certified standard health plans with

19 which an agreement was entered into under section 21413

20 and in accordance with the enrollment procedures of such

21 plans, enrollment in the plans only to community-rated in22 dividuals residing or employed in the community rating

23 area served by the purchasing cooperative.

24 ‘‘(b) OUTREACH.—In carrying out its responsibilities

25 under subsection (a), a purchasing cooperative shall per-
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1 form such activities, including outreach, as may be nec2 essary to actively seek the enrollment of community-rated

3 individuals, including children and pregnant women who

4 are eligible for subsidies under part B of title XIX or indi5 viduals who reside in medically underserved areas.

6 ‘‘SEC. 21412. DUTIES OF PURCHASING COOPERATIVES.

7 ‘‘(a) IN GENERAL.—Subject to subsection (b), each

8 purchasing cooperative shall—

9 ‘‘(1) enroll community-rated individuals in cer10 tified standard health plans in accordance with sec11 tion 21411;

12 ‘‘(2) collect premiums from individuals enrolled

13 in certified standard health plans through the pur14 chasing cooperative and forward such premiums to

15 the plans;

16 ‘‘(3) enter into agreements only with certified

17 standard health plans under section 21413;

18 ‘‘(4) ensure that the services of the purchasing

19 cooperative are accessible throughout the community

20 rating area;

21 ‘‘(5) ensure such accessibility by providing in22 formation in accordance with section 21414;

23 ‘‘(6) establish a process for the receipt and dis24 position of complaints regarding the performance of

25 its duties;
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•S 2351 PCS

1 ‘‘(7) coordinate activities with other purchasing

2 cooperatives under section 21420;

3 ‘‘(8) report to the participating State such in4 formation regarding marketing, enrollment, and ad5 ministrative expenses as the Secretary requires;

6 ‘‘(9) comply with such fiduciary responsibilities

7 as the Secretary requires; and

8 ‘‘(10) carry out other functions provided for

9 under this title.

10 ‘‘(b) LIMITATION ON ACTIVITIES.—A purchasing co11 operative shall not—

12 ‘‘(1) approve and enforce payment rates for

13 providers;

14 ‘‘(2) regulate premium rates for health plans;

15 ‘‘(3) certify or enforce compliance of certified

16 standard health plans with the requirements of sub17 title B;

18 ‘‘(4) assume financial risk in relation to any

19 such plan; or

20 ‘‘(5) perform other activities identified by the

21 participating State as being inconsistent with the

22 performance of its duties under subsection (a).

23 ‘‘(c) PERFORMANCE OF DUTIES.—

24 ‘‘(1) IN GENERAL.—If the participating State

25 finds that a purchasing cooperative is not carrying
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•S 2351 PCS

1 out its duties as required under subsections (a) and

2 (b), the State shall notify the Board of Directors of

3 such finding and permit such Board an opportunity

4 to take such action as may be necessary for the pur5 chasing cooperative to carry out such duties.

6 ‘‘(2) CORRECTIVE ACTION.—If, after such an

7 opportunity, the deficiency has not been corrected,

8 the participating State may—

9 ‘‘(A) order the purchasing cooperative to

10 hold a new election for members of the Board,

11 ‘‘(B) take such other action as may be ap12 propriate in order to assure the performance of

13 such duties, or

14 ‘‘(C) take actions described in both sub15 paragraphs (A) and (B).

16 ‘‘(3) PERFORMANCE CRITERIA.—The participat17 ing State shall develop criteria relating to the per18 formance of duties by purchasing cooperatives.

19 ‘‘SEC. 21413. AGREEMENTS WITH CERTIFIED STANDARD

20 HEALTH PLANS.

21 ‘‘(a) AGREEMENTS.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (2), each purchasing cooperative for a commu24 nity rating area may enter into an agreement under

25 this section with any certified standard health plan
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•S 2351 PCS

1 the purchasing cooperative desires to be made avail2 able through such purchasing cooperative.

3 ‘‘(2) MINIMUM REQUIREMENT.—

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

5 subparagraph (B), each purchasing coopera6 tive—

7 ‘‘(i) shall enter into an agreement

8 under paragraph (1) with at least 3 com9 munity-rated certified standard health

10 plans which provide the standard benefit

11 package under subtitle C, including, if

12 available, a fee-for-service plan and a

13 health plan with a point-of-service option,

14 and

15 ‘‘(ii) may enter into an agreement

16 with community-rated certified standard

17 health plans which provide the alternative

18 standard benefit package under subtitle C

19 or with community-rated certified supple20 mental health benefit plans.

21 ‘‘(B) WAIVER OF REQUIREMENT.—The

22 Governor of a participating State may waive the

23 requirement under subparagraph (A) for any

24 purchasing cooperative in a rural area of such

25 State which demonstrates an insufficient popu-
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•S 2351 PCS

1 lation density to support 3 community-rated

2 certified standard health plans.

3 ‘‘(3) TERMINATION OF AGREEMENT.—An

4 agreement under paragraph (1) shall remain in ef5 fect for a 12-month period, except that the purchas6 ing cooperative may terminate an agreement under

7 paragraph (1) if the certified standard health plan’s

8 certification under section 21101 is terminated or

9 for other good cause shown.

10 ‘‘(4) NO PROHIBITION ON OFFERING OF

11 PLANS.—Nothing in this subsection shall be con12 strued as prohibiting a certified standard health

13 plan with which a purchasing cooperative has de14 clined to enter into an agreement under paragraph

15 (1) from being offered to community-rated individ16 uals within a community rating area.

17 ‘‘(b) RECEIPT OF PREMIUMS ON BEHALF OF

18 PLANS.—

19 ‘‘(1) IN GENERAL.—An agreement under this

20 section shall provide that—

21 ‘‘(A) payment of premiums to which sub22 paragraph (B) does not apply shall be made by

23 individuals directly to the purchasing coopera24 tive for the benefit of the plan, and
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•S 2351 PCS

1 ‘‘(B) payments of premiums which an em2 ployer is required to make under section

3 21401(c) shall be made by the employer directly

4 to the purchasing cooperative for the benefit of

5 the plan.

6 ‘‘(2) PAYMENT OF PREMIUMS.—The purchasing

7 cooperative may provide for reasonable penalties and

8 grace periods for late payment.

9 ‘‘(3) CERTIFIED STANDARD HEALTH PLANS RE10 TAIN RISK OF NONPAYMENT.—Nothing in this sub11 section shall be construed as placing upon a pur12 chasing cooperative any risk associated with the fail13 ure of individuals and employers to make prompt

14 payment of premiums (other than the portion of the

15 premium representing the purchasing cooperative

16 administrative fee under section 21415).

17 ‘‘(c) FORWARDING OF PREMIUMS.—

18 ‘‘(1) IN GENERAL.—The purchasing cooperative

19 shall forward to a certified standard health plan the

20 amount of any premiums collected by such coopera21 tive on behalf of such plan.

22 ‘‘(2) PAYMENTS.—Payments shall be made by

23 the purchasing cooperative under this subsection

24 within a period of days (specified by the Secretary
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•S 2351 PCS

1 and not to exceed 7 days) after receipt of the pre2 mium.

3 ‘‘SEC. 21414. PROVISION OF INFORMATION.

4 ‘‘Each purchasing cooperative for a community rat5 ing area shall make available to each employer (other than

6 an experience-rated employer) located in the community

7 rating area and each community-rated individual residing

8 in such area—

9 ‘‘(1) enrollment information, including informa10 tion provided to the purchasing cooperative under

11 section 21013 by the participating State in which

12 such cooperative is located, and

13 ‘‘(2) the opportunity to enter into an agreement

14 with the cooperative for the purchase of a certified

15 standard health plan.

16 The provision of information described in paragraph (1)

17 may also be made at designated public access sites, includ18 ing public libraries and local government offices.

19 ‘‘SEC. 21415. ADMINISTRATIVE FEES.

20 ‘‘(a) IN GENERAL.—A purchasing cooperative may

21 impose an administrative fee with respect to a community22 rated individual enrolled under a certified standard health

23 plan offered through the purchasing cooperative.
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•S 2351 PCS

1 ‘‘(b) FEE.—The Secretary shall establish criteria for

2 determining the administrative fees charged by coopera3 tives under subsection (a).

4 ‘‘Subpart B—Organization and Operation of

5 Purchasing Cooperatives

6 ‘‘SEC. 21417. ESTABLISHMENT.

7 ‘‘(a) ESTABLISHMENT OF COOPERATIVES.—

8 ‘‘(1) IN GENERAL.—Any person meeting the re9 quirements of this part may establish a purchasing

10 cooperative.

11 ‘‘(2) STATE SPONSORSHIP.—If a not-for-profit

12 purchasing cooperative has not been organized in a

13 community rating area in a participating State, the

14 State shall, on or before January 1, 1996, establish

15 or sponsor, by legislation or otherwise, at least one

16 not-for-profit purchasing cooperative to serve in such

17 community rating area.

18 ‘‘(b) RULES OF CONSTRUCTION.—

19 ‘‘(1) NONEXCLUSIVE.—Nothing in this section

20 shall be construed as requiring that there be only

21 one purchasing cooperative serving a community rat22 ing area.

23 ‘‘(2) SINGLE ORGANIZATION SERVING MUL24 TIPLE COMMUNITY RATING AREAS.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—Nothing in this sec2 tion shall be construed as preventing a single

3 not-for-profit corporation from being a purchas4 ing cooperative for more than one community

5 rating area.

6 ‘‘(B) REPORTING.—If a purchasing coop7 erative serves more than one community rating

8 area and such community rating areas are lo9 cated in more than one State, the purchasing

10 cooperative shall separately report to each State

11 with respect to the residents of such State.

12 ‘‘(3) ROLE OF INSURERS.—An insurer may not

13 form or underwrite a purchasing cooperative, but

14 may administer such a cooperative.

15 ‘‘(4) ROLE OF GOVERNMENTAL UNITS.—Units

16 of State or local governments may form purchasing

17 cooperatives.

18 ‘‘SEC. 21418. BOARD OF DIRECTORS.

19 ‘‘(a) IN GENERAL.—A purchasing cooperative shall

20 be governed by a Board of Directors (in this part, referred

21 to as the ‘Board’), appointed consistent with the provi22 sions of this section. All powers vested in a purchasing

23 cooperative under this title shall be vested in the Board.

24 ‘‘(b) MEMBERSHIP.—
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•S 2351 PCS

1 ‘‘(1) IN GENERAL.—The Board shall consist

2 of—

3 ‘‘(A) members who represent individuals

4 who purchase coverage through the cooperative,

5 including employees who purchase such cov6 erage; and

7 ‘‘(B) members who represent employers

8 who purchase coverage through a cooperative.

9 ‘‘(2) EQUAL REPRESENTATION OF EMPLOYERS

10 AND CONSUMERS.—The number of members of the

11 Board described under subparagraph (A) of para12 graph (1) shall be the same as the number of mem13 bers described in subparagraph (B) of such para14 graph.

15 ‘‘(c) NO CONFLICT OF INTEREST PERMITTED.—An

16 individual may not serve as a member of the Board if the

17 individual is one of the following (or an immediate family

18 member of one of the following):

19 ‘‘(1) A health care provider.

20 ‘‘(2) An individual who is an employee or mem21 ber of the board of directors of, has a substantial

22 ownership interest in, or derives substantial income

23 from, a health care provider, health plan, pharma24 ceutical company, or a supplier of medical equip25 ment, devices, or services.
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•S 2351 PCS

1 ‘‘(3) A person who derives substantial income

2 from the provision of health care.

3 ‘‘(4) A member or employee of an association,

4 law firm, or other institution or organization that

5 represents the interests of one or more health care

6 providers, health plans, or others involved in the

7 health care field, or an individual who practices as

8 a professional in an area involving health care.

9 ‘‘(d) LIMITATION ON COMPENSATION.—A purchasing

10 cooperative shall not provide compensation to members of

11 the Board other than reimbursement for reasonable and

12 necessary expenses incurred in the performance of their

13 duties as members of the Board.

14 ‘‘(e) PROVIDER ADVISORY BOARD.—The Board shall

15 establish a provider advisory board consisting of rep16 resentatives of health care providers and professionals who

17 provide covered items and services through certified stand18 ard health plans offered by the purchasing cooperative.

19 ‘‘SEC. 21419. PROHIBITION AGAINST SELF-DEALING AND

20 CONFLICTS OF INTEREST.

21 ‘‘(a) PROMULGATION OF STANDARDS.—Each partici22 pating State shall promulgate standards of conduct in ac23 cordance with subsection (b) for any administrator, offi24 cer, trustee, fiduciary, custodian, counsel, agent, or em25 ployee of any purchasing cooperative.
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•S 2351 PCS

1 ‘‘(b) REQUIREMENTS FOR STANDARDS.—The stand2 ards of conduct referred to in subsection (a) shall set

3 forth—

4 ‘‘(1) the types of investment interests, owner5 ship interests, affiliations, or other employment that

6 would be improper for an individual described in

7 subsection (a) to hold during the time of the individ8 ual’s service or employment with the purchasing co9 operative; and

10 ‘‘(2) the circumstances that will constitute im11 permissible conflicts of interest or self-dealing by

12 such employees in performing their official duties

13 and functions for a purchasing cooperative.

14 ‘‘(c) SPECIFIC PROHIBITIONS.—No individual de15 scribed in subsection (a) shall, directly or indirectly—

16 ‘‘(1) operate, represent, be employed by, or be

17 affiliated with a health plan participating in the

18 same community rating area; and

19 ‘‘(2) use any of the information acquired

20 through the relationship of such person or entity

21 with the purchasing cooperative for purposes unre22 lated to such person’s or entity’s duties with such

23 cooperative.
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1 ‘‘SEC. 21420. COORDINATION AMONG PURCHASING CO2 OPERATIVES.

3 ‘‘The State shall establish rules for coordination

4 among purchasing cooperatives in cases in which employ5 ers are located in one community rating area and their

6 employees who are community-rated individuals reside in

7 a different community rating area.

8 ‘‘PART III—ACCESS THROUGH ASSOCIATION

9 PLANS

10 ‘‘Subpart A—Qualified Association Plans

11 ‘‘SEC. 21431. TREATMENT OF QUALIFIED ASSOCIATION

12 PLANS.

13 ‘‘(a) GENERAL RULE.—For purposes of this title, in

14 the case of a qualified association plan—

15 ‘‘(1) except as otherwise provided in this sub16 part, the plan shall be required to meet all applicable

17 requirements of this title for certified standard

18 health plans providing the standard benefit package

19 under subtitle C which are offered by experience20 rated employers,

21 ‘‘(2) if such plan is certified as meeting such

22 requirements, such plan shall be treated as a plan

23 established and maintained by an experienced-rated

24 employer and individuals enrolled in such plan shall

25 be treated as experience-rated individuals, and
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•S 2351 PCS

1 ‘‘(3) any individual who is a member of the as2 sociation not enrolling in the plan shall not be treat3 ed as an experience-rated individual solely by reason

4 of membership in such association.

5 ‘‘(b) ELECTION TO BE TREATED AS PURCHASING

6 COOPERATIVE.—Subsection (a) shall not apply to a quali7 fied association plan if—

8 ‘‘(1) the health plan sponsor makes an irrev9 ocable election to be treated as a purchasing cooper10 ative for purposes of this title, and

11 ‘‘(2) such sponsor meets all requirements of

12 this title applicable to a purchasing cooperative.

13 ‘‘SEC. 21432. MODIFICATIONS OF STANDARDS APPLICABLE

14 TO QUALIFIED ASSOCIATION PLANS.

15 ‘‘(a) CERTIFYING AUTHORITY.—For purposes of this

16 title, the Secretary of Labor shall be the appropriate cer17 tifying authority with respect to a qualified association

18 plan.

19 ‘‘(b) CAPITAL REQUIREMENTS.—

20 ‘‘(1) IN GENERAL.—The solvency requirements

21 established under the regulations under paragraph

22 (2) shall, on and after the effective date of such reg23 ulations, apply in lieu of the requirements under sec24 tion 21122.

25 ‘‘(2) SOLVENCY REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—The Secretary of

2 Labor shall prescribe by regulation—

3 ‘‘(i) solvency standards for qualified

4 association plans which will ensure that

5 benefits under such plans will be provided

6 in full when due, and

7 ‘‘(ii) rules for monitoring and enforc8 ing compliance with such standards.

9 Such regulations may provide procedures under

10 which the Secretary may enter into an agreement

11 with a State to have the State enforce the Federal

12 standards or State standards not inconsistent with

13 the Federal standards.

14 ‘‘(B) ASSETS HELD IN TRUST.—For pur15 poses of complying with regulations prescribing

16 solvency standards pursuant to subparagraph

17 (A), the plan sponsor of each qualified associa18 tion plan shall, in accordance with such regula19 tions, take such steps as are necessary to en20 sure that plan assets held for the purpose of

21 complying with such solvency standards are

22 held in trust under the plan and are available

23 solely for such purpose.

24 ‘‘(c) AVAILABILITY.—Except in the case of a quali25 fied association plan with respect to which an election is
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•S 2351 PCS

1 in effect under section 21431(b), a qualified association

2 plan may only include in coverage any individual who is

3 a member of the association establishing or maintaining

4 the plan, an employee of such member, or a spouse or de5 pendent of either.

6 ‘‘(d) LIMITATION ON GROWTH.—The number of par7 ticipants enrolled in a qualified association plan for any

8 year shall not exceed 110 percent of the number of partici9 pants enrolled in the plan during the preceding year.

10 ‘‘SEC. 21433. QUALIFIED ASSOCIATION PLAN DEFINED.

11 ‘‘(a) IN GENERAL.—The term ‘qualified association

12 plan’ means a health plan which—

13 ‘‘(1) is (or is a continuation of) an existing

14 plan, and

15 ‘‘(2) is established or maintained by a qualified

16 association.

17 ‘‘(b) EXISTING PLAN.—For purposes of this section,

18 a health plan is an existing plan if such plan—

19 ‘‘(1) was in existence and operating at all times

20 as a multiple employer welfare arrangement (or

21 rural electric cooperative or rural telephone coopera22 tive association plan) during the 3-year period end23 ing on the date of the enactment of the Health Se24 curity Act, and
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1 ‘‘(2) covered at least 500 participants in the

2 United States on June 1, 1994.

3 ‘‘(c) QUALIFIED ASSOCIATION.—For purposes of this

4 section, the term ‘qualified association’ means any organi5 zation which—

6 ‘‘(1) is organized and maintained in good faith

7 by a trade association, an industry association, a

8 professional association, a chamber of commerce, a

9 religious organization, or public entity association,

10 ‘‘(2) is organized and maintained for substan11 tial purposes other than to provide a health plan,

12 ‘‘(3) has a constitution, bylaws, or other similar

13 governing document which states its purpose,

14 ‘‘(4) receives the active support of its members,

15 and

16 ‘‘(5) has been in operation continuously during

17 the 3-year period ending on the date of the enact18 ment of the Health Security Act.

19 ‘‘(d) SPECIAL RULE FOR CERTAIN ARRANGE20 MENTS.—

21 ‘‘(1) IN GENERAL.—If, as of June 1, 1994, a

22 multiple employer welfare arrangement had been in

23 existence at least 18 months and an application with

24 the State insurance commissioner for a certificate of

25 operation as a health plan had been approved or was
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•S 2351 PCS

1 pending, the requirements of subsections (a)(2) and

2 (b)(1) shall not apply to such arrangement.

3 ‘‘(2) DISQUALIFICATION OF CERTAIN ARRANGE4 MENTS.—A multiple employer welfare arrangement

5 shall not be treated as meeting the requirements of

6 paragraph (1) if a State demonstrates that—

7 ‘‘(A) fraudulent or material misrepresenta8 tions have been made by the sponsor in the ap9 plication,

10 ‘‘(B) the arrangement that is the subject

11 of the application, on its face, fails to meet the

12 requirements for a complete application, or

13 ‘‘(C) a financial impairment exists with re14 spect to the applicant that is sufficient to dem15 onstrate the applicant’s inability to continue its

16 operations.

17 ‘‘(e) COORDINATION WITH SUBPART B.—The term

18 ‘qualified association plan’ shall not include a plan to

19 which subpart B applies.

20 ‘‘(f) DEFINITIONS.—For purposes of this subchapter,

21 the terms ‘multiple employer welfare arrangement’, ‘rural

22 electric cooperative’, and ‘rural telephone cooperative asso23 ciation’ have the meanings given such terms by section

24 3(40) of the Employee Retirement Income Security Act
200

•S 2351 PCS

1 of 1974 (as in effect before the date of the enactment of

2 the Health Security Act).

3 ‘‘Subpart B—Special Rule for Church and

4 Multiemployer Plans

5 ‘‘SEC. 21435. SPECIAL RULE FOR CHURCH AND MULTIEM6 PLOYER PLANS.

7 ‘‘(a) GENERAL RULE.—For purposes of this title, in

8 the case of a health plan to which this section applies—

9 ‘‘(1) except as otherwise provided in this part,

10 the plan shall be required to meet all applicable re11 quirements of this title for certified standard health

12 plans providing the standard benefit package under

13 subtitle C which are offered by experience-rated em14 ployers,

15 ‘‘(2) if such plan is certified as meeting such

16 requirements, such plan shall be treated as a plan

17 established and maintained by an experience-rated

18 employer and individuals enrolled in such plan shall

19 be treated as experience-rated individuals, and

20 ‘‘(3) any individual eligible to enroll in the plan

21 who does not enroll in the plan shall not be treated

22 as an experience-rated individual solely by reason of

23 being eligible to enroll in the plan.

24 ‘‘(b) MODIFIED STANDARDS.—
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•S 2351 PCS

1 ‘‘(1) CERTIFYING AUTHORITY.—For purposes

2 of this title, the Secretary of Labor shall be the ap3 propriate certifying authority with respect to a plan

4 to which this section applies.

5 ‘‘(2) SOLVENCY AND AVAILABILITY.—Rules

6 similar to the rules of subsections (b) and (c) of sec7 tion 21432 shall apply to a plan to which this sec8 tion applies.

9 ‘‘(3) ACCESS.—An employer which, pursuant to

10 a collective bargaining agreement, offers an em11 ployee the opportunity to enroll in a plan described

12 in subsection (c)(2) shall not be required to make

13 any other plan available to the employee.

14 ‘‘(c) PLANS TO WHICH SECTION APPLIES.—This sec15 tion shall apply to a health plan which—

16 ‘‘(1) is a church plan (as defined in section

17 414(e) of the Internal Revenue Code of 1986) which

18 has 100 or more participants in the United States,

19 or

20 ‘‘(2) is a multiemployer plan (as defined in sec21 tion 3(37) of the Employee Retirement Income Se22 curity Act of 1974) which is maintained by a health

23 plan sponsor described in section 3(16)(B)(iii) of

24 such Act but only if such plan (or a predecessor

25 plan)—
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•S 2351 PCS

1 ‘‘(A) offered health benefits as of June 1,

2 1994, and

3 ‘‘(B) as of June 1, 1994—

4 ‘‘(i) covered at least 500 participants

5 in the United States, or

6 ‘‘(ii) was maintained by one or more

7 affiliates of the same labor organization, or

8 one or more affiliates of labor organiza9 tions representing employees in the same

10 industry, covering at least 500 employees

11 in the United States.

12 ‘‘Subtitle E—Implementation of

13 Consumer Information Pro14 grams and Quality Research

15 ‘‘SEC. 21501. CONSUMER INFORMATION PROGRAMS.

16 ‘‘(a) IN GENERAL.—To support the consumer infor17 mation program established by each participating State

18 under section 21013, the Secretary, in consultation with

19 the National Health Plan Standards and Quality Advisory

20 Committee (established under section 21101(c)), shall—

21 ‘‘(1) develop a set of national measures of qual22 ity performance under subsection (b);

23 ‘‘(2) determine a national standard survey de24 sign and sampling strategy;
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•S 2351 PCS

1 ‘‘(3) determine a standard format for compara2 tive value information;

3 ‘‘(4) determine appropriate case-mix adjust4 ments for data comparisons;

5 ‘‘(5) approve interstate geographic areas with

6 respect to which comparative value information may

7 be prepared;

8 ‘‘(6) establish standards for the distribution of

9 such information; and

10 ‘‘(7) provide technical assistance and training.

11 ‘‘(b) NATIONAL MEASURES OF QUALITY PERFORM12 ANCE.—

13 ‘‘(1) IN GENERAL.—The Secretary shall develop

14 a set of national measures of quality performance in

15 accordance with paragraph (2), which shall be

16 used—

17 ‘‘(A) to provide comparative value informa18 tion for consumers under section 21013, and

19 ‘‘(B) to assess the provision of health care

20 services and access to such services.

21 ‘‘(2) SUBJECT OF MEASURES.—National meas22 ures of quality performance shall be developed in ac23 cordance with criteria to be determined by the Sec24 retary and shall measure information on the follow25 ing subjects:
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•S 2351 PCS

1 ‘‘(A) Access to health care services by con2 sumers.

3 ‘‘(B) Appropriateness of health care serv4 ices provided to consumers.

5 ‘‘(C) Outcomes of health care services and

6 procedures.

7 ‘‘(D) Health promotion.

8 ‘‘(E) Prevention of diseases, disorders, and

9 other health conditions.

10 ‘‘(F) Consumer satisfaction with care.

11 ‘‘(G) Risk assessment factors.

12 ‘‘(H) Population health status.

13 ‘‘(3) MODIFICATIONS TO PERFORMANCE MEAS14 URES.—The Secretary shall update the set of na15 tional measures of quality performance developed

16 under paragraph (1) as the Secretary determines ap17 propriate.

18 ‘‘(c) POPULATION HEALTH STATUS.—The Secretary,

19 in consultation with public health experts and the National

20 Health Plan Standards and Quality Advisory Committee

21 (established under section 21101(c)), shall develop and de22 fine methods to measure population health status, includ23 ing risk factor assessment. The Secretary shall use the

24 methods developed for measuring population health status

25 as the basis for developing consumer-focused quality im-
205

•S 2351 PCS

1 provement goals and the health plan standards in section

2 21124.

3 ‘‘SEC. 21502. HEALTH SERVICES AND QUALITY IMPROVE4 MENT RESEARCH.

5 ‘‘(a) HEALTH SERVICES RESEARCH.—

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

7 the Agency for Health Care Policy and Research

8 and the Health Care Financing Administration to

9 support and conduct research on the effects of

10 health care reform on health care delivery systems

11 and methods for risk adjustment.

12 ‘‘(2) QUALITY RESEARCH.—The Agency for

13 Health Care Policy and Research shall conduct and

14 support research on medical effectiveness includ15 ing—

16 ‘‘(A) outcomes research;

17 ‘‘(B) clinical practice guidelines;

18 ‘‘(C) technology assessment; and

19 ‘‘(D) dissemination and implementation

20 techniques.

21 ‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—In ad22 dition to any other amounts appropriated to carry out the

23 provisions of this section from the Biomedical and Behav24 ioral Research Trust Fund under section 9553 of the In25 ternal Revenue Code of 1986, there are authorized to be
206

•S 2351 PCS

1 appropriated $150,000,000 for fiscal year 1995,

2 $400,000,000 for fiscal year 1996, $500,000,000 for fis3 cal year 1997, and $600,000,000 for the fiscal years 1998

4 through 2004.

5 ‘‘SEC. 21503. IMPLEMENTING QUALITY IMPROVEMENT RE6 SEARCH.

7 ‘‘(a) IN GENERAL.—The Secretary shall award

8 grants to States or community-based, independent, not9 for-profit organizations that have submitted applications

10 in accordance with subsection (b) to establish demonstra11 tion projects that provide certified standard health plans

12 with the technical assistance to implement the results of

13 quality improvement research into medical practice.

14 ‘‘(b) APPLICATION.—For purposes of subsection (a),

15 an application is in accordance with this subsection if the

16 applicant submits the application to the Secretary at such

17 time, in such manner, and containing such information

18 and assurances as the Secretary may reasonably require.

19 ‘‘(c) AVAILABILITY OF TRUST FUND AMOUNTS.—

20 There shall be available $50,000,000 in each of the fiscal

21 years 1996 through 2004 from the Health Security Trust

22 Fund established under section 9551 of the Internal Reve23 nue Code of 1986 to make grants under subsection (a).
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•S 2351 PCS

1 ‘‘SEC. 21504. ANNUAL REPORTS.

2 ‘‘The Secretary shall provide an annual report to

3 Congress which—

4 ‘‘(1) reviews the results of the quality improve5 ment research grants under section 21503;

6 ‘‘(2) evaluates consumer information programs

7 established by participating States;

8 ‘‘(3) tracks the evolution of national perform9 ance measures and other research; and

10 ‘‘(4) evaluates State, regional, and national

11 trends on quality of health care.

12 ‘‘Subtitle F—Programs to Improve

13 Access To Underserved Areas

14 ‘‘PART I—GRANTS FOR THE DEVELOPMENT AND

15 OPERATION OF COMMUNITY HEALTH

16 GROUPS AND FOR CAPITAL ASSISTANCE

17 ‘‘SEC. 21601. DESIGNATION OF RURAL AND URBAN UNDER18 SERVED AREAS.

19 ‘‘(a) STATE DESIGNATION.—

20 ‘‘(1) IN GENERAL.—Subject to paragraph (2), a

21 participating State may designate areas within the

22 State as rural or urban underserved areas in accord23 ance with the criteria developed by the Secretary

24 under subsection (c).

25 ‘‘(2) SECRETARIAL APPROVAL OF STATE DES26 IGNATION.—A State designation of an area within
208

•S 2351 PCS

1 the State as a rural or urban underserved area is

2 subject to approval by the Secretary.

3 ‘‘(b) DESIGNATION BY THE SECRETARY.—In addi4 tion to rural and urban underserved areas designated by

5 a participating State under subsection (a)(1) and ap6 proved by the Secretary under subsection (a)(2), the Sec7 retary may designate additional areas within participating

8 States as rural or urban underserved areas in accordance

9 with the criteria developed by the Secretary under sub10 section (c).

11 ‘‘(c) CRITERIA.—The Secretary shall develop criteria

12 for designating an area as a rural or underserved area.

13 Such criteria shall take into account—

14 ‘‘(1) whether the area is—

15 ‘‘(A) an area in an urban or rural area

16 (which need not conform to the geographic

17 boundaries of a political subdivision and which

18 is a rational area for the delivery of health serv19 ices) which the Secretary determines has a

20 health manpower shortage,

21 ‘‘(B) a population group which the Sec22 retary determines has such a shortage, or

23 ‘‘(C) a public or nonprofit private medical

24 facility or other public facility which the Sec25 retary determines has such a shortage,
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•S 2351 PCS

1 except that the Secretary shall not remove an area

2 from an area determined to be an area described in

3 subparagraph (A) until the Secretary has afforded

4 interested persons and groups in such area an op5 portunity to provide data and information in support

6 of the designation as such an area or a population

7 group described in subparagraph (B) or a facility

8 described in subparagraph (C), and has made a de9 termination on the basis of the data and information

10 submitted by such persons and groups and other

11 data and information available to the Secretary;

12 ‘‘(2) whether a significant number of individ13 uals who are furnished health care services in the

14 area are members of a population of an urban or

15 rural area designated by the Secretary as an area

16 with a shortage of personal health services or are a

17 population group designated by the Secretary as

18 having a shortage of such services;

19 ‘‘(3) the financial and geographic access to cer20 tified standard health plans;

21 ‘‘(4) the availability, adequacy, and quality of

22 health care providers and health care facilities; and

23 ‘‘(5) the health status of residents of the area.
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•S 2351 PCS

1 ‘‘SEC. 21602. COMMUNITY HEALTH GROUP; CERTIFIED COM2 MUNITY HEALTH PLAN; COMMUNITY HEALTH

3 NETWORK; ELIGIBLE ENTITIES; ISOLATED

4 RURAL FACILITIES.

5 ‘‘(a) COMMUNITY HEALTH GROUP.—For purposes of

6 this part, the term ‘community health group’ means a cer7 tified community health plan or a community health net8 work.

9 ‘‘(b) COMMUNITY HEALTH NETWORK.—For pur10 poses of this part, the term ‘community health network’

11 means a consortium of health care providers that—

12 ‘‘(1) is a public or non-profit private entity;

13 ‘‘(2) furnishes at least a portion of the services

14 included in the standard benefit package either di15 rectly or indirectly through affiliations with other

16 entities;

17 ‘‘(3) has an agreement with one or more cer18 tified standard health plans;

19 ‘‘(4) has a written agreement with each of the

20 health care providers in the consortium governing

21 the participation of the providers;

22 ‘‘(5) has as participating members of the con23 sortium two or more of the categories of eligible en24 tities described in subsection (d);
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•S 2351 PCS

1 ‘‘(6) ensures that the health care services fur2 nished by the consortium are available and accessible

3 to each client with reasonable promptness; and

4 ‘‘(7) furnishes a significant volume of health

5 care services in a rural or urban underserved area

6 designated by the State and approved by the Sec7 retary under section 21601(a), or designated by the

8 Secretary under subsection (b) of such section.

9 ‘‘(c) CERTIFIED COMMUNITY HEALTH PLAN.—For

10 purposes of this part, the term ‘certified community health

11 plan’ means a health plan that—

12 ‘‘(1) is a public or nonprofit private entity;

13 ‘‘(2) furnishes a significant volume of health

14 care services in a rural or urban underserved area

15 designated by the State and approved by the Sec16 retary under section 21601(a), or designated by the

17 Secretary under subsection (b) of such section;

18 ‘‘(3) has two or more of the categories of eligi19 ble entities described in subsection (d) furnishing

20 health services through the health plan;

21 ‘‘(4) ensures that each individual enrolled with

22 the plan has a primary care provider; and

23 ‘‘(5) meets all other criteria required of a cer24 tified standard health plan, including the offering of

25 a standard benefits package under subtitle C.
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•S 2351 PCS

1 ‘‘(d) ELIGIBLE ENTITIES.—For purposes of this

2 part, the term ‘eligible entities’ means the following cat3 egories of entities:

4 ‘‘(1) Physicians, other health professionals, or

5 health care institutions, including public hospitals,

6 that provide a significant amount of health care

7 services in a rural or urban underserved area des8 ignated by the State and approved by the Secretary

9 under section 21601(a) or designated by the Sec10 retary under subsection (b) of such section.

11 ‘‘(2) Entities providing health services under

12 grants under sections 329 and 330 of the Public

13 Health Service Act.

14 ‘‘(3) Entities providing health services under

15 grants under sections 340 and 340A of such Act.

16 ‘‘(4) Entities providing health services under

17 grants under section 1001 or title XXVI of such

18 Act.

19 ‘‘(5) Entities providing health services under

20 title V of the Social Security Act.

21 ‘‘(6) Entities providing health services through

22 rural health clinics (as defined in section

23 1861(aa)(2)) and other federally qualified health

24 centers (as defined in 1861(aa)(4)).
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•S 2351 PCS

1 ‘‘(7) Entities providing health services in urban

2 areas through programs under title V of the Indian

3 Health Care Improvement Act, and entities provid4 ing outpatient health services through programs

5 under the Indian Self-Determination Act.

6 ‘‘(8) Programs providing personal health serv7 ices and operating through State or local public

8 health agencies.

9 ‘‘(9) Isolated rural facilities (as defined in sub10 section (e)).

11 ‘‘(e) ISOLATED RURAL FACILITIES.—The term ‘iso12 lated rural facility’ means a facility providing health serv13 ices that is located in a county (or equivalent unit of local

14 government) with fewer than 6 residents per square mile.

15 ‘‘Subpart A—Grants for the Development and

16 Operation of Community Health Groups

17 ‘‘SEC. 21611. GRANTS AND CONTRACTS FOR DEVELOPMENT

18 OF PLANS AND NETWORKS.

19 ‘‘(a) IN GENERAL.—In the case of a public or private

20 non-profit consortium of eligible entities that submits an

21 application in accordance with subsection (b), the Sec22 retary may make grants to and enter into contracts with

23 such consortium for the development of community health

24 groups.
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•S 2351 PCS

1 ‘‘(b) APPLICATION.—For purposes of subsection (a),

2 an application is in accordance with this subsection if—

3 ‘‘(1) the applicant submits an application to the

4 Secretary at such time and in such manner as the

5 Secretary may reasonably require;

6 ‘‘(2) the application is accompanied by an as7 sessment of need of the population or populations

8 proposed to be served by the applicant;

9 ‘‘(3) the application is accompanied by the fol10 lowing information:

11 ‘‘(A) A description of how the applicant

12 will design the proposed community health

13 group (including the service sites involved) for

14 such populations based on the assessment of

15 need.

16 ‘‘(B) A description of efforts to secure,

17 within the proposed service area of such com18 munity health group (including the service sites

19 involved), financial and professional assistance

20 and support for the project.

21 ‘‘(C) Evidence of significant community in22 volvement in the initiation, development and on23 going operation of the project;

24 ‘‘(4) the application is accompanied by the as25 surances described in subsection (c); and
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•S 2351 PCS

1 ‘‘(5) the application is accompanied by such ad2 ditional assurances, agreements and other informa3 tion as the Secretary may reasonably require.

4 ‘‘(c) ASSURANCES DESCRIBED.—The assurances de5 scribed in this subsection are the following:

6 ‘‘(1) GUARANTEED ACCESS AND CONTINUED

7 DELIVERY OF HEALTH CARE SERVICES IN A DES8 IGNATED AREA.—An assurance that the applicant

9 involved will furnish—

10 ‘‘(A) a significant volume of health care

11 services within a rural or urban underserved

12 area designated by the State and approved by

13 the Secretary under section 21601(a) or des14 ignated by the Secretary under subsection (b)

15 of such section, and

16 ‘‘(B) health care services without regard to

17 the financial or insurance status of an individ18 ual.

19 ‘‘(2) ACCESSIBILITY OF SERVICES.—

20 ‘‘(A) SERVICES FOR CERTAIN INDIVID21 UALS.—An assurance that the applicant will en22 sure that the services of the applicant will be

23 accessible directly or through formal contrac24 tual arrangements with its participating provid25 ers regardless of whether individuals who seek
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•S 2351 PCS

1 care from the applicant are eligible individuals

2 (as such term is defined in section 1958(3)).

3 ‘‘(B) USE OF THIRD-PARTY PAYORS.—An

4 assurance that the applicant will ensure that

5 the health care providers of the group are all

6 approved by the Secretary as providers under

7 title XVIII and by the appropriate State agency

8 as providers under title XIX, and the applicant

9 has made or will make every reasonable effort

10 to collect appropriate reimbursement for its

11 costs in providing health services to individuals

12 who are enrolled in a private health insurance

13 program or certified standard health plan, or

14 who are entitled to insurance benefits under

15 title XVIII, medical assistance under a State

16 plan approved under title XIX, or to assistance

17 for medical expenses under any other public as18 sistance program.

19 ‘‘(C) SCHEDULE OF FEES.—An assurance

20 that the applicant will—

21 ‘‘(i) prepare a schedule of fees or pay22 ments for the provision of all health care

23 services furnished by the applicant that is

24 consistent with locally prevailing rates or

25 charges and designed to cover its reason-
217

•S 2351 PCS

1 able costs of operation and has prepared a

2 corresponding schedule of discounts to be

3 applied to the payment of such fees or pay4 ments (or payments of cost sharing

5 amounts owed in the case of covered bene6 fits), which discounts are applied on the

7 basis of the patient’s ability to pay; and

8 ‘‘(ii) make every reasonable effort to

9 secure from patients payment in accord10 ance with such schedules, and to collect re11 imbursement for services to persons enti12 tled to public or private insurance benefits

13 or other medical assistance on the basis of

14 full fees without application of discounts,

15 except that the applicant will ensure that

16 no person is denied service based on the

17 person’s inability to pay therefor.

18 ‘‘(D) BARRIERS WITHIN SERVICE AREA.—

19 An assurance that the applicant will ensure

20 that the following conditions are met:

21 ‘‘(i) In the service area of the group,

22 the applicant will ensure that—

23 ‘‘(I) the services of the applicant

24 are accessible to all residents; and
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•S 2351 PCS

1 ‘‘(II) to the maximum extent pos2 sible, barriers to access to the services

3 of the applicant are eliminated, in4 cluding barriers resulting from the

5 area’s physical characteristics, its resi6 dential patterns, its economic, social

7 and cultural groupings, its available

8 transportation, and the ability of the

9 area’s residents to speak the English

10 language.

11 ‘‘(ii) The applicant will periodically

12 conduct reviews within the service area of

13 the group to determine whether the condi14 tions described in clause (i) are being met.

15 ‘‘(3) QUALITY CONTROL SYSTEM.—An assur16 ance that the applicant will maintain a community17 oriented, patient responsive, quality control system

18 under which the group, in accordance with regula19 tions prescribed by the Secretary—

20 ‘‘(A) conducts an ongoing quality assur21 ance program for the health services delivered

22 by participating provider entities;

23 ‘‘(B) maintains a continuous community

24 health status improvement process; and
219

•S 2351 PCS

1 ‘‘(C) maintains a system for development,

2 compilation, evaluation, and reporting of infor3 mation to the public regarding the costs of op4 eration, service utilization patterns, availability,

5 accessibility and acceptability of services, devel6 opments in the health status of the populations

7 served, uniform health and clinical performance

8 measures and financial performance of the ap9 plicant.

10 ‘‘(4) USE OF EXISTING RESOURCES.—An assur11 ance that the applicant will, in developing the com12 munity health group involved, utilize existing re13 sources to the maximum extent practicable.

14 ‘‘(d) DEVELOPMENT GRANTS.—

15 ‘‘(1) PREFERENCE.—In making a grant or en16 tering into a contract under subsection (a), the Sec17 retary shall give a greater degree of preference to

18 applicants—

19 ‘‘(A) according to the extent to which a

20 greater number of categories of eligible entities

21 described in section 21602(d) are members of

22 the consortium, except in areas such as rural

23 areas, where providers are severely limited in

24 number, and
220

•S 2351 PCS

1 ‘‘(B) in which the population to be served

2 by the consortium has a higher degree of unmet

3 need.

4 ‘‘(2) USE OF FINANCIAL ASSISTANCE.—A con5 sortium of eligible entities receiving financial assist6 ance under a grant or contract pursuant to sub7 section (a) may use such assistance for activities re8 lating to the development of a community health

9 group, including—

10 ‘‘(A) planning such group, including enter11 ing into contracts between the recipient of the

12 award and health care providers who are to

13 participate in the group;

14 ‘‘(B) recruitment, compensation, training,

15 and retention of health care professionals and

16 administrative staff;

17 ‘‘(C) acquisition and development of infor18 mation, billing, and reporting systems;

19 ‘‘(D) providing linkages between providers,

20 including through the use of information sys21 tems;

22 ‘‘(E) in the case of a consortium receiving

23 a grant or contract pursuant to subsection (a)

24 for the development of a certified community

25 health plan, the establishment of reserves re-
221

•S 2351 PCS

1 quired for furnishing services on a prepaid or

2 capitated basis; and

3 ‘‘(F) such other expenditures as the Sec4 retary determines to be appropriate to support

5 other activities related to the development of

6 community groups.

7 ‘‘(e) REPORTS AND AUDITS.—A public or private

8 non-profit consortium of eligible entities that receives a

9 grant or contract under subsection (a) shall—

10 ‘‘(1) provide such reports and information on

11 activities carried out under this section in a manner

12 and form required by the Secretary; and

13 ‘‘(2) provide an annual organizationwide audit

14 that meets applicable standards of the Secretary.

15 ‘‘(f) AVAILABILITY OF FUNDS FROM TRUST

16 FUND.—Except as provided in part III, the following

17 amounts shall be available for a calendar year for making

18 payments under subsection (a) from the Infrastructure

19 Development Account in the Health Security Trust Fund

20 established under section 9551 of the Internal Revenue

21 Code of 1986:

22 ‘‘(1) In the case of calendar year 1995,

23 $250,000,000.

24 ‘‘(2) In the case of calendar year 1996,

25 $300,000,000.
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•S 2351 PCS

1 ‘‘(3) In the case of calendar year 1997,

2 $300,000,000.

3 ‘‘(4) In the case of calendar year 1998,

4 $300,000,000.

5 ‘‘(5) In the case of calendar year 1999,

6 $200,000,000.

7 ‘‘(6) In the case of subsequent calendar years,

8 the amount made available under this subsection for

9 the previous calendar year (without regard to any

10 reduction in such amount under part III), updated

11 through the midpoint of the year by the estimated

12 percentage change in the Consumer Price Index for

13 All Urban Consumers (United States city average)

14 during the 12-month period ending at that midpoint,

15 with appropriate adjustments to reflect previous

16 underestimations or overestimations under this para17 graph in the projected percentage change in such

18 Consumer Price Index.

19 ‘‘SEC. 21612. GRANTS AND CONTRACTS FOR OPERATION OF

20 PLANS AND NETWORKS.

21 ‘‘(a) IN GENERAL.—In the case of a community

22 health group that submits an application in accordance

23 with subsection (b), the Secretary may make grants to and

24 enter into contracts with such groups for the operation

25 of such groups.
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•S 2351 PCS

1 ‘‘(b) APPLICATION.—For purposes of subsection (a),

2 an application is in accordance with this subsection if—

3 ‘‘(1) the applicant submits an application to the

4 Secretary at such time and in such manner as the

5 Secretary may reasonably require;

6 ‘‘(2) the application is accompanied by an as7 sessment of need of the population or populations

8 served by the applicant;

9 ‘‘(3) the application provides evidence of signifi10 cant community involvement in the ongoing oper11 ation of the community health group;

12 ‘‘(4) the application is accompanied by the as13 surances described in section 21611(c); and

14 ‘‘(5) the application is accompanied by such ad15 ditional assurances, agreements, and other informa16 tion as the Secretary may reasonably require.

17 ‘‘(c) OPERATION GRANTS.—

18 ‘‘(1) PREFERENCE.—In making a grant or en19 tering into a contract under subsection (a), the Sec20 retary shall give a greater degree of preference to

21 applicants in accordance with subparagraphs (A)

22 and (B) of section 21611(d)(1).

23 ‘‘(2) USE OF FINANCIAL ASSISTANCE.—A com24 munity health group receiving financial assistance

25 for the operation of the group under a grant or con-
224

•S 2351 PCS

1 tract pursuant to subsection (a) may use such as2 sistance to address geographic, financial, and other

3 barriers to access health care services including—

4 ‘‘(A) transportation, including rural and

5 frontier emergency transportation systems;

6 ‘‘(B) patient outreach;

7 ‘‘(C) patient education;

8 ‘‘(D) translation services;

9 ‘‘(E) consumer information that would im10 prove access to care; and

11 ‘‘(F) other services related to the provision

12 of health care services.

13 ‘‘(d) REPORTS AND AUDITS.—A community health

14 group that receives a grant or contract under subsection

15 (a) shall—

16 ‘‘(1) provide such reports and information on

17 activities carried out under this section in a manner

18 and form required by the Secretary; and

19 ‘‘(2) provide an annual organization-wide audit

20 that meets applicable standards of the Secretary.

21 ‘‘(e) AVAILABILITY OF FUNDS FROM TRUST

22 FUND.—Except as provided in part III, the following

23 amounts shall be available for a calendar year for making

24 payments under subsection (a) from the Infrastructure

25 Development Account in the Health Security Trust Fund
225

•S 2351 PCS

1 established under section 9551 of the Internal Revenue

2 Code of 1986:

3 ‘‘(1) In the case of calendar year 1995,

4 $230,000,000.

5 ‘‘(2) In the case of calendar year 1996,

6 $380,000,000.

7 ‘‘(3) In the case of calendar year 1997,

8 $380,000,000.

9 ‘‘(4) In the case of calendar year 1998,

10 $400,000,000.

11 ‘‘(5) In the case of calendar year 1999,

12 $400,000,000.

13 ‘‘(6) In the case of subsequent calendar years,

14 the amount made available under this subsection for

15 the previous calendar year (without regard to any

16 reduction in such amount under part III), updated

17 through the midpoint of the year by the estimated

18 percentage change in the Consumer Price Index for

19 All Urban Consumers (United States city average)

20 during the 12-month period ending at that midpoint,

21 with appropriate adjustments to reflect previous

22 underestimations or overestimations under this para23 graph in the projected percentage change in such

24 Consumer Price Index.
226

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1 ‘‘Subpart B—Capital Assistance

2 ‘‘SEC. 21613. LOANS, LOAN GUARANTEES, AND GRANTS FOR

3 CAPITAL INVESTMENT.

4 ‘‘(a) IN GENERAL.—In the case of a community

5 health group or isolated rural facility that submits an ap6 plication in accordance with subsection (b), the Secretary

7 may make the financial assistance described in subsection

8 (c) available to such group or facility for the provision of

9 capital assistance.

10 ‘‘(b) APPLICATION.—For purposes of subsection (a),

11 an application is in accordance with this subsection if—

12 ‘‘(1) the applicant submits an application to the

13 Secretary at such time and in such manner as the

14 Secretary may reasonably require;

15 ‘‘(2) in the case of an isolated rural facility,

16 such facility submits its application prior to January

17 1, 1999;

18 ‘‘(3) in the case of a project for construction,

19 conversion, expansion or modernization of a facility,

20 the applicant submits to the Secretary the following:

21 ‘‘(A) A description of the site.

22 ‘‘(B) Plans and specifications which meet

23 requirements prescribed by the Secretary.

24 ‘‘(C) Information reasonably demonstrat25 ing that title to such site is vested in one or

26 more of the entities filing the application (un-
227

•S 2351 PCS

1 less the agreement described in paragraph

2 (4)(A) is made).

3 ‘‘(D) A specification of the type of finan4 cial assistance being requested under subsection

5 (a);

6 ‘‘(4) in the case of a project for construction,

7 conversion, expansion or modernization of a facility,

8 the application is accompanied by the following

9 agreements:

10 ‘‘(A) Title to such site will be vested in one

11 or more of the entities filing the application

12 (unless the assurance described in paragraph

13 (3)(C) has been submitted under such para14 graph).

15 ‘‘(B) Adequate financial support will be

16 available for completion of the project and for

17 its maintenance and operation when completed.

18 ‘‘(C) The facility will be made available to

19 all persons seeking service regardless of their

20 ability to pay;

21 ‘‘(5) the application is accompanied by the as22 surances described in paragraphs section 21611(c)

23 to the same extent and in the same manner as such

24 provisions apply to awards of grants and contracts

25 under such paragraphs, except that if the applicant
228

•S 2351 PCS

1 is an isolated rural facility described in section

2 21602(d)(9) only the assurances described in para3 graph (1) and subparagraphs (A), (B), (C), and (D)

4 (if translation services are appropriate) of paragraph

5 (2) of section 21611(c) shall apply; and

6 ‘‘(6) the application is accompanied by such ad7 ditional assurances, agreements and other informa8 tion as the Secretary may reasonably require.

9 ‘‘(c) FINANCIAL ASSISTANCE DESCRIBED.—The fi10 nancial assistance that the Secretary may provide under

11 subsection (a) consists of—

12 ‘‘(1) loans;

13 ‘‘(2) guarantees on the payment of principal

14 and interest to Federal and non-Federal lenders on

15 behalf of community health groups and isolated

16 rural facilities; and

17 ‘‘(3) grants for urgent capital needs (in accord18 ance with criteria for determining such needs to be

19 developed by the Secretary).

20 ‘‘(d) PRIORITIES REGARDING AVAILABILITY OF FI21 NANCIAL ASSISTANCE.—

22 ‘‘(1) AMOUNTS RESERVED FOR FACILITIES IN

23 RURAL DESIGNATED AREAS.—At least 10 percent of

24 the dollar value of financial assistance made under

25 subsection (a) during any given year shall be allo-
229

•S 2351 PCS

1 cated to entities described in subsection (a) that

2 serve rural underserved areas designated by the

3 State and approved by the Secretary under section

4 21601(a) or designated by the Secretary under sub5 section (b) of such section, to the extent the Sec6 retary receives a sufficient number of qualified appli7 cations made by such entities.

8 ‘‘(2) PREFERENCES.—In making financial as9 sistance available under subsection (a), the Secretary

10 shall give a greater degree of preference to appli11 cants proposing to use such assistance—

12 ‘‘(A) for projects for the renovation and

13 modernization of medical facilities necessary to

14 prevent or eliminate safety hazards;

15 ‘‘(B) to avoid noncompliance with licensure

16 or accreditation standards; or

17 ‘‘(C) to provide essential services.

18 ‘‘(3) LIMITATION.—The Secretary may author19 ize the use of amounts under subsection (a) for the

20 construction of new buildings only if—

21 ‘‘(A) the Secretary determines that appro22 priate facilities are not available through ac23 quiring, modernizing, expanding or converting

24 existing buildings, or that construction of new

25 buildings will cost less; and
230

•S 2351 PCS

1 ‘‘(B) the applicant demonstrates that it

2 has secured assurances of State, local, or other

3 non-Federal support of the project.

4 ‘‘(e) AMOUNT OF ASSISTANCE.—The principal

5 amount of loans or loan guarantees under subsection (a)

6 may, when added to any other assistance under this sec7 tion, cover up to 100 percent of the costs involved.

8 ‘‘(f) USE OF ASSISTANCE.—

9 ‘‘(1) IN GENERAL.—An entity described in sub10 section (a) shall use the financial assistance de11 scribed in such subsection for—

12 ‘‘(A) the acquisition, modernization, con13 version, and expansion of facilities that will en14 hance the provision and accessibility of health

15 care; and

16 ‘‘(B) except as provided in paragraph (2),

17 for the purchase of major equipment, including

18 hardware for information systems.

19 ‘‘(2) ISOLATED RURAL FACILITIES.—In the

20 case of an isolated rural facility that receives finan21 cial assistance to purchase major equipment for the

22 furnishing of telemedicine services, such facility may

23 not use such assistance to purchase high-cost

24 telemedicine technologies that—
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•S 2351 PCS

1 ‘‘(A) incur high cost per minute of usage

2 charges; or

3 ‘‘(B) require consultants to be available at

4 the same time as the patient and the referring

5 physician.

6 ‘‘(g) TERMS AND CONDITIONS.—

7 ‘‘(1) LOANS.—Any loan made under subsection

8 (a) shall, subject to the Federal Credit Reform Act

9 of 1990, meet such terms and conditions (including

10 provisions for recovery in case of default) as the Sec11 retary, in consultation with the Secretary of the

12 Treasury, determines to be necessary to carry out

13 the purposes of such section while protecting the fi14 nancial interests of the United States. Terms and

15 conditions for such loans shall include provisions re16 garding the following:

17 ‘‘(A) Security.

18 ‘‘(B) Maturity date.

19 ‘‘(C) Amount and frequency of install20 ments.

21 ‘‘(D) Rate of interest, which shall be at a

22 rate comparable to the rate of interest prevail23 ing on the date the loan is made.

24 Notwithstanding the provisions of subparagraph

25 (D), the Secretary shall have the discretion to pro-
232

•S 2351 PCS

1 vide for a rate of interest that is lesser than the rate

2 of interest described in such subparagraph.

3 ‘‘(2) LOAN GUARANTEES.—The Secretary may

4 not approve a loan guarantee under this section un5 less the Secretary determines that the terms, condi6 tions, security (if any), and schedule and amount of

7 repayments with respect to the loan are sufficient to

8 protect the financial interests of the United States

9 and are otherwise reasonable. Such loan guarantees

10 shall be subject to such further terms and conditions

11 as the Secretary determines, in consultation with the

12 Secretary of the Treasury, and subject to the Fed13 eral Credit Reform Act of 1990, to be necessary to

14 ensure that the purposes of this section will be

15 achieved.

16 ‘‘(h) DEFAULTS; RIGHT OF RECOVERY.—

17 ‘‘(1) DEFAULTS.—

18 ‘‘(A) IN GENERAL.—The Secretary may

19 take such action as may be necessary to prevent

20 a default on loans or loan guarantees under this

21 section including the waiver of regulatory condi22 tions, deferral of loan payments, renegotiation

23 of loans, and the expenditure of funds for tech24 nical and consultative assistance, for the tem-
233

•S 2351 PCS

1 porary payment of the interest and principal on

2 such a loan, and for other purposes.

3 ‘‘(B) FORECLOSURE.—The Secretary may

4 take such action, consistent with State law re5 specting foreclosure procedures, as the Sec6 retary deems appropriate to protect the interest

7 of the United States in the event of a default

8 on a loan made pursuant to this section, includ9 ing selling real property pledged as security for

10 such a loan or loan guarantee and for a reason11 able period of time taking possession of, hold12 ing, and using real property pledged as security

13 for such a loan or loan guarantee.

14 ‘‘(C) WAIVERS.—The Secretary may, for

15 good cause, but with due regard to the financial

16 interests of the United States, waive any right

17 of recovery which the Secretary has by reason

18 of the failure of a borrower to make payments

19 of principal of and interest on a loan made pur20 suant to this section except that if such loan is

21 sold and guaranteed, any such waiver shall have

22 no effect upon the Secretary’s guarantee of

23 timely payment of principal and interest.

24 ‘‘(2) TWENTY-YEAR OBLIGATION; RIGHT OF RE25 COVERY.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—

2 ‘‘(i) LOANS AND LOAN GUARAN3 TEES.—With respect to a facility for which

4 a loan, or loan guarantee is to be made

5 pursuant to this section, the Secretary may

6 provide the loan or loan guarantee only if

7 the applicant involved agrees that the ap8 plicant will be liable to the United States

9 for the amount of the loan or loan guaran10 tee, together with an amount representing

11 interest, if at any time during the 20-year

12 period beginning on the date of completion

13 of the activities involved, the facility—

14 ‘‘(I) ceases to be a facility uti15 lized by a community health group, or

16 by another public or nonprofit private

17 entity that provides health services in

18 one or more areas that are rural or

19 urban underserved areas designated

20 by the State and approved by the Sec21 retary under section 21601(a), or des22 ignated by the Secretary under sub23 section (b) of such section; or

24 ‘‘(II) is sold or transferred to any

25 entity other than an entity that is—
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•S 2351 PCS

1 ‘‘(aa) a community health

2 group or other entity described in

3 subclause (I); and

4 ‘‘(bb) approved by the Sec5 retary as a purchaser or trans6 feree regarding the facility.

7 ‘‘(ii) DIRECT GRANTS.—With respect

8 to a facility for which substantial capital

9 costs are to be paid from a grant made

10 pursuant to this section, an assurance that

11 the applicant will be liable to the United

12 States for the amount of the award ex13 pended for such costs, together with an

14 amount representing interest, if at any

15 time during the 20-year period beginning

16 on the date of completion of the activities

17 involved, the facility—

18 ‘‘(I) ceases to be a facility uti19 lized by a community health group,

20 isolated rural facility, or by another

21 public or nonprofit private entity that

22 provides health services in one or

23 more rural or urban underserved

24 areas designated by the State and ap25 proved by the Secretary under section
236

•S 2351 PCS

1 21601(a) or designated by the Sec2 retary under subsection (b) of such

3 section; or

4 ‘‘(II) is sold or transferred to any

5 entity other than an entity that is—

6 ‘‘(aa) a community health

7 group or other entity described in

8 clause (i); and

9 ‘‘(bb) approved by the Sec10 retary as a purchaser or trans11 feree regarding the facility.

12 ‘‘(B) SUBORDINATION; WAIVERS.—The

13 Secretary may subordinate or waive the right of

14 recovery under clause (i) or (ii) of subpara15 graph (A), and any other Federal interest that

16 may be derived by virtue of a loan, loan guaran17 tee, or grant under subsection (a), if the Sec18 retary determines that subordination or waiver

19 will further the objectives of this section.

20 ‘‘(i) REPORTS AND AUDITS.—A community health

21 group or isolated rural facility that receives a loan, loan

22 guarantee, or grant under subsection (a) shall—

23 ‘‘(1) provide such reports and information on

24 activities carried out under this section in a manner

25 and form required by the Secretary; and
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•S 2351 PCS

1 ‘‘(2) provide an annual organization-wide audit

2 that meets applicable standards of the Secretary.

3 ‘‘(j) AVAILABILITY OF FUNDS FROM TRUST FUND.—

4 Except as provided in part III, the following amounts shall

5 be available for a calendar year for making payments

6 under subsection (a) from the Infrastructure Development

7 Account in the Health Security Trust Fund established

8 under section 9551 of the Internal Revenue Code of 1986:

9 ‘‘(1) In the case of calendar year 1995,

10 $500,000,000.

11 ‘‘(2) In the case of calendar year 1996,

12 $700,000,000.

13 ‘‘(3) In the case of calendar year 1997,

14 $700,000,000.

15 ‘‘(4) In the case of calendar year 1998,

16 $700,000,000.

17 ‘‘(5) In the case of calendar year 1999,

18 $700,000,000.

19 ‘‘(6) In the case of subsequent calendar years,

20 the amount made available under this subsection for

21 the previous calendar year (without regard to any

22 reduction in such amount under part III), updated

23 through the midpoint of the year by the estimated

24 percentage change in the Consumer Price Index for

25 All Urban Consumers (United States city average)
238

•S 2351 PCS

1 during the 12-month period ending at that midpoint,

2 with appropriate adjustments to reflect previous

3 underestimations or overestimations under this para4 graph in the projected percentage change in such

5 Consumer Price Index.

6 ‘‘(k) ADMINISTRATION OF PROGRAMS.—This sub7 part, and any other program of the Secretary that pro8 vides loans or loan guarantees, shall be carried out by a

9 centralized loan unit established within the Department

10 of Health and Human Services.

11 ‘‘PART II—DEMONSTRATION PROJECTS TO PRO12 MOTE TELEMEDICINE AND OTHER USES OF

13 THE TELECOMMUNICATIONS NETWORK IN

14 RURAL AREAS

15 ‘‘SEC. 21621. DEMONSTRATION PROJECTS TO PROMOTE

16 TELEMEDICINE AND OTHER USES OF THE

17 NETWORK.

18 ‘‘(a) DEFINITIONS.—For purposes of this section:

19 ‘‘(1) RURAL HEALTH CARE PROVIDER.—The

20 term ‘rural health care provider’ means any health

21 care provider located in a rural area (as defined in

22 section 1886(d)(2)(D)), including a rural referral

23 center, rural clinic, area health center, migrant

24 health center, rural community health center, local
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•S 2351 PCS

1 health department, and isolated rural facility (as de2 fined in section 21602(e)).

3 ‘‘(2) HEALTH RESOURCE PARTNER.—The term

4 ‘health resource partner’ means a tertiary care cen5 ter that is available for consultations 24–hours a day

6 and for follow up care.

7 ‘‘(3) NONHEALTH CARE ENTITY.—The term

8 ‘nonhealth care entity’ means any entity that is not

9 involved in the provision of health care, including a

10 business, educational institution, library, and prison.

11 ‘‘(b) ESTABLISHMENT.—The Secretary shall award

12 grants to eligible entities to establish demonstration

13 projects under which an eligible entity establishes a rural14 based consortium that enables members of the consortium

15 to utilize the telecommunications network—

16 ‘‘(1) to strengthen the delivery of health care

17 services in the rural area through the use of

18 telemedicine;

19 ‘‘(2) to provide for consultations involving

20 transmissions of detailed data about the patient that

21 serves as a reasonable substitute for face-to-face

22 interaction between the patient and consultant; and

23 ‘‘(3) to make outside resources or business

24 interaction more available to the rural area.
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•S 2351 PCS

1 ‘‘(c) ELIGIBLE ENTITY.—An entity eligible to receive

2 a grant under this section shall include as members at

3 least—

4 ‘‘(1) one rural health care provider and a health

5 resource partner; and

6 ‘‘(2) one nonhealth care entity located in the

7 same rural area as the rural health care provider de8 scribed in paragraph (1) and one other nonhealth

9 care entity.

10 The Secretary may waive the membership requirement

11 under paragraph (2) if the members described in para12 graph (1) are unable to locate a nonhealth care entity lo13 cated in the same rural area to participate in the dem14 onstration project.

15 ‘‘(d) PREFERENCES.—The Secretary shall give great16 er preference in awarding grants under this section to—

17 ‘‘(1) applicants that are seeking to serve rural

18 underserved areas designated by the State and ap19 proved by the Secretary under section 21601(a) or

20 designated by the Secretary under subsection (b) of

21 such section;

22 ‘‘(2) applicants that have integrated health care

23 resources or plan to integrate such resources within

24 the rural area to the maximum extent practicable in

25 order to avoid redundancy of scarce technology; and
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•S 2351 PCS

1 ‘‘(3) applicants that have coordinated usage of

2 the telecommunications infrastructure with other po3 tential telecommunications users in the area to take

4 advantage of economies-of-scale pricing of tele5 communications services.

6 ‘‘(e) APPLICATION.—To be eligible to receive a grant

7 under this section, an eligible entity described in sub8 section (c) shall prepare and submit to the Secretary an

9 application at such time, in such manner, and containing

10 such information as the Secretary may require, including

11 a description of the use to which the eligible entity would

12 apply any amounts received under such grant, the source

13 and amount of non-Federal funds the entity would pledge

14 for the project, and a showing of the long-term sustain15 ability of the project.

16 ‘‘(f) GRANTS.—Grants under this section shall be dis17 tributed in accordance with the following requirements:

18 ‘‘(1) GRANT LIMIT.—The Secretary may not

19 make a grant to an eligible entity under this section

20 in excess of $500,000 for each fiscal year in which

21 an eligible entity conducts a project under this sec22 tion.

23 ‘‘(2) MATCHING FUNDS.—

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

25 not make a grant to an eligible entity under
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•S 2351 PCS

1 this section unless the eligible entity agrees to

2 provide non-Federal funds in an amount equal

3 to not less than 20 percent of the total amount

4 to be expended by the eligible entity in any fis5 cal year for the purpose of conducting the

6 project under this section.

7 ‘‘(B) ADJUSTMENTS.—The Secretary shall

8 make necessary adjustments to the amount that

9 an eligible entity may receive in a subsequent

10 fiscal year if the eligible entity does not meet

11 the requirements of subparagraph (A) in the

12 preceding fiscal year.

13 ‘‘(g) USE OF GRANT AMOUNTS.—

14 ‘‘(1) IN GENERAL.—Amounts received under a

15 grant awarded under this section shall be utilized for

16 the development and operation of telemedicine sys17 tems that serve rural areas. All such grant funds

18 must be used to further the provision of health serv19 ices to rural areas.

20 ‘‘(2) RULES OF USE.—

21 ‘‘(A) PERMISSIBLE USAGES.—Grant funds

22 awarded under this section—

23 ‘‘(i) shall primarily be used to support

24 the costs of establishing and operating a
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•S 2351 PCS

1 telemedicine system that provides specialty

2 consultations to rural communities;

3 ‘‘(ii) may be used to demonstrate the

4 application of telemedicine for preceptor5 ship of medical students, residents, and

6 other health professions students in rural

7 training sites;

8 ‘‘(iii) may be used for transmission

9 costs, salaries, maintenance of equipment,

10 and compensation of specialists and refer11 ring practitioners; and

12 ‘‘(iv) may be used to demonstrate the

13 use of telemedicine to facilitate collabora14 tion between non-physician primary care

15 practitioners (including physician assist16 ants, nurse practitioners, certified nurse17 midwives, and clinical nurse specialists)

18 and physicians.

19 ‘‘(B) PROHIBITED USE OF FUNDS.—Grant

20 funds shall not be used by members of a rural21 based consortium for any of the following:

22 ‘‘(i) Expenditures to purchase or lease

23 equipment to the extent the expenditures

24 would exceed more than 40 percent of the

25 total grant funds.
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•S 2351 PCS

1 ‘‘(ii) In the case of a member of a

2 consortium that is an isolated rural facility

3 (as defined in section 21602(e)), purchase

4 of high-cost telecommunications tech5 nologies for the furnishing of telemedicine

6 services that—

7 ‘‘(I) incur high cost per minute

8 of usage charges; or

9 ‘‘(II) require consultants to be

10 available at the same time as the pa11 tient and the referring physician.

12 ‘‘(iii) Purchase or installation of

13 transmission equipment or establishment

14 or operation of a telecommunications com15 mon carrier network.

16 ‘‘(iv) Expenditures for indirect costs

17 (as determined by the Secretary) to the ex18 tent the expenditures would exceed more

19 than 20 percent of the total grant funds.

20 ‘‘(v) Construction (except for minor

21 renovations related to the installation of

22 equipment), or the acquisition or building

23 of real property.

24 ‘‘(h) REIMBURSEMENT FOR TELEMEDICINE SERV25 ICES UNDER THE MEDICARE PROGRAM.—
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•S 2351 PCS

1 ‘‘(1) IN GENERAL.—In consultation with the

2 Office of Rural Health Policy, the Secretary shall

3 designate 4 demonstration projects that have been

4 awarded grants under subsection (b) as projects in

5 which the Health Care Financing Administration

6 shall, in accordance with paragraph (2), reimburse

7 providers for telemedicine services furnished to—

8 ‘‘(A) individuals who are eligible for bene9 fits under part A of title XVIII; and

10 ‘‘(B) individuals who are eligible for bene11 fits under part A and enrolled under part B of

12 title XVIII.

13 ‘‘(2) DEVELOPMENT OF PAYMENT METHODOL14 OGY AND PAYMENT PROVIDED.—

15 ‘‘(A) IN GENERAL.—For purposes of para16 graph (1), the Health Care Financing Adminis17 tration shall reimburse a provider of

18 telemedicine services from funds made available

19 under subsection (k) in accordance with one or

20 more methodologies to be developed by the

21 Secretary.

22 ‘‘(B) CRITERIA FOR DEVELOPING PAY23 MENT METHODOLOGIES.—In developing pay24 ment methodologies under subparagraph (A),

25 the Secretary shall—
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1 ‘‘(i) limit payment to services that

2 would otherwise be paid for under the

3 medicare program under title XVIII if

4 such services were not telemedicine

5 services;

6 ‘‘(ii) have the discretion to develop

7 conditions for payment that protect the

8 health and safety of the individuals de9 scribed in paragraph (1), including limiting

10 payment for services that cannot be fur11 nished safely as telemedicine services;

12 ‘‘(iii) have the discretion to include

13 appropriate payments for transmission

14 costs in the payment methodology; and

15 ‘‘(iv) limit payment for telemedicine

16 consultation services to consultation serv17 ices specified by the Secretary that would

18 otherwise be paid for under the medicare

19 program under title XVIII if the patient

20 and practitioner had a face-to-face con21 sultation.

22 ‘‘(i) MAINTENANCE OF EFFORT.—Any funds avail23 able for the activities covered by a demonstration project

24 conducted under this section shall supplement, and shall
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•S 2351 PCS

1 not supplant, funds that are expended for similar purposes

2 under any State, regional, or local program.

3 ‘‘(j) EVALUATIONS.—Each eligible entity that con4 ducts a demonstration project under this section shall sub5 mit to the Secretary such information and interim evalua6 tions as the Secretary may require. The Secretary shall

7 provide the Interagency Task Force on Rural

8 Telemedicine with such evaluations and information sub9 mitted under the previous sentence as the Task Force may

10 require to carry out its duties under section 21622(b).

11 ‘‘(k) AVAILABILITY OF FUNDS FROM TRUST

12 FUND.—Except as provided in part III, $20,000,000 in

13 each of the calendar years 1995 through 1997 shall be

14 available for making payments under subsection (a) from

15 the Infrastructure Development Account in the Health Se16 curity Trust Fund established under section 9551 of the

17 Internal Revenue Code of 1986.

18 ‘‘SEC. 21622. FEDERAL INTERAGENCY TASK FORCE.

19 ‘‘(a) ESTABLISHMENT.—Not later than 90 days after

20 the date of the enactment of this section, the Secretary

21 of Health and Human Services shall establish a Federal

22 interagency task force to be known as the ‘Interagency

23 Task Force on Rural Telemedicine’ (hereafter in this sec24 tion referred to as the ‘Task Force’).

25 ‘‘(b) DUTIES.—
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1 ‘‘(1) IN GENERAL.—The Task Force shall—

2 ‘‘(A) identify specific uses for telemedicine

3 that have been proven to be effective to be used

4 in the evaluation of applications for federally

5 funded telemedicine demonstration projects, in6 cluding any application submitted under this

7 part;

8 ‘‘(B) review and coordinate evaluations of

9 all federally funded telemedicine and tele10 communications infrastructure demonstration

11 projects, including any demonstration project

12 established under this part;

13 ‘‘(C) establish mechanisms to facilitate a

14 local area needs assessment and consortium de15 velopment process to assist entities conducting

16 federally funded telemedicine demonstration

17 projects, including demonstration projects

18 under this part; and

19 ‘‘(D) review the policy of the Health Care

20 Financing Administration relating to reimburse21 ment for telemedicine services under the dem22 onstration projects established under section

23 21622(b) and designated under subsection

24 (g)(1) of such section.
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•S 2351 PCS

1 ‘‘(2) PUBLICATION OF RESULTS.—Not later

2 than 3 years after the Task Force is established,

3 and every 3 years thereafter, the Task Force shall

4 analyze and publish a report of its findings under

5 subparagraphs (A) through (D) of paragraph (1)

6 and shall make such publications available to the

7 Congress and the general public.

8 ‘‘(c) MEMBERSHIP.—

9 ‘‘(1) IN GENERAL.—The Task Force shall con10 sist of representatives of—

11 ‘‘(A) the Department of Health and

12 Human Services;

13 ‘‘(B) the Rural Electrification Administra14 tion;

15 ‘‘(C) the National Telecommunications In16 formation Agency;

17 ‘‘(D) the National Institutes of Health;

18 and

19 ‘‘(E) other agencies and departments that

20 have responsibility for overseeing telemedicine

21 projects.

22 ‘‘(2) CHAIRPERSON.—A representative of the

23 Department of Health and Human Services shall

24 serve as the chairperson of the Task Force.
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1 ‘‘(d) BASIC PAY.—Each member of the Task Force

2 shall serve without pay.

3 ‘‘(e) MEETINGS.—The Task Force shall meet at the

4 call of the chairperson.

5 ‘‘(f) QUORUM.—A majority of the members shall con6 stitute a quorum for the transaction of business.

7 ‘‘(g) REPORT ON TERMINATION OF COMMISSION.—

8 Not later than 5 years after the date on which the Task

9 Force is established, the Task Force shall submit to the

10 Congress a report that evaluates the penetration of

11 telemedicine in the United States and recommends wheth12 er the Task Force should be terminated.

13 ‘‘PART III—INSUFFICIENT AMOUNTS IN THE

14 TRUST FUND

15 ‘‘SEC. 21631. INSUFFICIENT AMOUNTS IN THE TRUST FUND

16 ACCOUNT.

17 ‘‘If the sum of the amounts specified under sections

18 21611(f), 21612(e), 21613(j), and 21621(k) for a cal19 endar year exceeds the amounts available for such cal20 endar year in the Infrastructure Development Account in

21 the Health Security Trust Fund established under section

22 9551 of the Internal Revenue Code of 1986, then each

23 such amount shall be reduced by the amount which bears

24 the same ratio to such amount as the amounts available

25 bears to the sum of such amounts.
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1 ‘‘Subtitle G—Automobile Insurance

2 Coordination

3 ‘‘SEC. 21701. DEFINITIONS.

4 ‘‘In this subtitle:

5 ‘‘(1) INJURED INDIVIDUAL.—The term ‘injured

6 individual’ means an individual who has a bodily in7 jury or illness sustained in an automobile accident

8 and who is entitled to receive automobile insurance

9 medical services from a certified standard health

10 plan.

11 ‘‘(2) AUTOMOBILE INSURANCE MEDICAL SERV12 ICES.—The term ‘automobile insurance medical serv13 ices’ means services and items covered by automobile

14 insurance that are medically necessary or appro15 priate for treatment of bodily injuries or illnesses

16 sustained in automobile accidents and that are with17 in the scope of the benefits to which an injured indi18 vidual who is enrolled in a certified standard health

19 plan is entitled under such health plan.

20 ‘‘(3) AUTOMOBILE INSURANCE CARRIER.—The

21 term ‘automobile insurance carrier’ means an insur22 ance company, employer, or fund that is liable for

23 payment for automobile insurance medical services

24 based either on a direct contractual obligation to an

25 injured individual or an obligation on behalf of a
252

•S 2351 PCS

1 person responsible for causation of an injured indi2 vidual’s bodily injury or illness.

3 ‘‘(4) CERTIFIED STANDARD HEALTH PLAN.—

4 The term ‘certified standard health plan’ has the

5 meaning given to such term by section 21111(a)(2).

6 ‘‘PART I—REQUIREMENTS RELATING TO

7 AUTOMOBILE INSURANCE MEDICAL SERVICES

8 ‘‘SEC. 21711. PROVISION OF AUTOMOBILE INSURANCE MED9 ICAL SERVICES THROUGH HEALTH PLANS.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) HEALTH PLANS.—An individual enrolled

12 in a certified standard health plan shall receive auto13 mobile insurance medical services under the terms

14 generally applicable to the provision (or arrangement

15 for the provision) of such services by such health

16 plan.

17 ‘‘(2) MEDICARE AND MEDICAID.—Paragraph

18 (1) shall not prevent a participating State from re19 quiring automobile insurance carriers to make direct

20 payment to health care providers for automobile in21 surance medical services that are covered both by (i)

22 medicare under title XVIII or a State medicaid pro23 gram under title XIX, and (ii) an automobile insur24 ance contract that is required by law and provides

25 for direct payment of medical services regardless of
253

•S 2351 PCS

1 fault. Payment for automobile insurance medical

2 services in such circumstances shall be made to the

3 extent of the automobile insurance carrier’s liability

4 under the applicable contract.

5 ‘‘(b) ALTERNATIVE PERMITTED.—Subsection (a)

6 shall not prevent an individual and an automobile insur7 ance carrier from agreeing that treatment for bodily injury

8 or illness sustained in an automobile accident shall be pro9 vided other than by or through the certified standard

10 health plan in which the individual is enrolled.

11 ‘‘SEC. 21712. PAYMENT FOR AUTOMOBILE INSURANCE MED12 ICAL SERVICES.

13 ‘‘(a) PAYMENT TO HEALTH PLANS.—Each auto14 mobile insurance carrier that is liable for payment for

15 automobile insurance medical services provided to an in16 jured individual by a certified standard health plan shall

17 make payment to such health plan for such services to

18 the extent of its obligations under the applicable auto19 mobile insurance contract.

20 ‘‘(b) REIMBURSEMENT FOR COST-SHARING.—Each

21 automobile insurance carrier shall be liable for the reim22 bursement or payment of any deductibles, copayments, or

23 coinsurance paid or owed by an injured individual for

24 automobile insurance medical services to the extent of the

25 applicable automobile insurance contract.
254

•S 2351 PCS

1 ‘‘(c) LIMITATION OF LIABILITY.—Except as provided

2 in subsections (a) and (b), nothing in this subtitle or any

3 other provision of law shall require an automobile insur4 ance carrier or any person insured by such a carrier to

5 make any payment to a health plan, health care provider,

6 or any other person for (1) automobile insurance medical

7 services, or (2) other health care services or items used

8 to treat an injury or illness sustained in an automobile

9 accident that are not medically necessary or appropriate.

10 ‘‘(d) USE OF FEE SCHEDULES.—

11 ‘‘(1) IN GENERAL.—Irrespective of the type of

12 health plan providing automobile insurance medical

13 services, payment by automobile insurance carriers

14 for such services shall be made to the plan exclu15 sively in accordance with any fee schedule or sched16 ules established by the plan or the participating

17 State for health care services generally.

18 ‘‘(2) MEDICARE FEE SCHEDULES.—If the in19 jured individual is a medicare beneficiary under title

20 XVIII, an automobile insurance carrier may use the

21 appropriate fee schedule for health care services es22 tablished under such title.

23 ‘‘(3) ALTERNATIVE PAYMENT METHODOLO24 GIES.—Fee schedules shall not be required in any

25 case in which an automobile insurance carrier and a
255

•S 2351 PCS

1 health plan have agreed on an alternative payment

2 arrangement.

3 ‘‘(e) REIMBURSEMENT FOR PAYMENTS MADE.—

4 Nothing in this subtitle or any other provision of law shall

5 impair the right of a certified standard health plan or

6 automobile insurance carrier to seek reimbursement from

7 any individual liable for a bodily injury or illness sustained

8 in an automobile accident for payments made for auto9 mobile insurance medical services to treat such injury or

10 illness.

11 ‘‘(f) RIGHTS TO COVERAGE FOR ADDITIONAL TREAT12 MENT.—Subject to the provisions of subsection (c), noth13 ing in this subtitle shall impair any rights with respect

14 to medically necessary or appropriate services and items

15 to which an individual injured in an automobile accident

16 is entitled that are not automobile insurance medical serv17 ices as defined in this subtitle.

18 ‘‘PART II—ADMINISTRATION

19 ‘‘SEC. 21721. PAYMENT FACILITATION.

20 ‘‘(a) IN GENERAL.—Each participating State shall

21 establish a system for payment of automobile insurance

22 medical services by automobile insurance carriers to cer23 tified standard health plans, including mechanisms for

24 prompt resolution of any issues or disputes that may arise

25 in connection with such payment. Such systems shall re-
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•S 2351 PCS

1 quire that automobile insurance carriers have an affirma2 tive obligation to identify to such health plans the auto3 mobile insurance carrier or carriers liable for payment for

4 automobile insurance medical services, through the use of

5 computer data programs where appropriate and cost effec6 tive.

7 ‘‘(b) SANCTIONS.—Each participating State shall au8 thorize appropriate sanctions for the failure of a health

9 plan, automobile insurance carrier, or any other person

10 to comply with the requirements established pursuant to

11 subsection (a).

12 ‘‘Subtitle H—Remedies and

13 Enforcement

14 ‘‘PART I—REVIEW OF BENEFIT DETERMINATIONS

15 FOR ENROLLED INDIVIDUALS

16 ‘‘Subpart A—General Rules

17 ‘‘SEC. 21801. HEALTH PLAN CLAIMS PROCEDURE.

18 ‘‘(a) DEFINITIONS.—For purposes of this section:

19 ‘‘(1) CLAIM.—The term ‘claim’ means a claim

20 for payment or provision of benefits under a health

21 plan, a request for preauthorization of items or serv22 ices which is submitted to a health plan prior to re23 ceipt of the items or services, or the denial, reduc24 tion, or termination of any service or request for a

25 referral or reimbursement.
257

•S 2351 PCS

1 ‘‘(2) INDIVIDUAL CLAIMANT.—The term ‘indi2 vidual claimant’ means, with respect to a claim, any

3 individual who submits the claim to a health plan in

4 connection with the individual’s enrollment under

5 the plan, or on whose behalf the claim is submitted

6 to the plan by a provider.

7 ‘‘(3) PROVIDER CLAIMANT.—The term ‘provider

8 claimant’ means, with respect to a claim, any pro9 vider who submits the claim to a health plan with

10 respect to items or services provided to an individual

11 enrolled under the plan.

12 ‘‘(b) GENERAL RULES GOVERNING TREATMENT OF

13 CLAIMS.—

14 ‘‘(1) ADEQUATE NOTICE OF DISPOSITION OF

15 CLAIM.—

16 ‘‘(A) IN GENERAL.—In any case in which

17 a claim is submitted in complete form to a

18 health plan, the plan shall provide to the indi19 vidual claimant and any provider claimant with

20 respect to the claim a written notice of the

21 plan’s approval or denial of the claim within 15

22 days after the date of the submission of the

23 claim. The notice to the individual claimant

24 shall be written in plain and easily understood

25 language.
258

•S 2351 PCS

1 ‘‘(B) DENIALS.—In the case of a denial of

2 the claim, the notice shall—

3 ‘‘(i) be provided within 5 days after

4 the date of the determination to deny the

5 claim;

6 ‘‘(ii) set forth the specific reasons for

7 the denial, including an explanation of

8 such reasons and the facts underlying the

9 decision to reduce or fail to provide serv10 ices or pay the claim; and

11 ‘‘(iii) clearly explain the right to ap12 peal the denial under paragraph (2) and

13 contain a description of the process for ap14 pealing such decision sufficient to allow the

15 claimant to initiate an appeal and submit

16 evidence to the decision maker in support

17 of the position of the claimant.

18 ‘‘(C) FAILURE TO DENY TREATED AS AP19 PROVAL.—Failure by any plan to comply with

20 the requirements of this paragraph with respect

21 to any claim submitted to the plan shall be

22 treated as approval by the plan of the claim.

23 ‘‘(2) PLAN’S DUTY TO REVIEW DENIALS UPON

24 TIMELY REQUEST.—The plan shall review its denial

25 of the claim if an individual claimant or provider
259

•S 2351 PCS

1 claimant with respect to the claim submits to the

2 plan a written request for reconsideration of the

3 claim after receipt of written notice from the plan of

4 the denial. The plan shall allow any such claimant

5 not less than 60 days, after receipt of written notice

6 from the plan of the denial, to submit the claimant’s

7 request for reconsideration of the claim.

8 ‘‘(3) TIME LIMIT FOR REVIEW.—The plan shall

9 complete any review required under paragraph (2),

10 and shall provide the individual claimant and any

11 provider claimant with respect to the claim written

12 notice of the plan’s decision on the claim after re13 consideration pursuant to the review, within 30 days

14 after the date of the receipt of the request for recon15 sideration.

16 ‘‘(4) DE NOVO REVIEWS.—Any review required

17 under paragraph (2)—

18 ‘‘(A) shall be de novo,

19 ‘‘(B) shall be conducted by an individual

20 who did not make the initial decision denying

21 the claim and who is authorized to approve the

22 claim, and

23 ‘‘(C) shall include review by a qualified

24 physician in the same speciality as the treating
260

•S 2351 PCS

1 physician if the resolution of any issues involved

2 requires medical expertise.

3 ‘‘(c) TREATMENT OF URGENT REQUESTS TO PLANS

4 FOR PREAUTHORIZATION.—

5 ‘‘(1) IN GENERAL.—This subsection applies in

6 the case of any claim submitted by an individual

7 claimant or a provider claimant consisting of a re8 quest for preauthorization of items or services which

9 is accompanied by an attestation that—

10 ‘‘(A) failure to immediately provide the

11 items or services could reasonably be expected

12 to result in—

13 ‘‘(i) placing the health of the individ14 ual claimant (or, with respect to an indi15 vidual claimant who is a pregnant woman,

16 the health of the woman or her unborn

17 child) in serious jeopardy,

18 ‘‘(ii) serious impairment to bodily

19 functions, or

20 ‘‘(iii) serious dysfunction of any bodily

21 organ or part,

22 or

23 ‘‘(B) immediate provision of the items or

24 services is necessary because the individual

25 claimant has made or is at serious risk of mak-
261

•S 2351 PCS

1 ing an attempt to harm such individual claim2 ant or another individual.

3 ‘‘(2) SHORTENED TIME LIMIT FOR CONSIDER4 ATION OF REQUESTS FOR PREAUTHORIZATION.—

5 Notwithstanding subsection (b)(1), a health plan

6 shall approve or deny any claim described in para7 graph (1) within 12 hours after submission of the

8 claim to the plan. Failure by the plan to comply with

9 the requirements of this paragraph with respect to

10 the claim shall be treated as approval by the plan of

11 the claim.

12 ‘‘(3) EXPEDITED EXHAUSTION OF PLAN REM13 EDIES.—Any claim described in paragraph (1) which

14 is denied by the plan shall be treated as a claim with

15 respect to which all remedies under the plan pro16 vided pursuant to this section are exhausted, irre17 spective of any review provided under subsection

18 (b)(2).

19 ‘‘(4) DENIAL OF PREVIOUSLY AUTHORIZED

20 CLAIMS NOT PERMITTED.—In any case in which a

21 health plan approves a claim described in paragraph

22 (1)—

23 ‘‘(A) the plan may not subsequently deny

24 payment or provision of benefits pursuant to

25 the claim, unless the plan makes a showing of
262

•S 2351 PCS

1 an intentional misrepresentation of a material

2 fact by the individual claimant, and

3 ‘‘(B) in the case of a violation of subpara4 graph (A) in connection with the claim, all rem5 edies under the plan provided pursuant to this

6 section with respect to the claim shall be treat7 ed as exhausted.

8 ‘‘(d) TIME LIMIT FOR DETERMINATION OF INCOM9 PLETENESS OF CLAIM.—For purposes of this section—

10 ‘‘(1) any claim submitted by an individual

11 claimant and accepted by a provider serving under

12 contract with a health plan and any claim described

13 in subsection (b)(1) shall be treated with respect to

14 the individual claimant as submitted in complete

15 form, and

16 ‘‘(2) any other claim for benefits under the plan

17 shall be treated as filed in complete form as of 10

18 days after the date of the submission of the claim,

19 unless the plan provides to the individual claimant

20 and any provider claimant, within such period, a

21 written notice of any required matter remaining to

22 be filed in order to complete the claim.

23 Any filing by the individual claimant or the provider claim24 ant of additional matter requested by the plan pursuant
263

•S 2351 PCS

1 to paragraph (2) shall be treated for purposes of this sec2 tion as an initial filing of the claim.

3 ‘‘(e) ADDITIONAL NOTICE AND DISCLOSURE RE4 QUIREMENTS FOR HEALTH PLANS.—In the case of a de5 nial of a claim for benefits under a health plan, the plan

6 shall include, together with the specific reasons provided

7 to the individual claimant and any provider claimant

8 under subsection (b)(1)—

9 ‘‘(1) if the denial is based in whole or in part

10 on a determination that the claim is for an item or

11 service which is not covered by a benefits package

12 established under subtitle C or exceeds payment

13 rates under the plan, the factual basis for the deter14 mination,

15 ‘‘(2) if the denial is based in whole or in part

16 on exclusion of coverage with respect to services be17 cause the services are determined to comprise an ex18 perimental treatment or investigatory procedure, the

19 medical basis for the determination and a descrip20 tion of the process used in making the determina21 tion, and

22 ‘‘(3) if the denial is based in whole or in part

23 on a determination that the treatment is not medi24 cally necessary or appropriate or is inconsistent with

25 the plan’s practice guidelines, the medical basis for
264

•S 2351 PCS

1 the determination, the guidelines used in making the

2 determination, and a description of the process used

3 in making the determination.

4 ‘‘(f) WAIVER OF RIGHTS PROHIBITED.—A health

5 plan may not require any party to waive any right under

6 the plan or this title as a condition for approval of any

7 claim under the plan, except to the extent otherwise speci8 fied in a formal settlement agreement.

9 ‘‘SEC. 21802. REVIEW IN AREA COMPLAINT REVIEW OFFICES

10 OF GRIEVANCES BASED ON ACTS OR PRAC11 TICES BY HEALTH PLANS.

12 ‘‘(a) COMPLAINT REVIEW OFFICES.—

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), in accordance with rules which shall be

15 prescribed by the Secretary, each participating State

16 shall establish and maintain a complaint review of17 fice for each community rating area established by

18 such State to serve all enrollees of health plans serv19 ing such area.

20 ‘‘(2) MULTISTATE PLANS.—Under regulations

21 of the Secretary of Labor, in consultation with the

22 Secretary, the complaint review office for a commu23 nity rating area established by such State shall also

24 serve as the complaint review office for multistate

25 self-insured health plans operating in the State with
265

•S 2351 PCS

1 respect to individuals who are enrolled under such

2 plans and who reside within the community rating

3 area.

4 ‘‘(b) FILINGS OF COMPLAINTS BY AGGRIEVED PER5 SONS.—In the case of any person who is aggrieved by any

6 act or practice engaged in by any health plan which con7 sists of, or results in, denial of payment or provision of

8 benefits under the plan or delay in the payment or provi9 sion of benefits, if the denial or delay is alleged to consist

10 of a failure to comply with the terms of the plan (including

11 the provision of benefits in full when due in accordance

12 with the terms of the plan), or with the applicable require13 ments of this title, such person may file a complaint with

14 the appropriate complaint review office.

15 ‘‘(c) EXHAUSTION OF PLAN REMEDIES.—Any com16 plaint to which this section applies, including a claim to

17 which section 21801 applies, may not be filed until the

18 complainant has exhausted all remedies provided under

19 the plan with respect to the claim.

20 ‘‘(d) FORM OF COMPLAINT.—Any complaint to which

21 this section applies shall be in writing under oath or affir22 mation, shall set forth the complaint in a manner cal23 culated to give notice of the nature of the complaint, and

24 shall contain such information as may be prescribed in

25 regulations of the Secretary.
266

•S 2351 PCS

1 ‘‘(e) NOTICE OF FILING.—The complaint review of2 fice shall serve by certified mail a notice of the complaint

3 (including the date, place, and circumstances of the al4 leged violation) on the person or persons alleged in the

5 complaint to have committed the violation within 10 days

6 after the filing of the complaint.

7 ‘‘(f) TIME LIMITATION.—A complaint may not be

8 brought under this section with respect to any violation

9 later than one year after the date on which the complain10 ing party knows, or reasonably should have known, that

11 a violation has occurred. This subsection shall not prevent

12 the subsequent amending of a complaint.

13 ‘‘SEC. 21803. INITIAL PROCEEDINGS IN COMPLAINT REVIEW

14 OFFICES.

15 ‘‘(a) ELECTIONS.—Whenever a complaint is brought

16 to the complaint review office under section 21802(b), the

17 complaint review office shall provide the complainant with

18 an opportunity, in such form and manner as shall be pre19 scribed in regulations of the Secretary, to make an irrev20 ocable election:

21 ‘‘(1) To forego further proceedings in the com22 plaint review office and rely on remedies available in

23 a court of competent jurisdiction with respect to any

24 matter in the complaint.
267

•S 2351 PCS

1 ‘‘(2) To submit the complaint as a dispute

2 under the Early Resolution Program established

3 under subpart B and thereby suspend further review

4 proceedings under this section pending termination

5 of proceedings under the Program.

6 ‘‘(3) In any case in which an election under

7 paragraph (1) or (2) is not made, or an election

8 under paragraph (2) was made but resolution of all

9 matters in the complaint was not obtained upon ter10 mination of proceedings pursuant to the election by

11 settlement agreement or otherwise, to proceed, with

12 the consent of the plan, with the complaint to a

13 hearing in the complaint review office under section

14 21804 regarding the unresolved matters.

15 ‘‘(b) DUTY OF COMPLAINT REVIEW OFFICE.—The

16 complaint review office shall provide (in a linguistically

17 and culturally appropriate manner) an explanation to com18 plainants bringing complaints to the office concerning the

19 legal and other ramifications of each option available

20 under this section.

21 ‘‘(c) EFFECT OF PARTICIPATION IN EARLY RESOLU22 TION PROGRAM.—Any matter in a complaint brought to

23 the complaint review office which is included in a dispute

24 which is timely submitted to the Early Resolution Pro25 gram established under subpart B shall not be assigned
268

•S 2351 PCS

1 to a hearing under section 21804 unless the proceedings

2 under the Program with respect to the dispute are termi3 nated without settlement or resolution of the dispute with

4 respect to such matter. Upon termination of any proceed5 ings regarding a dispute submitted to the Program, the

6 applicability of this section to any matter in a complaint

7 which was included in the dispute shall not be affected

8 by participation in the proceedings, except to the extent

9 otherwise required under the terms of any settlement

10 agreement or other formal resolution obtained in the pro11 ceedings.

12 ‘‘SEC. 21804. HEARINGS BEFORE HEARING OFFICERS IN

13 COMPLAINT REVIEW OFFICES.

14 ‘‘(a) HEARING PROCESS.—

15 ‘‘(1) ASSIGNMENT OF COMPLAINTS TO HEARING

16 OFFICERS AND NOTICE TO PARTIES.—

17 ‘‘(A) IN GENERAL.—In the case of an elec18 tion under section 21803(a)(3)—

19 ‘‘(i) the complaint review office shall

20 assign the complaint, and each motion in

21 connection with the complaint, to a hearing

22 officer employed by the participating State

23 in the office; and

24 ‘‘(ii) the hearing officer shall have the

25 power to issue and cause to be served upon
269

•S 2351 PCS

1 the plan named in the complaint a copy of

2 the complaint and a notice of hearing be3 fore the hearing officer at a place fixed in

4 the notice, not less than 5 days after the

5 serving of the complaint.

6 ‘‘(B) QUALIFICATIONS FOR HEARING OFFI7 CERS.—No individual may serve in a complaint

8 review office as a hearing officer unless the in9 dividual meets standards which shall be pre10 scribed by the Secretary. Such standards shall

11 include experience, training, ability to commu12 nicate with the enrollee, affiliations, diligence,

13 absence of actual or potential conflicts of inter14 est, and other qualifications deemed relevant by

15 the Secretary. At no time shall a hearing officer

16 have any official, financial, or personal conflict

17 of interest with respect to issues in controversy

18 before the hearing officer.

19 ‘‘(2) AMENDMENT OF COMPLAINTS.—Upon the

20 motion of the complainant, any complaint may, at

21 the discretion of the hearing officer conducting the

22 hearing, be amended at any time prior to the issu23 ance of an order based thereon.

24 ‘‘(3) ANSWERS.—The party against whom the

25 complaint is filed shall have the right to file an an-
270

•S 2351 PCS

1 swer to the original or amended complaint and to

2 appear in person or otherwise and give testimony at

3 the place and time fixed in the complaint.

4 ‘‘(b) ADDITIONAL PARTIES.—In the discretion of the

5 hearing officer conducting the hearing, any other person

6 may be allowed to intervene in the proceeding and to

7 present testimony.

8 ‘‘(c) HEARINGS.—

9 ‘‘(1) DE NOVO HEARING.—Each hearing officer

10 shall hear complaints and motions de novo.

11 ‘‘(2) TESTIMONY.—The testimony taken by the

12 hearing officer shall be reduced to writing. There13 after, the hearing officer, in the officer’s discretion,

14 may (after notice to the parties) provide for the tak15 ing of further testimony or the hearing of argu16 ments.

17 ‘‘(3) AUTHORITY OF HEARING OFFICERS.—

18 ‘‘(A) IN GENERAL.—The hearing officer

19 may compel by subpoena the attendance of wit20 nesses and the production of evidence at any

21 designated place or hearing. In case of contu22 macy or refusal to obey a subpoena lawfully is23 sued under this paragraph and upon application

24 of the hearing officer, an appropriate district

25 court of the United States may issue an order
271

•S 2351 PCS

1 requiring compliance with the subpoena and

2 any failure to obey the order may be punished

3 by the court as a contempt thereof. The hearing

4 officer may also seek enforcement of the sub5 poena in a State court of competent jurisdic6 tion.

7 ‘‘(B) EXPERT WITNESSES.—The hearing

8 officer may use independent medical experts.

9 ‘‘(4) RULES OF EVIDENCE.—Formal rules of

10 evidence shall apply to any hearing under this sec11 tion.

12 ‘‘(5) EXPEDITED HEARINGS.—Notwithstanding

13 section 21803 and the preceding provisions of this

14 section, upon receipt of a complaint containing a

15 claim described in section 21801(c)(1), the com16 plaint review office shall promptly provide the com17 plainant with the opportunity to make an election

18 under section 21803(a)(3) and assignment to a

19 hearing on the complaint before a hearing officer.

20 The complaint review office shall ensure that such a

21 hearing commences not later than 24 hours after re22 ceipt of the complaint by the complaint hearing of23 fice and not later than 3 days after the receipt of

24 a complaint, the complaint review office shall provide

25 a decision.
272

•S 2351 PCS

1 ‘‘(d) DECISION OF HEARING OFFICER.—

2 ‘‘(1) IN GENERAL.—Except as provided in sub3 section (c)(4), not later than 120 days after the date

4 on which a complaint is assigned under this section,

5 the hearing officer shall decide if the preponderance

6 of the evidence justifies the denial of services and

7 whether to decide in favor of the complainant with

8 respect to each alleged act or practice. Each such

9 decision—

10 ‘‘(A) shall include the hearing officer’s

11 findings of fact, and

12 ‘‘(B) shall constitute the hearing officer’s

13 final disposition of the proceedings.

14 ‘‘(2) DECISIONS FINDING IN FAVOR OF COM15 PLAINANT.—If the hearing officer’s decision includes

16 a determination that any party named in the com17 plaint has engaged in or is engaged in an act or

18 practice which consists of, or results in, a denial or

19 delay described in section 21802(b), the hearing offi20 cer shall issue and cause to be served on such party

21 an order which requires such party—

22 ‘‘(A) to cease and desist from such act or

23 practice,

24 ‘‘(B) to provide the benefits due under the

25 terms of the plan and to otherwise comply with
273

•S 2351 PCS

1 the terms of the plan and the applicable re2 quirements of this title,

3 ‘‘(C) to pay to the complainant prejudg4 ment interest on the actual costs incurred in

5 obtaining the items and services at issue in the

6 complaint,

7 ‘‘(D) to pay to the prevailing complainant

8 a reasonable attorney’s fee, reasonable expert

9 witness fees, and other reasonable costs and ex10 penses relating to the hearing on the charges on

11 which the complainant prevails, and

12 ‘‘(E) to provide other appropriate relief.

13 ‘‘(3) DECISIONS NOT IN FAVOR OF COMPLAIN14 ANT.—If the hearing officer’s decision includes a de15 termination that the party named in the complaint

16 has not engaged in or is not engaged in an act or

17 practice referred to in section 21802(b), the hearing

18 officer—

19 ‘‘(A) shall include in the decision a dismis20 sal of the charge in the complaint relating to

21 the act or practice, and

22 ‘‘(B) upon a finding that such charge is

23 frivolous, shall issue and cause to be served on

24 the complainant an order which requires the

25 complainant to pay to such party a reasonable
274

•S 2351 PCS

1 attorney’s fee, reasonable expert witness fees,

2 and other reasonable costs and expenses relat3 ing to the proceedings on such charge.

4 ‘‘(4) SUBMISSION AND SERVICE OF DECI5 SIONS.—The hearing officer shall submit each deci6 sion to the complaint review office at the conclusion

7 of the proceedings and the office shall cause a copy

8 of the decision to be served on the parties to the

9 proceedings.

10 ‘‘(e) REVIEW.—

11 ‘‘(1) IN GENERAL.—The decision of the hearing

12 officer shall be final and binding upon all parties.

13 Except as provided in paragraph (2), any party to

14 the complaint may, within 30 days after service of

15 the decision by the complaint review office, file an

16 appeal of the decision with the State Health Plan

17 Review Board established under section 21805 in

18 such form and manner as may be prescribed by such

19 Board.

20 ‘‘(2) EXCEPTION.—A decision in favor of the

21 complainant in the case of an expedited hearing

22 under subsection (c)(4) shall not be subject to re23 view.

24 ‘‘(f) COURT ENFORCEMENT OF ORDERS.—
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•S 2351 PCS

1 ‘‘(1) IN GENERAL.—If a decision of the hearing

2 officer in favor of the complainant is not appealed

3 under section 21805, the complainant may petition

4 any court of competent jurisdiction for enforcement

5 of the order. In any such proceeding, the order of

6 the hearing officer shall not be subject to review.

7 ‘‘(2) AWARDING OF COSTS.—In any action for

8 court enforcement under this subsection, a prevailing

9 complainant shall be entitled to a reasonable attor10 ney’s fee, reasonable expert witness fees, and other

11 reasonable costs and expenses relating to such ac12 tion.

13 ‘‘SEC. 21805. REVIEW BY STATE HEALTH PLAN REVIEW

14 BOARD.

15 ‘‘(a) ESTABLISHMENT AND MEMBERSHIP.—Each

16 participating State shall establish a State Health Plan Re17 view Board (hereafter in this subtitle referred to as the

18 ‘Review Board’). The Review Board shall be composed of

19 individuals who by reason of training, education, or experi20 ence are qualified to carry out the functions of the Review

21 Board under this subtitle, and who fairly represent all in22 terested parties. The State shall prescribe such rules as

23 are necessary for the orderly transaction of proceedings

24 by the Review Board. Every official act of the Review

25 Board shall be entered of record, and its hearings and
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•S 2351 PCS

1 records shall be open to the public consistent with State

2 law regarding individual privacy rights and the confiden3 tiality of medical records subject to the proceedings.

4 ‘‘(b) REVIEW PROCESS.—The Review Board shall en5 sure that reasonable notice is provided for each appeal be6 fore the Review Board of a hearing officer’s decision under

7 section 21804, and shall provide for the orderly consider8 ation of arguments by any party to the hearing upon

9 which the hearing officer’s decision is based. In the discre10 tion of the Review Board, any other person may be allowed

11 to intervene in the proceeding and to present written argu12 ment. The Secretary (or in the case of multistate self-in13 sured health plans, the Secretary of Labor) may intervene

14 in the proceeding as a matter of right.

15 ‘‘(c) SCOPE OF REVIEW.—The Review Board shall re16 view the decision of the hearing officer from which the

17 appeal is made, except that the review shall be only for

18 the purposes of determining—

19 ‘‘(1) whether the determination is supported by

20 substantial evidence on the record considered as a

21 whole,

22 ‘‘(2) in the case of any interpretation by the

23 hearing officer of contractual terms (irrespective of

24 the extent to which extrinsic evidence was consid-
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1 ered), whether the determination is supported by a

2 preponderance of the evidence,

3 ‘‘(3) whether the determination is in excess of

4 statutory jurisdiction, authority, or limitations, or is

5 in violation of a statutory right, or

6 ‘‘(4) whether the determination is without ob7 servance of procedure required by law.

8 ‘‘(d) DECISION OF REVIEW BOARD.—The decision of

9 the hearing officer as affirmed or modified by the Review

10 Board (or any reversal by the Review Board of the hearing

11 officer’s final disposition of the proceedings) shall become

12 the final order of the Review Board and binding on all

13 parties, subject to review under subsection (e). The Review

14 Board shall cause a copy of its decision to be served on

15 the parties to the proceedings not later than 5 days after

16 the date of the decision.

17 ‘‘(e) REVIEW OF FINAL ORDERS.—

18 ‘‘(1) IN GENERAL.—Not later than 60 days

19 after the entry of the final order, any person ag20 grieved by any such final order may seek a review

21 of the order under State procedures.

22 ‘‘(2) ENFORCEMENT DECREE IN ORIGINAL RE23 VIEW.—If, upon appeal of an order under paragraph

24 (1), the order is not reversed, the court shall have
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1 the jurisdiction to make and enter a decree enforcing

2 the order of the Review Board.

3 ‘‘(f) AWARDING OF ATTORNEYS’ FEES AND OTHER

4 COSTS AND EXPENSES.—In any proceeding before the Re5 view Board under this section or any judicial proceeding

6 under subsection (e), the Review Board or the court (as

7 the case may be) shall award to a prevailing complainant

8 a reasonable attorney’s fee, reasonable expert witness fees,

9 and other reasonable costs and expenses relating to the

10 causes on which the complainant prevails.

11 ‘‘SEC. 21806. CIVIL MONEY PENALTIES.

12 ‘‘(a) DENIAL OR DELAY IN PAYMENT OR PROVISION

13 OF BENEFITS.—The Secretary (or in the case of a

14 multistate self-insured health plan, the Secretary of

15 Labor) may assess a civil penalty against any health plan

16 for unreasonable denial or delay in the payment or provi17 sion of benefits thereunder, in an amount not to exceed—

18 ‘‘(1) $25,000 per violation, or $75,000 per vio19 lation in the case of a finding of bad faith on the

20 part of the plan, and

21 ‘‘(2) in the case of a finding of a pattern or

22 practice of such violations engaged in by the plan,

23 $1,000,000 in addition to the total amount of pen24 alties assessed under paragraph (1) with respect to

25 such violations.
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1 For purposes of paragraph (1), each violation with respect

2 to any single individual shall be treated as a separate vio3 lation.

4 ‘‘(b) CIVIL ACTION TO ENFORCE CIVIL PENALTY.—

5 The Secretary may commence a civil action in any court

6 of competent jurisdiction to enforce a civil penalty as7 sessed under subsection (a).

8 ‘‘(c) SUPPLEMENTAL PLANS.—Nothing in this sec9 tion shall be construed to limit the rights and remedies

10 available under State law with respect to supplemental

11 health benefits plans.

12 ‘‘Subpart B—Early Resolution Programs

13 ‘‘SEC. 21811. ESTABLISHMENT OF EARLY RESOLUTION PRO14 GRAMS IN COMPLAINT REVIEW OFFICES.

15 ‘‘(a) ESTABLISHMENT OF PROGRAMS.—Each partici16 pating State shall establish and maintain an Early Resolu17 tion Program in each complaint review office in such

18 State. The Program shall include—

19 ‘‘(1) the establishment and maintenance of fo20 rums for mediation of disputes in accordance with

21 this subpart, and

22 ‘‘(2) the establishment and maintenance of such

23 forums for other forms of alternative dispute resolu24 tion (including binding arbitration) as may be pre25 scribed in regulations of the Secretary.
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1 Each State shall ensure that the standards applied in

2 Early Resolution Programs administered in such State

3 which apply to any form of alternative dispute resolution

4 described in paragraph (2), and which relate to time re5 quirements, qualifications of facilitators, arbitrators, or

6 other mediators, and confidentiality, are at least equiva7 lent to the standards which apply to mediation proceedings

8 under this subpart.

9 ‘‘(b) DUTIES OF COMPLAINT REVIEW OFFICES.—

10 Each complaint review office in a participating State—

11 ‘‘(1) shall administer its Early Resolution Pro12 gram in accordance with regulations of the Sec13 retary,

14 ‘‘(2) shall, pursuant to subsection (a)(1)—

15 ‘‘(A) recruit and train individuals to serve

16 as facilitators for mediation proceedings under

17 the Early Resolution Program from attorneys

18 who have the requisite expertise for such serv19 ice, which shall be specified in regulations of

20 the Secretary,

21 ‘‘(B) provide meeting sites, maintain

22 records, and provide facilitators with adminis23 trative support staff, and

24 ‘‘(C) establish and maintain attorney refer25 ral panels,
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1 ‘‘(3) shall ensure that, upon the filing of a com2 plaint with the office, the complainant is adequately

3 apprised of the complainant’s options for review

4 under this part, and

5 ‘‘(4) shall monitor and evaluate the Program on

6 an ongoing basis.

7 ‘‘SEC. 21812. INITIATION OF PARTICIPATION IN MEDIATION

8 PROCEEDINGS.

9 ‘‘(a) ELIGIBILITY OF CASES FOR SUBMISSION TO

10 EARLY RESOLUTION PROGRAM.—A dispute may be sub11 mitted to the Early Resolution Program only if the follow12 ing requirements are met with respect to the dispute:

13 ‘‘(1) NATURE OF DISPUTE.—The dispute con14 sists of—

15 ‘‘(A) an assertion by an individual enrolled

16 under a health plan of one or more claims

17 against the health plan for payment or provi18 sion of benefits, based on alleged coverage

19 under the plan; and

20 ‘‘(B) a denial by the plan of the claims or

21 appropriate reimbursement based on the claims.

22 ‘‘(2) NATURE OF DISPUTED CLAIM.—Each

23 claim consists of—

24 ‘‘(A) a claim for payment or provision of

25 benefits under the plan; or
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•S 2351 PCS

1 ‘‘(B) a request for information or docu2 ments the disclosure of which is required under

3 this title (including claims of entitlement to dis4 closure based on colorable claims to rights to

5 benefits under the plan).

6 ‘‘(b) FILING OF ELECTION.—A complainant with a

7 dispute which is eligible for submission to the Early Reso8 lution Program may make the election under section

9 21803(a)(2) to submit the dispute to mediation proceed10 ings under the Program not later than 15 days after the

11 date the complaint is filed with the complaint review office

12 under section 21802(b).

13 ‘‘(c) AGREEMENT TO PARTICIPATE.—

14 ‘‘(1) ELECTION BY CLAIMANT.—A complainant

15 may elect participation in the mediation proceedings

16 only by entering into a written participation agree17 ment (including an agreement to comply with the

18 rules of the Program and consent for the complaint

19 review office to contact the health plan regarding the

20 agreement), and by releasing plan records to the

21 Program for the exclusive use of the facilitator as22 signed to the dispute.

23 ‘‘(2) PARTICIPATION BY PLANS OR HEALTH

24 BENEFITS CONTRACTORS.—Each party whose par25 ticipation in the mediation proceedings has been
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•S 2351 PCS

1 elected by a claimant pursuant to paragraph (1)

2 shall participate in, and cooperate fully with, the

3 proceedings. The claims review office shall provide

4 such party with a copy of the participation agree5 ment described in paragraph (1), together with a

6 written description of the Program. Such party shall

7 submit the copy of the agreement, together with its

8 authorized signature signifying receipt of notice of

9 the agreement, to the claims review office, and shall

10 include in the submission to the claims review office

11 a copy of the written record of the plan claims pro12 cedure completed pursuant to section 21801 with re13 spect to the dispute and all relevant plan documents.

14 The relevant documents shall include all documents

15 under which the plan is or was administered or oper16 ated, including copies of any insurance contracts

17 under which benefits are or were provided and any

18 fee or reimbursement schedules for health care pro19 viders.

20 ‘‘SEC. 21813. MEDIATION PROCEEDINGS.

21 ‘‘(a) ROLE OF FACILITATOR.—In the course of medi22 ation proceedings under the Early Resolution Program,

23 the facilitator assigned to the dispute shall prepare the

24 parties for a conference regarding the dispute and serve
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1 as a neutral mediator at such conference, with the goal

2 of achieving settlement of the dispute.

3 ‘‘(b) PREPARATIONS FOR CONFERENCE.—In advance

4 of convening the conference, the facilitator shall, after

5 identifying the necessary parties and confirming that the

6 case is eligible for the Program, analyze the record of the

7 claims procedure conducted pursuant to section 21801

8 and any position papers submitted by the parties to deter9 mine if further case development is needed to clarify the

10 legal and factual issues in dispute, and whether there is

11 any need for additional information and documents.

12 ‘‘(c) CONFERENCE.—Upon convening the conference,

13 the facilitator shall assist the parties in identifying undis14 puted issues and exploring settlement. If settlement is

15 reached, the facilitator shall assist in the preparation of

16 a written settlement agreement. If no settlement is

17 reached, the facilitator shall present the facilitator’s eval18 uation, including an assessment of the parties’ positions,

19 the likely outcome of further administrative action or liti20 gation, and suggestions for narrowing the issues in

21 dispute.

22 ‘‘(d) TIME LIMIT.—The facilitator shall ensure that

23 mediation proceedings with respect to any dispute under

24 the Early Resolution Program shall be completed within

25 120 days after the election to participate. The parties may
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•S 2351 PCS

1 agree to one extension of the proceedings by not more than

2 30 days if the proceedings are suspended to obtain an

3 agency ruling or to reconvene the conference in a subse4 quent session.

5 ‘‘(e) INAPPLICABILITY OF FORMAL RULES.—Formal

6 rules of evidence shall not apply to mediation proceedings

7 under the Early Resolution Program. All statements made

8 and evidence presented in the proceedings shall be admis9 sible in the proceedings. The facilitator shall be the sole

10 judge of the proper weight to be afforded to each submis11 sion. The parties to mediation proceedings under the Pro12 gram shall not be required to make statements or present

13 evidence under oath.

14 ‘‘(f) REPRESENTATION.—Parties may participate pro

15 se or be represented by attorneys throughout the proceed16 ings of the Early Resolution Program.

17 ‘‘(g) CONFIDENTIALITY.—

18 ‘‘(1) IN GENERAL.—Under regulations of the

19 Secretary, rules similar to the rules under section

20 574 of title 5, United States Code (relating to con21 fidentiality in dispute resolution proceedings), shall

22 apply to the mediation proceedings under the Early

23 Resolution Program.

24 ‘‘(2) CIVIL REMEDIES.—The Secretary may as25 sess a civil penalty against any person who discloses
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•S 2351 PCS

1 information in violation of the regulations prescribed

2 pursuant to paragraph (1) in the amount of three

3 times the amount of the claim involved. The Sec4 retary may bring a civil action to enforce such civil

5 penalty in any court of competent jurisdiction.

6 ‘‘SEC. 21814. LEGAL EFFECT OF PARTICIPATION IN MEDI7 ATION PROCEEDINGS.

8 ‘‘(a) PROCESS NONBINDING.—Findings and conclu9 sions made in the mediation proceedings of the Early Res10 olution Program shall be treated as advisory in nature and

11 nonbinding. Except as provided in subsection (b), the

12 rights of the parties under subpart A shall not be affected

13 by participation in the Program.

14 ‘‘(b) RESOLUTION THROUGH SETTLEMENT AGREE15 MENT.—If a case is settled through participation in medi16 ation proceedings under the Program, the facilitator shall

17 assist the parties in drawing up an agreement which shall

18 constitute, upon signature of the parties, a binding con19 tract between the parties which is enforceable under sec20 tion 21815.

21 ‘‘(c) PRESERVATION OF RIGHTS OF NON-PARTIES.—

22 The settlement agreement shall not have the effect of

23 waiving or otherwise affecting any rights to review under

24 subpart A, or any other right under this subtitle or the
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•S 2351 PCS

1 plan, with respect to any person who is not a party to

2 the settlement agreement.

3 ‘‘SEC. 21815. ENFORCEMENT OF SETTLEMENT AGREE4 MENTS.

5 ‘‘(a) ENFORCEMENT.—Any party to a settlement

6 agreement entered pursuant to mediation proceedings

7 under this subpart may petition any court of competent

8 jurisdiction for the enforcement of the agreement, by filing

9 in the court a written petition praying that the agreement

10 be enforced. In such a proceeding, the order of the hearing

11 officer shall not be subject to review.

12 ‘‘(b) COURT REVIEW.—It shall be the duty of the

13 court to advance on the docket, and to expedite to the

14 greatest extent possible, the disposition of any petition

15 filed under this section, with due deference to the role of

16 settlement agreements under this subpart in achieving

17 prompt resolution of disputes involving health plans.

18 ‘‘(c) AWARDING OF ATTORNEY’S FEES AND OTHER

19 COSTS AND EXPENSES.—In any action by an individual

20 enrolled under a health plan for court enforcement under

21 this section, a prevailing plaintiff shall be entitled to a rea22 sonable attorney’s fee, reasonable expert witness fees, and

23 other reasonable costs and expenses relating to the

24 charges on which the plaintiff prevails.
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1 ‘‘Subpart C—Funding

2 ‘‘SEC. 21816. AVAILABILITY OF TRUST FUND AMOUNTS.

3 ‘‘(a) IN GENERAL.—There shall be available

4 $100,000,000 in fiscal 1995, $150,000,000 in each of the

5 fiscal years 1996 through 1998, and $100,000,000 in each

6 of the fiscal years 1999 through 2004 from the Health

7 Security Trust Fund established under section 9551 of the

8 Internal Revenue Code of 1986 to the Secretary to sup9 port participating States that have submitted applications

10 in accordance with subsection (b) to establish and main11 tain complaint review systems and early resolution pro12 grams. The Secretary shall develop a formula for deter13 mining the appropriate awarding of funds to participating

14 States submitting such applications.

15 ‘‘(b) APPLICATION.—For purposes of subsection (a),

16 an application is in accordance with this subsection if the

17 applicant submits the application to the Secretary at such

18 time, in such manner, and containing such information

19 and assurances as the Secretary may reasonably require.

20 ‘‘PART II—ADDITIONAL REMEDIES AND

21 ENFORCEMENT PROVISIONS

22 ‘‘SEC. 21821. CIVIL ENFORCEMENT.

23 ‘‘Unless otherwise provided in this title, the district

24 courts of the United States shall have jurisdiction of civil

25 actions brought by—
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•S 2351 PCS

1 ‘‘(1) the Secretary to enforce any final order of

2 such Secretary or to collect any civil monetary pen3 alty assessed by such Secretary under this title; and

4 ‘‘(2) the Secretary of Labor, in consultation

5 with the Secretary, to enforce any final order of

6 such Secretary or to collect any civil monetary pen7 alty assessed by such Secretary under this title.

8 ‘‘SEC. 21822. FACIAL CONSTITUTIONAL CHALLENGES.

9 ‘‘(a) JURISDICTION.—The United States District

10 Court for the District of Columbia shall have original and

11 exclusive jurisdiction of any civil action brought to invali12 date any provision of, or amendment made by, the Health

13 Security Act on the ground of its being repugnant to the

14 Constitution of the United States on its face and for every

15 purpose. In any action described in this subsection, the

16 district court may not grant any temporary order or pre17 liminary injunction restraining the enforcement, oper18 ation, or execution of any provision of, or amendment

19 made by, the Health Security Act.

20 ‘‘(b) CONVENING OF THREE-JUDGE COURT.—An ac21 tion described in subsection (a) shall be heard and deter22 mined by a district court of three judges in accordance

23 with section 2284 of title 28, United States Code.

24 ‘‘(c) CONSOLIDATION.—When actions described in

25 subsection (a) involving a common question of law or fact
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•S 2351 PCS

1 are pending before a district court, the court shall order

2 all the actions consolidated.

3 ‘‘(d) DIRECT APPEAL TO SUPREME COURT.—In any

4 action described in subsection (a), an appeal may be taken

5 directly to the Supreme Court of the United States from

6 any final judgment, decree, or order in which the district

7 court—

8 ‘‘(1) holds any provision of, or amendment

9 made by, the Health Security Act invalid; and

10 ‘‘(2) makes a determination that its holding will

11 materially undermine the application of such Act as

12 a whole.

13 ‘‘(e) CONSTRUCTION.—This section does not limit—

14 ‘‘(1) the right of any person—

15 ‘‘(A) to litigation concerning any provision

16 of, or amendment made by, the Health Security

17 Act; or

18 ‘‘(B) to petition the Supreme Court for re19 view of any holding of a district court by writ

20 of certiorari at any time before the rendition of

21 judgment in a court of appeals; or

22 ‘‘(2) the authority of the Supreme Court to

23 grant a writ of certiorari for the review described in

24 paragraph (1)(B).
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1 ‘‘SEC. 21823. TREATMENT OF PLANS AS PARTIES IN CIVIL

2 ACTIONS.

3 ‘‘A health plan may sue or be sued under this title

4 as an entity.

5 ‘‘SEC. 21824. GENERAL NONPREEMPTION OF RIGHTS AND

6 REMEDIES.

7 ‘‘Nothing in this subtitle shall be construed to deny,

8 impair, or otherwise adversely affect a right or remedy

9 available under law to any person, except to the extent

10 the right or remedy is inconsistent with this subtitle.

11 ‘‘SEC. 21825. NONDISCRIMINATION IN FEDERALLY AS12 SISTED PROGRAMS.

13 ‘‘Federal payments under this title shall be treated

14 as Federal financial assistance for purposes of section 504

15 of the Rehabilitation Act of 1973 (29 U.S.C. 794), section

16 303 of the Age Discrimination Act of 1975 (42 U.S.C.

17 6102), and section 601 of the Civil Rights Act of 1964

18 (42 U.S.C. 2000d).

19 Subtitle B—Coordination With

20 Other Provisions of Law

21 SEC. 111. MCCARRAN-FERGUSON REFORM.

22 (a) IN GENERAL.—Section 3 of the Act of March 9,

23 1945 (15 U.S.C. 1013), known as the McCarran-Ferguson

24 Act, is amended by adding at the end the following:

25 ‘‘(c) Notwithstanding that the business of insurance

26 is regulated by State law, nothing in this Act shall limit
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•S 2351 PCS

1 the applicability of the following Acts to the business of

2 insurance to the extent that such business relates to the

3 provision of health benefits:

4 ‘‘(1) The Sherman Act (15 U.S.C. 1 et seq.).

5 ‘‘(2) The Clayton Act (15 U.S.C. 12 et seq.).

6 ‘‘(3) Federal Trade Commission Act (15 U.S.C.

7 41 et seq.).

8 ‘‘(4) The Act of June 19, 1936 (49 Stat. 1526;

9 15 U.S.C. 21a et seq.), known as the Robinson-Pat10 man Antidiscrimination Act.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall take effect with respect to causes of

13 action arising on or after January 1, 1996.

14 SEC. 112. OFFICE OF RURAL HEALTH POLICY.

15 (a) APPOINTMENT OF ASSISTANT SECRETARY.—

16 (1) IN GENERAL.—Section 711(a) of the Social

17 Security Act (42 U.S.C. 912(a)) is amended—

18 (A) by striking ‘‘by a Director, who shall

19 advise the Secretary’’ and inserting ‘‘by an As20 sistant Secretary for Rural Health (in this sec21 tion referred to as the ‘Assistant Secretary’),

22 who shall report directly to the Secretary’’; and

23 (B) by adding at the end the following new

24 sentence: ‘‘The Office shall not be a component
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1 of any other office, service, or component of the

2 Department.’’.

3 (2) CONFORMING AMENDMENTS.—(A) Section

4 711(b) of the Social Security Act (42 U.S.C. 912(b))

5 is amended by striking ‘‘the Director’’ and inserting

6 ‘‘the Assistant Secretary’’.

7 (B) Section 338J(a) of the Public Health Serv8 ice Act (42 U.S.C. 254r(a)) is amended by striking

9 ‘‘Director of the Office of Rural Health Policy’’ and

10 inserting ‘‘Assistant Secretary for Rural Health’’.

11 (C) Section 464T(b) of the Public Health Serv12 ice Act (42 U.S.C. 285p–2(b)) is amended in the

13 matter preceding paragraph (1) by striking ‘‘Direc14 tor of the Office of Rural Health Policy’’ and insert15 ing ‘‘Assistant Secretary for Rural Health’’.

16 (D) Section 6213 of the Omnibus Budget Rec17 onciliation Act of 1989 (42 U.S.C. 1395x note) is

18 amended in subsection (e)(1) by striking ‘‘Director

19 of the Office of Rural Health Policy’’ and inserting

20 ‘‘Assistant Secretary for Rural Health’’.

21 (E) Section 403 of the Ryan White Comprehen22 sive AIDS Resources Emergency Act of 1990 (42

23 U.S.C. 300ff–11 note) is amended in the matter pre24 ceding paragraph (1) of subsection (a) by striking
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1 ‘‘Director of the Office of Rural Health Policy’’ and

2 inserting ‘‘Assistant Secretary for Rural Health’’.

3 (3) AMENDMENT TO THE EXECUTIVE SCHED4 ULE.—Section 5315 of title 5, United States Code,

5 is amended by striking ‘‘Assistant Secretaries of

6 Health and Human Services (5)’’ and inserting ‘‘As7 sistant Secretaries of Health and Human Services

8 (6)’’.

9 (b) EXPANSION OF DUTIES.—Section 711(a) of the

10 Social Security Act (42 U.S.C. 912(a)) is amended by

11 striking ‘‘and access to (and the quality of) health care

12 in rural areas’’ and inserting ‘‘access to, and quality of,

13 health care in rural areas, and reforms to the health care

14 system and the implications of such reforms for rural

15 areas’’.

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

17 this section shall take effect on January 1, 1996.

18 SEC. 113. AMENDMENTS TO THE EMPLOYEE RETIREMENT

19 INCOME SECURITY ACT OF 1974.

20 (a) REPORTING AND DISCLOSURE REQUIREMENTS

21 APPLICABLE TO GROUP HEALTH PLANS.—

22 (1) IN GENERAL.—Part 1 of subtitle B of title

23 I of such Act is amended—

24 (A) in the heading for section 110, by add25 ing ‘‘BY PENSION PLANS’’ at the end;
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1 (B) by redesignating section 111 as section

2 112; and

3 (C) by inserting after section 110 the fol4 lowing new section:

5 ‘‘SPECIAL RULES FOR GROUP HEALTH PLANS

6 ‘‘SEC. 111. (a) IN GENERAL.—The Secretary may by

7 regulation provide special rules for the application of this

8 part to group health plans which are consistent with the

9 purposes of this title and the Health Security Act and

10 which take into account the special needs of participants,

11 beneficiaries, and health care providers under such plans.

12 ‘‘(b) EXPEDITIOUS REPORTING AND DISCLOSURE.—

13 Such special rules may include rules providing for—

14 ‘‘(1) reductions in the periods of time referred

15 to in this part,

16 ‘‘(2) increases in the frequency of reports and

17 disclosures required under this part, and

18 ‘‘(3) such other changes in the provisions of

19 this part as may result in more expeditious reporting

20 and disclosure of plan terms and changes in such

21 terms to the Secretary and to plan participants and

22 beneficiaries,

23 to the extent that the Secretary determines that the rules

24 described in this subsection are necessary to ensure timely

25 reporting and disclosure of information consistent with the
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1 purposes of this part and the Health Security Act as they

2 relate to group health plans.

3 ‘‘(c) GROUP HEALTH PLAN.—For purposes of this

4 section, the term ‘group health plan’ means an employee

5 welfare benefit plan which provides medical care (as de6 fined in section 213(d) of the Internal Revenue Code of

7 1986) to participants or beneficiaries directly or through

8 insurance, reimbursement, or otherwise.’’

9 (2) CLERICAL AMENDMENT.—The table of con10 tents in section 1 of such Act is amended by striking

11 the items relating to sections 110 and 111 and in12 serting the following new items:

‘‘Sec. 110. Alternative methods of compliance by pension plans.

‘‘Sec. 111. Special rules for group health plans.

‘‘Sec. 112. Repeal and effective date.’’

13 (b) COORDINATION WITH HEALTH SECURITY ACT.—

14 (1) ENFORCEMENT.—Section 502(a)(1)(B) of

15 the Employee Retirement Income Security Act of

16 1974 (29 U.S.C. 1132(a)(1)(B)) is amended by in17 serting ‘‘except in the case of an action by any par18 ticipant, beneficiary, or fiduciary to which subtitle H

19 of title XXI of the Social Security Act applies,’’ be20 fore ‘‘to recover’’.

21 (2) PREEMPTION OF STATE LAWS.—Section

22 514(b) of such Act (29 U.S.C. 1144(b)) is amended

23 by adding at the end the following new paragraph:
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1 ‘‘(9) Subsection (a) shall not apply to any law

2 of any State which implements a State single-payer

3 system under part II of subtitle A of title XXI of

4 the Social Security Act.’’

5 (c) REPEAL OF MULTIPLE EMPLOYER WELFARE AR6 RANGEMENTS.—

7 (1) IN GENERAL.—Paragraph (40) of section 3

8 of the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1002(40)) is repealed.

10 (2) CONFORMING AMENDMENT.—Paragraph (6)

11 of section 514(b) of such Act (29 U.S.C.

12 1144(b)(6)) is repealed.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall take effect on January 1, 1996.

15 TITLE II—COVERAGE

16 SEC. 201. COVERAGE.

17 The Social Security Act, as amended by section 101,

18 is amended by adding at the end the following new title:

19 ‘‘TITLE XXII—COVERAGE

20 ‘‘TABLE OF CONTENTS

‘‘Sec. 2201. National Health Care Commission.

‘‘Sec. 2202. Duties of Commission.

‘‘Sec. 2203. Congressional consideration of Commission recommendations.

‘‘Sec. 2204. Operation of the Commission.
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1 ‘‘SEC. 2201. NATIONAL HEALTH CARE COMMISSION.

2 ‘‘There is established a commission to be known as

3 the National Health Care Commission (in this title re4 ferred to as the ‘Commission’).

5 ‘‘SEC. 2202. DUTIES OF COMMISSION.

6 ‘‘(a) IN GENERAL.—The general duties of the Com7 mission are to monitor and respond to—

8 ‘‘(1) trends in health insurance coverage; and

9 ‘‘(2) changes in per-capita premiums and other

10 indicators of health care inflation.

11 The Commission may be advised by individuals with exper12 tise concerning the economic, demographic, and insurance

13 market factors that affect the cost and availability of

14 health insurance.

15 ‘‘(b) BIENNIAL REPORTS.—

16 ‘‘(1) IN GENERAL.—The Commission shall re17 port to Congress biennially on January 1 (beginning

18 in 1996) on the status of health insurance coverage

19 in the nation and the national goal of universal cov20 erage.

21 ‘‘(2) HEALTH INSURANCE COVERAGE.—For

22 purposes of this title, the term ‘health insurance cov23 erage’ means coverage under—

24 ‘‘(A) a certified standard health plan pro25 viding a standard benefits package or an alter26 native standard benefits package;
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1 ‘‘(B) the medicare program under title

2 XVIII;

3 ‘‘(C) the medicaid program under title

4 XIX;

5 ‘‘(D) the health care program for active

6 military personnel under title 10, United States

7 Code;

8 ‘‘(E) the veterans health care program

9 under chapter 17 of title 38, United States

10 Code;

11 ‘‘(F) the Civilian Health and Medical Pro12 gram of the Uniformed Services (CHAMPUS),

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

14 States Code;

15 ‘‘(G) the Indian health service program

16 under the Indian Health Care Improvement Act

17 (25 U.S.C. 1601 et seq.);

18 ‘‘(H) a State single-payer system approved

19 by the Secretary under section 21031; or

20 ‘‘(I) any governmental health care program

21 for institutionalized individuals.

22 ‘‘(3) CONTENTS OF REPORT.—Each biennial re23 port shall include the structure and performance

24 measures of every community rating area, including

25 the following:
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1 ‘‘(A) Demographics of the uninsured indi2 viduals, and findings on why such individuals

3 are uninsured.

4 ‘‘(B) Structure of delivery systems.

5 ‘‘(C) Number and organizational form of

6 certified standard health plans described in

7 paragraph (2)(A).

8 ‘‘(D) Level of enrollment in such certified

9 standard health plans.

10 ‘‘(E) State implementation of responsibil11 ities, including establishment of community rat12 ing areas, under title XXI.

13 ‘‘(F) Status of insurance reforms.

14 ‘‘(G) Development of purchasing coopera15 tives and other buyer reforms.

16 ‘‘(H) Success of market and other mecha17 nisms of controlling health expenditures and

18 premium costs in the community rating areas

19 and nationally.

20 ‘‘(I) Status of medicaid-eligible individuals

21 under the medicaid program under title XIX,

22 the integration of such individuals into coverage

23 by certified standard health plans providing

24 standard benefits packages, and the transition

25 of such program toward managed care.
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1 ‘‘(J) Adequacy of subsidies for individuals

2 under part B of title XIX.

3 ‘‘(K) Status of medicare-eligible individuals

4 under the medicare program under title XVIII,

5 the integration of such individuals into coverage

6 by certified standard health plans providing

7 standard benefits packages, and the transition

8 of such program into medicare risk contracts.

9 ‘‘(L) Coverage progress among individuals

10 who are employed, including status and level of

11 voluntary employer contributions and participa12 tion rates in purchasing cooperatives and

13 among large employers.

14 ‘‘(M) Percentage of individuals who are en15 rolled in certified standard health plans de16 scribed in paragraph (2)(A), separated into cat17 egories of medicare-eligible individuals, medic18 aid-eligible individuals, employed individuals,

19 and individuals eligible for subsidies.

20 ‘‘(N) Recommendations, specific to each

21 community rating area, on how the area might

22 increase coverage among the residents and fur23 ther moderate growth in premiums.

24 ‘‘(4) PROHIBITED ACTIVITY.—In carrying out

25 its duties, including the preparation of any biennial
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•S 2351 PCS

1 report, the Commission may not address issues re2 lated to defining an employee for tax purposes, in3 cluding discussing such issues with the Internal Rev4 enue Service or the Department of the Treasury.

5 ‘‘(c) COVERAGE TRIGGER.—

6 ‘‘(1) IN GENERAL.—In the event the Commis7 sion determines that health insurance coverage of at

8 least 95 percent of the resident population in the

9 United States will not be attained by 2002, the

10 Commission shall submit recommendations in its bi11 ennial report to Congress on January 1, 2002.

12 ‘‘(2) RECOMMENDATION REQUIREMENTS.—

13 ‘‘(A) IN GENERAL.—The recommendations

14 of the Commission shall include methods to

15 reach 95 percent health insurance coverage in

16 community rating areas that have failed to

17 meet that target. Such recommendations shall

18 address all relevant parties, including States,

19 employers, employees, unemployed and low-in20 come individuals, and public program partici21 pants.

22 ‘‘(B) REQUIRED SEPARATE RECOMMENDA23 TIONS.—In addition to any other recommenda24 tions the Commission submits, the Commission
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1 shall make separate recommendations on the

2 following:

3 ‘‘(i) A schedule of assessments or

4 contribaaaaaaaautions to encourage em5 ployers who are not doing so to purchase

6 coverage for their employees.

7 ‘‘(ii) A method of encouraging full

8 coverage which does not require any as9 sessments on or contributions from em10 ployers.

11 ‘‘(iii) Possible adjustments to the ac12 tuarial value of any of the benefits pack13 ages described in subsection (b)(2)(A).

14 ‘‘(iv) Possible adjustments to sub15 sidies under part B of title XIX.

16 ‘‘(v) Possible adjustments to the tax

17 treatment of health benefits.

18 The Commission shall inform the National

19 Health Benefits Board of any recommendations

20 relating to clause (iii).

21 ‘‘(3) IMPLEMENTING BILL.—The Commission

22 shall submit to the Congress an implementing bill

23 which contains such statutory provisions as the

24 Commission determines are necessary or appropriate
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•S 2351 PCS

1 to implement the recommendations developed under

2 this subsection.

3 ‘‘(d) DEFINITIONS.—For purposes of aythis title—

4 ‘‘(1) ALTERNATIVE STANDARD BENEFITS PACK5 AGE.—The term ‘alternative standard benefits pack6 age’ means the alternative standard benefits package

7 established under subtitle C of title XXI.

8 ‘‘(2) CERTIFIED STANDARD HEALTH PLAN.—

9 The term ‘certified standard health plan’ has the

10 meaning given such term by section 21011(a)(2).

11 ‘‘(3) COMMUNITY RATING AREA.—The term

12 ‘community rating area’ means an area established

13 under section 21021.

14 ‘‘(4) PURCHASING COOPERATIVE.—The term

15 ‘purchasing cooperative’ has the meaning given such

16 term by section 21100(14).

17 ‘‘(5) RESIDENT POPULATION.—The term ‘resi18 dent population’ includes any individual who is re19 siding in the United States and who is—

20 ‘‘(A) a citizen or national of the United

21 States; or

22 ‘‘(B) an alien permanently residing in the

23 United States under color of law (as defined in

24 section 1958(4)(C)).
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1 ‘‘(6) STANDARD BENEFITS PACKAGE.—The

2 term ‘standard benefits package’ means the stand3 ard benefits package established under subtitle C of

4 title XXI.

5 ‘‘(7) UNITED STATES.—The term ‘United

6 States’ means the various States (as defined in sec7 tion 21100(16)).

8 ‘‘SEC. 2203. CONGRESSIONAL CONSIDERATION OF COMMIS9 SION RECOMMENDATIONS.

10 ‘‘(a) IN GENERAL.—An implementing qbill described

11 in section 2202(c)(3) shall be considered by Congress

12 under the procedures for consideration described in sub13 section (b).

14 ‘‘(b) CONGRESSIONAL CONSIDERATION.—

15 ‘‘(1) RULES OF HOUSE OF REPRESENTATIVES

16 AND SENATE.—This subsection is enacted by Con17 gress—

18 ‘‘(A) as an exercise of the rulemaking

19 power of the House of Representatives and the

20 Senate, respectively, and as such is deemed a

21 part of the rules of each House, respectively,

22 but applicable only with respect to the proce23 dure to be followed in that House in the case

24 of an implementing bill described in subsection

25 (a), and supersedes other rules only to the ex-
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•S 2351 PCS

1 tent that such rules are inconsistent therewith;

2 and

3 ‘‘(B) with full recognition of the constitu4 tional right of either House to change the rules

5 (so far as relating to the procedure of that

6 House) at any time, in the same manner and

7 to the same extent as in the case of any other

8 rule of that House.

9 ‘‘(2) INTRODUCTION AND REFERRAL.—On the

10 day on which the implementing bill described in sub11 section (as) is transmitted to the House of Rep12 resentatives and the Senate, such bill shall be intro13 duced (by request) in the House of Representatives

14 by the majority leaderyay of the House, for himself

15 or herself, and the minority leader of the House, or

16 by Members of the House designated by the majority

17 leader and minority leader of the House and shall be

18 introduced (by request) in the Senate by the major19 ity leader of the Senate, for himself or herself, and

20 the minority leader of the Senate, or by Members of

21 the Senate designated by the majority leader and

22 minority leader of the Senate. If either House is not

23 in session on the day on which the implementing bill

24 is transmitted, the bill shall be introduced in that

25 House, as provided in the preceding sentence, on the
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•S 2351 PCS

1 first day thereafter on which that House is in ses2 sion. If the implementing bill is not introduced with3 in 5 days of its transmission, any Member of the

4 House and of the Senate may introduce such bill.

5 The implementing bill introduced in the House of

6 Representatives and the Senate shall be referred to

7 the appropriate committees of each House.

8 ‘‘(3) PERIOD FOR COMMITTEE CONSIDER9 ATION.—If the committee or committees of either

10 House to which an implementing bill has been re11 ferred have not reported the bill at the close of July

12 1, 2002 (or if such House is not in session, the next

13 day such House is in session), such committee or

14 committees shall be automatically discharged from

15 further consideration of the implementing bill and it

16 shall be placed on the appropriate calendar.

17 ‘‘(4) FLOOR CONSIDERATION IN THE SEN18 ATE.—

19 ‘‘(A) IN GENERAL.—Within 5 days after

20 the implementing bill is placed on the calendar,

21 the majority leader, at a time to be determined

22 by the majority leader in consultation with the

23 minority leader, shall proceed to the consider24 ation of the bill. If on the sixth day after the

25 bill is placed on the calendar, the Senate has
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•S 2351 PCS

1 not proceeded to consideration of the bill, then

2 the presiding officer shall automatically place

3 the bill before the Senate for consideration. A

4 motion in the Senate to proceed to the consider5 ation of an implementing bill shall be privileged

6 and not debatable. An amendment to the mo7 tion shall not be in order, nor shall it be in

8 order to move to reconsider the vote by which

9 the motion is agreed to or disagreed to.

10 ‘‘(B) TIME LIMITATION ON CONSIDER11 ATION OF BILL.—

12 ‘‘(i) IN GENERAL.—Debate in the

13 Senate on an implementing bill, and all

14 amendments and debatable motions and

15 appeals in connection therewith, shall be

16 limited to not more than 30 hours. The

17 time shall be equally divided between, and

18 controlled by, the majority leader and the

19 minority leader or their designees.

20 ‘‘(ii) DEBATE OF AMENDMENTS, MO21 TIONS, POINTS OF ORDER, AND AP22 PEALS.—In the Senate, no amendment

23 which is not relevant to the bill shall be in

24 order. Debate in the Senate on any amend25 ment, debatable motion or appeal, or point
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•S 2351 PCS

1 of order in connection with an implement2 ing bill shall be limited to—

3 ‘‘(I) not more than 2 hours for

4 each first degree relevant amendment,

5 ‘‘(II) one hour for each second

6 degree relevant amendment, and

7 ‘‘(III) 30 minutes for each debat8 able motion or appeal, or point of

9 order submitted to the Senate,

10 to be equally divided between, and con11 trolled by, the mover and the manager of

12 the implementing bill, except that in the

13 event the manager of the implementing bill

14 is in favor of any such amendment, mo15 tion, appeal, or point of order, the time in

16 opposition thereto, shall be controlled by

17 the minority leader or designee of the mi18 nority leader. The majority leader and mi19 nority leader, or either of them, may, from

20 time under their control on the passage of

21 an implementing bill, allot additional time

22 to any Senator during the consideration of

23 any amendment, debatable motion or ap24 peal, or point of order.
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•S 2351 PCS

1 ‘‘(C) OTHER MOTIONS.—A motion to re2 commit an implementing bill is not in order.

3 ‘‘(D) FINAL PASSAGE.—Upon the expira4 tion of the 30 hours available for consideration

5 of the implementing bill, it shall not be in order

6 to offer or vote on any amendment to, or mo7 tion with respect to, such bill. Immediately fol8 lowing the conclusion of debate in the Senate

9 on an implementing bill that was introduced in

10 the Senate, such bill shall be deemed to have

11 been read a third time and the vote on final

12 passage of such bill shall occur without any in13 tervening action or debate.

14 ‘‘(E) DEBATE ON DIFFERENCES BETWEEN

15 THE HOUSES.—Debate in the Senate on mo16 tions and amendments appropriate to resolve

17 the differences between the Houses, at any par18 ticular stage of the proceedings, shall be limited

19 to not more than 5 hours.

20 ‘‘(F) DEBATE ON CONFERENCE REPORT.—

21 Debate in the Senate on the conference report

22 shall be limited to not more than 10 hours.

23 ‘‘(5) FLOOR CONSIDERATION IN THE HOUSE OF

24 REPRESENTATIVES.—
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•S 2351 PCS

1 ‘‘(A) PROCEED TO CONSIDERATION.—On

2 the sixth day after the implementing bill is

3 placed on the calendar, it shall be privileged for

4 any Member to move without debate that the

5 House resolve itself into the Committee of the

6 Whole House on the state of the Union, for the

7 consideration of the bill, and the first reading

8 of the bill shall be dispensed with.

9 ‘‘(B) GENERAL DEBATE.—After general

10 debate, which shall be confined to the imple11 menting bill and which shall not exceed 4

12 hours, to be equally divided and controlled by

13 the chairman and ranking minority member of

14 the Committee or Committees to which the bill

15 had been referred, the bill shall be considered

16 for amendment by title under the 5-minute rule

17 and each title shall be considered as having

18 been read. The total time for considering all

19 amendments shall be limited to 26 hours of

20 which the total time for debating each amend21 ment under the 5-minute rule shall not exceed

22 one hour.

23 ‘‘(C) RISE AND REPORT.—At the conclu24 sion of the consideration of the implementing

25 bill for amendment, the Committee of the
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•S 2351 PCS

1 Whole on the state of the Union shall rise and

2 report the bill to the House with such amend3 ments as may have been adopted, and the pre4 vious question shall be considered as ordered on

5 the bill and the amendments thereto, and the

6 House shall proceed to vote on final passage

7 without intervening motion except one motion

8 to recommit.

9 ‘‘(6) COMPUTATION OF DAYS.—For purposes of

10 this subsection, in computing a number of days in

11 either House, there shall be excluded—

12 ‘‘(A) the days on which either House is not

13 in session because of an adjournment of more

14 than 3 days to a day certain, or an adjourn15 ment of the Congress sine die, and

16 ‘‘(B) any Saturday and Sunday not ex17 cluded under subparagraph (A) when either

18 House is not in session.

19 ‘‘SEC. 2204. OPERATION OF THE COMMISSION.

20 ‘‘(a) MEMBERSHIP.—

21 ‘‘(1) IN GENERAL.—The Commission shall be

22 composed of 7 members appointed by the President

23 and confirmed by the Senate. Members shall be ap24 pointed not later than 90 days after the date of the

25 enactment of this title.
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•S 2351 PCS

1 ‘‘(2) CHAIRPERSON.—The President shall des2 ignate 1 individual described in paragraph (1) who

3 shall serve as Chairperson of the Commission.

4 ‘‘(b) COMPOSITION.—The membership of the Com5 mission shall include individuals with national recognition

6 for their expertise in health markets. In appointing mem7 bers of the Commission, the President shall ensure that

8 no more than 4 members of the Commission are affiliated

9 with the same political party.

10 ‘‘(c) TERMS.—

11 ‘‘(1) IN GENERAL.—The terms of members of

12 the Commission shall be for 6 years, except that of

13 the members first appointed, 2 shall be appointed

14 for an initial term of 4 years and 2 shall be ap15 pointed for an initial term of 2 years.

16 ‘‘(2) CONTINUATION IN OFFICE.—Upon the ex17 piration of a term of office, a member shall continue

18 to serve until a successor is appointed and qualified.

19 ‘‘(d) VACANCIES.—

20 ‘‘(1) IN GENERAL.—A vacancy in the Commis21 sion shall be filled in the same manner as the origi22 nal appointment, but the individual appointed to fill

23 the vacancy shall serve only for the unexpired por24 tion of the term for which the individual’s prede25 cessor was appointed.
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•S 2351 PCS

1 ‘‘(2) NO IMPAIRMENT OF FUNCTION.—A va2 cancy in the membership of the Commission does

3 not impair the authority of the remaining members

4 to exercise all of the powers of the Commission.

5 ‘‘(3) ACTING CHAIRPERSON.—The Commission

6 may designate a member to act as Chairperson dur7 ing any period in which there is no Chairperson des8 ignated by the President.

9 ‘‘(e) MEETINGS; QUORUM.—

10 ‘‘(1) MEETINGS.—The Chairperson shall pre11 side at meetings of the Commission, and in the ab12 sence of the Chairperson, the Commission shall elect

13 a member to act as Chairperson pro tempore.

14 ‘‘(2) QUORUM.—Four members of the Commis15 sion shall constitute a quorum thereof.

16 ‘‘(f) ADMINISTRATIVE PROVISIONS.—

17 ‘‘(1) FACA NOT APPLICABLE.—The Federal

18 Advisory Committee Act (5 U.S.C. App.) shall not

19 apply to the Commission.

20 ‘‘(2) PAY AND TRAVEL EXPENSES.—

21 ‘‘(A) PAY.—Each member shall be paid at

22 a rate equal to the daily equivalent of the mini23 mum annual rate of basic pay payable for level

24 IV of the Executive Schedule under section

25 5315 of title 5, United States Code, for each
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1 day (including travel time) during which the

2 member is engaged in the actual performance of

3 duties vested in the Commission.

4 ‘‘(B) TRAVEL EXPENSES.—Members shall

5 receive travel expenses, including per diem in

6 lieu of subsistence, in accordance with sections

7 5702 and 5703 of title 5, United States Code.

8 ‘‘(3) EXECUTIVE DIRECTOR.—

9 ‘‘(A) IN GENERAL.—The Commission

10 shall, without regard to section 5311(b) of title

11 5, United States Code, appoint an Executive

12 Director.

13 ‘‘(B) PAY.—The Executive Director shall

14 be paid at a rate equivalent to a rate for the

15 Senior Executive Service.

16 ‘‘(4) STAFF.—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graphs (B) and (C), the Executive Director,

19 with the approval of the Commission, may ap20 point and fix the pay of additional personnel.

21 ‘‘(B) PAY.—The Executive Director may

22 make such appointments without regard to the

23 provisions of title 5, United States Code, gov24 erning appointments in the competitive service,

25 and any personnel so appointed may be paid
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•S 2351 PCS

1 without regard to the provisions of chapter 51

2 and subchapter III of chapter 53 of such title,

3 relating to classification and General Schedule

4 pay rates, except that an individual so ap5 pointed may not receive pay in excess of 120

6 percent of the annual rate of basic pay payable

7 for GS–15 of the General Schedule.

8 ‘‘(C) DETAILED PERSONNEL.—Upon re9 quest of the Executive Director, the head of any

10 Federal department or agency may detail any

11 of the personnel of that department or agency

12 to the Commission to assist the Commission in

13 carrying out its duties under this Act.

14 ‘‘(5) OTHER AUTHORITY.—

15 ‘‘(A) CONTRACT SERVICES.—The Commis16 sion may procure by contract, to the extent

17 funds are available, the temporary or intermit18 tent services of experts or consultants pursuant

19 to section 3109 of title 5, United States Code.

20 ‘‘(B) LEASES AND PROPERTY.—The Com21 mission may lease space and acquire personal

22 property to the extent funds are available.

23 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

24 are authorized to be appropriated such sums as are nec25 essary for the operation of the Commission.
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1 TITLE III—PREMIUM AND COST2 SHARING ASSISTANCE

3 SEC. 301. PREMIUM AND COST-SHARING ASSISTANCE.

4 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

5 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)),

6 as amended by section 101(a), is amended—

7 (1) by striking ‘‘and’’ at the end of paragraph

8 (62);

9 (2) by striking the period at the end of para10 graph (63) and inserting ‘‘; and’’; and

11 (3) by adding at the end the following new

12 paragraph:

13 ‘‘(64) provide for a State program furnishing

14 premium and cost-sharing assistance in accordance

15 with part B.’’.

16 (b) STATE PROGRAMS FOR PREMIUM AND COST17 SHARING ASSISTANCE.—Title XIX of the Social Security

18 Act (42 U.S.C. 1396 et seq.) is amended by adding at

19 the end the following new part:

20 ‘‘PART B—STATE PROGRAMS FOR PREMIUM AND

21 COST-SHARING ASSISTANCE

22 ‘‘SEC. 1951. REQUIREMENT TO OPERATE STATE PROGRAM.

23 ‘‘(a) IN GENERAL.—A State with a State plan ap24 proved under part A shall have in effect a program—
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•S 2351 PCS

1 ‘‘(1) for furnishing premium assistance under

2 section 1952—

3 ‘‘(A) to individuals with incomes below cer4 tain income thresholds described in section

5 1952(a)(2)(A)(i) in calendar years beginning

6 after 1996; and

7 ‘‘(B) to children and pregnant women de8 scribed in section 1952(a)(2)(A)(ii) in calendar

9 years beginning after 1995; and

10 ‘‘(2) for determining eligibility for cost-sharing

11 assistance under section 1953 in calendar years be12 ginning after 1996.

13 ‘‘(b) STATE OPTION.—A State may have in effect a

14 program—

15 ‘‘(1) for furnishing premium assistance under

16 section 1952 to individuals with incomes below cer17 tain income thresholds described in section

18 1952(a)(2)(A)(i) during 1996; and

19 ‘‘(2) for determining eligibility for cost-sharing

20 assistance under section 1953 during 1996.

21 ‘‘(c) DESIGNATION OF STATE AGENCY.—A State

22 may designate any appropriate State agency to administer

23 the program under this part.
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1 ‘‘SEC. 1952. ASSISTANCE WITH CERTIFIED STANDARD

2 HEALTH PLAN PREMIUMS.

3 ‘‘(a) ELIGIBILITY.—

4 ‘‘(1) IN GENERAL.—An eligible individual (as

5 defined in section 1958(3)) who has been determined

6 by a State under section 1954 to be a premium sub7 sidy eligible individual (as defined in paragraph (2))

8 shall be entitled to premium assistance in the

9 amount determined under subsection (b).

10 ‘‘(2) PREMIUM SUBSIDY ELIGIBLE INDIVID11 UAL.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 part, the term ‘premium subsidy eligible indi14 vidual’ means any of the following individuals:

15 ‘‘(i) INDIVIDUALS WITH INCOMES

16 BELOW CERTAIN INCOME THRESHOLDS.—

17 An eligible individual who has a family in18 come determined under section 1958(2)

19 which does not exceed the eligibility per20 centage specified in subparagraph (B) of

21 the poverty line (as defined in section

22 1958(5)).

23 ‘‘(ii) CHILDREN AND PREGNANT

24 WOMEN.—An eligible individual who is a

25 child under 18 years of age or a pregnant

26 woman (as defined in section 1958(6)) and
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•S 2351 PCS

1 has a family income determined under sec2 tion 1958(2) which does not exceed 240

3 percent of the poverty line.

4 ‘‘(iii) REDUCTION IN ELIGIBILITY

5 PERCENTAGES.—For requirement that the

6 President reduce the percentage of the

7 poverty line applicable to an individual’s

8 family income for purposes of determining

9 eligibility for premium assistance under

10 this section, see section 801 of the Health

11 Security Act.

12 ‘‘(B) ELIGIBILITY PERCENTAGE.—

13 ‘‘(i) IN GENERAL.—The eligibility per14 centage shall be determined under the fol15 lowing table:

Applicable

‘‘Calendar year: eligibility percentage:

1996 .................................................................................. 100

1997 .................................................................................. 125

1998 .................................................................................. 150

1999 .................................................................................. 175

2000 .................................................................................. 200

16 ‘‘(b) AMOUNT OF ASSISTANCE.—

17 ‘‘(1) IN GENERAL.—

18 ‘‘(A) DETERMINATION OF AMOUNT.—Ex19 cept as provided in paragraph (4), the amount

20 of premium assistance for a month for a pre21 mium subsidy eligible individual is the lesser

22 of—
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1 ‘‘(i) the premium assistance amount

2 determined under paragraph (2); or

3 ‘‘(ii) the amount of the premium for

4 coverage under the certified standard

5 health plan (as defined in section 1958(1))

6 in which the individual is enrolled that is

7 not paid (or offered to be paid) on behalf

8 of such individual by an employer.

9 ‘‘(B) SPECIAL RULE FOR DETERMINING

10 AMOUNT OF EMPLOYER PAYMENTS.—If an em11 ployer makes a payment toward the premium

12 for coverage under a certified standard health

13 plan on behalf of a family (rather than any par14 ticular individual) such contribution shall be al15 located ratably among the individuals in the

16 family.

17 ‘‘(2) PREMIUM ASSISTANCE AMOUNT DETER18 MINED.—

19 ‘‘(A) IN GENERAL.—The premium assist20 ance amount determined under this paragraph

21 is an amount equal to the lesser of—

22 ‘‘(i) the subsidy percentage specified

in paragraph (3) multiplied by 1 23 ⁄12th of the

24 annual premium for coverage under the
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•S 2351 PCS

1 certified standard health plan in which the

2 individual is enrolled, or

3 ‘‘(ii) the subsidy percentage specified

in paragraph (3) multiplied by 1 4 ⁄12th of the

5 weighted average annual premium for the

6 individual’s class of enrollment (determined

7 in accordance with subparagraph (B)) for

8 all community-rated certified standard

9 health plans offered in the community rat10 ing area in which the individual resides.

11 ‘‘(B) DETERMINATION OF WEIGHTED AV12 ERAGE ANNUAL PREMIUM.—For purposes of

13 subparagraph (A)(ii), the weighted average an14 nual premium for a class of enrollment under

15 community-rated certified standard health plans

16 offered in a community rating area shall be

17 based on the number of primary enrollees in

18 such class enrolled in each of the plans.

19 ‘‘(3) SUBSIDY PERCENTAGE.—For purposes of

20 paragraph (2)(A), the term ‘subsidy percentage’

21 means the following:

22 ‘‘(A) INDIVIDUALS WITH INCOMES BELOW

23 CERTAIN INCOME THRESHOLDS.—
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1 ‘‘(i) PERCENTAGE DETERMINED.—

2 For a premium subsidy eligible individual

3 described in subsection (a)(2)(A)(i)—

4 ‘‘(I) for 1997, 100 percent re5 duced (but not below zero) by the

6 product of the applicable factor deter7 mined under clause (ii) multiplied by

8 the number of percentage points

9 (rounded to the nearest whole num10 ber) by which such individual’s family

11 income exceeds 100 percent of the

12 poverty line; and

13 ‘‘(II) for succeeding years, 100

14 percent reduced (but not below zero)

15 by 1 percentage point for each 1 per16 centage point by which such individ17 ual’s family income exceeds 100 per18 cent of the poverty line.

19 ‘‘(ii) APPLICABLE FACTOR.—The ap20 plicable factor determined under this

21 clause for a calendar year is the number

22 equal to the quotient of—

23 ‘‘(I) 100, divided by

24 ‘‘(II) the eligibility percentage for

25 the year determined under subsection
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1 (a)(2)(B) (expressed as a whole num2 ber) minus 100.

3 ‘‘(B) CHILDREN AND PREGNANT

4 WOMEN.—For a premium subsidy eligible indi5 vidual described in subsection (a)(2)(A)(ii)—

6 ‘‘(i) 100 percent if the individual’s

7 family income does not exceed 185 percent

8 of the poverty line;

9 ‘‘(ii) 80 percent if the individual’s

10 family income exceeds 185 percent of the

11 poverty line but does not exceed 200 per12 cent of the poverty line;

13 ‘‘(iii) 60 percent if the individual’s

14 family income exceeds 200 percent of the

15 poverty line but does not exceed 215 per16 cent of the poverty line;

17 ‘‘(iv) 40 percent if the individual’s

18 family income exceeds 215 percent of the

19 poverty line but does not exceed 230 per20 cent of the poverty line; and

21 ‘‘(v) 20 percent if the individual’s

22 family income exceeds 230 percent of the

23 poverty line but does not exceed 240 per24 cent of the poverty line.

25 ‘‘(4) MINIMUM AMOUNT.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—If the total amount

2 determined under paragraph (1) with respect to

3 all premium subsidy eligible individuals in a

4 family for a year (determined as if the individ5 uals were eligible for subsidies for the entire

6 year) does not exceed the amount determined

7 under subparagraph (B) the individuals shall

8 not be eligible to receive premium assistance

9 under this section.

10 ‘‘(B) AMOUNT DETERMINED.—The

11 amount determined under this subparagraph

12 shall be—

13 ‘‘(i) for 1996, $150; and

14 ‘‘(ii) for 1997 and succeeding years,

15 an amount equal to the amount determined

16 under this subparagraph for the previous

17 year updated through the midpoint of the

18 year by the estimated percentage change in

19 the medical consumer price index (as de20 fined in section 1958(4)) during the 12-

21 month period ending at that midpoint,

22 with appropriate adjustments to reflect

23 previous underestimations or overesti24 mations under this subparagraph in the
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1 projected percentage change in the medical

2 consumer price index.

3 ‘‘(C) ROUNDING.—Any amount determined

4 under subparagraph (B)(ii) for a year shall be

5 rounded to the nearest multiple of $5.

6 ‘‘(c) PAYMENTS.—

7 ‘‘(1) IN GENERAL.—The amount of the pre8 mium assistance available to a premium subsidy eli9 gible individual under subsection (b) shall be paid by

10 the State in which the individual resides directly to

11 the certified standard health plan in which the indi12 vidual is enrolled. Payments under the preceding

13 sentence shall commence in the first month during

14 which the individual is enrolled in a certified stand15 ard health plan and determined under section 1954

16 to be a premium subsidy eligible individual.

17 ‘‘(2) ADMINISTRATIVE ERRORS.—A State is fi18 nancially responsible for premium assistance paid

19 based on an eligibility determination error to the ex20 tent the State’s error rate for eligibility determina21 tions exceeds a maximum permissible error rate to

22 be specified by the Secretary.

23 ‘‘SEC. 1953. ASSISTANCE WITH CERTIFIED STANDARD

24 HEALTH PLAN COST-SHARING.

25 ‘‘(a) ELIGIBILITY.—
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1 ‘‘(1) IN GENERAL.—An eligible individual who

2 has been determined by a State under section 1954

3 to be a cost-sharing subsidy eligible individual (as

4 defined in paragraph (2)) shall be eligible for cost5 sharing assistance as described in subsection (b). If

6 a State determines that an individual is a cost-shar7 ing eligible individual, the State shall notify the cer8 tified standard health plan in which such individual

9 is enrolled of such determination in a timely man10 ner.

11 ‘‘(2) COST-SHARING SUBSIDY ELIGIBLE INDI12 VIDUAL.—For purposes of this part, the term ‘cost13 sharing subsidy eligible individual’ means an eligible

14 individual who has a family income determined

15 under section 1958(2) which does not exceed 100

16 percent of the poverty line.

17 ‘‘(b) COST-SHARING ASSISTANCE.—In the case of a

18 cost-sharing subsidy eligible individual who is enrolled in

19 a certified standard health plan, the cost-sharing assist20 ance under this subsection shall consist of the plan’s re21 duction in the cost-sharing otherwise imposed under the

22 plan to amounts that are determined appropriate by the

23 National Health Benefits Board under section 21213(d).

24 ‘‘(c) TERMINATION OF COST-SHARING ASSIST25 ANCE.—An individual’s eligibility for cost-sharing assist-
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•S 2351 PCS

1 ance under this section shall terminate the month imme2 diately following a month in which the State determines

3 that the individual is no longer a cost-sharing subsidy eli4 gible individual.

5 ‘‘SEC. 1954. ELIGIBILITY DETERMINATIONS.

6 ‘‘(a) IN GENERAL.—The Secretary shall promulgate

7 regulations specifying requirements for State programs

8 under this part with respect to determining eligibility for

9 premium and cost-sharing assistance, including require10 ments with respect to—

11 ‘‘(1) application procedures;

12 ‘‘(2) information verification procedures;

13 ‘‘(3) timeliness of eligibility determinations;

14 ‘‘(4) procedures for applicants to appeal adverse

15 decisions; and

16 ‘‘(5) any other matters determined appropriate

17 by the Secretary.

18 ‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg19 ulations promulgated by the Secretary under subsection

20 (a) shall include the following requirements:

21 ‘‘(1) FREQUENCY OF APPLICATIONS.—A State

22 program shall provide that an individual may file an

23 application for assistance with an agency designated

24 by the State at any time, in person or by mail.
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•S 2351 PCS

1 ‘‘(2) APPLICATION FORM.—A State program

2 shall provide for the use of an application form de3 veloped by the Secretary under subsection (c).

4 ‘‘(3) DISTRIBUTION OF APPLICATIONS.—A

5 State program shall distribute applications for as6 sistance through employers and appropriate public

7 agencies.

8 ‘‘(4) REQUIREMENT TO SUBMIT REVISED AP9 PLICATION.—A State program shall, in accordance

10 with regulations promulgated by the Secretary, re11 quire individuals to submit revised applications dur12 ing a year to reflect changes in estimated family in13 comes, including changes in employment status of

14 family members, during the year. The State shall re15 vise the amount of any premium assistance based on

16 such a revised application.

17 ‘‘(5) PRESUMPTIVE ELIGIBILITY FOR PREG18 NANT WOMEN.—A State program shall, in accord19 ance with regulations promulgated by the Secretary,

20 establish a system under which pregnant women

21 may be determined presumptively eligible for assist22 ance under this part for a period determined appro23 priate by the Secretary.

24 ‘‘(6) AFDC APPLICANTS.—A State program

25 shall include a procedure under which individuals
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•S 2351 PCS

1 applying for benefits under title IV shall have an op2 portunity to apply for assistance under this part in

3 connection with such application.

4 ‘‘(7) VERIFICATION.—A State program shall

5 provide for verification of the information supplied

6 in applications under this part. Such verification

7 may include examining return information disclosed

8 to the State for such purpose under section

9 6103(l)(15) of the Internal Revenue Code of 1986.

10 ‘‘(c) ADMINISTRATION OF STATE PROGRAMS.—

11 ‘‘(1) IN GENERAL.—The Secretary shall estab12 lish standards for States operating programs under

13 this part which ensure that such programs are oper14 ated in a uniform manner with respect to application

15 procedures, data processing systems, and such other

16 administrative activities as the Secretary determines

17 to be necessary.

18 ‘‘(2) APPLICATION FORMS.—The Secretary

19 shall develop an application form for assistance

20 which shall—

21 ‘‘(A) be simple in form and understandable

22 to the average individual;

23 ‘‘(B) require the provision of information

24 necessary to make a determination as to wheth25 er an individual is a premium or cost-sharing
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•S 2351 PCS

1 subsidy eligible individual including a declara2 tion of estimated income by the individual

3 based, at the election of the individual—

4 ‘‘(i) on multiplying by a factor of 4

5 the individual’s family income for the 3-

6 month period immediately preceding the

7 month in which the application is made, or

8 ‘‘(ii) on estimated income for the en9 tire year for which the application is sub10 mitted; and

11 ‘‘(C) require attachment of such docu12 mentation as deemed necessary by the Sec13 retary in order to ensure eligibility for assist14 ance.

15 ‘‘(3) OUTREACH ACTIVITIES.—A State operat16 ing a program under this part shall conduct such

17 outreach activities as the Secretary determines ap18 propriate.

19 ‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM

20 SUBSIDIES.—A determination by a State that an individ21 ual is a premium subsidy eligible individual shall be effec22 tive for the calendar year for which such determination

23 is made unless a revised application submitted under sub24 section (b)(4) indicates that an individual is no longer eli25 gible for premium assistance.
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•S 2351 PCS

1 ‘‘(e) PENALTIES FOR MATERIAL MISREPRESENTA2 TIONS.—

3 ‘‘(1) IN GENERAL.—Any individual who know4 ingly makes a material misrepresentation of infor5 mation in an application for assistance under this

6 part shall be liable to the Federal Government for

7 the amount any premium assistance and cost-shar8 ing assistance received by individual on the basis of

9 a misrepresentation and interest on such amount at

10 a rate specified by the Secretary, and shall, in addi11 tion, be liable to the Federal Government for $2,000

12 or, if greater, 3 times the amount any premium as13 sistance and cost-sharing assistance received by indi14 vidual on the basis of a misrepresentation.

15 ‘‘(2) COLLECTION OF PENALTY AMOUNTS.—A

16 State which receives an application for assistance

17 with respect to which a material misrepresentation

18 has been made shall collect the penalty amount re19 quired under paragraph (1) and submit 50 percent

20 of such amount to the Secretary in a timely manner.

21 ‘‘SEC. 1955. END-OF-YEAR RECONCILIATION FOR PREMIUM

22 ASSISTANCE.

23 ‘‘(a) IN GENERAL.—

24 ‘‘(1) REQUIREMENT TO FILE STATEMENT.—An

25 individual who received premium assistance under
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•S 2351 PCS

1 this part from a State for any month in a calendar

2 year shall file with the State an income reconcili3 ation statement to verify the individual’s family in4 come for the year. Such a statement shall be filed

5 at such time, and contain such information, as the

6 State may specify in accordance with regulations

7 promulgated by the Secretary.

8 ‘‘(2) NOTICE OF REQUIREMENT.—A State shall

9 provide a written notice of the requirement under

10 paragraph (1) at the end of the year to an individual

11 who received premium assistance under this part

12 from such State in any month during the year.

13 ‘‘(b) RECONCILIATION OF PREMIUM ASSISTANCE

14 BASED ON ACTUAL INCOME.—

15 ‘‘(1) IN GENERAL.—Based on and using the in16 come reported in the reconciliation statement filed

17 under subsection (a) with respect to an individual,

18 the State shall compute the amount of premium as19 sistance that should have been provided under this

20 part with respect to the individual for the year in21 volved.

22 ‘‘(2) OVERPAYMENT OF ASSISTANCE.—If the

23 total amount of the premium assistance provided

24 was greater than the amount computed under para25 graph (1), the individual is liable to the State to pay
334

•S 2351 PCS

1 an amount equal to the amount of the excess pay2 ment. Any amount collected by a State under this

3 paragraph shall be submitted to the Secretary in a

4 timely manner.

5 ‘‘(3) UNDERPAYMENT OF ASSISTANCE.—If the

6 total amount of the premium assistance provided

7 was less than the amount computed under para8 graph (1), the State shall pay to the individual an

9 amount equal to the amount of the deficit.

10 ‘‘(4) STATE OPTION.—A State may, in accord11 ance with regulations promulgated by the Secretary,

12 establish a procedure under which any overpayments

13 or underpayments of premium assistance determined

14 under paragraphs (2) and (3) with respect to an in15 dividual for a year may be collected or paid, as ap16 propriate, through adjustments to the premium as17 sistance furnished to such individual in the succeed18 ing year.

19 ‘‘(c) VERIFICATION.—Each State may use such infor20 mation as it has available to verify income of individuals

21 with applications filed under this part, including return

22 information disclosed to the State for such purpose under

23 section 6103(l)(15) of the Internal Revenue Code of 1986.

24 ‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the

25 case of an individual who is required to file a statement
335

•S 2351 PCS

1 under this section in a year who fails to file such a state2 ment by such date as the Secretary shall specify in regula3 tions, the entire amount of the premium assistance pro4 vided in such year shall be considered an excess amount

5 under subsection (b)(2) and such individual shall not be

6 eligible for premium assistance under this part until such

7 statement is filed. A State, using rules established by the

8 Secretary, shall waive the application of this subsection

9 if the individual establishes, to the satisfaction of the State

10 under such rules, good cause for the failure to file the

11 statement on a timely basis.

12 ‘‘(e) PENALTIES FOR FALSE INFORMATION.—Any in13 dividual who provides false information in a statement

14 filed under subsection (a) is subject to the same penalties

15 as are provided under section 1954(e) for a misrepresenta16 tion of material fact described in such section.

17 ‘‘(f) NO RECONCILIATION FOR COST-SHARING RE18 DUCTIONS.—No reconciliation statement is required under

19 this section with respect to cost-sharing assistance pro20 vided under section 1953.

21 ‘‘SEC. 1956. PAYMENTS TO STATES.

22 ‘‘(a) IN GENERAL.—

23 ‘‘(1) PAYMENTS FOR PREMIUM ASSISTANCE.—A

24 State operating a program for furnishing premium

25 assistance under section 1952 shall be entitled to re-
336

•S 2351 PCS

1 ceive payments in an amount equal to the amount

2 of premium assistance paid on behalf of premium

3 subsidy eligible individuals. Such payments shall be

4 made at such time and in such form as provided in

5 regulations promulgated by the Secretary.

6 ‘‘(2) MATCHING PAYMENTS FOR ADMINISTRA7 TIVE EXPENSES.—The Secretary shall pay to each

8 State operating a program for furnishing premium

9 assistance under section 1952 and determining eligi10 bility for cost-sharing assistance under section 1953,

11 for each quarter beginning with the quarter com12 mencing January 1, 1996, an amount equal to 75

13 percent of the total amount expended by the State

14 during the quarter as found necessary by the Sec15 retary for the proper and efficient administration of

16 the program.

17 ‘‘(3) STATE ENTITLEMENT.—This subsection

18 constitutes budget authority in advance of appro19 priations Acts, and represents the obligation of the

20 Federal Government to provide payments to States

21 operating programs under this part in accordance

22 with this subsection.

23 ‘‘(b) FUNDING.—The amount paid to States under

24 subsection (a) shall be paid by the Secretary from—
337

•S 2351 PCS

1 ‘‘(1) amounts made available under the Health

2 Security Trust Fund established under section 9551

3 of the Internal Revenue Code of 1986, or

4 ‘‘(2) if such amounts are insufficient, out of

5 any funds in the Treasury of the United States not

6 otherwise appropriated.

7 ‘‘(c) AUDITS.—The Secretary shall conduct regular

8 audits of the activities under the State programs con9 ducted under this part.

10 ‘‘SEC. 1957. GRANT PROGRAM FOR PROVIDING COST-SHAR11 ING ASSISTANCE FOR CERTAIN INDIVIDUALS

12 WITH INCOMES ABOVE 100 PERCENT OF THE

13 POVERTY LINE.

14 ‘‘(a) ESTABLISHMENT.—The Secretary shall pay to

15 a State which elects to operate a cost-sharing assistance

16 program under this section beginning on or after January

17 1, 1997, the amount determined under subsection (c).

18 ‘‘(b) PROGRAM DESCRIBED.—

19 ‘‘(1) IN GENERAL.—A program described in

20 this subsection consists of a State providing cost21 sharing assistance to individuals enrolled in certified

22 standard health plans whose family income deter23 mined under section 1958(2) exceeds 100 percent

24 but does not exceed 200 percent of the poverty line.
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•S 2351 PCS

1 ‘‘(2) ELIGIBILITY AND ADMINISTRATION.—A

2 State operating a program under this subsection

3 shall be responsible for administering the program,

4 including—

5 ‘‘(A) establishing eligibility requirements

6 for individuals applying for assistance under the

7 program; and

8 ‘‘(B) with respect to an eligible individual,

9 determining the appropriate amount of cost10 sharing that will be paid by the program.

11 ‘‘(3) PAYMENTS FOR COST-SHARING.—The

12 amount of cost-sharing assistance available to an eli13 gible individual under this section (as determined in

14 accordance with paragraph (2)(B)) shall be paid by

15 the State directly to the certified standard health

16 plan in which the individual is enrolled.

17 ‘‘(c) FEDERAL PAYMENT AMOUNT.—

18 ‘‘(1) IN GENERAL.—The Secretary shall pay a

19 State operating a program under this section during

20 a quarter an amount equal to 50 percent of the sum

21 of—

22 ‘‘(A) the amount demonstrated by the

23 State to have been expended during the quarter

24 for furnishing cost-sharing assistance under

25 this section to eligible individuals; and
339

•S 2351 PCS

1 ‘‘(B) the amount expended during the

2 quarter as found necessary by the Secretary for

3 the proper and efficient administration of the

4 program.

5 ‘‘(2) LIMITATION ON FEDERAL PAYMENTS.—

6 ‘‘(A) IN GENERAL.—The total amount paid

7 to a State under paragraph (1) for a fiscal year

8 shall not exceed the amount determined under

9 subparagraph (B).

10 ‘‘(B) AMOUNT DETERMINED.—

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in clause (ii), the amount determined

13 under this subparagraph for a State for a

14 fiscal year is the product of—

15 ‘‘(I) $2,000,000,000; multiplied

16 by

17 ‘‘(II) the ratio of the average

18 population of the State during the fis19 cal year as estimated by the Secretary

20 to the average population of all States

21 during the fiscal year as estimated by

22 the Secretary.

23 ‘‘(ii) SPECIAL RULE FOR FISCAL YEAR

24 1998.—The amount determined under this

25 subparagraph for a State for fiscal year
340

•S 2351 PCS

1 1998 shall be an amount equal to 75 per2 cent of the amount determined under

3 clause (i) for such fiscal year.

4 ‘‘(iii) FUNDING.—The amount paid to

5 a State under this subsection shall be paid

6 by the Secretary from amounts made avail7 able under the Health Security Trust

8 Fund established under section 9551 of

9 the Internal Revenue Code of 1986.

10 ‘‘(3) ADDITIONAL LIMITATION ON PAYMENTS.—

11 For requirement that the President reduce the pay12 ments to States under this subsection, see section

13 801 of the Health Security Act.

14 ‘‘(4) AUDITS.—The Secretary shall conduct reg15 ular audits of the activities under the State pro16 grams conducted under this section.

17 ‘‘SEC. 1958. DEFINITIONS AND DETERMINATIONS OF IN18 COME.

19 ‘‘For purposes of this part:

20 ‘‘(1) CERTIFIED STANDARD HEALTH PLAN.—

21 The term ‘certified standard health plan’ means a

22 certified health plan (within the meaning of section

23 21011(a)(1)) providing the standard benefits pack24 age as described in section 21201(a).

25 ‘‘(2) DETERMINATIONS OF INCOME.—
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•S 2351 PCS

1 ‘‘(A) FAMILY INCOME.—The term ‘family

2 income’ means, with respect to an individual

3 who—

4 ‘‘(i) is not a dependent (as defined in

5 subparagraph (B)) of another individual,

6 the sum of the modified adjusted gross in7 comes (as defined in subparagraph (D))

8 for the individual, the individual’s spouse,

9 and dependents of the individual; or

10 ‘‘(ii) is a dependent of another indi11 vidual, the sum of the modified adjusted

12 gross incomes for the other individual, the

13 other individual’s spouse, and dependents

14 of the other individual.

15 ‘‘(B) DEPENDENT.—The term ‘dependent’

16 shall have the meaning given such term under

17 paragraphs (1) or (2) of section 152(a) of the

18 Internal Revenue Code of 1986.

19 ‘‘(C) SPECIAL RULE FOR FOSTER CHIL20 DREN.—For purposes of subparagraph (A), a

21 child who is placed in foster care by a State

22 agency shall not be considered a dependent of

23 another individual.

24 ‘‘(D) MODIFIED ADJUSTED GROSS IN25 COME.—The term ‘modified adjusted gross in-
342

•S 2351 PCS

1 come’ means adjusted gross income (as defined

2 in section 62(a) of the Internal Revenue Code

3 of 1986)—

4 ‘‘(i) determined without regard to sec5 tions 135, 162(l), 911, 931, and 933 of

6 such Code, and

7 ‘‘(ii) increased by—

8 ‘‘(I) the amount of interest re9 ceived or accrued by the individual

10 during the taxable year which is ex11 empt from tax,

12 ‘‘(II) the amount of the social se13 curity benefits (as defined in section

14 86(d) of such Code) received during

15 the taxable year to the extent not in16 cluded in gross income under section

17 86 of such Code, and

18 ‘‘(III) the amount of aid to fami19 lies with dependent children received

20 during the taxable year under part A

21 of title IV to the extent not included

22 in gross income under such Code.

23 The determination under the preceding sen24 tence shall be made without regard to any car25 ryover or carryback.
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1 ‘‘(3) ELIGIBLE INDIVIDUAL.—

2 ‘‘(A) IN GENERAL.—The term ‘eligible in3 dividual’ means an individual who is residing in

4 the United States and who is—

5 ‘‘(i) a citizen or national of the United

6 States; or

7 ‘‘(ii) an alien permanently residing in

8 the United States under color of law (as

9 defined in subparagraph (C)).

10 ‘‘(B) EXCLUSION.—The term ‘eligible indi11 vidual’ shall not include an individual who is an

12 inmate of a public institution (except as a pa13 tient of a medical institution).

14 ‘‘(C) ALIEN PERMANENTLY RESIDING IN

15 THE UNITED STATES UNDER COLOR OF LAW.—

16 The term ‘alien permanently residing in the

17 United States under color of law’ means an

18 alien lawfully admitted for permanent residence

19 (within the meaning of section 101(a)(20) of

20 the Immigration and Nationality Act), and in21 cludes any of the following:

22 ‘‘(i) An alien who is admitted as a ref23 ugee under section 207 of the Immigration

24 and Nationality Act.
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•S 2351 PCS

1 ‘‘(ii) An alien who is granted asylum

2 under section 208 of such Act.

3 ‘‘(iii) An alien whose deportation is

4 withheld under section 243(h) of such Act.

5 ‘‘(iv) An alien who is admitted for

6 temporary residence under section 210,

7 210A, or 245A of such Act.

8 ‘‘(v) An alien who has been paroled

9 into the United States under section

10 212(d)(5) of such Act for an indefinite pe11 riod or who has been granted extended vol12 untary departure as a member of a nation13 ality group.

14 ‘‘(vi) An alien who is the spouse or

15 unmarried child under 21 years of age of

16 a citizen of the United States, or the par17 ent of such a citizen if the citizen is over

18 21 years of age, and with respect to whom

19 an application for adjustment to lawful

20 permanent residence is pending.

21 ‘‘(4) MEDICAL CONSUMER PRICE INDEX.—The

22 term ‘medical consumer price index’ means the med23 ical care services component of the consumer price

24 index (for urban consumers) as determined by the

25 Bureau of Labor Statistics.
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•S 2351 PCS

1 ‘‘(5) POVERTY LINE.—The term ‘poverty line’

2 means the income official poverty line (as defined by

3 the Office of Management and Budget, and revised

4 annually in accordance with section 673(2) of the

5 Omnibus Budget Reconciliation Act of 1981) that—

6 ‘‘(A) in the case of a family of less than

7 five individuals, is applicable to a family of the

8 size involved; and

9 ‘‘(B) in the case of a family of more than

10 four individuals, is applicable to a family of

11 four persons.

12 ‘‘(6) PREGNANT WOMAN.—The term ‘pregnant

13 woman’ means a woman described in section

14 1902(l)(1)(A).

15 ‘‘(7) PREMIUM.—Any reference to the term

16 ‘premium’ includes a reference to premium equiva17 lence for self-insured plans.’’.

18 (c) CONFORMING AMENDMENTS.—(1) Title XIX of

19 the Social Security Act (42 U.S.C. 1396 et seq.) is amend20 ed by striking the title and inserting the following:
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•S 2351 PCS

1 ‘‘TITLE XIX—MEDICAL ASSIST2 ANCE PROGRAMS AND STATE

3 PROGRAMS FOR PREMIUM

4 AND COST-SHARING ASSIST5 ANCE

6 ‘‘PART A—GRANTS TO STATES FOR MEDICAL

7 ASSISTANCE PROGRAMS’’.

8 (2) Title XIX of the Social Security Act (42 U.S.C.

9 1396 et seq.) is amended by striking each reference to

10 ‘‘this title’’ and inserting ‘‘this part’’.

11 TITLE IV—ADMINISTRATIVE

12 SIMPLIFICATION AND PRIVACY

13 SEC. 401. ADMINISTRATIVE SIMPLIFICATION.

14 (a) MEDICARE AND MEDICAID COVERAGE DATA

15 BANK AND RELATED IDENTIFICATION PROCESSES.—

16 (1) DELAY OF EMPLOYER REPORTING RE17 QUIREMENT.—

18 (A) IN GENERAL.—Section 1144(c)(1)(A)

19 of the Social Security Act (42 U.S.C. 1320–

20 14(c)(1)(A)) is amended by striking ‘‘January

21 1, 1994’’ and inserting ‘‘January 1, 1996’’.

22 (B) EFFECTIVE DATE.—The amendment

23 made by this paragraph shall be effective on the

24 date of the enactment of this Act.

25 (2) REPEAL OF DATA BANK.—
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•S 2351 PCS

1 (A) IN GENERAL.—Effective January 1,

2 1996, section 1144 of the Social Security Act

3 (42 U.S.C. 1320b–14) and section 101(f) of the

4 Employee Retirement Income Security Act of

5 1974 (29 U.S.C. 1021(f)) are repealed.

6 (B) INTERNAL REVENUE CODE PROVI7 SION.—Section 6103(l) of the Internal Revenue

8 Code of 1986 is amended by striking paragraph

9 (12).

10 (C) IDENTIFICATION OF MEDICARE SEC11 ONDARY PAYER SITUATIONS.—Section 1862(b)

12 of the Social Security Act (42 U.S.C. 1395y(b))

13 is amended by striking paragraph (5).

14 (D) CONFORMING AMENDMENTS.—(i) Sec15 tion 1902(a)(25)(A)(i) of the Social Security

16 Act (42 U.S.C. 1396a(a)(25)(A)(i)) is amended

17 by striking ‘‘including the use of information

18 collected by the Medicare and Medicaid Cov19 erage Data Bank under section 1144 and any

20 additional measures’’.

21 (ii) Subsection (a)(8)(B) of section 552a of

22 title 5, United States Code, is amended—

23 (I) in clause (v), by inserting ‘‘; or’’ at

24 the end;
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•S 2351 PCS

1 (II) in clause (vi), by striking ‘‘or’’ at

2 the end; and

3 (III) by striking clause (vii).

4 (E) EFFECTIVE DATE.—The amendments

5 made by this paragraph shall be effective on

6 and after January 1, 1996.

7 (b) HEALTH INFORMATION NETWORK.—

8 (1) IN GENERAL.—Title XI of the Social Secu9 rity Act (42 U.S.C. 1301 et seq.) is amended by

10 adding at the end the following new subtitle:

11 ‘‘Subtitle B—Administrative

12 Simplification

‘‘TABLE OF CONTENTS OF SUBTITLE

‘‘Subtitle B—Administrative Simplification

‘‘PART I—PURPOSE AND DEFINITIONS

‘‘Sec. 11701. Purpose.

‘‘Sec. 11702. Definitions.

‘‘PART II—STANDARDS FOR DATA ELEMENTS AND INFORMATION

TRANSACTIONS

‘‘Sec. 11711. General requirements on Secretary.

‘‘Sec. 11712. Standards for data elements of health information.

‘‘Sec. 11713. Information transaction standards.

‘‘Sec. 11714. Timetables for adoption of standards.

‘‘PART III—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS

AND INFORMATION

‘‘Sec. 11721. Requirements with respect to certain transactions and information.

‘‘Sec. 11722. Timetables for compliance with requirements.

‘‘PART IV—ACCESSING HEALTH INFORMATION

‘‘Sec. 11731. Accessing health information for authorized purposes.

‘‘Sec. 11732. Responding to access requests.

‘‘Sec. 11733. Length of time information should be accessible.

‘‘Sec. 11734. Timetables for adoption of standards and compliance.
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‘‘PART V—STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION

NETWORK

‘‘Sec. 11741. Standards and certification for health information network

services.

‘‘Sec. 11742. Ensuring availability of information.

‘‘PART VI—PENALTIES

‘‘Sec. 11751. General penalty for failure to comply with requirements and

standards.

‘‘PART VII—MISCELLANEOUS PROVISIONS

‘‘Sec. 11761. Imposition of additional requirements.

‘‘Sec. 11762. Effect on State law.

‘‘Sec. 11764. Health information continuity.

‘‘Sec. 11765. Protection of commercial information.

‘‘Sec. 11766. Payment for health care services or health plan premiums.

‘‘Sec. 11767. Health security cards.

‘‘Sec. 11768. Misuse of health security card or personal health identifier.

‘‘Sec. 11769. Direct billing for clinical laboratory services.

‘‘Sec. 11770. Authorization of appropriations.

‘‘PART VIII—ASSISTANCE TO THE SECRETARY

‘‘Sec. 11771. General requirement on Secretary.

‘‘Sec. 11772. Health information advisory committee.

‘‘PART IX—DEMONSTRATION PROJECTS FOR COMMUNITY-BASED CLINICAL

INFORMATION SYSTEMS

‘‘Sec. 11781. Grants for demonstration projects.

1 ‘‘PART I—PURPOSE AND DEFINITIONS

2 ‘‘SEC. 11701. PURPOSE.

3 ‘‘It is the purpose of this subtitle to improve the effi4 ciency and effectiveness of the health care system, includ5 ing the medicare program under title XVIII and the med6 icaid program under title XIX, by encouraging the devel7 opment of a health information network through the es8 tablishment of standards and requirements for the elec9 tronic transmission of certain health information.

10 ‘‘SEC. 11702. DEFINITIONS.

11 ‘‘For purposes of this subtitle:
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1 ‘‘(1) CODE SET.—The term ‘code set’ means

2 any set of codes used for encoding data elements,

3 such as tables of terms, medical concepts, medical

4 diagnostic codes, or medical procedure codes.

5 ‘‘(2) COORDINATION OF BENEFITS.—The term

6 ‘coordination of benefits’ means determining and co7 ordinating the financial obligations of health plans

8 when health care benefits are payable under 2 or

9 more health plans.

10 ‘‘(3) HEALTH CARE PROVIDER.—The term

11 ‘health care provider’ includes a provider of services

12 (as defined in section 1861(u)), a provider of medi13 cal or other health services (as defined in section

14 1861(s)), and any other person furnishing health

15 care services or supplies.

16 ‘‘(4) HEALTH INFORMATION.—The term ‘health

17 information’ means any information, whether oral or

18 recorded in any form or medium that—

19 ‘‘(A) is created or received by a health care

20 provider, health plan, health oversight agency

21 (as defined in section 11802), health re22 searcher, public health authority (as defined in

23 section 11802), employer, life insurer, school or

24 university, or health information network serv25 ice certified under section 11741; and
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•S 2351 PCS

1 ‘‘(B) relates to the past, present, or future

2 physical or mental health or condition of an in3 dividual, the provision of health care to an indi4 vidual, or the past, present, or future payment

5 for the provision of health care to an individual.

6 ‘‘(5) HEALTH INFORMATION NETWORK.—The

7 term ‘health information network’ means the health

8 information system that is formed through the appli9 cation of the requirements and standards established

10 under this subtitle.

11 ‘‘(6) HEALTH INFORMATION PROTECTION OR12 GANIZATION.—The term ‘health information protec13 tion organization’ means a private entity or an en14 tity operated by a State that accesses standard data

15 elements of health information through the health

16 information network, processes such information

17 into non-identifiable health information, and may

18 store such information.

19 ‘‘(7) HEALTH INFORMATION NETWORK SERV20 ICE.—The term ‘health information network serv21 ice’—

22 ‘‘(A) means a private entity or an entity

23 operated by a State that enters into contracts

24 to—
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1 ‘‘(i) process or facilitate the process2 ing of nonstandard data elements of health

3 information into standard data elements;

4 ‘‘(ii) provide the means by which per5 sons are connected to the health informa6 tion network for purposes of meeting the

7 requirements of this subtitle, including the

8 holding of standard data elements of

9 health information;

10 ‘‘(iii) provide authorized access to

11 health information through the health in12 formation network; or

13 ‘‘(iv) provide specific information

14 processing services, such as automated co15 ordination of benefits and claims trans16 action routing; and

17 ‘‘(B) includes a health information protec18 tion organization.

19 ‘‘(8) HEALTH PLAN.—The term ‘health plan’

20 has the meaning given such term in section

21 21004(a)(1) except that such term shall include sub22 paragraphs (C), (D), (E), (F), and (H) of such sec23 tion.

24 ‘‘(9) NON-IDENTIFIABLE HEALTH INFORMA25 TION.—The term ‘non-identifiable health informa-
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•S 2351 PCS

1 tion’ means health information that is not protected

2 health information as defined in section 11802.

3 ‘‘(10) HEALTH RESEARCHER.—The term

4 ‘health researcher’ shall have the meaning given

5 such term under section 11802.

6 ‘‘(11) PATIENT MEDICAL RECORD INFORMA7 TION.—The term ‘patient medical record informa8 tion’ means health information derived from a clini9 cal encounter that relates to the physical or mental

10 condition of an individual.

11 ‘‘(12) STANDARD.—The term ‘standard’ when

12 referring to an information transaction or to data

13 elements of health information means the trans14 action or data elements meet any standard adopted

15 by the Secretary under part II that applies to such

16 information transaction or data elements.

17 ‘‘PART II—STANDARDS FOR DATA ELEMENTS

18 AND INFORMATION TRANSACTIONS

19 ‘‘SEC. 11711. GENERAL REQUIREMENTS ON SECRETARY.

20 ‘‘(a) IN GENERAL.—The Secretary shall adopt stand21 ards and modifications to standards under this subtitle

22 that are—

23 ‘‘(1) consistent with the objective of reducing

24 the costs of providing and paying for health care;

25 and
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•S 2351 PCS

1 ‘‘(2) in use and generally accepted or developed

2 or modified by the standards setting organizations

3 accredited by the American National Standard Insti4 tute (ANSI).

5 ‘‘(b) INITIAL STANDARDS.—The Secretary may de6 velop an expedited process for the adoption of initial

7 standards under this subtitle.

8 ‘‘(c) FAILSAFE.—If the Secretary is unable to adopt

9 standards or modified standards in accordance with sub10 section (a) that meet the requirements of this subtitle—

11 ‘‘(1) the Secretary may develop or modify such

12 standards and, after providing public notice and

13 after an adequate period for public comment, adopt

14 such standards; and

15 ‘‘(2) if the Secretary adopts standards under

16 paragraph (1), the Secretary shall submit a report

17 to the appropriate committees of Congress on the

18 actions taken by the Secretary under this subsection.

19 ‘‘(d) PAPER FORMATS.—The Secretary may develop

20 methods by which a person may use the standards adopted

21 by the Secretary under this subtitle with respect to health

22 information that is in written rather than electronic form.
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1 ‘‘SEC. 11712. STANDARDS FOR DATA ELEMENTS OF HEALTH

2 INFORMATION.

3 ‘‘(a) IN GENERAL.—The Secretary shall adopt stand4 ards necessary to make data elements of the following

5 health information uniform and compatible for electronic

6 transmission through the health information network:

7 ‘‘(1) the health information that is appropriate

8 for transmission in connection with transactions de9 scribed in subsections (a), (b), and (d) of section

10 11721;

11 ‘‘(2) the information required to be submitted

12 by a health plan to a State under section 21013;

13 and

14 ‘‘(3) patient medical record information.

15 ‘‘(b) ADDITIONS.—The Secretary may make addi16 tions to the sets of data elements adopted under sub17 section (a) as the Secretary determines appropriate in a

18 manner that minimizes the disruption and cost of compli19 ance with such additions.

20 ‘‘(c) CERTAIN DATA ELEMENTS.—

21 ‘‘(1) UNIQUE HEALTH IDENTIFIERS.—The Sec22 retary shall establish a system to provide for a

23 standard unique health identifier for each individual,

24 employer, health plan, and health care provider for

25 use in the health care system. The personal health

26 identifier for an individual shall be an encrypted
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•S 2351 PCS

1 form of the social security account number assigned

2 to the individual by the Secretary under section

3 205(c)(2).

4 ‘‘(2) CODE SETS.—

5 ‘‘(A) IN GENERAL.—The Secretary, in con6 sultation with experts from the private sector

7 and Federal agencies, shall—

8 ‘‘(i) select code sets for appropriate

9 data elements from among the code sets

10 that have been developed by private and

11 public entities; or

12 ‘‘(ii) establish code sets for such data

13 elements if no code sets for the data ele14 ments have been developed.

15 ‘‘(B) DISTRIBUTION.—The Secretary shall

16 establish efficient and low-cost procedures for

17 distribution of code sets and modifications to

18 such code sets under section 11714(c).

19 ‘‘SEC. 11713. INFORMATION TRANSACTION STANDARDS.

20 ‘‘(a) IN GENERAL.—The Secretary shall adopt tech21 nical standards relating to the method by which data ele22 ments of health information that have been standardized

23 under section 11712 may be transmitted electronically, in24 cluding standards with respect to the format in which such

25 data elements shall be transmitted.
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•S 2351 PCS

1 ‘‘(b) SPECIAL RULE FOR COORDINATION OF BENE2 FITS.—Any standards adopted by the Secretary under

3 paragraph (1) that relate to coordination of benefits shall

4 provide that a claim for reimbursement for medical serv5 ices furnished is tested by an algorithm specified by the

6 Secretary against all records of enrollment and eligibility

7 for the individual who received such services to determine

8 any primary and secondary obligors for payment.

9 ‘‘(c) ELECTRONIC SIGNATURE.—The Secretary, in

10 coordination with the Secretary of Commerce, shall pro11 mulgate regulations specifying procedures for the elec12 tronic transmission and authentication of signatures, com13 pliance with which will be deemed to satisfy State and

14 Federal statutory requirements for written signatures with

15 respect to information transactions required by this Act

16 and written signatures on medical records and prescrip17 tions.

18 ‘‘SEC. 11714. TIMETABLES FOR ADOPTION OF STANDARDS.

19 ‘‘(a) INITIAL STANDARDS FOR DATA ELEMENTS.—

20 The Secretary shall adopt standards relating to—

21 ‘‘(1) the data elements for the information de22 scribed in section 11712(a)(1) not later than 9

23 months after the date of the enactment of this sub24 title (except in the case of standards with respect to

25 data elements for claims attachments which shall be
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•S 2351 PCS

1 adopted not later than 24 months after the date of

2 the enactment of this subtitle);

3 ‘‘(2) the data elements for the information de4 scribed in section 11712(a)(2) not later than 9

5 months after the date of the enactment of this sub6 title;

7 ‘‘(3) data elements for patient medical record

8 information not earlier than 24 months and not

9 later than 7 years after the date of the enactment

10 of this subtitle; and

11 ‘‘(4) any addition to a set of data elements, in

12 conjunction with making such an addition.

13 ‘‘(b) INITIAL STANDARDS FOR INFORMATION TRANS14 ACTIONS.—The Secretary shall adopt standards relating

15 to information transactions under section 11713 not later

16 than 9 months after the date of the enactment of this sub17 title (except in the case of standards for claims attach18 ments which shall be adopted not later than 24 months

19 after the date of the enactment of this subtitle).

20 ‘‘(c) MODIFICATIONS TO STANDARDS.—

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graph (2), the Secretary shall review the standards

23 adopted under this subtitle and shall adopt modified

24 standards as determined appropriate, but no more

25 frequently than once every 6 months. Any modifica-
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•S 2351 PCS

1 tion to standards shall be completed in a manner

2 which minimizes the disruption and cost of compli3 ance.

4 ‘‘(2) SPECIAL RULES.—

5 ‘‘(A) MODIFICATIONS DURING FIRST 12-

6 MONTH PERIOD.—Except with respect to addi7 tions and modifications to code sets under sub8 paragraph (B), the Secretary shall not adopt

9 any modifications to standards adopted under

10 this subtitle during the 12-month period begin11 ning on the date such standards are adopted

12 unless the Secretary determines that a modi13 fication is necessary in order to permit compli14 ance with requirements relating to the stand15 ards.

16 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

17 CODE SETS.—

18 ‘‘(i) IN GENERAL.—The Secretary

19 shall ensure that procedures exist for the

20 routine maintenance, testing, enhancement,

21 and expansion of code sets to accommodate

22 changes in biomedical science and health

23 care delivery.

24 ‘‘(ii) ADDITIONAL RULES.—If a code

25 set is modified under this subsection, the
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•S 2351 PCS

1 modified code set shall include instructions

2 on how data elements that were encoded

3 prior to the modification are to be con4 verted or translated so as to preserve the

5 value of the data elements. Any modifica6 tion to a code set under this subsection

7 shall be implemented in a manner that

8 minimizes the disruption and cost of com9 plying with such modification.

10 ‘‘(d) EVALUATION OF STANDARDS.—The Secretary

11 may establish a process to measure or verify the consist12 ency of standards adopted or modified under this subtitle.

13 Such process may include demonstration projects and

14 analysis of the cost of implementing such standards and

15 modifications.

16 ‘‘PART III—REQUIREMENTS WITH RESPECT TO

17 CERTAIN TRANSACTIONS AND INFORMATION

18 ‘‘SEC. 11721. REQUIREMENTS WITH RESPECT TO CERTAIN

19 TRANSACTIONS AND INFORMATION.

20 ‘‘(a) REQUIREMENTS ON PLANS AND PROVIDERS RE21 LATING TO FINANCIAL AND ADMINISTRATIVE TRANS22 ACTIONS.—If a health care provider or a health plan con23 ducts any of the following transactions, such transactions

24 shall be standard transactions and the information trans-
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•S 2351 PCS

1 mitted or received in connection with such transaction

2 shall be in the form of standard data elements:

3 ‘‘(1) Claims (including coordination of benefits).

4 ‘‘(2) Claims attachments.

5 ‘‘(3) Responses to research inquiries by a health

6 researcher.

7 ‘‘(4) Other transactions determined appropriate

8 by the Secretary consistent with the goal of reducing

9 administrative costs.

10 ‘‘(b) REQUIREMENT ONLY ON PLANS RELATING TO

11 FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.—If a

12 person desires to conduct any of the following transactions

13 with a health plan as a standard transaction, the health

14 plan shall conduct such standard transaction and the in15 formation transmitted or received in connection with such

16 transaction shall be in the form of standard data elements:

17 ‘‘(1) Enrollment and disenrollment.

18 ‘‘(2) Eligibility.

19 ‘‘(3) Payment and remittance advice.

20 ‘‘(4) Premium payments.

21 ‘‘(5) First report of injury.

22 ‘‘(6) Claims status.

23 ‘‘(7) Referral certification and authorization.
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•S 2351 PCS

1 ‘‘(8) Other transactions determined appropriate

2 by the Secretary consistent with the goal of reducing

3 administrative costs.

4 ‘‘(c) REQUIREMENT ON PLANS RELATING TO QUAL5 ITY INFORMATION.—Any information required to be sub6 mitted by a health plan to a State under section 21013

7 shall be in the form of standard data elements and the

8 transmission of such data shall be in the form of a stand9 ard transaction.

10 ‘‘(d) REQUIREMENT ONLY ON PURCHASING CO11 OPERATIVES.—If a person desires to conduct any of the

12 following transactions with a purchasing cooperative (as

13 defined in section 21100(14)) as a standard transaction,

14 the cooperative shall conduct such standard transaction

15 and the information transmitted or received in connection

16 with such transaction shall be in the form of standard data

17 elements:

18 ‘‘(1) Enrollment and disenrollment.

19 ‘‘(2) Premium payments.

20 ‘‘(e) REQUIREMENT WITH RESPECT TO DISCLOSURE

21 OF INFORMATION.—

22 ‘‘(1) IN GENERAL.—A health plan or health

23 care provider shall make the standard data elements

24 transmitted or received by such plan or provider in

25 connection with the transactions described in sub-
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•S 2351 PCS

1 sections (a), (b), and (c) or acquired under section

2 11764(a) available for disclosure as authorized by

3 this subtitle.

4 ‘‘(2) SPECIAL RULE.—In the case of a health

5 care provider that does not file claims, such provider

6 shall be responsible for making standard data ele7 ments for encounter information available for disclo8 sure as authorized by this subtitle.

9 ‘‘(f) SATISFACTION OF REQUIREMENTS.—A health

10 care provider, health plan, or consumer purchasing cooper11 ative may satisfy the requirement imposed on such pro12 vider, plan, or cooperative under subsection (a), (b), (c),

13 (d), or (e) by—

14 ‘‘(1) directly transmitting standard data ele15 ments;

16 ‘‘(2) submitting nonstandard data elements to a

17 health information network service certified under

18 section 11741 for processing into standard data ele19 ments and transmission; or

20 ‘‘(3) in the case of a provider, submitting data

21 elements to a plan which satisfies the requirements

22 imposed on such provider on the provider’s behalf.

23 ‘‘(g) TIMELINESS.—A health care provider or health

24 plan shall be determined to have satisfied a requirement

25 imposed under this section only if the action required is
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•S 2351 PCS

1 completed in a timely manner, as determined by the Sec2 retary. In setting standards for timeliness, the Secretary

3 shall take into consideration the age and the amount of

4 information being requested.

5 ‘‘SEC. 11722. TIMETABLES FOR COMPLIANCE WITH RE6 QUIREMENTS.

7 ‘‘(a) INITIAL COMPLIANCE.—

8 ‘‘(1) IN GENERAL.—Not later than 12 months

9 after the date on which standards are adopted under

10 part II with respect to a type of transaction or data

11 elements for a type of health information, a health

12 plan, health care provider, or purchasing cooperative

13 shall comply with the requirements of this subtitle

14 with respect to such transaction or information.

15 ‘‘(2) ADDITIONAL DATA ELEMENTS.—Not later

16 than 12 months after the date on which the Sec17 retary adopts an addition to a set of data elements

18 for health information under part II, a health plan,

19 health care provider, or purchasing cooperative shall

20 comply with the requirements of this subtitle using

21 such data elements.

22 ‘‘(b) COMPLIANCE WITH MODIFIED STANDARDS.—

23 ‘‘(1) IN GENERAL.—If the Secretary adopts a

24 modified standard under part II, a health plan,

25 health care provider, or purchasing cooperative shall
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1 be required to comply with the modified standard at

2 such time as the Secretary determines appropriate

3 taking into account the time needed to comply due

4 to the nature and extent of the modification.

5 ‘‘(2) SPECIAL RULE.—In the case of modifica6 tions to standards that do not occur within the 12-

7 month period beginning on the date such standards

8 are adopted, the time determined appropriate by the

9 Secretary under paragraph (1) shall be no sooner

10 than the last day of the 90-day period beginning on

11 the date such modified standard is adopted and no

12 later than the last day of the 12 month period begin13 ning on the date such modified standard is adopted.

14 ‘‘PART IV—ACCESSING HEALTH INFORMATION

15 ‘‘SEC. 11731. ACCESSING HEALTH INFORMATION FOR AU16 THORIZED PURPOSES.

17 ‘‘(a) IN GENERAL.—The Secretary shall adopt tech18 nical standards for appropriate persons, including health

19 plans, health care providers, health information network

20 services certified under section 11741, health researchers,

21 and Federal and State agencies, to locate and access the

22 health information that is available through the health in23 formation network due to the requirements of this subtitle.

24 Such technical standards shall ensure that any request to
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1 locate or access information shall be authorized under sub2 title C.

3 ‘‘(b) PROCUREMENT RULE FOR GOVERNMENT AGEN4 CIES.—

5 ‘‘(1) IN GENERAL.—Health information protec6 tion organizations certified under section 11741

7 shall make available to a Federal or State agency

8 pursuant to a Federal Acquisition Regulation (or an

9 equivalent State system), any non-identifiable health

10 information that is requested by such agency.

11 ‘‘(2) CERTAIN INFORMATION AVAILABLE AT

12 LOW COST.—If a health information protection orga13 nization described in paragraph (1) needs informa14 tion from a health plan or health care provider in

15 order to comply with a request of a Federal or State

16 agency that is necessary to comply with a require17 ment under this Act, such plan or provider shall

18 make such information available to such organiza19 tion for a charge that does not exceed the reasonable

20 cost of transmitting the information. If requested, a

21 health information protection organization that re22 ceives information under the preceding sentence

23 must make such information available to any other

24 such organization that is certified under section
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•S 2351 PCS

1 11741 for a charge that does not exceed the reason2 able cost of transmitting the information.

3 ‘‘(c) FUNCTIONAL SEPARATION.—The standards

4 adopted by the Secretary under subsection (a) shall ensure

5 that any health information disclosed under such sub6 section shall not, after such disclosure, be used or released

7 for an administrative, regulatory, or law enforcement pur8 pose unless such disclosure was made for such purpose.

9 ‘‘(d) PUBLIC USE FUNCTIONS.—Nothing in this sub10 title shall be construed to limit the authority of a Federal

11 or State agency to make non-identifiable health informa12 tion available for public use functions.

13 ‘‘SEC. 11732. RESPONDING TO ACCESS REQUESTS.

14 ‘‘(a) IN GENERAL.—The Secretary may adopt, and

15 modify as appropriate, standards under which a health

16 care provider or health plan shall respond to requests for

17 access to health information consistent with this subtitle

18 and subtitle C.

19 ‘‘(b) STANDARDS DESCRIBED.—The standards under

20 subsection (a) shall provide—

21 ‘‘(1) for a standard format under which a pro22 vider or plan will respond to each request either by

23 satisfying the request or responding with an expla24 nation of the specific restriction which results in a

25 failure to satisfy the request; and
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1 ‘‘(2) that any restrictions will not prevent a

2 plan or provider from responding to a request in a

3 timely manner taking into account the age and

4 amount of the information being requested.

5 ‘‘(c) CONSTRUCTION.—Nothing in this section shall

6 be construed as permitting a health care provider or health

7 plan to refuse to disclose any health information that is

8 required to be disclosed by law.

9 ‘‘SEC. 11733. LENGTH OF TIME INFORMATION SHOULD BE

10 ACCESSIBLE.

11 ‘‘The Secretary shall adopt standards with respect to

12 the length of time any standard data elements for a type

13 of health information should be accessible through the

14 health information network.

15 ‘‘SEC. 11734. TIMETABLES FOR ADOPTION OF STANDARDS

16 AND COMPLIANCE.

17 ‘‘(a) INITIAL STANDARDS.—The Secretary shall

18 adopt standards under this part not later than 9 months

19 after the date of the enactment of this subtitle and such

20 standards shall be effective upon adoption.

21 ‘‘(b) MODIFICATIONS TO STANDARDS.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (2), the Secretary shall review the standards

24 adopted under this part and shall adopt modified

25 standards as determined appropriate, but no more
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1 frequently than once every 6 months. Any modifica2 tion to standards shall be completed in a manner

3 which minimizes the disruption and cost of compli4 ance. Any modifications to standards adopted under

5 this part shall be effective upon adoption.

6 ‘‘(2) SPECIAL RULE.—The Secretary shall not

7 adopt modifications to any standards adopted under

8 this part during the 12-month period beginning on

9 the date such standards are adopted unless the Sec10 retary determines that a modification is necessary in

11 order to permit compliance with the requirements of

12 this part.

13 ‘‘PART V—STANDARDS AND CERTIFICATION FOR

14 HEALTH INFORMATION NETWORK

15 ‘‘SEC. 11741. STANDARDS AND CERTIFICATION FOR HEALTH

16 INFORMATION NETWORK SERVICES.

17 ‘‘(a) STANDARDS FOR OPERATION.—The Secretary

18 shall establish standards with respect to the operation of

19 health information network services, including standards

20 ensuring that—

21 ‘‘(1) such services develop, operate, and cooper22 ate with one another to form the health information

23 network;

24 ‘‘(2) such services meet all of the requirements

25 under subtitle C that are applicable to such services;
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1 ‘‘(3) such services make public information con2 cerning their performance, as measured by uniform

3 indicators such as accessibility, transaction respon4 siveness, administrative efficiency, reliability, de5 pendability, and any other indicator determined ap6 propriate by the Secretary;

7 ‘‘(4) such services have security procedures that

8 are consistent with the privacy requirements under

9 subtitle C, including secure methods of access to and

10 transmission of data;

11 ‘‘(5) such services, if they are part of a larger

12 organization, have policies and procedures in place

13 which isolate their activities with respect to process14 ing information in a manner that prevents access to

15 such information by such larger organization.

16 ‘‘(b) CERTIFICATION BY THE SECRETARY.—

17 ‘‘(1) ESTABLISHMENT.—Not later than 12

18 months after the date of the enactment of this sub19 title, the Secretary shall establish a certification pro20 cedure for health information network services which

21 ensures that certified services are qualified to meet

22 the requirements of this subtitle and the standards

23 established by the Secretary under this section. Such

24 certification procedure shall be implemented in a
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1 manner that minimizes the costs and delays of oper2 ations for such services.

3 ‘‘(2) APPLICATION.—Each entity desiring to be

4 certified as a health information network service

5 shall apply to the Secretary for certification in a

6 form and manner determined appropriate by the

7 Secretary.

8 ‘‘(3) AUDITS AND REPORTS.—The procedure

9 established under paragraph (1) shall provide for au10 dits by the Secretary and reports by an entity cer11 tified under this section as the Secretary determines

12 appropriate in order to monitor such entity’s compli13 ance with the requirements of this subtitle, subtitle

14 C, and the standards established by the Secretary

15 under this section.

16 ‘‘(4) RECERTIFICATION.—A health information

17 network service must be recertified under this sub18 section at least every 3 years.

19 ‘‘(c) LOSS OF CERTIFICATION.—

20 ‘‘(1) MANDATORY TERMINATION.—Except as

21 provided in paragraph (3), if a health information

22 network service violates a requirement imposed on

23 such service under subtitle C, its certification under

24 this section shall be terminated unless the Secretary
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1 determines that appropriate corrective action has

2 been taken.

3 ‘‘(2) DISCRETIONARY TERMINATION.—If a

4 health information network service violates a re5 quirement or standard imposed under this subtitle

6 and a penalty has been imposed under section

7 11751, the Secretary shall review the certification of

8 such service and may terminate such certification.

9 ‘‘(3) CONDITIONAL CERTIFICATION.—The Sec10 retary may establish a procedure under which a

11 health information network service may remain cer12 tified on a conditional basis if the service is operat13 ing consistently with a plan intended to correct any

14 violations described in paragraphs (1) or (2). Such

15 procedure may provide for the appointment of a

16 trustee to continue operation of the service until the

17 requirements for full certification are met.

18 ‘‘(d) CERTIFICATION BY PRIVATE ENTITIES.—The

19 Secretary may designate private entities to conduct the

20 certification procedures established by the Secretary under

21 this section. A health information network service certified

22 by such an entity in accordance with such designation

23 shall be considered to be certified by the Secretary.
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1 ‘‘SEC. 11742. ENSURING AVAILABILITY OF INFORMATION.

2 ‘‘The Secretary shall establish a procedure under

3 which a health plan or health care provider which does

4 not have the ability to transmit standard data elements

5 directly or does not have access to a health information

6 network service certified under section 11741 shall be able

7 to make health information available for disclosure as au8 thorized by this subtitle.

9 ‘‘PART VI—PENALTIES

10 ‘‘SEC. 11751. GENERAL PENALTY FOR FAILURE TO COMPLY

11 WITH REQUIREMENTS AND STANDARDS.

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

13 (b), the Secretary shall impose on any person that violates

14 a requirement or standard imposed under this subtitle a

15 penalty of not more than $1,000 for each violation. The

16 provisions of section 1128A (other than subsections (a)

17 and (b) and the second sentence of subsection (f)) shall

18 apply to the imposition of a civil money penalty under this

19 subsection in the same manner as such provisions apply

20 to the imposition of a penalty under section 1128A.

21 ‘‘(b) LIMITATIONS.—

22 ‘‘(1) NONCOMPLIANCE NOT DISCOVERED EXER23 CISING REASONABLE DILIGENCE.—A penalty may

24 not be imposed under subsection (a) if it is estab25 lished to the satisfaction of the Secretary that the

26 person liable for the penalty did not know, and by
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1 exercising reasonable diligence would not have

2 known, that such person failed to comply with the

3 requirement or standard described in subsection (a).

4 ‘‘(2) FAILURES DUE TO REASONABLE CAUSE.—

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

6 subparagraphs (B) and (C), a penalty may not

7 be imposed under subsection (a) if—

8 ‘‘(i) the failure to comply was due to

9 reasonable cause and not to willful neglect;

10 and

11 ‘‘(ii) the failure to comply is corrected

12 during the 30-day period beginning on the

13 1st date the person liable for the penalty

14 knew, or by exercising reasonable diligence

15 would have known, that the failure to com16 ply occurred.

17 ‘‘(B) EXTENSION OF PERIOD.—

18 ‘‘(i) NO PENALTY.—The period re19 ferred to in subparagraph (A)(ii) may be

20 extended as determined appropriate by the

21 Secretary based on the nature and extent

22 of the failure to comply.

23 ‘‘(ii) ASSISTANCE.—If the Secretary

24 determines that a health plan, health care

25 provider, or purchasing cooperative failed
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1 to comply because such person was unable

2 to comply, the Secretary may provide tech3 nical assistance to such person. Such as4 sistance shall be provided in any manner

5 determined appropriate by the Secretary.

6 ‘‘(3) REDUCTION.—In the case of a failure to

7 comply which is due to reasonable cause and not to

8 willful neglect, any penalty under subsection (a) that

9 is not entirely waived under paragraph (2) may be

10 waived to the extent that the payment of such pen11 alty would be excessive relative to the compliance

12 failure involved.

13 ‘‘PART VII—MISCELLANEOUS PROVISIONS

14 ‘‘SEC. 11761. IMPOSITION OF ADDITIONAL REQUIREMENTS.

15 ‘‘(a) DATA ELEMENT STANDARDS.—A person may

16 not impose a standard on another person that is in addi17 tion to the standards adopted by the Secretary under sec18 tion 11712 unless—

19 ‘‘(1) such person voluntarily agrees to such

20 standard; or

21 ‘‘(2) a waiver is granted under subsection (c) to

22 impose such standard.

23 ‘‘(b) TRANSACTIONS AND ACCESS STANDARDS.—A

24 person may not impose a standard on another person that

25 is in addition to the standards adopted by the Secretary
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1 under section 11713 or 11731 unless such person volun2 tarily agrees to such standard.

3 ‘‘(c) CONDITIONS FOR WAIVERS.—

4 ‘‘(1) IN GENERAL.—A person may request a

5 waiver from the Secretary in order to require an6 other person to comply with a standard that is in

7 addition to the standards adopted by the Secretary

8 under section 11712.

9 ‘‘(2) CONSIDERATION OF WAIVER REQUESTS.—

10 No waiver may be granted unless the Secretary de11 termines that the value of the data to be exchanged

12 for research or other purposes significantly out13 weighs the administrative cost of the additional

14 standard taking into consideration the burden of the

15 timing of the imposition of the additional standard.

16 ‘‘(3) ANONYMOUS REPORTING.—If a person at17 tempts to impose a standard in addition to the

18 standards adopted by the Secretary under section

19 11712, the person on whom such additional stand20 ard is being imposed may contact the Secretary. The

21 Secretary shall develop a procedure under which the

22 contacting person shall remain anonymous. The Sec23 retary shall notify the person imposing the addi24 tional standard that the additional standard may not

25 be imposed unless the other person voluntarily
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1 agrees to such standard or a waiver is obtained

2 under this subsection.

3 ‘‘SEC. 11762. EFFECT ON STATE LAW.

4 ‘‘(a) IN GENERAL.—A provision, requirement, or

5 standard under this subtitle shall supersede any contrary

6 provision of State law, including—

7 ‘‘(1) a provision of State law that requires med8 ical or health plan records (including billing informa9 tion) to be maintained or transmitted in written

10 rather than electronic form, and

11 ‘‘(2) a provision of State law which provides for

12 requirements or standards that are more stringent

13 than the requirements or standards under this sub14 title;

15 except where the Secretary determines that the provision

16 is necessary to prevent fraud and abuse, with respect to

17 controlled substances, or for other purposes.

18 ‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this

19 subtitle shall be construed to invalidate or limit the au20 thority, power, or procedures established under any law

21 providing for the reporting of disease or injury, child

22 abuse, birth, or death, public health surveillance, or public

23 health investigation or intervention.
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1 ‘‘SEC. 11764. HEALTH INFORMATION CONTINUITY.

2 ‘‘(a) INFORMATION HELD BY HEALTH PLANS AND

3 PROVIDERS.—If a health plan or health care provider

4 takes any action that would threaten the continued avail5 ability of the standard data elements of health information

6 held by such plan or provider, such data elements shall

7 be obtained by the State in which such plan or provider

8 is located. The State shall ensure that such data elements

9 are transferred to a health plan or health care provider

10 in accordance with procedures established by the Sec11 retary.

12 ‘‘(b) INFORMATION HELD BY HEALTH INFORMATION

13 NETWORK SERVICES.—If a health information network

14 service certified under section 11741 loses its certified sta15 tus or takes any action that would threaten the continued

16 availability of the standard data elements of health infor17 mation held by such service, such data elements shall be

18 transferred to another health information network service

19 certified under section 11741, as designated by the Sec20 retary.

21 ‘‘SEC. 11765. PROTECTION OF COMMERCIAL INFORMATION.

22 ‘‘In adopting standards under this subtitle, the Sec23 retary shall not require disclosure of trade secrets and

24 confidential commercial information by entities operating

25 in the health information network except as required by

26 law.
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1 ‘‘SEC. 11766. PAYMENT FOR HEALTH CARE SERVICES OR

2 HEALTH PLAN PREMIUMS.

3 ‘‘Nothing in this subtitle shall be construed to pro4 hibit payments for health care services or health plan pre5 miums from being made by debit, credit, or other payment

6 cards or numbers or other electronic payment means.

7 ‘‘SEC. 11767. HEALTH SECURITY CARDS.

8 ‘‘(a) IN GENERAL.—The Secretary shall establish

9 standards relating to the form of health security cards is10 sued by health plans and the information to be encoded

11 electronically on such cards.

12 ‘‘(b) FORM DESCRIBED.—The standard form for a

13 health security card shall be a card which—

14 ‘‘(1) is made of plastic or a similar durable ma15 terial with a useful life of at least 5 years;

16 ‘‘(2) is resistant to counterfeiting;

17 ‘‘(3) can store information that can be encoded

18 and retrieved electronically;

19 ‘‘(4) can be produced in a cost-effective manner

20 and used in all types of health care locations; and

21 ‘‘(5) specifies on its face the social security ac22 count number assigned to the individual who is the

23 cardholder by the Secretary under section 205(c)(2).

24 ‘‘(c) INFORMATION DESCRIBED.—The information

25 electronically encoded on a health security card shall in26 clude the identity of the individual to whom the card was
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1 issued, including such individual’s personal health identi2 fier specified under section 11712(c)(1), and may include

3 any other information that the Secretary determines may

4 be useful in order for the card to serve the purpose of

5 easing access to and paying for health care services. A

6 health plan shall make available to an individual card7 holder, upon demand by such individual, a printed copy

8 of all information electronically encoded on such individ9 ual’s health security card.

10 ‘‘SEC. 11768. MISUSE OF HEALTH SECURITY CARD OR PER11 SONAL HEALTH IDENTIFIER.

12 ‘‘(a) HEALTH SECURITY CARD.—A person who—

13 ‘‘(1) requires the display of, requires the use of,

14 or uses a health security card for any purpose other

15 than obtaining or paying for health care;

16 ‘‘(2) falsely makes, forges, counterfeits or alters

17 a health security card;

18 ‘‘(3) without lawful authority prints, photo19 graphs, or makes any impression in the likeness of

20 any health security card; or

21 ‘‘(4) sells, transfers, or otherwise delivers a

22 false, forged, counterfeited, or altered health security

23 card knowing that the card is false, forged, counter24 feited, or altered;
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1 shall be fined not more than $25,000, imprisoned not

2 more than 2 years, or both.

3 ‘‘(b) PERSONAL HEALTH IDENTIFIER.—A person

4 who requires the disclosure of, requires the use of, or uses

5 an individual’s personal health identifier for any purpose

6 that is not authorized by the Secretary, shall be fined not

7 more than $25,000, imprisoned not more than 2 years,

8 or both.

9 ‘‘SEC. 11769. DIRECT BILLING FOR CLINICAL LABORATORY

10 SERVICES.

11 ‘‘(a) IN GENERAL.—

12 ‘‘(1) REQUIREMENT.—Except as provided in

13 paragraph (2), in the case of a claim for payment

14 for a clinical diagnostic laboratory test for which

15 payment may otherwise be made, payment may be

16 made only to the person who, or entity which, per17 formed or supervised the test.

18 ‘‘(2) EXCEPTIONS.—Payment for a clinical di19 agnostic laboratory test may be made to a physician

20 with whom the physician who performed the test

21 shares a practice.

22 ‘‘(b) ADDITIONAL EXCEPTIONS.—The Secretary

23 may, by regulation, establish exceptions to the require24 ment under subsection (a)(1) that are in addition to the
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1 exceptions under subsection (a)(2). In establishing such

2 exceptions the Secretary shall take into account—

3 ‘‘(1) circumstances in which an individual’s pri4 vacy might be violated; or

5 ‘‘(2) the need for confidentiality on the part of

6 the person furnishing the test.

7 ‘‘SEC. 11770. AUTHORIZATION OF APPROPRIATIONS.

8 ‘‘There are authorized to be appropriated such sums

9 as may be necessary to carry out the purposes of this sub10 title.

11 ‘‘PART VIII—ASSISTANCE TO THE SECRETARY

12 ‘‘SEC. 11771. GENERAL REQUIREMENT ON SECRETARY.

13 ‘‘In complying with any requirements imposed under

14 this subtitle, the Secretary shall rely on recommendations

15 of the Health Information Advisory Committee established

16 under section 11772 and shall consult with appropriate

17 Federal agencies.

18 ‘‘SEC. 11772. HEALTH INFORMATION ADVISORY COMMIT19 TEE.

20 ‘‘(a) ESTABLISHMENT.—There is established a com21 mittee to be known as the Health Care Information Advi22 sory Committee.

23 ‘‘(b) DUTY.—

24 ‘‘(1) IN GENERAL.—The committee shall—
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1 ‘‘(A) provide assistance to the Secretary in

2 complying with the requirements imposed on

3 the Secretary under this subtitle and subtitle C;

4 ‘‘(B) be generally responsible for advising

5 the Secretary and the Congress on the status of

6 the health information network; and

7 ‘‘(C) make recommendations to correct any

8 problems that may occur in the network’s im9 plementation and ongoing operations and to re10 fine and improve the network.

11 ‘‘(2) TECHNICAL ASSISTANCE.—In performing

12 its duties under this subsection, the committee shall

13 receive technical assistance from appropriate Federal

14 agencies.

15 ‘‘(c) MEMBERSHIP.—

16 ‘‘(1) IN GENERAL.—The committee shall con17 sist of 15 members to be appointed by the President

18 not later than 60 days after the date of the enact19 ment of this subtitle. The President shall designate

20 1 member as the Chair.

21 ‘‘(2) EXPERTISE.—The membership of the com22 mittee shall consist of individuals who are of recog23 nized standing and distinction and who possess the

24 demonstrated capacity to discharge the duties im25 posed on the committee.
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1 ‘‘(3) TERMS.—Each member of the committee

2 shall be appointed for a term of 5 years, except that

3 the members first appointed shall serve staggered

4 terms such that the terms of no more than 3 mem5 bers expire at one time.

6 ‘‘(4) VACANCIES.—

7 ‘‘(A) IN GENERAL.—A vacancy on the

8 committee shall be filled in the manner in which

9 the original appointment was made and shall be

10 subject to any conditions which applied with re11 spect to the original appointment.

12 ‘‘(B) FILLING UNEXPIRED TERM.—An in13 dividual chosen to fill a vacancy shall be ap14 pointed for the unexpired term of the member

15 replaced.

16 ‘‘(C) EXPIRATION OF TERMS.—The term

17 of any member shall not expire before the date

18 on which the member’s successor takes office.

19 ‘‘(5) CONFLICTS OF INTEREST.—Members of

20 the committee shall disclose upon appointment to

21 the committee or at any subsequent time that it may

22 occur, conflicts of interest.

23 ‘‘(d) MEETINGS.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the committee shall meet at the call of

3 the Chair.

4 ‘‘(2) INITIAL MEETING.—Not later than 30

5 days after the date on which all members of the

6 committee have been appointed, the committee shall

7 hold its first meeting.

8 ‘‘(3) QUORUM.—A majority of the members of

9 the committee shall constitute a quorum, but a less10 er number of members may hold hearings.

11 ‘‘(e) POWER TO HOLD HEARINGS.—The committee

12 may hold such hearings, sit and act at such times and

13 places, take such testimony, and receive such evidence as

14 the committee considers advisable to carry out the pur15 poses of this section.

16 ‘‘(f) OTHER ADMINISTRATIVE PROVISIONS.—Sub17 paragraphs (C), (D), and (H) of section 1886(e)(6) shall

18 apply to the committee in the same manner as they apply

19 to the Prospective Payment Assessment Commission.

20 ‘‘(g) REPORTS.—

21 ‘‘(1) IN GENERAL.—The committee shall annu22 ally prepare and submit to Congress and the Sec23 retary a report including at least an analysis of—

24 ‘‘(A) the status of the health information

25 network established under this subtitle, includ-
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1 ing whether the network is fulfilling the pur2 pose described in section 11701;

3 ‘‘(B) the savings and costs of the network;

4 ‘‘(C) the activities of health information

5 network services certified under section 11741,

6 health care providers, health plans, and other

7 entities using the network to exchange health

8 information;

9 ‘‘(D) the extent to which entities described

10 in subparagraph (C) are meeting the standards

11 adopted under this subtitle and working to12 gether to form an integrated network that

13 meets the needs of its users;

14 ‘‘(E) the extent to which entities described

15 in subparagraph (C) are meeting the privacy

16 and security protections of subtitle C;

17 ‘‘(F) the number and types of penalties as18 sessed for noncompliance with the standards

19 adopted under this subtitle;

20 ‘‘(G) whether the Federal Government and

21 State Governments are receiving information of

22 sufficient quality to meet their responsibilities

23 under the Health Security Act;

24 ‘‘(H) any problems with respect to imple25 mentation of the network;
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1 ‘‘(I) the extent to which timetables under

2 this subtitle for the adoption and implementa3 tion of standards are being met; and

4 ‘‘(J) any legislative recommendations relat5 ed to the health information network.

6 ‘‘(2) AVAILABILITY TO THE PUBLIC.—Any in7 formation in the report submitted to Congress under

8 paragraph (1) shall be made available to the public

9 unless such information may not be disclosed by law.

10 ‘‘(h) DURATION.—Notwithstanding section 14(a) of

11 the Federal Advisory Committee Act, the committee shall

12 continue in existence until otherwise provided by law.

13 ‘‘(i) AUTHORIZATION OF APPROPRIATIONS.—

14 ‘‘(1) IN GENERAL.—There are authorized to be

15 appropriated such sums as may be necessary to

16 carry out the purposes of this section.

17 ‘‘(2) AVAILABILITY.—Any sums appropriated

18 under the authorization contained in this subsection

19 shall remain available, without fiscal year limitation,

20 until expended.
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1 ‘‘PART IX—DEMONSTRATION PROJECTS FOR

2 COMMUNITY-BASED CLINICAL INFORMATION

3 SYSTEMS

4 ‘‘SEC. 11781. GRANTS FOR DEMONSTRATION PROJECTS.

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

6 for demonstration projects to promote the development

7 and use of electronically integrated community-based clini8 cal information systems and computerized patient medical

9 records.

10 ‘‘(b) APPLICATIONS.—

11 ‘‘(1) SUBMISSION.—To apply for a grant under

12 this part for any fiscal year, an applicant shall sub13 mit an application to the Secretary in accordance

14 with the procedures established by the Secretary.

15 ‘‘(2) CRITERIA FOR APPROVAL.—The Secretary

16 may not approve an application submitted under

17 paragraph (1) unless the application includes assur18 ances satisfactory to the Secretary regarding the fol19 lowing:

20 ‘‘(A) USE OF EXISTING TECHNOLOGY.—

21 Funds received under this part will be used to

22 apply telecommunications and information sys23 tems technology that is in existence on the date

24 the application is submitted in a manner that

25 improves the quality of health care, reduces the

26 costs of such care, and protects the privacy and
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1 confidentiality of information relating to the

2 physical or mental condition of an individual.

3 ‘‘(B) USE OF EXISTING INFORMATION SYS4 TEMS.—Funds received under this part will be

5 used—

6 ‘‘(i) to enhance telecommunications or

7 information systems that are operating on

8 the date the application is submitted;

9 ‘‘(ii) to integrate telecommunications

10 or information systems that are operating

11 on the date the application is submitted; or

12 ‘‘(iii) to connect additional users to

13 telecommunications or information net14 works or systems that are operating on the

15 date the application is submitted.

16 ‘‘(C) MATCHING FUNDS.—The applicant

17 shall make available funds for the demonstra18 tion project in an amount that equals at least

19 20 percent of the cost of the project.

20 ‘‘(c) GEOGRAPHIC DIVERSITY.—In making any

21 grants under this part, the Secretary shall, to the extent

22 practicable, make grants to persons representing different

23 geographic areas of the United States, including urban

24 and rural areas.
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1 ‘‘(d) REVIEW AND SANCTIONS.—The Secretary shall

2 review at least annually the compliance of a person receiv3 ing a grant under this part with the provisions of this

4 part. The Secretary shall establish a procedure for deter5 mining whether such a person has failed to comply sub6 stantially within the provisions of this part and the sanc7 tions to be imposed for any such noncompliance.

8 ‘‘(e) ANNUAL REPORT.—The Secretary shall submit

9 an annual report to the President for transmittal to Con10 gress containing a description of the activities carried out

11 under this part.

12 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

13 are authorized to be appropriated such sums as may be

14 necessary to carry out the purposes of this section.’’.

15 (2) Conforming amendments.—(A) Title XI of

16 the Social Security Act (42 U.S.C. 1301 et seq.) is

17 amended by striking the title and inserting the fol18 lowing:
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1 ‘‘TITLE XI—GENERAL PROVI2 SIONS, PEER REVIEW, AND

3 ADMINISTRATIVE SIM4 PLIFICATION

5 ‘‘Subtitle A—General Provisions

6 and Peer Review’’

7 (B) Title XI of the Social Security Act (42

8 U.S.C. 1301 et seq.) is amended by striking each

9 reference to ‘‘this title’’ and inserting ‘‘this subtitle’’.

10 SEC. 402. PRIVACY OF HEALTH INFORMATION UNDER THE

11 SOCIAL SECURITY ACT.

12 (a) IN GENERAL.—Title XI of the Social Security Act

13 (42 U.S.C. 1301 et seq.), as amended by section 401, is

14 amended by adding at the end the following new subtitle:

15 ‘‘Subtitle C—Privacy of Health

16 Information

‘‘TABLE OF CONTENTS OF SUBTITLE

‘‘Subtitle C—Privacy of Health Information

‘‘PART I—FINDINGS AND DEFINITIONS

‘‘Sec. 11801. Findings and purposes.

‘‘Sec. 11802. Definitions.

‘‘PART II—AUTHORIZED DISCLOSURES

‘‘SUBPART A—GENERAL PROVISIONS

‘‘Sec. 11811. General rules regarding disclosure.

‘‘Sec. 11812. Authorizations for disclosure of protected health information.

‘‘Sec. 11813. Certified health information network services.

‘‘SUBPART B—SPECIFIC DISCLOSURES RELATING TO PATIENT

‘‘Sec. 11821. Disclosures for treatment and financial and administrative

transactions.

‘‘Sec. 11822. Next of kin and directory information.
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‘‘Sec. 11823. Emergency circumstances.

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

PURPOSES

‘‘Sec. 11831. Oversight.

‘‘Sec. 11832. Public health.

‘‘Sec. 11833. Health research.

‘‘SUBPART D—DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW

ENFORCEMENT PURPOSES

‘‘Sec. 11841. Judicial and administrative purposes.

‘‘Sec. 11842. Law enforcement.

‘‘SUBPART E—DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR

WARRANT

‘‘Sec. 11851. Government subpoenas and warrants.

‘‘Sec. 11852. Access procedures for law enforcement subpoenas and warrants.

‘‘Sec. 11853. Challenge procedures for law enforcement warrants and subpoenas.

‘‘SUBPART F—DISCLOSURE PURSUANT TO PRIVATE PARTY SUBPOENA

‘‘Sec. 11854. Private party subpoenas.

‘‘Sec. 11855. Access procedures for private party subpoenas.

‘‘Sec. 11856. Challenge procedures for private party subpoenas.

‘‘PART III—PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH

INFORMATION

‘‘SUBPART A—ESTABLISHMENT OF SAFEGUARDS

‘‘Sec. 11861. Establishment of safeguards.

‘‘Sec. 11862. Accounting for disclosures.

‘‘SUBPART B—REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS

OF THE INFORMATION

‘‘Sec. 11871. Inspection of protected health information.

‘‘Sec. 11872. Amendment of protected health information.

‘‘Sec. 11873. Notice of information practices.

‘‘SUBPART C—STANDARDS FOR ELECTRONIC DISCLOSURES

‘‘Sec. 11882. Standards for electronic disclosures.

‘‘PART IV—SANCTIONS

‘‘SUBPART A—NO SANCTIONS FOR PERMISSIBLE ACTIONS

‘‘Sec. 11891. No liability for permissible disclosures.

‘‘Sec. 11892. No liability for institutional review board determinations.

‘‘Sec. 11893. Reliance on certified entity.

‘‘SUBPART B—CIVIL SANCTIONS

‘‘Sec. 11901. Civil penalty.

‘‘Sec. 11902. Civil action.
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‘‘SUBPART C—CRIMINAL SANCTIONS

‘‘Sec. 11911. Wrongful disclosure of protected health information.

‘‘PART V—ADMINISTRATIVE PROVISIONS

‘‘Sec. 11921. Relationship to other laws.

‘‘Sec. 11922. Rights of incompetents.

‘‘Sec. 11923. Exercise of rights.

1 ‘‘PART I—FINDINGS AND DEFINITIONS

2 ‘‘SEC. 11801. FINDINGS AND PURPOSES.

3 ‘‘(a) FINDINGS.—The Congress finds as follows:

4 ‘‘(1) The improper disclosure of individually

5 identifiable health care information may cause sig6 nificant harm to an individual’s interests in privacy,

7 health care, and reputation and may unfairly affect

8 the ability of an individual to obtain employment,

9 education, insurance, and credit.

10 ‘‘(2) The movement of people and health care

11 related information across State lines, the availabil12 ity of, access to, and exchange of health care related

13 information with Federally funded health care sys14 tems, the medicare program under title XVIII, and

15 the medicaid program under title XIX, through

16 automated data banks and networks, and the emer17 gence of other multistate health care providers and

18 payors create a need for a uniform Federal law gov19 erning the disclosure of health care information.

20 ‘‘(b) PURPOSE.—The purpose of this subtitle is to es21 tablish effective mechanisms to protect the privacy of indi-
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1 viduals with respect to individually identifiable health care

2 information that is created or maintained as part of health

3 treatment, enrollment, payment, testing, or research proc4 esses.

5 ‘‘SEC. 11802. DEFINITIONS.

6 ‘‘(a) TERMS RELATING TO PROTECTED HEALTH IN7 FORMATION.—In this subtitle:

8 ‘‘(1) PROTECTED HEALTH INFORMATION.—The

9 term ‘protected health information’ means any infor10 mation, including demographic information collected

11 from an individual, whether oral or recorded in any

12 form or medium, that—

13 ‘‘(A) is created or received by a health care

14 provider, health plan, health oversight agency,

15 health researcher, public health authority, em16 ployer, life insurer, school or university, or cer17 tified health information network service; and

18 ‘‘(B) relates to the past, present, or future

19 physical or mental health or condition of an in20 dividual, the provision of health care to an indi21 vidual, or the past, present, or future payment

22 for the provision of health care to an individual,

23 and—

24 ‘‘(i) identifies an individual; or
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1 ‘‘(ii) with respect to which there is a

2 reasonable basis to believe that the infor3 mation can be used to identify an individ4 ual.

5 ‘‘(2) DISCLOSE.—The term ‘disclose’, when

6 used with respect to protected health information,

7 means to provide access to the information, but only

8 if such access is provided to a person other than the

9 individual who is the subject of the information.

10 ‘‘(b) TERMS RELATING TO HEALTH CARE SYSTEM

11 PARTICIPANTS.—In this subtitle:

12 ‘‘(1) HEALTH INFORMATION TRUSTEE.—The

13 term ‘health information trustee’ means—

14 ‘‘(A) a health care provider, health plan,

15 health oversight agency, certified health infor16 mation network service, employer, life insurer,

17 or school or university insofar as it creates, re18 ceives, maintains, uses, or transmits protected

19 health information;

20 ‘‘(B) any person who obtains protected

21 health information under section 11823, 11832,

22 11833, 11841, 11842, 11851, or 11854; and

23 ‘‘(C) any employee or agent of a person

24 covered under subparagraphs (A) or (B).

25 ‘‘(2) HEALTH CARE.—The term ‘health care’—
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1 ‘‘(A) means—

2 ‘‘(i) a preventative, diagnostic, thera3 peutic, rehabilitative, maintenance, or pal4 liative care, counseling, service, or proce5 dure—

6 ‘‘(I) with respect to the physical

7 or mental condition of an individual;

8 or

9 ‘‘(II) affecting the structure or

10 function of the human body or any

11 part of the human body; or

12 ‘‘(ii) any sale or dispensing of a drug,

13 device, equipment, or other item to an indi14 vidual, or for the use of an individual, pur15 suant to a prescription; but

16 ‘‘(B) does not include any item or service

17 that is not furnished for the purpose of examin18 ing, maintaining, or improving the health of an

19 individual.

20 ‘‘(3) HEALTH CARE PROVIDER.—The term

21 ‘health care provider’ means a person who is li22 censed, certified, registered, or otherwise authorized

23 by law to provide an item or service that constitutes

24 health care in the ordinary course of business or

25 practice of a profession.
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1 ‘‘(4) HEALTH OVERSIGHT AGENCY.—The term

2 ‘health oversight agency’ means a person who—

3 ‘‘(A) performs or oversees the performance

4 of an assessment, evaluation, determination, or

5 investigation relating to the licensing, accredita6 tion, or certification of health care

7 providers; or

8 ‘‘(B)(i) performs or oversees the perform9 ance of an assessment, evaluation, determina10 tion, or investigation relating to the effective11 ness of, compliance with, or applicability of

12 legal, fiscal, medical, or scientific standards or

13 aspects of performance related to the delivery

14 of, or payment for, health care or relating to

15 health care fraud or fraudulent claims for pay16 ment regarding health; and

17 ‘‘(ii) is a public agency, acting on behalf of

18 a public agency, acting pursuant to a require19 ment of a public agency, or carrying out activi20 ties under a Federal or State law governing the

21 assessment, evaluation, determination, or inves22 tigation described in clause (i).

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

24 shall have the meaning given such term under sec25 tion 11702.
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1 ‘‘(6) HEALTH RESEARCHER.—The term ‘health

2 researcher’ means a person who conducts a bio3 medical, public health, epidemiological, health serv4 ices, or health statistics research project or a re5 search project on social and behavioral factors relat6 ing to health.

7 ‘‘(7) INSTITUTIONAL REVIEW BOARD.—The

8 term ‘institutional review board’ means—

9 ‘‘(A) a board established in accordance

10 with regulations of the Secretary under section

11 491(a) of the Public Health Service Act;

12 ‘‘(B) a similar board established by the

13 Secretary for the protection of human subjects

14 in research conducted by the Secretary; or

15 ‘‘(C) a similar board established under reg16 ulations of a Federal Government authority

17 other than the Secretary.

18 ‘‘(8) PUBLIC HEALTH AUTHORITY.—The term

19 ‘public health authority’ means an authority or in20 strumentality of the United States, a State, or a po21 litical subdivision of a State that is (A) responsible

22 for public health matters; and (B) engaged in such

23 activities as injury reporting, public health surveil24 lance, and public health investigation or interven25 tion.
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1 ‘‘(c) REFERENCES TO CERTIFIED ENTITIES.—In this

2 subtitle:

3 ‘‘(1) CERTIFIED HEALTH INFORMATION NET4 WORK SERVICE.—The term ‘certified health informa5 tion network service’ means a health information

6 service (as defined under section 11702) that is cer7 tified under section 11741.

8 ‘‘(2) CERTIFIED HEALTH INFORMATION PRO9 TECTION ORGANIZATION.—The term ‘certified health

10 information protection organization’ means a health

11 information protection organization (as defined in

12 section 11702) that is certified under section 11741.

13 ‘‘(d) OTHER TERMS.—In this subtitle:

14 ‘‘(1) INDIVIDUAL REPRESENTATIVE.—The term

15 ‘individual representative’ means any individual le16 gally empowered to make decisions concerning the

17 provision of health care to an individual (where the

18 individual lacks the legal capacity under State law to

19 make such decisions) or the administrator or execu20 tor of the estate of a deceased individual.

21 ‘‘(2) LAW ENFORCEMENT INQUIRY.—The term

22 ‘law enforcement inquiry’ means an investigation or

23 official proceeding inquiring into whether there is a

24 violation of, or failure to comply with, any criminal
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1 or civil statute or any regulation, rule, or order is2 sued pursuant to such a statute.

3 ‘‘(3) PERSON.—The term ‘person’ includes an

4 authority of the United States, a State, or a political

5 subdivision of a State.

6 ‘‘PART II—AUTHORIZED DISCLOSURES

7 ‘‘Subpart A—General Provisions

8 ‘‘SEC. 11811. GENERAL RULES REGARDING DISCLOSURE.

9 ‘‘(a) GENERAL RULE.—A health information trustee

10 may disclose protected health information only for a pur11 pose that is authorized under this subtitle.

12 ‘‘(b) DISCLOSURE WITHIN A TRUSTEE.—A health in13 formation trustee may disclose protected health informa14 tion to an officer, employee, or agent of the trustee, but

15 only for a purpose that is compatible with and related to

16 the purpose for which the information was collected or re17 ceived by that trustee.

18 ‘‘(c) SCOPE OF DISCLOSURE.—

19 ‘‘(1) IN GENERAL.—Every disclosure of pro20 tected health information by a health information

21 trustee shall be limited to the minimum amount of

22 information necessary to accomplish the purpose for

23 which the information is disclosed.

24 ‘‘(2) REGULATIONS.—The Secretary, after no25 tice and opportunity for public comment, may issue
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1 regulations under paragraph (1), which shall take

2 into account the technical capabilities of the record

3 systems used to maintain protected health informa4 tion and the costs of limiting disclosure.

5 ‘‘(d) NO GENERAL REQUIREMENT TO DISCLOSE.—

6 Nothing in this subtitle that permits a disclosure of health

7 information shall be construed to require such disclosure.

8 ‘‘(e) USE AND REDISCLOSURE OF INFORMATION.—

9 The protected health information received under a disclo10 sure permitted by the subtitle may not be used or disclosed

11 unless the use or disclosure is necessary to fulfill the pur12 pose for which the information was obtained and is not

13 otherwise prohibited by law. Protected health information

14 about an individual that is disclosed under this subtitle

15 may not be used in, or disclosed to any person for use

16 in, any administrative, civil, or criminal action or inves17 tigation directed against the individual unless specifically

18 permitted by this subtitle.

19 ‘‘(f) IDENTIFICATION OF DISCLOSED INFORMATION

20 AS PROTECTED INFORMATION.—

21 ‘‘(1) IN GENERAL.—Except with respect to pro22 tected health information that is disclosed under sec23 tion 11823 and except as provided in paragraph (2),

24 a health information trustee may not disclose pro25 tected health information unless such information is
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1 clearly identified as protected health information

2 that is subject to this subtitle.

3 ‘‘(2) ROUTINE DISCLOSURES SUBJECT TO WRIT4 TEN AGREEMENT.—A health information trustee

5 who routinely discloses protected health information

6 to a person may satisfy the identification require7 ment in paragraph (1) through a written agreement

8 between the trustee and the person with respect to

9 the protected health information.

10 ‘‘(g) CONSTRUCTION.—Nothing in this subtitle shall

11 be construed to limit the ability of a health information

12 trustee to charge a reasonable fee for the disclosure or

13 reproduction of health information.

14 ‘‘(h) INFORMATION IN WHICH PROVIDERS ARE IDEN15 TIFIED.—The Secretary, after notice and opportunity for

16 public comment, may issue regulations protecting informa17 tion identifying providers in order to promote the availabil18 ity of health care services.

19 ‘‘SEC. 11812. AUTHORIZATIONS FOR DISCLOSURE OF PRO20 TECTED HEALTH INFORMATION.

21 ‘‘(a) WRITTEN AUTHORIZATIONS.—A health infor22 mation trustee may disclose protected health information

23 pursuant to an authorization executed by the individual

24 who is the subject of the information, if each of the follow25 ing requirements is met:
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1 ‘‘(1) WRITING.—The authorization is in writ2 ing, signed by the individual who is the subject of

3 the information, and dated on the date of such sig4 nature.

5 ‘‘(2) SEPARATE FORM.—The authorization is

6 not on a form used to authorize or facilitate the pro7 vision of, or payment for, health care.

8 ‘‘(3) TRUSTEE DESCRIBED.—The trustee is

9 specifically named or generically described in the au10 thorization as authorized to disclose such informa11 tion.

12 ‘‘(4) RECIPIENT DESCRIBED.—The person to

13 whom the information is to be disclosed is specifi14 cally named or generically described in the author15 ization as a person to whom such information may

16 be disclosed.

17 ‘‘(5) STATEMENT OF INTENDED DISCLO18 SURES.—The authorization contains an acknowledg19 ment that the individual who is the subject of the in20 formation has read a statement of the disclosures

21 that the person to receive the protected health infor22 mation intends to make, which statement shall be in

23 writing, on a form that is distinct from the author24 ization for disclosure, and which statement must be
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•S 2351 PCS

1 received by the individual authorizing the disclosure

2 on or before such authorization is executed.

3 ‘‘(6) INFORMATION DESCRIBED.—The informa4 tion to be disclosed is described in the authorization.

5 ‘‘(7) EXPIRATION DATE SPECIFIED.—The au6 thorization specifies a date or event upon which the

7 authorization expires, which shall not exceed 2 years

8 from the date of the execution of the authorization.

9 ‘‘(8) AUTHORIZATION TIMELY RECEIVED.—The

10 authorization is received by the trustee during a pe11 riod described in subsection (c)(1).

12 ‘‘(9) DISCLOSURE TIMELY MADE.—The disclo13 sure occurs during a period described in subsection

14 (c)(2).

15 ‘‘(b) AUTHORIZATIONS REQUESTED IN CONNECTION

16 WITH PROVISION OF HEALTH CARE.—

17 ‘‘(1) IN GENERAL.—A health information trust18 ee may not request that an individual provide to any

19 other person an authorization described in sub20 section (a) on a day on which—

21 ‘‘(A) the trustee provides health care to

22 the individual requested to provide the author23 ization; or

24 ‘‘(B) in the case of a trustee that is a

25 health facility, the individual is admitted into
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•S 2351 PCS

1 the facility as a resident or inpatient in order

2 to receive health care.

3 ‘‘(2) EXCEPTION.—Paragraph (1) does not

4 apply if a health information trustee requests that

5 an individual provide an authorization described in

6 subsection (a) for the purpose of assisting the indi7 vidual in obtaining counseling or social services from

8 a person other than the trustee.

9 ‘‘(c) TIME LIMITATIONS ON AUTHORIZATIONS.—

10 ‘‘(1) RECEIPT BY TRUSTEE.—For purposes of

11 subsection (a)(8), an authorization is timely received

12 if it is received by the trustee during—

13 ‘‘(A) the 1-year period beginning on the

14 date on which the authorization is signed under

15 subsection (a)(1), if the authorization permits

16 the disclosure of protected health information to

17 a person who provides health counseling or so18 cial services to individuals; or

19 ‘‘(B) the 30-day period beginning on the

20 date on which the authorization is signed under

21 subsection (a)(1), if the authorization permits

22 the disclosure of protected health information to

23 a person other than a person described in sub24 paragraph (A).
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1 ‘‘(2) DISCLOSURE BY TRUSTEE.—For purposes

2 of subsection (a)(9), a disclosure is timely made if

3 it occurs before the date or event specified in the au4 thorization upon which the authorization expires.

5 ‘‘(d) REVOCATION OR AMENDMENT OF AUTHORIZA6 TION.—

7 ‘‘(1) IN GENERAL.—An individual may in writ8 ing revoke or amend an authorization described in

9 subsection (a), in whole or in part, at any time, ex10 cept when—

11 ‘‘(A) disclosure of protected health infor12 mation has been authorized to permit validation

13 of expenditures for health care; or

14 ‘‘(B) action has been taken in reliance on

15 the authorization.

16 ‘‘(2) NOTICE OF REVOCATION.—A health infor17 mation trustee who discloses protected health infor18 mation pursuant to an authorization that has been

19 revoked shall not be subject to any liability or pen20 alty under this subtitle if—

21 ‘‘(A) the reliance was in good faith;

22 ‘‘(B) the trustee had no notice of the rev23 ocation; and

24 ‘‘(C) the disclosure was otherwise in ac25 cordance with the requirements of this subtitle.
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1 ‘‘(e) DECEASED INDIVIDUAL.—The Secretary shall

2 develop and establish through regulation a procedure for

3 obtaining protected health information relating to a de4 ceased individual when there is no individual representa5 tive for such individual.

6 ‘‘(f) MODEL AUTHORIZATIONS.—The Secretary, after

7 notice and opportunity for public comment, shall develop

8 and disseminate model written authorizations of the type

9 described in subsection (a) and model statements of in10 tended disclosures of the type described in subsection

11 (a)(5).

12 ‘‘(g) COPY.—A health information trustee who dis13 closes protected health information pursuant to an author14 ization under this section shall maintain a copy of the au15 thorization.

16 ‘‘SEC. 11813. CERTIFIED HEALTH INFORMATION NETWORK

17 SERVICES.

18 ‘‘(a) IN GENERAL.—A health information trustee

19 may disclose protected health information to a certified

20 health information network service acting as an agent of

21 the trustee for any purpose permitted by this subtitle.

22 Such a service, acting as an agent of a trustee, may dis23 close protected health information to another person as

24 permitted under this subtitle to facilitate the completion
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•S 2351 PCS

1 of the purpose for which such information was disclosed

2 to the service.

3 ‘‘(b) CERTIFIED HEALTH INFORMATION PROTEC4 TION ORGANIZATIONS.—A health information trustee may

5 disclose protected health information to a certified health

6 information protection organization for the purpose of cre7 ating non-identifiable health information (as defined in

8 section 11702).

9 ‘‘Subpart B—Specific Disclosures Relating to Patient

10 ‘‘SEC. 11821. DISCLOSURES FOR TREATMENT AND FINAN11 CIAL AND ADMINISTRATIVE TRANSACTIONS.

12 ‘‘(a) HEALTH CARE TREATMENT.—A health care

13 provider, health plan, employer, or person who receives

14 protected health information under section 11823, may

15 disclose protected health information to a health care pro16 vider for the purpose of providing health care to an indi17 vidual if the individual who is the subject of the informa18 tion has not previously objected in writing to the disclo19 sure.

20 ‘‘(b) DISCLOSURE TO HEALTH PLANS FOR FINAN21 CIAL AND ADMINISTRATIVE PURPOSES.—A health care

22 provider or employer may disclose protected health infor23 mation to a health plan for the purpose of providing for

24 the payment for, or reviewing the payment of, health care

25 furnished to an individual.
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•S 2351 PCS

1 ‘‘(c) DISCLOSURE BY HEALTH PLANS FOR FINAN2 CIAL AND ADMINISTRATIVE PURPOSES.—A health plan

3 may disclose protected health information to a health care

4 provider or a health plan for the purpose of providing for

5 the payment for, or reviewing the payment of, health care

6 furnished to an individual.

7 ‘‘SEC. 11822. NEXT OF KIN AND DIRECTORY INFORMATION.

8 ‘‘(a) NEXT OF KIN.—A health care provider or per9 son who receives protected health information under sec10 tion 11823 may disclose protected health information to

11 the next of kin, an individual representative of the individ12 ual who is the subject of the information, or an individual

13 with whom that individual has a close personal relation14 ship if—

15 ‘‘(1) the individual who is the subject of the in16 formation—

17 ‘‘(A) has been notified of the individual’s

18 right to object and has not objected to the dis19 closure;

20 ‘‘(B) is not competent to be notified about

21 the right to object; or

22 ‘‘(C) exigent circumstances exist such that

23 it would not be practicable to notify the individ24 ual of the right to object; and
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•S 2351 PCS

1 ‘‘(2) the information disclosed relates to health

2 care currently being provided to that individual.

3 ‘‘(b) DIRECTORY INFORMATION.—A health care pro4 vider and a person receiving protected health information

5 under section 11823 may disclose protected health infor6 mation to any person if—

7 ‘‘(1) the information does not reveal specific in8 formation about the physical or mental condition of

9 the individual who is the subject of the information

10 or health care provided to that person;

11 ‘‘(2) the individual who is the subject of the in12 formation—

13 ‘‘(A) has been notified of the individual’s

14 right to object and has not objected to the dis15 closure;

16 ‘‘(B) is not competent to be notified about

17 the right to object; or

18 ‘‘(C) exigent circumstances exist such that

19 it would not be practicable to notify the individ20 ual of the right to object; and

21 ‘‘(3) the information consists only of 1 or more

22 of the following items:

23 ‘‘(A) The name of the individual who is the

24 subject of the information.
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•S 2351 PCS

1 ‘‘(B) If the individual who is the subject of

2 the information is receiving health care from a

3 health care provider on a premises controlled by

4 the provider—

5 ‘‘(i) the location of the individual on

6 the premises; and

7 ‘‘(ii) the general health status of the

8 individual, described as critical, poor, fair,

9 stable, or satisfactory or in terms denoting

10 similar conditions.

11 ‘‘(d) IDENTIFICATION OF DECEASED INDIVIDUAL.—

12 A health care provider, health plan, employer, or life in13 surer, may disclose protected health information if nec14 essary to assist in the identification of a deceased individ15 ual.

16 ‘‘SEC. 11823. EMERGENCY CIRCUMSTANCES.

17 ‘‘(a) IN GENERAL.—A health care provider, health

18 plan, employer, or person who receives protected health

19 information under this section may disclose protected

20 health information in emergency circumstances when nec21 essary to protect the health or safety of an individual from

22 imminent harm.

23 ‘‘(b) SCOPE OF DISCLOSURE.—The disclosure of pro24 tected health information under this section shall be lim-
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•S 2351 PCS

1 ited to persons who need the information to take action

2 to protect the health or safety of the individual.

3 ‘‘Subpart C—Disclosure for Oversight, Public Health,

4 and Research Purposes

5 ‘‘SEC. 11831. OVERSIGHT.

6 ‘‘(a) IN GENERAL.—A health information trustee

7 may disclose protected health information to a health over8 sight agency for an oversight function authorized by law.

9 ‘‘(b) USE IN ACTION AGAINST INDIVIDUALS.—Not10 withstanding section 11811(e), protected health informa11 tion about an individual that is disclosed under this sec12 tion may be used in, or disclosed to any person for use

13 in, any administrative, civil, or criminal action or inves14 tigation directed against the individual who is the subject

15 of the information if the action or investigation arises out

16 of and is directly related to receipt of health care or pay17 ment for health care or an action involving a fraudulent

18 claim related to health.

19 ‘‘SEC. 11832. PUBLIC HEALTH.

20 ‘‘A health care provider, health plan, public health

21 authority, employer, or person who receives protected

22 health information under section 11823 may disclose pro23 tected health information to a public health authority or

24 other person authorized by law for use in a legally author25 ized—
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•S 2351 PCS

1 ‘‘(1) disease or injury reporting;

2 ‘‘(2) public health surveillance; or

3 ‘‘(3) public health investigation or intervention.

4 ‘‘SEC. 11833. HEALTH RESEARCH.

5 ‘‘(a) IN GENERAL.—A health information trustee

6 may disclose protected health information to a health re7 searcher if an institutional review board determines that

8 the research project engaged in by the health researcher—

9 ‘‘(1) requires use of the protected health infor10 mation for the effectiveness of the project; and

11 ‘‘(2) is of sufficient importance to outweigh the

12 intrusion into the privacy of the individual who is

13 the subject of the information that would result from

14 the disclosure.

15 ‘‘(b) RESEARCH REQUIRING DIRECT CONTACT.—A

16 health information trustee may disclose protected health

17 information to a health researcher for a research project

18 that includes direct contact with an individual who is the

19 subject of protected health information if an institutional

20 review board determines that—

21 ‘‘(1) the research project meets the require22 ments of paragraphs (1) and (2) of subsection (a);

23 ‘‘(2) direct contact is necessary to accomplish

24 the research purpose; and
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•S 2351 PCS

1 ‘‘(3) the direct contact will be made in a man2 ner that minimizes the risk of harm, embarrassment,

3 or other adverse consequences to the individual.

4 ‘‘(c) USE OF HEALTH INFORMATION NETWORK.—

5 ‘‘(1) IN GENERAL.—A health information trust6 ee may disclose protected health information to a

7 health researcher using the health information net8 work (as defined in section 11702) only if an institu9 tional review board certified by the Secretary under

10 paragraph (2) determines that the research project

11 engaged in by the health researcher meets the re12 quirements of this section.

13 ‘‘(2) CERTIFICATION OF INSTITUTIONAL RE14 VIEW BOARDS.—

15 ‘‘(A) REGULATIONS.—The Secretary, after

16 notice and opportunity for public comment,

17 shall issue regulations establishing certification

18 requirements for institutional review boards

19 under this subtitle. Such regulations shall be

20 based on regulations issued under section

21 491(a) of the Public Health Service Act and

22 shall ensure that institutional review boards

23 certified under this paragraph have the quali24 fications to access and protect the confidential25 ity of research subjects.
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•S 2351 PCS

1 ‘‘(B) CERTIFICATION.—The Secretary

2 shall certify an institutional review board that

3 meets the certification requirements established

4 by the Secretary under subparagraph (A).

5 ‘‘(d) OBLIGATIONS OF RECIPIENT.—A person who

6 receives protected health information pursuant to sub7 section (a)—

8 ‘‘(1) shall remove or destroy, at the earliest op9 portunity consistent with the purposes of the project,

10 information that would enable an individual to be

11 identified, unless—

12 ‘‘(A) an institutional review board has de13 termined that there is a health or research jus14 tification for retention of such identifiers; and

15 ‘‘(B) there is an adequate plan to protect

16 the identifiers from disclosure that is inconsist17 ent with this section; and

18 ‘‘(2) shall use protected health information sole19 ly for purposes of the health research project for

20 which disclosure was authorized under this section.
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•S 2351 PCS

1 ‘‘Subpart D—Disclosure For Judicial, Administrative,

2 and Law Enforcement Purposes

3 ‘‘SEC. 11841. JUDICIAL AND ADMINISTRATIVE PURPOSES.

4 A health care provider, health plan, health oversight

5 agency, or employer may disclose protected health infor6 mation—

7 ‘‘(1) pursuant to the Federal Rules of Civil

8 Procedure, the Federal Rules of Criminal Procedure,

9 or comparable rules of other courts or administrative

10 agencies in connection with litigation or proceedings

11 to which the individual who is the subject of the in12 formation is a party and in which the individual has

13 placed the individual’s physical or mental condition

14 in issue;

15 ‘‘(2) to a court, and to others ordered by a

16 court, if the protected health information is devel17 oped in response to a court-ordered physical or men18 tal examination; or

19 ‘‘(3) pursuant to a law requiring the reporting

20 of specific medical information to law enforcement

21 authorities.

22 ‘‘SEC. 11842. LAW ENFORCEMENT.

23 ‘‘(a) IN GENERAL.—A health care provider, health

24 plan, health oversight agency, employer, or person who re25 ceives protected health information under section 11823

26 may disclose protected health information to a law en-
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•S 2351 PCS

1 forcement agency (other than a health oversight agency

2 governed by section 11831) if the information is requested

3 for use—

4 ‘‘(1) in an investigation or prosecution of a

5 health information trustee;

6 ‘‘(2) in the identification of a victim or witness

7 in a law enforcement inquiry; or

8 ‘‘(3) in connection with the investigation of

9 criminal activity committed against the trustee or on

10 premises controlled by the trustee.

11 ‘‘(b) CERTIFICATION.—When a law enforcement

12 agency (other than a health oversight agency) requests

13 that a health information trustee disclose protected health

14 information under this section, the law enforcement agen15 cy shall provide the trustee with a written certification

16 that—

17 ‘‘(1) specifies the information requested;

18 ‘‘(2) states that the information is needed for a

19 lawful purpose under this section; and

20 ‘‘(3) is signed by a supervisory official of a rank

21 designated by the head of the agency.

22 ‘‘(c) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

23 Notwithstanding section 11811(e), protected health infor24 mation about an individual that is disclosed to a law en25 forcement agency under this section may be used in, or
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•S 2351 PCS

1 disclosed for, an administrative, civil, or criminal action

2 or investigation against the individual if the action or in3 vestigation arises out of and is directly related to the ac4 tion or investigation for which the information was ob5 tained.

6 ‘‘Subpart E—Disclosure Pursuant to Government

7 Subpoena or Warrant

8 ‘‘SEC. 11851. GOVERNMENT SUBPOENAS AND WARRANTS.

9 ‘‘(a) IN GENERAL.—A health care provider, health

10 plan, health oversight agency, employer, or person who re11 ceives protected health information under section 11823

12 may disclose protected health information under this sec13 tion if the disclosure is pursuant to—

14 ‘‘(1) a subpoena issued under the authority of

15 a grand jury, and the trustee is provided a written

16 certification by the grand jury seeking the informa17 tion that the grand jury has complied with the appli18 cable access provisions of section 11852;

19 ‘‘(2) an administrative subpoena or a judicial

20 subpoena or warrant, and the trustee is provided a

21 written certification by the person seeking the infor22 mation that the person has complied with the appli23 cable access provisions of section 11852; or

24 ‘‘(3) an administrative subpoena or a judicial

25 subpoena or warrant, and the disclosure otherwise
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•S 2351 PCS

1 meets the conditions of section 11831, 11832,

2 11841, or 11842.

3 ‘‘(b) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

4 ‘‘(1) ACTIONS OR INVESTIGATIONS.—Notwith5 standing section 11811(c), protected health informa6 tion about an individual that is received under sub7 section (a) may be disclosed for, or used in, any ad8 ministrative, civil, or criminal action or investigation

9 against the individual if the action or investigation

10 arises out of and is directly related to the inquiry for

11 which the information was obtained.

12 ‘‘(2) SPECIAL RULE.—Protected health infor13 mation about an individual that is received under

14 subsection (a)(3) may not be disclosed by the recipi15 ent unless the recipient complies with the conditions

16 and restrictions on disclosure with which the recipi17 ent would have been required to comply if the disclo18 sure had been made under section 11831, 11832,

19 11841, or 11842.

20 ‘‘SEC. 11852. ACCESS PROCEDURES FOR LAW ENFORCE21 MENT SUBPOENAS AND WARRANTS.

22 ‘‘(a) PROBABLE CAUSE REQUIREMENT.—A govern23 ment authority may not obtain protected health informa24 tion about an individual under paragraph (1) or (2) of

25 section 11851(a) for use in a law enforcement inquiry un-
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1 less there is probable cause to believe that the information

2 is relevant to a legitimate law enforcement inquiry being

3 conducted by the government authority.

4 ‘‘(b) WARRANTS.—A government authority that ob5 tains protected health information about an individual

6 under circumstances described in subsection (a) and pur7 suant to a warrant shall, not later than 30 days after the

8 date the warrant was executed, serve the individual with,

9 or mail to the last known address of the individual, a no10 tice that protected health information about the individual

11 was so obtained, together with a notice of the individual’s

12 right to challenge the warrant in accordance with section

13 11853.

14 ‘‘(c) SUBPOENAS.—Except as provided in subsection

15 (d), a government authority may not obtain protected

16 health information about an individual under cir17 cumstances described in subsection (a) and pursuant to

18 a subpoena unless a copy of the subpoena has been served

19 on the individual on or before the date of return of the

20 subpoena, together with a notice of the individual’s right

21 to challenge the subpoena in accordance with section

22 11853, and—

23 ‘‘(1) 15 days have passed since the date of serv24 ice on the individual and within that time period the
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•S 2351 PCS

1 individual has not initiated a challenge in accordance

2 with section 11853; or

3 ‘‘(2) disclosure is ordered by a court after chal4 lenge under section 11853.

5 ‘‘(d) APPLICATION FOR DELAY.—

6 ‘‘(1) IN GENERAL.—A government authority

7 may apply ex parte and under seal to an appropriate

8 court to delay (for an initial period of not longer

9 than 90 days) serving a notice or copy of a subpoena

10 required under subsection (b) or (c) with respect to

11 a law enforcement inquiry. The government author12 ity may apply to the court for extensions of the

13 delay.

14 ‘‘(2) REASONS FOR DELAY.—An application for

15 a delay, or extension of a delay, under this sub16 section shall state, with reasonable specificity, the

17 reasons why the delay or extension is being sought.

18 ‘‘(3) EX PARTE ORDER.—The court shall enter

19 an ex parte order delaying or extending the delay of

20 notice, an order prohibiting the disclosure of the re21 quest for, or disclosure of, the protected health in22 formation, and an order requiring the disclosure of

23 the protected health information if the court finds

24 that—
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1 ‘‘(A) the inquiry being conducted is within

2 the lawful jurisdiction of the government au3 thority seeking the protected health informa4 tion;

5 ‘‘(B) there is probable cause to believe that

6 the protected health information being sought is

7 relevant to a legitimate law enforcement in8 quiry;

9 ‘‘(C) the government authority’s need for

10 the information outweighs the privacy interest

11 of the individual who is the subject of the infor12 mation; and

13 ‘‘(D) there is reasonable ground to believe

14 that receipt of notice by the individual will re15 sult in—

16 ‘‘(i) endangering the life or physical

17 safety of any individual;

18 ‘‘(ii) flight from prosecution;

19 ‘‘(iii) destruction of or tampering with

20 evidence or the information being sought;

21 or

22 ‘‘(iv) intimidation of potential wit23 nesses.
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1 ‘‘SEC. 11853. CHALLENGE PROCEDURES FOR LAW EN2 FORCEMENT WARRANTS AND SUBPOENAS.

3 ‘‘(a) MOTION TO QUASH.—Within 15 days after the

4 date of service of a notice of execution or a copy of a sub5 poena of a government authority seeking protected health

6 information about an individual under paragraph (1) or

7 (2) of section 11851(a), the individual may file a motion

8 to quash—

9 ‘‘(1) in the case of a State judicial warrant or

10 subpoena, in the court which issued the warrant or

11 subpoena;

12 ‘‘(2) in the case of a warrant or subpoena is13 sued under the authority of a State that is not a

14 State judicial warrant or subpoena, in a court of

15 competent jurisdiction; or

16 ‘‘(3) in the case of any other warrant or sub17 poena issued under the authority of a Federal court

18 or the United States, in the United States district

19 court for the district in which the individual resides

20 or in which the warrant or subpoena was issued.

21 ‘‘(b) COPY.—A copy of the motion shall be served by

22 the individual upon the government authority by reg23 istered or certified mail.

24 ‘‘(c) PROCEEDINGS.—The government authority may

25 file with the court such papers, including affidavits and

26 other sworn documents, as sustain the validity of the war-
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1 rant or subpoena. The individual may file with the court

2 reply papers in response to the government authority’s fil3 ing. The court, upon the request of the individual or the

4 government authority or both, may proceed in camera.

5 The court may conduct such proceedings as it deems ap6 propriate to rule on the motion, but shall endeavor to ex7 pedite its determination.

8 ‘‘(d) STANDARD FOR DECISION.—A court may deny

9 a motion under subsection (a) if it finds there is probable

10 cause to believe the protected health information is rel11 evant to a legitimate law enforcement inquiry being con12 ducted by the government authority, unless the court finds

13 the individual’s privacy interest outweighs the government

14 authority’s need for the information. The individual shall

15 have the burden of demonstrating that the individual’s pri16 vacy interest outweighs the need by the government au17 thority for the information.

18 ‘‘(e) SPECIFIC CONSIDERATIONS WITH RESPECT TO

19 PRIVACY INTEREST.—In reaching its determination, the

20 court shall consider—

21 ‘‘(1) the particular purpose for which the infor22 mation was collected;

23 ‘‘(2) the degree to which disclosure of the infor24 mation will embarrass, injure, or invade the privacy

25 of the individual;
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•S 2351 PCS

1 ‘‘(3) the effect of the disclosure on the individ2 ual’s future health care;

3 ‘‘(4) the importance of the inquiry being con4 ducted by the government authority, and the impor5 tance of the information to that inquiry; and

6 ‘‘(5) any other factor deemed relevant by the

7 court.

8 ‘‘(f) ATTORNEY’S FEES.—In the case of a motion

9 brought under subsection (a) in which the individual has

10 substantially prevailed, the court may assess against the

11 government authority a reasonable attorney’s fee and

12 other litigation costs (including expert’s fees) reasonably

13 incurred.

14 ‘‘(g) NO INTERLOCUTORY APPEAL.—A ruling deny15 ing a motion to quash under this section shall not be

16 deemed to be a final order, and no interlocutory appeal

17 may be taken therefrom by the individual. An appeal of

18 such a ruling may be taken by the individual within such

19 period of time as is provided by law as part of any appeal

20 from a final order in any legal proceeding initiated against

21 the individual arising out of or based upon the protected

22 health information disclosed.
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1 ‘‘Subpart F—Disclosure Pursuant to Private Party

2 Subpoena

3 ‘‘SEC. 11854. PRIVATE PARTY SUBPOENAS.

4 ‘‘A health care provider, health plan, employer, or

5 person who receives protected health information under

6 section 11823 may disclose protected health information

7 under this section if the disclosure is pursuant to a sub8 poena issued on behalf of a private party who has complied

9 with the access provisions of section 11855.

10 ‘‘SEC. 11855. ACCESS PROCEDURES FOR PRIVATE PARTY

11 SUBPOENAS.

12 ‘‘A private party may not obtain protected health in13 formation about an individual pursuant to a subpoena un14 less a copy of the subpoena together with a notice of the

15 individual’s right to challenge the subpoena in accordance

16 with section 11856 has been served upon the individual

17 on or before the date of return of the subpoena, and—

18 ‘‘(1) 15 days have passed since the date of serv19 ice on the individual, and within that time period the

20 individual has not initiated a challenge in accordance

21 with section 11856; or

22 ‘‘(2) disclosure is ordered by a court under sec23 tion 11856.
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1 ‘‘SEC. 11856. CHALLENGE PROCEDURES FOR PRIVATE

2 PARTY SUBPOENAS.

3 ‘‘(a) MOTION TO QUASH SUBPOENA.—Within 15

4 days after service of a copy of the subpoena seeking pro5 tected health information under section 11854, the indi6 vidual who is the subject of the protected health informa7 tion may file in any court of competent jurisdiction a mo8 tion to quash the subpoena and serve a copy of the motion

9 on the person seeking the information.

10 ‘‘(b) STANDARD FOR DECISION.—The court shall

11 grant a motion under subsection (a) unless the respondent

12 demonstrates that—

13 ‘‘(1) there is reasonable ground to believe the

14 information is relevant to a lawsuit or other judicial

15 or administrative proceeding; and

16 ‘‘(2) the need of the respondent for the infor17 mation outweighs the privacy interest of the individ18 ual.

19 ‘‘(c) SPECIFIC CONSIDERATIONS WITH RESPECT TO

20 PRIVACY INTEREST.—In determining under subsection

21 (b) whether the need of the respondent for the information

22 outweighs the privacy interest of the individual, the court

23 shall consider—

24 ‘‘(1) the particular purpose for which the infor25 mation was collected;
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•S 2351 PCS

1 ‘‘(2) the degree to which disclosure of the infor2 mation would embarrass, injure, or invade the pri3 vacy of the individual;

4 ‘‘(3) the effect of the disclosure on the individ5 ual’s future health care;

6 ‘‘(4) the importance of the information to the

7 lawsuit or proceeding; and

8 ‘‘(5) any other relevant factor.

9 ‘‘(d) ATTORNEY’S FEES.—In the case of a motion

10 brought under subsection (a) in which the individual has

11 substantially prevailed, the court may assess against the

12 respondent a reasonable attorney’s fee and other litigation

13 costs and expenses (including expert’s fees) reasonably in14 curred.

15 ‘‘PART III—PROCEDURES FOR ENSURING SECU16 RITY OF PROTECTED HEALTH INFORMATION

17 ‘‘Subpart A—Establishment of Safeguards

18 ‘‘SEC. 11861. ESTABLISHMENT OF SAFEGUARDS.

19 ‘‘(a) IN GENERAL.—A health information trustee

20 shall establish and maintain appropriate administrative,

21 technical, and physical safeguards—

22 ‘‘(1) to ensure the integrity and confidentiality

23 of protected health information created or received

24 by the trustee; and
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1 ‘‘(2) to protect against any anticipated threats

2 or hazards to the security or integrity of such infor3 mation.

4 ‘‘(b) REGULATIONS.—The Secretary shall promul5 gate regulations regarding security measures for protected

6 health information.

7 ‘‘SEC. 11862. ACCOUNTING FOR DISCLOSURES.

8 ‘‘(a) IN GENERAL.—

9 ‘‘(1) REQUIREMENT TO CREATE OR MAINTAIN

10 RECORD.—A health information trustee shall create

11 and maintain, with respect to any protected health

12 information disclosed in exceptional circumstances

13 (as described in paragraph (2)), a record of—

14 ‘‘(A) the date and purpose of the disclo15 sure;

16 ‘‘(B) the name of the person to whom or

17 to which the disclosure was made;

18 ‘‘(C) the address of the person to whom or

19 to which the disclosure was made or the loca20 tion to which the disclosure was made; and

21 ‘‘(D) the information disclosed, if the re22 cording of the information disclosed is prac23 ticable, taking into account the technical capa24 bilities of the system used to maintain the

25 record and the costs of such maintenance.
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1 ‘‘(2) EXCEPTIONAL CIRCUMSTANCES DE2 SCRIBED.—For purposes of paragraph (1) protected

3 health information is disclosed in exceptional cir4 cumstances if the disclosure—

5 ‘‘(A) is not a routine part of doing busi6 ness, as determined in accordance with guide7 lines promulgated by the Secretary; or

8 ‘‘(B) is permitted under sections 11823

9 and 11832.

10 ‘‘(b) DISCLOSURE RECORD PART OF INFORMATION.—

11 A record created and maintained under paragraph (a)

12 shall be maintained as part of the protected health infor13 mation to which the record pertains.

14 ‘‘Subpart B—Review of Protected Health Information

15 By Subjects of the Information

16 ‘‘SEC. 11871. INSPECTION OF PROTECTED HEALTH INFOR17 MATION.

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

19 (c), a health care provider or health plan—

20 ‘‘(1) shall permit an individual who is the sub21 ject of protected health information to inspect any

22 such information that the provider or plan main23 tains;

24 ‘‘(2) shall permit the individual to have a copy

25 of the information;
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1 ‘‘(3) shall permit a person who has been des2 ignated in writing by the individual who is the sub3 ject of the information to inspect, or to have a copy

4 of, the information on behalf of the individual or to

5 accompany the individual during the inspection; and

6 ‘‘(4) may offer to explain or interpret informa7 tion that is inspected or copied under this sub8 section.

9 ‘‘(b) ADDITIONAL REQUESTS.—Except as provided in

10 subsection (c), a health plan or health care provider shall,

11 upon written request of an individual—

12 ‘‘(1) determine the identity of previous provid13 ers to the individual; and

14 ‘‘(2) obtain protected health information re15 garding the individual.

16 ‘‘(c) EXCEPTIONS.—A health care provider or health

17 plan is not required by this section to permit inspection

18 or copying of protected health information if any of the

19 following conditions apply:

20 ‘‘(1) MENTAL HEALTH TREATMENT NOTES.—

21 The information consists of psychiatric, psycho22 logical, or mental health treatment notes, and the

23 provider or plan determines, based on reasonable

24 medical judgment, that inspection or copying of the

25 notes would cause sufficient harm to the individual
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•S 2351 PCS

1 who is the subject of the notes so as to outweigh the

2 desirability of permitting access, and the provider or

3 plan has not disclosed the notes to any person not

4 directly engaged in treating the individual, except

5 with the authorization of the individual or under

6 compulsion of law.

7 ‘‘(2) INFORMATION ABOUT OTHERS.—The in8 formation relates to an individual other than the in9 dividual seeking to inspect or have a copy of the in10 formation and the provider or plan determines,

11 based on reasonable medical judgment, that inspec12 tion or copying of the information would cause suffi13 cient harm to 1 or both of the individuals so as to

14 outweigh the desirability of permitting access.

15 ‘‘(3) ENDANGERMENT TO LIFE OR SAFETY.—

16 The provider or plan determines that disclosure of

17 the information could reasonably be expected to en18 danger the life or physical safety of any individual.

19 ‘‘(4) CONFIDENTIAL SOURCE.—The information

20 identifies or could reasonably lead to the identifica21 tion of a person (other than a health care provider)

22 who provided information under a promise of con23 fidentiality to a health care provider concerning the

24 individual who is the subject of the information.
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1 ‘‘(5) ADMINISTRATIVE PURPOSES.—The infor2 mation—

3 ‘‘(A) is used by the provider or plan solely

4 for administrative purposes and not in the pro5 vision of health care to the individual who is the

6 subject of the information; and

7 ‘‘(B) has not been disclosed by the pro8 vider or plan to any other person.

9 ‘‘(d) INSPECTION AND COPYING OF SEGREGABLE

10 PORTION.—A health care provider or health plan shall

11 permit inspection and copying under subsection (a) of any

12 reasonably segregable portion of a record after deletion of

13 any portion that is exempt under subsection (c).

14 ‘‘(e) CONDITIONS.—A health care provider or health

15 plan may require a written request for the inspection and

16 copying of protected health information under this sub17 section. The health care provider or health plan may re18 quire a cost reimbursement for such inspection and copy19 ing.

20 ‘‘(f) STATEMENT OF REASONS FOR DENIAL.—If a

21 health care provider or health plan denies a request for

22 inspection or copying under this section, the provider or

23 plan shall provide the individual who made the request (or

24 the individual’s designated representative) with a written

25 statement of the reasons for the denial.
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1 ‘‘(g) DEADLINE.—A health care provider or health

2 plan shall comply with or deny a request for inspection

3 or copying of protected health information under this sec4 tion within the 30-day period beginning on the date on

5 which the provider or plan receives the request.

6 ‘‘SEC. 11872. AMENDMENT OF PROTECTED HEALTH INFOR7 MATION.

8 ‘‘(a) IN GENERAL.—A health care provider or health

9 plan shall, within the 45-day period beginning on the date

10 on which the provider or plan receives from an individual

11 a written request that the provider or plan correct or

12 amend the information—

13 ‘‘(1) make the correction or amendment re14 quested;

15 ‘‘(2) inform the individual of the correction or

16 amendment that has been made; and

17 ‘‘(3) inform any person who is identified by the

18 individual, who is not an officer, employee or agent

19 of the provider or plan, and to whom the uncor20 rected or unamended portion of the information was

21 previously disclosed, of the correction or amendment

22 that has been made.

23 ‘‘(b) REFUSAL TO CORRECT.—If the provider or plan

24 refuses to make the corrections, the provider or plan shall

25 inform the individual of—
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•S 2351 PCS

1 ‘‘(1) the reasons for the refusal of the provider

2 or plan to make the correction or amendment;

3 ‘‘(2) any procedures for further review of the

4 refusal; and

5 ‘‘(3) the individual’s right to file with the pro6 vider or plan a concise statement setting forth the

7 requested correction or amendment and the individ8 ual’s reasons for disagreeing with the refusal of the

9 provider or plan.

10 ‘‘(c) BASES FOR REQUEST TO CORRECT OR

11 AMEND.—An individual may request correction or amend12 ment of protected health information about the individual

13 under paragraph (a) if the information is not timely, accu14 rate, relevant to the system of records, or complete.

15 ‘‘(d) STATEMENT OF DISAGREEMENT.—After an in16 dividual has filed a statement of disagreement under para17 graph (b)(3), the provider or plan, in any subsequent dis18 closure of the disputed portion of the information—

19 ‘‘(1) shall include a copy of the individual’s

20 statement; and

21 ‘‘(2) may include a concise statement of the

22 reasons of the provider or plan for not making the

23 requested correction or amendment.

24 ‘‘(e) RULE OF CONSTRUCTION.—This section shall

25 not be construed to require a health care provider or
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•S 2351 PCS

1 health plan to conduct a formal, informal, or other hearing

2 or proceeding concerning a request for a correction or

3 amendment to protected health information the provider

4 or plan maintains.

5 ‘‘(f) CORRECTION.—For purposes of paragraph (a),

6 a correction is deemed to have been made to protected

7 health information when information that is not timely,

8 accurate, relevant to the system of records, or complete

9 is clearly marked as incorrect or when supplementary cor10 rect information is made part of the information.

11 ‘‘SEC. 11873. NOTICE OF INFORMATION PRACTICES.

12 ‘‘(a) PREPARATION OF WRITTEN NOTICE.—A health

13 care provider or health plan shall prepare a written notice

14 of information practices describing the following:

15 ‘‘(1) PERSONAL RIGHTS OF AN INDIVIDUAL.—

16 The rights under this subpart of an individual who

17 is the subject of protected health information, in18 cluding the right to inspect and copy such informa19 tion and the right to seek amendments to such infor20 mation, and the procedures for authorizing disclo21 sures of protected health information and for revok22 ing such authorizations.

23 ‘‘(2) PROCEDURES OF PROVIDER OR PLAN.—

24 The procedures established by the provider or plan
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1 for the exercise of the rights of individuals about

2 whom protected health information is maintained.

3 ‘‘(3) AUTHORIZED DISCLOSURES.—The disclo4 sures of protected health information that are au5 thorized.

6 ‘‘(b) DISSEMINATION OF NOTICE.—A health care

7 provider or health plan—

8 ‘‘(1) shall, upon request, provide any individual

9 with a copy of the notice of information practices de10 scribed in subsection (a); and

11 ‘‘(2) shall make reasonable efforts to inform in12 dividuals in a clear and conspicuous manner of the

13 existence and availability of the notice.

14 ‘‘(c) MODEL NOTICE.—The Secretary, after notice

15 and opportunity for public comment, shall develop and dis16 seminate a model notice of information practices for use

17 by health care providers and health plans under this sec18 tion.

19 ‘‘Subpart C—Standards for Electronic Disclosures

20 ‘‘SEC. 11882. STANDARDS FOR ELECTRONIC DISCLOSURES.

21 ‘‘The Secretary shall promulgate standards for dis22 closing protected health information in accordance with

23 this subtitle in electronic form. Such standards shall in24 clude standards relating to the creation, transmission, re-
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1 ceipt, and maintenance, of any written document required

2 or authorized under this subtitle.

3 ‘‘PART IV—SANCTIONS

4 ‘‘Subpart A—No Sanctions for Permissible Actions

5 ‘‘SEC. 11891. NO LIABILITY FOR PERMISSIBLE DISCLO6 SURES.

7 ‘‘A health information trustee who makes a disclosure

8 of protected health information about an individual that

9 is permitted by this subtitle shall not be liable to the indi10 vidual for the disclosure under common law.

11 ‘‘SEC. 11892. NO LIABILITY FOR INSTITUTIONAL REVIEW

12 BOARD DETERMINATIONS.

13 ‘‘If the members of an institutional review board

14 make a determination in good faith that—

15 ‘‘(1) a health research project is of sufficient

16 importance to outweigh the intrusion into the pri17 vacy of an individual; and

18 ‘‘(2) the effectiveness of the project requires use

19 of protected health information,

20 the members, the board, and the parent institution of the

21 board shall not be liable to the individual as a result of

22 the determination.

23 ‘‘SEC. 11893. RELIANCE ON CERTIFIED ENTITY.

24 ‘‘If a health information trustee contracts with a cer25 tified health information network service to make a disclo-
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1 sure of any protected health information on behalf of such

2 trustee in accordance with this subtitle and such service

3 makes a disclosure of such information that is in violation

4 of this subtitle, the trustee shall not be liable for to the

5 individual who is the subject of the information for such

6 unlawful disclosure.

7 ‘‘Subpart B—Civil Sanctions

8 ‘‘SEC. 11901. CIVIL PENALTY.

9 ‘‘(a) VIOLATION.—Any health information trustee

10 who the Secretary determines has substantially failed to

11 comply with this subtitle shall be subject, in addition to

12 any other penalties that may be prescribed by law, to a

13 civil penalty of not more than $10,000 for each such viola14 tion.

15 ‘‘(b) PROCEDURES FOR IMPOSITION OF PEN16 ALTIES.—Section 1128A, other than subsections (a) and

17 (b) and the second sentence of subsection (f) of that sec18 tion, shall apply to the imposition of a civil monetary pen19 alty under this section in the same manner as such provi20 sions apply with respect to the imposition of a penalty

21 under section 1128A.

22 ‘‘SEC. 11902. CIVIL ACTION.

23 ‘‘(a) IN GENERAL.—An individual who is aggrieved

24 by conduct in violation of this subtitle may bring a civil

25 action to recover—
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1 ‘‘(1) the greater of actual damages or liquidated

2 damages of $5,000;

3 ‘‘(2) punitive damages;

4 ‘‘(3) a reasonable attorney’s fee and expenses of

5 litigation;

6 ‘‘(4) costs of litigation; and

7 ‘‘(5) such preliminary and equitable relief as

8 the court determines to be appropriate.

9 ‘‘(b) LIMITATION.—No action may be commenced

10 under this section more than 3 years after the date on

11 which the violation was or should reasonably have been

12 discovered.

13 ‘‘Subpart C—Criminal Sanctions

14 ‘‘SEC. 11911. WRONGFUL DISCLOSURE OF PROTECTED

15 HEALTH INFORMATION.

16 ‘‘(a) OFFENSE.—A person who knowingly—

17 ‘‘(1) obtains protected health information relat18 ing to an individual in violation of this subtitle; or

19 ‘‘(2) discloses protected health information to

20 another person in violation of this subtitle,

21 shall be punished as provided in subsection (b).

22 ‘‘(b) PENALTIES.—A person described in subsection

23 (a) shall—

24 ‘‘(1) be fined not more than $50,000, impris25 oned not more than 1 year, or both;
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1 ‘‘(2) if the offense is committed under false pre2 tenses, be fined not more than $100,000, imprisoned

3 not more than 5 years, or both; and

4 ‘‘(3) if the offense is committed with intent to

5 sell, transfer, or use protected health information for

6 commercial advantage, personal gain, or malicious

7 harm, fined not more than $250,000, imprisoned not

8 more than 10 years, or both.

9 ‘‘PART V—ADMINISTRATIVE PROVISIONS

10 ‘‘SEC. 11921. RELATIONSHIP TO OTHER LAWS.

11 ‘‘(a) STATE LAW.—Except as provided in subsections

12 (b), (c), and (d), this subtitle preempts State law.

13 ‘‘(b) LAWS RELATING TO PUBLIC OR MENTAL

14 HEALTH.—Nothing in this subtitle shall be construed to

15 preempt or operate to the exclusion of any State law relat16 ing to public health or mental health that prevents or reg17 ulates disclosure of protected health information otherwise

18 allowed under this subtitle.

19 ‘‘(c) PRIVILEGES.—Nothing in this subtitle is in20 tended to preempt or modify State common or statutory

21 law to the extent such law concerns a privilege of a witness

22 or person in a court of the State. This subtitle does not

23 supersede or modify Federal common or statutory law to

24 the extent such law concerns a privilege of a witness or

25 person in a court of the United States. Authorizations
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1 pursuant to section 11812 shall not be construed as a

2 waiver of any such privilege.

3 ‘‘(d) CERTAIN DUTIES UNDER STATE OR FEDERAL

4 LAW.—This subtitle shall not be construed to preempt,

5 supersede, or modify the operation of—

6 ‘‘(1) any law that provides for the reporting of

7 vital statistics such as birth or death information;

8 ‘‘(2) any law requiring the reporting of abuse or

9 neglect information about any individual;

10 ‘‘(3) subpart II of part E of title XXVI of the

11 Public Health Service Act (relating to notifications

12 of emergency response employees of possible expo13 sure to infectious diseases); or

14 ‘‘(4) any Federal law or regulation governing

15 confidentiality of alcohol and drug patient records.

16 ‘‘SEC. 11922. RIGHTS OF INCOMPETENTS.

17 ‘‘(a) EFFECT OF DECLARATION OF INCOM18 PETENCE.—Except as provided in section 11923, if an in19 dividual has been declared to be incompetent by a court

20 of competent jurisdiction, the rights of the individual

21 under this subtitle shall be exercised and discharged in

22 the best interests of the individual through the individual’s

23 representative.

24 ‘‘(b) NO COURT DECLARATION.—Except as provided

25 in section 11923, if a health care provider determines that
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1 an individual, who has not been declared to be incom2 petent by a court of competent jurisdiction, suffers from

3 a medical condition that prevents the individual from act4 ing knowingly or effectively on the individual’s own behalf,

5 the right of the individual to authorize disclosure may be

6 exercised and discharged in the best interest of the individ7 ual by the individual’s representative.

8 ‘‘SEC. 11923. EXERCISE OF RIGHTS.

9 ‘‘(a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA10 BLE.—In the case of an individual—

11 ‘‘(1) who is 18 years of age or older, all rights

12 of the individual shall be exercised by the individual;

13 or

14 ‘‘(2) who, acting alone, has the legal right, as

15 determined by State law, to apply for and obtain a

16 type of medical examination, care, or treatment and

17 who has sought such examination, care, or treat18 ment, the individual shall exercise all rights of an in19 dividual under this subtitle with respect to protected

20 health information relating to such examination,

21 care, or treatment.

22 ‘‘(b) INDIVIDUALS UNDER 18.—Except as provided

23 in subsection (a)(2), in the case of an individual who is—
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1 ‘‘(1) under 14 years of age, all the individual’s

2 rights under this subtitle shall be exercised through

3 the parent or legal guardian of the individual; or

4 ‘‘(2) 14, 15, 16, or 17 years of age, the rights

5 of inspection and amendment, and the right to au6 thorize disclosure of protected health information of

7 the individual may be exercised either by the individ8 ual or by the parent or legal guardian of the individ9 ual.’’.

10 (b) CONFORMING AMENDMENT.—Title XI of the So11 cial Security Act (42 U.S.C. 1301 et seq.), as amended

12 by section 401, is amended by striking the title and insert13 ing the following:

14 ‘‘TITLE XI—GENERAL PROVI15 SIONS, PEER REVIEW, ADMIN16 ISTRATIVE SIMPLIFICATION,

17 AND PRIVACY’’

18 TITLE V—MALPRACTICE AND

19 FRAUD

20 Subtitle A—Federal Tort Reform

21 SEC. 501. FEDERAL TORT REFORM.

22 (a) IN GENERAL.—Part A of subtitle A of title XI

23 of the Social Security Act (42 U.S.C. 1301 et seq.), as

24 amended by section 401, is amended by inserting after

25 section 1128B the following new section:
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1 ‘‘SEC. 1129. FEDERAL TORT REFORM.

2 ‘‘(a) APPLICABILITY.—

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (3), this section shall apply with respect to

5 any medical malpractice claim or medical mal6 practice liability action brought in any Federal or

7 State court, except that this section shall not apply

8 to a claim or action for damages arising from a vac9 cine-related injury or death to the extent that title

10 XXI of the Public Health Service Act applies to the

11 claim or action.

12 ‘‘(2) PREEMPTION.—The provisions of this sec13 tion shall preempt any State law to the extent such

14 law is inconsistent with the limitations contained in

15 such provisions. The provisions of this section shall

16 not preempt any State law that provides for defenses

17 in addition to those contained in this section, places

18 greater limitations on the amount of attorneys’ fees

19 that can be collected, or otherwise imposes greater

20 restrictions on non-economic or punitive damages

21 than those provided in this section.

22 ‘‘(3) EFFECT ON SOVEREIGN IMMUNITY AND

23 CHOICE OF LAW OR VENUE.—Nothing in this section

24 shall be construed to—
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1 ‘‘(A) waive or affect any defense of sov2 ereign immunity asserted by any State under

3 any provision of law;

4 ‘‘(B) waive or affect any defense of sov5 ereign immunity asserted by the United States;

6 ‘‘(C) affect the applicability of any provi7 sion of the Foreign Sovereign Immunities Act

8 of 1976;

9 ‘‘(D) preempt State choice-of-law rules

10 with respect to claims brought by a foreign na11 tion or a citizen of a foreign nation; or

12 ‘‘(E) affect the right of any court to trans13 fer venue or to apply the law of a foreign nation

14 or to dismiss a claim of a foreign nation or of

15 a citizen of a foreign nation on the ground of

16 inconvenient forum.

17 ‘‘(4) FEDERAL COURT JURISDICTION NOT ES18 TABLISHED ON FEDERAL QUESTION GROUNDS.—

19 Nothing in this section shall be construed to estab20 lish any jurisdiction in the district courts of the

21 United States over medical malpractice liability ac22 tions on the basis of section 1331 or 1337 of title

23 28, United States Code.

24 ‘‘(b) DEFINITIONS.—In this section, the following

25 definitions apply:
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•S 2351 PCS

1 ‘‘(1) ALTERNATIVE DISPUTE RESOLUTION SYS2 TEM; ADR.—The term ‘alternative dispute resolution

3 system’ or ‘ADR’ means a system that provides for

4 the resolution of medical malpractice claims in a

5 manner other than through medical malpractice li6 ability actions.

7 ‘‘(2) CLAIMANT.—The term ‘claimant’ means

8 any person who alleges a medical malpractice claim,

9 and any person on whose behalf such a claim is al10 leged, including the decedent in the case of an action

11 brought through or on behalf of an estate.

12 ‘‘(3) HEALTH CARE PROFESSIONAL.—The term

13 ‘health care professional’ means any individual who

14 provides health care services in a State and who is

15 required by the laws or regulations of the State to

16 be licensed or certified by the State to provide such

17 services in the State.

18 ‘‘(4) HEALTH CARE PROVIDER.—The term

19 ‘health care provider’ means any organization or in20 stitution that is engaged in the delivery of health

21 care services in a State and that is required by the

22 laws or regulations of the State to be licensed or cer23 tified by the State to engage in the delivery of such

24 services in the State.
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•S 2351 PCS

1 ‘‘(5) INJURY.—The term ‘injury’ means any ill2 ness, disease, or other harm that is the subject of

3 a medical malpractice liability action or a medical

4 malpractice claim.

5 ‘‘(6) MEDICAL MALPRACTICE LIABILITY AC6 TION.—The term ‘medical malpractice liability ac7 tion’ means a civil action brought in a State or Fed8 eral court against a health care provider or health

9 care professional (regardless of the theory of liability

10 on which the claim is based) in which the plaintiff

11 alleges a medical malpractice claim.

12 ‘‘(7) MEDICAL MALPRACTICE CLAIM.—

13 ‘‘(A) IN GENERAL.—The term ‘medical

14 malpractice claim’ means a claim brought

15 against a health care provider or health care

16 professional in which a claimant alleges that in17 jury was caused by the provision of (or the fail18 ure to provide) health care services, including

19 health care services provided under a health

20 care plan described in subparagraph (B), except

21 that such term does not include—

22 ‘‘(i) any claim based on an allegation

23 of an intentional tort; or

24 ‘‘(ii) any claim based on an allegation

25 that a product is defective that is brought
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1 against any individual or entity that is not

2 a health care professional or health care

3 provider.

4 ‘‘(B) HEALTH CARE PLAN DESCRIBED.—A

5 health care plan described in this subparagraph

6 includes—

7 ‘‘(i) a certified standard or non8 standard health plan;

9 ‘‘(ii) a certified supplemental health

10 benefits plan;

11 ‘‘(iii) a certified long-term care policy;

12 ‘‘(iv) a State health care program (as

13 defined in section 1128(h)); and

14 ‘‘(v) the medicare program under title

15 XVIII.

16 ‘‘(8) PARTICIPATING STATE.—The term ‘par17 ticipating State’ means a participating State under

18 title XXI.

19 ‘‘(c) ALTERNATIVE DISPUTE RESOLUTION.—

20 ‘‘(1) ADR IN PARTICIPATING STATES.—Each

21 participating State shall—

22 ‘‘(A) establish an alternative dispute reso23 lution system for the determination of medical

24 malpractice claims (including the tolling of any
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•S 2351 PCS

1 applicable statute of limitations during any ac2 tion under such system); and

3 ‘‘(B) require that State health care pro4 grams and certified standard and nonstandard

5 health plans disclose to enrollees (and potential

6 enrollees), in accordance with standards estab7 lished by the Secretary—

8 ‘‘(i) the availability of procedures for

9 consumer grievances under the program or

10 plan;

11 ‘‘(ii) the alternative dispute resolution

12 method or methods adopted by the State

13 under this subsection for its alternative

14 dispute resolution system and the proce15 dures for filing actions under such system;

16 ‘‘(iii) the consequences of, and alter17 natives to, participation in such system.

18 ‘‘(2) APPLICATION TO MEDICAL MALPRACTICE

19 CLAIMS.—In the case of any medical malpractice

20 claim, no medical malpractice liability action may be

21 brought with respect to such claim in a participating

22 State until the final resolution of the claim under

23 the alternative dispute resolution system established

24 by the State under paragraph (1).
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1 ‘‘(3) ADOPTION OF MECHANISM BY PARTICIPAT2 ING STATES.—Each participating State shall adopt

3 at least one of the methods of alternative dispute

4 resolution specified under paragraph (4) or (5) for

5 the resolution of medical malpractice claims.

6 ‘‘(4) SPECIFICATION OF PERMISSIBLE ADR

7 METHODS.—

8 ‘‘(A) IN GENERAL.—The Secretary shall,

9 by regulation, develop alternative dispute reso10 lution methods for use by participating States

11 in resolving medical malpractice claims under

12 paragraph (1). Such methods shall include at

13 least the following:

14 ‘‘(i) BINDING ARBITRATION.—The use

15 of binding arbitration.

16 ‘‘(ii) FAULT-BASED SYSTEMS.—The

17 use of fault-based administrative systems,

18 expedited review, and dismissal of claims

19 when not adequately supported.

20 ‘‘(iii) EARLY OFFERS OF SETTLE21 MENT.—The use of a process under which

22 parties have the option to make early of23 fers of settlement.
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1 ‘‘(iv) CATASTROPHIC SYSTEMS.—The

2 use of catastrophic injury compensation

3 systems.

4 ‘‘(B) STANDARDS FOR ESTABLISHING

5 METHODS.—In developing alternative dispute

6 resolution methods under subparagraph (A),

7 the Secretary shall assure that the methods

8 promote the resolution of medical malpractice

9 claims in a manner that—

10 ‘‘(i) is affordable for the parties in11 volved;

12 ‘‘(ii) provides for timely resolution of

13 claims;

14 ‘‘(iii) provides for the consistent and

15 fair resolution of claims; and

16 ‘‘(iv) provides for reasonably conven17 ient access to the alternative dispute reso18 lution system for individuals enrolled in

19 certified standard and nonstandard health

20 plans.

21 ‘‘(5) STATE INITIATED ALTERNATIVE.—A par22 ticipating State will be permitted to operate a meth23 od of alternative dispute resolution (other than a

24 method described in paragraph (4)) that otherwise

25 complies with this section if such system—
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1 ‘‘(A) is determined by the Secretary to ac2 complish the purposes and otherwise meet the

3 requirements of this section; and

4 ‘‘(B) is certified by the Secretary as an ap5 propriate alternative dispute resolution method.

6 ‘‘(d) PROCEDURES FOR FILING ACTIONS.—

7 ‘‘(1) CONTESTING OF ADR DECISION.—If either

8 party to a decision issued with respect to an alter9 native dispute resolution method applied under sub10 section (c) is dissatisfied with such decision, such

11 party may (to the extent otherwise permitted by

12 State law) contest such decision after it is issued

13 and seek a rehearing of the medical malpractice

14 claim involved in a court of competent jurisdiction.

15 ‘‘(2) NOTICE OF INTENT TO CONTEST DECI16 SION.—Not later than 60 days after a decision is is17 sued with respect to a medical malpractice claim

18 under an alternative dispute resolution system estab19 lished by a participating State under subsection (c),

20 each party affected by the decision shall submit a

21 sealed statement to a court of competent jurisdiction

22 indicating whether or not the party intends to con23 test the decision.
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1 ‘‘(3) COURT OF COMPETENT JURISDICTION.—

2 For purposes of this subsection, the term ‘court of

3 competent jurisdiction’ means—

4 ‘‘(A) with respect to actions filed in a

5 State court, the appropriate State trial court;

6 and

7 ‘‘(B) with respect to actions filed in a Fed8 eral court, the appropriate United States dis9 trict court.

10 ‘‘(4) LEGAL EFFECT OF UNCONTESTED ALTER11 NATIVE DISPUTE RESOLUTION SYSTEM DECISION.—

12 The decision reached under an alternative dispute

13 resolution system shall, for purposes of enforcement

14 by a court of competent jurisdiction, have the same

15 status in the court as the verdict of a medical mal16 practice liability action adjudicated in a State or

17 Federal trial court. The previous sentence shall not

18 apply to a decision that is contested by a party af19 fected by the decision pursuant to paragraph (1).

20 ‘‘(e) TREATMENT OF ATTORNEYS’ FEES AND OTHER

21 COSTS.—

22 ‘‘(1) LIMITATION ON AMOUNT OF CONTINGENCY

23 FEES.—

24 ‘‘(A) IN GENERAL.—An attorney who rep25 resents, on a contingency fee basis, a claimant
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1 in a medical malpractice claim or medical mal2 practice liability action may not charge, de3 mand, receive, or collect for services rendered in

4 connection with such claim or action in excess

5 of the following amount recovered by judgment

6 or settlement under such claim or action:

‘‘(i) 331 7 ⁄3 percent of the first

8 $150,000 (or portion thereof) recovered,

9 based on after-tax recovery, plus

10 ‘‘(ii) 25 percent of any amount in ex11 cess of $150,000 recovered, based on after12 tax recovery.

13 ‘‘(B) CALCULATION OF PERIODIC PAY14 MENTS.—In the event that a judgment or set15 tlement includes periodic or future payments of

16 damages, the amount recovered for purposes of

17 computing the limitation on the contingency fee

18 under subparagraph (A) shall be based on the

19 cost of the annuity or trust established to make

20 the payments. In any case in which an annuity

21 or trust is not established to make such pay22 ments, such amount shall be based on the

23 present value of the payments.

24 ‘‘(2) REQUIRING PARTY CONTESTING ADR RUL25 ING TO PAY ATTORNEYS’ FEES AND OTHER COSTS.—
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1 ‘‘(A) IN GENERAL.—The court in a medi2 cal malpractice liability action shall require a

3 party that (pursuant to subsection (d)(1)) con4 tests the ruling of the alternative dispute reso5 lution system of a participating State with re6 spect to the medical malpractice claim that is

7 the subject of the action to pay to the opposing

8 party the costs incurred by the opposing party

9 under the action, including attorneys’ fees, fees

10 paid to expert witnesses, and other litigation ex11 penses (but not including court costs, filing

12 fees, or other expenses paid directly by the

13 party to the court, or any fees or costs associ14 ated with the resolution of the claim under the

15 alternative dispute resolution system), but only

16 if—

17 ‘‘(i) in the case of an action in which

18 the party that contested the ruling is the

19 claimant, the amount of damages awarded

20 to the party under the action is less than

662 21 ⁄3 percent of the amount of damages

22 awarded to the party under the alternative

23 dispute resolution system; and

24 ‘‘(ii) in the case of an action in which

25 the party that contested the ruling is the
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1 defendant, the amount of damages as2 sessed against the party under the action

3 is greater than the amount of damages as4 sessed under the alternative dispute resolu5 tion system.

6 ‘‘(B) EXCEPTION.—Subparagraph (A)

7 shall not apply if the court finds that the appli8 cation of such subparagraph to a party would

9 constitute an undue hardship, and issues an

10 order waiving or modifying the application of

11 such subparagraph that specifies the grounds

12 for the court’s decision.

13 ‘‘(C) LIMIT ON ATTORNEYS’ FEES PAID.—

14 Attorneys’ fees that are required to be paid

15 under subparagraph (A) by the contesting party

16 shall not exceed the amount of the attorneys’

17 fees incurred by the contesting party in the ac18 tion. If the attorneys’ fees of the contesting

19 party are based on a contingency fee agree20 ment, the amount of attorneys’ fees for pur21 poses of the preceding sentence shall not exceed

22 the reasonable value of those services.

23 ‘‘(3) CONTINGENCY FEE DEFINED.—As used in

24 this subsection, the term ‘contingency fee’ means

25 any fee for professional legal services which is, in
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1 whole or in part, contingent upon the recovery of

2 any amount of damages, whether through judgment

3 or settlement.

4 ‘‘(f) SCOPE OF LIABILITY.—

5 ‘‘(1) IN GENERAL.—With respect to punitive

6 and noneconomic damages, the liability of each de7 fendant in a medical malpractice claim or medical

8 malpractice liability action shall be several only and

9 may not be joint. Such a defendant shall be liable

10 only for the amount of punitive or noneconomic

11 damages allocated to the defendant in direct propor12 tion to such defendant’s percentage of fault or re13 sponsibility for the injury suffered by the claimant.

14 ‘‘(2) DETERMINATION OF PERCENTAGE OF LI15 ABILITY.—The trier of fact in a medical malpractice

16 claim or medical malpractice liability action shall de17 termine the extent of each defendant’s fault or re18 sponsibility for injury suffered by the claimant, and

19 shall assign a percentage of responsibility for such

20 injury to each such defendant.

21 ‘‘(g) REFORM OF DAMAGES.—

22 ‘‘(1) LIMITATION ON NONECONOMIC DAM23 AGES.—

24 ‘‘(A) IN GENERAL.—With respect to a

25 medical malpractice claim or medical mal-
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1 practice liability action brought in any forum,

2 the total amount of damages that may be

3 awarded to an individual and the family mem4 bers of such individual for noneconomic losses

5 resulting from an injury alleged under such

6 claim or action may not exceed the amount de7 termined under subparagraph (B), regardless of

8 the number of health care professionals, health

9 care providers, and other defendants against

10 whom the action is brought or the number of

11 actions brought with respect to the injury. With

12 respect to actions heard by a jury, the jury may

13 not be informed of the limitation contained in

14 this paragraph. If the jury’s damage award ex15 ceeds such limitation, a reduction in such award

16 shall be made by the court.

17 ‘‘(B) LIMITATION AMOUNT.—The amount

18 determined under this subparagraph shall be

19 equal to—

20 ‘‘(i) in 1995, $250,000; and

21 ‘‘(ii) in subsequent years, the amount

22 determined under this subparagraph in the

23 previous year, updated by the estimated

24 percentage change in the Consumer Price

25 Index for All Urban Consumers (United
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1 States city average) during the previous

2 calendar year, adjusted by any previous

3 over estimations or under estimations

4 under this subparagraph.

5 ‘‘(2) PUNITIVE DAMAGES.—

6 ‘‘(A) FUND.—Each participating State

7 shall establish a health care safety and policy

8 program, to be approved by the Secretary, and

9 a fund consisting of such amounts as are trans10 ferred to the fund under subparagraph (B).

11 ‘‘(B) TRANSFER OF AMOUNTS.—Each par12 ticipating State shall require that 75 percent of

13 all awards of punitive damages resulting from

14 all medical malpractice claims or medical mal15 practice liability actions in that State be trans16 ferred to the fund established under subpara17 graph (A) in the State.

18 ‘‘(C) OBLIGATIONS FROM FUND.—The

19 chief executive officer of a participating State

20 shall obligate such sums as are available in the

21 fund established in that State under subpara22 graph (A) to—

23 ‘‘(i) license and certify health care

24 professionals in the State;
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1 ‘‘(ii) implement health care quality as2 surance programs;

3 ‘‘(iii) carry out public education pro4 grams to increase awareness of the avail5 ability of comparative value information on

6 certified standard health plans distributed

7 in accordance with the State consumer in8 formation program established under sec9 tion 21025; and

10 ‘‘(iv) carry out programs to reduce

11 malpractice-related costs for health care

12 providers volunteering to provide health

13 care services in medically underserved

14 areas.

15 ‘‘(h) NO-FAULT LIABILITY DEMONSTRATION

16 PROJECTS.—

17 ‘‘(1) IN GENERAL.—The Secretary may provide

18 funds (in such amount as the Secretary considers

19 appropriate) to one or more eligible participating

20 States to establish no-fault medical liability system

21 demonstration projects to replace the common law

22 tort liability system for medical injuries.

23 ‘‘(2) ELIGIBILITY OF STATE.—A participating

24 State is eligible to participate in the demonstration

25 project established under paragraph (1) if the State
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1 submits an application to the Secretary at such

2 time, in such manner, and containing such informa3 tion and assurances as the Secretary may require.

4 ‘‘(3) WAIVERS.—The Secretary may waive any

5 provision of this section that the Secretary deter6 mines is necessary for a State to conduct a dem7 onstration project established under paragraph (1).

8 ‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—

9 There are authorized to be appropriated such sums

10 as may be necessary to carry out the demonstration

11 projects under this subsection.’’.

12 (b) EFFECTIVE DATE.—The amendment made by

13 subsection (a) shall apply to medical malpractice claims

14 arising on or after January 1, 1995.

15 Subtitle B—Expanded Efforts To

16 Control Health Care Fraud and

17 Abuse Affecting Federal Outlay

18 Programs

19 PART I—IMPROVED ENFORCEMENT

20 SEC. 511. HEALTH CARE FRAUD AND ABUSE AFFECTING

21 FEDERAL OUTLAY PROGRAMS.

22 (a) IN GENERAL.—Part A of subtitle A of title XI

23 of the Social Security Act, as amended by section 501,

24 is amended by inserting after section 1128B (42 U.S.C.

25 1320a-7b) the following new sections:
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1 ‘‘HEALTH CARE FRAUD AND ABUSE AFFECTING FEDERAL

2 OUTLAY PROGRAMS

3 ‘‘SEC. 1128C. (a) IN GENERAL.—Not later than Jan4 uary 1, 1996, the Secretary and the Attorney General of

5 the United States shall establish a joint program—

6 ‘‘(1) to coordinate Federal, State, and local law

7 enforcement programs to control fraud and abuse af8 fecting Federal outlay programs,

9 ‘‘(2) to prosecute health care matters (through

10 criminal, civil, and administrative proceedings);

11 ‘‘(3) to conduct investigations (including

12 consumer complaint investigations), audits, evalua13 tions, and inspections relating to the delivery of and

14 payment for health care in the United States,

15 ‘‘(4) to conduct financial and performance au16 dits of health care programs and operations;

17 ‘‘(5) to conduct inspections and other evalua18 tions;

19 ‘‘(6) to provide rewards paid under section

20 1128F;

21 ‘‘(7) to facilitate the enforcement of sections

22 1128 through 1128G and other statutes applicable

23 to health care fraud and abuse.

24 ‘‘(8) to provide health care provider and

25 consumer education (including the provision of advi-
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1 sory opinions) regarding compliance with the provi2 sions of sections 1128 through 1128G.

3 Not more than 20 percent of the amounts available in the

4 Federal Outlay Program Fraud and Abuse Control Ac5 count for any fiscal year shall be used for the purposes

6 described in paragraph (8).

7 ‘‘(b) COORDINATION WITH LAW ENFORCEMENT

8 AGENCIES.—In carrying out the program under sub9 section (a), the Secretary and the Attorney General shall

10 consult with, and arrange for the sharing of data and re11 sources with, Federal, State, and local law enforcement

12 agencies, State Medicaid Fraud Control Units, and State

13 agencies responsible for the licensing and certification of

14 health care providers.

15 ‘‘(c) COORDINATION WITH PURCHASING COOPERA16 TIVES AND CERTIFIED HEALTH PLANS.—In carrying out

17 the program under subsection (a), the Secretary and the

18 Attorney General shall consult with, and arrange for the

19 sharing of data with representatives of purchasing co20 operatives and certified health plans.

21 ‘‘(d) AUTHORITIES OF ATTORNEY GENERAL AND

22 SECRETARY.—In carrying out duties under subsection (a),

23 the Attorney General and the Secretary are authorized—

24 ‘‘(1) to conduct, supervise, and coordinate au25 dits, civil and criminal investigations, inspections,
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1 and evaluations relating to the program established

2 under such subsection;

3 ‘‘(2) to have access (including on-line access as

4 requested and available) to all records available to

5 purchasing cooperatives and certified health plans

6 relating to the activities described in paragraph (1)

7 (subject to restrictions based on the confidentiality

8 of certain information under part II of subtitle B of

9 this title); and

10 ‘‘(3) to issue advisory opinions, fraud alerts,

11 and other appropriate educational material to assist

12 in compliance with the provisions of sections 1128

13 through 1128G.

14 ‘‘(e) QUALIFIED IMMUNITY FOR PROVIDING INFOR15 MATION.—The provisions of section 1157(a) (relating to

16 limitation on liability) shall apply to a person providing

17 information or communications to the Secretary or the At18 torney General in conjunction with their performance of

19 duties under this section, in the same manner as such sec20 tion applies to information provided to organizations with

21 a contract under part B of this subtitle.

22 ‘‘(f) USE OF POWERS UNDER INSPECTOR GENERAL

23 ACT OF 1978.—In carrying out duties and responsibilities

24 under the program established under subsection (a), the

25 Inspector General is authorized to exercise all powers
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1 granted under the Inspector General Act of 1978 to the

2 same manner and extent as provided in that Act.

3 ‘‘(g) DEFINITIONS.—In this subtitle:

4 ‘‘(1) CERTIFIED HEALTH PLANS; PURCHASING

5 COOPERATIVES.—The terms ‘certified health plan’

6 and ‘purchasing cooperative’ have the meanings

7 given such terms by sections 21011(a)(1) and

8 21100(14), respectively.

9 ‘‘(2) FEDERAL OUTLAY PROGRAMS.—The term

10 ‘Federal outlay programs’ means—

11 ‘‘(A) any program under title XVIII, and

12 ‘‘(B) any State health care program (as

13 defined in section 1128(h).

14 ‘‘(3) INSPECTOR GENERAL.—The term ‘Inspec15 tor General’ means the Inspector General of the De16 partment of Health and Human Services.’’.

17 (b) STATE HEALTH CARE PROGRAM DEFINED.—

18 Section 1128(h) of the Social Security Act (42 U.S.C.

19 1320a-7(h)) is amended by redesignating paragraphs (2)

20 and (3) as paragraphs (3) and (4), respectively, and by

21 inserting after paragraph (1) the following new paragraph:

22 ‘‘(2) any participating State program approved

23 under title XXI (including any program established

24 by the Secretary of Labor with respect to multistate

25 self-insured health plans) and any standard or non-
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1 standard health plan, supplemental health benefits

2 plan, or long-term care policy certified under such

3 program,’’.

4 SEC. 512. DEFINITION OF FEDERAL HEALTH CARE OF5 FENSE.

6 Subtitle A of title XI of the Social Security Act, as

7 amended by section 511, is amended by inserting after

8 section 1128C the following new section:

9 ‘‘FEDERAL HEALTH CARE OFFENSE DEFINED

10 ‘‘SEC. 1128D. For purposes of this title, the term

11 ‘Federal health care offense’ means a violation of, or a

12 criminal conspiracy to violate—

13 ‘‘(1) sections 226, 668, 1033, or 1347 of title

14 18, United States Code;

15 ‘‘(2) section 1128B;

16 ‘‘(3) sections 287, 371, 664, 666, 1001, 1027,

17 1341, 1343, or 1954 of title 18, United States Code,

18 if the violation or conspiracy relates to health care

19 fraud;

20 ‘‘(4) sections 501 or 511 of the Employee Re21 tirement Income Security Act of 1974, if the viola22 tion or conspiracy relates to health care fraud; or

23 ‘‘(5) sections 301, 303(a)(2), or 303 (b) or (e)

24 of the Federal Food Drug and Cosmetic Act, if the

25 violation or conspiracy relates to health care fraud.’’.
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1 SEC. 513. USE OF FUNDS BY INSPECTOR GENERAL.

2 Subtitle A of title XI of the Social Security Act, as

3 amended by section 512, is amended by inserting after

4 section 1128D the following new section:

5 ‘‘USE OF FUNDS BY INSPECTOR GENERAL

6 ‘‘SEC. 1128E. (a) REIMBURSEMENTS FOR INVES7 TIGATIONS.—

8 ‘‘(1) IN GENERAL.—The Inspector General is

9 authorized to receive and retain for current use re10 imbursement for the costs of conducting investiga11 tions, when such restitution is ordered by a court,

12 voluntarily agreed to by the payer, or otherwise.

13 ‘‘(2) CREDITING.—Funds received by the In14 spector General as reimbursement for costs of con15 ducting investigations shall be deposited to the cred16 it of the appropriation from which initially paid, or

17 to appropriations for similar purposes currently

18 available at the time of deposit, and shall remain

19 available for obligation for 1 year from the date of

20 their deposit.

21 ‘‘(3) EXCEPTION FOR FORFEITURES.—This

22 subsection does not apply to investigative costs paid

23 to the Inspector General from the Department of

24 Justice Asset Forfeiture Fund, which monies shall

25 be deposited and expended in accordance with sub26 section (b).
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1 ‘‘(b) HHS OFFICE OF INSPECTOR GENERAL ASSET

2 FORFEITURE PROCEEDS FUND.—

3 ‘‘(1) IN GENERAL.—There is hereby established

4 the ‘HHS Office of Inspector General Asset Forfeit5 ure Proceeds Fund,’ to be administered by the In6 spector General, which shall be available to the In7 spector General without fiscal year limitation for ex8 penses relating to the investigation of matters within

9 the jurisdiction of the Inspector General.

10 ‘‘(2) DEPOSITS.—There shall be deposited in

11 the Fund all proceeds from forfeitures that have

12 been transferred to the Inspector General from the

13 Department of Justice Asset Forfeiture Fund under

14 section 524 of title 28, United States Code.’’.

15 SEC. 514. REWARDS FOR INFORMATION LEADING TO PROS16 ECUTION AND CONVICTION.

17 Subtitle A of title XI of the Social Security Act, as

18 amended by section 513, is amended by inserting after

19 section 1128E the following new section:

20 ‘‘REWARDS FOR INFORMATION LEADING TO PROSECUTION

21 AND CONVICTION

22 ‘‘SEC. 1128F. (a) IN GENERAL.—In special cir23 cumstances, the Secretary and the Attorney General of the

24 United States may jointly make a payment of up to

25 $10,000 to a person who furnishes information unknown

26 to the Government relating to a possible prosecution of
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1 a Federal health care offense (as defined in section

2 1128D).

3 ‘‘(b) INELIGIBLE PERSONS.—A person is not eligible

4 for a payment under subsection (a) if—

5 ‘‘(1) the person is a current or former officer

6 or employee of a Federal or State government agen7 cy or instrumentality who furnishes information dis8 covered or gathered in the course of government em9 ployment;

10 ‘‘(2) the person knowingly participated in the

11 offense;

12 ‘‘(3) the information furnished by the person

13 consists of allegations or transactions that have been

14 disclosed to the public—

15 ‘‘(A) in a criminal, civil, or administrative

16 proceeding;

17 ‘‘(B) in a congressional, administrative, or

18 General Accounting Office report, hearing,

19 audit, or investigation; or

20 ‘‘(C) by the news media, unless the person

21 is the original source of the information; or

22 ‘‘(4) when, in the judgment of the Attorney

23 General, it appears that a person whose illegal ac24 tivities are being prosecuted or investigated could

25 benefit from the award.
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1 ‘‘(c) DEFINITION.—For the purposes of subsection

2 (b)(3)(C), the term ‘original source’ means a person who

3 has direct and independent knowledge of the information

4 that is furnished and has voluntarily provided the informa5 tion to the Government prior to disclosure by the news

6 media.

7 ‘‘(d) NO JUDICIAL REVIEW.—Neither the failure of

8 the Secretary and the Attorney General to authorize a

9 payment under subsection (a) nor the amount authorized

10 shall be subject to judicial review.’’.

11 PART II—CIVIL PENALTIES AND RIGHTS OF

12 ACTION

13 SEC. 521. CIVIL MONETARY PENALTIES.

14 (a) IN GENERAL.—Section 1128A(a) of the Social

15 Security Act (42 U.S.C. 1320a-7a(a)) is amended by add16 ing at the end the following new sentence: ‘‘Any amounts

17 recovered under this subsection with respect to a certified

18 health plan (as defined in section 21011(a)) or certified

19 long-term care policy (as defined in section 21013(a)(2))

20 shall be paid to the Secretary and such portions of the

21 amounts recovered as is determined to have been improp22 erly paid from a certified health plan or certified long-term

23 care policy for the delivery of or payment for health care

24 items or services shall be repaid to such plan or policy

25 (and enrollees of such plan or policy as appropriate) and
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1 the remainder of the amounts recovered shall be deposited

2 in the Federal Outlays Program Fraud and Abuse Control

3 Account established under section 9551 of the Internal

4 Revenue Code of 1986.’’.

5 (b) ADDITIONAL OFFENSES.—

6 (1) IN GENERAL.—Section 1128A(a) of the So7 cial Security Act (42 U.S.C. 1320a–7a(a)) is amend8 ed—

9 (A) by striking ‘‘or’’ at the end of para10 graphs (1) and (2);

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

12 paragraph (2) and inserting a semicolon; and

13 (C) by inserting after paragraph (3) the

14 following new paragraphs:

15 ‘‘(4) offers, pays, or transfers remuneration to

16 any individual eligible for benefits under title XVIII

17 of this Act, or under a State health care program

18 (as defined in section 1128(h)), that such person

19 knows or should know is likely to influence such in20 dividual to order or receive from a particular pro21 vider, practitioner, or supplier any item or service

22 for which payment may be made, in whole or in

23 part, under title XVIII, or a State health care pro24 gram;
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1 ‘‘(5) in the case of a person who is not an orga2 nization, agency, or other entity, who is excluded

3 from participating in a program under title XVIII or

4 a State health care program in accordance with this

5 section, section 1128, or section 1156 and who, dur6 ing the period of exclusion, retains either a direct or

7 indirect ownership or control interest of 5 percent or

8 more in, or an ownership or control interest (as de9 fined in section 1124(a)(3)) in, or who is an officer,

10 director, agent, or managing employee (as defined in

11 section 1126(b)) of, an entity that is participating in

12 a program under title XVIII or a State health care

13 program;

14 ‘‘(6) engages in a practice that circumvents a

15 payment methodology intended to reimburse for two

16 or more discreet medical items or services at a single

17 or fixed amount, including but not limited to, mul18 tiple admissions or readmission to hospitals and

19 other institutions reimbursed on a diagnosis reim20 bursement grouping basis;

21 ‘‘(7) engages in a practice which has the effect

22 of limiting or discouraging (as compared to other

23 plan enrollees) the utilization of health care services

24 covered by law or under the service contract by title

25 XIX or other publicly subsidized patients, including
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1 but not limited to differential standards for the loca2 tion and hours of service offered by providers par3 ticipating in the plan;

4 ‘‘(8) substantially fails to cooperate with a qual5 ity assurance program or a utilization review activ6 ity;

7 ‘‘(9) fails substantially to provide or authorize

8 medically necessary items and services that are re9 quired to be provided to an individual covered under

10 a certified health plan (as defined in section

11 21011(a)) or public program for the delivery of or

12 payment for health care items or services, if the fail13 ure has adversely affected (or had a substantial like14 lihood of adversely affecting) the individual;

15 ‘‘(10) employs or contracts with any individual

16 or entity who is excluded from participating in a

17 program under title XVIII or a State health care

18 program in accordance with this section, section

19 1128, or section 1156, for the provision of any serv20 ices (including but not limited to health care, utiliza21 tion review, medical social work, or administrative),

22 or employs or contracts with any entity for the di23 rect or indirect provision of such services, through

24 such an excluded individual or entity; or
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1 ‘‘(11) submits false or fraudulent statements,

2 data or information, or claims to the Secretary, the

3 Secretary of Labor, any other Federal agency, a

4 State health care agency, a purchasing cooperative

5 (under subtitle D of title XXI), or any other Fed6 eral, State or local agency charged with implementa7 tion or oversight of a certifed health plan under this

8 Act or a public program that the person knows or

9 should know is fraudulent;’’.

10 (2) REMUNERATION DEFINED.—Section

11 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is

12 amended by adding at the end the following new

13 paragraph:

14 ‘‘(6) The term ‘remuneration’ includes the waiv15 er of coinsurance and deductible amounts (or any

16 part thereof), and transfers of items or services for

17 free or for other than fair market value, except that

18 such term does not include the waiver of coinsurance

19 or deductible amounts by a person or entity, if—

20 ‘‘(A) the waiver is not offered as part of

21 any advertisement or solicitation;

22 ‘‘(B) the person does not routinely waive

23 coinsurance or deductible amounts; and

24 ‘‘(C) the person—
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1 ‘‘(i) waives the coinsurance and de2 ductible amounts after determining in good

3 faith that the individual is indigent;

4 ‘‘(ii) fails to collect coinsurance or de5 ductible amounts after making reasonable

6 collection efforts; or

7 ‘‘(iii) provides for any permissible

8 waiver as specified in section 1128B(b)(3)

9 or in regulations issued by the Secretary.’’.

10 (3) CLAIM FOR ITEM OR SERVICE BASED ON IN11 CORRECT CODING OR MEDICALLY UNNECESSARY

12 SERVICES.—Section 1128A(a)(1) of such Act (42

13 U.S.C. 1320a–7a(a)(1)) is amended—

14 (A) in subparagraph (A), by striking

15 ‘‘claimed,’’ and inserting the following:

16 ‘‘claimed, including any person who presents or

17 causes to be presented a claim for an item or

18 service which includes a procedure or diagnosis

19 code that the person knows or should know will

20 result in a greater payment to the person than

21 the code applicable to the item or service actu22 ally provided or actual patient medical condi23 tion,’’;

24 (B) in subparagraph (C), by striking ‘‘or’’

25 at the end;
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1 (C) in subparagraph (D), by striking ‘‘;

2 or’’ and inserting ‘‘, or’’; and

3 (D) by inserting after subparagraph (D)

4 the following new subparagraph:

5 ‘‘(E) is for a medical or other item or serv6 ice that a person knows or should know is not

7 medically necessary or appropriate; or’’.

8 (c) PENALTIES INCREASED.—

9 (1) GENERAL RULE.—Section 1128A(a) of the

10 Social Security Act (42 U.S.C. 1320a-7a(a)) is

11 amended—

12 (A) by striking ‘‘$2,000’’ and inserting

13 ‘‘$10,000’’; and

14 (B) by striking ‘‘twice the amount

15 claimed’’ and inserting ‘‘3 times the amount

16 claimed’’.

17 (2) INTEREST ON PENALTIES.—Section

18 1128A(f) of such Act (42 U.S.C. 1320a-7a(f)) is

19 amended by adding after the first sentence the fol20 lowing: ‘‘Interest shall accrue on the penalties and

21 assessments imposed by a final determination of the

22 Secretary in accordance with an annual rate estab23 lished by the Secretary under the Federal Claims

24 Collection Act. The rate of interest charged shall be

25 the rate in effect on the date the determination be-
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1 comes final and shall remain fixed at that rate until

2 the entire amount due is paid. In addition, the Sec3 retary is authorized to recover the costs of collection

4 in any case where such penalties and assessments

5 are not paid within 30 days after the determination

6 becomes final, or in the case of a compromised

7 amount, where payments are more than 90 days

8 past due. In lieu of actual costs, the Secretary is au9 thorized to impose a charge of up to 10 percent of

10 the amount of such penalties and assessments owed

11 to cover the costs of collection.’’.

12 (d) AUTHORITY OF SECRETARY OF LABOR TO IM13 POSE PENALTIES, ASSESSMENTS, AND EXCLUSIONS.—

14 Section 1128A of the Social Security Act (42 U.S.C.

15 1320a-7a) is amended by adding at the end the following

16 new subsection:

17 ‘‘(m)(1) The Secretary of Labor may initiate an ac18 tion to impose a civil monetary penalty, assessment, or

19 exclusion under this section with respect to actions relat20 ing to a certified multistate self-insured health plan (as

21 defined on section 21051(b)) pursuant to regulations pro22 mulgated by the Secretary of Health and Human Services,

23 in consultation with the Attorney General.

24 ‘‘(2) Under the regulations promulgated under para25 graph (1), the Attorney General and the Secretary shall
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1 review an action proposed by the Secretary of Labor, and

2 not later than 60 days after receiving notice of the pro3 posed action from the Secretary of Labor, shall—

4 ‘‘(A) approve the proposed action to be taken

5 by the Secretary of Labor;

6 ‘‘(B) disapprove the proposed action; or

7 ‘‘(C) assume responsibility for initiating a

8 criminal, civil, or administrative action based on the

9 information provided in the notice.

10 ‘‘(3) If the Attorney General and the Secretary fail

11 to respond to a proposed action by the Secretary of Labor

12 within the period described in paragraph (2), the Attorney

13 General and the Secretary shall be deemed to have ap14 proved the proposed action to be taken by the Secretary

15 of Labor.’’.

16 (e) NOTIFICATION OF LICENSING AUTHORITIES.—

17 Section 1128A of the Social Security Act (42 U.S.C.

18 1320a-7a), as amended by subsection (d), is amended by

19 adding at the end the following new subsection:

20 ‘‘(n) Whenever the Secretary’s determination to im21 pose a penalty, assessment, or exclusion under this section

22 becomes final, the Secretary shall notify the appropriate

23 State or local licensing agency or organization (including

24 the agency specified in section 1864(a) and 1902(a)(33))
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1 that such a penalty, assessment, or exclusion has become

2 final and the reasons therefor.’’.

3 SEC. 522. PERMITTING PARTIES TO BRING ACTIONS ON

4 OWN BEHALF.

5 Subtitle A of title XI of the Social Security Act, as

6 amended by section 514, is amended by inserting after

7 section 1128F the following new section:

8 ‘‘PRIVATE RIGHTS OF ACTION

9 ‘‘SEC. 1128G. (a) IN GENERAL.—Subject to sub10 sections (b) and (c), a certified health plan (as defined

11 in section 21011(b)) or experience-rated employer (as de12 fined in section 21004(d)(4)) that suffers harm or mone13 tary loss exceeding the sum or value of $10,000 (excluding

14 interest) as a result of any activity of an individual or en15 tity which makes the individual or entity subject to a civil

16 monetary penalty under section 1128A may, in a civil ac17 tion against the individual or entity in the United States

18 District Court, obtain treble damages and costs including

19 attorneys’ fees against the individual or entity and such

20 equitable relief as is appropriate.

21 ‘‘(b) REQUIREMENTS FOR BRINGING ACTION.—A

22 person may bring a civil action under this section only if—

23 ‘‘(1) the person provides the Secretary with

24 written notice of—

25 ‘‘(A) the person’s intent to bring an action

26 under this section,
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1 ‘‘(B) the identities of the individuals or en2 tities the person intends to name as defendants

3 to the action, and

4 ‘‘(C) all information the person possesses

5 regarding the activity that is the subject of the

6 action that may materially affect the Sec7 retary’s decision to initiate a proceeding to im8 pose a civil monetary penalty under section

9 1128A against the defendants, and

10 ‘‘(2) one of the following conditions is met:

11 ‘‘(A) During the 60-day period that begins

12 on the date the Secretary receives the written

13 notice described in paragraph (1), the Secretary

14 does not notify the person that the Secretary

15 intends to initiate an investigation to determine

16 whether to impose a civil monetary penalty

17 under section 1128A against the defendants.

18 ‘‘(B) The Secretary notifies the person

19 during the 60-day period described in subpara20 graph (A) that the Secretary intends to initiate

21 an investigation to determine whether to impose

22 a civil monetary penalty under such section

23 against the defendants, and the Secretary sub24 sequently notifies the person that the Secretary

25 no longer intends to initiate an investigation or
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1 proceeding to impose a civil monetary penalty

2 against the defendants.

3 ‘‘(C) After the expiration of the 1-year pe4 riod that begins on the date written notice is

5 provided to the Secretary, the Secretary has not

6 initiated a proceeding to impose a civil mone7 tary penalty against the defendants.

8 ‘‘(c) TREATMENT OF EXCESS AWARDS.—If a person

9 is awarded any amounts in an action brought under this

10 section that are in excess of the damages suffered by the

11 person as a result of the defendant’s activities, 20 percent

12 of such amounts shall be withheld from the person for pay13 ment into the Federal Outlays Program Fraud and Abuse

14 Control Account established under section 1128C(a).

15 ‘‘(d) STATUTE OF LIMITATIONS.—No action may be

16 brought under this section more than 6 years after the

17 date of the activity with respect to which the action is

18 brought.

19 ‘‘(e) NO LIMITATION ON OTHER ACTIONS.—Nothing

20 in this section shall limit the right of any person to pursue

21 any other right of action or remedy available under the

22 law.

23 ‘‘(f) PENDANT JURISDICTION.—Nothing in this sec24 tion shall be construed, by reason of a claim arising under
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1 this section, to confer on the Courts of the United States

2 jurisdiction over any State law claim.’’.

3 SEC. 523. EXCLUSION FROM PROGRAM PARTICIPATION.

4 (a) MANDATORY EXCLUSION.—Section 1128(a) of

5 the Social Security Act (42 U.S.C. 1320a-7) is amended—

6 (1) by inserting ‘‘(1)’’ before ‘‘The’’;

7 (2) by redesignating paragraphs (1) and (2) as

8 subparagraphs (A) and (B), respectively; and

9 (3) by adding at the end the following:

10 ‘‘(C) CONVICTION OF CRIMINAL OFFENSE.—

11 Any individual or entity that has been convicted

12 after the date of the enactment of this subpara13 graph, under Federal or State law, in connection

14 with the delivery of a health care item or service of

15 a criminal offense consisting of a felony relating to

16 fraud, theft, embezzlement, breach of fiduciary re17 sponsibility, or other financial misconduct.

18 ‘‘(D) CONVICTION RELATING TO CONTROLLED

19 SUBSTANCE.—Any individual or entity has been con20 victed after such date, under Federal or State law,

21 of a criminal offense consisting of a felony relating

22 to the unlawful manufacture, distribution, prescrip23 tion, or dispensing of a controlled substance.

24 ‘‘(2) WAIVER PERMITTED.—
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1 ‘‘(A) IN GENERAL.—When, in the opinion of

2 the Secretary, mandatory exclusion under paragraph

3 (1) of an individual or entity would significantly

4 harm the public health or pose a significant risk to

5 the public health, the Secretary may waive such ex6 clusion and shall apply such other appropriate pen7 alties as authorized under this subtitle.

8 ‘‘(B) APPLICATION FOR WAIVER OF EXCLU9 SION.—

10 ‘‘(i) IN GENERAL.—An individual or entity

11 subject to mandatory exclusion under this sub12 section may apply to the Secretary, in a manner

13 specified by the Secretary in regulations, for

14 waiver of the exclusion.

15 ‘‘(ii) SECRETARIAL RESPONSE.—The Sec16 retary may waive the exclusion for the reasons

17 described in subparagraph (A).’’.

18 (b) PERMISSIVE EXCLUSION.—Section 1128(b) of

19 the Social Security Act (42 U.S.C. 1320a-7) is amended—

20 (1) in paragraph (1), by inserting ‘‘consisting of

21 a misdemeanor’’ after ‘‘offense’’; and

22 (2) in paragraph (3), by inserting ‘‘consisting of

23 a misdemeanor’’ after ‘‘offense’’.

24 (c) PERIOD OF EXCLUSION.—
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1 (1) MINIMUM PERIOD FOR MANDATORY EXCLU2 SIONS.—Section 1128(c)(3)(B) of the Social Secu3 rity Act (42 U.S.C. 1320a-7(c)(3)(B)) is amended

4 by striking ‘‘five years’’ and inserting ‘‘two years’’.

5 (2) MINIMUM PERIOD FOR CERTAIN PERMIS6 SIVE EXCLUSIONS.—Section 1128(c)(3) of such Act

7 (42 U.S.C. 1320a-7(c)(3)) is amended by adding the

8 following new subparagraph:

9 ‘‘(D)(i) In the case of an exclusion of an individual

10 excluded from participation in a public program under, or

11 is otherwise described in, paragraph (1), (2), or (3) of sub12 section (b), the period of exclusion shall be a minimum

13 of 1 year, unless the Secretary determines that a longer

14 period is necessary because of aggravating circumstances.

15 ‘‘(ii) In the case of an exclusion of an individual or

16 entity excluded from participation in a public program

17 under, or is otherwise described in, paragraph (4), (5)(A),

18 or (5)(B) of subsection (b), the period of the exclusion

19 shall not be less than the period during which the individ20 ual’s or entity’s license to provide health care is revoked,

21 suspended or surrendered, or the individual or the entity

22 is excluded or suspended from a Federal or State health

23 care program.
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1 ‘‘(iii) In the case of an exclusion of an individual or

2 entity described in paragraph (6)(B) of subsection (b), the

3 period of the exclusion shall be not less than 1 year.’’.

4 (d) NOTICE TO ENTITIES ADMINISTERING PUBLIC

5 PROGRAMS FOR THE DELIVERY OF OR PAYMENT FOR

6 HEALTH CARE ITEMS OR SERVICES.—Section 1128(d) of

7 the Social Security Act (42 U.S.C. 1320a-7(d)) is amend8 ed—

9 (1) in paragraph (1), by inserting ‘‘and all cer10 tified health plans certified under such program for

11 the delivery of or payment for health care items or

12 services’’ after ‘‘participate’’;

13 (2) in paragraph (2), by inserting ‘‘and each

14 sponsor of a certified health plan’’ after ‘‘program’’.

15 (e) EXPANDED OPPORTUNITY FOR ADMINISTRATIVE

16 HEARINGS.—Section 1128(f)(2) of the Social Security Act

17 (42 U.S.C. 1320a-7(f)(2)) is amended by striking ‘‘sub18 section (b)(7)’’ and inserting ‘‘paragraphs (6)(B), (7), (8),

19 (9), (11), (12), or (14) of subsection (b)’’.

20 (f) NOTIFICATION OF TERMINATION OF EXCLU21 SION.—Section 1128(g)(3)) of the Social Security Act (42

22 U.S.C. 1320a-7(g)(3)) is amended by inserting ‘‘and each

23 sponsor of a certified health plan’’ after ‘‘program’’.
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1 (g) REQUEST FOR EXCLUSION.—Section 1128(d) of

2 the Social Security Act (42 U.S.C. 1320a-7(d)) is amend3 ed by adding at the end the following new paragraph:

4 ‘‘(4)(A) The sponsor of any certified health plan, the

5 board of any purchasing cooperative, and the Secretary

6 of Labor in the case of a multistate self-insured health

7 plan may request that the Secretary of Health and Human

8 Services exclude an individual or entity with respect to ac9 tions under a certified health plan in accordance with this

10 section.

11 ‘‘(B) Notwithstanding any other provision of this title

12 and title XXI, no payment may be made under a certified

13 health plan for the delivery of or payment for any item

14 or service (other than an emergency item or service, not

15 including items or services furnished in an emergency

16 room of a hospital) furnished—

17 ‘‘(i) by an individual or entity during the period

18 when such individual or entity is excluded pursuant

19 to this section from participation in a certified

20 health plan; or

21 ‘‘(ii) at the medical direction or on the prescrip22 tion of a physician during the period when the physi23 cian is excluded pursuant to this section from par24 ticipation in a certified health plan and the person

25 furnishing the item or service knew or had reason to
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1 know of the exclusion (after a reasonable time period

2 after reasonable notice has been furnished to the

3 person).’’.

4 PART III—AMENDMENTS TO CRIMINAL LAW

5 SEC. 531. HEALTH CARE FRAUD.

6 (a) IN GENERAL.—Chapter 63 of title 18, United

7 States Code, is amended by adding at the end the follow8 ing:

9 ‘‘§ 1347. Health care fraud

10 ‘‘(a) Whoever knowingly executes, or attempts to exe11 cute, a scheme or artifice—

12 ‘‘(1) to defraud any purchasing cooperative,

13 certified health plan, certified long-term care policy,

14 or other person, in connection with the delivery of or

15 payment for health care benefits, items, or services;

16 or

17 ‘‘(2) to obtain, by means of false or fraudulent

18 pretenses, representations, or promises, any of the

19 money or property owned by, or under the custody

20 or control of, any purchasing cooperative, certified

21 health plan, certified long-term care policy, or per22 son in connection with the delivery of or payment for

23 health care benefits, items, or services;

24 shall be fined under this title or imprisoned not more than

25 10 years, or both. If the violation results in serious bodily
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1 injury (as defined in section 1365 of this title) such person

2 shall be imprisoned for any term of years.

3 ‘‘(b) As used in this section—

4 ‘‘(1) the terms ‘purchasing cooperative’, ‘cer5 tified health plan’, and ‘certified long-term care pol6 icy’ have the meanings given those terms in sections

7 21100(14), 21011(a)(1), and 21011(b)(2) of the So8 cial Security Act, respectively.’’.

9 (b) CLERICAL AMENDMENT.—The table of sections

10 at the beginning of chapter 63 of title 18, United States

11 Code, is amended by adding at the end the following:

‘‘1347. Health care fraud.’’.

12 SEC. 532. THEFT OR EMBEZZLEMENT.

13 (a) IN GENERAL.—Chapter 31 of title 18, United

14 States Code, is amended by adding at the end the follow15 ing:

16 ‘‘§ 668. Theft or embezzlement in connection with

17 health care

18 ‘‘(a) Whoever embezzles, steals, willfully and unlaw19 fully converts to the use of any person other than the

20 rightful owner, or intentionally misapplies any of the mon21 eys, securities, premiums, credits, property, or other assets

22 of a purchasing cooperative, certified health plan, certified

23 long-term care policy, or of any fund connected with such

24 a cooperative, plan, or policy, shall be fined under this title

25 or imprisoned not more than 10 years, or both.
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1 ‘‘(b) As used in this section, the terms ‘purchasing

2 cooperative’, ‘certified health plan’, and ‘certified long3 term care policy’ have the meanings given those terms in

4 sections 21100(14), 21011(a)(1), and 21011(b)(2) of the

5 Social Security Act, respectively.’’.

6 (b) CLERICAL AMENDMENT.—The table of sections

7 at the beginning of chapter 31 of title 18, United States

8 Code, is amended by adding at the end the following:

‘‘668. Theft or embezzlement in connection with health care.’’.

9 SEC. 533. FALSE STATEMENTS.

10 (a) IN GENERAL.—Chapter 47 of title 18, United

11 States Code, is amended by adding at the end the follow12 ing:

13 ‘‘§ 1033. False statements relating to health care mat14 ters

15 ‘‘(a) Whoever, in any matter involving a purchasing

16 cooperative, certified health plan, or certified long-term

17 care policy, knowingly and willfully falsifies, conceals, or

18 covers up by any trick, scheme, or device a material fact,

19 or makes any false, fictitious, or fraudulent statements or

20 representations, or makes or uses any false writing or doc21 ument knowing the same to contain any false, fictitious,

22 or fraudulent statement or entry, shall be fined under this

23 title or imprisoned not more than 5 years, or both.

24 ‘‘(b) As used in this section, the terms ‘purchasing

25 cooperative’, ‘certified health plan’, and ‘certified long-
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1 term care policy’ have the meanings given those terms in

2 sections 21100(14), 21011(a)(1), and 21011(b)(2) of the

3 Social Security Act, respectively.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 at the beginning of chapter 47 of title 18, United States

6 Code, is amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

7 SEC. 534. BRIBERY AND GRAFT.

8 (a) IN GENERAL.—Chapter 11 of title 18, United

9 States Code, is amended by adding at the end the follow10 ing:

11 ‘‘§ 226. Bribery and graft in connection with health

12 care

13 ‘‘(a) Whoever—

14 ‘‘(1) directly or indirectly, corruptly gives, of15 fers, or promises anything of value to a health care

16 official, or offers or promises a health care official

17 to give anything of value to any other person, with

18 intent—

19 ‘‘(A) to influence any of the health care of20 ficial’s actions, decisions, or duties relating to a

21 purchasing cooperative, certified health plan, or

22 certified long-term care policy;

23 ‘‘(B) to influence such an official to com24 mit or aid in the committing, or collude in or

25 allow, any fraud, or make opportunity for the
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1 commission of any fraud, on a purchasing coop2 erative, certified health plan, or certified long3 term care policy; or

4 ‘‘(C) to induce such an official to engage

5 in any conduct in violation of the lawful duty of

6 such official; or

7 ‘‘(2) being a health care official, directly or in8 directly, corruptly demands, seeks, receives, accepts,

9 or agrees to accept anything of value personally or

10 for any other person or entity, the giving of which

11 violates paragraph (1) of this subsection;

12 shall be fined under this title or imprisoned not more than

13 15 years, or both.

14 ‘‘(b) Whoever, otherwise than as provided by law for

15 the proper discharge of any duty, directly or indirectly

16 gives, offers, or promises anything of value to a health

17 care official, for or because of any of the health care offi18 cial’s actions, decisions, or duties relating to a purchasing

19 cooperative, certified health plan, or certified long-term

20 care policy, shall be fined under this title or imprisoned

21 not more than two years, or both.

22 ‘‘(c) As used in this section—

23 ‘‘(1) the term ‘health care official’ means—

24 ‘‘(A) an administrator, officer, trustee, fi25 duciary, custodian, counsel, agent, or employee
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1 of any purchasing cooperative, certified health

2 plan, or certified long-term care policy;

3 ‘‘(B) an officer, counsel, agent, or em4 ployee, of an organization that provides services

5 under contract to any purchasing cooperative,

6 certified health plan, or certified long-term care

7 policy;

8 ‘‘(C) an official or employee of a State

9 agency having regulatory authority over any

10 purchasing cooperative, certified health plan, or

11 certified long-term care policy;

12 ‘‘(D) an officer, counsel, agent, or em13 ployee of a health care sponsor;

14 ‘‘(2) the term ‘health care sponsor’ means any

15 individual or entity serving as the sponsor of a cer16 tified health plan for purposes of title XXI of the

17 Social Security Act, and includes the joint board of

18 trustees or other similar body used by two or more

19 employers to administer a certified health plan for

20 purposes of such Act; and

21 ‘‘(3) the terms ‘purchasing cooperative’, ‘cer22 tified health plan’, and ‘certified long-term care pol23 icy’ have the meanings given those terms in sections

24 21100(14), 21011(a)(1), and 21011(b)(2) of the So25 cial Security Act, respectively.’’.
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1 (b) CLERICAL AMENDMENT.—The table of chapters

2 at the beginning of chapter 11 of title 18, United States

3 Code, is amended by adding at the end the following:

‘‘226. Bribery and graft in connection with health care.’’.

4 SEC. 535. INJUNCTIVE RELIEF RELATING TO HEALTH CARE

5 OFFENSES.

6 Section 1345(a)(1) of title 18, United States Code,

7 is amended—

8 (1) by striking ‘‘or’’ at the end of subparagraph

9 (A);

10 (2) by inserting ‘‘or’’ at the end of subpara11 graph (B); and

12 (3) by adding at the end the following:

13 ‘‘(C) committing or about to commit a Federal

14 health care offense (as defined in section 1128D of

15 the Social Security Act);’’.

16 SEC. 536. GRAND JURY DISCLOSURE.

17 Section 3322 of title 18, United States Code, is

18 amended—

19 (1) by redesignating subsections (c) and (d) as

20 subsections (d) and (e), respectively; and

21 (2) by inserting after subsection (b) the follow22 ing:

23 ‘‘(c) A person who is privy to grand jury information

24 concerning a health law violation—
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1 ‘‘(1) received in the course of duty as an attor2 ney for the Government; or

3 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the

4 Federal Rules of Criminal Procedure;

5 may disclose that information to an attorney for the Gov6 ernment to use in any civil proceeding related to a Federal

7 health care offense (as defined in section 1128D of the

8 Social Security Act).’’.

9 SEC. 537. FORFEITURES FOR VIOLATIONS OF FRAUD STAT10 UTES.

11 Section 982(a) of title 18, United States Code, is

12 amended by inserting after paragraph (5) the following:

13 ‘‘(6) The court, in imposing sentence on a person con14 victed of a Federal health care offense (as defined in sec15 tion 1128D of the Social Security Act) that results in seri16 ous bodily injury (as defined in section 1365 of this title),

17 shall order such person to forfeit to the United States any

18 property, real or personal, constituting or traceable to the

19 gross proceeds obtained, directly or indirectly, as a result

20 of the commission of the offense.’’.

21 PART IV—AMENDMENTS TO CIVIL FALSE CLAIMS

22 ACT

23 SEC. 541. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

24 Section 3729 of title 31, United States Code, is

25 amended—
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1 (1) in subsection (a)(7), by inserting ‘‘or to a

2 certified health plan or certified long-term care pol3 icy’’ after ‘‘property to the Government’’;

4 (2) in the matter following subsection (a)(7), by

5 inserting ‘‘or certified health plan or certified long6 term care policy’’ before ‘‘sustains because of the act

7 of that person,’’;

8 (3) at the end of the first sentence of sub9 section (a), by inserting ‘‘or certified health plan or

10 certified long-term care policy’’ before ‘‘sustains be11 cause of the act of the person.’’;

12 (4) in subsection (c)—

13 (A) by inserting ‘‘the term’’ after ‘‘sec14 tion,’’; and

15 (B) by adding at the end the following:

16 ‘‘The term also includes any request or demand,

17 whether under contract of otherwise, for money

18 or property which is made or presented to a

19 certified health plan or certified long-term care

20 policy.’’; and

21 (5) by adding at the end the following:

22 ‘‘(f) CERTIFIED HEALTH PLAN AND CERTIFIED

23 LONG-TERM CARE POLICY DEFINED.—For purposes of

24 this section, the terms ‘purchasing cooperative’, ‘certified

25 health plan’, and ‘certified long-term care policy’ have the
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1 meanings given those terms in sections 21100(14),

2 21011(a)(1), and 21011(b)(2) of the Social Security Act,

3 respectively.’’.

4 PART V—EFFECTIVE DATE

5 SEC. 551. EFFECTIVE DATE.

6 Except as otherwise provided in this subtitle, the pro7 visions of, and amendments made by, this subtitle shall

8 be effective on and after January 1, 1996.

9 TITLE VI—MEDICARE, MEDICAL

10 EDUCATION, AND MEDICAID

11 SEC. 600. REFERENCES TO SOCIAL SECURITY ACT.

12 Except as otherwise specifically provided, whenever in

13 this title an amendment is expressed in terms of an

14 amendment to or repeal of a section or other provision,

15 the reference shall be considered to be made to that sec16 tion or other provision of the Social Security Act.

17 Subtitle A—Medicare

18 PART I—RISK CONTRACTING ENTITIES

19 SEC. 601. IMPROVEMENTS OF RISK CONTRACTS.

20 (a) IN GENERAL.—Section 1876 (42 U.S.C.

21 1395mm) is amended to read as follows:

22 ‘‘PAYMENTS TO CERTAIN CERTIFIED STANDARD HEATH

23 PLANS

24 ‘‘SEC. 1876. (a) IN GENERAL.—

25 ‘‘(1) GENERAL PERMISSION TO CONTRACT.—
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1 ‘‘(A) RISK CONTRACTS.—The Secretary

2 may enter into a risk contract with any certified

3 standard health plan (as defined in paragraph

4 (4)(A)) in a service area (as defined in para5 graph (4)(B)) if—

6 ‘‘(i) the plan has at least 5,000 enroll7 ees (except that the Secretary may enter

8 into such a contract with a certified stand9 ard health plan that has fewer enrollees if

10 the plan primarily serves members residing

11 outside of urbanized areas); and

12 ‘‘(ii) the plan—

13 ‘‘(I) meets the requirements of

14 this section with respect to individuals

15 enrolled under this section; and

16 ‘‘(II) meets the requirements nec17 essary to maintain its status as a cer18 tified standard health plan with re19 spect to individuals enrolled under

20 this section that do not conflict with

21 any of the requirements under this

22 section.

23 ‘‘(B) REASONABLE COST REIMBURSEMENT

24 CONTRACTS.—The Secretary may enter into a

25 reasonable cost reimbursement contract (as de-
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1 fined in paragraph (4)(C)) with any certified

2 standard health plan in a service area if—

3 ‘‘(i)(I) the plan so elects;

4 ‘‘(II) the Secretary is not satisfied

5 that the plan has the capacity to bear the

6 risk of potential losses under a risk con7 tract under this section, or

8 ‘‘(III) the plan has an insufficient

9 number of individuals enrolled to be eligi10 ble to enter into a risk contract; and

11 ‘‘(ii) the Secretary is otherwise satis12 fied that the plan is able to perform its

13 contractual obligations effectively and effi14 ciently.

15 ‘‘(2) AVAILABILITY OF PLANS.—

16 ‘‘(A) IN GENERAL.—Subject to the provi17 sions of subsection (e), every individual entitled

18 to benefits under part A and enrolled under

19 part B shall be eligible to enroll under this sec20 tion with any certified standard health plan

21 with a contract under this section which serves

22 the service area in which the individual resides,

23 except that an employer-sponsored plan may

24 limit its enrollment to certain classes of individ-
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1 uals, as designated by the Secretary in regula2 tions.

3 ‘‘(B) ENROLLMENT BY AN INDIVIDUAL.—

4 An individual may enroll under this section with

5 a certified standard health plan with a contract

6 under this section in such manner as may be

7 prescribed in regulations (including enrollment

8 through a third party) and the individual may

9 terminate enrollment—

10 ‘‘(i) during an annual period as pre11 scribed by the Secretary, and

12 ‘‘(ii) as specified by the Secretary if

13 the plan is financially insolvent, if the indi14 vidual moves from the service area served

15 by the plan, or if other special cir16 cumstances exist, as prescribed by the Sec17 retary.

18 ‘‘(C) INFORMATION.—

19 ‘‘(i) DISTRIBUTION BY PLANS.—The

20 Secretary may prescribe the procedures

21 and conditions under which a certified

22 standard health plan with a contract under

23 this section may provide individuals eligible

24 to enroll under this section with informa25 tion about the plan. No brochures, applica-
501

•S 2351 PCS

1 tion forms, or other promotional or infor2 mational material may be distributed by a

3 plan to (or for the use of) individuals eligi4 ble to enroll with the plan under this sec5 tion unless—

6 ‘‘(I) at least 45 days before its

7 distribution, the plan has submitted

8 the material to the Secretary for re9 view, and

10 ‘‘(II) the Secretary has not dis11 approved the distribution of the mate12 rial.

13 The Secretary shall review all such mate14 rial submitted and shall disapprove such

15 material if the Secretary determines, in the

16 Secretary’s discretion, that the material is

17 materially inaccurate or misleading or oth18 erwise makes a material misrepresentation.

19 ‘‘(ii) DISTRIBUTION BY THE SEC20 RETARY.—The Secretary shall develop and

21 distribute comparative materials to individ22 uals eligible to enroll under this section re23 garding all certified standard health plans

24 with contracts under this section.

25 ‘‘(3) PAYMENTS.—
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•S 2351 PCS

1 ‘‘(A) PAYMENTS IN LIEU OF NORMAL PAY2 MENTS.—Subject to subsection (i)(3), payments

3 under a contract to a certified standard health

4 plan under this section shall be instead of the

5 amounts which (in the absence of the contract)

6 would be otherwise payable, pursuant to sec7 tions 1814(b) and 1833(a), for services fur8 nished by or through the plan to individuals en9 rolled with the plan under this section.

10 ‘‘(B) SOURCE OF PAYMENT.—The payment

11 to a certified standard health plan under this

12 section for individuals enrolled under this sec13 tion with the plan and entitled to benefits under

14 part A and enrolled under part B shall be made

15 from the Federal Hospital Insurance Trust

16 Fund and the Federal Supplementary Medical

17 Insurance Trust Fund. The portion of that pay18 ment to the plan for a month to be paid by

19 each trust fund shall be determined as follows:

20 ‘‘(i) With respect to expenditures by

21 certified standard health plans with risk

22 contracts under this section, the allocation

23 shall be determined each year by the Sec24 retary based on the ratio of expenditures

25 from each trust fund for the preceding
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•S 2351 PCS

1 year to the expenditures from both trust

2 funds for the preceding year.

3 ‘‘(ii) With respect to expenditures by

4 a certified standard health plan with a rea5 sonable cost reimbursement contract under

6 this section, the initial allocation shall be

7 based on the plan’s most recent budget,

8 such allocation to be adjusted, as needed,

9 after cost settlement to reflect the distribu10 tion of actual expenditures.

11 ‘‘(4) DEFINITIONS.—For purposes of this sec12 tion:

13 ‘‘(A) CERTIFIED STANDARD HEALTH

14 PLAN.—The term ‘certified standard health

15 plan’ shall have the meaning given such term in

16 section 21011(a)(2).

17 ‘‘(B) SERVICE AREA.—The term ‘service

18 area’ means the service areas designated by a

19 State under section 21128.

20 ‘‘(C) REASONABLE COST REIMBURSEMENT

21 CONTRACT.—The term ‘reasonable cost reim22 bursement contract’ means a contract with a

23 certified standard health plan pursuant to

24 which such plan is reimbursed on the basis of

25 its reasonable cost (as defined in section
504

•S 2351 PCS

1 1861(v)) in the manner prescribed in subsection

2 (c)(2).

3 ‘‘(b) PAYMENT RULES UNDER RISK CONTRACTS.—

4 ‘‘(1) IN GENERAL.—

5 ‘‘(A) PAYMENTS.—Except as provided in

6 subparagraph (C), with respect to any calendar

7 year, each certified standard health plan with a

8 risk contract under this section shall receive a

9 payment under this title with respect to each

10 individual enrolled with the plan for each month

11 such individual is enrolled equal to the average

12 medicare per capita rate determined under

13 paragraph (2) for the plan’s service area ad14 justed by the rate factor determined under sub15 paragraph (B) for the class of such individual.

16 ‘‘(B) DETERMINATION OF CLASSES OF IN17 DIVIDUALS AND RATE FACTORS FOR SUCH

18 CLASSES.—

19 ‘‘(i) DETERMINATION OF CLASSES.—

20 For purposes of this section, the Secretary

21 shall define appropriate classes of individ22 uals, based on age, disability status, and

23 such other factors as the Secretary deter24 mines to be appropriate.
505

•S 2351 PCS

1 ‘‘(ii) RATE FACTORS.—The Secretary

2 shall annually determine the rate factors

3 for each class of individuals defined in

4 clause (i) reflecting the differences in the

5 average per capita spending for benefits

6 under parts A and B among individuals in

7 such classes. The Secretary shall announce

8 such rate factors (in a manner intended to

9 provide notice to interested parties) not

10 later than July 1 before the calendar year

11 concerned.

12 ‘‘(C) BUDGET NEUTRALITY.—The Sec13 retary shall reduce the amount of payments to

14 be made to certified standard health plans

15 under subparagraph (A) for a year by an

16 amount the Secretary determines necessary so

17 that such payments do not exceed an amount

18 equal to the total amount that would have been

19 paid under this section for the year if section

20 601 of the Health Security Act had not been

21 enacted.

22 ‘‘(2) DETERMINATION OF AVERAGE MEDICARE

23 PER CAPITA RATE.—

24 ‘‘(A) DETERMINATION BY SECRETARY.—
506

•S 2351 PCS

1 ‘‘(i) IN GENERAL.—The Secretary

2 shall annually determine under subpara3 graph (B), and shall announce (in a man4 ner intended to provide notice to interested

5 parties) not later than October 1 before

6 the calendar year concerned, the average

7 medicare per capita rate of payment for

8 each service area.

9 ‘‘(B) FORMULA FOR AVERAGE MEDICARE

10 PER CAPITA RATE.—

11 ‘‘(i) IN GENERAL.—The monthly aver12 age medicare per capita rate of payment

13 for a service area served by a certified

14 standard health plan shall be equal to the

15 sum of—

16 ‘‘(I) the plan component deter17 mined under clause (ii); and

18 ‘‘(II) the fee-for-service compo19 nent determined under clause (iii).

20 ‘‘(ii) PLAN COMPONENT.—The

21 amount determined under this clause is the

22 sum of the following amounts determined

23 with respect to each certified standard

24 health plan—
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•S 2351 PCS

1 ‘‘(I) the amount of the uniform

2 monthly premium submitted by the

3 plan to the Secretary under subpara4 graph (C), adjusted by a factor deter5 mined by the Secretary to normalize

6 the difference in the distribution of in7 dividuals projected to be enrolled in

8 the plan among the various classes of

9 individuals defined by the Secretary to

10 the national distribution of all individ11 uals in the program under this title

12 among such classes; multiplied by

13 ‘‘(II) a fraction (expressed as a

14 percentage), the numerator of which

15 is the number of all individuals en16 rolled in the plan (as projected by the

17 plan using either historical experience

18 or some other methodology developed

19 by the Secretary), and the denomina20 tor of which is the number of all med21 icare eligible individuals in the service

22 area.

23 ‘‘(iii) FEE-FOR-SERVICE COMPO24 NENT.—The amount determined under

25 this clause is—
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•S 2351 PCS

1 ‘‘(I) the projected average

2 monthly per capita fee-for-service

3 costs (as defined in subparagraph

4 (D)) for the service area for individ5 uals not enrolled in certified standard

6 health plans with contracts under this

7 section, adjusted by the factor de8 scribed in clause (ii)(I); multiplied by

9 ‘‘(II) a fraction (expressed as a

10 percentage), the numerator of which

11 is equal to the number of all medicare

12 eligible individuals in the service area

13 minus the number of individuals who

14 are enrolled in certified standard

15 health plans with risk contracts under

16 this section (as determined in accord17 ance with subclause (I)), and the de18 nominator of which is the number of

19 all medicare eligible individuals in the

20 service area.

21 ‘‘(C) UNIFORM MONTHLY PREMIUMS; PRE22 MIUM FOR ADDITIONAL SERVICES.—

23 ‘‘(i) IN GENERAL.—Each certified

24 standard health plan with a risk contract

25 under this section shall, not later than Au-
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•S 2351 PCS

1 gust 1 of each year, submit to the Sec2 retary a bid for the next calendar year for

3 each service area with respect to which the

4 plan has a risk contract. A bid with re5 spect to a service area shall include the fol6 lowing:

7 ‘‘(I) UNIFORM MONTHLY PRE8 MIUM.—A statement of the uniform

9 monthly premium amount that the

10 plan intends to charge for individuals

11 enrolled under this section with the

12 plan and entitled to benefits under

13 part A and enrolled in part B and a

14 projection of the plan’s enrollment by

15 class for such services in the service

16 area.

17 ‘‘(II) PREMIUM FOR ADDITIONAL

18 SERVICES.—A statement of the pre19 mium amount that the plan intends to

20 charge for each class of individuals

21 enrolled under this section with the

22 plan for the additional mandatory

23 services described in subparagraphs

24 (A)(ii) and (B) of subsection (d)(1).
510

•S 2351 PCS

1 ‘‘(III) PREMIUM FOR ADDI2 TIONAL HEALTH CARE SERVICES.—A

3 statement of the premium amount

4 that the plan intends to charge for

5 each package of additional health care

6 services offered by the plan.

7 ‘‘(ii) NOTICE BEFORE BID SUBMIS8 SIONS.—At least 45 days before the date

9 for submitting bids under clause (ii) for a

10 year, the Secretary shall provide for notice

11 to certified standard health plans with risk

12 contracts of proposed changes to be made

13 in the methodology or benefit coverage as14 sumptions from the methodology and as15 sumptions used in the previous calendar

16 year and shall provide such plans an op17 portunity to comment on such proposed

18 changes.

19 ‘‘(D) PROJECTED AVERAGE MONTHLY PER

20 CAPITA FEE-FOR-SERVICE COSTS.—

21 ‘‘(i) IN GENERAL.—For purposes of

22 subparagraph (B), the term ‘projected av23 erage monthly per capita fee-for-service

24 costs’ means, with respect to a service

25 area, the amount, prorated to be expressed
511

•S 2351 PCS

1 as a monthly amount, that the Secretary

2 estimates in advance would be payable in

3 any contract year for services covered

4 under parts A and B and types of expenses

5 otherwise reimbursable under parts A and

6 B (including administrative costs incurred

7 by organizations described in sections 1816

8 and 1842), if the services were to be fur9 nished by other than a certified standard

10 health plan with a risk contract under this

11 section.

12 ‘‘(ii) BASIS FOR ESTIMATES.—The es13 timate made by the Secretary under clause

14 (i) shall be made on the basis of actual ex15 perience of the service area or, if the Sec16 retary determines that the data in that

17 service area are inadequate to make an ac18 curate estimate, the Secretary may use the

19 actual experience of a similar area, with

20 appropriate adjustments to assure actuar21 ial equivalence, including adjustments the

22 Secretary may determine appropriate to

23 adjust for demographics, health status,

24 and the presence of specific medical condi25 tions.
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•S 2351 PCS

1 ‘‘(3) PAYMENT RULES.—

2 ‘‘(A) AMOUNT OF PREMIUM.—Each cer3 tified standard health plan with a contract

4 under this section must provide to individuals

5 enrolled with the plan under this section, for

6 the duration of such enrollment during each

7 contract period, a fixed monthly premium equal

8 to the sum of the uniform monthly premium

9 amount determined by the plan with respect to

10 the individual under paragraph (2)(C) and the

11 premium amount determined under such para12 graph for the additional mandatory services de13 scribed in subparagraphs (A)(ii) and (B) of

14 subsection (d)(1). An individual enrolled in the

15 plan shall be responsible for paying to the plan

16 the difference between the fixed monthly pre17 mium amount described in the preceding sen18 tence and the average medicare per capita rate

19 paid to the plan in accordance with subpara20 graph (B).

21 ‘‘(B) AVERAGE MEDICARE PER CAPITA

22 RATE.—

23 ‘‘(i) IN GENERAL.—The Secretary

24 shall make monthly payments in advance

25 and in accordance with the rate deter-
513

•S 2351 PCS

1 mined under paragraph (2) to each cer2 tified standard health plan with a risk con3 tract under this section for each individual

4 enrolled with the plan under this section.

5 ‘‘(ii) ADJUSTMENTS.—

6 ‘‘(I) IN GENERAL.—The amount

7 of payment under this paragraph may

8 be retroactively adjusted to take into

9 account any difference between the

10 actual number of individuals enrolled

11 in the plan under this section and the

12 number of such individuals estimated

13 to be so enrolled in determining the

14 amount of the advance payment.

15 ‘‘(II) SPECIAL RULE.—The Sec16 retary may make retroactive adjust17 ments under subclause (I) to take into

18 account individuals enrolled during

19 the period beginning on the date on

20 which the individual enrolls with a

21 certified standard health plan with a

22 risk contract under this section under

23 a health benefit plan operated, spon24 sored, or contributed to, by the indi25 vidual’s employer or former employer
514

•S 2351 PCS

1 (or the employer or former employer

2 of the individual’s spouse) and ending

3 on the date on which the individual is

4 enrolled in the plan under this section,

5 except that for purposes of making

6 such retroactive adjustments under

7 this clause, such period may not ex8 ceed 90 days. No adjustment may be

9 made under the preceding sentence

10 with respect to any individual who

11 does not certify that the plan provided

12 the individual with the explanation de13 scribed in subsection (e)(6) at the

14 time the individual enrolled with the

15 plan.

16 ‘‘(iii) PAYMENT TO PLAN ONLY.—Sub17 ject to subsection (i)(3), if an individual is

18 enrolled under this section with a certified

19 standard health plan with a risk contract

20 under this section, only the plan shall be

21 entitled to receive payments from the Sec22 retary under this title for services fur23 nished to the individual.

24 ‘‘(C) PAYMENT GREATER THAN FIXED

25 MONTHLY PREMIUM.—If, with respect to any
515

•S 2351 PCS

1 individual enrolled in a certified standard health

2 plan with a risk contract under this section, the

3 average medicare per capita rate paid under

4 this section to the plan exceeds the fixed

5 monthly premium amount described in subpara6 graph (A), the plan shall pay such excess to the

7 individual, at the election of the plan, in the

8 form of cash or as a contribution to a premium

9 for any policy for additional health care serv10 ices.

11 ‘‘(c) PAYMENT RULES FOR REASONABLE COST REIM12 BURSEMENT CONTRACTS.—

13 ‘‘(1) REIMBURSEMENT.—

14 ‘‘(A) IN GENERAL.—A certified standard

15 health plan with a reasonable cost reimburse16 ment contract under this section may, at the

17 option of such plan, provide that the Sec18 retary—

19 ‘‘(i) will reimburse hospitals and

20 skilled nursing facilities either for the rea21 sonable cost (as determined under section

22 1861(v)) or for payment amounts deter23 mined in accordance with section 1886, as

24 applicable, of services furnished to individ25 uals enrolled with such plan, and
516

•S 2351 PCS

1 ‘‘(ii) will deduct the amount of such

2 reimbursement from payment which would

3 otherwise be made to such plan.

4 ‘‘(B) DIRECT PAYMENTS.—If a certified

5 standard health plan with a reasonable cost re6 imbursement contract under this section pays a

7 hospital or skilled nursing facility directly, the

8 amount paid shall not exceed the reasonable

9 cost of the services (as determined under sec10 tion 1861(v)) or the amount determined under

11 section 1886, as applicable, unless such plan

12 demonstrates to the satisfaction of the Sec13 retary that such excess payments are justified

14 on the basis of advantages gained by the plan.

15 ‘‘(2) PAYMENTS TO PLANS.—Payments made to

16 a certified standard health plan with a reasonable

17 cost reimbursement contract under this section shall

18 be subject to appropriate retroactive corrective ad19 justment at the end of each contract year so as to

20 assure that such plan is paid for the reasonable cost

21 actually incurred (excluding any part of incurred

22 cost found to be unnecessary in the efficient delivery

23 of health services) or the amounts otherwise deter24 mined under section 1886 for the types of expenses

25 otherwise reimbursable under this title for providing
517

•S 2351 PCS

1 services covered under this title to individuals en2 rolled in the plan.

3 ‘‘(3) REPORTS BY PLANS.—A certified standard

4 health plan with a reasonable cost reimbursement

5 contract under this subsection shall provide that the

6 Secretary shall require, at such time following the

7 expiration of each accounting period of the plan

8 (and in such form and in such detail) as the Sec9 retary may prescribe—

10 ‘‘(A) that the plan report to the Secretary

11 in an independently certified financial state12 ment its per capita incurred cost based on the

13 types of components of expenses otherwise re14 imbursable under this title for providing serv15 ices under parts A and B, including therein, in

16 accordance with accounting procedures pre17 scribed by the Secretary, its methods of allocat18 ing costs between individuals enrolled under

19 this section and other individuals enrolled with

20 such plan;

21 ‘‘(B) that failure to report such informa22 tion as may be required may be deemed to con23 stitute evidence of likely overpayment on the

24 basis of which appropriate collection action may

25 be taken;
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•S 2351 PCS

1 ‘‘(C) that in any case in which a plan is re2 lated to another plan by common ownership or

3 control, a consolidated financial statement shall

4 be filed and that the allowable costs for such

5 organization may not include costs for the types

6 of expense otherwise reimbursable under this

7 title, in excess of those which would be deter8 mined to be reasonable in accordance with regu9 lations (providing for limiting reimbursement to

10 costs rather than charges to the plan by related

11 plans and owners) issued by the Secretary; and

12 ‘‘(D) that in any case in which compensa13 tion is paid by a plan substantially in excess of

14 what is normally paid for similar services by

15 similar practitioners (regardless of method of

16 compensation), such compensation may as ap17 propriate be considered to constitute a distribu18 tion of profits.

19 ‘‘(d) COVERAGE OF BENEFITS.—

20 ‘‘(1)IN GENERAL.—

21 ‘‘(A) SERVICES PROVIDED.—A certified

22 standard health plan with a contract under this

23 section must provide to individuals enrolled in

24 the plan under this section, through providers
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•S 2351 PCS

1 and other persons that meet the applicable re2 quirements of this title and part A of title XI—

3 ‘‘(i) except as provided in subpara4 graph (B), the services covered under parts

5 A and B of this title; and

6 ‘‘(ii) preventive care services, as de7 fined by the Secretary.

8 ‘‘(B) ADDITIONS TO PART A COVERAGE.—

9 For purposes of subparagraph (A)(i)—

10 ‘‘(i) inpatient hospital services shall

11 not be limited to 150 days pursuant to sec12 tion 1812(a)(1); and

13 ‘‘(ii) the requirement that an individ14 ual be an inpatient in a hospital for 3 con15 secutive days prior to the individual’s re16 ceipt of post-hospital extended care serv17 ices pursuant to section 1861(i) shall not

18 apply.

19 ‘‘(2) PROVISION OF MEDICALLY NECESSARY

20 CARE.—Each certified standard health plan with a

21 contract under this section must—

22 ‘‘(A) make the services described in para23 graph (1) (and such other health care services

24 as enrolled individuals have contracted for)—
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•S 2351 PCS

1 ‘‘(i) available and accessible to en2 rolled individuals within the service area

3 with reasonable promptness and in a man4 ner which assures continuity, and

5 ‘‘(ii) when medically necessary, avail6 able and accessible twenty-four hours a

7 day and seven days a week, and

8 ‘‘(B) provide for reimbursement with re9 spect to services which are described in sub10 paragraph (A) and which are provided to such

11 an individual other than through the plan, if—

12 ‘‘(i) the services were medically nec13 essary and immediately required because of

14 an unforeseen illness, injury, or condition,

15 and

16 ‘‘(ii) it was not reasonable given the

17 circumstances to obtain the services

18 through the plan.

19 ‘‘(3) SPECIAL EXCEPTION.—If there is a na20 tional coverage determination made in the period be21 ginning on the date for the submission of bids under

22 subsection (b)(2)(C) and ending on the next such

23 date of submission that the Secretary projects will

24 result in a significant change in the costs to a cer25 tified standard health plan with a risk contract
521

•S 2351 PCS

1 under this section of providing the benefits that are

2 the subject of such national coverage determination

3 and that was not incorporated in the determination

4 of the bid for such period, and if such coverage de5 termination provides for coverage of additional bene6 fits or under additional circumstances, subsection

7 (a)(3)(A) shall not apply to payment for such addi8 tional benefits or benefits provided under such addi9 tional circumstances until the first contract year

10 that begins after the end of such period, unless oth11 erwise required by law.

12 ‘‘(4) COST SHARING.—

13 ‘‘(A) IN GENERAL.—Each certified stand14 ard health plan with a contract under this sec15 tion must provide to individuals enrolled under

16 this section with respect to the services de17 scribed in paragraph (1), cost sharing require18 ments that are no greater than the cost sharing

19 requirements for such services under the plan

20 for individuals not enrolled in the plan under

21 this section.

22 ‘‘(B) COST SHARING FIXED DURING CON23 TRACT PERIOD.—Each certified standard plan

24 must provide to individuals enrolled under this

25 section, for the duration of such enrollment
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•S 2351 PCS

1 during each contract period, cost sharing that

2 is fixed during the duration of the contract pe3 riod.

4 ‘‘(e) ENROLLMENT PERIODS.—

5 ‘‘(1) IN GENERAL.—Each certified standard

6 health plan with a contract under this section must

7 have an open enrollment period (which may be speci8 fied by the Secretary), for the enrollment of individ9 uals under this section, of at least 30 days duration

10 every year and for the additional periods specified

11 under paragraphs (2) through (4), and must provide

12 that at any time during which enrollments are ac13 cepted, the plan will accept up to the limits of its

14 capacity (as determined by the Secretary) and with15 out restrictions, except as may be authorized in reg16 ulations, individuals who are eligible to enroll in the

17 plan in the order in which they apply for enrollment,

18 unless to do so would result in failure to meet the

19 requirements of subsection (f) or would result in the

20 enrollment of enrollees substantially

21 nonrepresentative, as determined in accordance with

22 regulations of the Secretary, of the population in the

23 service area served by the plan.

24 ‘‘(2) NONRENEWAL OR TERMINATION.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—If a contract under

2 this section is not renewed or is otherwise ter3 minated, certified standard health plans with

4 contracts under this section and serving the

5 same service area as under the terminated con6 tract are required to have an open enrollment

7 period for individuals who were enrolled under

8 the terminated contract as of the date of notice

9 of such termination.

10 ‘‘(B) OPEN ENROLLMENT PERIOD.—The

11 open enrollment periods required under sub12 paragraph (A) shall be for 30 days and shall

13 begin 30 days after the date that the Secretary

14 provides notice of such requirement.

15 ‘‘(C) EFFECTIVENESS OF ENROLLMENT.—

16 Enrollment under this paragraph shall be effec17 tive 30 days after the end of the open enroll18 ment period, or, if the Secretary determines

19 that such date is not feasible, such other date

20 as the Secretary specifies.

21 ‘‘(3) SPECIAL RULE.—Each certified standard

22 health plan with a contract under this section shall

23 have an open enrollment period for each individual

24 who enrolls in a plan during any enrollment period

25 specified by section 1837 that applies to that indi-
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•S 2351 PCS

1 vidual. Enrollment under this clause shall be effec2 tive as specified by section 1838.

3 ‘‘(4) RESIDENTS OUTSIDE SERVICE AREA.—

4 Each certified standard health plan with a contract

5 under this section shall have an open enrollment pe6 riod for each individual eligible to enroll in such a

7 plan who has previously resided outside the service

8 area. The enrollment period shall begin with the be9 ginning of the month that precedes the month in

10 which the individual becomes a resident of that serv11 ice area and shall end at the end of the following

12 month. Enrollment under this subparagraph shall be

13 effective as of the first of the month following the

14 month in which the individual enrolls.

15 ‘‘(5) CONTINUED ENROLLMENT PROTECTED.—

16 Each certified standard health plan with a contract

17 under this section must provide assurances to the

18 Secretary that it will not expel or refuse to re-enroll

19 any enrolled individual because of the individual’s

20 health status or requirements for health care serv21 ices, and that it will notify each such individual of

22 such fact at the time of the individual’s enrollment.

23 ‘‘(6) NOTICE OF RIGHTS, ETC.—Each certified

24 standard health plan with a contract under this sec25 tion shall provide each enrollee, at the time of enroll-
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•S 2351 PCS

1 ment and not less frequently than annually there2 after, an explanation of the enrollee’s rights under

3 this section, including an explanation of—

4 ‘‘(A) the enrollee’s rights to benefits from

5 the plan,

6 ‘‘(B) the restrictions on payments under

7 this title for services furnished other than by or

8 through the plan,

9 ‘‘(C) out-of-area coverage provided by the

10 plan,

11 ‘‘(D) the plan’s coverage of emergency

12 services and urgently needed care,

13 ‘‘(E) appeal rights of enrollees, and

14 ‘‘(F) the health care providers with whom

15 the plan has entered into contracts for the pro16 vision of services.

17 ‘‘(7) CONTINUATION OF COVERAGE.—Each cer18 tified standard plan that provides items and services

19 pursuant to a contract under this section shall pro20 vide assurances to the Secretary that in the event

21 the plan ceases to provide such items and services,

22 the plan shall provide or arrange for supplemental

23 coverage of benefits under this title related to a pre24 existing condition with respect to any exclusion pe25 riod, to all individuals enrolled with the plan who re-
526

•S 2351 PCS

1 ceive benefits under this title, for the lesser of six

2 months or the duration of such period.

3 ‘‘(8) NOTICE OF RIGHT OF TERMINATION.—

4 ‘‘(A) IN GENERAL.—Each certified stand5 ard health plan with a risk contract under this

6 section shall notify individuals eligible to enroll

7 with the plan under this section and individuals

8 enrolled with the plan under this section that—

9 ‘‘(i) the plan is authorized by law to

10 terminate or refuse to renew the contract,

11 and

12 ‘‘(ii) termination or nonrenewal of the

13 contract may result in termination of the

14 enrollments of individuals enrolled with the

15 plan under this section.

16 ‘‘(B) PLACEMENT OF NOTICE.—The notice

17 required by subparagraph (A) shall be included

18 in—

19 ‘‘(i) any marketing materials de20 scribed in subsection (a)(2)(C) that are

21 distributed by a plan to individuals eligible

22 to enroll under this section with the plan,

23 and
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•S 2351 PCS

1 ‘‘(ii) any explanation provided to en2 rollees by the plan pursuant to paragraph

3 (6).

4 ‘‘(f) MEMBERSHIP ENROLLMENT REQUIREMENTS.—

5 ‘‘(1) IN GENERAL.—Each certified standard

6 health plan with a contract under this section shall

7 have, for the duration of such contract, an enrolled

8 membership at least one-half of which consists of in9 dividuals who are not entitled to benefits under this

10 title or under a State plan approved under title XIX.

11 ‘‘(2) WAIVER.—

12 ‘‘(A) IN GENERAL.—The Secretary may

13 modify or waive the requirement imposed by

14 paragraph (1) if the plan demonstrates that it

15 provides for an adequate quality of care for

16 beneficiaries by—

17 ‘‘(i) meeting the quality standards for

18 plans with contracts under this section;

19 ‘‘(ii) meeting the fiscal soundness re20 quirements under title XIII of the Public

21 Health Service Act and any such require22 ments necessary to remain a certified

23 standard health plan for at least the 3

24 years immediately preceding an application

25 for a waiver under this paragraph;
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•S 2351 PCS

1 ‘‘(iii) demonstrating successful oper2 ational experience as a certified standard

3 health plan with a contract under this sec4 tion for at least the 3 years immediately

5 preceding an application for a waiver

6 under this paragraph; and

7 ‘‘(iv) demonstrating that the number

8 of individuals enrolled in the plan or its

9 parent organization is at least 50,000 at

10 the time of application for a waiver under

11 this paragraph.

12 ‘‘(B) STANDARDS.—In reviewing a plan’s

13 quality performance, the Secretary may accept

14 quality performance standards as measured by

15 private organizations acceptable to the Sec16 retary or organizations designated by the Sec17 retary, including peer review organizations.

18 ‘‘(3) SUSPENSION OF ENROLLMENT.—If the

19 Secretary determines that a certified standard health

20 plan with a contract under this section has failed to

21 comply with the requirements of this subsection, the

22 Secretary may provide for the suspension of enroll23 ment of individuals under this section or of payment

24 to the plan under this section for individuals newly
529

•S 2351 PCS

1 enrolled with the plan, after the date the Secretary

2 notifies the plan of such noncompliance.

3 ‘‘(4) TERMINATION OF REQUIREMENT.—The

4 Secretary may terminate the requirement under

5 paragraph (1) when the Secretary determines that

6 health plans have established alternative quality as7 surance mechanisms that effectively provide suffi8 cient quality safeguards.

9 ‘‘(g) PAYMENT RULES FOR PLANS.—

10 ‘‘(1) SUBROGATION RIGHTS.—Notwithstanding

11 any other provision of law, each certified standard

12 health plan with a contract under this section may

13 (in the case of the provision of services to an individ14 ual enrolled under this section by a primary plan

15 under section 1862(b)(2)) charge or authorize the

16 provider of such services to charge, in accordance

17 with the charges allowed under such law or policy—

18 ‘‘(A) the insurance carrier, employer, or

19 other entity which under such law, plan, or pol20 icy is to pay for the provision of such services,

21 or

22 ‘‘(B) such individual to the extent that the

23 individual has been paid under such law, plan,

24 or policy for such services.

25 ‘‘(2) PROMPT PAYMENT REQUIREMENT.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—A risk contract under

2 this section shall require the certified standard

3 health plan to provide prompt payment (consist4 ent with the provisions of sections 1816(c)(2)

5 and 1842(c)(2)) of claims submitted for serv6 ices and supplies furnished to individuals pursu7 ant to such contract, if the services or supplies

8 are not furnished under a contract between the

9 plan and the provider or supplier.

10 ‘‘(B) FAILURE.—In the case of a plan

11 which the Secretary determines, after notice

12 and opportunity for a hearing, has failed to

13 make payments of amounts in compliance with

14 subparagraph (A), the Secretary may provide

15 for direct payment of the amounts owed to pro16 viders and suppliers for such covered services

17 furnished to individuals enrolled under this sec18 tion under the contract. If the Secretary pro19 vides for such direct payments, the Secretary

20 shall provide for an appropriate reduction in

21 the amount of payments otherwise made to the

22 plan under this section to reflect the amount of

23 the Secretary’s payments (and costs incurred by

24 the Secretary in making such payments).
531

•S 2351 PCS

1 ‘‘(h) DURATION, TERMINATION, EFFECTIVE DATE,

2 AND TERMS OF CONTRACT; POWERS AND DUTIES OF

3 SECRETARY.—

4 ‘‘(1) DURATION AND TERMINATION.—

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

6 subparagraph (B), each contract under this sec7 tion shall be for a term of at least one year, as

8 determined by the Secretary, and may be made

9 automatically renewable from term to term in

10 the absence of notice by either party of inten11 tion to terminate at the end of the current

12 term.

13 ‘‘(B) EXCEPTION.—The Secretary may

14 terminate a contract at any time (after such

15 reasonable notice and opportunity for hearing

16 to the certified standard health plan involved as

17 the Secretary may provide in regulations), if the

18 Secretary finds that the plan—

19 ‘‘(i) has failed substantially to carry

20 out the contract,

21 ‘‘(ii) is carrying out the contract in a

22 manner inconsistent with the efficient and

23 effective administration of this section, or

24 ‘‘(iii) no longer substantially complies

25 with the requirements of this section.
532

•S 2351 PCS

1 ‘‘(2) EFFECTIVE DATE.—The effective date of

2 any contract executed pursuant to this section shall

3 be specified in the contract.

4 ‘‘(3) TERMS.—Each contract under this sec5 tion—

6 ‘‘(A) shall provide that the Secretary, or

7 any person or organization designated by the

8 Secretary—

9 ‘‘(i) shall have the right to inspect or

10 otherwise evaluate—

11 ‘‘(I) the quality, appropriateness,

12 and timeliness of services performed

13 under the contract, and

14 ‘‘(II) the facilities of the organi15 zation when there is reasonable evi16 dence of some need for such inspec17 tion, and

18 ‘‘(ii) shall have the right to audit and

19 inspect any books and records of the cer20 tified standard health plan that pertain—

21 ‘‘(I) to the ability of the plan to

22 bear the risk of potential financial

23 losses, or
533

•S 2351 PCS

1 ‘‘(II) to services performed or de2 terminations of amounts payable

3 under the contract;

4 ‘‘(B) shall require the plan with a contract

5 to provide (and pay for) written notice in ad6 vance of the contract’s termination, as well as

7 a description of alternatives for obtaining bene8 fits under this title, to each individual enrolled

9 under this section with the plan; and

10 ‘‘(C)(i) shall require the plan to comply

11 with subsections (a) and (c) of section 1318 of

12 the Public Health Service Act (relating to dis13 closure of certain financial information) and

14 with the requirement of section 1301(c)(8) of

15 such Act (relating to liability arrangements to

16 protect members);

17 ‘‘(ii) shall require the plan to provide and

18 supply information determined appropriate by

19 the Secretary in the manner determined appro20 priate by the Secretary;

21 ‘‘(iii) shall require the plan to notify the

22 Secretary of loans and other special financial

23 arrangements which are made between the plan

24 and subcontractors, affiliates, and related par25 ties; and
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•S 2351 PCS

1 ‘‘(D) shall contain such other terms and

2 conditions not inconsistent with this section (in3 cluding requiring the organization to provide

4 the Secretary with such information) as the

5 Secretary may find necessary and appropriate.

6 ‘‘(4) PERIOD OF DISQUALIFICATION.—The Sec7 retary may not enter into a risk contract with a cer8 tified standard health plan if a previous risk con9 tract with that plan under this section was termi10 nated at the request of the plan within the preceding

11 five-year period, except in circumstances which war12 rant special consideration, as determined by the Sec13 retary.

14 ‘‘(5) DISREGARD OF CERTAIN INCONSISTENT

15 LAWS, ETC.—The authority vested in the Secretary

16 by this section may be performed without regard to

17 such provisions of law or regulations relating to the

18 making, performance, amendment, or modification of

19 contracts of the United States as the Secretary may

20 determine to be inconsistent with the furtherance of

21 the purpose of this title.

22 ‘‘(6) FINDINGS OF FAILURE.—

23 ‘‘(A) IN GENERAL.—If the Secretary deter24 mines that a certified standard health plan with

25 a contract under this section—
535

•S 2351 PCS

1 ‘‘(i) fails substantially to provide

2 medically necessary items and services that

3 are required (under law or under the con4 tract) to be provided to an individual cov5 ered under the contract, if the failure has

6 adversely affected (or has substantial like7 lihood of adversely affecting) the individ8 ual;

9 ‘‘(ii) imposes premiums on individuals

10 enrolled under this section in excess of the

11 premiums permitted;

12 ‘‘(iii) acts to expel or to refuse to re13 enroll an individual in violation of the pro14 visions of this section;

15 ‘‘(iv) engages in any practice that

16 would reasonably be expected to have the

17 effect of denying or discouraging enroll18 ment (except as permitted by this section)

19 by eligible individuals with the plan whose

20 medical condition or history indicates a

21 need for substantial future medical serv22 ices;

23 ‘‘(v) misrepresents or falsifies infor24 mation that is furnished—
536

•S 2351 PCS

1 ‘‘(I) to the Secretary under this

2 section, or

3 ‘‘(II) to an individual or to any

4 other entity under this section;

5 ‘‘(vi) fails to comply with the require6 ments of subsection (g)(2)(A) or para7 graph (8);

8 ‘‘(vii) employs or contracts with any

9 individual or entity that is excluded from

10 participation under this title under section

11 1128 or 1128A for the provision of health

12 care, utilization review, medical social

13 work, or administrative services or employs

14 or contracts with any entity for the provi15 sion (directly or indirectly) through such

16 an excluded individual or entity of such

17 services; or

18 ‘‘(viii) substantially fails to cooperate

19 with the utilization and quality control

20 peer review organization;

21 the Secretary may provide, in addition to any

22 other remedies authorized by law, for any of the

23 remedies described in subparagraph (B).

24 ‘‘(B) REMEDIES.—The remedies described

25 in this subparagraph are—
537

•S 2351 PCS

1 ‘‘(i) civil money penalties of not more

2 than $ 25,000 for each determination

3 under subparagraph (A) or, with respect to

4 a determination under clause (iv) or (v)(I)

5 of such subparagraph, of not more than $

6 100,000 for each such determination, plus,

7 with respect to a determination under sub8 paragraph (A)(ii), double the excess

9 amount charged in violation of such sub10 paragraph (and the excess amount charged

11 shall be deducted from the penalty and re12 turned to the individual concerned), and

13 plus, with respect to a determination under

14 subparagraph (A)(iv), $ 15,000 for each

15 individual not enrolled as a result of the

16 practice involved,

17 ‘‘(ii) suspension of enrollment of indi18 viduals under this section after the date

19 the Secretary notifies the plan of a deter20 mination under subparagraph (A) and

21 until the Secretary is satisfied that the

22 basis for such determination has been cor23 rected and is not likely to recur, or

24 ‘‘(iii) suspension of payment to the

25 plan under this section for individuals en-
538

•S 2351 PCS

1 rolled after the date the Secretary notifies

2 the plan of a determination under subpara3 graph (A) and until the Secretary is satis4 fied that the basis for such determination

5 has been corrected and is not likely to

6 recur.

7 The provisions of section 1128A (other than

8 subsections (a) and (b)) shall apply to a civil

9 money penalty under clause (i) in the same

10 manner as they apply to a civil money penalty

11 or proceeding under section 1128A(a).

12 ‘‘(7) AGREEMENT WITH UTILIZATION AND

13 QUALITY CONTROL PEER REVIEW ORGANIZATION.—

14 ‘‘(A) IN GENERAL.—Each risk contract

15 with a certified standard health plan under this

16 section shall provide that the plan will maintain

17 an agreement with a utilization and quality con18 trol peer review organization (which has a con19 tract with the Secretary under part B of title

20 XI for the area in which the eligible organiza21 tion is located) or with an entity selected by the

22 Secretary under section 1154(a)(4)(C) under

23 which the review organization will perform

24 functions under section 1154(a)(4)(B) and sec25 tion 1154(a)(14) (other than those performed
539

•S 2351 PCS

1 under contracts described in section

2 1866(a)(1)(F)) with respect to services, fur3 nished by the plan, for which payment may be

4 made under this title.

5 ‘‘(B) COST OF SERVICES.—For purposes of

6 payment under this title, the cost of such agree7 ment to the plan shall be considered a cost in8 curred by a provider of services in providing

9 covered services under this title and shall be

10 paid directly by the Secretary to the review or11 ganization on behalf of such plan in accordance

12 with a schedule established by the Secretary.

13 ‘‘(C) SOURCE OF PAYMENTS.—Such pay14 ments—

15 ‘‘(i) shall be transferred in appro16 priate proportions from the Federal Hos17 pital Insurance Trust Fund and from the

18 Supplementary Medical Insurance Trust

19 Fund, without regard to amounts appro20 priated in advance in appropriation Acts,

21 in the same manner as transfers are made

22 for payment for services provided directly

23 to beneficiaries, and

24 ‘‘(ii) shall not be less in the aggregate

25 for such plans for a fiscal year than the
540

•S 2351 PCS

1 amounts the Secretary determines to be

2 sufficient to cover the costs of such plans’

3 conducting activities described in subpara4 graph (A) with respect to such plans under

5 part B of title XI.

6 ‘‘(i) OTHER GENERAL REQUIREMENTS ON PLANS.—

7 ‘‘(1) GRIEVANCE PROCEDURES.—Each certified

8 standard health plan with a contract under this sec9 tion must provide meaningful procedures for hearing

10 and resolving grievances between the plan (including

11 any entity or individual through which the plan pro12 vides health care services) and individuals enrolled

13 with the plan under this section.

14 ‘‘(2) APPEALS.—An individual enrolled with a

15 certified standard health plan under this section who

16 is dissatisfied by reason of the individual’s failure to

17 receive any health service to which the individual be18 lieves the individual is entitled and at no greater

19 charge than the individual believes the individual is

20 required to pay is entitled, if the amount in con21 troversy is $100 or more, to a hearing before the

22 Secretary to the same extent as is provided in sec23 tion 205(b), and in any such hearing the Secretary

24 shall make the plan a party. If the amount in con25 troversy is $1,000 or more, the individual or plan
541

•S 2351 PCS

1 shall, upon notifying the other party, be entitled to

2 judicial review of the Secretary’s final decision as

3 provided in section 205(g), and both the individual

4 and the plan shall be entitled to be parties to that

5 judicial review.

6 ‘‘(3) ADVANCE DIRECTIVES.—A contract under

7 this section shall provide that the certified standard

8 health plan shall meet the requirement of section

9 1866(f) (relating to maintaining written policies and

10 procedures respecting advance directives).

11 ‘‘4) SPECIAL REQUIREMENT RELATING TO SUB12 SECTION (d) HOSPITALS.—A risk contract under this

13 section shall provide that in the case of an individual

14 who is receiving inpatient hospital services from a

15 subsection (d) hospital (as defined in section

16 1886(d)(1)(B)) as of the effective date of the indi17 vidual’s—

18 ‘‘(A) enrollment with such plan under this

19 section—

20 ‘‘(i) payment for such services until

21 the date of the individual’s discharge shall

22 be made under this title as if the individual

23 were not enrolled with the plan,

24 ‘‘(ii) the plan shall not be financially

25 responsible for payment for such services
542

•S 2351 PCS

1 until the date after the date of the individ2 ual’s discharge, and

3 ‘‘(iii) the plan shall nonetheless be

4 paid the full amount otherwise payable to

5 the plan under this section; or

6 ‘‘(B) termination of enrollment with a plan

7 under this section—

8 ‘‘(i) the plan shall be financially re9 sponsible for payment for such services

10 after such date and until the date of the

11 individual’s discharge,

12 ‘‘(ii) payment for such services during

13 the stay shall not be made under section

14 1886(d), and

15 ‘‘(iii) the plan shall not receive any

16 payment with respect to the individual

17 under this section during the period the in18 dividual is not enrolled.

19 ‘‘(j) LIMIT ON CHARGES FOR CERTAIN SERVICES.—

20 ‘‘(1) IN GENERAL.—(A) In the case of physi21 cians’ services or renal dialysis services described in

22 paragraph (2) which are furnished by a participating

23 physician to an individual enrolled with a certified

24 standard health plan under this section and enrolled

25 under part B, the applicable participation agreement
543

•S 2351 PCS

1 is deemed to provide that the physician or provider

2 of services or renal dialysis facility will accept as

3 payment in full from the eligible plan the amount

4 that would be payable to the physician or provider

5 of services or renal dialysis facility under part B and

6 from the individual under such part, if the individual

7 were not enrolled with a plan under this section.

8 ‘‘(B) In the case of physicians’ services de9 scribed in paragraph (2) which are furnished by a

10 nonparticipating physician, the limitations on actual

11 charges for such services otherwise applicable under

12 part B (to services furnished by individuals not en13 rolled with an eligible organization under this sec14 tion) shall apply in the same manner as such limita15 tions apply to services furnished to individuals not

16 enrolled with such an organization.

17 ‘‘(2) SERVICES DESCRIBED.—The ‘physicians’

18 services described in this paragraph are physicians’

19 services which are furnished to an enrollee of a cer20 tified standard health plan under this section by a

21 physician, provider of services, or renal dialysis facil22 ity who is not under a contract with the plan.

23 ‘‘(k) STUDY ON CERTIFIED STANDARD HEALTH

24 PLANS.—
544

•S 2351 PCS

1 ‘‘(1) IN GENERAL.—The Prospective Payment

2 Assessment Commission (established under section

3 1886(e)(2)) and the Physician Payment Review

4 Commission (established under section 1845) shall

5 study and make recommendations to Congress on

6 the matters described in paragraph (2).

7 ‘‘(2) MATTERS DESCRIBED.—The matters de8 scribed in this paragraph include—

9 ‘‘(A) ways in which enrollment in certified

10 standard health plans with risk contracts under

11 this section could be increased;

12 ‘‘(B) alternatives to the current payment

13 methodology that might encourage more health

14 plans to enter into certified standard health

15 plans with risk contracts under this section and

16 encourage more individuals to enroll in such

17 plans;

18 ‘‘(C) whether the demographic characteris19 tics and health status of beneficiaries enrolled

20 in certified standard health plans with risk con21 tracts under this section differs from other indi22 viduals entitled to benefits under part A and

23 enrolled under part B; and

24 ‘‘(D) whether the volume and quality of

25 care rendered to individuals enrolled in certified
545

•S 2351 PCS

1 standard health plans with risk contracts under

2 this section differs from that rendered to other

3 individuals entitled to benefits under part A

4 and enrolled under part B.’’.

5 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

6 The Secretary of Health and Human Services shall, within

7 90 days of the date of the enactment of this section, sub8 mit to the appropriate committees of Congress, a legisla9 tive proposal providing for such technical and conforming

10 amendments in the law as are required by the provisions

11 of this section.

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

13 this section shall be effective with respect to contracts en14 tered into on or after January 1, 1996.

15 PART II—PROVISIONS RELATED TO PART A

16 SEC. 611. INPATIENT HOSPITAL SERVICES UPDATE FOR

17 PPS HOSPITALS.

18 Section 1886(b)(3)(B)(i) (42 U.S.C.

19 1395ww(b)(3)(B)(i)) is amended—

20 (1) by amending subclause (XII) to read as fol21 lows:

22 ‘‘(XII) for fiscal years 1997 through 2000, the

23 market basket percentage minus 2.0 percentage

24 points for hospitals in all areas, and’’; and
546

•S 2351 PCS

1 (2) in subclause (XIII), by striking ‘‘1998’’ and

2 inserting ‘‘2001’’.

3 SEC. 612. REDUCTION IN PAYMENTS FOR CAPITAL-RELAT4 ED COSTS FOR INPATIENT HOSPITAL SERV5 ICES.

6 (a) REDUCTION IN BASE PAYMENT RATES FOR PPS

7 HOSPITALS.—Section 1886(g)(1)(A) (42 U.S.C.

8 1395ww(g)(1)(A)) is amended by adding at the end the

9 following new sentence: ‘‘In addition to the reduction de10 scribed in the preceding sentence, for discharges occurring

11 after September 30, 1995, the Secretary shall reduce by

12 7.31 percent the unadjusted standard Federal capital pay13 ment rate (as described in 42 CFR 412.308(c), as in effect

14 on the date of the enactment of the Health Security Act)

15 and shall reduce by 10.41 percent the unadjusted hospital16 specific rate (as described in 42 CFR 412.328(e)(1), as

17 in effect on the date of the enactment of the Health Secu18 rity Act).’’.

19 (b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT

20 HOSPITALS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1))

21 is amended by adding at the end the following new sub22 paragraph:

23 ‘‘(T) Such regulations shall provide that, in determin24 ing the amount of the payments that may be made under

25 this title with respect to the capital-related costs of inpa-
547

•S 2351 PCS

1 tient hospital services furnished by a hospital that is not

2 a subsection (d) hospital (as defined in section

3 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital

4 (as defined in section 1886(d)(9)(A)), the Secretary shall

5 reduce the amounts of such payments otherwise estab6 lished under this title by 15 percent for payments attrib7 utable to portions of cost reporting periods occurring dur8 ing each of the fiscal years 1996 through 2003.’’.

9 SEC. 613. REDUCTIONS IN DISPROPORTIONATE SHARE PAY10 MENTS.

11 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

12 1395ww(d)(5)(F)) is amended—

13 (1) in clause (ii), by striking ‘‘The amount’’

14 and inserting ‘‘Subject to clause (ix), the amount’’;

15 and

16 (2) by adding at the end the following new

17 clauses:

18 ‘‘(ix) Notwithstanding any other provision of this

19 subparagraph, the Secretary shall reduce the amount of

20 any additional payment made to a hospital under this sub21 paragraph for discharges occurring on or after October 1,

22 1997, by 25 percent.

23 ‘‘(x) Not later than July 1, 1996, the Secretary and

24 the Prospective Payment Assessment Commission shall

25 submit to the Congress a recommendation on a methodol-
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•S 2351 PCS

1 ogy for measuring and allocating funds for hospitals that

2 receive an additional payment under this paragraph in3 cluding a replacement for the fraction described in clause

4 (vi)(II).’’.

5 SEC. 614. REVISED PAYMENT METHODOLOGY FOR REHA6 BILITATION AND LONG-TERM CARE HOS7 PITALS.

8 (a) REHABILITATION HOSPITALS AND DISTINCT

9 PART UNITS.—

10 (1) DEFINITION.—Section 1886(d)(1)(B) (42

11 U.S.C. 1395ww(d)(1)(B)) is amended by adding at

12 the end the following new sentence: ‘‘In defining a

13 rehabilitation hospital and a rehabilitation unit of a

14 hospital which is a distinct part of a hospital, the

15 Secretary shall take into account the impact of new

16 technologies, survival rates, and changes in the prac17 tice of rehabilitation medicine.’’.

18 (2) TARGET AMOUNT CALCULATION FOR REHA19 BILITATION HOSPITALS AND DISTINCT PART

20 UNITS.—

21 (A) IN GENERAL.—Section 1886(b)(3) (42

22 U.S.C. 1395ww(b)(3)) is amended—

23 (i) in subparagraph (A), by striking

24 ‘‘(D), and (E)’’ and inserting ‘‘(D), (E),

25 and (F)’’;
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•S 2351 PCS

1 (ii) in subparagraph (B)(ii), by strik2 ing ‘‘and (E)’’ and inserting ‘‘(E), and

3 (F)’’; and

4 (iii) by adding at the end the follow5 ing new subparagraph:

6 ‘‘(F)(i) Subject to clause (ii), for cost re7 porting periods beginning on or after October 1,

8 1994, in the case of a hospital described in sub9 section (d)(1)(B)(ii) or a rehabilitation unit de10 scribed in such subparagraph, the term ‘target

11 amount’ means—

12 ‘‘(I) with respect to the first 12-

13 month cost reporting period in which this

14 subparagraph is applied to the hospital or

15 unit—

16 ‘‘(aa) the allowable operating

17 costs of inpatient hospital services (as

18 defined in subsection (a)(4)) recog19 nized under this title for the hospital

20 or unit for the 12-month cost report21 ing period (in this subparagraph re22 ferred to as the ‘base cost reporting

23 period’) preceding the first cost re24 porting period for which this subpara25 graph was in effect with respect to
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•S 2351 PCS

1 such hospital, increased (in a

2 compounded manner), by

3 ‘‘(bb) the applicable percentage

4 increases applied to such hospital or

5 unit under this paragraph for cost re6 porting periods after the base cost re7 porting period and up to and includ8 ing such first 12-month cost reporting

9 period, or

10 ‘‘(II) with respect to a later cost re11 porting period, the target amount for the

12 preceding 12-month cost reporting period,

13 increased by the applicable percentage in14 crease under subparagraph (B).

15 There shall be substituted for the allowable av16 erage costs of inpatient hospital services deter17 mined under subclause (I)(aa), the average of

18 the allowable average costs of inpatient hospital

19 services (as so defined) recognized under this

20 title for the hospital or unit for cost reporting

21 periods beginning during fiscal years 1990 and

22 1991 (if any).

23 ‘‘(ii)(I) Notwithstanding the provisions of

24 clause (i), in the case of a hospital or unit to

25 which the last sentence of clause (i) applies, the
551

•S 2351 PCS

1 hospital or unit’s target amount under such

2 clause for a cost reporting period shall be—

3 ‘‘(aa) not less than 70 percent of the

4 national weighted average of all target

5 amounts calculated under such clause for

6 all hospitals and units described in such

7 clause (as determined by the Secretary),

8 and

9 ‘‘(bb) not less than the allowable oper10 ating costs of inpatient hospital services

11 (as defined in subsection (a)(4) for such

12 hospital or unit in the base cost reporting

13 period (including any payments made to

14 such hospital or unit pursuant to para15 graph (1)(A)), multiplied by the applicable

16 percentage increase for such cost reporting

17 period under subparagraph (B).

18 ‘‘(II) Notwithstanding the provisions of

19 clause (i), in the case of a hospital or unit that

20 is not described in subclause (I), the hospital or

21 unit’s target amount under such clause for a

22 cost reporting period shall be—

23 ‘‘(aa) not less than the amount de24 scribed in subclause (I)(aa), and
552

•S 2351 PCS

1 ‘‘(bb) not greater than 110 percent of

2 the national weighted average of all target

3 amounts calculated under clause (i) for all

4 hospitals and units described in such

5 clause (as determined by the Secretary).’’.

6 (B) EFFECTIVE DATE.—The amendments

7 made by subparagraph (A) shall apply with re8 spect to cost reporting periods beginning on or

9 after October 1, 1994.

10 (3) DEVELOPMENT OF NATIONAL PROSPECTIVE

11 RATES FOR REHABILITATION HOSPITALS AND DIS12 TINCT PART UNITS.—

13 (A) DEVELOPMENT OF PROPOSAL.—The

14 Secretary of Health and Human Services (here15 after in this section referred to as the ‘‘Sec16 retary’’) shall develop a proposal to replace the

17 current system under which rehabilitation hos18 pitals and rehabilitation units of a hospital

19 which are a distinct part of a hospital (as de20 scribed in section 1886(d)(1)(B) of the Social

21 Security Act (42 U.S.C. 1395ww(d)(1)(B))) re22 ceive payment for the operating and capital-re23 lated costs of inpatient hospital services under

24 part A of title XVIII of such Act with a pro25 spective payment system. In developing any
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•S 2351 PCS

1 proposal under this paragraph to replace the

2 current system with a prospective payment sys3 tem, the Secretary shall develop a system that

4 provides for—

5 (i) a payment on a per-discharge

6 basis, and

7 (ii) an appropriate weighting of such

8 payment amount as it relates to the classi9 fication of the discharge.

10 (B) REPORTS.—Not later than October 1,

11 1996, the Secretary shall submit the proposal

12 developed under subparagraph (A) to the Con13 gress.

14 (b) ASSIGNMENT OF NEW BASE YEAR FOR CER15 TIFIED LONG-STAY HOSPITALS THAT ALSO SERVE A SIG16 NIFICANT PROPORTION OF LOW-INCOME PATIENTS.—

17 (1) REBASING FOR LONG-TERM HOSPITALS.—

18 (A) IN GENERAL.—Section 1886(b)(3) (42

19 U.S.C. 1395ww(b)(3)), as amended by sub20 section (a), is further amended—

21 (i) in subparagraph (A), by striking

22 ‘‘(E), and (F)’’ and inserting ‘‘(E), (F),

23 and (G)’’;
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•S 2351 PCS

1 (ii) in subparagraph (B)(ii), by strik2 ing ‘‘(E), and (F)’’ and inserting ‘‘(E),

3 (F), and (G)’’; and

4 (iii) by inserting after subparagraph

5 (F) the following new subparagraph:

6 ‘‘(G)(i) For cost reporting periods begin7 ning on or after October 1, 1994, in the case

8 of a hospital described in subsection

9 (d)(1)(B)(iv) that—

10 ‘‘(I) has not received the additional

11 payment amount described in paragraph

12 (1)(A) for at least the preceding 2 consecu13 tive 12-month cost reporting periods; and

14 ‘‘(II) for which the sum of the

15 amounts described in subclauses (I) and

16 (II) of subsection (d)(5)(F)(vi) during the

17 period described in clause (I) exceeds 25

18 percent,

19 the term ‘target amount’ has the meaning given

20 such term by clause (ii).

21 ‘‘(ii) In the case of a hospital described in

22 clause (i), the term ‘target amount’ means—

23 ‘‘(I) with respect to the first 12-

24 month cost reporting period in which this

25 subparagraph is applied to the hospital—
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•S 2351 PCS

1 ‘‘(aa) the average allowable oper2 ating costs of inpatient hospital serv3 ices (as defined in subsection (a)(4))

4 recognized under this title for the hos5 pital during cost reporting periods of

6 the hospital beginning during fiscal

7 years 1990 and 1991 for such hos8 pital (in this subparagraph referred to

9 as the ‘base cost reporting period’),

10 increased (in a compounded manner),

11 by

12 ‘‘(bb) the applicable percentage

13 increases applied to such hospital or

14 under this paragraph for cost report15 ing periods after the base cost report16 ing period and up to and including

17 such first 12-month cost reporting pe18 riods, or

19 ‘‘(II) with respect to a subsequent 12-

20 month cost reporting period, the target

21 amount for the preceding 12-month cost

22 reporting period, increased by the applica23 ble percentage increase under subpara24 graph (B).
556

•S 2351 PCS

1 ‘‘(iii) Notwithstanding clause (ii)(II), if,

2 after 2 consecutive 12-month cost reporting pe3 riods, a hospital continues to be described in

4 subclauses (I) and (II) of clause (i), there shall

5 be substituted for the base cost reporting period

6 described in clause (ii)(I)(aa) the most recent

7 preceding 2 12-month cost reporting periods of

8 the hospital for which data is available (as de9 termined by the Secretary), but only if such

10 substituting results in an increase in the target

11 amount for the hospital. The substitution under

12 the preceding sentence may not occur more

13 often than every 2 years.

14 ‘‘(iv) Effective October 1, 1994, the Sec15 retary shall take into account the enactment of

16 this subparagraph in making available to the

17 hospital the payments described in section

18 1815(e)(2), and, shall increase such payments

19 as if the target amount of the hospital had been

20 established pursuant to this subparagraph as of

21 such date.’’.

22 (2) EFFECTIVE DATE.—The amendments made

23 by this subsection shall be effective with respect to

24 cost reporting periods beginning on or after October

25 1, 1994.
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1 SEC. 615. MORATORIUM ON DESIGNATION OF NEW LONG2 TERM HOSPITALS.

3 Effective October 1, 1994, notwithstanding clause

4 (iv) of section 1886(d)(1)(B) of the Social Security Act

5 (42 U.S.C. 1395ww(d)(1)(B)), a hospital which has an av6 erage inpatient length of stay (as determined by the Sec7 retary of Health and Human Services) of greater than 25

8 days shall not be treated as a hospital described in such

9 clause for purposes of such title unless such hospital was

10 treated as a hospital described in such clause for purposes

11 of such title as of the date of the enactment of this Act.

12 SEC. 616. EXTENSION OF FREEZE ON UPDATES TO ROUTINE

13 SERVICE COST LIMITS FOR SKILLED NURS14 ING FACILITIES.

15 (a) PAYMENTS BASED ON COST LIMITS.—Section

16 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking

17 ‘‘112 percent’’ each place it appears and inserting ‘‘100

18 percent (adjusted by such amount as the Secretary deter19 mines to be necessary to preserve the savings resulting

20 from the enactment of section 13503(a)(1) of the Omni21 bus Budget Reconciliation Act of 1993)’’.

22 (b) ADJUSTMENTS TO LIMITS.—Section 1888(c) (42

23 U.S.C. 1395yy(c)) is amended by inserting the following

24 sentence at the end: ‘‘The effect of the amendment made

25 by section 616(a) of the Health Security Act shall not be
558

•S 2351 PCS

1 considered by the Secretary in making adjustments pursu2 ant to this subsection.’’

3 (c) PAYMENTS DETERMINED ON PROSPECTIVE

4 BASIS.—Section 1888(d)(2)(B) (42 U.S.C.

5 1395yy(d)(2)(B)) is amended by striking ‘‘105 percent’’

6 and inserting ‘‘100 percent (adjusted by such amount as

7 the Secretary determines to be necessary to preserve the

8 savings resulting from the enactment of section 13503(b)

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

10 (d) EFFECTIVE DATE.—The amendments made by

11 subsections (a), (b), and (c) shall apply to cost reporting

12 periods beginning on or after October 1, 1995.

13 SEC. 617. PAYMENTS FOR SOLE COMMUNITY HOSPITALS

14 WITH TEACHING PROGRAMS AND

15 MULTIHOSPITAL CAMPUSES.

16 (a) IN GENERAL.—Section 1886(d)(5)(D) (42 U.S.C.

17 1395ww(d)(5)(D)) is amended by adding at the end the

18 following new clause:

19 ‘‘(vi) The Secretary shall determine payment under

20 clause (i) for a sole-community hospital that is a part of

21 a multi-campus hospital by making the determination

22 under such clause for each facility of the multi-campus

23 hospital if any facility of the hospital would have a value

24 of ‘r’ greater than 0, as ‘r’ is defined in subparagraph

25 (B)(ii). In making a determination for each such facility,
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•S 2351 PCS

1 the Secretary shall determine the DRG-specific rate appli2 cable to the facility based on its location in accordance

3 with paragraph (3)(D).’’.

4 (b) EFFECTIVE DATE.—The amendment made by

5 subsection (a) shall apply to discharges occurring on or

6 after October 1, 1993, from multi-campus hospitals that

7 merged facilities on or after October 1, 1987.

8 SEC. 618. MEDICARE-DEPENDENT, SMALL RURAL HOS9 PITALS.

10 (a) CLARIFICATION OF ADDITIONAL PAYMENT.—

11 Section 1886(d)(5)(G)(ii)(I) (42 U.S.C.

12 1395ww(d)(5)(G)(ii)(I)) is amended by striking ‘‘the first

13 3 12-month cost reporting periods that begin’’ and insert14 ing ‘‘the 36-month period beginning with the first day of

15 the cost reporting period that begins’’.

16 (b) SPECIAL TREATMENT EXTENDED.—Section

17 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is amend18 ed—

19 (1) in clause (i), by striking ‘‘October 1, 1994’’

20 and inserting ‘‘October 1, 1999’’; and

21 (2) in clause (ii)(II), by striking ‘‘October 1,

22 1994’’ and inserting ‘‘October 1, 1999’’.

23 (c) EXTENSION OF TARGET AMOUNT.—Section

24 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) is amend25 ed—
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•S 2351 PCS

1 (1) in the matter preceding clause (i), by strik2 ing ‘‘March 31, 1993’’ and inserting ‘‘September 30,

3 1999’’; and

4 (2) by amending clause (iii) to read as follows:

5 ‘‘(iii) with respect to discharges occurring in fis6 cal years 1994 through 1999, the target amount for

7 the cost reporting period beginning in the previous

8 fiscal year increased by the applicable percentage in9 crease under subparagraph (B)(iv).’’.

10 SEC. 619. PROVISIONS RELATING TO RURAL HEALTH TRAN11 SITION GRANT PROGRAM.

12 (a) ELIGIBILITY OF RURAL PRIMARY CARE HOS13 PITALS FOR GRANTS.—

14 (1) IN GENERAL.—Section 4005(e)(2) of the

15 Omnibus Budget Reconciliation Act of 1987 is

16 amended in the matter preceding subparagraph (A)

17 by inserting ‘‘any rural primary care hospital as de18 fined in section 1861(mm)(1), or’’ after ‘‘means’’.

19 (2) EFFECTIVE DATE.—The amendment made

20 by paragraph (1) shall apply to grants made on or

21 after October 1, 1993.

22 (b) EXTENSION OF AUTHORIZATION OF APPROPRIA23 TIONS.—Section 4005(e)(9) of Omnibus Budget Reconcili24 ation Act of 1987 is amended—
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•S 2351 PCS

1 (1) by striking ‘‘1989 and’’ and inserting

2 ‘‘1989,’’; and

3 (2) by striking ‘‘1992’’ and inserting ‘‘1992

4 and $30,000,000 for each of the fiscal years 1993

5 through 1999’’.

6 (c) FREQUENCY OF REQUIRED REPORTS.—Section

7 4008(e)(8)(B) of the Omnibus Budget Reconciliation Act

8 of 1987 is amended by striking ‘‘every 6 months’’ and in9 serting ‘‘every 12 months’’.

10 SEC. 620. LIMITED SERVICE HOSPITAL PROGRAM.

11 (a) LIMITED SERVICE HOSPITAL PROGRAM.—Sec12 tion 1820 (42 U.S.C. 13951–4) is amended to read as fol13 lows:

14 ‘‘LIMITED SERVICE HOSPITAL PROGRAM

15 ‘‘SEC. 1820. (a) PURPOSE.—The purpose of this sec16 tion is to—

17 ‘‘(1) make available alternative hospital models

18 to small rural or isolated rural communities in which

19 facilities are relieved of the burden of selected regu20 latory requirements by limiting the scope of inpa21 tient acute services required to be offered;

22 ‘‘(2) alter medicare reimbursement policy to

23 support the financial viability of alternative facilities

24 by limiting the financial risk faced by such small

25 hospitals through the use of reasonable cost reim26 bursement; and
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•S 2351 PCS

1 ‘‘(3) promote linkages between facilities des2 ignated by the State under this section and broader

3 programs supporting the development of and transi4 tion to integrated provider networks.

5 ‘‘(b) IN GENERAL.—Any State that submits an appli6 cation in accordance with subsection (c) may establish a

7 limited hospital program described in subsection (d).

8 ‘‘(c) APPLICATION.—A State may establish a limited

9 hospital program described in subsection (d) if the State

10 submits to the Secretary at such time and in such form

11 as the Secretary may require an application containing—

12 ‘‘(1) assurances that the State—

13 ‘‘(A) has developed, or is in the process of

14 developing, a State rural health care plan

15 that—

16 ‘‘(i) in the case of a State applying to

17 establish a rural primary care hospital pro18 gram (described in subsection (d)(1)(A)),

19 provides for the creation of one or more

20 rural health networks (as defined in sub21 section (e)) in the State,

22 ‘‘(ii) promotes regionalization of rural

23 health services in the State, and
563

•S 2351 PCS

1 ‘‘(iii) improves access to hospital and

2 other health services for rural residents of

3 the State;

4 ‘‘(B) has developed the rural health care

5 plan described in subparagraph (A) in consulta6 tion with the hospital association of the State,

7 rural hospitals located in the State, and the

8 State Office of Rural Health (or, in the case of

9 a State in the process of developing such plan,

10 that assures the Secretary that it will consult

11 with its State hospital association, rural hos12 pitals located in the State, and the State Office

13 of Rural Health in developing such plan); and

14 ‘‘(2) assurances that the State has designated

15 (consistent with the rural health care plan described

16 in paragraph (1)(A)), or is in the process of des17 ignating, rural nonprofit or public hospitals or facili18 ties located in the State as rural primary care hos19 pitals facilities or medical assistance facilities; and

20 ‘‘(3) such other information and assurances as

21 the Secretary may require.

22 ‘‘(d) LIMITED HOSPITAL PROGRAM DESCRIBED.—

23 ‘‘(1) IN GENERAL.—A State that has submitted

24 an application in accordance with subsection (c),
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•S 2351 PCS

1 may establish a limited hospital program that in2 cludes—

3 ‘‘(A) a rural primary care hospital pro4 gram under which—

5 ‘‘(i) at least one facility in the State

6 shall be designated as a rural primary care

7 hospital in accordance with paragraph (2),

8 and

9 ‘‘(ii) the State shall develop at least

10 one rural health network (as defined in

11 subsection (e)) in the State;

12 ‘‘(B) a medical assistance facility program

13 under which at least one facility in the State

14 shall be designated as a medical assistance fa15 cility in accordance with paragraph (2); or

16 ‘‘(C) both.

17 ‘‘(2) STATE DESIGNATION OF FACILITIES.—A

18 State may designate one or more facilities as a rural

19 primary care hospital or medical assistance facility

20 in accordance with subparagraph (A) or (B).

21 ‘‘(A) CRITERIA FOR DESIGNATION AS

22 RURAL PRIMARY CARE HOSPITAL.—A State

23 may designate a facility as a rural primary care

24 hospital only if the facility—
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•S 2351 PCS

1 ‘‘(i) is located in a rural area (as de2 fined in section 1886(d)(2)(D)), or is lo3 cated in a county whose geographic area is

4 substantially larger than the average geo5 graphic area for urban counties in the

6 United States and whose hospital service

7 area is characteristic of service areas of

8 hospitals located in rural areas;

9 ‘‘(ii) at the time such facility applies

10 to the State for designation as a rural pri11 mary care hospital, is a hospital (or, in the

12 case of a facility that closed during the 12-

13 month period that ends on the date the fa14 cility applies for such designation, at the

15 time the facility closed), with a participa16 tion agreement in effect under section

17 1866(a);

18 ‘‘(iii) has in effect an agreement to

19 participate with other hospitals and facili20 ties in a rural health network;

21 ‘‘(iv) provides 24-hour emergency

22 services to ill or injured persons prior to

23 admission to the facility or prior to their

24 transportation to a full-service hospital;
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•S 2351 PCS

1 ‘‘(v) provides not more than 15 inpa2 tient beds (meeting such conditions as the

3 Secretary may establish) for providing

4 acute inpatient care;

5 ‘‘(vi) provides inpatient care for a pe6 riod not to exceed an average length of 96

7 hours (unless a longer period is required

8 because transfer to a hospital is precluded

9 because of inclement weather or other

10 emergency conditions);

11 ‘‘(vii) meets such staffing require12 ments as would apply under section

13 1861(e), to a hospital located in a rural

14 area, except that—

15 ‘‘(I) the facility need not meet

16 hospital standards relating to the

17 number of hours during a day, or

18 days during a week, in which the fa19 cility must be open and fully staffed,

20 except insofar as the facility is re21 quired to provide emergency care on a

22 24-hour basis under clause (v) and

23 must have nursing services available

24 on a 24-hour basis, but need not oth-
567

•S 2351 PCS

1 erwise staff the facility except when

2 an inpatient is present,

3 ‘‘(II) the facility may provide any

4 services otherwise required to be pro5 vided by a full-time, onsite dietician,

6 pharmacist, laboratory technician,

7 medical technologist, and radiological

8 technologist on a part-time, offsite

9 basis under arrangements as defined

10 in section 1861(w)(1), and

11 ‘‘(III) the inpatient care de12 scribed in clause (vii) may be provided

13 by a physician’s assistant, nurse prac14 titioner, or clinical nurse specialist

15 subject to the oversight of a physician

16 who need not be present in the facil17 ity; and

18 ‘‘(viii) meets the requirements of sub19 paragraphs (C) through (I) of paragraph

20 (2) of section 1861(aa), and of clauses (ii)

21 and (iv) of the second sentence of that

22 paragraph, except that in determining

23 whether a facility meets the requirements

24 of this subparagraph, subparagraphs (E)

25 and (F) of that paragraph shall be applied
568

•S 2351 PCS

1 as if any reference to ‘physician’ is a ref2 erence to a physician as defined in section

3 1861(r)(1).

4 ‘‘(B) CRITERIA FOR DESIGNATION AS MED5 ICAL ASSISTANCE FACILITY.—A State may des6 ignate a facility as a medical assistance facility

7 only if the facility—

8 ‘‘(i) is located in a county (or equiva9 lent unit of local government)—

10 ‘‘(I) with fewer than 6 residents

11 per square mile, or

12 ‘‘(II) in a rural area (as defined

13 in section 1886(d)(2)(D)) that is lo14 cated more than a 35–mile or 45–

15 minute drive from a hospital, a rural

16 primary care hospital, or another fa17 cility described in this subsection;

18 ‘‘(ii) at the time such facility applies

19 to the State for designation as a medical

20 assistance facility—

21 ‘‘(I) is a hospital (or in the case

22 of a facility that closed during the 12-

23 month period that ends on the date

24 the facility applies for such designa25 tion, at the time the facility closed),
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1 with a participation agreement in ef2 fect under section 1866(a); or

3 ‘‘(II) is licensed in accordance

4 with applicable State and local laws

5 and regulations;

6 ‘‘(iii) meets the requirements of

7 clauses (iv), (vi), and (vii) of subparagraph

8 (A); and

9 ‘‘(iv) meets the requirements of sub10 paragraph (I) of paragraph (2) of section

11 1861(aa).

12 ‘‘(e) RURAL HEALTH NETWORK DEFINED.—For

13 purposes of this section, the term ‘rural health network’

14 means, with respect to a State, an organization—

15 ‘‘(1) consisting of—

16 ‘‘(A) at least 1 facility that the State has

17 designated or plans to designate as a rural pri18 mary care hospital, and

19 ‘‘(B) at least 1 hospital that furnishes

20 services that a rural primary care hospital can21 not furnish, and

22 ‘‘(2) the members of which have entered into

23 agreements regarding—

24 ‘‘(A) patient referral and transfer,
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•S 2351 PCS

1 ‘‘(B) the development and use of commu2 nications systems, including (where feasible) te3 lemetry systems and systems for electronic

4 sharing of patient data,

5 ‘‘(C) the provision of emergency and non6 emergency transportation among the members,

7 and

8 ‘‘(D) credentialing and quality assurance.

9 ‘‘(f) CERTIFICATION BY THE SECRETARY.—The Sec10 retary shall certify a facility as a rural primary care hos11 pital or medical assistance facility (as the case may be)

12 if the facility—

13 ‘‘(1) is located in a State that has established

14 a limited hospital program in accordance with sub15 section (d);

16 ‘‘(2) is designated as a rural primary care hos17 pital or medical assistance facility by the State in

18 which it is located; and

19 ‘‘(3) meets such other criteria as the Secretary

20 may require.

21 ‘‘(g) PERMITTING MAINTENANCE OF SWING BEDS.—

22 Nothing in this section shall be construed to prohibit a

23 State from designating or the Secretary from certifying

24 a facility as a rural primary care hospital or medical as25 sistance facility solely because, at the time the facility ap-
571

•S 2351 PCS

1 plies to the State for designation as a rural primary care

2 hospital or medical assistance facility, there is in effect

3 an agreement between the facility and the Secretary under

4 section 1883 under which the facility’s inpatient hospital

5 facilities are used for the furnishing of extended care serv6 ices, except that the number of beds used for the furnish7 ing of such services may not exceed the total number of

8 licensed inpatient beds at the time the facility applies to

9 the State for such designation (minus the number of inpa10 tient beds used for providing inpatient care in a rural pri11 mary care facility pursuant to subsection (d)(2)(A)(vi)).

12 The Secretary may establish additional conditions of par13 ticipation for rural primary care hospitals with a substan14 tial number of such beds. For purposes of the first sen15 tence, the number of beds of the facility used for the fur16 nishing of extended care services shall not include any

17 beds of a unit of the facility that is licensed as a distinct18 part skilled nursing facility at the time the facility applies

19 to the State for designation as a rural primary care hos20 pital or medical assistance facility.

21 ‘‘(h) GRANTS.—

22 ‘‘(1) LIMITED HOSPITAL PROGRAM.—The Sec23 retary may award grants to States that have submit24 ted applications in accordance with subsection (c)

25 for—
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1 ‘‘(A) engaging in activities relating to plan2 ning and implementing a rural health care plan;

3 ‘‘(B) in the case of a rural primary care

4 hospital program described in subsection

5 (d)(1)(A), engaging in activities relating to

6 planning and implementing rural health net7 works; and

8 ‘‘(C) designation of facilities as rural pri9 mary care hospitals or medical assistance facili10 ties.

11 ‘‘(2) RURAL EMERGENCY MEDICAL SERVICES.—

12 ‘‘(A) IN GENERAL.—The Secretary may

13 award grants to States that have submitted ap14 plications in accordance with subparagraph (B)

15 for the establishment or expansion of a pro16 gram for the provision of rural emergency medi17 cal services.

18 ‘‘(B) APPLICATION.—An application is in

19 accordance with this subparagraph if the State

20 submits to the Secretary at such time and in

21 such form as the Secretary may require an ap22 plication containing the assurances described in

23 subparagraphs (A)(ii), (A)(iii), and (B) of sub24 section (c)(1) and paragraph (3) of such sub25 section.
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•S 2351 PCS

1 ‘‘(i) STUDY ON CLINICALLY BASED ALTERNATIVE TO

2 96-HOUR RULE.—The Secretary shall conduct a study on

3 the feasibility of admitting patients to rural primary care

4 hospitals and medical assistance facilities on a limited

5 DRG basis instead of using the 96-hour average length

6 of stay criteria described in subsection (d)(2)(A)(vii).

7 ‘‘(j) WAIVER OF CONFLICTING PART A PROVI8 SIONS.—The Secretary is authorized to waive such provi9 sions of this part and part C as are necessary to conduct

10 the program established under this section.

11 ‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There

12 are authorized to be appropriated from the Federal Hos13 pital Insurance Trust Fund—

14 ‘‘(1) for making grants under subsection (h)(1)

15 to States that have established a rural primary care

16 hospital program in the State under subsection

17 (d)(1)(A), $15,000,000 for each of fiscal years 1993

18 through 1995; and

19 ‘‘(2) for making grants to all States under sub20 section (h), $25,000,000 in each of the fiscal years

21 1996 through 1999.’’.

22 (b) PART A AMENDMENTS RELATING TO RURAL PRI23 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA24 CILITIES.—
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1 (1) DEFINITIONS.—Section 1861 (42 U.S.C.

2 1395x) is amended by adding at the end the follow3 ing new subsection:

4 ‘‘MEDICAL ASSISTANCE FACILITY; MEDICAL ASSISTANCE

5 FACILITY SERVICES

6 ‘‘(oo)(1) The term ‘medical assistance facility’ means

7 a facility certified by the Secretary as a medical assistance

8 facility under section 1820(f).

9 ‘‘(2) The term ‘medical assistance facility services’

10 means items and services, furnished to an inpatient for

11 a medical assistance facility by such facility, that would

12 be inpatient hospital services if furnished to an inpatient

13 of a hospital by a hospital.’’.

14 (2) COVERAGE AND PAYMENT.—(A)(i) Section

15 1812(a)(1) (42 U.S.C. 1395d(a)(1)) is amended by

16 striking ‘‘inpatient hospital services’’ the first place

17 it appears and inserting ‘‘, inpatient hospital serv18 ices and inpatient medical assistance facility serv19 ices’’; and

20 (ii) by striking ‘‘inpatient hospital services’’ the

21 second place it appears and inserting ‘‘such serv22 ices’’.

23 (B) Section 1814 (42 U.S.C. 1395f) is amend24 ed—

25 (i) in subsection (b), by striking ‘‘inpatient

26 rural primary care hospital services,’’ and in-
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•S 2351 PCS

1 serting ‘‘inpatient rural primary care hospital

2 services, other than a medical assistance facility

3 providing inpatient medical assistance facility

4 services,’’; and

5 (ii) by amending subsection (l) to read as

6 follows:

7 ‘‘(l) PAYMENT FOR INPATIENT RURAL PRIMARY

8 CARE SERVICES AND INPATIENT MEDICAL ASSISTANCE

9 FACILITY SERVICES.—The amount of payment under this

10 part for inpatient rural primary care services and inpa11 tient medical assistance facility services is the reasonable

12 costs of the rural primary care hospital or medical assist13 ance facility in providing such services.’’.

14 (3) TREATMENT OF MEDICAL ASSISTANCE FA15 CILITIES AS PROVIDERS OF SERVICES.—(A) Section

16 1861(u) (42 U.S.C. 1395x(u)) is amended by insert17 ing ‘‘medical assistance facility,’’after ‘‘rural primary

18 care hospital,’’.

19 (B) The first sentence of section 1864(a) (42

20 U.S.C. 1395aa(a)) is amended by inserting ‘‘a medi21 cal assistance facility, as defined in section

22 1861(oo)(1),’’ after ‘‘1861(mm)(1),’’.

23 (C) The third sentence of section 1865(a) of

24 such Act (42 U.S.C. 1395bb(a)) is amended by
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•S 2351 PCS

1 striking ‘‘or 1861(mm)(1)’’ and inserting

2 ‘‘1861(mm)(1), or 1861(oo)(1),’’.

3 (4) CONFORMING AMENDMENTS.—(A) Section

4 1128A(b)(1) (42 U.S.C. 1320a–7a(b)(1)) is amend5 ed—

6 (i) by striking ‘‘or a rural primary care

7 hospital’’ the first place it appears and insert8 ing ‘‘, a rural primary care hospital, or a medi9 cal assistance facility’’; and

10 (ii) by striking ‘‘or a rural primary care

11 hospital’’ the second place it appears and in12 serting ‘‘, the rural primary care hospital, or

13 the medical assistance facility’’.

14 (B) Section 1128B(c) (42 U.S.C. 1320a–7b(c))

15 is amended by inserting ‘‘medical assistance facil16 ity,’’ after ‘‘rural primary care hospital,’’.

17 (C) Section 1134 (42 U.S.C. 1320b–4) is

18 amended by striking ‘‘or rural primary care hos19 pitals’’ each place it appears and inserting ‘‘, rural

20 primary care hospitals, or medical assistance facili21 ties’’.

22 (D) Section 1138(a)(1) (42 U.S.C. 1320b–

23 8(a)(1)) is amended—

24 (i) in the matter preceding subparagraph

25 (A), by striking ‘‘or rural primary care hos-
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1 pital’’ and inserting ‘‘, rural primary care hos2 pital, or medical assistance facility’’, and

3 (ii) in the matter preceding clause (i) of

4 subparagraph (A), by striking ‘‘or rural pri5 mary care hospital’’ and inserting ‘‘, rural pri6 mary care hospital, or medical assistance facil7 ity’’.

8 (E) Section 1164(e) (42 U.S.C. 1320c–13(e)) is

9 amended by inserting ‘‘medical assistance facilities,’’

10 after ‘‘rural primary care hospitals,’’.

11 (F) Section 1816(c)(2)(C) (42 U.S.C.

12 1395h(c)(2)(C)) is amended by inserting ‘‘medical

13 assistance facility,’’ after ‘‘rural primary care hos14 pital,’’.

15 (G) Section 1833 (42 U.S.C. 1395l) is amend16 ed—

17 (i) in subsection (h)(5)(A)(iii)—

18 (I) by striking ‘‘or rural primary care

19 hospital’’ and inserting ‘‘rural primary

20 care hospital, or medical assistance facil21 ity’’; and

22 (II) by striking ‘‘to the hospital’’ and

23 inserting ‘‘to the hospital or the facility’’;
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•S 2351 PCS

1 (ii) in subsection (i)(1)(A), by inserting

2 ‘‘medical assistance facility,’’ after ‘‘rural pri3 mary care hospital,’’;

4 (iii) in subsection (i)(3)(A), by striking ‘‘or

5 rural primary care hospital services’’ and in6 serting ‘‘rural primary care hospital services, or

7 medical assistance facility services’’;

8 (iv) in subsection (l)(5)(A), by inserting

9 ‘‘medical assistance facility,’’ after ‘‘rural pri10 mary care hospital,’’ each place it appears; and

11 (v) in subsection (l)(5)(C), by striking ‘‘or

12 rural primary care hospital’’ each place it ap13 pears and inserting ‘‘, rural primary care hos14 pital, or medical assistance facility’’.

15 (H) Section 1835(c) (42 U.S.C. 1395n(c)) is

16 amended by adding at the end the following: ‘‘A

17 medical assistance facility shall be considered a hos18 pital for purposes of this subsection.’’.

19 (I) Section 1842(b)(6)(A)(ii) (42 U.S.C.

20 1395u(b)(6)(A)(ii)) is amended by inserting ‘‘medi21 cal assistance facility,’’ after ‘‘rural primary care

22 hospital,’’.

23 (J) Section 1861 (42 U.S.C. 1395x) is amend24 ed—
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1 (i) in the last sentence of subsection (e), by

2 striking ‘‘1861(mm)(1))’’ and inserting

3 ‘‘1861(mm)(1)) or a medical assistance facility

4 (as defined in section 1861(oo)(1)).’’,

5 (ii) in subsection (w)(1) by inserting ‘‘med6 ical assistance facility,’’ after ‘‘rural primary

7 care hospital,’’, and

8 (iii) in subsection (w)(2), by striking ‘‘or

9 rural primary care hospital’’ each place it ap10 pears and inserting ‘‘, rural primary care hos11 pital, or medical assistance facility’’.

12 (K) Section 1862(a)(14) (42 U.S.C.

13 1395y(a)(14)) is amended by striking ‘‘or rural pri14 mary care hospital’’ each place it appears and in15 serting ‘‘, rural primary care hospital, or medical as16 sistance facility’’.

17 (L) Section 1866(a)(1) (42 U.S.C

18 1395cc(a)(1)) is amended—

19 (i) in subparagraph (F)(ii), by inserting

20 ‘‘medical assistance facilities,’’ after ‘‘rural pri21 mary care hospitals,’’;

22 (ii) in subparagraph (H)—

23 (I) in the matter preceding clause (i),

24 by inserting ‘‘and in the case of medical

25 assistance facilities which provide inpatient
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•S 2351 PCS

1 medical assistance facility services’’ after

2 ‘‘rural primary care hospital services’’; and

3 (II) in clauses (i) and (ii), by striking

4 ‘‘hospital’’ each place it appears and in5 serting ‘‘hospital or facility’’;

6 (iii) in subparagraph (I)—

7 (I) in the matter preceding clause (i),

8 by striking ‘‘or rural primary care hos9 pital’’ and inserting ‘‘, a rural primary

10 care hospital, or a medical assistance facil11 ity’’; and

12 (II) in clause (ii), by striking ‘‘the

13 hospital’’ and inserting ‘‘the hospital or the

14 facility’’; and

15 (iv) in subparagraph (N)—

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

17 by striking ‘‘and rural primary hospitals’’

18 and inserting ‘‘, rural primary care hos19 pitals, and medical assistance facilities’’;

20 (II) in clause (i), by striking ‘‘or rural

21 primary care hospital,’’ and inserting ‘‘,

22 rural primary care hospital, or medical as23 sistance facility,’’; and

24 (III) in clause (ii), by striking ‘‘hos25 pital’’ and inserting ‘‘hospital or facility’’.
581

•S 2351 PCS

1 (M) Section 1866(a)(3) (42 U.S.C

2 1395cc(a)(3)) is amended—

3 (i) by striking ‘‘rural primary care hos4 pital,’’ each place it appears in subparagraphs

5 (A) and (B) and inserting ‘‘rural primary care

6 hospital, medical assistance facility,’’, and

7 (ii) in subparagraph (C)(ii)(II), by striking

8 ‘‘rural primary care hospitals,’’ each place it

9 appears and inserting ‘‘rural primary care hos10 pitals, medical assistance facilities’’.

11 (N) Section 1867(e)(5) (42 U.S.C.

12 1395dd(e)(5)) is amended by striking

13 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) or a

14 medical assistance facility (as defined in section

15 1861(oo)(1)).’’.

16 (c) PART B AMENDMENTS RELATING TO RURAL PRI17 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA18 CILITIES.—

19 (1) COVERAGE.—(A) Section 1861(oo) (42

20 U.S.C. 1395x(oo)) as added by subsection (b)(1), is

21 amended by adding at the end the following new

22 paragraph:

23 ‘‘(3) The term ‘outpatient medical assistance facility

24 services’ means medical and other health services fur-
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•S 2351 PCS

1 nished by a medical assistance facility on an outpatient

2 basis.’’.

3 (B) Section 1832(a)(2) (42 U.S.C.

4 1395k(a)(2)) is amended—

5 (i) in subparagraph (I), by striking ‘‘and’’

6 at the end;

7 (ii) in subparagraph (J), by striking the

8 period at the end and inserting ‘‘; and’’; and

9 (iii) by adding at the end the following new

10 subparagraph:

11 ‘‘(K) outpatient medical assistance facility

12 services (as defined in section 1861(oo)(3)).’’.

13 (2) PAYMENT.—(A) Section 1833(a) (42 U.S.C.

14 1395l(a)) is amended—

15 (i) in paragraph (2), in the matter preced16 ing subparagraph (A), by striking ‘‘and (I)’’

17 and inserting ‘‘(I), and (K)’’;

18 (ii) in paragraph (6), by striking ‘‘and’’ at

19 the end;

20 (iii) in paragraph (7), by striking the pe21 riod at the end and inserting ‘‘; and’’; and

22 (iv) by adding at the end the following new

23 paragraph:
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•S 2351 PCS

1 ‘‘(8) in the case of outpatient medical assist2 ance facility services, the amounts described in sec3 tion 1834(g).’’.

4 (B) Section 1834(g) (42 U.S.C. 1395m(g)) is

5 amended—

6 (i) in the subsection heading by inserting

7 ‘‘AND OUTPATIENT MEDICAL ASSISTANCE FA8 CILITY SERVICES’’ after ‘‘SERVICES’’;

9 (ii) in paragraph (1), by striking ‘‘provided

10 during a year before 1993 in a rural primary

11 care hospital under this part shall be deter12 mined by one of the following methods as elect13 ed by the rural primary care hospital’’ and in14 serting ‘‘in a rural primary care hospital or

15 medical assistance facility under this part shall

16 be determined by one of the following methods

17 as elected by the rural primary care hospital or

18 medical assistance facility’’;

19 (iii) in paragraph (1)(A)(ii), by striking

20 ‘‘outpatient rural primary care hospital serv21 ices’’ each place it appears and inserting ‘‘out22 patient rural primary care hospital services or

23 outpatient medical assistance facility services’’;

24 and
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•S 2351 PCS

1 (iv) in paragraph (1)(B), by striking ‘‘hos2 pital’’ and inserting ‘‘hospital or facility’’.

3 (d) PAYMENT CONTINUED TO DESIGNATED

4 EACHS.—

5 (1) TERMINATION OF EACH DESIGNATION.—

6 Section 1820(i)(1)(A) (42 U.S.C. 1395l(4)(i)(1)(A))

7 is amended by inserting at the end the following new

8 flush sentence:

9 ‘‘The Secretary shall not designate any hospital as

10 an essential access community hospital on or after

11 July 1, 1994.’’.

12 (2) PERMITTING PAYMENT TO PRIOR DES13 IGNATED EACHS.—Section 1886(d)(5)(D) (42

14 U.S.C. 1395ww(d)(5)(D)) is amended—

15 (A) in clause (iii)(III), by inserting ‘‘as

16 such section was in effect as of July 1, 1994’’

17 before the period at the end; and

18 (B) in clause (v), by inserting ‘‘as such

19 section was in effect as of July 1, 1994’’ after

20 ‘‘1820(i)(1).’’

21 (3) EFFECTIVE DATE.—The amendments made

22 by this subsection shall take effect on July 1, 1994.

23 (e) TECHNICAL AMENDMENT RELATING TO PART A

24 DEDUCTIBLE, COINSURANCE AND SPELL OF ILLNESS.—
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•S 2351 PCS

1 (1) Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)), as

2 amended by subsection (b)(2)(A), is amended—

3 (A) by striking ‘‘inpatient medical assistance fa4 cility services’’ and inserting ‘‘inpatient medical as5 sistance facility services, inpatient rural primary

6 care hospital services, or inpatient medical assist7 ance facility services’’; and

8 (B) by striking ‘‘and inpatient rural primary

9 care hospital services’’.

10 (2) Sections 1813(a) and 1813(b)(3)(A) (42 U.S.C.

11 1395e(a), 1395e(b)(3)(A)) are each amended by striking

12 ‘‘inpatient hospital services’’ each place it appears and in13 serting ‘‘inpatient hospital services, inpatient rural pri14 mary care hospital services, or inpatient medical assist15 ance facility services,’’.

16 (3) Section 1813(b)(3)(B) (42 U.S.C.

17 1395e(b)(3)(B)) is amended by striking ‘‘inpatient hos18 pital services’’ and inserting ‘‘inpatient hospital services,

19 inpatient rural primary care hospital services, inpatient

20 medical assistance facility services,’’.

21 (4) Section 1861(a) (42 U.S.C. 1395x(a)) is amend22 ed—

23 (A) in paragraph (1), by striking ‘‘inpatient

24 hospital services’’ and inserting ‘‘inpatient hospital

25 services, inpatient rural primary care hospital serv-
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•S 2351 PCS

1 ices, inpatient medical assistance facility services,’’;

2 and

3 (B) in paragraph (2), by striking ‘‘hospital’’

4 and inserting ‘‘hospital, rural primary care hospital,

5 or medical assistance facility’’.

6 (f) REPEAL OF DEVELOPMENT OF PPS SYSTEM FOR

7 INPATIENT RURAL PRIMARY CARE HOSPITAL SERV8 ICES.—

9 (1) IN GENERAL.—Section 1814(l) (42 U.S.C.

10 1395f(l)) is amended by striking paragraph (2).

11 (2) CONFORMING AMENDMENTS.—Section

12 1814(l)(1) (42 U.S.C. 1395F(l)(1)) is amended—

13 (A) by striking ‘‘(l)(1)’’ and inserting

14 ‘‘(l)’’;

15 (B) by redesignating subparagraphs (A)

16 and (B) as paragraphs (1) and (2), respectively;

17 (C) in paragraph (2), as redesignated, by

18 striking ‘‘paragraph’’ and inserting ‘‘sub19 section’’; and

20 (D) in the last sentence, by striking ‘‘para21 graph’’ and inserting ‘‘subsection’’.

22 (g) REPEAL OF DEVELOPMENT AND IMPLEMENTA23 TION OF ALL INCLUSIVE PPS SYSTEM FOR OUTPATIENT

24 RURAL PRIMARY CARE SERVICES.—
587

•S 2351 PCS

1 (1) IN GENERAL.—Section 1834(g) (42 U.S.C.

2 1395m(g)), as amended by subsection (c)(2)(B), is

3 amended by striking paragraph (2).

4 (2) CONFORMING AMENDMENTS.—Section

5 1834(g)(1) (42 U.S.C. 1395m(g)(1)) is amended—

6 (A) by striking ‘‘(1) IN GENERAL.—’’

7 (B) by redesignating subparagraph (A)

8 and clauses (i) and (ii) of such subparagraph as

9 paragraph (1) and subparagraphs (A) and (B)

10 of such paragraph, respectively;

11 (C) by redesignating subparagraph (B) as

12 paragraph (2);

13 (D) in paragraph (1)(A), as redesignated,

14 by striking ‘‘subparagraph (B)’’; and

15 (E) in paragraph (1)(B), as so redesig16 nated, by striking ‘‘subparagraph’’ and insert17 ing ‘‘paragraph’’.

18 (h) EFFECTIVE DATE.—Except as otherwise pro19 vided, the amendments made by this section shall apply

20 to services furnished on or after October 1, 1994.

21 SEC. 621. TERMINATION OF INDIRECT MEDICAL EDU22 CATION PAYMENTS.

23 (a) IN GENERAL.—Section 1886(d)(5)(B) (42 U.S.C.

24 1395ww(d)(5)(B)) is amended in the matter preceding

25 clause (i) by striking ‘‘The Secretary’’ and inserting ‘‘For
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•S 2351 PCS

1 discharges occurring before January 1, 1996, the Sec2 retary’’.

3 (b) ADJUSTMENT TO STANDARDIZED AMOUNTS.—

4 Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i))

5 is amended by striking ‘‘excluding’’ and inserting ‘‘for dis6 charges occurring before January 1, 1996, excluding’’.

7 SEC. 622. SUBACUTE CARE STUDY.

8 (a) STUDY.—The Secretary of Health and Human

9 Services (hereafter in this section referred to as the ‘‘Sec10 retary’’) shall—

11 (1) define the level and type of care that should

12 constitute subacute care;

13 (2) determine the appropriateness of furnishing

14 subacute care in different settings by evaluating the

15 quality of care and patient outcomes;

16 (3) determine the cost and effectiveness of pro17 viding subacute care under the medicare program

18 under title XVIII of such Act to individuals who are

19 eligible for benefits under part A of such title;

20 (4) determine the extent to which hospital DRG

21 prospective payment rates under section 1886(d) of

22 such Act (42 U.S.C. 1395ww(d)) are appropriate for

23 the less restrictive institutional settings that provide

24 subacute care; and
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•S 2351 PCS

1 (5) study the relationships between institutions

2 and their payment methodologies in order to develop

3 ways in which to maximize the continuity of care for

4 each patient episode in which subacute care is fur5 nished.

6 (b) REPORT.—Not later than October 1, 1996, the

7 Secretary shall submit to the Congress a report on the

8 matters studied under subsection (a).

9 PART III—PROVISIONS RELATING TO PART B

10 SEC. 631. UPDATES FOR PHYSICIANS’ SERVICES.

11 Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is

12 amended—

13 (1) in subparagraph (A), by inserting after

14 ‘‘subparagraph (B)’’ the following: ‘‘and, in the case

15 of 1995, specified in subparagraph (C)’’;

16 (2) by redesignating subparagraph (C) as sub17 paragraph (D); and

18 (3) by inserting after subparagraph (B) the fol19 lowing new subparagraph:

20 ‘‘(C) SPECIAL PROVISION FOR 1995.—For

21 purposes of subparagraph (A), the conversion

22 factor specified in this subparagraph for 1995

23 is—

24 ‘‘(i) in the case of physicians’ services

25 included in the category of primary care
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•S 2351 PCS

1 services (as defined for purposes of sub2 section (j)(1)), the conversion factor estab3 lished under this subsection for 1994 re4 duced by 1 percent and adjusted by the

5 update established under paragraph (3) for

6 1995; and

7 ‘‘(ii) in the case of any other physi8 cians’ services, the conversion factor estab9 lished under this subsection for 1994 re10 duced by 4.0 percent and adjusted by the

11 update established under paragraph (3) for

12 1995.’’.

13 SEC. 632. SUBSTITUTION OF REAL GDP TO ADJUST FOR

14 VOLUME AND INTENSITY; REPEAL OF RE15 STRICTION ON MAXIMUM REDUCTION PER16 MITTED IN DEFAULT UPDATE.

17 (a) USE OF REAL GDP TO ADJUST FOR VOLUME

18 AND INTENSITY.—Section 1848(f)(2)(A)(iii) (42 U.S.C.

19 1395w–4(f)(2)(A)(iii)) is amended to read as follows:

20 ‘‘(iii) 1 plus the average per capita

21 growth in the real gross domestic product

22 (divided by 100) for the 5-fiscal-year pe23 riod ending with the previous fiscal year

24 (increased by 1.5 percentage points for the
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•S 2351 PCS

1 category of services consisting of primary

2 care services), and’’.

3 (b) REPEAL OF RESTRICTION ON MAXIMUM REDUC4 TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w–

5 4(d)(3)(B)(ii)) is amended—

6 (1) in the heading, by inserting ‘‘IN CERTAIN

7 YEARS’’ after ‘‘ADJUSTMENT’’;

8 (2) in the matter preceding subclause (I), by

9 striking ‘‘for a year’’;

10 (3) in subclause (I), by adding ‘‘and’’ at the

11 end;

12 (4) in subclause (II), by striking ‘‘, and’’ and

13 inserting a period; and

14 (5) by striking subclause (III).

15 (c) REPEAL OF PERFORMANCE STANDARD FAC16 TOR.—

17 (1) IN GENERAL.—Section 1848(f)(2) is

18 amended by striking subparagraph (B) and redesig19 nating subparagraph (C) as subparagraph (B).

20 (2) CONFORMING AMENDMENT.—Section

21 1848(f)(2)(A) is amended in the matter following

22 clause (iv) by striking ‘‘1, multiplied by 100’’ and all

23 that follows through ‘‘subparagraph (B))’’ and in24 serting ‘‘1 and multiplied by 100’’.

25 (d) EFFECTIVE DATE.—
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1 (1) VOLUME PERFORMANCE STANDARDS.—The

2 amendments made by subsections (a) and (c) shall

3 apply with respect to volume performance standards

4 established beginning with fiscal year 1995.

5 (2) REPEAL OF RESTRICTION ON MAXIMUM RE6 DUCTION.—The amendments made by subsection (b)

7 shall apply to services furnished on or after January

8 1, 1997.

9 SEC. 633. PAYMENT FOR PHYSICIANS’ SERVICES RELATING

10 TO INPATIENT STAYS IN CERTAIN HOS11 PITALS.

12 (a) IN GENERAL.—

13 (1) LIMITATIONS DESCRIBED.—Part B of title

14 XVIII (42 U.S.C. 1831 et seq.) is amended by in15 serting after section 1848 the following new section:

16 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

17 RELATING TO INPATIENT STAYS IN CERTAIN HOSPITALS

18 ‘‘SEC. 1849. (a) DEFINITIONS.—In this section, the

19 following definitions apply:

20 ‘‘(1) HOSPITAL.—The term ‘hospital’ means a

21 subsection (d) hospital as defined in section

22 1886(d)(1)(B).

23 ‘‘(2) MEDICAL STAFF.—An individual furnish24 ing a physician’s service is considered to be on the

25 medical staff of a hospital—
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•S 2351 PCS

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

2 for hospitals established by the Joint Commis3 sion on Accreditation of Health Organiza4 tions)—

5 ‘‘(i) the individual is subject to by6 laws, rules, and regulations established by

7 the hospital to provide a framework for the

8 self-governance of medical staff activities;

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

10 regulations, the individual has clinical

11 privileges granted by the hospital’s govern12 ing body; and

13 ‘‘(iii) under such clinical privileges,

14 the individual may provide physicians’

15 services independently within the scope of

16 the individual’s clinical privileges, or

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

18 service to a medicare beneficiary in such hos19 pital.

20 ‘‘(3) RURAL AREA; URBAN AREA.—The terms

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

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

23 ‘‘(4) TEACHING HOSPITAL.—The term ‘teaching

24 hospital’ means a hospital which has a teaching pro25 gram approved as specified in section 1861(b)(6).
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1 ‘‘(b) SERVICES SUBJECT TO REDUCTION.—

2 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

3 PER ADMISSION RELATIVE VALUE.—Not later than

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

5 Secretary shall determine for each hospital—

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

7 relative value under subsection (c)(2) for the

8 following year; and

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

10 value is projected to exceed the allowable aver11 age per admission relative value applicable to

12 the hospital for the following year under sub13 section (c)(1).

14 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

15 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

16 RELATIVE VALUE.—If the Secretary determines

17 (under paragraph (1)) that a medical staff’s hos18 pital-specific per admission relative value for a year

19 (beginning with 1998) is projected to exceed the al20 lowable average per admission relative value applica21 ble to the medical staff for the year, the Secretary

22 shall reduce (in accordance with subsection (d)) the

23 amount of payment otherwise determined under this

24 part for each physician’s service furnished during

25 the year to an inpatient of the hospital by an indi-
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1 vidual who is a member of the hospital’s medical

2 staff.

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

4 HOSPITALS AND CARRIERS.—Not later than October

5 1 of each year (beginning with 1997), the Secretary

6 shall notify the medical executive committee of each

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

8 Commission on the Accreditation of Health Organi9 zations) of the determinations made with respect to

10 the medical staff of such hospital under paragraph

11 (1).

12 ‘‘(c) DETERMINATION OF ALLOWABLE AVERAGE PER

13 ADMISSION RELATIVE VALUE AND HOSPITAL-SPECIFIC

14 PER ADMISSION RELATIVE VALUES.—

15 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

16 RELATIVE VALUE.—

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

18 hospital located in an urban area, the allowable

19 average per admission relative value established

20 under this subsection for a year is equal to 125

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

22 the median of 1996 hospital-specific per admis23 sion relative values determined under paragraph

24 (2) for all hospital medical staffs.
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•S 2351 PCS

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

2 hospital located in a rural area, the allowable

3 average per admission relative value established

4 under this subsection for 1998 and each suc5 ceeding year, is equal to 140 percent of the me6 dian of the 1996 hospital-specific per admission

7 relative values determined under paragraph (2)

8 for all hospital medical staffs.

9 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL10 ATIVE VALUE.—

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

12 per admission relative value projected for a hos13 pital (other than a teaching hospital) for a cal14 endar year shall be equal to the average per ad15 mission relative value (as determined under sec16 tion 1848(c)(2)) for physicians’ services fur17 nished to inpatients of the hospital by the hos18 pital’s medical staff (excluding interns and resi19 dents) during the second year preceding such

20 calendar year, adjusted for variations in case21 mix and disproportionate share status among

22 hospitals (as determined by the Secretary under

23 subparagraph (C)).

24 ‘‘(B) SPECIAL RULE FOR TEACHING HOS25 PITALS.—The hospital-specific per admission
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•S 2351 PCS

1 relative value projected for a teaching hospital

2 in a calendar year shall be equal to the sum

3 of—

4 ‘‘(i) the average per admission relative

5 value (as determined under section

6 1848(c)(2)) for physicians’ services fur7 nished to inpatients of the hospital by the

8 hospital’s medical staff (excluding interns

9 and residents) during the second year pre10 ceding such calendar year adjusted for

11 variations in case-mix, disproportionate

12 share status, and teaching status among

13 hospitals (as determined by the Secretary

14 under subparagraph (C)); and

15 ‘‘(ii) the equivalent per admission rel16 ative value (as determined under section

17 1848(c)(2)) for physicians’ services fur18 nished to inpatients of the hospital by in19 terns and residents of the hospital during

20 the second calendar year preceding such

21 calendar year, adjusted for variations in

22 case-mix, disproportionate share status,

23 and teaching status among hospitals (as

24 determined by the Secretary under sub25 paragraph (C)). The Secretary shall deter-
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•S 2351 PCS

1 mine such equivalent relative value unit

2 per admission for interns and residents

3 based on the best available data for teach4 ing hospitals and may make such adjust5 ment in the aggregate.

6 ‘‘(C) ADJUSTMENT FOR TEACHING AND

7 DISPROPORTIONATE SHARE HOSPITALS.—The

8 Secretary shall adjust the allowable per admis9 sion relative values otherwise determined under

10 this paragraph to take into account the needs

11 of teaching hospitals and hospitals receiving ad12 ditional payments under subparagraphs (F) and

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

14 teaching status or disproportionate share shall

15 not be less than zero.

16 ‘‘(d) AMOUNT OF REDUCTION.—The amount of pay17 ment otherwise made under this part for a physician’s

18 service that is subject to a reduction under subsection (b)

19 during a year shall be reduced by 15 percent, in the case

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

21 of the hospital for which the Secretary determines under

22 subsection (b)(1) that the hospital medical staff’s pro23 jected relative value per admission exceeds the allowable

24 average per admission relative value.
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•S 2351 PCS

1 ‘‘(e) RECONCILIATION OF REDUCTIONS BASED ON

2 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

3 WITH ACTUAL RELATIVE VALUES.—

4 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

5 PER ADMISSION RELATIVE VALUE.—Not later than

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

7 Secretary shall determine the actual average per ad8 mission relative value (as determined pursuant to

9 section 1848(c)(2)) for the physicians’ services fur10 nished by members of a hospital’s medical staff to

11 inpatients of the hospital during the previous year,

12 on the basis of claims for payment for such services

13 that are submitted to the Secretary not later than

14 90 days after the last day of such previous year. The

15 actual average per admission relative value shall be

16 adjusted by the appropriate case-mix, disproportion17 ate share factor, and teaching factor for the hospital

18 medical staff (as determined by the Secretary under

19 subsection (c)(2)(C)).

20 ‘‘(2) RECONCILIATION WITH REDUCTIONS

21 TAKEN.—

22 ‘‘(A) REIMBURSEMENT.—In the case of a

23 hospital for which the payment amounts for

24 physicians’ services furnished by members of

25 the hospital’s medical staff to inpatients of the
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1 hospital were reduced under this section for a

2 year—

3 ‘‘(i) if the actual average per admis4 sion relative value for such hospital’s medi5 cal staff during the year (as determined by

6 the Secretary under paragraph (1)) did not

7 exceed the allowable average per admission

8 relative value applicable to the hospital’s

9 medical staff under subsection (c)(1) for

10 the year, the Secretary shall reimburse the

11 fiduciary agent for the medical staff by the

12 amount by which payments for such serv13 ices were reduced for the year under sub14 section (d), including interest at an appro15 priate rate determined by the Secretary;

16 and

17 ‘‘(ii) if the actual average per admis18 sion relative value for such hospital’s medi19 cal staff during the year (as determined by

20 the Secretary under paragraph (1)) ex21 ceeded the allowable average per admission

22 relative value applicable to the hospital’s

23 medical staff under subsection (c)(1) for

24 the year, the Secretary shall reimburse the

25 fiduciary agent for the medical staff, as a
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•S 2351 PCS

1 percent of the total amount of payment

2 otherwise determined under this part for

3 physicians’ services furnished during the

4 year to inpatients of the hospital by the

5 hospital’s medical staff (prior to the reduc6 tion under subsection (d)), the difference

7 between 15 percentage points and the ac8 tual number of percentage points that the

9 medical staff exceeded the allowable aver10 age per admission relative value, including

11 interest at any appropriate rate determined

12 by the Secretary.

13 ‘‘(B) NO REIMBURSEMENT.—The Sec14 retary shall not pay the fiduciary agent for the

15 medical staff of a hospital any amounts by

16 which payments for physicians’ services pro17 vided by the medical staff were reduced for a

18 year under this section if the actual average per

19 admission relative value for such hospital’s

20 medical staff during the year (as determined by

21 the Secretary under paragraph (1)) exceeded

22 the allowable average per admission relative

23 value applicable to the hospital’s medical staff

24 under subsection (c)(1) for the year by 15 per25 centage points or more.
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•S 2351 PCS

1 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

2 HOSPITAL.—Each medical executive committee of a

3 hospital whose medical staff is projected to exceed

4 the allowable relative value per admission for a year,

5 shall have 1 year from the date of notification that

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

10 the carrier.

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

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

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

16 in payments during a year, the Secretary shall make

17 such reimbursement to the members of the hospital’s

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

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

22 ‘‘(f) CLAIMS TO BE SUBMITTED NOT LATER THAN

23 90 DAYS AFTER END OF YEAR.—Notwithstanding any

24 other provision of law, no payment may be made under

25 this part for any physician’s service furnished by a mem-
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1 ber of the medical staff of a hospital to an inpatient of

2 the hospital during a year unless the hospital submits a

3 claim to the Secretary for the payment for such service

4 not later than 90 days after the last day of the year.’’.

5 (2) CONFORMING AMENDMENTS.—(A) Section

6 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is

7 amended by inserting ‘‘(subject to reduction under

8 section 1849)’’ after ‘‘1848(a)(1)’’.

9 (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w–

10 4(a)(1)(B)) is amended by striking ‘‘this sub11 section,’’ and inserting ‘‘this subsection and section

12 1849,’’.

13 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

14 AT WHICH SERVICE FURNISHED.—Section

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

16 amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene17 ficiary (and, in the case of a service furnished to an inpa18 tient of a hospital, report the hospital identification num19 ber on such claim form),’’.

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

21 this section shall apply to services furnished on or after

22 January 1, 1998.
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1 SEC. 634. CHANGES IN UNDERSERVED AREA BONUS PAY2 MENTS.

3 (a) IN GENERAL.—Section 1833(m) (42 U.S.C.

4 1395l(m)) is amended—

5 (1) by inserting ‘‘(1)’’ after ‘‘(m)’’,

6 (2) by inserting ‘‘described in paragraph (2)’’

7 after ‘‘physicians’ services’’,

8 (3) by striking ‘‘10 percent’’ and inserting ‘‘the

9 applicable percent’’,

10 (4) by striking ‘‘service’’ the last place it ap11 pears and inserting ‘‘services’’, and

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

13 paragraph:

14 ‘‘(2)(A) The applicable percent referred to in para15 graph (1) is 20 percent in the case of primary care serv16 ices, as defined in section 1842(i)(4), and 10 percent for

17 services other than primary care services furnished in

18 health professional shortage areas located in rural areas

19 as defined in section 1886(d)(2)(D).

20 ‘‘(B) The Secretary shall reduce payments for all

21 services (other than primary care services) for which pay22 ment may be made under this section by such percentage

23 as the Secretary determines necessary so that, beginning

24 on the date of the enactment of the Health Security Act,

25 the amendments made by section 634(a) of such Act

26 would not result in expenditures under this section that
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1 exceed the amount of such expenditures that would have

2 been made if such amendment had not been made.’’.

3 (b) EFFECTIVE DATE.—The amendments made by

4 subsection (a) are effective for services furnished on or

5 after January 1, 1995.

6 SEC. 635. DEVELOPMENT AND IMPLEMENTATION OF RE7 SOURCE-BASED METHODOLOGY FOR PRAC8 TICE EXPENSES.

9 (a) DEVELOPMENT.—

10 (1) IN GENERAL.—The Secretary of Health and

11 Human Services shall develop a methodology for im12 plementing in 1997 a resource-based system for de13 termining practice expense relative value units for

14 each physician’s service. The methodology utilized

15 shall recognize the staff, equipment, and supplies

16 used in the provision of various medical and surgical

17 services in various settings.

18 (2) REPORT.—The Secretary shall transmit a

19 report by January 1, 1996, on the methodology de20 veloped under paragraph (1) to the Committee on

21 Ways and Means and the Committee on Energy and

22 Commerce of the House of Representatives and the

23 Committee on Finance of the Senate. The report

24 shall include a presentation of data utilized in devel-
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•S 2351 PCS

1 oping the methodology and an explanation of the

2 methodology.

3 (b) IMPLEMENTATION.—

4 (1) IN GENERAL.—Section 1848(c)(2)(C)(ii)

5 (42 U.S.C. 1395w–4(c)(2)(C)(ii)) is amended—

6 (A) by inserting ‘‘for the service for years

7 before 1997’’ before ‘‘equal to’’,

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

9 subclause (II) and inserting a comma, and

10 (C) by adding after and below subclause

11 (II) the following:

12 ‘‘and for years beginning with 1997 based

13 on the relative practice expense resources

14 involved in furnishing the service.’’.

15 (2) CONFORMING AMENDMENT.—Section

16 1848(c)(3)(C)(ii) (42 U.S.C. 1395w–4(c)(3)(C)(ii))

17 is amended by striking ‘‘The practice’’ and inserting

18 ‘‘For years before 1997, the practice’’.

19 (3) APPLICATION OF CERTAIN PROVISIONS.—In

20 implementing the amendment made by paragraph

21 (1)(C), the provisions of clauses (ii)(II) and (iii) of

22 section 1848(c)(2)(B) of the Social Security Act

23 shall apply in the same manner as they apply to ad24 justments under clause (ii)(I) of such section.
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1 SEC. 636. DEMONSTRATION PROJECTS FOR MEDICARE

2 STATE-BASED PERFORMANCE STANDARD

3 RATE OF INCREASE.

4 Section 1848(f) (42 U.S.C. 1395w–4(f)) is amended

5 by adding at the end the following new paragraph:

6 ‘‘(6) STATE-BASED PERFORMANCE STANDARD

7 RATES OF INCREASE DEMONSTRATION PROJECTS.—

8 The Secretary shall establish demonstration projects

9 in not more than 3 States under which a State

10 elects State-based performance standard rates of in11 crease to substitute for the national performance

12 standard rates of increase established for the year

13 under paragraph (2). The Secretary shall develop

14 criteria for the establishment of such demonstration

15 projects which shall include the requirement of

16 budget-neutrality for payments made under this part

17 with respect to physicians’ services furnished in a

18 State participating in the demonstration project.’’.

19 SEC. 637. ELIMINATION OF FORMULA-DRIVEN OVERPAY20 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

21 SERVICES.

22 (a) AMBULATORY SURGICAL CENTER PROCE23 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

24 1395l(i)(3)(B)(i)(II)) is amended—

25 (1) by striking ‘‘of 80 percent’’; and
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1 (2) by striking the period at the end and insert2 ing the following: ‘‘, less the amount a provider may

3 charge as described in clause (ii) of section

4 1866(a)(2)(A).’’.

5 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE6 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

7 1395l(n)(1)(B)(i)(II)) is amended—

8 (1) by striking ‘‘of 80 percent’’; and

9 (2) by striking the period at the end and insert10 ing the following: ‘‘, less the amount a provider may

11 charge as described in clause (ii) of section

12 1866(a)(2)(A).’’.

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

14 this section shall apply to services furnished during por15 tions of cost reporting periods occurring on or after Janu16 ary 1, 1995.

17 SEC. 638. EYE OR EYE AND EAR HOSPITALS.

18 Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is

19 amended in the matter following clause (iii) by striking

20 ‘‘January 1, 1995’’ and inserting ‘‘September 30, 1997’’.

21 SEC. 639. IMPOSITION OF COINSURANCE ON LABORATORY

22 SERVICES.

23 (a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of

24 section 1833(a) (42 U.S.C. 1395l(a)) are each amended—
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1 (1) by striking ‘‘(or 100 percent’’ and all that

2 follows through ‘‘the first opinion))’’; and

3 (2) by striking ‘‘100 percent of such negotiated

4 rate’’ and inserting ‘‘80 percent of such negotiated

5 rate’’.

6 (b) EFFECTIVE DATE.—The amendments made by

7 subsection (a) shall apply to tests furnished on or after

8 January 1, 1995.

9 SEC. 640. APPLICATION OF COMPETITIVE ACQUISITION

10 PROCESS FOR PART B ITEMS AND SERVICES.

11 (a) GENERAL RULE.—Part B of title XVIII is

12 amended by inserting after section 1846 the following:

13 ‘‘COMPETITION ACQUISITION FOR ITEMS AND SERVICES

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

15 AREAS.—

16 ‘‘(1) IN GENERAL.—The Secretary shall estab17 lish competitive acquisition areas for the purpose of

18 awarding a contract or contracts for the furnishing

19 under this part of the items and services described

20 in subsection (c) on or after January 1, 1995. The

21 Secretary may establish different competitive acqui22 sition areas under this subsection for different class23 es of items and services under this part.

24 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The

25 competitive acquisition areas established under para26 graph (1) shall—
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1 ‘‘(A) initially be, or be within, metropolitan

2 statistical areas; and

3 ‘‘(B) be chosen based on the availability

4 and accessibility of suppliers and the probable

5 savings to be realized by the use of competitive

6 bidding in the furnishing of items and services

7 in the area.

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

9 ‘‘(1) IN GENERAL.—The Secretary shall con10 duct a competition among individuals and entities

11 supplying items and services under this part for

12 each competitive acquisition area established under

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

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

15 The Secretary may not award a contract to any indi16 vidual or entity under the competition conducted

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

18 service under this part unless the Secretary finds

19 that the individual or entity meets quality standards

20 specified by the Secretary for the furnishing of such

21 item or service.

22 ‘‘(3) CONTENTS OF CONTRACT.—A contract en23 tered into with an individual or entity under the

24 competition conducted pursuant to paragraph (1)
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1 shall specify (for all of the items and services within

2 a class)—

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

4 entity shall provide; and

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

6 the Secretary may require.

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

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

9 follows:

10 ‘‘(1) Magnetic resonance imaging tests and

11 computerized axial tomography scans, including a

12 physician’s interpretation of the results of such tests

13 and scans.

14 ‘‘(2) Oxygen and oxygen equipment.’’.

15 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

16 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)

17 (42 U.S.C. 1395y(a)) is amended—

18 (1) by striking ‘‘or’’ at the end of paragraph

19 (15);

20 (2) by striking the period at the end of para21 graph (16) and inserting ‘‘; or’’; and

22 (3) by inserting after paragraph (16) the fol23 lowing new paragraph:

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

25 service furnished in a competitive acquisition area
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1 (as established by the Secretary under section

2 1847(a)) by an individual or entity other than the

3 supplier with whom the Secretary has entered into

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

5 of such item or service in that area, unless the Sec6 retary finds that such expenses were incurred in a

7 case of urgent need.’’.

8 (c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI9 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC10 TION IN PAYMENTS.—Notwithstanding any other provi11 sion of title XVIII of the Social Security Act, if the estab12 lishment of competitive acquisition areas under section

13 1847 of such Act (as added by subsection (a)) and the

14 limitation of coverage for items and services under part

15 B of such title to items and services furnished by providers

16 with competitive acquisition contracts under such section

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

18 the projected payment amount that would have applied to

19 the item or service under part B if the item or service

20 had not been furnished through competitive acquisition

21 under such section, the Secretary shall reduce the pay22 ment amount by such percentage as the Secretary deter23 mines necessary to result in such a reduction.

24 (d) EFFECTIVE DATE.—The amendments made by

25 this section shall apply to items and services furnished
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1 under part B of title XVIII of the Social Security Act on

2 or after January 1, 1995.

3 SEC. 641. APPLICATION OF COMPETITIVE ACQUISITION

4 PROCEDURES FOR LABORATORY SERVICES.

5 (a) IN GENERAL.—Section 1847(c), as added by sec6 tion 640, is amended by inserting after paragraph (2) the

7 following new paragraph:

8 ‘‘(3) Clinical diagnostic laboratory tests.’’.

9 (b) REDUCTION IN FEE SCHEDULE AMOUNTS IF

10 COMPETITIVE ACQUISITION FAILS TO ACHIEVE SAV11 INGS.—Section 1833(h) (42 U.S.C. 1395l(h)) is amended

12 by adding at the end the following new paragraph:

13 ‘‘(7) Notwithstanding any other provision of this sub14 section, if the Secretary applies the authority provided

15 under section 1847 to establish competitive acquisition

16 areas for the furnishing of clinical diagnostic laboratory

17 tests in a year and the application of such authority does

18 not result in a reduction of at least 10 percent in the pro19 jected payment amount that would have applied to such

20 tests under this section if the tests had not been furnished

21 through competitive acquisition under section 1847, the

22 Secretary shall reduce each payment amount otherwise de23 termined under the fee schedules and negotiated rates es24 tablished under this subsection by such percentage as the
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1 Secretary determines necessary to result in such a reduc2 tion.’’.

3 SEC. 642. EXPANDED COVERAGE FOR PHYSICIAN ASSIST4 ANTS AND NURSE PRACTITIONERS.

5 (a) COVERAGE IN OUTPATIENT SETTINGS.—Section

6 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended—

7 (1) in clause (i)—

8 (A) by striking ‘‘or’’ at the end of

9 subclause (II); and

10 (B) by inserting ‘‘or (IV) in an outpatient

11 setting as defined by the Secretary’’ following

12 ‘‘shortage area,’’; and

13 (2) in clause (ii), by striking ‘‘section 1919(a)’’

14 and inserting ‘‘section 1919(a) or in an outpatient

15 setting as defined by the Secretary’’.

16 (b) PAYMENT BASED ON PHYSICIAN FEE SCHED17 ULE.—

18 (1) Section 1833(a)(1)(O) (42 U.S.C.

19 1395l(a)(1)(O)) is amended—

20 (A) by striking ‘‘section 1861(s)(2)(K)(iii)

21 (relating to nurse practitioner and clinical nurse

22 specialist services provided in a rural area)’’

23 and inserting ‘‘section 1861(s)(2)(K)’’;

24 (B) by striking ‘‘for services furnished on

25 or after January 1, 1992,’’ and inserting ‘‘for
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1 services described in section 1861(s)(2)(K)(iii)

2 furnished on or after January 1, 1992, and for

3 services described in clauses (i), (ii), and (iv) of

4 section 1861(s)(2)(K) furnished on or after

5 January 1, 1997,’’; and

6 (C) by striking ‘‘subsection (r)(2)’’ and in7 serting ‘‘subsection (r)(2) or subparagraph (A)

8 or (B) of section 1842(b)(12)’’.

9 (2) Section 1842(b)(12)(A) (42 U.S.C.

10 1395u(b)(12)(A)) is amended—

11 (A) by striking ‘‘and’’ at the end of clause

12 (i);

13 (B) in clause (ii) in the matter preceding

14 subclause (I), by striking ‘‘the prevailing’’ and

15 inserting ‘‘for services furnished before January

16 1, 1997, the prevailing’’;

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

18 clause (ii)(II) and inserting ‘‘; and’’; and

19 (D) by inserting at the end the following

20 clause:

21 ‘‘(iii) in the case of services furnished

22 on or after January 1, 1997, the fee sched23 ule amount shall be equal to—
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1 ‘‘(I) in the case of services per2 formed as an assistant at surgery, 65

3 percent of the amount that would oth4 erwise be recognized if performed by a

5 physician who is serving as an assist6 ance at surgery,

7 ‘‘(II) in the case of services per8 formed (other than as an assistant at

9 surgery) in a hospital, 75 percent of

10 the fee schedule amount specified

11 under section 1848, and

12 ‘‘(III) in the case of other serv13 ices, 85 percent of the fee schedule

14 amount specified under section 1848.

15 (c) RURAL NURSE PRACTITIONERS AS ASSISTANTS

16 AT SURGERY IN URBAN AREAS.—Section

17 1861(s)(2)(K)(ii) (42 U.S.C. 1395x(s)(2)(K)(ii)), as

18 amended by subsection (a)(2), is further amended by add19 ing ‘‘or services as an assistant at surgery furnished by

20 a nurse practitioner whose primary practice location (as

21 defined by the Secretary) is in a rural area (as defined

22 in section 1886(d)(2)(D)) to an individual who resides in

23 a rural area when the service is furnished to such individ24 ual in an urban area by such practitioner when such prac25 titioner refers such individual to an urban area for the
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1 furnishing of services’’ after ‘‘as defined by the Sec2 retary’’.

3 (d) CONFORMING AMENDMENTS.—

4 (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4))

5 is amended by striking ‘‘subsection (s)(2)(K)(i)’’ and

6 inserting ‘‘subsection (s)(2)(K)’’.

7 (2) Section 1862(a)(14) (42 U.S.C.

8 1395y(a)(14)), as amended by section 620(b)(4)(K),

9 is amended by striking ‘‘section 1861(s)(2)(K)(i)’’

10 and inserting ‘‘section 1861(s)(2)(K)’’.

11 (3) Section 1866(a)(1)(H) (42 U.S.C.

12 1395cc(a)(1)(H)), as amended by section

13 620(b)(4)(L)(ii), is further amended by striking

14 ‘‘section 1861(s)(2)(K)(i)’’ and inserting ‘‘section

15 1861(s)(2)(K)’’.

16 (e) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to services furnished on or after

18 January 1, 1997.

19 SEC. 643. GENERAL PART B PREMIUM.

20 Section 1839(e) (42 U.S.C. 1395r(e)) is amended—

21 (1) in paragraph (1)(A), by striking ‘‘and prior

22 to January 1999’’; and

23 (2) in paragraph (2), by striking ‘‘prior to Jan24 uary 1998’’.
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1 PART IV—PROVISIONS RELATED TO PARTS A

2 AND B

3 SEC. 651. MEDICARE SECONDARY PAYER CHANGES.

4 (a) EXTENSION OF DATA MATCH.—

5 (1) Section 1862(b)(5)(C) (42 U.S.C.

6 1395y(b)(5)(C)) is amended by striking clause (iii).

7 (2) Section 6103(l)(12) of the Internal Revenue

8 Code of 1986 is amended by striking subparagraph

9 (F).

10 (b) REPEAL OF SUNSET ON APPLICATION TO DIS11 ABLED EMPLOYEES OF EMPLOYERS WITH MORE THAN

12 100 EMPLOYEES.—Section 1862(b)(1)(B)(iii) (42 U.S.C.

13 1395y(b)(1)(B)(iii)) is amended—

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

15 inserting ‘‘EFFECTIVE DATE’’; and

16 (2) by striking ‘‘, and before October 1, 1998’’.

17 (c) EXTENSION OF PERIOD FOR END STAGE RENAL

18 DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) (42

19 U.S.C. 1395y(b)(1)(C)) is amended in the second sentence

20 by striking ‘‘and on or before October 1, 1998,’’.

21 SEC. 652. MODIFICATION TO PHYSICIAN REFERRAL EXCEP22 TION.

23 Section 1877(d) (42 U.S.C. 1395nn(d)) is amended

24 by adding the following new paragraph:

25 ‘‘(4) FRONTIER PROVIDERS.—In the case of a

26 designated health service furnished in an urban area
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1 (as defined in section 1886(d)(2)(D)) by an entity

2 if—

3 ‘‘(A) the entity is located more than 100

4 miles from other like entities;

5 ‘‘(B) no less than 50 percent of the pa6 tient-users in the entity’s service area utilize

7 the entity; or

8 ‘‘(C) because of the area’s local topography

9 or periods of prolonged severe weather condi10 tions, other entities providing like services are

11 not readily accessible for at least 30 days in 2

12 out of 3 years.’’.

13 SEC. 653. EXPANSION OF CENTERS OF EXCELLENCE.

14 (a) IN GENERAL.—The Secretary of Health and

15 Human Services shall use a competitive process to con16 tract with centers of excellence for cataract surgery and

17 coronary artery by-pass surgery. Payment under title

18 XVIII of the Social Security Act will be made for services

19 subject to such contracts on the basis of negotiated or all20 inclusive rates as follows:

21 (1) The center shall cover services provided in

22 an urban area (as defined in section 1886(d)(2)(D)

23 of the Social Security Act) for years beginning with

24 fiscal year 1995.
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1 (2) The amount of payment made by the Sec2 retary to the center under title XVIII of the Social

3 Security Act for services covered under the contract

4 shall be less than the aggregate amount of the pay5 ments that the Secretary would have made to the

6 center for such services had the contract not been in

7 effect.

8 (3) The Secretary shall make payments to the

9 center on such a basis for the following services fur10 nished to individuals entitled to benefits under such

11 title:

12 (A) Facility, professional, and related serv13 ices relating to cataract surgery.

14 (B) Coronary artery bypass surgery and

15 related services.

16 (b) REBATE OF PORTION OF SAVINGS.—In the case

17 of any services provided under a contract conducted under

18 subsection (a), the Secretary shall make a payment to

19 each individual to whom such services are furnished (at

20 such time and in such manner as the Secretary may pro21 vide) in an amount equal to 10 percent of the amount by

22 which—

23 (1) the amount of payment that would have

24 been made by the Secretary under title XVIII of the

25 Social Security Act to the center for such services if
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1 the services had not been provided under the con2 tract, exceeds

3 (2) the amount of payment made by the Sec4 retary under such title to the center for such serv5 ices.

6 SEC. 654. MEDICARE SELECT.

7 (a) AMENDMENTS TO PROVISIONS RELATING TO

8 MEDICARE SELECT POLICIES.—

9 (1) PERMITTING MEDICARE SELECT POLICIES

10 IN ALL STATES.—Subsection (c) of section 4358 of

11 the Omnibus Budget Reconciliation Act of 1990 is

12 hereby repealed.

13 (2) REQUIREMENTS OF MEDICARE SELECT

14 POLICIES.—Section 1882(t)(1) (42 U.S.C.

15 1395ss(t)(1)) is amended to read as follows:

16 ‘‘(1)(A) If a medicare supplemental policy meets the

17 requirements of the 1991 NAIC Model Regulation or 1991

18 Federal Regulation and otherwise complies with the re19 quirements of this section except that—

20 ‘‘(i) the benefits under such policy are re21 stricted to items and services furnished by certain

22 entities (or reduced benefits are provided when items

23 or services are furnished by other entities), and

24 ‘‘(ii) in the case of a policy described in sub25 paragraph (C)(i)—
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1 ‘‘(I) the benefits under such policy are not

2 one of the groups or packages of benefits de3 scribed in subsection (p)(2)(A),

4 ‘‘(II) except for nominal copayments im5 posed for services covered under part B of this

6 title, such benefits include at least the core

7 group of basic benefits described in subsection

8 (p)(2)(B), and

9 ‘‘(III) an enrollee’s liability under such pol10 icy for physician’s services covered under part

11 B of this title is limited to the nominal

12 copayments described in subclause (II),

13 the policy shall nevertheless be treated as meeting

14 those requirements if the policy meets the require15 ments of subparagraph (B).

16 ‘‘(B) A policy meets the requirements of this sub17 paragraph if—

18 ‘‘(i) full benefits are provided for items and

19 services furnished through a network of entities

20 which have entered into contracts or agreements

21 with the issuer of the policy,

22 ‘‘(ii) full benefits are provided for items and

23 services furnished by other entities if the services are

24 medically necessary and immediately required be25 cause of an unforeseen illness, injury, or condition
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1 and it is not reasonable given the circumstances to

2 obtain the services through the network,

3 ‘‘(iii) the network offers sufficient access,

4 ‘‘(iv) the issuer of the policy has arrangements

5 for an ongoing quality assurance program for items

6 and services furnished through the network,

7 ‘‘(v)(I) the issuer of the policy provides to each

8 enrollee at the time of enrollment an explanation

9 of—

10 ‘‘(aa) the restrictions on payment under

11 the policy for services furnished other than by

12 or through the network,

13 ‘‘(bb) out of area coverage under the pol14 icy,

15 ‘‘(cc) the policy’s coverage of emergency

16 services and urgently needed care, and

17 ‘‘(dd) the availability of a policy through

18 the entity that meets the 1991 Model NAIC

19 Regulation or 1991 Federal Regulation without

20 regard to this subsection and the premium

21 charged for such policy, and

22 ‘‘(II) each enrollee prior to enrollment acknowl23 edges receipt of the explanation provided under

24 subclause (I), and
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1 ‘‘(vi) the issuer of the policy makes available to

2 individuals, in addition to the policy described in this

3 subsection, any policy (otherwise offered by the is4 suer to individuals in the State) that meets the 1991

5 Model NAIC Regulation or 1991 Federal Regulation

6 and other requirements of this section without re7 gard to this subsection.

8 ‘‘(C)(i) A policy described in this subparagraph—

9 ‘‘(I) is offered by an eligible organization (as

10 defined in section 1876(b)),

11 ‘‘(II) is not a policy or plan providing benefits

12 pursuant to a contract under section 1876 or an ap13 proved demonstration project described in section

14 603(c) of the Social Security Amendments of 1983,

15 section 2355 of the Deficit Reduction Act of 1984,

16 or section 9412(b) of the Omnibus Budget Reconcili17 ation Act of 1986, and

18 ‘‘(III) provides benefits which, when combined

19 with benefits which are available under this title, are

20 substantially similar to benefits under policies of21 fered to individuals who are not entitled to benefits

22 under this title.

23 ‘‘(ii) In making a determination under subclause (III)

24 of clause (i) as to whether certain benefits are substan25 tially similar, there shall not be taken into account, except
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1 in the case of preventive services, benefits provided under

2 policies offered to individuals who are not entitled to bene3 fits under this title which are in addition to the benefits

4 covered by this title and which are benefits an entity must

5 provide in order to meet the definition of an eligible orga6 nization under section 1876(b)(1).’’.

7 (b) RENEWABILITY OF MEDICARE SELECT POLI8 CIES.—Section 1882(q)(1) (42 U.S.C. 1395ss(q)(1)) is

9 amended—

10 (1) by striking ‘‘(1) Each’’ and inserting

11 ‘‘(1)(A) Except as provided in subparagraph (B),

12 each’’;

13 (2) by redesignating subparagraphs (A) and

14 (B) as clauses (i) and (ii), respectively; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(B)(i) In the case of a policy that meets the

18 requirements of subsection (t), an issuer may cancel

19 or nonrenew such policy with respect to an individ20 ual who leaves the service area of such policy; except

21 that, if such individual moves to a geographic area

22 where such issuer, or where an affiliate of such is23 suer, is issuing medicare supplemental policies, such

24 individual must be permitted to enroll in any medi25 care supplemental policy offered by such issuer or
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1 affiliate that provides benefits comparable to or less

2 than the benefits provided in the policy being can3 celed or nonrenewed. An individual whose coverage

4 is canceled or nonrenewed under this subparagraph

5 shall, as part of the notice of termination or

6 nonrenewal, be notified of the right to enroll in other

7 medicare supplemental policies offered by the issuer

8 or its affiliates.

9 ‘‘(ii) For purposes of this subparagraph, the

10 term ‘affiliate’ shall have the meaning given such

11 term by the 1991 NAIC Model Regulation.’’.

12 (c) CIVIL PENALTY.—Section 1882(t)(2) (42 U.S.C.

13 1395ss(t)(2)) is amended—

14 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

15 (2) by redesignating subparagraphs (A), (B),

16 (C), and (D) as clauses (i), (ii), (iii), and (iv), re17 spectively;

18 (3) in clause (iv), as redesignated—

19 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

20 inserting ‘‘paragraph (1)(B)(v)(I); and

21 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

22 inserting ‘‘paragraph (1)(B)(v)(II)’’;

23 (4) by striking ‘‘the previous sentence’’ and in24 serting ‘‘this subparagraph’’; and
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1 (5) by adding at the end the following new sub2 paragraph:

3 ‘‘(B) If the Secretary determines that an issuer of

4 a policy approved under paragraph (1) has made a mis5 representation to the Secretary or has provided the Sec6 retary with false information regarding such policy, the

7 issuer is subject to a civil money penalty in an amount

8 not to exceed $100,000 for each such determination. The

9 provisions of section 1128A (other than the first sentence

10 of subsection (a) and other than subsection (b)) shall

11 apply to a civil money penalty under this subparagraph

12 in the same manner as such provisions apply to a penalty

13 or proceeding under section 1128A(a).’’.

14 (d) EFFECTIVE DATES.—

15 (1) NAIC STANDARDS.—If, within 9 months

16 after the date of the enactment of this Act, the Na17 tional Association of Insurance Commissioners

18 (hereafter in this subsection referred to as the

19 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

20 Regulation (as defined in section 1882(p)(1)(A) of

21 the Social Security Act) to incorporate the additional

22 requirements imposed by the amendments made by

23 this section, section 1882(g)(2)(A) of such Act shall

24 be applied in each State, effective for policies issued

25 to policyholders on and after the date specified in
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1 paragraph (3), as if the reference to the Model Reg2 ulation adopted on June 6, 1979, were a reference

3 to the 1991 NAIC Model Regulation (as so defined)

4 as changed under this paragraph (such changed

5 Regulation referred to in this subsection as the

6 ‘‘1995 NAIC Model Regulation’’).

7 (2) SECRETARY STANDARDS.—If the NAIC

8 does not make changes in the 1991 NAIC Model

9 Regulation (as so defined) within the 9-month period

10 specified in paragraph (1), the Secretary of Health

11 and Human Services (hereafter in this subsection re12 ferred to as the ‘‘Secretary’’) shall promulgate a reg13 ulation and section 1882(g)(2)(A) of the Social Se14 curity Act shall be applied in each State, effective

15 for policies issued to policyholders on and after the

16 date specified in paragraph (3), as if the reference

17 to the Model Regulation adopted on June 6, 1979,

18 were a reference to the 1991 NAIC Model Regula19 tion (as so defined) as changed by the Secretary

20 under this paragraph (such changed Regulation re21 ferred to in this subsection as the ‘‘1995 Federal

22 Regulation’’).

23 (3) DATE SPECIFIED.—
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1 (A) IN GENERAL.—Subject to subpara2 graph (B), the date specified in this paragraph

3 for a State is the earlier of—

4 (i) the date the State adopts the 1995

5 NAIC Model Regulation or the 1995 Fed6 eral Regulation, or

7 (ii) 1 year after the date the NAIC or

8 the Secretary first adopts such regulations.

9 (B) ADDITIONAL LEGISLATIVE ACTION RE10 QUIRED.—In the case of a State which the Sec11 retary identifies, in consultation with the NAIC,

12 as—

13 (i) requiring State legislation (other

14 than legislation appropriating funds) in

15 order for medicare supplemental policies to

16 meet the 1995 NAIC Model Regulation or

17 the 1995 Federal Regulation, but

18 (ii) having a legislature which is not

19 scheduled to meet in 1995 in a legislative

20 session in which such legislation may be

21 considered,

22 the date specified in this paragraph is the first

23 day of the first calendar quarter beginning after

24 the close of the first legislative session of the

25 State legislature that begins on or after Janu-
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1 ary 1, 1996. For purposes of the previous sen2 tence, in the case of a State that has a 2-year

3 legislative session, each year of such session

4 shall be deemed to be a separate regular session

5 of the State legislature.

6 SEC. 655. MEDIGAP.

7 (a) 30-DAY OPEN ENROLLMENT PERIOD.—Section

8 1882(s) (42 U.S.C. 1395ss(s)) is amended—

9 (1) in paragraph (3), by striking ‘‘paragraphs

10 (1) and (2)’’ and inserting ‘‘paragraph (1), (2), or

11 (3)’’,

12 (2) by redesignating paragraph (3) as para13 graph (4), and

14 (3) by inserting after paragraph (2) the follow15 ing new paragraph:

16 ‘‘(3) Each issuer of a medicare supplemental policy

17 shall have an open enrollment period of at least 30 days

18 duration every year (which shall be the period specified

19 by the Secretary under section 1876(e)(1)), during which

20 the issuer may not deny or condition the issuance or effec21 tiveness of a medicare supplemental policy, or discriminate

22 in the pricing of the policy, because of age, health status,

23 claims experience, receipt of health care, or medical condi24 tion. The policy may not provide any time period applica25 ble to pre-existing conditions, waiting periods, elimination
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1 periods, and probationary periods (except as provided by

2 paragraph (2)(B)).’’.

3 (b) EFFECTIVE DATES.—

4 (1) NAIC STANDARDS.—If, within 9 months

5 after the date of the enactment of this Act, the Na6 tional Association of Insurance Commissioners

7 (hereafter in this subsection referred to as the

8 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

9 Regulation (as defined in section 1882(p)(1)(A) of

10 the Social Security Act) to incorporate the additional

11 requirements imposed by the amendments made by

12 this section, section 1882(g)(2)(A) of such Act shall

13 be applied in each State, effective for policies issued

14 to policyholders on and after the date specified in

15 paragraph (3), as if the reference to the Model Reg16 ulation adopted on June 6, 1979, were a reference

17 to the 1991 NAIC Model Regulation (as so defined)

18 as changed under this paragraph (such changed

19 Regulation referred to in this subsection as the

20 ‘‘1995 NAIC Model Regulation’’).

21 (2) SECRETARY STANDARDS.—If the NAIC

22 does not make changes in the 1991 NAIC Model

23 Regulation (as so defined) within the 9-month period

24 specified in paragraph (1), the Secretary of Health

25 and Human Services (hereafter in this subsection re-
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1 ferred to as the ‘‘Secretary’’) shall promulgate a reg2 ulation and section 1882(g)(2)(A) of the Social Se3 curity Act shall be applied in each State, effective

4 for policies issued to policyholders on and after the

5 date specified in paragraph (3), as if the reference

6 to the Model Regulation adopted on June 6, 1979,

7 were a reference to the 1991 NAIC Model Regula8 tion (as so defined) as changed by the Secretary

9 under this paragraph (such changed Regulation re10 ferred to in this subsection as the ‘‘1995 Federal

11 Regulation’’).

12 SEC. 656. REDUCTION IN ROUTINE COST LIMITS FOR HOME

13 HEALTH SERVICES.

14 (a) REDUCTION IN UPDATE TO MAINTAIN FREEZE

15 IN 1996.—

16 (1) IN GENERAL.—Section 1861(v)(1)(L)(i) (42

17 U.S.C. 1395x(v)(1)(L)(i)) is amended—

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

19 the end;

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

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

22 1996, 112 percent, or’’; and

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

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

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

5 Budget Reconciliation Act of 1993),’’.

6 (2) ADJUSTMENT TO LIMITS.—Section

7 1861(v)(1)(L)(ii) (42 U.S.C. 1395x(v)(1)(L)(ii)) is

8 amended by adding at the end the following new

9 sentence: ‘‘The effect of the amendments made by

10 656(a) of the Health Security Act shall not be con11 sidered by the Secretary in making adjustments pur12 suant to this clause.’’.

13 (b) BASING LIMITS IN SUBSEQUENT YEARS ON ME14 DIAN OF COSTS.—

15 (1) IN GENERAL.—Section 1861(v)(1)(L)(i) (42

16 U.S.C. 1395x(v)(1)(L)(i)), as amended by subsection

17 (a), is amended in the matter following subclause

18 (IV) by striking ‘‘the mean’’ and inserting ‘‘the me19 dian’’.

20 (2) EFFECTIVE DATE.—The amendment made

21 by paragraph (1) shall apply to cost reporting peri22 ods beginning on or after July 1, 1997.
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1 SEC. 657. TERMINATION OF GRADUATE MEDICAL EDU2 CATION PAYMENTS.

3 (a) IN GENERAL.—Section 1886(h) (42 U.S.C.

4 1395ww(h)) is amended by adding at the end the following

5 new paragraph:

6 ‘‘(6) TERMINATION OF PAYMENTS ATTRIB7 UTABLE TO COSTS OF TRAINING PHYSICIANS.—Not8 withstanding any other provision of this section or

9 section 1861(v), no payment may be made under

10 this title for direct graduate medical education costs

11 attributable to an approved medical residency train12 ing program for any cost reporting period (or por13 tion thereof) beginning on or after January 1,

14 1996.’’.

15 (b) PROHIBITION AGAINST RECOGNITION OF

16 COSTS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

17 amended by section 612(b), is amended by adding at the

18 end the following new subparagraph:

19 ‘‘(U) Such regulations shall not include any provision

20 for specific recognition of the costs of graduate medical

21 education for hospitals for any cost reporting period (or

22 portion thereof) beginning on or after January 1, 1996.

23 Nothing in the previous sentence shall be construed to af24 fect in any way payments to hospitals for the costs of any

25 approved educational activities that are not described in

26 such sentence.’’.
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1 SEC. 658. EXTENSION OF SOCIAL HEALTH MAINTENANCE

2 ORGANIZATION DEMONSTRATIONS.

3 Section 4018(b) of the Omnibus Budget Reconcili4 ation Act of 1987, as amended by section 4207(b)(4)(B)

5 of the Omnibus Budget Reconciliation Act of 1990 and

6 section 13567(a) of the Omnibus Budget Reconciliation

7 Act of 1993, is amended—

8 (1) in paragraph (1), by striking ‘‘December

9 31, 1997’’ and inserting ‘‘December 31, 1999’’; and

10 (2) in paragraph (4), by striking ‘‘March 31,

11 1998’’ and inserting ‘‘March 31, 2000’’.

12 SEC. 659. STUDY ON MEDICARE SPENDING.

13 The Prospective Payment Assessment Commission

14 (established under section 1886(e)(2) of the Social Secu15 rity Act (42 U.S.C. 1395ww(e)(2))) and the Physician

16 Payment Review Commission (established under section

17 1845 of such Act (42 U.S.C. 1395w–1)) shall each con18 duct a study of the rate of increase in spending under

19 title XVIII of such Act and make recommendations to

20 Congress on strategies to slow the rate of growth. Such

21 studies shall include—

22 (1) an examination of ways to slow both the na23 tional rate of growth and the rate of growth in com24 munity-rating areas; and
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1 (2) an assessment of whether setting local ex2 penditure targets or local volume performance stand3 ards would be successful as part of this effort.

4 SEC. 660. STREAMLINED PROCESSING SYSTEMS.

5 (a) IN GENERAL.—The Secretary of Health and

6 Human Services may develop a process to ensure that

7 claims for services under title XVIII of the such Act are

8 submitted first by the medicare program under such title,

9 medicare supplemental policies (described in section

10 1886(g)(1) of such Act (42 U.S.C. 1395ww(g)(1)), and

11 other policies that provide supplemental benefits under

12 such title before providers can submit claims to medicare

13 beneficiaries.

14 (b) SUPERSEDING CONFLICTING REQUIREMENTS.—

15 The provisions of sections 1816 and 1842 of the Social

16 Security Act (42 U.S.C. 1395h and 1395u) (including pro17 vider nominating provisions in such section 1816 of such

18 Act) are superseded to the extent required to carry out

19 this section.

20 Subtitle B—Medical Education

21 SEC. 665. MEDICAL EDUCATION.

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

23 1395 et seq.) is amended by adding at the end the follow24 ing new part:
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1 ‘‘PART D—MEDICAL EDUCATION

2 ‘‘Subpart I—Approved Physician and Dental

3 Training Programs

4 ‘‘SEC. 1893. APPROVED PHYSICIAN AND DENTAL TRAINING

5 PROGRAMS.

6 ‘‘(a) FEDERAL PAYMENTS TO QUALIFIED APPLI7 CANTS.—

8 ‘‘(1) IN GENERAL.—In the case of a qualified

9 applicant that in accordance with paragraph (2) sub10 mits to the Secretary an application for calendar

11 year 1996 or any subsequent calendar year, the Sec12 retary shall make payments for such year to the ap13 plicant for the purpose specified in paragraph (3).

14 The Secretary shall make the payments in an

15 amount determined in accordance with subsection

16 (b) and may administer the payments as a contract,

17 grant, or cooperative agreement.

18 ‘‘(2) APPLICATION FOR PAYMENTS.—For pur19 poses of paragraph (1), an application for payments

20 under such paragraph for a calendar year is in ac21 cordance with this paragraph if—

22 ‘‘(A) the qualified applicant submits the

23 application not later than the date specified by

24 the Secretary;

25 ‘‘(B) the application provides such assur26 ances as the Secretary may require that the
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1 qualified applicant will expend payments only

2 for the purpose described in paragraph (3); and

3 ‘‘(C) the application is in such form, is

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

7 this section.

8 ‘‘(3) PAYMENTS FOR OPERATION OF APPROVED

9 MEDICAL TRAINING PROGRAMS.—The purpose of

10 payments under paragraph (1) is to assist each ap11 proved medical training program operated by the

12 qualified applicant with the costs of operation of

13 such programs.

14 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

15 ANNUAL AMOUNT OF PAYMENTS.—

16 ‘‘(1) AVAILABILITY OF FUNDS FROM TRUST

17 FUND.—Except as provided in section 1896, the fol18 lowing amounts shall be available for a calendar year

19 for making payments under subsection (a) from the

20 Graduate Medical and Nursing Education Trust

21 Fund established under section 9552(a)(2)(A) of the

22 Internal Revenue Code of 1986:

23 ‘‘(A) In the case of calendar year 1996,

24 $3,200,000,000.
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1 ‘‘(B) In the case of calendar year 1997,

2 $3,550,000,000.

3 ‘‘(C) In the case of calendar year 1998,

4 $5,800,000,000.

5 ‘‘(D) In the case of each subsequent cal6 endar year, the amount specified in this para7 graph in the previous calendar year (without re8 gard to any reduction of such amount under

9 section 1896) updated through the midpoint of

10 the year by the estimated percentage change in

11 the general health care inflation factor during

12 the 12-month period ending at that midpoint,

13 with appropriate adjustments to reflect previous

14 underestimations or overestimations under this

15 subparagraph in the projected health care infla16 tion factor.

17 ‘‘(2) AMOUNT OF PAYMENTS FOR QUALIFIED

18 APPLICANTS.—

19 ‘‘(A) IN GENERAL.—Subject to the annual

20 amount available under paragraph (1) for a cal21 endar year, the amount of payments required

22 under subsection (a) to be made to a qualified

23 applicant that submits to the Secretary an ap24 plication for such year in accordance with sub-
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1 section (a)(2) is an amount equal to the prod2 uct of—

3 ‘‘(i) the number of full-time equivalent

4 training participants in the approved medi5 cal training program operated by the quali6 fied applicant (as determined under sub7 section (c)); and

8 ‘‘(ii) the average costs of the qualified

9 applicant in training such a participant in

10 a calendar year for the base period, up11 dated through the midpoint of the year by

12 the estimated percentage change in the

13 health care inflation factor after the base

14 period and up to and including the cal15 endar year involved.

16 For purposes of clause (ii), the term ‘base pe17 riod’ means the most recent 2-year period for

18 which the Secretary can determine the training

19 costs of the qualified applicant. If the qualified

20 applicant has not been in operation for suffi21 cient time to have a base period, the amount

22 determined under clause (ii) for such applicant

23 shall be the national average costs of all quali24 fied applicants operating the approved medical

25 training program for the most recent 2-year pe-
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1 riod (as determined by the Secretary), updated

2 in accordance with clause (ii).

3 ‘‘(3) LIMITATION.—If the annual amount avail4 able under paragraph (1) for a calendar year is in5 sufficient for providing each qualified applicant that

6 submits to the Secretary an application for such

7 year in accordance with subsection (a)(2) with the

8 amount of payments determined under paragraph

9 (2) for the program for such year, the Secretary

10 shall make such pro rata reductions in the amounts

11 so determined as may be necessary to ensure that

12 the total of payments made under subsection (a) for

13 such year equals the total of such amount.

14 ‘‘(c) DETERMINATION OF FULL-TIME-EQUIVALENT

15 TRAINING PARTICIPANTS.—

16 ‘‘(1) RULES.—The Secretary shall establish

17 rules consistent with this subsection for the com18 putation of the number of full-time-equivalent train19 ing participants in approved medical training pro20 grams.

21 ‘‘(2) ADJUSTMENT FOR PART-YEAR OR PART22 TIME TRAINING PARTICIPANTS.—Such rules shall

23 take into account individuals who serve as training

24 participants for only a portion of a period in an ap-
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1 proved medical training program or simultaneously

2 with more than one such program.

3 ‘‘(3) WEIGHTING FACTORS FOR CERTAIN

4 TRAINING PARTICIPANTS.—Subject to paragraph

5 (4), such rules shall provide, in calculating the num6 ber of full-time-equivalent training participants in an

7 approved medical training program—

8 ‘‘(A) for a training participant who is in

9 the participant’s initial training period, the

10 weighting factor is 1.00, and

11 ‘‘(B) for a training participant who is not

12 in the participant’s initial training period, the

13 weighting factor is .50.

14 ‘‘(4) FOREIGN MEDICAL GRADUATES REQUIRED

15 TO PASS FMGEMS EXAMINATION.—Such rules shall

16 provide that, in the case of an individual who is a

17 foreign medical graduate, the individual shall not be

18 counted as a training participant unless—

19 ‘‘(A) the individual has passed the

20 FMGEMS examination, or

21 ‘‘(B) the individual has previously received

22 certification from, or has previously passed the

23 examination of, the Educational Commission for

24 Foreign Medical Graduates.
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1 ‘‘(5) COUNTING TIME SPENT IN OUTPATIENT

2 SETTINGS.—Such rules shall provide that only time

3 spent in activities relating to patient care shall be

4 counted and that all the time so spent by a training

5 participant under an approved physician training

6 program or approved dental training program shall

7 be counted toward the determination of full-time

8 equivalency, without regard to the setting in which

9 the activities are performed.

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

11 ‘‘(1) APPROVED DENTAL TRAINING PRO12 GRAM.—The term ‘approved dental training pro13 gram’ means—

14 ‘‘(A) an internship, residency, or fellowship

15 program that is accredited by the Commission

16 on Dental Accreditation, or

17 ‘‘(B) a post-doctoral dental training pro18 gram in oral medicine, oral radiology, dental

19 anesthesia, or geriatric dentistry, that is deter20 mined by the Secretary to meet appropriate

21 standards.

22 ‘‘(2) APPROVED MEDICAL TRAINING PRO23 GRAM.—the term ‘approved medical training pro24 gram’ means an approved physician training pro-
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1 gram, an approved dental training program, or an

2 approved podiatric training program.

3 ‘‘(3) APPROVED PHYSICIAN TRAINING PRO4 GRAM.—

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

6 physician training program’, with respect to the

7 medical speciality involved, means a residency

8 or other postgraduate program that trains phy9 sicians and meets the following conditions:

10 ‘‘(i) Participation in the program may

11 be counted toward certification in the med12 ical specialty.

13 ‘‘(ii) The program is accredited by the

14 Accreditation Council on Graduate Medical

15 Education, or approved by the Council on

16 Postgraduate Training of the American

17 Osteopathic Association.

18 ‘‘(B) TRAINING IN OUTPATIENT FACILI19 TIES.—The term ‘approved physician training

20 program’ includes any postgraduate program

21 described in subparagraph (A) that provides

22 health services in an ambulatory setting, with23 out regard to whether the program provides in24 patient hospital services.
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1 ‘‘(C) NONHOSPITAL TRAINING ENTITIES

2 INCLUDED.—The term ‘approved physician

3 training program’ includes any postgraduate

4 program described in subparagraph (A), wheth5 er operated by academic health centers, teach6 ing hospitals, multispecialty group practices,

7 ambulatory care providers, prepaid health

8 plans, or other entities.

9 ‘‘(4) APPROVED PODIATRIC TRAINING PRO10 GRAM.—The term ‘approved podiatric training pro11 gram’ includes a training program approved by the

12 Council of Podiatric Medical Education of the Amer13 ican Podiatric Medical Association.

14 ‘‘(5) FOREIGN MEDICAL GRADUATE.—The term

15 ‘foreign medical graduate’ means a training partici16 pant who is a graduate of a school of medicine,

17 school of osteopathy, school of dentistry, or school of

18 podiatry that is not—

19 ‘‘(A) a school of medicine accredited by the

20 Liaison Committee on Medical Education of the

21 American Medical Association and the Associa22 tion of American Medical Colleges (or approved

23 by such Committee as meeting the standards

24 necessary for such accreditation),
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1 ‘‘(B) a school of osteopathy accredited by

2 the American Osteopathic Association, or ap3 proved by such Association as meeting the

4 standards necessary for such accreditation, or

5 ‘‘(C) a school of dentistry or podiatry

6 which is accredited (or meets the standards for

7 accreditation) by an organization recognized by

8 the Secretary for such purpose.

9 ‘‘(6) FMGEMS EXAMINATION.—The term

10 ‘FMGEMS examination’ means parts I and II of the

11 Foreign Medical Graduate Examination in the Medi12 cal Sciences or any successor examination recognized

13 by the Secretary for this purpose.

14 ‘‘(7) GENERAL HEALTH CARE INFLATION FAC15 TOR.—The term ‘general health care inflation factor’

16 means the consumer price index for medical services

17 as determined by the Bureau of Labor Statistics.

18 ‘‘(8) INITIAL TRAINING PERIOD.—The term

19 ‘initial training period’ means the period of board

20 eligibility, except that—

21 ‘‘(A) except as provided in subparagraph

22 (B), in no case shall the initial period of partici23 pation exceed an aggregate period of formal

24 training of more than five years for any individ25 ual, and
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1 ‘‘(B) a period, of not more than two years,

2 during which an individual is in a—

3 ‘‘(i) joint M.D. and Ph.D. program of

4 study or research as meets such criteria as

5 the Secretary may establish;

6 ‘‘(ii) residency or fellowship program

7 in geriatric medicine, preventive medicine,

8 or adolescent medicine; or

9 ‘‘(iii) a primary care fellowship pro10 gram which meets such criteria as the Sec11 retary may establish,

12 shall be treated as part of the initial training

13 participation period, but shall not be counted

14 against any limitation on the initial training pe15 riod.

16 The initial training period shall be determined, with

17 respect to a training participant, as of the time the

18 training participant enters the approved medical

19 training program.

20 ‘‘(9) PERIOD OF BOARD ELIGIBILITY.—

21 ‘‘(A) GENERAL RULE.—Subject to sub22 paragraphs (B) and (C), the term ‘period of

23 board eligibility’ means, for a training partici24 pant, the minimum number of years of formal

25 training necessary to satisfy the requirements
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1 for initial board eligibility in the particular spe2 cialty for which the training participant is

3 training.

4 ‘‘(B) APPLICATION OF 1985–1986 DIREC5 TORY.—Except as provided in subparagraph

6 (C), the period of board eligibility shall be such

7 period specified in the 1985-1986 Directory of

8 Residency Training Programs published by the

9 Accreditation Council on Graduate Medical

10 Education.

11 ‘‘(C) CHANGES IN PERIOD OF BOARD ELI12 GIBILITY.—If the Accreditation Council on

13 Graduate Medical Education, in its Directory of

14 Residency Training Programs.—

15 ‘‘(i) increases the minimum number of

16 years of formal training necessary to sat17 isfy the requirements for a specialty, above

18 the period specified in its 1985-1986 Di19 rectory, the Secretary may increase the pe20 riod of board eligibility for that specialty,

21 but not to exceed the period of board eligi22 bility specified in that later Directory, or

23 ‘‘(ii) decreases the minimum number

24 of years of formal training necessary to

25 satisfy the requirements for a specialty,
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1 below the period specified in its 1985-1986

2 Directory, the Secretary may decrease the

3 period of board eligibility for that spe4 cialty, but not below the period of board

5 eligibility specified in that later Directory.

6 ‘‘(10) QUALIFIED APPLICANT.—The term

7 ‘qualified applicant’ means an entity that operates

8 an approved medical training program.

9 ‘‘(11) TRAINING PARTICIPANT.—The term

10 ‘training participant’ means an individual who is en11 rolled in an approved medical training program.

12 ‘‘SEC. 1894. GRADUATE NURSING EDUCATION PAYMENTS

13 ‘‘(a) FEDERAL PAYMENTS TO GRADUATE NURSE

14 TRAINING PROGRAMS.—

15 ‘‘(1) IN GENERAL.—In the case of a graduate

16 nurse training program that in accordance with

17 paragraph (2) submits to the Secretary an applica18 tion for calendar year 1996 or any subsequent cal19 endar year, the Secretary shall make payments for

20 such year to the program for the purpose specified

21 in paragraph (3). The Secretary shall make the pay22 ments in an amount determined in accordance with

23 subsection (b), and may administer the payments as

24 a contract, grant, or cooperative agreement.
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1 ‘‘(2) APPLICATION FOR PAYMENTS.—For pur2 poses of paragraph (1), an application for payments

3 under such paragraph for a calendar year is in ac4 cordance with this paragraph if—

5 ‘‘(A) the graduate nurse training program

6 involved submits the application not later than

7 the date specified by the Secretary;

8 ‘‘(B) the application provides such assur9 ances as the Secretary may require that the

10 program will expend payments only for the pur11 pose described in paragraph (3); and

12 ‘‘(C) the application is in such form, is

13 made in such manner, and contains such agree14 ments, assurances, and information as the Sec15 retary determines to be necessary to carry out

16 this section.

17 ‘‘(3) PAYMENTS FOR OPERATION OF GRADUATE

18 NURSE TRAINING PROGRAMS.—The purpose of pay19 ments under paragraph (1) is to assist a graduate

20 nurse training program with the costs of operation.

21 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

22 ANNUAL AMOUNT OF PAYMENTS.—

23 ‘‘(1) AVAILABILITY OF FUNDS FROM TRUST

24 FUND.—Except as provided in section 1896, the fol25 lowing amounts shall be available for a calendar year
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1 for making payments under subsection (a) from the

2 Graduate Medical and Nursing Education Trust

3 Fund established under section 9552(a)(2)(A) of the

4 Internal Revenue Code of 1986:

5 ‘‘(A) In the case of calendar year 1996,

6 $200,000,000.

7 ‘‘(B) In the case of each subsequent cal8 endar year, the amount specified in this para9 graph in the previous calendar year (without re10 gard to any reduction of such amount under

11 section 1896) updated through the midpoint of

12 the year by the estimated percentage change in

13 the general health care inflation factor during

14 the 12-month period ending at that midpoint,

15 with appropriate adjustments to reflect previous

16 underestimations or overestimations under this

17 subparagraph in the projected health care infla18 tion factor.

19 ‘‘(2) AMOUNT OF PAYMENTS FOR INDIVIDUAL

20 ELIGIBLE PROGRAMS.—Subject to the annual

21 amount available under paragraph (1) for a calendar

22 year, the amount of payments required under sub23 section (a) to be made to a graduate nurse training

24 program that submits to the Secretary an applica-
652

•S 2351 PCS

1 tion for such year in accordance with subsection

2 (a)(2) is an amount equal to the product of—

3 ‘‘(A) the number of full-time equivalent

4 training participants in the program determined

5 in accordance with paragraph (3); and

6 ‘‘(B) the national average per participant

7 cost of all graduate nurse training programs for

8 the most recent 2-year period (as determined by

9 the Secretary), adjusted for geography and

10 other factors to be determined by the Secretary

11 and updated through the midpoint of the year

12 by the estimated percentage change in the

13 health care inflation factor after the base period

14 up to and including the calendar year involved.

15 ‘‘(3) DETERMINATION OF FULL-TIME EQUIVA16 LENT TRAINING PARTICIPANTS.—The Secretary

17 shall develop a method for determining full-time

18 equivalent training participants in graduate nurse

19 training programs for purposes of determining pay20 ments under this section.

21 ‘‘(4) LIMITATION.—If the annual amount avail22 able under paragraph (1) for a calendar year is in23 sufficient for providing each graduate nurse training

24 program that submits to the Secretary an applica25 tion for such year in accordance with subsection
653

•S 2351 PCS

1 (a)(2) with the amount of payments determined

2 under paragraph (2) for the program for such year,

3 the Secretary shall make such pro rata reductions in

4 the amounts so determined as may be necessary to

5 ensure that the total of payments made under sub6 section (a) for such year equals the total of such

7 amount.

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) GRADUATE NURSE TRAINING PROGRAM.—

10 The term ‘graduate nurse training program’ means

11 a program for advanced nurse education, a program

12 for education as a nurse practitioner, a program for

13 education as a nurse midwife, a program for edu14 cation as a nurse anesthetist, and such other pro15 grams for training in clinical nurse specialties as are

16 determined by the Secretary to require advanced

17 education.

18 ‘‘(2) PROGRAM FOR ADVANCED NURSE EDU19 CATION.—The term ‘program for advanced nurse

20 education’ means a program meeting the conditions

21 to be a program for which awards of grants and con22 tracts may be made under section 821 of the Public

23 Health Service Act.

24 ‘‘(3) PROGRAM FOR EDUCATION AS NURSE

25 PRACTITIONER.—The term ‘program for education
654

•S 2351 PCS

1 as a nurse practitioner’ means a program meeting

2 the conditions to be a program for which awards of

3 grants and contracts may be made under section

4 822 of the Public Health Service Act for education

5 as a nurse practitioners.

6 ‘‘(4) PROGRAM FOR EDUCATION AS NURSE MID7 WIFE.—The term ‘program for education as a nurse

8 midwife’’ means a program meeting the conditions

9 to be a program for which awards of grants and con10 tracts may be made under section 822 of the Public

11 Health Service Act for education as nurse midwives.

12 ‘‘(5) PROGRAM FOR EDUCATION AS NURSE AN13 ESTHETIST.—The term ‘program for education as a

14 nurse anesthetist’ means a program meeting the

15 conditions to be a program for which awards of

16 grants may be made under section 831 of the Public

17 Health Service Act for education as nurse anes18 thetists.

19 ‘‘(6) GENERAL HEALTH CARE INFLATION FAC20 TOR.—The term ‘general health care inflation fac21 tor’, has the meaning given such term in section

22 1893(d)(7) for such year.

23 ‘‘SEC. 1895. MEDICAL SCHOOL PAYMENTS.

24 ‘‘(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS

25 FOR CERTAIN COSTS.—
655

•S 2351 PCS

1 ‘‘(1) IN GENERAL.—In the case of a medical

2 school that in accordance with paragraph (2) sub3 mits to the Secretary an application for calendar

4 year 1996 or any subsequent calendar year, the Sec5 retary shall make payments for such year to the pro6 gram for the purpose specified in paragraph (3).

7 The Secretary shall make the payments in an

8 amount determined in accordance with subsection

9 (b), and may administer the payments as a contract,

10 grant, or cooperative agreement.

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

13 under such paragraph for a calendar year is in ac14 cordance with this paragraph if—

15 ‘‘(A) the medical school involved submits

16 the application not later than the date specified

17 by the Secretary; and

18 ‘‘(B) the application is in such form, is

19 made in such manner, and contains such agree20 ments, assurances, and information as the Sec21 retary determines to be necessary to carry out

22 this section.

23 ‘‘(3) PURPOSE OF PAYMENTS.—The purpose of

24 payments under paragraph (1) is to assist a medical

25 school with the costs associated with the transition
656

•S 2351 PCS

1 to managed competition and expanded ambulatory

2 teaching services.

3 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

4 ANNUAL AMOUNT OF PAYMENTS.—

5 ‘‘(1) AVAILABILITY OF TRUST FUND FOR PAY6 MENTS.—Except as provided in section 1896, the

7 following amounts shall be available for a calendar

8 year for making payments under subsection (a) from

9 the Graduate Medical and Nursing Education Trust

10 Fund established under section 9552(a)(2)(A) of the

11 Internal Revenue Code of 1986:

12 ‘‘(A) In the case of calendar year 1996,

13 $200,000,000.

14 ‘‘(B) In the case of calendar year 1997,

15 $300,000,000.

16 ‘‘(C) In the case of calendar year 1998,

17 $400,000,000.

18 ‘‘(D) In the case of calendar year 1999,

19 $500,000,000.

20 ‘‘(E) In the case of calendar year 2000,

21 $600,000,000.

22 ‘‘(F) In the case of each subsequent cal23 endar year, the amount specified in this para24 graph in the previous calendar year (without re25 gard to any reduction of such amount under
657

•S 2351 PCS

1 section 1896) updated through the midpoint of

2 the year by the estimated percentage change in

3 the general health care inflation factor (as de4 fined in section 1893(d)(7)) during the 12-

5 month period ending at that midpoint, with ap6 propriate adjustments to reflect previous

7 underestimations or overestimations under this

8 subparagraph in the projected health care infla9 tion factor.

10 ‘‘(2) AMOUNT OF PAYMENTS FOR MEDICAL

11 SCHOOLS.—

12 ‘‘(A) IN GENERAL.—Subject to the annual

13 amount available under paragraph (1) for a cal14 endar year, the amount of payments required

15 under subsection (a) to be made to a medical

16 school that submits to the Secretary an applica17 tion for such year in accordance with subsection

18 (a)(2) is an amount equal to an amount deter19 mined by the Secretary in accordance with sub20 paragraph (B).

21 ‘‘(B) DEVELOPMENT OF FORMULA.—The

22 Secretary shall develop a formula for allocation

23 of funds to medical schools under this section

24 consistent with the purpose described in sub25 section (a)(3).
658

•S 2351 PCS

1 ‘‘(c) LIMITATION.—If the annual amount available

2 under subsection (b) for a calendar year is insufficient for

3 providing each medical school that submits to the Sec4 retary an application for such year in accordance with sub5 section (a)(2) with the amount of payments determined

6 under subsection (b)(2) for the program for such year, the

7 Secretary shall make such pro rata reductions in the

8 amounts so determined as may be necessary to ensure that

9 the total of payments made under subsection (a) for such

10 year equals the total of such amount.

11 ‘‘(d) MEDICAL SCHOOL DEFINED.—For purposes of

12 this section, the term ‘medical school’ means a school of

13 medicine (as defined in section 799 of the Public Health

14 Service Act) or a school of osteopathic medicine (as de15 fined in such section).

16 ‘‘SEC. 1896. AMOUNTS IN TRUST FUND INSUFFICIENT.

17 ‘‘If the sum of the amounts specified in sections

18 1893(b)(1), 1894(b)(1), and 1895(b)(1) for a calendar

19 year exceeds the amounts available for such calendar year

20 in the Graduate Medical Education and Nursing Trust

21 Fund established under section 9552(a)(2)(A) of the In22 ternal Revenue Code of 1986, then each such amount shall

23 be reduced to an amount which bears the same ratio to

24 such amount as the amounts available bear to the sum

25 of such amounts.
659

•S 2351 PCS

1 ‘‘Subpart II—Academic Health Centers and Other

2 Eligible Institutions

3 ‘‘SEC. 1897. ACADEMIC HEALTH CENTERS AND OTHER ELI4 GIBLE INSTITUTIONS.

5 ‘‘(a) FEDERAL PAYMENTS TO ACADEMIC HEALTH

6 CENTERS AND OTHER ELIGIBLE INSTITUTIONS.—

7 ‘‘(1) IN GENERAL.—In the case of an eligible

8 institution, that in accordance with paragraph (2)

9 submits to the Secretary an application for calendar

10 year 1996 or any subsequent calendar year, the Sec11 retary shall make payments for such year to the in12 stitution for the purposes specified in paragraph (3).

13 The Secretary shall make the payments in an

14 amount determined in accordance with subsection

15 (b), and may administer the payments as a contract,

16 grant, or cooperative agreement.

17 ‘‘(2) APPLICATION.—For purposes of para18 graph (1), an application for payments under such

19 paragraph for a calendar year is in accordance with

20 this paragraph if—

21 ‘‘(A) the eligible institution involved sub22 mits the application at such time, in such man23 ner, and accompanied by such agreements, and

24 information as the Secretary may determine

25 necessary to carry out this section; and

26 ‘‘(B) such application is accompanied by—
660

•S 2351 PCS

1 ‘‘(i) an assurance that, in exchange

2 for receiving payments under paragraph

3 (1), the eligible institution shall agree to

4 maintain its status as an eligible institu5 tion; and

6 ‘‘(ii) such additional assurances as the

7 Secretary may reasonably require consist8 ent with the purposes of this section.

9 ‘‘(3) PAYMENT FOR COSTS INCURRED BY ELIGI10 BLE INSTITUTIONS.—

11 ‘‘(A) NON-COMPARABLE COSTS OF ACA12 DEMIC HEALTH CENTERS AND OTHER TEACH13 ING HOSPITALS.—With respect to an eligible in14 stitution that is a qualified academic health

15 center or a qualified teaching hospital, the pur16 pose of payments under paragraph (1) is to as17 sist such institutions with costs that are not

18 routinely incurred by other entities in providing

19 health services, but are incurred by such insti20 tutions in providing health services. Such costs

21 include—

22 ‘‘(i) with respect to productivity in the

23 provision of health services, costs resulting

24 from the reduced rate of productivity of

25 faculty due to teaching responsibilities;
661

•S 2351 PCS

1 ‘‘(ii) the uncompensated costs of clini2 cal research;

3 ‘‘(iii) exceptional costs associated with

4 the treatment of health conditions with re5 spect to which an eligible institution has

6 specialized expertise (including treatment

7 of rare diseases, treatment of unusually se8 vere conditions, and providing other spe9 cialized health care); and

10 ‘‘(iv) the costs of treating a substan11 tial number of severely ill patients.

12 ‘‘(B) OTHER COSTS.—With respect to—

13 ‘‘(i) an eligible institution that is a

14 school of dentistry, the purpose of pay15 ments under paragraph (1) is to assist

16 such school with the costs of training den17 tists, including unreimbursed oral health

18 care costs; and

19 ‘‘(ii) an eligible institution that is a

20 high intensity nonteaching rural hospital,

21 the purpose of payments under paragraph

22 (1) is to assist the institution with the

23 costs described under subparagraph

24 (A)(iv).
662

•S 2351 PCS

1 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

2 ANNUAL AMOUNT OF PAYMENTS.—

3 ‘‘(1) AVAILABILITY OF FUNDS FROM TRUST

4 FUND.—Except as provided in subsection (e), the

5 following amounts shall be available for a calendar

6 year for making payments under subsection (a) from

7 the Academic Health Center Trust Fund established

8 under section 9552(a)(2)(B) of the Internal Revenue

9 Code of 1986:

10 ‘‘(A) In the case of calendar year 1996,

11 $6,280,000,000.

12 ‘‘(B) In the case of calendar year 1997,

13 $7,250,000,000.

14 ‘‘(C) In the case of calendar year 1998,

15 $8,220,000,000.

16 ‘‘(D) In the case of calendar year 1999,

17 $9,400,000,000.

18 ‘‘(E) In the case of calendar year 2000,

19 $10,640,000,000.

20 ‘‘(F) In the case of each subsequent cal21 endar year, the amount specified in this para22 graph in the previous calendar year (without re23 gard to any reduction of such amount under

24 subsection (e)) updated through the midpoint of

25 the year by the estimated percentage change in
663

•S 2351 PCS

1 the general health care inflation factor (as de2 fined in section 1893(d)(7)) during the 12-

3 month period ending at that midpoint, with ap4 propriate adjustments to reflect previous

5 underestimations or overestimations under this

6 subparagraph in the projected health care infla7 tion factor.

8 ‘‘(2) SPECIAL ALLOTMENTS.—Of the amounts

9 available for a calendar year for making payments

10 under subsection (a) pursuant to paragraph (1)—

11 ‘‘(A) such amounts as are necessary shall

12 be reserved to make payments to eligible insti13 tutions that are high intensity nonteaching

14 rural hospitals; and

15 ‘‘(B) after reserving the amounts described

16 in subparagraph (A), the following amounts

17 shall be reserved to make payments to eligible

18 institutions that are schools of dentistry:

19 ‘‘(i) In the case of calendar year

20 1996, $50,000,000.

21 ‘‘(ii) In the case of each subsequent

22 calendar year, the amount specified in this

23 subparagraph for the previous calendar

24 year updated through the midpoint of the

25 year by the estimated percentage change in
664

•S 2351 PCS

1 the general health care inflation factor

2 during the 12-month period ending at that

3 midpoint, with appropriate adjustments to

4 reflect previous underestimations or over5 estimations under this clause in the pro6 jected health care inflation factor.

7 ‘‘(3) AMOUNT OF PAYMENTS FOR ELIGIBLE IN8 STITUTIONS.—

9 ‘‘(A) QUALIFIED ACADEMIC HEALTH CEN10 TER OR QUALIFIED TEACHING HOSPITAL.—

11 Subject to the annual amount available under

12 paragraphs (1) and (2) for a calendar year, the

13 amount of payments required under subsection

14 (a) to be made to a qualified academic health

15 center or qualified teaching hospital is an

16 amount equal to—

17 ‘‘(i) the inpatient costs of the quali18 fied academic health center or qualified

19 teaching hospital for furnishing patient

20 care for all patients for the calendar year,

21 multiplied by

22 ‘‘(ii) (e raised to the power (.405 x

23 r)–1), where ‘r’ is the ratio of the qualified

24 academic health center’s or the qualified

25 teaching hospital’s full-time equivalent
665

•S 2351 PCS

1 training participants (as determined under

2 section 1893(c)) to beds for such center or

3 institution for the calendar year and ‘e’ is

4 the natural log of one.

5 ‘‘(B) SCHOOL OF DENTISTRY.—Subject to

6 the annual amount available under paragraphs

7 (1) and (2) for a calendar year, the amount re8 quired under subsection (a) to be made to a

9 school of dentistry is an amount equal to the

10 sum of—

11 ‘‘(i) 75 percent of the amount avail12 able pursuant to paragraph (2)(B) multi13 plied by the ratio of the number of full14 time equivalent training participants in the

15 school of dentistry (determined in accord16 ance with a method to be developed by the

17 Secretary) to the national number of full18 time equivalent training participants in all

19 schools of dentistry (as determined by the

20 Secretary); and

21 ‘‘(ii) 25 percent of the amount avail22 able pursuant to paragraph (2)(B) multi23 plied by the ratio of the unreimbursed oral

24 health care costs of the school of dentistry

25 to the national unreimbursed oral health
666

•S 2351 PCS

1 care costs of all schools of dentistry (as de2 termined by the Secretary).

3 ‘‘(C) HIGH INTENSITY NONTEACHING

4 RURAL HOSPITAL.—Subject to the annual

5 amount available under paragraphs (1) and (2)

6 for a calendar year, the amount required under

7 subsection (a) to be made to a high intensity

8 nonteaching rural hospital is an amount equal

9 to 5 percent of the inpatient costs of patient

10 care for all patients of the hospital.

11 ‘‘(4) LIMITATION.—If the annual amount avail12 able under paragraph (1) for a calendar year is in13 sufficient for providing each eligible institution that

14 submits to the Secretary an application for such

15 year in accordance with subsection (a)(2) with the

16 amount of payments determined under paragraph

17 (3) for the institution for such year or is in excess

18 of the amount required for making such payments

19 for such year, the Secretary shall make such pro

20 rata reductions or increases in the amounts so deter21 mined as may be necessary to ensure that the total

22 of payments made under subsection (a) for such

23 year equals the total of such amount.

24 ‘‘(c) REPORT ON MODIFICATIONS IN FORMULA.—

25 Not later than July 1, 1996, the Secretary shall submit
667

•S 2351 PCS

1 to the Congress a report containing any recommendations

2 of the Secretary regarding policies for allocating amounts

3 under subsection (b)(3) among eligible institutions. In

4 making such recommendations, the Secretary shall con5 sider the costs described in subsection (a)(3) (including

6 outpatient costs) that are incurred by such institutions.

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

8 ‘‘(1) QUALIFIED ACADEMIC HEALTH CENTER.—

9 The term ‘qualified academic health center’ means

10 an entity that—

11 Subtitle C—Home and Community12 Based Services

13 SEC. 667. STATE PROGRAMS FOR HOME AND COMMUNITY14 BASED SERVICES FOR INDIVIDUALS WITH

15 DISABILITIES.

16 (a) IN GENERAL.—Title XIX of the Social Security

17 Act (42 U.S.C. 1396 et seq.), as amended by section 301,

18 is amended by adding at the end the following new part:
668

•S 2351 PCS

1 ‘‘PART C—STATE PROGRAMS FOR HOME AND

2 COMMUNITY-BASED SERVICES FOR INDIVID3 UALS WITH DISABILITIES

4 ‘‘SEC. 1971. STATE PROGRAMS FOR HOME AND COMMU5 NITY-BASED SERVICES FOR INDIVIDUALS

6 WITH DISABILITIES.

7 ‘‘(a) IN GENERAL.—Each State that has a plan for

8 home and community-based services for individuals with

9 disabilities submitted to and approved by the Secretary

10 under section 1972(b) is entitled to payment in accordance

11 with section 1978.

12 ‘‘(b) ENTITLEMENT TO SERVICES.—Nothing in this

13 part shall be construed to create a right to services for

14 individuals or a requirement that a State with an approved

15 plan expend the entire amount of funds to which it is enti16 tled under this part.

17 ‘‘(c) DESIGNATION OF AGENCY.—Not later than 6

18 months after the date of enactment of this part, the Sec19 retary shall designate an agency responsible for program

20 administration under this part.

21 ‘‘SEC. 1972. STATE PLANS.

22 ‘‘(a) PLAN REQUIREMENTS.—In order to be ap23 proved under subsection (b), a State plan for home and

24 community-based services for individuals with disabilities

25 must meet the following requirements:

26 ‘‘(1) ELIGIBILITY.—
669

•S 2351 PCS

1 ‘‘(A) IN GENERAL.—Within the amounts

2 provided by the State and under section 1978

3 for such plan, the plan shall provide that serv4 ices under the plan will be available to individ5 uals with disabilities (as defined in section

6 1973(a)) in the State.

7 ‘‘(B) INITIAL SCREENING.—The plan shall

8 provide a process for the initial screening of an

9 individual who has some reasonable probability

10 of being an individual with disabilities. Any

11 such process shall require the provision of as12 sistance to individuals who wish to apply but

13 whose disability limits their ability to apply.

14 The initial screening and the determination of

15 disability (as defined under section 1973(b)(1))

16 shall be conducted by a public agency.

17 ‘‘(C) RESTRICTIONS.—The plan may not

18 limit the eligibility of individuals with disabil19 ities based on—

20 ‘‘(i) income,

21 ‘‘(ii) age,

22 ‘‘(iii) geography,

23 ‘‘(iv) nature or category of disability,

24 ‘‘(v) residential setting (other than an

25 institutional setting), or
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•S 2351 PCS

1 ‘‘(vi) other grounds specified by the

2 Secretary;

3 except that the Secretary may permit a State to

4 limit eligibility based on level of disability.

5 ‘‘(D) CONTINUATION OF SERVICES.—The

6 plan must provide assurances that, in the case

7 of an individual receiving medical assistance for

8 home and community-based services under the

9 State medicaid plan as of the date the first

10 State plan is approved under this part, the

11 State will continue to make available (either

12 under this plan, under the State medicaid plan,

13 or otherwise) to such individual an appropriate

14 level of assistance for home and community15 based services, taking into account the level of

16 assistance provided as of such date and the in17 dividual’s need for home and community-based

18 services.

19 ‘‘(2) SERVICES.—

20 ‘‘(A) NEEDS ASSESSMENT.—Not later than

21 the end of the second year of implementation,

22 the plan or its amendments shall include the re23 sults of a statewide assessment of the needs of

24 individuals with disabilities in a format required

25 by the Secretary. The needs assessment shall
671

•S 2351 PCS

1 include demographic data concerning the num2 ber of individuals within each category of dis3 ability described in this part, and the services

4 available to meet the needs of such individuals.

5 ‘‘(B) SPECIFICATION.—Consistent with

6 section 1974, the plan shall specify—

7 ‘‘(i) the services made available under

8 the plan,

9 ‘‘(ii) the extent and manner in which

10 such services are allocated and made avail11 able to individuals with disabilities, and

12 ‘‘(iii) the manner in which services

13 under the plan are coordinated with each

14 other and with health and long-term care

15 services available outside the plan for indi16 viduals with disabilities.

17 ‘‘(C) TAKING INTO ACCOUNT INFORMAL

18 CARE.—A State plan may take into account, in

19 determining the amount and array of services

20 made available to covered individuals with dis21 abilities, the availability of informal care.

22 ‘‘(D) ALLOCATION.—The State plan—

23 ‘‘(i) shall specify how services under

24 the plan will be allocated among covered

25 individuals with disabilities,
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•S 2351 PCS

1 ‘‘(ii) shall attempt to meet the needs

2 of individuals with a variety of disabilities

3 within the limits of available funding,

4 ‘‘(iii) shall include services that assist

5 all categories of individuals with disabil6 ities, regardless of their age or the nature

7 of their disabling conditions,

8 ‘‘(iv) shall demonstrate that services

9 are allocated equitably, in accordance with

10 the needs assessment required under sub11 paragraph (A), and

12 ‘‘(v) shall ensure that—

13 ‘‘(I) the proportion of the popu14 lation of low-income individuals with

15 disabilities in the State that rep16 resents individuals with disabilities

17 who are provided home and commu18 nity-based services either under the

19 plan, under the State medicaid plan,

20 or under both, is not less than,

21 ‘‘(II) the proportion of the popu22 lation of the State that represents in23 dividuals who are low-income individ24 uals.
673

•S 2351 PCS

1 ‘‘(E) LIMITATION ON LICENSURE OR CER2 TIFICATION.—The State may not subject

3 consumer-directed providers of personal assist4 ance services to licensure, certification, or other

5 requirements which the Secretary finds not to

6 be necessary for the health and safety of indi7 viduals with disabilities.

8 ‘‘(F) CONSUMER CHOICE.—To the extent

9 feasible, the State shall follow the choice of an

10 individual with disabilities (or that individual’s

11 designated representative who may be a family

12 member) regarding which covered services to re13 ceive and the providers who will provide such

14 services.

15 ‘‘(3) COST SHARING.—The plan shall impose

16 cost sharing with respect to covered services in ac17 cordance with section 1975.

18 ‘‘(4) TYPES OF PROVIDERS AND REQUIRE19 MENTS FOR PARTICIPATION.—The plan shall speci20 fy—

21 ‘‘(A) the types of service providers eligible

22 to participate in the program under the plan,

23 which shall include consumer-directed providers

24 of personal assistance services, except that the

25 plan—
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•S 2351 PCS

1 ‘‘(i) may not limit benefits to services

2 provided by registered nurses or licensed

3 practical nurses; and

4 ‘‘(ii) may not limit benefits to services

5 provided by agencies or providers certified

6 under title XVIII; and

7 ‘‘(B) any requirements for participation

8 applicable to each type of service provider.

9 ‘‘(5) PROVIDER REIMBURSEMENT.—

10 ‘‘(A) PAYMENT METHODS.—The plan shall

11 specify the payment methods to be used to re12 imburse providers for services furnished under

13 the plan. Such methods may include retrospec14 tive reimbursement on a fee-for-service basis,

15 prepayment on a capitation basis, payment by

16 cash or vouchers to individuals with disabilities,

17 or any combination of these methods. In the

18 case of payment to consumer-directed providers

19 of personal assistance services, including pay20 ment through the use of cash or vouchers, the

21 plan shall specify how the plan will assure com22 pliance with applicable employment tax and

23 health care coverage provisions.
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•S 2351 PCS

1 ‘‘(B) PAYMENT RATES.—The plan shall

2 specify the methods and criteria to be used to

3 set payment rates for—

4 ‘‘(i) agency administered services fur5 nished under the plan; and

6 ‘‘(ii) consumer-directed personal as7 sistance services furnished under the plan,

8 including cash payments or vouchers to in9 dividuals with disabilities, except that such

10 payments shall be adequate to cover

11 amounts required under applicable employ12 ment tax and health care coverage provi13 sions.

14 ‘‘(C) PLAN PAYMENT AS PAYMENT IN

15 FULL.—The plan shall restrict payment under

16 the plan for covered services to those providers

17 that agree to accept the payment under the

18 plan (at the rates established pursuant to sub19 paragraph (B)) and any cost sharing permitted

20 or provided for under section 1975 as payment

21 in full for services furnished under the plan.

22 ‘‘(7) QUALITY ASSURANCE AND SAFEGUARDS.—

23 The State plan shall provide for quality assurance

24 and safeguards for applicants and beneficiaries in

25 accordance with section 1976.
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•S 2351 PCS

1 ‘‘(8) ADVISORY GROUP.—The State plan

2 shall—

3 ‘‘(A) assure the establishment and mainte4 nance of an advisory group under section

5 1977(b), and

6 ‘‘(B) include the documentation prepared

7 by the group under section 1977(b)(4).

8 ‘‘(9) ADMINISTRATION AND ACCESS.—

9 ‘‘(A) STATE AGENCY.—The plan shall des10 ignate a State agency or agencies to administer

11 (or to supervise the administration of) the plan.

12 ‘‘(B) COORDINATION.—The plan shall

13 specify how it will—

14 ‘‘(i) coordinate services provided

15 under the plan, including eligibility

16 prescreening, service coordination, and re17 ferrals for individuals with disabilities who

18 are ineligible for services under this part

19 with the State medicaid plan, titles V and

20 XX, programs under the Older Americans

21 Act of 1965, programs under the Devel22 opmental Disabilities Assistance and Bill

23 of Rights Act, the Individuals with Disabil24 ities Education Act, and any other Federal

25 or State programs that provide services or
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•S 2351 PCS

1 assistance targeted to individuals with dis2 abilities, and

3 ‘‘(ii) coordinate with health plans.

4 ‘‘(C) ADMINISTRATIVE EXPENDITURES.—

5 Effective beginning with fiscal year 2003, the

6 plan shall contain assurances that not more

7 than 10 percent of expenditures under the plan

8 for all quarters in any fiscal year shall be for

9 administrative costs.

10 ‘‘(10) REPORTS AND INFORMATION TO SEC11 RETARY; AUDITS.—The plan shall provide that the

12 State will furnish to the Secretary—

13 ‘‘(A) such reports, and will cooperate with

14 such audits, as the Secretary determines are

15 needed concerning the State’s administration of

16 its plan under this part, including the process17 ing of claims under the plan, and

18 ‘‘(B) such data and information as the

19 Secretary may require in a uniform format as

20 specified by the Secretary.

21 ‘‘(11) USE OF STATE FUNDS FOR MATCHING.—

22 The plan shall provide assurances that Federal

23 funds will not be used to provide for the State share

24 of expenditures under this part.
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•S 2351 PCS

1 ‘‘(12) HEALTH CARE WORKER REDEPLOY2 MENT.—The plan shall provide for the following:

3 ‘‘(A) Before initiating the process of imple4 menting the State program under such plan,

5 negotiations will be commenced with labor

6 unions representing the employees of the af7 fected hospitals or other facilities.

8 ‘‘(B) Negotiations under subparagraph (A)

9 will address the following:

10 ‘‘(i) The impact of the implementation

11 of the program upon the workforce.

12 ‘‘(ii) Methods to redeploy workers to

13 positions in the proposed system, in the

14 case of workers affected by the program.

15 ‘‘(C) The plan will provide evidence that

16 there has been compliance with subparagraphs

17 (A) and (B), including a description of the re18 sults of the negotiations.

19 ‘‘(13) TERMINOLOGY.—The plan shall adhere

20 to uniform definitions of terms, as specified by the

21 Secretary.

22 ‘‘(b) APPROVAL OF PLANS.—The Secretary shall ap23 prove a plan submitted by a State if the Secretary deter24 mines that the plan—
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•S 2351 PCS

1 ‘‘(1) was developed by the State after a public

2 comment period of not less than 30 days, and

3 ‘‘(2) meets the requirements of subsection (a).

4 The approval of such a plan shall take effect as of the

5 first day of the first fiscal year beginning after the date

6 of such approval (except that any approval made before

7 January 1, 1998, shall be effective as of January 1, 1998).

8 In order to budget funds allotted under this part, the Sec9 retary shall establish a deadline for the submission of such

10 a plan before the beginning of a fiscal year as a condition

11 of its approval effective with that fiscal year. Any signifi12 cant changes to the State plan shall be submitted to the

13 Secretary in the form of plan amendments and shall be

14 subject to approval by the Secretary.

15 ‘‘(c) MONITORING.—The Secretary shall annually

16 monitor the compliance of State plans with the require17 ments of this part according to specified performance

18 standards. States that fail to comply with such require19 ments may be subject to the withholding of Federal funds

20 for services or administration until such time as compli21 ance is achieved.

22 ‘‘(d) TECHNICAL ASSISTANCE.—The Secretary shall

23 ensure the availability of ongoing technical assistance to

24 States under this section. Such assistance shall include
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•S 2351 PCS

1 serving as a clearinghouse for information regarding suc2 cessful practices in providing long-term care services.

3 ‘‘(e) REGULATIONS.—The Secretary shall issue such

4 regulations as may be appropriate to carry out this part

5 on a timely basis.

6 ‘‘SEC. 1973. INDIVIDUALS WITH DISABILITIES DEFINED.

7 ‘‘(a) IN GENERAL.—For purposes of this part, the

8 term ‘individual with disabilities’ means any individual

9 within one or more of the following categories of individ10 uals:

11 ‘‘(1) INDIVIDUALS REQUIRING HELP WITH AC12 TIVITIES OF DAILY LIVING.—An individual of any

13 age who—

14 ‘‘(A) requires hands-on or standby assist15 ance, supervision, or cueing (as defined in regu16 lations) to perform three or more activities of

17 daily living (as defined in subsection (d)), and

18 ‘‘(B) is expected to require such assistance,

19 supervision, or cueing over a period of at least

20 90 days.

21 ‘‘(2) INDIVIDUALS WITH SEVERE COGNITIVE OR

22 MENTAL IMPAIRMENT.—An individual of any age—

23 ‘‘(A) whose score, on a standard mental

24 status protocol (or protocols) appropriate for

25 measuring the individual’s particular condition
681

•S 2351 PCS

1 specified by the Secretary, indicates either se2 vere cognitive impairment or severe mental im3 pairment, or both;

4 ‘‘(B) who—

5 ‘‘(i) requires hands-on or standby as6 sistance, supervision, or cueing with one or

7 more activities of daily living,

8 ‘‘(ii) requires hands-on or standby as9 sistance, supervision, or cueing with at

10 least such instrumental activity (or activi11 ties) of daily living related to cognitive or

12 mental impairment as the Secretary speci13 fies, or

14 ‘‘(iii) displays symptoms of one or

15 more serious behavioral problems (that is

16 on a list of such problems specified by the

17 Secretary) which create a need for super18 vision to prevent harm to self or others;

19 and

20 ‘‘(C) who is expected to meet the require21 ments of subparagraphs (A) and (B) over a pe22 riod of at least 90 days.

23 Not later than 2 years after the date of enactment

24 of this part, the Secretary shall make recommenda-
682

•S 2351 PCS

1 tions regarding the most appropriate duration of dis2 ability under this paragraph.

3 ‘‘(3) INDIVIDUALS WITH SEVERE OR PROFOUND

4 MENTAL RETARDATION.—An individual of any age

5 who has severe or profound mental retardation (as

6 determined according to a protocol specified by the

7 Secretary).

8 ‘‘(4) YOUNG CHILDREN WITH SEVERE DISABIL9 ITIES.—An individual under 6 years of age who—

10 ‘‘(A) has a severe disability or chronic

11 medical condition that limits functioning in a

12 manner that is comparable in severity to the

13 standards established under paragraphs (1),

14 (2), or (3), and

15 ‘‘(B) is expected to have such a disability

16 or condition and require such services over a

17 period of at least 90 days.

18 ‘‘(b) DETERMINATION.—

19 ‘‘(1) IN GENERAL.—In formulating eligibility

20 criteria under subsection (a), the Secretary shall es21 tablish criteria for assessing the functional level of

22 disability among all categories of individuals with

23 disabilities that are comparable in severity, regard24 less of the age or the nature of the disabling condi25 tion of the individual. The determination of whether
683

•S 2351 PCS

1 an individual is an individual with disabilities shall

2 be made by a public or nonprofit agency that is

3 specified under the State plan and that is not a pro4 vider of home and community-based services under

5 this part and by using a uniform protocol consisting

6 of an initial screening and a determination of dis7 ability specified by the Secretary. A State may not

8 impose cost sharing with respect to a determination

9 of disability. A State may collect additional informa10 tion, at the time of obtaining information to make

11 such determination, in order to provide for the as12 sessment and plan described in section 1974(b) or

13 for other purposes.

14 ‘‘(2) PERIODIC REASSESSMENT.—The deter15 mination that an individual is an individual with dis16 abilities shall be considered to be effective under the

17 State plan for a period of not more than 6 months

18 (or for such longer period in such cases as a signifi19 cant change in an individual’s condition that may af20 fect such determination is unlikely). A reassessment

21 shall be made if there is a significant change in an

22 individual’s condition that may affect such deter23 mination.

24 ‘‘(c) ELIGIBILITY CRITERIA.—The Secretary shall re25 assess the validity of the eligibility criteria described in
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•S 2351 PCS

1 subsection (a) as new knowledge regarding the assess2 ments of functional disabilities becomes available. The

3 Secretary shall report to the Committee on Finance of the

4 Senate and the Committees on Ways and Means and En5 ergy and Commerce of the House of Representatives on

6 its findings under the preceding sentence as determined

7 appropriate by the Secretary.

8 ‘‘(d) ACTIVITY OF DAILY LIVING DEFINED.—For

9 purposes of this part, the term ‘activity of daily living’

10 means any of the following: eating, toileting, dressing,

11 bathing, and transferring.

12 ‘‘SEC. 1974. HOME AND COMMUNITY-BASED SERVICES COV13 ERED UNDER STATE PLAN.

14 ‘‘(a) SPECIFICATION.—

15 ‘‘(1) IN GENERAL.—Subject to the succeeding

16 provisions of this section, the State plan under this

17 part shall specify—

18 ‘‘(A) the home and community-based serv19 ices available under the plan to individuals with

20 disabilities (or to such categories of such indi21 viduals), and

22 ‘‘(B) any limits with respect to such serv23 ices.

24 ‘‘(2) FLEXIBILITY IN MEETING INDIVIDUAL

25 NEEDS.—Subject to subsection (e)(2), such services
685

•S 2351 PCS

1 may be delivered in an individual’s home, a range of

2 community residential arrangements, or outside the

3 home.

4 ‘‘(b) REQUIREMENT FOR CARE MANAGEMENT.—

5 ‘‘(1) IN GENERAL.—The State shall make avail6 able to each category of individuals with disabilities

7 care management services that at a minimum in8 clude—

9 ‘‘(A) a comprehensive assessment of the in10 dividual’s need for home and community-based

11 services (regardless of whether all needed serv12 ices are available under the plan),

13 ‘‘(B) an individualized plan of care based

14 on such assessment,

15 ‘‘(C) arrangements for the provision of

16 such services, and

17 ‘‘(D) monitoring of the delivery of services.

18 ‘‘(2) CARE MANAGEMENT SERVICES.—

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

20 subparagraph (B), the care management serv21 ices described in paragraph (1) shall be pro22 vided by a public or private entity that is not

23 providing home and community-based services

24 under this part.
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•S 2351 PCS

1 ‘‘(B) EXCEPTION.—A person who provides

2 home and community-based services under this

3 part may provide care management services

4 if—

5 ‘‘(i) the State determines that there is

6 an insufficient pool of entities willing to

7 provide such services in an area due to a

8 low population of individuals eligible for

9 home and community-based services under

10 this part residing in such area; and

11 ‘‘(ii) the State plan specifies proce12 dures that the State will implement in

13 order to avoid conflicts of interest.

14 ‘‘(3) COMPREHENSIVE ASSESSMENTS.—The

15 Secretary shall develop a uniform comprehensive as16 sessment tool that shall be used by the States under

17 paragraph (1)(A). Alternative comprehensive assess18 ment tools may be used by the States only with the

19 approval of the Secretary. The Secretary shall pro20 vide guidance to the States with regard to the ap21 propriate qualifications for individuals who conduct

22 comprehensive assessments.

23 ‘‘(4) INDIVIDUALIZED PLAN OF CARE.—

24 ‘‘(A) IN GENERAL.—The plan of care

25 under paragraph (1)(B) shall—
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•S 2351 PCS

1 ‘‘(i) specify which services included

2 under the individual plan will be provided

3 under the State plan under this part,

4 ‘‘(ii) identify (to the extent possible)

5 how the individual will be provided any

6 services specified under the plan of care

7 and not provided under the State plan,

8 ‘‘(iii) specify how the provision of

9 services to the individual under the plan

10 will be coordinated with the provision of

11 other health care services to the individual,

12 and

13 ‘‘(iv) be reviewed and updated every 6

14 months (or more frequently if there is a

15 change in the individual’s condition).

16 The State shall make reasonable efforts to iden17 tify and arrange for services described in clause

18 (ii). Nothing in this subsection shall be con19 strued as requiring a State (under the State

20 plan or otherwise) to provide all the services

21 specified in such a plan.

22 ‘‘(B) INVOLVEMENT OF INDIVIDUALS.—

23 The individualized plan of care under para24 graph (1)(B) for an individual with disabilities

25 shall—
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•S 2351 PCS

1 ‘‘(i) be developed by qualified individ2 uals (specified under the State plan),

3 ‘‘(ii) be developed and implemented in

4 close consultation with the individual or

5 the individual’s designated representative,

6 and

7 ‘‘(iii) be approved by the individual

8 (or the individual’s designated representa9 tive).

10 ‘‘(c) MANDATORY COVERAGE OF PERSONAL ASSIST11 ANCE SERVICES.—The State plan shall include, in the

12 array of services made available to each category of indi13 viduals with disabilities, both agency-administered and

14 consumer-directed personal assistance services (as defined

15 in subsection (g)).

16 ‘‘(d) ADDITIONAL SERVICES.—

17 ‘‘(1) TYPES OF SERVICES.—Subject to sub18 section (e), services available under a State plan

19 under this part may include any (or all) of the fol20 lowing:

21 ‘‘(A) Homemaker and chore assistance.

22 ‘‘(B) Home modifications.

23 ‘‘(C) Respite services.
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•S 2351 PCS

1 ‘‘(D) Assistive devices, as defined in the

2 Technology Related Assistance for Individuals

3 with Disabilities Act.

4 ‘‘(E) Adult day services.

5 ‘‘(F) Habilitation and rehabilitation.

6 ‘‘(G) Supported employment.

7 ‘‘(H) Home health services.

8 ‘‘(I) Transportation.

9 ‘‘(J) Any other care or assistive services

10 specified by the State and approved by the Sec11 retary that will help individuals with disabilities

12 to remain in their homes and communities.

13 ‘‘(2) CRITERIA FOR SELECTION OF SERVICES.—

14 The State electing services under paragraph (1)

15 shall specify in the State plan—

16 ‘‘(A) the methods and standards used to

17 select the types, and the amount, duration, and

18 scope, of services to be covered under the plan

19 and to be available to each category of individ20 uals with disabilities, and

21 ‘‘(B) how the types, and the amount, dura22 tion, and scope, of services specified, within the

23 limits of available funding, provide substantial

24 assistance in living independently to individuals
690

•S 2351 PCS

1 within each of the categories of individuals with

2 disabilities.

3 ‘‘(e) EXCLUSIONS AND LIMITATIONS.—

4 ‘‘(1) IN GENERAL.—A State plan may not pro5 vide for coverage of—

6 ‘‘(A) room and board,

7 ‘‘(B) services furnished in a hospital, nurs8 ing facility, intermediate care facility for the

9 mentally retarded, or other institutional setting

10 specified by the Secretary,

11 ‘‘(C) items and services to the extent cov12 erage is provided for the individual under a

13 health plan or the medicare program, or

14 ‘‘(D) the services described in paragraph

15 (2) with respect to an individual who is eligible

16 for medical assistance consisting of such serv17 ices under the State plan under part A.

18 ‘‘(2) MEDICAID SERVICES DESCRIBED.—The

19 services described in this paragraph are the follow20 ing:

21 ‘‘(A) Personal care services (as described

22 in section 1905(a)(24)).

23 ‘‘(B) Private duty nursing services (as re24 ferred to in section 1905(a)(8)).
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•S 2351 PCS

1 ‘‘(C) Home or community-based services

2 furnished under a waiver granted under sub3 section (c), (d), or (e) of section 1915.

4 ‘‘(D) Home and community care furnished

5 to functionally disabled elderly individuals

6 under section 1929.

7 ‘‘(E) Community supported living arrange8 ments services under section 1930.

9 ‘‘(F) Case-management services (as de10 scribed in section 1915(g)(2)).

11 ‘‘(G) Home health care services (as re12 ferred to in section 1905(a)(7)).

13 ‘‘(H) Clinic services and rehabilitation

14 services that are furnished to an individual who

15 has a condition or disability that qualifies the

16 individual to receive any of the services de17 scribed in subparagraph (F).

18 ‘‘(3) STATE MAINTENANCE OF EFFORT RE19 GARDING MEDICAID ELIGIBILITY AND COVERED

20 SERVICES.—

21 ‘‘(A) IN GENERAL.—A State plan under

22 this part shall provide that the State will, dur23 ing the time that the State is furnishing home

24 and community-based services under this part,

25 continue to make available under the State plan
692

•S 2351 PCS

1 under part A to the classes or categories of in2 dividuals described in subparagraph (B) any of

3 the services described in paragraph (2) that

4 were available to such classes or categories of

5 individuals during the fiscal year immediately

6 preceding the fiscal year in which the State

7 first submits a State plan for approval under

8 this part.

9 ‘‘(B) CLASSES OR CATEGORIES OF INDI10 VIDUALS.—The classes or categories of individ11 uals described in this subparagraph are any

12 classes or categories of individuals who were eli13 gible for medical assistance consisting of any of

14 the services described in paragraph (2) during

15 the fiscal year immediately preceding the fiscal

16 year in which the State first submits a State

17 plan for approval under this part.

18 ‘‘(f) PAYMENT FOR SERVICES.—In order to pay for

19 covered services, a State plan may provide for the use of—

20 ‘‘(1) vouchers,

21 ‘‘(2) cash payments directly to individuals with

22 disabilities,

23 ‘‘(3) capitation payments to health plans, and

24 ‘‘(4) payment to providers.

25 ‘‘(g) PERSONAL ASSISTANCE SERVICES.—
693

•S 2351 PCS

1 ‘‘(1) IN GENERAL.—For purposes of this part,

2 the term ‘personal assistance services’ means those

3 services specified under the State plan as personal

4 assistance services and shall include at least hands5 on and standby assistance, supervision, and cueing

6 with activities of daily living, whether agency-admin7 istered or consumer-directed (as defined in para8 graph (2)).

9 ‘‘(2) CONSUMER-DIRECTED.—For purposes of

10 this part:

11 ‘‘(A) IN GENERAL.—The term ‘consumer12 directed’ means, with reference to personal as13 sistance services or the provider of such serv14 ices, services that are provided by an individual

15 who is selected and managed (and, at the op16 tion of the service recipient, trained) by the in17 dividual receiving the services.

18 ‘‘(B) STATE RESPONSIBILITIES.—A State

19 plan shall ensure that where services are pro20 vided in a consumer-directed manner, the State

21 shall create or contract with an entity, other

22 than the consumer or the individual provider,

23 to—
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•S 2351 PCS

1 ‘‘(i) inform both recipients and provid2 ers of rights and responsibilities under all

3 applicable Federal labor and tax law; and

4 ‘‘(ii) assume responsibility for provid5 ing effective billing, payments for services,

6 tax withholding, unemployment insurance,

7 and workers’ compensation coverage, and

8 act as the employer of the home care pro9 vider.

10 ‘‘(C) RIGHT OF CONSUMERS.—Notwith11 standing the State responsibilities described in

12 subparagraph (B), service recipients, and,

13 where appropriate, their designated representa14 tive, shall retain the right to independently se15 lect, hire, terminate, and direct (including man16 age, train, schedule, and verify services pro17 vided) the work of a home care provider.

18 ‘‘(3) AGENCY ADMINISTERED.—For purposes of

19 this part, the term ‘agency-administered’ means,

20 with respect to such services, services that are not

21 consumer-directed.

22 ‘‘SEC. 1975. COST SHARING.

23 ‘‘(a) NO COST SHARING FOR POOREST.—

24 ‘‘(1) IN GENERAL.—The State plan may not

25 impose any cost sharing for individuals with income
695

•S 2351 PCS

1 (as determined under subsection (d)) less than 125

2 percent of the official poverty level (referred to in

3 paragraph (2)) applicable to a family of the size in4 volved.

5 ‘‘(2) OFFICIAL POVERTY LEVEL.—The term

6 ‘applicable poverty level’ means, for a family for a

7 year, the official poverty line (as defined by the Of8 fice of Management and Budget, and revised annu9 ally in accordance with section 673(2) of the Omni10 bus Budget Reconciliation Act of 1981) applicable to

11 a family of the size involved.

12 ‘‘(b) SLIDING SCALE FOR REMAINDER.—

13 ‘‘(1) REQUIRED COINSURANCE.—The State

14 plan shall impose cost sharing in the form of coin15 surance (based on the amount paid under the State

16 plan for a service)—

17 ‘‘(A) at a rate of 10 percent for individuals

18 with disabilities with income not less than 125

19 percent, and less than 175 percent, of such offi20 cial poverty line (as so applied);

21 ‘‘(B) at a rate of 15 percent for such indi22 viduals with income not less than 175 percent,

23 and less than 225 percent, of such official pov24 erty line (as so applied);
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•S 2351 PCS

1 ‘‘(C) at a rate of 25 percent for such indi2 viduals with income not less than 225 percent,

3 and less than 275 percent, of such official pov4 erty line (as so applied);

5 ‘‘(D) at a rate of 30 percent for such indi6 viduals with income not less than 275 percent,

7 and less than 325 percent, of such official pov8 erty line (as so applied); and

9 ‘‘(E) at a rate of 35 percent for such indi10 viduals with income equal to at least 325 per11 cent of such official poverty line (as so applied).

12 ‘‘(2) REQUIRED ANNUAL DEDUCTIBLE.—The

13 State plan shall impose cost sharing in the form of

14 an annual deductible—

15 ‘‘(A) of $100 for individuals with disabil16 ities with income not less than 125 percent, and

17 less than 175 percent, of such official poverty

18 line (as so applied);

19 ‘‘(B) of $200 for such individuals with in20 come not less than 175 percent, and less than

21 225 percent, of such official poverty line (as so

22 applied);

23 ‘‘(C) of $300 for such individuals with in24 come not less than 225 percent, and less than
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•S 2351 PCS

1 275 percent, of such official poverty line (as so

2 applied);

3 ‘‘(D) of $400 for such individuals with in4 come not less than 275 percent, and less than

5 325 percent, of such official poverty line (as so

6 applied); and

7 ‘‘(E) of $500 for such individuals with in8 come equal to at least 325 percent of such offi9 cial poverty line (as so applied).

10 ‘‘(c) RECOMMENDATION OF THE SECRETARY.—The

11 Secretary shall make recommendations to the States as

12 to how to reduce cost-sharing for individuals with extraor13 dinary out-of-pocket costs for whom the cost-sharing pro14 visions of this section could jeopardize their ability to take

15 advantage of the services offered under this part. The Sec16 retary shall establish a methodology for reducing the cost17 sharing burden for individuals with exceptionally high out18 of-pocket costs under this part.

19 ‘‘(d) DETERMINATION OF INCOME FOR PURPOSES OF

20 COST SHARING.—The State plan shall specify the process

21 to be used to determine the income of an individual with

22 disabilities for purposes of this section. Such standards

23 shall include a uniform Federal definition of income and

24 any allowable deductions from income.
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•S 2351 PCS

1 ‘‘SEC. 1976. QUALITY ASSURANCE AND SAFEGUARDS.

2 ‘‘(a) QUALITY ASSURANCE.—

3 ‘‘(1) IN GENERAL.—The State plan shall speci4 fy how the State will ensure and monitor the quality

5 of services, including—

6 ‘‘(A) safeguarding the health and safety of

7 individuals with disabilities,

8 ‘‘(B) setting the minimum standards for

9 agency providers and how such standards will

10 be enforced,

11 ‘‘(C) setting the minimum competency re12 quirements for agency provider employees who

13 provide direct services under this part and how

14 the competency of such employees will be en15 forced,

16 ‘‘(D) setting minimum competency require17 ments for consumer directed providers of per18 sonal assistance services and how such com19 petency requirements will be demonstrated,

20 ‘‘(E) obtaining meaningful consumer input,

21 including consumer surveys that measure the

22 extent to which participants receive the services

23 described in the plan of care and participant

24 satisfaction with such services,
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•S 2351 PCS

1 ‘‘(F) establishing a process to receive, in2 vestigate, and resolve allegations of neglect and/

3 or abuse,

4 ‘‘(G) establishing optional training pro5 grams for individuals with disabilities in the use

6 and direction of consumer directed providers of

7 personal assistance services,

8 ‘‘(H) establishing an appeals procedure for

9 eligibility denials and a grievance procedure for

10 disagreements with the terms of an individual11 ized plan of care;

12 ‘‘(I) providing for participation in quality

13 assurance activities, and

14 ‘‘(J) specifying the role of the long-term

15 care ombudsman (under the Older Americans

16 Act of 1965) and the Protection and Advocacy

17 Agency (under the Developmental Disabilities

18 Assistance and Bill of Rights Act) in assuring

19 quality of services and protecting the rights of

20 individuals with disabilities.

21 ‘‘(2) ISSUANCE OF REGULATIONS.—Not later

22 than 1 year after the date of enactment of this part,

23 the Secretary shall issue regulations implementing

24 the quality provisions of this subsection.
700

•S 2351 PCS

1 ‘‘(b) FEDERAL STANDARDS.—The State plan shall

2 adhere to Federal quality standards in the following areas:

3 ‘‘(1) Case review of a specified sample of client

4 records.

5 ‘‘(2) The mandatory reporting of abuse, neglect,

6 or exploitation.

7 ‘‘(3) The development of a registry of provider

8 agencies or home care workers and consumer di9 rected providers of personal assistance services

10 against whom any complaints have been sustained,

11 which shall be available to the public.

12 ‘‘(4) Sanctions to be imposed on States or pro13 viders, including disqualification from the program,

14 if minimum standards are not met.

15 ‘‘(5) Surveys of client satisfaction.

16 ‘‘(6) State optional training programs for infor17 mal caregivers.

18 ‘‘(c) SAFEGUARDS.—

19 ‘‘(1) CONFIDENTIALITY.—The State plan shall

20 provide safeguards which restrict the use or disclo21 sure of information concerning applicants and bene22 ficiaries to purposes directly connected with the ad23 ministration of the plan.

24 ‘‘(2) SAFEGUARDS AGAINST ABUSE.—The State

25 plans shall provide safeguards against physical, emo-
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•S 2351 PCS

1 tional, or financial abuse or exploitation (specifically

2 including appropriate safeguards in cases where pay3 ment for program benefits is made by cash pay4 ments or vouchers given directly to individuals with

5 disabilities). All providers of services shall be re6 quired to register with the State agency.

7 ‘‘(d) SPECIFIED RIGHTS.—The State plan shall pro8 vide that in furnishing home and community-based serv9 ices under the plan the following individual rights are pro10 tected:

11 ‘‘(1) The right to be fully informed in advance,

12 orally and in writing, of the care to be provided, to

13 be fully informed in advance of any changes in care

14 to be provided, and (except with respect to an indi15 vidual determined incompetent) to participate in

16 planning care or changes in care.

17 ‘‘(2) The right to—

18 ‘‘(A) voice grievances with respect to serv19 ices that are (or fail to be) furnished without

20 discrimination or reprisal for voicing grievances,

21 ‘‘(B) be told how to complain to State and

22 local authorities, and

23 ‘‘(C) prompt resolution of any grievances

24 or complaints.
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•S 2351 PCS

1 ‘‘(3) The right to confidentiality of personal

2 and clinical records and the right to have access to

3 such records.

4 ‘‘(4) The right to privacy and to have one’s

5 property treated with respect.

6 ‘‘(5) The right to refuse all or part of any care

7 and to be informed of the likely consequences of

8 such refusal.

9 ‘‘(6) The right to education or training for one10 self and for members of one’s family or household on

11 the management of care.

12 ‘‘(7) The right to be free from physical or men13 tal abuse, corporal punishment, and any physical or

14 chemical restraints imposed for purposes of dis15 cipline or convenience and not included in an indi16 vidual’s plan of care.

17 ‘‘(8) The right to be fully informed orally and

18 in writing of the individual’s rights.

19 ‘‘(9) The right to a free choice of providers.

20 ‘‘(10) The right to direct provider activities

21 when an individual is competent and willing to direct

22 such activities.

23 ‘‘SEC. 1977. ADVISORY GROUPS.

24 ‘‘(a) FEDERAL ADVISORY GROUP.—
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•S 2351 PCS

1 ‘‘(1) ESTABLISHMENT.—The Secretary shall es2 tablish an advisory group, to advise the Secretary

3 and States on all aspects of the program under this

4 part.

5 ‘‘(2) COMPOSITION.—The group shall be com6 posed of individuals with disabilities and their rep7 resentatives, providers, Federal and State officials,

8 and local community implementing agencies. A ma9 jority of its members shall be individuals with dis10 abilities and their representatives.

11 ‘‘(b) STATE ADVISORY GROUPS.—

12 ‘‘(1) IN GENERAL.—Each State plan shall pro13 vide for the establishment and maintenance of an

14 advisory group to advise the State on all aspects of

15 the State plan under this part.

16 ‘‘(2) COMPOSITION.—Members of each advisory

17 group shall be appointed by the Governor (or other

18 chief executive officer of the State) and shall include

19 individuals with disabilities and their representa20 tives, providers, State officials, and local community

21 implementing agencies. A majority of its members

22 shall be individuals with disabilities and their rep23 resentatives. The members of the advisory group

24 shall be selected from the those nominated as de25 scribed in paragraph (3).
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•S 2351 PCS

1 ‘‘(3) SELECTION OF MEMBERS.—Each State

2 shall establish a process whereby all residents of the

3 State, including individuals with disabilities and

4 their representatives, shall be given the opportunity

5 to nominate members to the advisory group.

6 ‘‘(4) PARTICULAR CONCERNS.—Each advisory

7 group shall—

8 ‘‘(A) before the State plan is developed,

9 advise the State on guiding principles and val10 ues, policy directions, and specific components

11 of the plan,

12 ‘‘(B) meet regularly with State officials in13 volved in developing the plan, during the devel14 opment phase, to review and comment on all as15 pects of the plan,

16 ‘‘(C) participate in the public hearings to

17 help assure that public comments are addressed

18 to the extent practicable,

19 ‘‘(D) report to the Governor and make

20 available to the public any differences between

21 the group’s recommendations and the plan,

22 ‘‘(E) report to the Governor and make

23 available to the public specifically the degree to

24 which the plan is consumer-directed, and
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1 ‘‘(F) meet regularly with officials of the

2 designated State agency (or agencies) to pro3 vide advice on all aspects of implementation and

4 evaluation of the plan.

5 ‘‘SEC. 1978. PAYMENTS TO STATES.

6 ‘‘(a) IN GENERAL.—Subject to section 1972(a)(9)(C)

7 (relating to limitation on payment for administrative

8 costs), the Secretary, in accordance with the Cash Man9 agement Improvement Act, shall authorize payment to

10 each State with a plan approved under this part, for each

11 quarter (beginning on or after January 1, 1998), from its

12 allotment under section 1979(b), an amount equal to—

13 ‘‘(1) the Federal home and community-based

14 services matching percentage (as defined in sub15 section (b)) of amount demonstrated by State claims

16 to have been expended during the quarter for home

17 and community-based services under the plan for in18 dividuals with disabilities; plus

19 ‘‘(2) an amount equal to 90 percent of the

20 amount demonstrated by the State to have been ex21 pended during the quarter for quality assurance ac22 tivities under the plan; plus

23 ‘‘(3) an amount equal to 90 percent of amount

24 expended during the quarter under the plan for ac25 tivities (including preliminary screening) relating to
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1 determination of eligibility and performance of needs

2 assessment; plus

3 ‘‘(4) an amount equal to 90 percent (or, begin4 ning with quarters in fiscal year 2003, 75 percent)

5 of the amount expended during the quarter for the

6 design, development, and installation of mechanical

7 claims processing systems and for information re8 trieval; plus

9 ‘‘(5) an amount equal to 50 percent of the re10 mainder of the amounts expended during the quar11 ter as found necessary by the Secretary for the prop12 er and efficient administration of the State plan.

13 ‘‘(b) FEDERAL HOME AND COMMUNITY-BASED

14 SERVICES MATCHING PERCENTAGE.—In subsection (a),

15 the term ‘Federal home and community-based services

16 matching percentage’ means, with respect to a State, the

17 State’s Federal medical assistance percentage (as defined

18 in section 1905(b)) increased by 15 percentage points, ex19 cept that the Federal home and community-based services

20 matching percentage shall in no case be less than 65 per21 cent or more than 90 percent.

22 ‘‘(c) PAYMENTS ON ESTIMATES WITH RETROSPEC23 TIVE ADJUSTMENTS.—The method of computing and

24 making payments under this section shall be as follows:
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1 ‘‘(1) The Secretary shall, prior to the beginning

2 of each quarter, estimate the amount to be paid to

3 the State under subsection (a) for such quarter,

4 based on a report filed by the State containing its

5 estimate of the total sum to be expended in such

6 quarter, and such other information as the Secretary

7 may find necessary.

8 ‘‘(2) From the allotment available therefore, the

9 Secretary shall provide for payment of the amount

10 so estimated, reduced or increased, as the case may

11 be, by any sum (not previously adjusted under this

12 section) by which the Secretary finds that the esti13 mate of the amount to be paid the State for any

14 prior period under this section was greater or less

15 than the amount which should have been paid.

16 ‘‘(d) APPLICATION OF RULES REGARDING LIMITA17 TIONS ON PROVIDER-RELATED DONATIONS AND HEALTH

18 CARE RELATED TAXES.—The provisions of section

19 1903(w) shall apply to payments to States under this sec20 tion in the same manner as they apply to payments to

21 States under section 1903(a).

22 ‘‘(e) FAILURE TO COMPLY WITH STATE PLAN.—If

23 a State furnishing home and community-based services

24 under this part fails to comply with the State plan ap25 proved under this part, the Secretary may withhold an
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1 amount of funds determined appropriate by the Secretary

2 from any payment to the State under this section.

3 ‘‘SEC. 1979. TOTAL FEDERAL BUDGET; ALLOTMENTS TO

4 STATES.

5 ‘‘(a) TOTAL FEDERAL BUDGET.—The total Federal

6 budget for State plans under this part for any fiscal year

7 beginning on or after October 1, 1997, is an amount equal

8 to the sum of—

9 ‘‘(1) the amount of funds deposited in the

10 Long-Term Care Account of the Health Security

11 Trust Fund established under section 9551 of the

12 Internal Revenue Code of 1986 for such fiscal year;

13 and

14 ‘‘(2) any funds in such account that were not

15 expended in any preceding fiscal year.

16 ‘‘(b) ALLOTMENTS TO STATES.—

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

18 each State for each fiscal year an amount that bears

19 the same ratio to the total Federal budget for the

20 fiscal year (specified under subsection (a)) as the

21 State allotment factor (under paragraph (2) for the

22 State for the fiscal year) bears to the sum of such

23 factors for all States for that fiscal year.

24 ‘‘(2) STATE ALLOTMENT FACTOR.—
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1 ‘‘(A) IN GENERAL.—For each State for

2 each fiscal year, the Secretary shall compute a

3 State allotment factor equal to the sum of—

4 ‘‘(i) the base allotment factor (speci5 fied in subparagraph (B)), and

6 ‘‘(ii) the low income allotment factor

7 (specified in subparagraph (C)).

8 ‘‘(B) BASE ALLOTMENT FACTOR.—The

9 base allotment factor, specified in this subpara10 graph, for a State for a fiscal year is equal to

11 the product of the following:

12 ‘‘(i) NUMBER OF INDIVIDUALS WITH

13 DISABILITIES.—The number of individuals

14 with disabilities in the State (determined

15 under paragraph (3)) for the fiscal year.

16 ‘‘(ii) 80 PERCENT OF THE NATIONAL

17 PER CAPITA BUDGET.—80 percent of the

18 national average per capita budget amount

19 (determined under paragraph (4)) for the

20 fiscal year.

21 ‘‘(iii) WAGE ADJUSTMENT FACTOR.—

22 The wage adjustment factor (determined

23 under paragraph (5)) for the State for the

24 fiscal year.
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1 ‘‘(iv) FEDERAL HOME AND COMMU2 NITY-BASED SERVICES MATCHING PER3 CENTAGE.—The Federal home and com4 munity-based services matching percentage

5 (determined under section 1978(b)) for the

6 fiscal year.

7 ‘‘(C) LOW INCOME ALLOTMENT FACTOR.—

8 The low income allotment factor, specified in

9 this subparagraph, for a State for a fiscal year

10 is equal to the product of the following:

11 ‘‘(i) NUMBER OF INDIVIDUALS WITH

12 DISABILITIES.—The number of individuals

13 with disabilities in the State (determined

14 under paragraph (3)) for the fiscal year.

15 ‘‘(ii) 10 PERCENT OF THE NATIONAL

16 PER CAPITA BUDGET.—10 percent of the

17 national average per capita budget amount

18 (determined under paragraph (4)) for the

19 fiscal year.

20 ‘‘(iii) WAGE ADJUSTMENT FACTOR.—

21 The wage adjustment factor (determined

22 under paragraph (5)) for the State for the

23 fiscal year.

24 ‘‘(iv) FEDERAL HOME AND COMMU25 NITY-BASED SERVICES MATCHING PER-
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1 CENTAGE.—The Federal home and com2 munity-based services matching percentage

3 (determined under section 1978(b)) for the

4 fiscal year.

5 ‘‘(v) LOW INCOME INDEX.—The low

6 income index (determined under paragraph

7 (6)) for the State for the preceding fiscal

8 year.

9 ‘‘(3) NUMBER OF INDIVIDUALS WITH DISABIL10 ITIES.—The number of individuals with disabilities

11 in a State for a fiscal year shall be determined as

12 follows:

13 ‘‘(A) BASE.—The Secretary shall deter14 mine the number of individuals in the State by

15 age, sex, and income category, based on the

16 1990 decennial census, adjusted (as appro17 priate) by the March 1996 current population

18 survey.

19 ‘‘(B) DISABILITY PREVALENCE LEVEL BY

20 POPULATION CATEGORY.—The Secretary shall

21 determine, for each such age, sex, and income

22 category, the national average proportion of the

23 population of such category that represents in24 dividuals with disabilities. The Secretary may
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1 conduct periodic surveys in order to determine

2 such proportions.

3 ‘‘(C) BASE DISABLED POPULATION IN A

4 STATE.—The number of individuals with dis5 abilities in a State in 1996 is equal to the sum

6 of the products, for such each age, sex, and in7 come category, of—

8 ‘‘(i) the population of individuals in

9 the State in the category (determined

10 under subparagraph (A)), and

11 ‘‘(ii) the national average proportion

12 for such category (determined under sub13 paragraph (B)).

14 ‘‘(D) UPDATE.—The Secretary shall deter15 mine the number of individuals with disabilities

16 in a State in a fiscal year equal to the number

17 determined under subparagraph (C) for the

18 State increased (or decreased) by the percent19 age increase (or decrease) in the disabled popu20 lation of the State as determined under the cur21 rent population survey from 1996 to the year

22 before the fiscal year involved.

23 ‘‘(4) NATIONAL PER CAPITA BUDGET

24 AMOUNT.—The national average per capita budget

25 amount, for a fiscal year, is—
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•S 2351 PCS

1 ‘‘(A) the total Federal budget specified

2 under subsection (a) for the fiscal year; divided

3 by

4 ‘‘(B) the sum, for the fiscal year, of the

5 numbers of individuals with disabilities (deter6 mined under paragraph (3)) for all the States

7 for the fiscal year.

8 ‘‘(5) WAGE ADJUSTMENT FACTOR.—The wage

9 adjustment factor, for a State for a fiscal year, is

10 equal to the ratio of—

11 ‘‘(A) the average hourly wages for service

12 workers (other than household or protective

13 services) in the State, to

14 ‘‘(B) the national average hourly wages for

15 service workers (other than household or protec16 tive services).

17 The hourly wages shall be determined under this

18 paragraph based on data from the most recent de19 cennial census for which such data are available.

20 ‘‘(6) LOW INCOME INDEX.—The low income

21 index for each State for a fiscal year is the ratio, de22 termined for the preceding fiscal year, of—

23 ‘‘(A) the percentage of the State’s popu24 lation that has income below 150 percent of the

25 poverty level, to
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•S 2351 PCS

1 ‘‘(B) the percentage of the population of

2 the United States that has income below 150

3 percent of the poverty level.

4 Such percentages shall be based on data from the

5 most recent decennial census for which such data

6 are available, adjusted by data from the most recent

7 current population survey as determined appropriate

8 by the Secretary.

9 ‘‘(7) NO DUPLICATE PAYMENT.—No payment

10 may be made to a State under this section for any

11 services provided to an individual to the extent that

12 the State received payment for such services under

13 section 1903(a).

14 ‘‘(c) CARRY-OVER.—With respect to fiscal years

15 1998 through 2005, a State shall be permitted to carry16 over not more than 25 percent of the allotment of such

17 State for expenditures in the subsequent year.

18 ‘‘(d) STATE ENTITLEMENT.—This part constitutes

19 budget authority in advance of appropriations Acts, and

20 represents the obligation of the Federal Government to

21 provide for the payment to States of amounts described

22 in subsection (a).

23 ‘‘SEC. 1980. FEDERAL EVALUATIONS.

24 ‘‘Not later than December 31, 2003, December 31,

25 2006, and each December 31 thereafter, the Secretary
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1 shall provide to Congress analytical reports that evalu2 ate—

3 ‘‘(1) the extent to which individuals with low in4 comes and disabilities are equitably served;

5 ‘‘(2) the adequacy and equity of service plans to

6 individuals with similar levels of disability across

7 States;

8 ‘‘(3) the comparability of program participation

9 across States, described by level and type of disabil10 ity; and

11 ‘‘(4) the ability of service providers to suffi12 ciently meet the demand for services.’’.

13 (b) CONFORMING AMENDMENT.—Title XIX of the

14 Social Security Act (42 U.S.C. 1396 et seq.), as amended

15 by section 301, is amended by striking the title inserting

16 the following:
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1 ‘‘TITLE XIX—MEDICAL ASSIST2 ANCE PROGRAMS, STATE

3 PROGRAMS FOR PREMIUM

4 AND COST-SHARING ASSIST5 ANCE, AND STATE PROGRAMS

6 FOR HOME AND COMMUNITY7 BASED SERVICES’’.

8 Subtitle D—Medicaid Program

9 PART I—INTEGRATION OF CERTAIN MEDICAID

10 ELIGIBLES INTO REFORMED HEALTH CARE

11 SYSTEM

12 SEC. 671. LIMITING COVERAGE UNDER MEDICAID OF ITEMS

13 AND SERVICES COVERED UNDER STANDARD

14 BENEFITS PACKAGE.

15 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

16 seq.) is amended by redesignating section 1931 as section

17 1932 and by inserting after section 1930 the following new

18 section:

19 ‘‘TREATMENT OF ITEMS AND SERVICES IN THE

20 STANDARD BENEFITS PACKAGE

21 ‘‘SEC. 1931. (a) ITEMS AND SERVICES COVERED

22 UNDER STANDARD BENEFITS PACKAGE.—Except as pro23 vided in subsection (c), a State plan under this part shall

24 not provide medical assistance consisting of payment for
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•S 2351 PCS

1 items and services in the standard benefits package de2 scribed in section 21201(a).

3 ‘‘(b) MEDICAL ASSISTANCE NOT AFFECTED.—Sub4 section (a) shall not be construed as—

5 ‘‘(1) affecting the eligibility of any individual

6 for medical assistance consisting of payment for

7 items and services not covered under the standard

8 benefits package;

9 ‘‘(2) affecting the amount, duration, and scope

10 of any medical assistance consisting of payment for

11 the items and services described in paragraph (1); or

12 ‘‘(3) prohibiting payment of medical assistance

13 for items and services covered under the standard

14 benefits package to the extent that the items and

15 services under this part exceed the items and serv16 ices covered under such package with respect to

17 amount, duration, and scope.

18 ‘‘(c) EXCEPTIONS.—

19 ‘‘(1) IN GENERAL.—Subsection (a) shall not af20 fect the provision of medical assistance consisting of

21 payment for items and services in the standard ben22 efits package—

23 ‘‘(A) which are provided to—

24 ‘‘(i) except as provided in paragraph

25 (2), an individual eligible for medical as-
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•S 2351 PCS

1 sistance under the State plan who is not a

2 premium subsidy eligible individual (as de3 fined in section 1952(a)(2));

4 ‘‘(ii) an individual with respect to

5 whom supplemental security income bene6 fits are being paid under title XVI; and

7 ‘‘(iii) an individual who is eligible for

8 benefits under part A of title XVIII; or

9 ‘‘(B) which consist of emergency services

10 to certain aliens under section 1903(v)(2).

11 ‘‘(2) SPECIAL RULE.—With respect to the first

12 year in which the eligibility percentage for premium

13 assistance under section 1952(a)(2)(B) equals 200

14 percent and any succeeding year, subsection (a) shall

15 apply to an individual who is not a premium subsidy

16 eligible individual because the individual’s family in17 come determined under section 1958(2) exceeds 200

18 percent of the poverty line (as defined in section

19 1958(5)).

20 ‘‘(d) STATE MAINTENANCE OF EFFORT.—

21 ‘‘(1) IN GENERAL.—

22 ‘‘(A) REDUCTION IN QUARTERLY PAY23 MENTS.—For any calendar quarter in an appli24 cable year (as defined in subparagraph (B)),

25 the amount otherwise payable to a State under
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1 section 1903 for the quarter shall be reduced by

2 the State maintenance of effort amount for the

3 quarter determined under paragraph (2).

4 ‘‘(B) APPLICABLE YEAR.—For purposes of

5 this paragraph, the term ‘applicable year’

6 means 1996 and any succeeding year.

7 ‘‘(2) MAINTENANCE OF EFFORT AMOUNT.—

8 ‘‘(A) IN GENERAL.—The maintenance of

9 effort amount for a State for a calendar quarter

10 in an applicable year shall be equal to 25 per11 cent of the State’s base payment amount (de12 termined under subparagraph (B)), multiplied

13 by the inflation index (described in subpara14 graph (C)(i)) and the State population index

15 (described in subparagraph (C)(ii)).

16 ‘‘(B) STATE BASE PAYMENT AMOUNT.—

17 The base payment amount for a State for an

18 applicable year shall be an amount, as deter19 mined by the Secretary, equal to the total ex20 penditures from State funds made under the

21 State plan during fiscal year 1994 with respect

22 to medical assistance consisting of items and

23 services of the type included in the standard

24 benefits package for individuals who would not

25 have received such medical assistance if the
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1 provisions of this section and part B (as in ef2 fect in the applicable year) had been in effect

3 in fiscal year 1994.

4 ‘‘(C) INDEXES.—

5 ‘‘(i) INFLATION INDEX.—

6 ‘‘(I) IN GENERAL.—For purposes

7 of this paragraph, the Secretary shall

8 establish a cumulative inflation index

9 for the applicable year which equals 1

10 plus the product of—

11 ‘‘(aa) the percentage change

12 in the national per capita health

13 expenditures plus the applicable

14 percentage points (determined

15 under subclause (II)); multiplied

16 by

17 ‘‘(bb) the cumulative level of

18 the index for the preceding year.

19 ‘‘(II) APPLICABLE PERCENTAGE

20 POINTS.—For purposes of subclause

21 (I), the applicable percentage points

22 are—

23 ‘‘(aa) for each of years 1995

24 through 1997, 1;

25 ‘‘(bb) for 1998, .8;
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•S 2351 PCS

1 ‘‘(cc) for 1999, .6;

2 ‘‘(dd) for 2000, .4;

3 ‘‘(ee) for 2001, .2; and

4 ‘‘(ff) for succeeding years, 0.

5 ‘‘(III) BASE YEAR.—The base

6 year for the inflation index under this

7 clause is 1994.

8 ‘‘(ii) STATE POPULATION INDEX.—

9 For purposes of this paragraph, the Sec10 retary shall establish a State population

11 index where the level of the index is equal

12 to 1 plus the cumulative percentage change

13 in the number of individuals residing in a

14 State from 1994 through December 31 of

15 the year preceding the applicable year.’’.

16 (b) NO FEDERAL FINANCIAL PARTICIPATION.—Sec17 tion 1903(i) (42 U.S.C. 1396b(i)) is amended—

18 (1) by striking ‘‘or’’ at the end of paragraph

19 (14),

20 (2) by striking the period at the end of para21 graph (15) and inserting ‘‘; or’’, and

22 (3) by inserting after paragraph (15) the fol23 lowing new paragraph:

24 ‘‘(16) with respect to items and services covered

25 under the standard benefits package described in
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1 section 21201(a) for individuals to whom section

2 1931(a) applies.’’.

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

4 this section shall apply with respect to items or services

5 furnished in a State on or after January 1, 1996.

6 PART II—COORDINATED CARE SERVICES FOR

7 DISABLED MEDICAID ELIGIBLES

8 SEC. 672. COORDINATED CARE SERVICES FOR DISABLED

9 MEDICAID ELIGIBLES.

10 (a) STATE EXPENDITURES LIMITED TO CERTIFIED

11 HEALTH PLANS.—Section 1903(m) (42 U.S.C. 1396b) is

12 amended by adding at the end the following new para13 graph:

14 ‘‘(7) No payment shall be made under this part

15 to a State with respect to expenditures incurred by

16 the State for payment for services provided by an

17 entity with a contract under this subsection unless

18 such entity is a certified standard health plan (as

19 defined in section 21011(a)(2)).’’.

20 (b) MODIFICATION TO 75/25 RULE.—Section

21 1903(m)(2)(A)(ii) (42 U.S.C. 1396b(m)(2)(A)(ii)) is

22 amended by striking ‘‘75 percent’’ and inserting ‘‘50 per23 cent’’.

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

25 this section shall become effective with respect to pay-
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1 ments for calendar quarters beginning on or after January

2 1, 1996.

3 PART III—PAYMENTS TO HOSPITALS SERVING

4 VULNERABLE POPULATIONS

5 SEC. 673. REPLACEMENT OF DSH PAYMENT PROVISIONS

6 WITH PROVISIONS RELATING TO PAYMENTS

7 TO HOSPITALS SERVING VULNERABLE POPU8 LATIONS.

9 (a) AMENDMENTS TO PROVISIONS REQUIRING

10 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.—

11 (1) ADJUSTMENTS TO NATIONAL DSH PAYMENT

12 LIMIT.—Section 1923(f)(1)(B) (42 U.S.C. 1396r–

13 4(f)(1)(B)) is amended to read as follows:

14 ‘‘(B) NATIONAL DSH PAYMENT LIMIT.—

15 ‘‘(i) IN GENERAL.—Except as pro16 vided in clause (ii), the national DSH pay17 ment limit for a fiscal year is equal to 12

18 percent of the total amount of expenditures

19 under the State plans under this part for

20 medical assistance during the fiscal year.

21 ‘‘(ii) REDUCTION IN LIMIT.—For fis22 cal years during which the eligibility per23 centage for premium assistance under sec24 tion 1952(a)(2)(B)—
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1 ‘‘(I) equals or exceeds 125 per2 cent but is less than 150 percent, ‘10

3 percent’ shall be substituted for ‘12

4 percent’ in clause (i);

5 ‘‘(II) equals or exceeds 150 per6 cent but is less than 175 percent, ‘8

7 percent’ shall be substituted for ‘12

8 percent’ in clause (i);

9 ‘‘(III) equals or exceeds 175 per10 cent but is less than 200 percent, ‘6

11 percent’ shall be substituted for ‘12

12 percent’ in clause (i); and

13 ‘‘(IV) equals 200 percent, ‘4 per14 cent’ shall be substituted for ‘12 per15 cent’ in clause (i).

16 (2) ADJUSTMENTS TO STATE ALLOTMENT LIM17 ITS.—Section 1923(f)(2)(B) (42 U.S.C. 1396r–

18 4(f)(2)(B)) is amended to read as follows:

19 ‘‘(B) EXCEPTIONS.—

20 ‘‘(i) IN GENERAL.—Except as pro21 vided in clause (ii), a State DSH allotment

22 under subparagraph (A) for a fiscal year

23 shall not exceed 12 percent of the total

24 amount of expenditures under the State
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1 plan for medical assistance during the fis2 cal year.

3 ‘‘(ii) REDUCTION IN LIMIT.—For fis4 cal years during which the eligibility per5 centage for premium assistance under sec6 tion 1952(a)(2)(B)—

7 ‘‘(I) equals or exceeds 125 per8 cent but is less than 150 percent, ‘10

9 percent’ shall be substituted for ‘12

10 percent’ in clause (i);

11 ‘‘(II) equals or exceeds 150 per12 cent but is less than 175 percent, ‘8

13 percent’ shall be substituted for ‘12

14 percent’ in clause (i);

15 ‘‘(III) equals or exceeds 175 per16 cent but is less than 200 percent, ‘6

17 percent’ shall be substituted for ‘12

18 percent’ in clause (i); and

19 ‘‘(IV) equals 200 percent, ‘4 per20 cent’ shall be substituted for ‘12 per21 cent’ in clause (i).

22 (3) ELIMINATION OF HIGH DSH STATES AND

23 STATE SUPPLEMENTAL AMOUNTS.—
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1 (A) IN GENERAL.—Section 1923(f)(2)(A)

2 (42 U.S.C. 1396r–4(f)(2)(A)) is amended to

3 read as follows:

4 ‘‘(A) IN GENERAL.—Subject to subpara5 graph (B), the State DSH allotment for a fiscal

6 year is equal to the State DSH allotment for

7 the previous fiscal year increased by the State

8 growth factor (as defined in paragraph (3)(B))

9 for the fiscal year.’’.

10 (B) CONFORMING AMENDMENTS.—(i) Sec11 tion 1923(f) (42 U.S.C. 1396r–4(f)) is amended

12 by striking paragraph (3) and redesignating

13 paragraph (4) as paragraph (3).

14 (ii) Section 1923(f)(3) (42 U.S.C. 1396r–

15 4(f)(3)), as redesignated by clause (i), is

16 amended by striking subparagraphs (A) and

17 (C) and redesignating subparagraphs (B), (D),

18 and (E) as subparagraphs (A), (B), and (C).

19 (iii) Section 1923(f)(3)(B) (42 U.S.C.

20 1396r–4(f)(3)(B)), as redesignated by clauses

21 (i) and (ii), is amended to read as follows:

22 ‘‘(B) STATE GROWTH AMOUNT.—The term

23 ‘State growth amount’ means, with respect to a

24 State for a fiscal year, the product of the State
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•S 2351 PCS

1 growth factor and the State DSH payment

2 limit for the previous fiscal year.’’.

3 (iv) Section 1923(f)(1)(A) (42 U.S.C.

4 1396r–4(f)(1)(A) is amended by striking ‘‘(as

5 defined in paragraph (4)(B))’’ and inserting

6 ‘‘(as defined in paragraph (3)(A))’’.

7 (3) TERMINATION OF REQUIREMENT ON

8 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.—

9 Section 1923 (42 U.S.C. 1396r–4) is amended by

10 adding at the end the following new subsection:

11 ‘‘(h) TERMINATION OF REQUIREMENT TO MAKE

12 PAYMENT ADJUSTMENTS.—

13 ‘‘(1) IN GENERAL.—Any requirement imposed

14 by this section on a State to increase the rate or

15 amount of payment for inpatient hospital services

16 provided by a hospital which serves a disproportion17 ate number of low income patients with special

18 needs shall terminate in the year described in para19 graph (2).

20 ‘‘(2) YEAR DESCRIBED.—The year described in

21 this paragraph is the first year beginning after the

22 year in which the eligibility percentage for premium

23 assistance under section 1952(a)(2)(B) equals 200

24 percent.’’.
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1 (4) NO FEDERAL FINANCIAL PARTICIPATION.—

2 Section 1903(i) (42 U.S.C. 1396b(i)), as amended

3 by section 671(b), is amended—

4 (1) by striking ‘‘or’’ at the end of paragraph

5 (15),

6 (2) by striking the period at the end of para7 graph (16) and inserting ‘‘; or’’, and

8 (3) by inserting after paragraph (16) the fol9 lowing new paragraph:

10 ‘‘(17) during or after the year described in sec11 tion 1923(h)(2) with respect to any payment made

12 by a State to a hospital which serves a dispropor13 tionate number of low income patients with special

14 needs that is in excess of the payment otherwise re15 quired under this part.’’.

16 (5) EFFECTIVE DATE.—The amendments made

17 by this section shall be effective for calendar quar18 ters beginning on or after October 1, 1997.

19 (b) PAYMENTS TO HOSPITALS SERVING VULNER20 ABLE POPULATIONS.—Title XIX, as amended by sections

21 301 and 667, is amended by adding at the end the follow22 ing new part:
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1 ‘‘PART D—PAYMENTS TO HOSPITALS SERVING

2 VULNERABLE POPULATIONS

3 ‘‘SEC. 1991. PAYMENTS TO HOSPITALS.

4 ‘‘(a) ENTITLEMENT STATUS.—The Secretary shall

5 make payments in accordance with this part to eligible

6 hospitals described in section 1992. The preceding sen7 tence constitutes budget authority in advance of appro8 priations Acts and represents the obligation of the Federal

9 Government to provide funding for such payments in the

10 amounts, and for the fiscal years, specified in subsection

11 (b).

12 ‘‘(b) AMOUNT OF ENTITLEMENT.—For purposes of

13 subsection (a), the amounts and fiscal years specified in

14 this subsection are (in the aggregate for all eligible hos15 pitals) $2,500,000,000 for the first applicable fiscal year

16 (as defined in section 1994) and for each subsequent fiscal

17 year.

18 ‘‘(c) PAYMENTS MADE ON QUARTERLY BASIS.—Pay19 ments to an eligible hospital under this section for a year

20 shall be made on a quarterly basis during the year.

21 ‘‘SEC. 1992. IDENTIFICATION OF ELIGIBLE HOSPITALS.

22 ‘‘(a) HOSPITALS IN PARTICIPATING STATES.—In

23 order to be an eligible hospital under this part, a hospital

24 must be located in a State that is a participating State

25 under title XXI.
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1 ‘‘(b) STATE IDENTIFICATION.—In accordance with

2 the criteria described in subsection (c) and such proce3 dures as the Secretary may require, each State shall iden4 tify the hospitals in the State that meet such criteria and

5 provide the Secretary with a list of such hospitals.

6 ‘‘(c) CRITERIA FOR ELIGIBILITY.—A hospital meets

7 the criteria described in this subsection if the hospital’s

8 low-income utilization rate for the base year under section

9 1923(b)(3) (as such section is in effect on the day before

10 the date of the enactment of this part) is not less than

11 25 percent.

12 ‘‘SEC. 1993. AMOUNT OF PAYMENTS.

13 ‘‘(a) IN GENERAL.—The total amount available for

14 payments under this part in a year shall be allocated to

15 hospitals for low-income assistance in accordance with this

16 subsection.

17 ‘‘(b) DETERMINATION OF HOSPITAL PAYMENT

18 AMOUNT.—The amount of payment to an eligible hospital

19 during a year shall be the equal to the hospital’s low-in20 come percentage (as defined in subsection (c)) of the total

21 amount available for payments under this part for the

22 year.

23 ‘‘(c) LOW-INCOME PERCENTAGE DEFINED.—

24 ‘‘(1) IN GENERAL.—For purposes of this sec25 tion, an eligible hospital’s ‘low-income percentage’
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1 for a year is equal to the amount (expressed as a

2 percentage) of the total low-income days for all eligi3 ble hospitals for the year that are attributable to the

4 hospital.

5 ‘‘(2) LOW-INCOME DAYS DESCRIBED.—For pur6 poses of paragraph (1), an eligible hospital’s low-in7 come days for a year shall be equal to the product

8 of—

9 ‘‘(A) the total number of inpatient days for

10 the hospital for the year (as reported to the

11 Secretary by the State in which the hospital is

12 located, in accordance with a reporting schedule

13 and procedures established by the Secretary);

14 and

15 ‘‘(B) the hospital’s low-income utilization

16 rate for the base year under section 1923(b)(3)

17 (as such section is in effect on the day before

18 the date of the enactment of this part).

19 ‘‘SEC. 1994. DEFINITIONS.

20 ‘‘For purposes of this part:

21 ‘‘(1) BASE YEAR.—The term ‘base year’ means

22 1995.

23 ‘‘(2) FIRST APPLICABLE FISCAL YEAR—The

24 term ‘first applicable fiscal year’ means first fiscal

25 year that begins after the fiscal year in which the
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•S 2351 PCS

1 eligibility percentage for premium assistance under

2 section 1952(a)(2)(B) equals 200 percent.’’

3 (c) CONFORMING AMENDMENT.—Title XIX (42

4 U.S.C. 1396 et seq.), as amended by sections 301 and

5 667, is amended by striking the title inserting the follow6 ing:

7 ‘‘TITLE XIX—MEDICAL ASSIST8 ANCE PROGRAMS, PROGRAMS

9 FOR PREMIUM AND COST10 SHARING ASSISTANCE, PRO11 GRAMS FOR HOME AND COM12 MUNITY-BASED SERVICES,

13 AND PAYMENTS TO HOS14 PITALS SERVING VULNER15 ABLE POPULATIONS’’.

16 PART IV—MEDICAID LONG-TERM CARE

17 PROVISIONS

18 SEC. 674. PAYMENTS FOR HOME OR COMMUNITY-BASED

19 CARE, PERSONAL CARE SERVICES, AND

20 FRAIL ELDERLY SERVICES.

21 (a) IN GENERAL.—

22 (1) PAYMENT.—Section 1903(a) (42 U.S.C.

23 1396b(a)) is amended—

24 (A) by striking the period at the end of

25 paragraph (7) and inserting ‘‘; plus’’; and
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•S 2351 PCS

1 (B) by adding at the end the following new

2 paragraph:

3 ‘‘(8) an amount equal to the Federal home or

4 community-based care matching percentage (as de5 fined in section 1905(t)) of the total amount ex6 pended during such quarter for home or community7 based services furnished under a waiver under sub8 section (c) or (d) of section 1915, personal care serv9 ices described in section 1905(a)(24), and home and

10 community care for functionally disabled elderly in11 dividuals under section 1929.’’.

12 (2) FEDERAL HOME OR COMMUNITY-BASED

13 CARE MATCHING PERCENTAGE.—Section 1905 (42

14 U.S.C. 1396d) is amended by adding at the end the

15 following new subsection:

16 ‘‘(t) The term ‘Federal home or community-based

17 care matching percentage’ means, with respect to a State,

18 the State’s Federal medical assistance percentage (as de19 fined in subsection (b)) increased by 10 percentage

20 points.’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 subsection (a) shall apply to payments for medical assist23 ance for calendar quarters beginning on or after January

24 1, 1995.
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1 SEC. 675. INCREASED RESOURCE DISREGARD FOR INDIVID2 UALS RECEIVING CERTAIN SERVICES.

3 (a) IN GENERAL.—Section 1902(a)(10) (42 U.S.C.

4 1396a(a)(10)) is amended—

5 (1) by striking ‘‘and’’ at the end of subpara6 graph (E);

7 (2) by adding ‘‘and’’ at the end of subpara8 graph (F); and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(G) provide that, in determining the eligi12 bility of any unmarried individual who has ap13 plied for or is receiving medical assistance con14 sisting of community-based services furnished

15 under a waiver under subsection (c) or (d) of

16 section 1915, personal care services described in

17 section 1905(a)(24), or home and community

18 care for functionally disabled elderly individuals

19 under section 1929, the first $4,000 of re20 sources may, at the option of the State, be dis21 regarded.’’.

22 (b) EFFECTIVE DATE.—The amendments made by

23 subsection (a) shall apply to payments for medical assist24 ance for calendar quarters beginning on or after January

25 1, 1995.
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1 SEC. 676. FRAIL ELDERLY DEMONSTRATION PROJECT

2 WAIVERS.

3 (a) EXPANSION OF NUMBER OF WAIVERS.—Section

4 9412(b)(1) of the Omnibus Budget Reconciliation Act of

5 1986 is amended by striking ‘‘15’’ and inserting ‘‘40’’.

6 (b) DEVELOPMENT OF PROTOCOLS AND MODEL

7 CERTIFICATION GUIDELINES.—Section 9412(b) of the

8 Omnibus Budget Reconciliation Act of 1986 is amended

9 by adding at the end the following new paragraphs:

10 ‘‘(5) The Secretary, in consultation with the

11 States and organizations operating projects in ac12 cordance with waivers under this subsection shall de13 velop and publish a waiver protocol that will estab14 lish minimum standard requirements that an organi15 zation must meet to be eligible for a waiver under

16 this subsection. In developing the protocol under the

17 preceding sentence, the Secretary shall incorporate

18 standards for organizations to deliver integrated

19 acute and long-term care services for the elderly,

20 children, and young adults.

21 ‘‘(6) The Secretary shall develop model guide22 lines that shall be available to States that choose to

23 establish a comprehensive procedure for the licen24 sure and certification of an organization operating a

25 demonstration project under a waiver granted pursu26 ant to this subsection. Such guidelines shall encom-
736

•S 2351 PCS

1 pass the range of services provided by such an orga2 nization.

3 (c) EVALUATIONS AND REPORTS.—Section 9412(b)

4 of the Omnibus Budget Reconciliation Act of 1986, as

5 amended by subsection (b), is amended by adding at the

6 end the following new paragraph:

7 ‘‘(7)(A) The Secretary shall develop standard

8 evaluation protocols to assess the cost-effectiveness

9 and quality of service provided under—

10 ‘‘(i) demonstration projects operating on

11 the date of the enactment of this paragraph

12 under waivers granted pursuant to this sub13 section; and

14 ‘‘(ii) demonstration projects granted waiv15 ers after the date of the enactment of this para16 graph.

17 ‘‘(B) The Secretary shall conduct evaluations of

18 the demonstration projects in accordance with the

19 protocols developed under subparagraph (A) and

20 based on the results of such evaluations, report to

21 the Committee on Finance of the Senate, the Com22 mittee on Ways and Means of the House of Rep23 resentatives, and the Subcommittee on Health and

24 the Environment of the Committee on Energy and

25 Commerce of the House of Representatives by—
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•S 2351 PCS

1 ‘‘(i) not later than January 1, 1998, with

2 respect to demonstration projects described in

3 subparagraph (A)(i); and

4 ‘‘(ii) not later than January 1, 2003, with

5 respect to demonstration projects described in

6 subparagraph (A)(ii);

7 on the desirability of granting permanent status

8 under titles XVIII and XIX of the Social Security

9 Act to such demonstration projects that the Sec10 retary has determined to be successful.’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall take effect on the date of the enactment

13 of this Act.

14 SEC. 677. ELIMINATION OF REQUIREMENT OF PRIOR INSTI15 TUTIONALIZATION WITH RESPECT TO HA16 BILITATION SERVICES FURNISHED UNDER A

17 WAIVER FOR HOME OR COMMUNITY-BASED

18 SERVICES.

19 (a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C.

20 1396n(c)(5)) is amended in the matter preceding subpara21 graph (A) by striking ‘‘, with respect to individuals who

22 receive such services after discharge from a nursing facil23 ity or intermediate care facility for the mentally retarded’’.
738

•S 2351 PCS

1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to services furnished on or after

3 January 1, 1995.

4 SEC. 678. ELIMINATION OF RULE REGARDING AVAILABIL5 ITY OF BEDS IN CERTAIN INSTITUTIONS.

6 (a) IN GENERAL.—The first sentence of section

7 1915(c)(1) (42 U.S.C. 1396n(c)(1)) is amended by insert8 ing the following before the end period: ‘‘(at the option

9 of the State, such determination may be made without re10 gard to the availability of beds in such a hospital, nursing

11 facility, or intermediate care facility for the mentally re12 tarded located in the State)’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 subsection (a) shall be effective with respect to waivers

15 granted or renewed on or after January 1, 1995.

16 PART V—MISCELLANEOUS

17 SEC. 679. MEDICAID COVERAGE OF ALL CERTIFIED NURSE

18 PRACTITIONER AND CLINICAL NURSE SPE19 CIALIST SERVICES.

20 (a) IN GENERAL.—Paragraph (21) of section

21 1905(a) (42 U.S.C. 1396d(a)) is amended to read as fol22 lows:

23 ‘‘(21) services furnished by all certified nurse

24 practitioners (as defined by the Secretary) or clinical

25 nurse specialists (as defined in subsection (u)) which
739

•S 2351 PCS

1 the certified nurse practitioner or clinical nurse spe2 cialist is legally authorized to perform under State

3 law (or the State regulatory mechanism provided by

4 State law), whether or not the certified nurse practi5 tioner or clinical nurse specialist is under the super6 vision of, or associated with, a physician or other

7 health care provider;’’.

8 (b) CLINICAL NURSE SPECIALIST DEFINED.—Sec9 tion 1905 (42 U.S.C. 1396), as amended by section 674,

10 is amended by adding at the end the following new sub11 section:

12 ‘‘(u) The term ‘clinical nurse specialist’ means an in13 dividual who—

14 ‘‘(1) is a registered nurse and is licensed to

15 practice nursing in the State in which the clinical

16 nurse specialist services are performed; and

17 ‘‘(2) holds a master’s degree in a defined clini18 cal area of nursing from an accredited educational

19 institution.’’.

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

21 this section shall become effective with respect to pay22 ments for calendar quarters beginning on or after January

23 1, 1995.
740

•S 2351 PCS

1 TITLE VII—REVENUE

2 PROVISIONS

3 SEC. 700. AMENDMENT OF 1986 CODE.

4 Except as otherwise expressly provided, whenever in

5 this title an amendment or repeal is expressed in terms

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

8 section or other provision of the Internal Revenue Code

9 of 1986.

10 Subtitle A—Financing Provisions

11 PART I—INCREASE IN TAX ON TOBACCO

12 PRODUCTS

13 SEC. 701. INCREASE IN EXCISE TAXES ON TOBACCO

14 PRODUCTS.

15 (a) CIGARETTES.—Subsection (b) of section 5701 is

16 amended—

17 (1) by striking ‘‘$12 per thousand ($10 per

18 thousand on cigarettes removed during 1991 or

19 1992)’’ in paragraph (1) and inserting ‘‘$62 per

20 thousand’’, and

21 (2) by striking ‘‘$25.20 per thousand ($21 per

22 thousand on cigarettes removed during 1991 or

23 1992)’’ in paragraph (2) and inserting ‘‘$130.20 per

24 thousand’’.
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•S 2351 PCS

1 (b) CIGARS.—Subsection (a) of section 5701 is

2 amended—

3 (1) by striking ‘‘$1.125 cents per thousand

4 (93.75 cents per thousand on cigars removed during

5 1991 or 1992)’’ in paragraph (1) and inserting

6 ‘‘$51.13 per thousand’’, and

7 (2) by striking ‘‘equal to’’ and all that follows

8 in paragraph (2) and inserting ‘‘equal to 66 percent

9 of the price for which sold but not more than $155

10 per thousand.’’

11 (c) CIGARETTE PAPERS.—Subsection (c) of section

12 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

13 cigarette papers removed during 1991 or 1992)’’ and in14 serting ‘‘3.88 cents’’.

15 (d) CIGARETTE TUBES.—Subsection (d) of section

16 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

17 cigarette tubes removed during 1991 or 1992)’’ and in18 serting ‘‘7.76 cents’’.

19 (e) SMOKELESS TOBACCO.—Subsection (e) of section

20 5701 is amended—

21 (1) by striking ‘‘36 cents (30 cents on snuff re22 moved during 1991 or 1992)’’ in paragraph (1) and

23 inserting ‘‘$13.69’’, and
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•S 2351 PCS

1 (2) by striking ‘‘12 cents (10 cents on chewing

2 tobacco removed during 1991 or 1992)’’ in para3 graph (2) and inserting ‘‘$5.45’’.

4 (f) PIPE TOBACCO.—Subsection (f) of section 5701

5 is amended by striking ‘‘67.5 cents (56.25 cents on pipe

6 tobacco removed during 1991 or 1992)’’ and inserting

7 ‘‘$17.35’’.

8 (g) APPLICATION OF TAX INCREASE TO PUERTO

9 RICO.—Section 5701 is amended by adding at the end the

10 following new subsection:

11 ‘‘(h) APPLICATION TO TAXES TO PUERTO RICO.—

12 Notwithstanding subsections (b) and (c) of section 7653

13 and any other provision of law—

14 ‘‘(1) IN GENERAL.—On tobacco products and

15 cigarette papers and tubes, manufactured or im16 ported into the Commonwealth of Puerto Rico, there

17 is hereby imposed a tax at the rate equal to the ex18 cess of—

19 ‘‘(A) the rate of tax applicable under this

20 section to like articles manufactured in the

21 United States, over

22 ‘‘(B) the rate referred to in subparagraph

23 (A) as in effect on the day before the date of

24 the enactment of the Health Security Act.
743

•S 2351 PCS

1 ‘‘(2) SHIPMENTS TO PUERTO RICO FROM THE

2 UNITED STATES.—Only the rates of tax in effect on

3 the day before the date of the enactment of this sub4 section shall be taken into account in determining

5 the amount of any exemption from, or credit or

6 drawback of, any tax imposed by this section on any

7 article shipped to the Commonwealth of Puerto Rico

8 from the United States.

9 ‘‘(3) SHIPMENTS FROM PUERTO RICO TO THE

10 UNITED STATES.—The rates of tax taken into ac11 count under section 7652(a) with respect to tobacco

12 products and cigarette papers and tubes coming into

13 the United States from the Commonwealth of Puer14 to Rico shall be the rates of tax in effect on the day

15 before the date of the enactment of the Health Secu16 rity Act.

17 ‘‘(4) DISPOSITION OF REVENUES.—The provi18 sions of section 7652(a)(3) shall not apply to any

19 tax imposed by reason of this subsection.’’

20 (h) FUNDING OF SUBSIDIES FOR CHILDREN AND

21 PREGNANT WOMEN.—Section 5701 is amended by adding

22 at the end the following new subsection:

23 ‘‘(i) FUNDING OF SUBSIDIES FOR CHILDREN AND

24 PREGNANT WOMEN.—In the case of articles removed after

25 June 30, 1996, and before January 1, 2002—
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•S 2351 PCS

1 ‘‘(1) each of the following rates of tax shall be

2 increased by the amount determined in accordance

3 with the following table:

‘‘For the tax under subsection: The increase is:

(a)(1) ........................................................................................ $15.00

(a)(2) ........................................................................................ 37.40

(b)(1) ........................................................................................ 15.00

(b)(2) ........................................................................................ 31.50

(e)(1) ........................................................................................ 4.00

(e)(2) ........................................................................................ 1.60

(f) ............................................................................................. 5.00

(g) ............................................................................................ 5.00,

4 ‘‘(2) the rate of tax under subsection (c) shall

5 be increased by 0.93 cent,

6 ‘‘(3) the rate of tax under subsection (d) shall

7 be increased by 1.86 cents, and

8 ‘‘(4) subsection (a)(2) shall be applied by sub9 stituting ‘81.81 percent’ for ‘66 percent’.’’

10 (i) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to articles removed (as defined in

12 section 5702(k) of the Internal Revenue Code of 1986,

13 as amended by this Act) after December 31, 1994.

14 (j) FLOOR STOCKS TAXES.—

15 (1) IMPOSITION OF TAX.—On tobacco products

16 and cigarette papers and tubes manufactured in or

17 imported into the United States or the Common18 wealth of Puerto Rico which are removed before any

19 tax-increase date, and held on such date for sale by

20 any person, there is hereby imposed a tax in an

21 amount equal to the excess of—
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•S 2351 PCS

1 (A) the tax which would be imposed under

2 section 5701 of the Internal Revenue Code of

3 1986 on the article if the article had been re4 moved on such date, over

5 (B) the prior tax (if any) imposed under

6 section 5701 or 7652 of such Code on such ar7 ticle.

8 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

9 IN VENDING MACHINES.—To the extent provided in

10 regulations prescribed by the Secretary, no tax shall

11 be imposed by paragraph (1) on cigarettes held for

12 retail sale on any tax-increase date, by any person

13 in any vending machine. If the Secretary provides

14 such a benefit with respect to any person, the Sec15 retary may reduce the $500 amount in paragraph

16 (3) with respect to such person.

17 (3) CREDIT AGAINST TAX.—Each person shall

18 be allowed as a credit against the taxes imposed by

19 paragraph (1) an amount equal to $500. Such credit

20 shall not exceed the amount of taxes imposed by

21 paragraph (1) on each tax-increase date for which

22 such person is liable.

23 (4) LIABILITY FOR TAX AND METHOD OF PAY24 MENT.—
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•S 2351 PCS

1 (A) LIABILITY FOR TAX.—A person hold2 ing cigarettes on any tax-increase date, to

3 which any tax imposed by paragraph (1) applies

4 shall be liable for such tax.

5 (B) METHOD OF PAYMENT.—The tax im6 posed by paragraph (1) shall be paid in such

7 manner as the Secretary shall prescribe by reg8 ulations.

9 (C) TIME FOR PAYMENT.—The tax im10 posed by paragraph (1) shall be paid on or be11 fore the date which is 3 months after the tax12 increase date.

13 (5) ARTICLES IN FOREIGN TRADE ZONES.—

14 Notwithstanding the Act of June 18, 1934 (48 Stat.

15 998, 19 U.S.C. 81a) and any other provision of law,

16 any article which is located in a foreign trade zone

17 on any tax-increase date shall be subject to the tax

18 imposed by paragraph (1) if—

19 (A) internal revenue taxes have been deter20 mined, or customs duties liquidated, with re21 spect to such article before such date pursuant

22 to a request made under the 1st proviso of sec23 tion 3(a) of such Act, or
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•S 2351 PCS

1 (B) such article is held on such date under

2 the supervision of a customs officer pursuant to

3 the 2d proviso of such section 3(a).

4 (6) DEFINITIONS.—For purposes of this sub5 section—

6 (A) IN GENERAL.—Terms used in this sub7 section which are also used in section 5702 of

8 the Internal Revenue Code of 1986 shall have

9 the respective meanings such terms have in

10 such section, as amended by this Act.

11 (B) SECRETARY.—The term ‘‘Secretary’’

12 means the Secretary of the Treasury or his del13 egate.

14 (C) TAX-INCREASE DATE.—The term ‘‘tax15 increase date’’ means January 1, 1995, and

16 July 1, 1996.

17 (7) CONTROLLED GROUPS.—Rules similar to

18 the rules of section 5061(e)(3) of such Code shall

19 apply for purposes of this subsection.

20 (8) OTHER LAWS APPLICABLE.—All provisions

21 of law, including penalties, applicable with respect to

22 the taxes imposed by section 5701 of such Code

23 shall, insofar as applicable and not inconsistent with

24 the provisions of this subsection, apply to the floor

25 stocks taxes imposed by paragraph (1), to the same
748

•S 2351 PCS

1 extent as if such taxes were imposed by such section

2 5701. The Secretary may treat any person who bore

3 the ultimate burden of the tax imposed by para4 graph (1) as the person to whom a credit or refund

5 under such provisions may be allowed or made.

6 SEC. 702. MODIFICATIONS OF CERTAIN TOBACCO TAX PRO7 VISIONS.

8 (a) EXEMPTION FOR EXPORTED TOBACCO PROD9 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

10 ONLY TO ARTICLES MARKED FOR EXPORT.—

11 (1) Subsection (b) of section 5704 is amended

12 by adding at the end the following new sentence:

13 ‘‘Tobacco products and cigarette papers and tubes

14 may not be transferred or removed under this sub15 section unless such products or papers and tubes

16 bear such marks, labels, or notices as the Secretary

17 shall by regulations prescribe.’’

18 (2) Section 5761 is amended by redesignating

19 subsections (c) and (d) as subsections (d) and (e),

20 respectively, and by inserting after subsection (b)

21 the following new subsection:

22 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

23 PAPERS AND TUBES FOR EXPORT.—Except as provided

24 in subsections (b) and (d) of section 5704—
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•S 2351 PCS

1 ‘‘(1) every person who sells, relands, or receives

2 within the jurisdiction of the United States any to3 bacco products or cigarette papers or tubes which

4 have been labeled or shipped for exportation under

5 this chapter,

6 ‘‘(2) every person who sells or receives such

7 relanded tobacco products or cigarette papers or

8 tubes, and

9 ‘‘(3) every person who aids or abets in such

10 selling, relanding, or receiving,

11 shall, in addition to the tax and any other penalty provided

12 in this title, be liable for a penalty equal to the greater

13 of $1,000 or 5 times the amount of the tax imposed by

14 this chapter. All tobacco products and cigarette papers

15 and tubes relanded within the jurisdiction of the United

16 States, and all vessels, vehicles, and aircraft used in such

17 relanding or in removing such products, papers, and tubes

18 from the place where relanded, shall be forfeited to the

19 United States.’’

20 (3) Subsection (a) of section 5761 is amended

21 by striking ‘‘subsection (b)’’ and inserting ‘‘sub22 section (b) or (c)’’.

23 (4) Subsection (d) of section 5761, as redesig24 nated by paragraph (2), is amended by striking

25 ‘‘The penalty imposed by subsection (b)’’ and insert-
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•S 2351 PCS

1 ing ‘‘The penalties imposed by subsections (b) and

2 (c)’’.

3 (5)(A) Subpart F of chapter 52 is amended by

4 adding at the end the following new section:

5 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE6 VIOUSLY EXPORTED TOBACCO PRODUCTS.

7 ‘‘(a) IN GENERAL.—Tobacco products and cigarette

8 papers and tubes previously exported from the United

9 States may be imported or brought into the United States

10 only as provided in section 5704(d). For purposes of this

11 section, section 5704(d), section 5761, and such other pro12 visions as the Secretary may specify by regulations, ref13 erences to exportation shall be treated as including a ref14 erence to shipment to the Commonwealth of Puerto Rico.

15 ‘‘(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).’’

16 (B) The table of sections for subpart F of chap17 ter 52 is amended by adding at the end the following

18 new item:

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’

19 (b) IMPORTERS REQUIRED TO BE QUALIFIED.—

20 (1) Sections 5712, 5713(a), 5721, 5722,

21 5762(a)(1), and 5763(b) and (c) are each amended

22 by inserting ‘‘or importer’’ after ‘‘manufacturer’’.
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•S 2351 PCS

1 (2) The heading of subsection (b) of section

2 5763 is amended by inserting ‘‘QUALIFIED IMPORT3 ERS,’’ after ‘‘MANUFACTURERS,’’.

4 (3) The heading for subchapter B of chapter 52

5 is amended by inserting ‘‘and Importers’’ after

6 ‘‘Manufacturers’’.

7 (4) The item relating to subchapter B in the

8 table of subchapters for chapter 52 is amended by

9 inserting ‘‘and importers’’ after ‘‘manufacturers’’.

10 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

11 OF CIGARETTE MANUFACTURERS.—

12 (1) Subsection (a) of section 5704 is amend13 ed—

14 (A) by striking ‘‘EMPLOYEE USE OR’’ in

15 the heading, and

16 (B) by striking ‘‘for use or consumption by

17 employees or’’ in the text.

18 (2) Subsection (e) of section 5723 is amended

19 by striking ‘‘for use or consumption by their employ20 ees, or for experimental purposes’’ and inserting

21 ‘‘for experimental purposes’’.

22 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

23 STATES.—Subsection (b) of section 5704 is amended by

24 striking ‘‘and manufacturers may similarly remove such

25 articles for use of the United States;’’.
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•S 2351 PCS

1 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

2 SUBJECT TO TAX.—Subsection (c) of section 5701 is

3 amended by striking ‘‘On each book or set of cigarette

4 papers containing more than 25 papers,’’ and inserting

5 ‘‘On cigarette papers,’’.

6 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection

7 (k) of section 5702 is amended by inserting ‘‘under section

8 5704’’ after ‘‘internal revenue bond’’.

9 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC10 TURING ACTIVITY REQUIREMENTS.—Section 5712 is

11 amended by striking ‘‘or’’ at the end of paragraph (1),

12 by redesignating paragraph (2) as paragraph (3), and by

13 inserting after paragraph (1) the following new paragraph:

14 ‘‘(2) the activity proposed to be carried out at

15 such premises does not meet such minimum capacity

16 or activity requirements as the Secretary may pre17 scribe, or’’.

18 (h) SPECIAL RULES RELATING TO PUERTO RICO

19 AND THE VIRGIN ISLANDS.—Section 7652 is amended by

20 adding at the end the following new subsection:

21 ‘‘(h) LIMITATION ON COVER OVER OF TAX ON TO22 BACCO PRODUCTS.—For purposes of this section, with re23 spect to taxes imposed under section 5701 or this section

24 on any tobacco product or cigarette paper or tube, the

25 amount covered into the treasuries of Puerto Rico and the
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•S 2351 PCS

1 Virgin Islands shall not exceed the rate of tax under sec2 tion 5701 in effect on the article on the day before the

3 date of the enactment of the Health Security Act.’’

4 (i) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to articles removed (as defined in

6 section 5702(k) of the Internal Revenue Code of 1986,

7 as amended by this Act) after December 31, 1994.

8 SEC. 703. IMPOSITION OF EXCISE TAX ON MANUFACTURE

9 OR IMPORTATION OF ROLL-YOUR-OWN TO10 BACCO.

11 (a) IN GENERAL.—Section 5701 (relating to rate of

12 tax), as amended by section 701, is amended by redesig13 nating subsections (g) and (h) as subsections (h) and (i)

14 and by inserting after subsection (f) the following new

15 subsection:

16 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own

17 tobacco, manufactured in or imported into the United

18 States, there shall be imposed a tax of $17.35 per pound

19 (and a proportionate tax at the like rate on all fractional

20 parts of a pound).’’

21 (b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re22 lating to definitions) is amended by adding at the end the

23 following new subsection:

24 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll25 your-own tobacco’ means any tobacco which, because of
754

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1 its appearance, type, packaging, or labeling, is suitable for

2 use and likely to be offered to, or purchased by, consumers

3 as tobacco for making cigarettes.’’

4 (c) TECHNICAL AMENDMENTS.—

5 (1) Subsection (c) of section 5702 is amended

6 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe

7 tobacco, and roll-your-own tobacco’’.

8 (2) Subsection (d) of section 5702 is amend9 ed—

10 (A) in the material preceding paragraph

11 (1), by striking ‘‘or pipe tobacco’’ and inserting

12 ‘‘pipe tobacco, or roll-your-own tobacco’’, and

13 (B) by striking paragraph (1) and insert14 ing the following new paragraph:

15 ‘‘(1) a person who produces cigars, cigarettes,

16 smokeless tobacco, pipe tobacco, or roll-your-own to17 bacco solely for the person’s own personal consump18 tion or use, and’’.

19 (3) The chapter heading for chapter 52 is

20 amended to read as follows:

21 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

22 CIGARETTE PAPERS AND TUBES’’.

23 (4) The table of chapters for subtitle E is

24 amended by striking the item relating to chapter 52

25 and inserting the following new item:

‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’
755

•S 2351 PCS

1 (d) EFFECTIVE DATE.—

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

3 this section shall apply to roll-your-own tobacco re4 moved (as defined in section 5702(k) of the Internal

5 Revenue Code of 1986, as amended by this Act)

6 after December 31, 1994.

7 (2) TRANSITIONAL RULE.—Any person who—

8 (A) on the date of the enactment of this

9 Act is engaged in business as a manufacturer of

10 roll-your-own tobacco or as an importer of to11 bacco products or cigarette papers and tubes,

12 and

13 (B) before January 1, 1995, submits an

14 application under subchapter B of chapter 52

15 of such Code to engage in such business,

16 may, notwithstanding such subchapter B, continue

17 to engage in such business pending final action on

18 such application. Pending such final action, all pro19 visions of such chapter 52 shall apply to such appli20 cant in the same manner and to the same extent as

21 if such applicant were a holder of a permit under

22 such chapter 52 to engage in such business.
756

•S 2351 PCS

1 PART II—HEALTH RELATED ASSESSMENTS

2 SEC. 705. ASSESSMENTS ON INSURED AND SELF-INSURED

3 HEALTH PLANS.

4 (a) GENERAL RULE.—Subtitle D (relating to mis5 cellaneous excise taxes) is amended by adding after chap6 ter 36 the following new chapter:

7 ‘‘CHAPTER 37—HEALTH RELATED

8 ASSESSMENTS

‘‘SUBCHAPTER A. Insured and self-insured health plans.

9 ‘‘Subchapter A—Insured and Self-Insured

10 Health Plans

‘‘Sec. 4501. Health insurance and health-related administrative

services.

‘‘Sec. 4502. Self-insured health plans.

‘‘Sec. 4503. Definitions and special rules.

11 ‘‘SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED

12 ADMINISTRATIVE SERVICES.

13 ‘‘(a) IMPOSITION OF TAX.—There is hereby im14 posed—

15 ‘‘(1) on each taxable health insurance policy, a

16 tax equal to 1.75 percent of the premiums received

17 under such policy, and

18 ‘‘(2) on each amount received for health-related

19 administrative services, a tax equal to 1.75 percent

20 of the amount so received.

21 ‘‘(b) LIABILITY FOR TAX.—
757

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1 ‘‘(1) HEALTH INSURANCE.—The tax imposed

2 by subsection (a)(1) shall be paid by the issuer of

3 the policy.

4 ‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV5 ICES.—The tax imposed by subsection (a)(2) shall

6 be paid by the person providing the health-related

7 administrative services.

8 ‘‘(c) TAXABLE HEALTH INSURANCE POLICY.—For

9 purposes of this section—

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this section, the term ‘taxable health insur12 ance policy’ means any insurance policy providing

13 accident or health insurance with respect to individ14 uals residing in the United States.

15 ‘‘(2) EXEMPTION OF CERTAIN POLICIES.—The

16 term ‘taxable health insurance policy’ does not in17 clude any insurance policy if substantially all of the

18 coverage provided under such policy relates to—

19 ‘‘(A) liabilities incurred under workers’

20 compensation laws,

21 ‘‘(B) tort liabilities,

22 ‘‘(C) liabilities relating to ownership or use

23 of property,

24 ‘‘(D) credit insurance, or
758

•S 2351 PCS

1 ‘‘(E) such other similar liabilities as the

2 Secretary may specify by regulations.

3 ‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES

4 OTHER COVERAGE.—In the case of any taxable

5 health insurance policy under which amounts are

6 payable other than for accident or health coverage,

7 in determining the amount of the tax imposed by

8 subsection (a)(1) on any premium paid under such

9 policy, there shall be excluded the amount of the

10 charge for the nonaccident or health coverage if—

11 ‘‘(A) the charge for such nonaccident or

12 health coverage is either separately stated in

13 the policy, or furnished to the policyholder in a

14 separate statement, and

15 ‘‘(B) such charge is reasonable in relation

16 to the total charges under the policy.

17 In any other case, the entire amount of the premium

18 paid under such a policy shall be subject to tax

19 under subsection (a)(1).

20 ‘‘(4) TREATMENT OF PREPAID HEALTH COV21 ERAGE ARRANGEMENTS.—

22 ‘‘(A) IN GENERAL.—In the case of any ar23 rangement described in subparagraph (B)—

24 ‘‘(i) such arrangement shall be treated

25 as a taxable health insurance policy,
759

•S 2351 PCS

1 ‘‘(ii) the payments or premiums re2 ferred to in subparagraph (B)(i) shall be

3 treated as premiums received for a taxable

4 health insurance policy, and

5 ‘‘(iii) the person referred to in sub6 paragraph (B)(i) shall be treated as the is7 suer.

8 ‘‘(B) DESCRIPTION OF ARRANGEMENTS.—

9 An arrangement is described in this subpara10 graph if under such arrangement—

11 ‘‘(i) fixed payments or premiums are

12 received as consideration for any person’s

13 agreement to provide or arrange for the

14 provision of accident or health coverage to

15 residents of the United States, regardless

16 of how such coverage is provided or ar17 ranged to be provided, and

18 ‘‘(ii) substantially all of the risks of

19 the rates of utilization of services is as20 sumed by such person or the provider of

21 such services.

22 ‘‘(d) HEALTH-RELATED ADMINISTRATIVE SERV23 ICES.—For purposes of this section, the term ‘health-re24 lated administrative services’ means—
760

•S 2351 PCS

1 ‘‘(1) the processing of claims or performance of

2 other administrative services in connection with acci3 dent or health coverage under a taxable health in4 surance policy if the charge for such services is not

5 included in the premiums under such policy, and

6 ‘‘(2) processing claims, arranging for provision

7 of accident or health coverage, or performing other

8 administrative services in connection with an appli9 cable self-insured health plan (as defined in section

10 4502(c)) established or maintained by a person

11 other than the person performing the services.

12 For purposes of paragraph (1), rules similar to the rules

13 of subsection (c)(3) shall apply.

14 ‘‘SEC. 4502. SELF-INSURED HEALTH PLANS.

15 ‘‘(a) IMPOSITION OF TAX.—In the case of any appli16 cable self-insured health plan, there is hereby imposed a

17 tax for each month equal to 1.75 percent of the sum of—

18 ‘‘(1) the accident or health coverage expendi19 tures for such month under such plan, and

20 ‘‘(2) the direct administrative expenditures for

21 such month under such plan.

22 ‘‘(b) LIABILITY FOR TAX.—

23 ‘‘(1) IN GENERAL.—The tax imposed by sub24 section (a) shall be paid by the plan sponsor.
761

•S 2351 PCS

1 ‘‘(2) PLAN SPONSOR.—For purposes of para2 graph (1), the term ‘plan sponsor’ means—

3 ‘‘(A) the employer in the case of a plan es4 tablished or maintained by a single employer,

5 ‘‘(B) the employee organization in the case

6 of a plan established or maintained by an em7 ployee organization, or

8 ‘‘(C) in the case of—

9 ‘‘(i) a plan established or maintained

10 by 2 or more employers or jointly by 1 or

11 more employers and 1 or more employee

12 organizations,

13 ‘‘(ii) a voluntary employees’ bene14 ficiary association under section 501(c)(9),

15 or

16 ‘‘(iii) a plan described in subsection

17 (c)(2)(E),

18 the association, committee, joint board of trust19 ees, or other similar group of representatives of

20 the parties who establish or maintain the plan.

21 ‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—

22 For purposes of this section, the term ‘applicable self-in23 sured health plan’ means any plan for providing accident

24 or health coverage if—
762

•S 2351 PCS

1 ‘‘(1) any portion of such coverage is provided

2 other than through an insurance policy, and

3 ‘‘(2) such plan is established or maintained—

4 ‘‘(A) by one or more employers for the

5 benefit of their employees or former employees,

6 ‘‘(B) by one or more employee organiza7 tions for the benefit of their members or former

8 members,

9 ‘‘(C) jointly by 1 or more employers and 1

10 or more employee organizations for the benefit

11 of employees or former employees,

12 ‘‘(D) by a voluntary employees’ beneficiary

13 association described in section 501(c)(9), or

14 ‘‘(E) in the case of a plan not described in

15 the preceding subparagraphs, by a qualified as16 sociation (as defined in section 21433(c) of the

17 Social Security Act).

18 ‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI19 TURES.—For purposes of this section—

20 ‘‘(1) IN GENERAL.—The accident or health cov21 erage expenditures of any applicable self-insured

22 health plan for any month are the aggregate expend23 itures paid in such month for accident or health cov24 erage provided under such plan to the extent such
763

•S 2351 PCS

1 expenditures are not subject to tax under section

2 4501.

3 ‘‘(2) TREATMENT OF REIMBURSEMENTS.—In

4 determining accident or health coverage expenditures

5 during any month of any applicable self-insured

6 health plan, reimbursements (by insurance or other7 wise) received during such month shall be taken into

8 account as a reduction in accident or health coverage

9 expenditures.

10 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

11 Paragraph (1) shall not apply to any expenditure for

12 the acquisition or improvement of land or for the ac13 quisition or improvement of any property to be used

14 in connection with the provision of accident or

15 health coverage which is subject to the allowance

16 under section 167, except that, for purposes of para17 graph (1), allowances under section 167 shall be

18 considered as expenditures.

19 ‘‘(e) DIRECT ADMINISTRATIVE EXPENDITURES.—

20 For purposes of this section, the term ‘direct administra21 tive expenditures’ means the administrative expenditures

22 under the plan to the extent such expenditures are not

23 subject to tax under section 4501. In determining the

24 amount of such expenditures, rules similar to the rules of

25 subsection (d)(3) shall apply.
764

•S 2351 PCS

1 ‘‘SEC. 4503. DEFINITIONS AND SPECIAL RULES.

2 ‘‘(a) DEFINITIONS.—For purposes of this sub3 chapter—

4 ‘‘(1) ACCIDENT OR HEALTH COVERAGE.—The

5 term ‘accident or health coverage’ means any cov6 erage which, if provided by an insurance policy,

7 would cause such policy to be a taxable health insur8 ance policy (as defined in section 4501(c)).

9 ‘‘(2) INSURANCE POLICY.—The term ‘insurance

10 policy’ means any policy or other instrument where11 by a contract of insurance is issued, renewed, or ex12 tended.

13 ‘‘(3) PREMIUM.—The term ‘premium’ means

14 the gross amount of premiums and other consider15 ation (including advance premiums, deposits, fees,

16 and assessments) arising from policies issued by a

17 person acting as the primary insurer, adjusted for

18 any return or additional premiums paid as a result

19 of endorsements, cancellations, audits, or retrospec20 tive rating. Amounts returned where the amount is

21 not fixed in the contract but depends on the experi22 ence of the insurer or the discretion of management

23 shall not be included in return premiums.

24 ‘‘(4) UNITED STATES.—The term ‘United

25 States’ includes any possession of the United States.

26 ‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—
765

•S 2351 PCS

1 ‘‘(1) IN GENERAL.—For purposes of this sub2 chapter—

3 ‘‘(A) the term ‘person’ includes any gov4 ernmental entity, and

5 ‘‘(B) notwithstanding any other law or rule

6 of law, governmental entities shall not be ex7 empt from the taxes imposed by this subchapter

8 except as provided in paragraph (2).

9 ‘‘(2) EXEMPT GOVERNMENTAL PROGRAMS.—In

10 the case of an exempt governmental program—

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

12 4501 on any premium received pursuant to

13 such program or on any amount received for

14 health-related administrative services pursuant

15 to such program, and

16 ‘‘(B) no tax shall be imposed under section

17 4502 on any expenditures pursuant to such

18 program.

19 ‘‘(3) EXEMPT GOVERNMENTAL PROGRAM.—For

20 purposes of this subchapter, the term ‘exempt gov21 ernmental program’ means—

22 ‘‘(A) the insurance programs established

23 by parts A and B of title XVIII of the Social

24 Security Act,
766

•S 2351 PCS

1 ‘‘(B) the medical assistance program es2 tablished by title XIX of the Social Security

3 Act,

4 ‘‘(C) any program established by Federal

5 law for providing medical care (other than

6 through insurance policies) to individuals (or

7 the spouses and dependents thereof) by reason

8 of such individuals being—

9 ‘‘(i) members of the Armed Forces of

10 the United States, or

11 ‘‘(ii) veterans, and

12 ‘‘(D) any program established by Federal

13 law for providing medical care (other than

14 through insurance policies) to members of In15 dian tribes (as defined in section 4(d) of the In16 dian Health Care Improvement Act).

17 ‘‘(c) NO COVER OVER TO POSSESSIONS.—Notwith18 standing any other provision of law, no amount collected

19 under this subchapter shall be covered over to any posses20 sion of the United States.’’

21 (b) CLERICAL AMENDMENT.—The table of chapters

22 for subtitle D is amended by inserting after the item relat23 ing to chapter 36 the following new item:

‘‘CHAPTER 37. Health related assessments.’’

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

25 this section shall apply with respect to premiums received,
767

•S 2351 PCS

1 and expenses incurred, with respect to coverage for peri2 ods after December 31, 1995.

3 SEC. 706. TAX ON HIGH COST HEALTH PLANS.

4 (a) IN GENERAL.—Subchapter A of chapter 37 (re5 lating to assessments on insured and self-insured health

6 benefits), as added by section 705, is amended by adding

7 at the end the following new part:

8 ‘‘PART II—HIGH COST HEALTH PLANS

‘‘Sec. 4511. Tax on high cost health plans.

‘‘Sec. 4512. Definitions and special rules.

9 ‘‘SEC. 4511. TAX ON HIGH COST HEALTH PLANS.

10 ‘‘(a) IMPOSITION OF TAX.—If an applicable health

11 plan is a high cost plan for any taxable period, there is

12 hereby imposed a tax equal to 25 percent of the taxable

13 amount with respect to the high cost plan for the period.

14 ‘‘(b) LIABILITY FOR TAX.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2), the tax imposed by subsection (a) shall be

17 paid by the issuer of the high cost plan.

18 ‘‘(2) SELF-INSURED PLANS.—In the case of a

19 high cost plan which is a self-insured plan, the tax

20 shall be paid by the plan sponsor.

21 ‘‘(c) HIGH COST PLAN.—For purposes of this sec22 tion—

23 ‘‘(1) IN GENERAL.—An applicable health plan

24 is a high cost plan for any taxable period if—
768

•S 2351 PCS

1 ‘‘(A) the premiums received under the plan

2 during the taxable period, exceed

3 ‘‘(B) the sum of the target amounts deter4 mined with respect to each class of enrollment

5 under the plan.

6 ‘‘(2) TARGET AMOUNT.—

7 ‘‘(A) IN GENERAL.—The target amount for

8 any class of enrollment under a plan for any

9 taxable period is an amount equal to the prod10 uct of—

11 ‘‘(i) the target premium for such

12 class, and

13 ‘‘(ii) the number of primary insureds

14 in such class during the period.

15 ‘‘(B) PROPORTIONATE REDUCTION OF

16 TARGET PREMIUM.—The target premium under

17 subparagraph (A)(i) applicable to an individual

18 who was a primary insured for only a portion

19 of the taxable period shall be proportionately

20 reduced to reflect the period the individual was

21 not a primary insured.

22 ‘‘(3) CERTAIN SUPPLEMENTAL PREMIUMS IN23 CLUDED.—The amount determined under paragraph

24 (1)(A) shall include applicable supplemental pre25 miums.
769

•S 2351 PCS

1 ‘‘(4) CERTAIN ACTUARIAL ADJUSTMENTS DIS2 REGARDED.—The amount determined under para3 graph (1)(A) (after application of paragraph (3))

4 shall be adjusted, in accordance with regulations, as

5 follows:

6 ‘‘(A) AGE ADJUSTMENTS UNDER COMMU7 NITY-RATED PLANS.—In the case of a commu8 nity-rated plan, to reflect the premiums which

9 would have been received if any age adjustment

10 factor were disregarded.

11 ‘‘(B) RISK ADJUSTMENTS UNDER OTHER

12 PLANS.—In the case of any plan which is not

13 a community-rated plan, by adjusting such

14 amount so that it does not reflect the relative

15 risks among the participants in the plan.

16 ‘‘(5) CERTAIN PLANS NOT TREATED AS HIGH

17 COST PLANS.—

18 ‘‘(A) IN GENERAL.—An applicable health

19 plan shall not be treated as a high cost plan for

20 any taxable period beginning in a calendar year

21 if its adjusted average premium is determined,

22 in such manner as the Secretary may prescribe,

23 to be in the bottom quartile of the adjusted av24 erage premiums of all certified standard health
770

•S 2351 PCS

1 plans in the United States for the calendar

2 year.

3 ‘‘(B) ADJUSTED AVERAGE PREMIUM.—For

4 purposes of subparagraph (A), the adjusted av5 erage premium for any plan shall be determined

6 in such manner as the Secretary shall prescribe

7 and shall be equal to the weighted average pre8 mium for all classes of enrollment under the

9 plan—

10 ‘‘(i) adjusted to reflect—

11 ‘‘(I) differences in cost-of-living

12 among community-rated areas,

13 ‘‘(II) other differences among

14 community-rated areas which affect

15 premium costs,

16 ‘‘(III) in the case of a commu17 nity-rated plan, age adjustment fac18 tors, and

19 ‘‘(IV) in the case of plans which

20 are not community-rated plans, rel21 ative risks described in paragraph

22 (4)(B), and

23 ‘‘(ii) determined by taking into ac24 count applicable supplemental premiums

25 under the plan.
771

•S 2351 PCS

1 ‘‘(d) TAXABLE AMOUNT.—For purposes of this sec2 tion, the term ‘taxable amount’ means the excess (if any)

3 which is determined under subsection (c)(1), except that

4 in applying subsection (c) for purposes of this subsection,

5 the reference premium shall be substituted for the target

6 premium.

7 ‘‘(e) TARGET AND REFERENCE PREMIUMS.—For

8 purposes of this section—

9 ‘‘(1) IN GENERAL.—As soon as practicable

10 after the annual open enrollment period established

11 under section 21024 of the Social Security Act for

12 a community rating area, the Secretary shall estab13 lish—

14 ‘‘(A) separate target and reference pre15 miums for each class of enrollment under com16 munity-rated plans in such area, and

17 ‘‘(B) separate target and reference pre18 miums for each class of enrollment under plans

19 which are not community-rated plans in such

20 area.

21 ‘‘(2) BASIS FOR ESTABLISHING PREMIUMS.—

22 ‘‘(A) TARGET PREMIUMS.—The Secretary

23 shall establish target premiums under para24 graph (1) for each community rating area at

25 the levels which the Secretary estimates will re-
772

•S 2351 PCS

1 sult in the following plans being treated as high

2 cost plans (determined without regard to sub3 section (c)(5)):

4 ‘‘(i) Community-rated certified stand5 ard health plans in the area which cover

6 40 percent of the total primary insureds

7 covered by all such plans in the area.

8 ‘‘(ii) Certified standard health plans

9 in the area which are not community-rated

10 which cover 40 percent of the total pri11 mary insureds covered by all such plans in

12 the area.

13 ‘‘(B) REFERENCE PREMIUMS.—The Sec14 retary shall establish reference premiums under

15 paragraph (1) for each community rating area

16 which shall be equal to the average premium

17 per primary insured for all certified standard

18 health plans offered in the area for the class of

19 enrollment for which the premium is being es20 tablished.

21 ‘‘SEC. 4512. DEFINITIONS AND SPECIAL RULES.

22 ‘‘(a) APPLICABLE PLANS.—For purposes of this

23 part—
773

•S 2351 PCS

1 ‘‘(1) APPLICABLE HEALTH PLAN.—The term

2 ‘applicable health plan’ means a certified standard

3 health plan or a certified nonstandard health plan.

4 ‘‘(2) APPLICABLE SUPPLEMENTAL PREMIUM.—

5 The term ‘applicable supplemental premium’ means,

6 with respect to any issuer or plan sponsor of a cer7 tified standard health plan, any premium received by

8 the issuer or plan sponsor under a certified supple9 mental health plan covering an individual who is

10 covered under the certified standard health plan.

11 ‘‘(b) CERTIFIED HEALTH PLANS.—For purposes of

12 this part—

13 ‘‘(1) CERTIFIED STANDARD HEALTH PLAN.—

14 The term ‘certified standard health plan’ has the

15 meaning given such term by section 21011(a)(2) of

16 the Social Security Act, except that such term does

17 not include a plan offering the alternative standard

18 benefit package described in subtitle C of such Act.

19 ‘‘(2) CERTIFIED NONSTANDARD HEALTH

20 PLAN.—The term ‘certified nonstandard health plan’

21 has the meaning given such term by section

22 21011(a)(3) of such Act.

23 ‘‘(3) CERTIFIED SUPPLEMENTAL HEALTH

24 PLAN.—The term ‘certified supplemental health
774

•S 2351 PCS

1 plan’ has the meaning given such term by section

2 21011(a)(4) of such Act.

3 ‘‘(c) COMMUNITY RATING AREAS AND PLANS.—For

4 purposes of this part—

5 ‘‘(1) COMMUNITY RATING AREA.—The term

6 ‘community rating area’ means an area established

7 under section 21021 of the Social Security Act.

8 ‘‘(2) COMMUNITY-RATED PLAN.—The term

9 ‘community-rated plan’ means a plan which is com10 munity-rated under section 21113 of such Act.

11 ‘‘(d) PREMIUMS.—For purposes of this part—

12 ‘‘(1) IN GENERAL.—The term ‘premium’ has

13 the meaning given such term by section 4503(a)(3).

14 ‘‘(2) ADMINISTRATIVE COSTS.—Amounts re15 ceived for health-related administrative services (as

16 defined in section 4501(d)) provided in connection

17 with any applicable health plan or any certified sup18 plemental health plan taken into account under sec19 tion 4511(c)(3) shall be treated as premiums.

20 ‘‘(3) SELF-INSURED PLANS.—In the case of a

21 self-insured plan, premiums shall include—

22 ‘‘(A) a reasonable estimate (actuarially de23 termined in such manner as the Secretary may

24 prescribe) of the expenditures described in sub-
775

•S 2351 PCS

1 sections (d) and (e) of section 4502 with re2 spect to coverage under the plan, and

3 ‘‘(B) in the case of any coverage provided

4 through an insurance policy, premiums paid for

5 such coverage.

6 ‘‘(e) INSURANCE POLICY, SELF-INSURED PLANS,

7 AND PLAN SPONSOR.—For purposes of this part—

8 ‘‘(1) INSURANCE POLICY.—The term ‘insurance

9 policy’ has the meaning given such term by section

10 4503(a)(2).

11 ‘‘(2) SELF-INSURED PLAN.—The term ‘self-in12 sured plan’ means any certified standard health plan

13 any portion of the coverage of which is provided

14 other than through an insurance policy (including an

15 arrangement described in section 4501(c)(4)(B)).

16 ‘‘(3) PLAN SPONSOR.—The term ‘plan sponsor’

17 has the meaning given such term by section

18 4502(b)(2), except that in the case of a plan not de19 scribed in such section, such term means the person

20 or persons who establish or maintain the plan.

21 ‘‘(f) TAXABLE PERIOD.—For purposes of this part—

22 ‘‘(1) IN GENERAL.—The term ‘taxable period’

23 means, with respect to any applicable health plan in

24 a community rating area for any year, the 12-month

25 period following the close of the annual open enroll-
776

•S 2351 PCS

1 ment period for such area under section 21024 of

2 the Social Security Act for which an individual en3 rolling during such enrollment period receives cov4 erage under the plan.

5 ‘‘(2) SPECIAL RULE FOR MULTISTATE SELF-IN6 SURED PLANS.—If an applicable health plan in a

7 community rating area has a different annual open

8 enrollment period than the one described in para9 graph (1), its taxable period for any year shall be

10 determined under paragraph (1) by reference to its

11 first coverage period beginning on or after the first

12 day of the coverage period for the enrollment period

13 described in paragraph (1).

14 ‘‘(g) SPECIAL RULES.—For purposes of this part—

15 ‘‘(1) DEPOSITS.—The Secretary may require

16 deposits of any taxes imposed by section 4511 at

17 such times as the Secretary determines appropriate.

18 ‘‘(2) GOVERNMENTAL ENTITIES SUBJECT TO

19 TAX.—The rules of section 4503(b) shall apply for

20 purposes of this part.

21 ‘‘(3) PLANS COVERING MORE THAN 1 AREA.—

22 If an applicable health plan covers individuals resid23 ing in more than 1 community rating area, the indi24 viduals in each such area shall be treated as covered

25 by a separate plan.
777

•S 2351 PCS

1 ‘‘(4) NO COVER OVER TO POSSESSIONS.—Not2 withstanding any other provision of law, no amount

3 collected under this part shall be covered over to any

4 possession of the United States.

5 ‘‘(h) FUNDING OF SUBSIDIES FOR CHILDREN AND

6 PREGNANT WOMEN.—In the case of taxable periods be7 ginning after December 31, 1996, and before January 1,

8 2002, the rate of tax under section 4511(a) shall be in9 creased by 4 percent.

10 ‘‘(i) REGULATIONS.—The Secretary shall issue such

11 regulations as are necessary to carry out the provisions

12 of this part, including regulations—

13 ‘‘(1) requiring the maintenance of such records,

14 and the reporting of such information as the Sec15 retary determines necessary, and

16 ‘‘(2) which provide that 2 or more plans of a

17 person or any related persons must be aggregated,

18 or a plan must be treated as 2 or more separate

19 plans.’’

20 (b) TAX NOT DEDUCTIBLE.—Section 275(a) (relat21 ing to disallowance of deductions for certain taxes) is

22 amended by adding at the end the following new para23 graph:

24 ‘‘(7) Taxes imposed by section 4511 (relating to

25 taxes on high cost health plans).’’
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•S 2351 PCS

1 (c) CONFORMING AMENDMENTS.—

2 (1) Subchapter A of chapter 37, as added by

3 section 705, is amended by inserting after the sub4 chapter heading the following:

‘‘Part I. Premium and related assessments.

‘‘Part II. High cost health plans.

5 ‘‘PART I—PREMIUM AND RELATED

6 ASSESSMENTS’’.

7 (2) Section 4503, as so added, is amended by

8 striking ‘‘subchapter’’ each place it appears and in9 serting ‘‘part’’.

10 (d) EFFECTIVE DATE.—The amendments made by

11 this section shall take effect on January 1, 1996.

12 PART III—RECAPTURE OF CERTAIN HEALTH

13 CARE SUBSIDIES

14 SEC. 711. RECAPTURE OF CERTAIN HEALTH CARE SUB15 SIDIES RECEIVED BY HIGH-INCOME INDIVID16 UALS.

17 (a) IN GENERAL.—Subchapter A of chapter 1 is

18 amended by adding at the end the following new part:

19 ‘‘PART VIII—CERTAIN HEALTH CARE SUBSIDIES

20 RECEIVED BY HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Recapture of certain health care subsidies.
779

•S 2351 PCS

1 ‘‘SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUB2 SIDIES.

3 ‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the

4 case of an individual, if the modified adjusted gross in5 come of the taxpayer for the taxable year exceeds the

6 threshold amount, such taxpayer shall pay (in addition to

7 any other amount imposed by this subtitle) a recapture

8 amount for such taxable year equal to the aggregate of

9 the Medicare part B recapture amounts (if any) for

10 months during such year that a premium is paid under

11 part B of title XVIII of the Social Security Act for the

12 coverage of the individual under such part.

13 ‘‘(b) MEDICARE PART B PREMIUM RECAPTURE

14 AMOUNT FOR MONTH.—For purposes of this section, the

15 Medicare part B premium recapture amount for any

16 month is the amount equal to the excess of—

17 ‘‘(1) 150 percent of the monthly actuarial rate

18 for enrollees age 65 and over determined for that

19 calendar year under section 1839(b) of the Social

20 Security Act, over

21 ‘‘(2) the total monthly premium under section

22 1839 of the Social Security Act (determined without

23 regard to subsections (b) and (f) of section 1839 of

24 such Act).

25 ‘‘(c) PHASE-IN OF RECAPTURE AMOUNT.—
780

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1 ‘‘(1) IN GENERAL.—If the modified adjusted

2 gross income of the taxpayer for any taxable year

3 exceeds the threshold amount by less than $15,000,

4 the recapture amount imposed by this section for

5 such taxable year shall be an amount which bears

6 the same ratio to the recapture amount which would

7 (but for this subsection) be imposed by this section

8 for such taxable year as such excess bears to

9 $15,000.

10 ‘‘(2) JOINT RETURNS.—If a recapture amount

11 is determined separately for each spouse filing a

12 joint return, paragraph (1) shall be applied by sub13 stituting ‘$30,000’ for ‘$15,000’ each place it ap14 pears.

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

16 For purposes of this section—

17 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh18 old amount’ means—

19 ‘‘(A) except as otherwise provided in this

20 paragraph, $90,000,

21 ‘‘(B) $115,000 in the case of a joint re22 turn, and

23 ‘‘(C) zero in the case of a taxpayer who—
781

•S 2351 PCS

1 ‘‘(i) is married (as determined under

2 section 7703) but does not file a joint re3 turn for such year, and

4 ‘‘(ii) does not live apart from his

5 spouse at all times during the taxable year.

6 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

7 The term ‘modified adjusted gross income’ means

8 adjusted gross income—

9 ‘‘(A) determined without regard to sections

10 135, 911, 931, and 933, and

11 ‘‘(B) increased by the amount of interest

12 received or accrued by the taxpayer during the

13 taxable year which is exempt from tax.

14 ‘‘(3) JOINT RETURNS.—In the case of a joint

15 return—

16 ‘‘(A) the recapture amount under sub17 section (a) shall be the sum of the recapture

18 amounts determined separately for each spouse,

19 and

20 ‘‘(B) subsections (a) and (c) shall be ap21 plied by taking into account the combined modi22 fied adjusted gross income of the spouses.

23 ‘‘(4) COORDINATION WITH OTHER PROVI24 SIONS.—
782

•S 2351 PCS

1 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.—

2 For purposes of subtitle F, the recapture

3 amount imposed by this section shall be treated

4 as if it were a tax imposed by section 1.

5 ‘‘(B) NOT TREATED AS TAX FOR CERTAIN

6 PURPOSES.—The recapture amount imposed by

7 this section shall not be treated as a tax im8 posed by this chapter for purposes of determin9 ing—

10 ‘‘(i) the amount of any credit allow11 able under this chapter, or

12 ‘‘(ii) the amount of the minimum tax

13 under section 55.

14 ‘‘(C) TREATED AS PAYMENT FOR MEDICAL

15 INSURANCE.—The recapture amount imposed

16 by this section shall be treated as an amount

17 paid for insurance covering medical care, within

18 the meaning of section 213(d).

19 ‘‘(5) TAXES IMPOSED BY POSSESSIONS.—The

20 tax imposed by this section shall not apply to a bona

21 fide resident of a possession with respect to which

22 the requirements of section 21026 of the Social Se23 curity Act are met.’’

24 (b) TRANSFERS TO FEDERAL SUPPLEMENTARY

25 MEDICAL INSURANCE TRUST FUND.—
783

•S 2351 PCS

1 (1) IN GENERAL.—There are hereby appro2 priated to the Federal Supplementary Medical Insur3 ance Trust Fund amounts equivalent to the aggre4 gate increase in liabilities under chapter 1 of the In5 ternal Revenue Code of 1986 which is attributable

6 to the application of section 59B(a) of such Code, as

7 added by this section.

8 (2) TRANSFERS.—The amounts appropriated

9 by paragraph (1) to the Federal Supplementary

10 Medical Insurance Trust Fund shall be transferred

11 from time to time (but not less frequently than

12 quarterly) from the general fund of the Treasury on

13 the basis of estimates made by the Secretary of the

14 Treasury of the amounts referred to in paragraph

15 (1). Any quarterly payment shall be made on the

16 first day of such quarter and shall take into account

17 the recapture amounts referred to in such section

18 59B(a) for such quarter. Proper adjustments shall

19 be made in the amounts subsequently transferred to

20 the extent prior estimates were in excess of or less

21 than the amounts required to be transferred.

22 (c) REPORTING REQUIREMENTS.—

23 (1) Paragraph (1) of section 6050F(a) (relating

24 to returns relating to social security benefits) is

25 amended by striking ‘‘and’’ at the end of subpara-
784

•S 2351 PCS

1 graph (B) and by inserting after subparagraph (C)

2 the following new subparagraph:

3 ‘‘(D) the number of months during the cal4 endar year for which a premium was paid under

5 part B of title XVIII of the Social Security Act

6 for the coverage of such individual under such

7 part, and’’.

8 (2) Paragraph (2) of section 6050F(b) is

9 amended to read as follows:

10 ‘‘(2) the information required to be shown on

11 such return with respect to such individual.’’

12 (3) Subparagraph (A) of section 6050F(c)(1) is

13 amended by inserting before the comma ‘‘and in the

14 case of the information specified in subsection

15 (a)(1)(D)’’.

16 (4) The heading for section 6050F is amended

17 by inserting ‘‘AND MEDICARE PART B COV18 ERAGE’’ before the period.

19 (5) The item relating to section 6050F in the

20 table of sections for subpart B of part III of sub21 chapter A of chapter 61 is amended by inserting

22 ‘‘and Medicare part B coverage’’ before the period.

23 (d) WAIVER OF CERTAIN ESTIMATED TAX PEN24 ALTIES.—No addition to tax shall be imposed under sec25 tion 6654 of the Internal Revenue Code of 1986 (relating
785

•S 2351 PCS

1 to failure to pay estimated income tax) for any period be2 fore April 16, 1997, with respect to any underpayment

3 to the extent that such underpayment resulted from sec4 tion 59B(a) of the Internal Revenue Code of 1986, as

5 added by this section.

6 (e) CLERICAL AMENDMENT.—The table of parts for

7 subchapter A of chapter 1 is amended by adding at the

8 end thereof the following new item:

‘‘Part VIII. Certain health care subsidies received by high-income

individuals.’’

9 (f) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1995.

12 PART IV—OTHER PROVISIONS

13 SEC. 715. INCREASE IN TAX ON CERTAIN HOLLOW POINT

14 AND LARGE CALIBER HANDGUN AMMUNI15 TION.

16 (a) INCREASE IN MANUFACTURERS TAX.—

17 (1) IN GENERAL.—Section 4181 (relating to

18 imposition of tax on firearms) is amended—

19 (A) by striking ‘‘Shells, and cartridges’’

20 and inserting ‘‘Shells and cartridges not taxable

21 at 10,000 percent’’, and

22 (B) by adding at the end the following:

23 ‘‘ARTICLES TAXABLE AT 10,000 PERCENT.—
786

•S 2351 PCS

1 ‘‘Any jacketed, hollow point projectile

2 which may be used in a handgun and the jacket

3 of which is designed to produce, upon impact,

4 sharp-tipped, barb-like projections that extend

5 beyond the diameter of the unfired projectile.

6 ‘‘Any cartridge with a projectile measuring

7 .500 inch or greater in diameter which may be

8 used in a handgun.’’

9 (2) ADDITIONAL TAXES ADDED TO THE GEN10 ERAL FUND.—Section 3(a) of the Act of September

11 2, 1937 (16 U.S.C. 669b(a)), commonly referred to

12 as the ‘‘Pittman-Robertson Wildlife Restoration

13 Act’’, is amended by adding at the end the following

14 new sentence: ‘‘There shall not be covered into the

15 fund the portion of the tax imposed by such section

16 4181 that is attributable to any increase in amounts

17 received in the Treasury under such section by rea18 son of the amendments made by section 715(a)(1) of

19 the Health Security Act, as estimated by the Sec20 retary.’’

21 (b) EFFECTIVE DATES.—

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

23 this section shall apply to sales after December 31,

24 1994.

25 (2) FLOOR STOCKS TAX.—
787

•S 2351 PCS

1 (A) IN GENERAL.—In the case of any arti2 cle held on January 1, 1995, which is taxable

3 under section 4181 of the Internal Revenue

4 Code of 1986 on and after such date at a tax

5 rate of 10,000 percent, there is hereby imposed

6 a tax equal to the excess of—

7 (i) the tax which would be imposed

8 under section 4181 of such Code if the ar9 ticle were sold on such date, over

10 (ii) the prior tax (if any) imposed

11 under such section on such article.

12 (B) CREDIT.—Each person shall be al13 lowed as a credit against the taxes imposed by

14 subparagraph (A) an amount equal to the taxes

15 imposed on articles which such person destroys

16 (in such manner as the Secretary may pre17 scribe) after December 31, 1994, and before

18 April 1, 1995.

19 (C) PAYMENT.—The taxes imposed by sub20 paragraph (A) on any article shall be paid by

21 the person holding the article on January 1,

22 1995. Such taxes shall be paid before April 1,

23 1995, in such manner as the Secretary of the

24 Treasury may prescribe.
788

•S 2351 PCS

1 (D) ARTICLES IN FOREIGN TRADE

2 ZONES.—Notwithstanding the Act of June 18,

3 1934 (48 Stat. 998, 19 U.S.C. 81a) and any

4 other provision of law, any article which is lo5 cated in a foreign trade zone on January 1,

6 1995, shall be subject to the tax imposed by

7 subparagraph (A) if—

8 (i) internal revenue taxes have been

9 determined, or customs duties liquidated,

10 with respect to such article before such

11 date pursuant to a request made under the

12 1st proviso of section 3(a) of such Act, or

13 (ii) such article is held on such date

14 under the supervision of a customs officer

15 pursuant to the 2d proviso of such section

16 3(a).

17 (E) CONTROLLED GROUPS.—Rules similar

18 to the rules of section 5061(e)(3) of such Code

19 shall apply for purposes of this paragraph.

20 (F) OTHER LAWS APPLICABLE.—All provi21 sions of law, including penalties, applicable with

22 respect to the taxes imposed by section 4181 of

23 such Code shall, insofar as applicable and not

24 inconsistent with the provisions of this sub25 section, apply to the floor stocks taxes imposed
789

•S 2351 PCS

1 by subparagraph (A), to the same extent as if

2 such taxes were imposed by such section 4181.

3 The Secretary may treat any person who bore

4 the ultimate burden of the tax imposed by sub5 paragraph (A) as the person to whom a credit

6 or refund under such provisions may be allowed

7 or made.

8 SEC. 716. MODIFICATION TO SELF-EMPLOYMENT TAX

9 TREATMENT OF CERTAIN S CORPORATION

10 SHAREHOLDERS AND PARTNERS.

11 (a) TREATMENT OF CERTAIN S CORPORATION

12 SHAREHOLDERS.—

13 (1) AMENDMENT TO INTERNAL REVENUE

14 CODE.—Section 1402 (relating to definitions) is

15 amended by adding at the end the following new

16 subsection:

17 ‘‘(k) TREATMENT OF CERTAIN S CORPORATION

18 SHAREHOLDERS.—

19 ‘‘(1) IN GENERAL.—In the case of any individ20 ual—

21 ‘‘(A) who is a 2-percent shareholder (as

22 defined in section 1372(b)) of an S corporation

23 for any taxable year of such corporation, and
790

•S 2351 PCS

1 ‘‘(B) who provides significant services to or

2 on behalf of such S corporation during such

3 taxable year,

4 such shareholder’s net earnings from self-employ5 ment shall include 80 percent of such shareholder’s

6 pro rata share (as determined under section

7 1366(a)) of the taxable income or loss of such cor8 poration for such taxable year from service-related

9 businesses carried on by such corporation, and to

10 the extent provided in regulations, for any other tax11 able year to the extent attributable to such services.

12 ‘‘(2) CERTAIN EXCEPTIONS TO APPLY.—In de13 termining the amount to be taken into account

14 under paragraph (1), the exceptions provided in sub15 section (a) shall apply, except that, in the case of

16 the exceptions provided in subsection (a)(5), rules

17 similar to the rules of subparagraph (B) thereof

18 shall apply to shareholders in S corporations.

19 ‘‘(3) SERVICE-RELATED BUSINESS.—For pur20 poses of this subsection, the term ‘service-related

21 business’ means—

22 ‘‘(A) any trade or business involving the

23 performance of services in the fields of health

24 (other than with respect to inpatient personal

25 care facilities), law, engineering, architecture,
791

•S 2351 PCS

1 accounting, actuarial services, performing arts,

2 consulting, athletics, or financial services (other

3 than lending or brokerage services), or

4 ‘‘(B) any other trade or business with re5 spect to which the Secretary determines that

6 capital is an insignificant income-producing fac7 tor.

8 ‘‘(4) APPLICATION OF DEFERRED COMPENSA9 TION RULES.—For purposes of subchapter D of

10 chapter 1 (and any other provision of this title relat11 ing thereto), in the case of an individual who is

12 treated as having net earnings from self-employment

13 by reason of paragraph (1)—

14 ‘‘(A) such individual shall not be treated as

15 a self-employed individual (within the meaning

16 of section 401(c)(1)) with respect to services

17 performed for the S corporation, and

18 ‘‘(B) such net earnings shall be treated as

19 compensation received by the individual as an

20 employee of the S corporation.’’

21 (2) AMENDMENT TO SOCIAL SECURITY ACT.—

22 Section 211 of the Social Security Act is amended

23 by adding at the end the following new subsection:

24 ‘‘Treatment of Certain S Corporation Shareholders

25 ‘‘(k)(1) In the case of any individual—
792

•S 2351 PCS

1 ‘‘(A) who is a 2-percent shareholder (as defined

2 in section 1372(b) of the Internal Revenue Code of

3 1986) of an S corporation for any taxable year of

4 such corporation, and

5 ‘‘(B) who provides significant services to or on

6 behalf of such S corporation during such taxable

7 year,

8 such shareholder’s net earnings from self-employment

9 shall include 80 percent of such shareholder’s pro rata

10 share (as determined under section 1366(a) of such Code)

11 of the taxable income or loss of such corporation for such

12 taxable year from service-related businesses (as defined in

13 section 1402(k)(3) of such Code) carried on by such cor14 poration, and to the extent provided in regulations, for any

15 other taxable year to the extent attributable to such serv16 ices.

17 ‘‘(2) In determining the amount to be taken into ac18 count under paragraph (1), the exceptions provided in

19 subsection (a) shall apply, except that, in the case of the

20 exceptions provided in subsection (a)(5), rules similar to

21 the rules of subparagraph (B) thereof shall apply to share22 holders in S corporations.’’

23 (b) TREATMENT OF CERTAIN LIMITED PARTNERS.—
793

•S 2351 PCS

1 (1) AMENDMENT OF THE INTERNAL REVENUE

2 CODE.—Paragraph (13) of section 1402(a) is

3 amended to read as follows:

4 ‘‘(13) there shall be excluded the distributive

5 share of any item of income or loss of a limited part6 ner, as such, other than—

7 ‘‘(A) guaranteed payments described in

8 section 707(c) to that partner for services actu9 ally rendered to or on behalf of the partnership

10 to the extent that those payments are estab11 lished to be in the nature of remuneration for

12 those services, or

13 ‘‘(B) in the case of a limited partner who

14 provides significant services to or on behalf of

15 the partnership for any taxable year of the

16 partnership, 80 percent of the limited partner’s

17 distributive share (determined without regard to

18 payments described in subparagraph (A)) of the

19 taxable income or loss of such partnership—

20 ‘‘(i) for such taxable year from serv21 ice-related businesses (as defined in sub22 section (k)(3)) of such partnership, and

23 ‘‘(ii) to the extent provided in regula24 tions, for any other taxable year to the ex25 tent attributable to such services;’’.
794

•S 2351 PCS

1 (2) AMENDMENT OF THE SOCIAL SECURITY

2 ACT.—Paragraph (12) of section 211(a) of the So3 cial Security Act is amended to read as follows:

4 ‘‘(12) there shall be excluded the distributive

5 share of any item of income or loss of a limited part6 ner, as such, other than—

7 ‘‘(A) guaranteed payments described in

8 section 707(c) of the Internal Revenue Code of

9 1986 to that partner for services actually ren10 dered to or on behalf of the partnership to the

11 extent that those payments are established to

12 be in the nature of remuneration for those serv13 ices, or

14 ‘‘(B) in the case of a limited partner who

15 provides significant services to or on behalf of

16 the partnership for any taxable year of the

17 partnership, 80 percent of the limited partner’s

18 distributive share (determined without regard to

19 payments described in subparagraph (A)) of the

20 taxable income or loss of such partnership—

21 ‘‘(i) for such taxable year from serv22 ice-related businesses (as defined in section

23 1402(k)(3) of such Code) of such partner24 ship, and
795

•S 2351 PCS

1 ‘‘(ii) to the extent provided in regula2 tions prescribed by the Secretary of the

3 Treasury, for any other taxable year to the

4 extent attributable to such services;’’.

5 (c) INVENTORY INCOME.—Section 1402 (relating to

6 definitions), as amended by subsection (a), is amended by

7 adding at the end the following new subsection:

8 ‘‘(l) INVENTORY INCOME.—

9 ‘‘(1) IN GENERAL.—The net earnings from self10 employment of any taxpayer for any taxable year

11 under subsection (a) (determined without regard to

12 this subsection) shall be reduced by 40 percent of

13 the lesser of—

14 ‘‘(A) the taxpayer’s allocable share of net

15 inventory income, or

16 ‘‘(B) the amount of such net earnings in

17 excess of the applicable amount for the taxable

18 year.

19 ‘‘(2) NET INVENTORY INCOME.—

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (1), the term ‘net inventory income’

22 means net income from the sale of property de23 scribed in section 1221(1).

24 ‘‘(B) DEALERS IN SECURITIES.—For pur25 poses of subparagraph (A)—
796

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1 ‘‘(i) any security described in section

2 475(c)(2) (without regard to the last sen3 tence thereof) which is held by a person as

4 a dealer in securities (as defined in section

5 475(c)(1)) shall be treated as property de6 scribed in section 1221(1), and

7 ‘‘(ii) net income from any such secu8 rity shall be taken into account to the ex9 tent otherwise taken into account in com10 puting net earnings from self-employment.

11 ‘‘(3) APPLICABLE AMOUNT.—For purposes of

12 paragraph (1), the term ‘applicable amount’ means

13 the excess of—

14 ‘‘(A) $135,000, adjusted, in the case of

15 any taxable year beginning in any calendar year

16 after 1996, in the same manner as is used in

17 adjusting the contribution and benefit base for

18 the calendar year under section 230(b) of the

19 Social Security Act, over

20 ‘‘(B) the amount of wages paid to the indi21 vidual during the taxable year.’’

22 (d) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years of individuals be24 ginning after December 31, 1995, and to taxable years
797

•S 2351 PCS

1 of S corporations and partnerships ending with or within

2 such taxable years of individuals.

3 SEC. 717. EXTENDING MEDICARE COVERAGE OF, AND AP4 PLICATION OF HOSPITAL INSURANCE TAX

5 TO, ALL STATE AND LOCAL GOVERNMENT

6 EMPLOYEES.

7 (a) IN GENERAL.—

8 (1) APPLICATION OF HOSPITAL INSURANCE

9 TAX.—Section 3121(u)(2) is amended by striking

10 subparagraphs (C) and (D).

11 (2) COVERAGE UNDER MEDICARE.—Section

12 210(p) of the Social Security Act (42 U.S.C. 410(p))

13 is amended by striking paragraphs (3) and (4).

14 (3) EFFECTIVE DATE.—The amendments made

15 by this subsection shall apply to services performed

16 after September 30, 1995.

17 (b) TRANSITION IN BENEFITS FOR STATE AND

18 LOCAL GOVERNMENT EMPLOYEES AND FORMER EM19 PLOYEES.—

20 (1) IN GENERAL.—

21 (A) EMPLOYEES NEWLY SUBJECT TO

22 TAX.—For purposes of sections 226, 226A, and

23 1811 of the Social Security Act, in the case of

24 any individual who performs services during the

25 calendar quarter beginning October 1, 1995,
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•S 2351 PCS

1 the wages for which are subject to the tax im2 posed by section 3101(b) of the Internal Reve3 nue Code of 1986 only because of the amend4 ment made by subsection (a), the individual’s

5 medicare qualified State or local government

6 employment (as defined in subparagraph (B))

7 performed before October 1, 1995, shall be con8 sidered to be ‘‘employment’’ (as defined for pur9 poses of title II of such Act), but only for pur10 poses of providing the individual (or another

11 person) with entitlement to hospital insurance

12 benefits under part A of title XVIII of such Act

13 for months beginning with October 1995.

14 (B) MEDICARE QUALIFIED STATE OR

15 LOCAL GOVERNMENT EMPLOYMENT DE16 FINED.—In this paragraph, the term ‘‘medicare

17 qualified State or local government employ18 ment’’ means medicare qualified government

19 employment described in section 210(p)(1)(B)

20 of the Social Security Act (determined without

21 regard to section 210(p)(3) of such Act, as in

22 effect before its repeal under subsection (a)(2)).

23 (2) AUTHORIZATION OF APPROPRIATIONS.—

24 There are authorized to be appropriated to the Fed25 eral Hospital Insurance Trust Fund from time to
799

•S 2351 PCS

1 time such sums as the Secretary of Health and

2 Human Services deems necessary for any fiscal year

3 on account of—

4 (A) payments made or to be made during

5 such fiscal year from such Trust Fund with re6 spect to individuals who are entitled to benefits

7 under title XVIII of the Social Security Act

8 solely by reason of paragraph (1),

9 (B) the additional administrative expenses

10 resulting or expected to result therefrom, and

11 (C) any loss in interest to such Trust

12 Fund resulting from the payment of those

13 amounts, in order to place such Trust Fund in

14 the same position at the end of such fiscal year

15 as it would have been in if this subsection had

16 not been enacted.

17 (3) INFORMATION TO INDIVIDUALS WHO ARE

18 PROSPECTIVE MEDICARE BENEFICIARIES BASED ON

19 STATE AND LOCAL GOVERNMENT EMPLOYMENT.—

20 Section 226(g) of the Social Security Act (42 U.S.C.

21 426(g)) is amended—

22 (A) by redesignating paragraphs (1)

23 through (3) as subparagraphs (A) through (C),

24 respectively,

25 (B) by inserting ‘‘(1)’’ after ‘‘(g)’’, and
800

•S 2351 PCS

1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(2) The Secretary, in consultation with State

4 and local governments, shall provide procedures de5 signed to assure that individuals who perform medi6 care qualified government employment by virtue of

7 service described in section 210(a)(7) are fully in8 formed with respect to (A) their eligibility or poten9 tial eligibility for hospital insurance benefits (based

10 on such employment) under part A of title XVIII,

11 (B) the requirements for, and conditions of, such eli12 gibility, and (C) the necessity of timely application

13 as a condition of becoming entitled under subsection

14 (b)(2)(C), giving particular attention to individuals

15 who apply for an annuity or retirement benefit and

16 whose eligibility for such annuity or retirement bene17 fit is based on a disability.’’

18 (c) TECHNICAL AMENDMENTS.—

19 (1) Subparagraph (A) of section 3121(u)(2) is

20 amended by striking ‘‘subparagraphs (B) and (C),’’

21 and inserting ‘‘subparagraph (B),’’.

22 (2) Subparagraph (B) of section 210(p)(1) of

23 the Social Security Act (42 U.S.C. 410(p)(1)) is

24 amended by striking ‘‘paragraphs (2) and (3).’’ and

25 inserting ‘‘paragraph (2).’’
801

•S 2351 PCS

1 (3) Section 218 of the Social Security Act (42

2 U.S.C. 418) is amended by striking subsection (n).

3 (4) The amendments made by this subsection

4 shall apply after September 30, 1995.

5 Subtitle B—Tax Treatment of

6 Employer-Provided Health Care

7 SEC. 721. TAX TREATMENT OF VOLUNTARY EMPLOYER

8 HEALTH CARE CONTRIBUTIONS.

9 (a) IN GENERAL.—Chapter 37 (relating to health-re10 lated taxes), as added by section 705, is amended by add11 ing at the end the following new subchapter:

12 ‘‘Subchapter B—Voluntary Employer13 Provided Health Benefits

‘‘Sec. 4521. Taxable employer-provided health benefits.

‘‘Sec. 4522. Discriminatory employer practices.

‘‘Sec. 4523. Exceptions.

‘‘Sec. 4524. Definitions and special rules.

14 ‘‘SEC. 4521. TAXABLE EMPLOYER-PROVIDED HEALTH BENE15 FITS.

16 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

17 a tax equal to the product of—

18 ‘‘(1) the sum of—

19 ‘‘(A) the taxable employer contributions for

20 any taxable year, plus

21 ‘‘(B) the aggregate employer contributions

22 for permitted coverage described in subpara23 graph (A) or (B) of subsection (b)(2) during
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1 any portion of the taxable year during which

2 there is discriminatory permitted coverage, and

3 ‘‘(2) the highest rate of tax imposed under sec4 tion 11(b) for the taxable year.

5 ‘‘(b) TAXABLE EMPLOYER CONTRIBUTION.—For

6 purposes of this section—

7 ‘‘(1) IN GENERAL.—The term ‘taxable employer

8 contribution’ means any employer contribution under

9 an accident or health plan for coverage of an em10 ployee other than permitted coverage.

11 ‘‘(2) PERMITTED COVERAGE.—For purposes of

12 this subsection, the term ‘permitted coverage’

13 means—

14 ‘‘(A) coverage under a certified standard

15 health plan (as defined in section 21011(a)(2)

16 of the Social Security Act),

17 ‘‘(B) coverage under a certified supple18 mental health benefit plan (as defined in section

19 21011(a)(4) of the Social Security Act), except

20 that this subparagraph shall not apply to cov21 erage of any employee who is covered under

22 such a certified standard health plan which pro23 vides the alternative standard benefits package

24 described in subtitle C of such Act,
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•S 2351 PCS

1 ‘‘(C) coverage under a qualified long-term

2 care insurance policy (as defined in section

3 7702B(b)),

4 ‘‘(D) coverage providing wages or pay5 ments in lieu of wages for any period during

6 which the employee is absent from work on ac7 count of sickness or injury,

8 ‘‘(E) coverage only for accidental death or

9 dismemberment,

10 ‘‘(F) coverage under a medicare supple11 mental policy (as defined in section 1882(g)(1)

12 of the Social Security Act),

13 ‘‘(G) worker’s compensation or similar in14 surance, and

15 ‘‘(H) coverage under an equivalent health

16 care program (as defined in section 21100(6) of

17 the Social Security Act).

18 ‘‘(c) DISCRIMINATORY PERMITTED COVERAGE.—For

19 purposes of this section, the term ‘discriminatory per20 mitted coverage’ means, with respect to any period, cov21 erage—

22 ‘‘(1) which is permitted coverage described in

23 subparagraph (A) or (B) of subsection (b)(2), and
804

•S 2351 PCS

1 ‘‘(2) with respect to which the requirements of

2 subsection (a) or (b) of section 4522 are not met

3 during such period.

4 ‘‘SEC. 4522. DISCRIMINATORY EMPLOYER PRACTICES.

5 ‘‘(a) HEALTH STATUS REQUIREMENTS.—For pur6 poses of section 4521(c), an employer meets the require7 ments of this subsection if, with respect to coverage de8 scribed in such section—

9 ‘‘(1) there is no waiting period or denial of cov10 erage with respect to an employee, and

11 ‘‘(2) the amount of the employer contribution

12 on behalf of an employee is not conditioned, and

13 does not vary,

14 by reason of the employee’s health status, claims experi15 ence, medical history, receipt of health care, or lack of evi16 dence of insurability.

17 ‘‘(b) UNIFORM CONTRIBUTION REQUIREMENTS.—

18 ‘‘(1) IN GENERAL.—For purposes of section

19 4521(c), an employer meets the requirements of this

20 subsection if the employer contribution on behalf of

21 an employee for coverage described in such section

22 is equivalent to each employer contribution on behalf

23 of all other employees who elect such coverage under

24 plans offered by the employer.
805

•S 2351 PCS

1 ‘‘(2) EQUIVALENT CONTRIBUTION.—For pur2 poses of paragraph (1), a contribution is equivalent

3 to any other contribution if—

4 ‘‘(A) it is the same dollar amount as the

5 other contribution,

6 ‘‘(B) it represents the same percentage of

7 cost under the plan to which it is made as does

8 the other contribution, or

9 ‘‘(C) it represents the same percentage of

10 the weighted average premium for the class of

11 enrollment (as defined in section 1952 of the

12 Social Security Act) for the community rating

13 area in which the employee works as does the

14 other contribution.

15 For purposes of applying subparagraph (B) or (C),

16 any dollar limitation applicable to all employer con17 tributions (whether expressed as a dollar amount or

18 a percentage described in subparagraph (C)) shall be

19 disregarded.

20 ‘‘(3) EXCLUDED EMPLOYEES.—

21 ‘‘(A) IN GENERAL.—The following employ22 ees of an employer shall be excluded from con23 sideration under this subsection:
806

•S 2351 PCS

1 ‘‘(i) Any employee before the employee

2 has completed 6 months of service with the

3 employer.

4 ‘‘(ii) Any employee who normally

5 works less than 24 hours per week.

6 ‘‘(iii) Any employee who normally

7 works during not more than 6 months of

8 any year.

9 ‘‘(iv) Any employee who has not at10 tained age 18.

11 ‘‘(v) Any employee who is included in

12 a unit of employees covered by an agree13 ment which the Secretary finds to be a col14 lective bargaining agreement between em15 ployee representatives and 1 or more em16 ployers if there is evidence that employer17 provided benefits for standard health bene18 fits coverage was the subject of good faith

19 bargaining between the employee rep20 resentatives and employer or employers.

21 ‘‘(vi) Any employee who is a non22 resident alien and who receives no earned

23 income (within the meaning of section

24 911(d)(2)) from the employer which con25 stitutes income from sources within the
807

•S 2351 PCS

1 United States (within the meaning of sec2 tion 861(a)(3)).

3 ‘‘(vii) Any former employee.

4 ‘‘(B) COVERAGE OF PART-TIME EMPLOY5 EES.—

6 ‘‘(i) IN GENERAL.—If an employer

7 makes an employer contribution for any

8 period for coverage described in section

9 4521(c) for any employee who normally

10 works at least 10 hours but less than 24

11 hours per week, subparagraph (A)(ii) shall

12 be applied by substituting ‘10 hours’ for

13 ‘24 hours’.

14 ‘‘(ii) REQUIREMENTS MAY BE MET

15 SEPARATELY.—If an employer elects the

16 application of this clause—

17 ‘‘(I) the requirements of this sub18 section shall be applied separately to

19 employees to whom this subsection ap20 plies by reason of clause (i), and

21 ‘‘(II) such employees shall be ex22 cluded in determining whether such

23 requirements are met with respect to

24 any other employees.
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•S 2351 PCS

1 ‘‘(iii) PRO RATA CONTRIBUTIONS PER2 MISSIBLE.—For purposes of this sub3 section, contributions on behalf of any em4 ployee to which this subsection applies by

5 reason of clause (i) shall not fail to be

6 treated as equivalent solely because they

7 are proportionate to the number of hours

8 the employee works.

9 ‘‘(4) AGGREGATION RULES.—For purposes of

10 this subsection—

11 ‘‘(A) IN GENERAL.—All employers treated

12 as a single employer under subsection (b) or (c)

13 of section 414 shall be treated as a single em14 ployer.

15 ‘‘(B) AFFILIATED SERVICE GROUPS.—All

16 employees of members of an affiliated service

17 group (as defined in section 414(m)) shall be

18 treated as employed by a single employer.

19 ‘‘(5) SEPARATE LINES OF BUSINESS.—If, under

20 section 414(r), an employer is treated as operating

21 separate lines of business for a year, the employer

22 may apply this subsection separately to employees in

23 each separate line of business.
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•S 2351 PCS

1 ‘‘SEC. 4523. EXCEPTIONS.

2 ‘‘(a) EXCEPTION FOR REASONABLE DILIGENCE.—No

3 tax shall be imposed by this subchapter during any period

4 for which it is established to the satisfaction of the Sec5 retary that the employer did not know, or exercising rea6 sonable diligence would not have known, that the employer

7 had taken any action subject to tax under this subchapter.

8 ‘‘(b) CORRECTIONS WITHIN 30 DAYS.—No tax shall

9 be imposed by this subchapter with respect to any action

10 subject to tax under this subchapter if—

11 ‘‘(1) such action was due to reasonable cause

12 and not to willful neglect, and

13 ‘‘(2) such action is corrected during the 30-day

14 period beginning on the 1st date the employer knew,

15 or exercising reasonable diligence would have known,

16 that such action was subject to such tax.

17 ‘‘(c) WAIVER BY SECRETARY.—In the case of any ac18 tion subject to tax under this subchapter which is due to

19 reasonable cause and not to willful neglect, the Secretary

20 may waive part or all of any tax imposed by this sub21 chapter to the extent that the payment of such tax would

22 be excessive relative to the failure involved.

23 ‘‘SEC. 4524. DEFINITIONS AND SPECIAL RULES.

24 ‘‘(a) DEFINITIONS.—For purposes of this sub25 chapter—

26 ‘‘(1) EMPLOYER.—
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•S 2351 PCS

1 ‘‘(A) IN GENERAL.—The term ‘employer’

2 means any person or governmental entity for

3 whom an individual performs services, of what4 ever nature, as an employee (as defined in sec5 tion 3401(c)).

6 ‘‘(B) SPECIAL RULES.—

7 ‘‘(i) A partnership shall be treated as

8 the employer of each partner who is an

9 employee within the meaning of section

10 401(c)(1).

11 ‘‘(ii) An S corporation shall be treated

12 as the employer of each shareholder who is

13 an employee within the meaning of section

14 401(c)(1).

15 ‘‘(2) EMPLOYER CONTRIBUTIONS.—

16 ‘‘(A) IN GENERAL.—The term ‘employer

17 contribution’ means, with respect to coverage

18 under a health plan, a reasonable estimate of

19 the portion of the cost of the coverage which is

20 to be provided by the employer.

21 ‘‘(B) SPECIAL RULE FOR CAFETERIA

22 PLANS.—The cost of any coverage provided

23 through a cafeteria plan shall be determined on

24 the basis of the coverage available through the

25 plan.
811

•S 2351 PCS

1 ‘‘(b) LIABILITY FOR TAX.—Any tax imposed by this

2 subchapter shall be paid by the employer.

3 ‘‘(c) TAXES TO APPLY TO GOVERNMENTAL AND

4 OTHER TAX-EXEMPT ENTITIES.—Notwithstanding any

5 other provision of law or rule of law, none of the following

6 shall be exempt from the taxes imposed by this sub7 chapter:

8 ‘‘(1) The United States, any State or political

9 subdivision thereof, the District of Columbia, and

10 any agency or instrumentality of any of the fore11 going.

12 ‘‘(2) Any other entity otherwise exempt from

13 tax under chapter 1.

14 ‘‘(d) NO COVER OVER TO POSSESSIONS.—Notwith15 standing any other provision of law, no amount collected

16 under this subchapter shall be covered over to any posses17 sion of the United States.

18 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

19 such regulations as are necessary to carry out the provi20 sions of this subchapter, including regulations providing

21 for the determination of the amount of any employer con22 tribution, the aggregation of governmental and tax-exempt

23 entities, and the prevention of the avoidance of any tax

24 imposed by this subchapter through the use of any ar25 rangement described in section 414(o).’’
812

•S 2351 PCS

1 (b) EMPLOYEE LEASING.—Paragraph (3) of section

2 414(n) is amended by striking ‘‘and’’ at the end of sub3 paragraph (B), by striking the period at the end of sub4 paragraph (C) and inserting ‘‘, and’’, and by adding at

5 the end the following new subparagraph:

6 ‘‘(D) subchapter B of chapter 37.’’

7 (c) TAX NOT DEDUCTIBLE.—Paragraph (7) of sec8 tion 275(a), as added by section 706(b), is amended by

9 inserting ‘‘or 4521 (relating to taxable employer-provided

10 health benefits’’ after ‘‘plans)’’.

11 (d) CONFORMING AMENDMENT.—The table of sub12 chapters for chapter 37 is amended by adding at the end

13 the following new item:

‘‘SUBCHAPTER B. Voluntary employer-provided health benefits.’’

14 (e) EFFECTIVE DATE.—The amendments made by

15 this section shall take effect on January 1, 1996.

16 SEC. 722. ELIMINATION OF EXCLUSION OF HEALTH BENE17 FITS PROVIDED THROUGH A FLEXIBLE

18 SPENDING ARRANGEMENT.

19 (a) IN GENERAL.—The text of section 106 (relating

20 to contributions by employer to accident and health plans)

21 is amended to read as follows:

22 ‘‘(a) GENERAL RULE.—Except as otherwise provided

23 in this section, gross income of an employee does not in24 clude employer-provided coverage under an accident or

25 health plan.
813

•S 2351 PCS

1 ‘‘(b) EXCEPTION FOR COVERAGE THROUGH FLEXI2 BLE SPENDING ARRANGEMENTS.—

3 ‘‘(1) IN GENERAL.—Subsection (a) shall not

4 apply to coverage provided through a flexible spend5 ing or similar arrangement.

6 ‘‘(2) FLEXIBLE SPENDING ARRANGEMENT.—

7 For purposes of this subsection, a flexible spending

8 arrangement is a benefit program which provides

9 employees with coverage under which—

10 ‘‘(A) specified incurred expenses may be

11 reimbursed (subject to reimbursement maxi12 mums and other reasonable conditions), and

13 ‘‘(B) the maximum amount of reimburse14 ment which is reasonably available to a partici15 pant for such coverage is less than 500 percent

16 of the cost of such coverage.

17 In the case of an insured plan, the maximum

18 amount reasonably available shall be determined on

19 the basis of the underlying coverage.’’

20 (b) EMPLOYMENT TAX TREATMENT.—

21 (1) SOCIAL SECURITY TAX.—

22 (A) Subsection (a) of section 3121 is

23 amended by inserting after paragraph (21) the

24 following new sentence:
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•S 2351 PCS

1 ‘‘Nothing in paragraph (2) shall exclude from the term

2 ‘wages’ any amount which is required to be included in

3 gross income under section 106(b).’’

4 (B) Subsection (a) of section 209 of the

5 Social Security Act is amended by inserting

6 after paragraph (21) the following new sen7 tence:

8 ‘‘Nothing in paragraph (2) shall exclude from the term

9 ‘wages’ any amount which is required to be included in

10 gross income under section 106(b) of the Internal Revenue

11 Code of 1986.’’

12 (2) RAILROAD RETIREMENT TAX.—Paragraph

13 (1) of section 3231(e) is amended by adding at the

14 end thereof the following new sentence: ‘‘Nothing in

15 clause (i) of the second sentence of this paragraph

16 shall exclude from the term ‘compensation’ any

17 amount which is required to be included in gross in18 come under section 106(b).’’

19 (3) UNEMPLOYMENT TAX.—Subsection (b) of

20 section 3306 is amended by inserting after para21 graph (16) the following new sentence:

22 ‘‘Nothing in paragraph (2) shall exclude from the term

23 ‘wages’ any amount which is required to be included in

24 gross income under section 106(b).’’
815

•S 2351 PCS

1 (4) WAGE WITHHOLDING.—Subsection (a) of

2 section 3401 is amended by adding at the end there3 of the following new sentence:

4 ‘‘Nothing in the preceding provisions of this subsection

5 shall exclude from the term ‘wages’ any amount which is

6 required to be included in gross income under section

7 106(b).’’

8 (c) EFFECTIVE DATE.—

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

10 this section shall take effect on January 1, 1996.

11 (2) BENEFITS PROVIDED PURSUANT TO COL12 LECTIVE BARGAINING AGREEMENTS.—In the case of

13 a flexible spending arrangement maintained pursu14 ant to 1 or more collective bargaining agreements

15 between employee representatives and 1 or more em16 ployers which was ratified before June 30, 1994, the

17 amendments referred to in paragraph (1) shall not

18 apply to benefits pursuant to any such agreement

19 before the later of—

20 (A) January 1, 1996, or

21 (B) the earlier of—

22 (i) the date on which the last of such

23 agreements terminate (determined without

24 regard to any extension thereof on or after

25 June 30, 1994), or
816

•S 2351 PCS

1 (ii) January 1, 1998.

2 SEC. 723. 2-YEAR EXTENSION OF DEDUCTION FOR HEALTH

3 INSURANCE COSTS OF SELF-EMPLOYED INDI4 VIDUALS.

5 (a) IN GENERAL.—Paragraph (6) of section 162(l)

6 (relating to special rules for health insurance costs of self7 employed individuals) is amended by striking ‘‘1993’’ and

8 inserting ‘‘1995’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 paragraph (1) shall apply to taxable years beginning after

11 December 31, 1993.

12 SEC. 724. LIMITATION ON PREPAYMENT OF MEDICAL IN13 SURANCE PREMIUMS.

14 (a) GENERAL RULE.—Subsection (d) of section 213

15 is amended by adding at the end the following new para16 graph:

17 ‘‘(10) LIMITATION ON PREPAYMENTS.—If the

18 taxpayer pays a premium or other amount which

19 constitutes medical care under paragraph (1), to the

20 extent such premium or other amount is properly al21 locable to insurance coverage or care to be provided

22 during periods more than 12 months after the

23 month in which such payment is made, such pre24 mium shall be treated as paid ratably over the pe25 riod during which such insurance coverage or care is
817

•S 2351 PCS

1 to be provided. The preceding sentence shall not

2 apply to any premium to which paragraph (7) ap3 plies.’’

4 (b) EFFECTIVE DATE.—The amendment made by

5 subsection (a) shall apply to amounts paid after December

6 31, 1994.

7 Subtitle C—Deduction for Individ8 uals Purchasing Own Health In9 surance

10 SEC. 731. DEDUCTION FOR HEALTH INSURANCE COSTS OF

11 INDIVIDUALS.

12 (a) IN GENERAL.—Section 213 (relating to deduction

13 for medical, dental, etc. expenses) is amended by adding

14 at the end the following new subsection:

15 ‘‘(f) STANDARD HEALTH INSURANCE COSTS OF IN16 DIVIDUALS.—

17 ‘‘(1) IN GENERAL.—The adjusted gross income

18 limitation under subsection (a) shall not apply to

19 100 percent of the amounts paid by an eligible indi20 vidual during the taxable year for qualified health

21 care costs (and such amounts shall not be taken into

22 account in determining whether such limitation ap23 plies to other amounts).

24 ‘‘(2) QUALIFIED HEALTH CARE COSTS.—For

25 purposes of this subsection—
818

•S 2351 PCS

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

2 health care costs’ means expenses for coverage

3 of the taxpayer, the taxpayer’s spouse, or any

4 dependent under a certified standard health

5 plan.

6 ‘‘(B) LIMITATIONS.—For purposes of sub7 paragraph (A)—

8 ‘‘(i) NO DEDUCTION FOR EMPLOYER9 SUBSIDIZED HEALTH COSTS.—Qualified

10 health care costs shall not include any

11 amount paid for coverage of an individual

12 under a certified standard health plan for

13 any month if the individual is eligible to

14 participate for such month in an employer15 subsidized certified standard health plan

16 maintained by any employer of the tax17 payer, the taxpayer’s spouse, or any de18 pendent.

19 ‘‘(ii) CERTAIN PREPAYMENTS.—If any

20 amount paid during a taxable year is allo21 cable to coverage to be provided more than

22 12 months after the month of payment,

23 such amount shall be treated as paid rat24 ably over the period of the coverage.
819

•S 2351 PCS

1 ‘‘(3) OTHER DEFINITIONS AND SPECIAL

2 RULES.—For purposes of this subsection—

3 ‘‘(A) CERTIFIED STANDARD HEALTH

4 PLAN.—The term ‘certified standard health

5 plan’ has the meaning given such term by sec6 tion 21011(a)(2) of the Social Security Act.

7 ‘‘(B) EMPLOYER.—The term ‘employer’

8 has the meaning given such term by section

9 4524(a)(1).

10 ‘‘(C) DEDUCTION NOT ALLOWED FOR

11 SELF-EMPLOYMENT TAX PURPOSES.—The de12 duction allowable by reason of this subsection

13 shall not be taken into account in determining

14 an individual’s net earnings from self-employ15 ment (within the meaning of section 1402(a))

16 for purposes of chapter 2.

17 ‘‘(4) REDUCTION IN PERCENTAGE.—For re18 quirement that the President reduce the percentage

19 under paragraph (1) to offset deficits in Federal

20 health care spending, see section 801 of the Health

21 Security Act.’’

22 (b) DEDUCTION ALLOWED AGAINST GROSS IN23 COME.—Section 62(a) (defining adjusted gross income) is

24 amended by inserting after paragraph (15) the following

25 new paragraph:
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•S 2351 PCS

1 ‘‘(16) DEDUCTION FOR QUALIFIED HEALTH

2 CARE COSTS.—The deduction allowed under section

3 213(a) for amounts described in section 213(f).’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 1995.

7 Subtitle D—Exempt Organizations

8 PART I—HEALTH CARE ORGANIZATIONS

9 SEC. 741. QUALIFICATION AND DISCLOSURE REQUIRE10 MENTS FOR NONPROFIT HEALTH CARE OR11 GANIZATIONS.

12 (a) TREATMENT OF HOSPITALS AND OTHER ENTI13 TIES PROVIDING HEALTH CARE SERVICES.—Section 501

14 (relating to exemption from tax on corporations, certain

15 trusts, etc.) is amended by redesignating subsection (n)

16 as subsection (o) and by inserting after subsection (m) the

17 following new subsection:

18 ‘‘(n) QUALIFICATION OF HEALTH CARE ORGANIZA19 TIONS AS EXEMPT ORGANIZATIONS.—

20 ‘‘(1) IN GENERAL.—An organization which is

21 described in paragraph (3) or (4) of subsection (c)

22 and the predominant activity of which is the provi23 sion of health care services shall be exempt from tax

24 under subsection (a) only if—
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•S 2351 PCS

1 ‘‘(A) such organization, with the participa2 tion of community representatives, annually—

3 ‘‘(i) assesses its community’s needs

4 for health care services and qualified out5 reach services, and

6 ‘‘(ii) prepares a written plan to meet

7 those needs,

8 ‘‘(B) pursuant to such plan, such organiza9 tion provides (directly or indirectly) significant

10 qualified outreach services,

11 ‘‘(C) such organization does not discrimi12 nate against individuals in the provision of

13 health care services on the basis of participation

14 in a government-sponsored health plan, and

15 ‘‘(D) such organization does not discrimi16 nate against individuals in the provision of

17 emergency health care services on the basis of

18 ability to pay.

19 ‘‘(2) SPECIAL RULE FOR HEALTH MAINTE20 NANCE ORGANIZATIONS.—A health maintenance or21 ganization shall not be treated as described in sub22 section (c)(3) unless substantially all of its primary

23 care health services are provided as described in sub24 section (m)(6)(A).
822

•S 2351 PCS

1 ‘‘(3) DEFINITIONS AND SPECIAL RULE.—For

2 purposes of this subsection—

3 ‘‘(A) QUALIFIED OUTREACH SERVICES.—

4 The term ‘qualified outreach services’ means

5 health care services (or preventive care, edu6 cational, or social services programs related

7 thereto) which are provided—

8 ‘‘(i) in 1 or more medically under9 served areas,

10 ‘‘(ii) at below cost to individuals who

11 are otherwise unable to afford such serv12 ices, or

13 ‘‘(iii) at emergency care facilities

14 which provide specialty services and which

15 normally operate at a loss.

16 Such term shall not include insurance described

17 in subparagraph (B)(iii) unless such insurance

18 is provided on a subsidized basis.

19 ‘‘(B) HEALTH CARE SERVICES.—The term

20 ‘health care services’ means—

21 ‘‘(i) any activity which consists of pro22 viding medical care (as defined in section

23 213(d)(1)(A)) to individuals,

24 ‘‘(ii) in the case of an organization de25 scribed in subsection (c)(3), any activity
823

•S 2351 PCS

1 which is treated as accomplishing an ex2 empt purpose of the organization solely be3 cause it is carried on as part of an activity

4 described in clause (i), and

5 ‘‘(iii) insurance (other than commer6 cial-type insurance, as defined in sub7 section (m)) for the activities described in

8 clauses (i) and (ii).

9 ‘‘(C) MEDICALLY UNDERSERVED AREA.—

10 The term ‘medically underserved area’ means,

11 with respect to a health care service, any area

12 reasonably determined by the organization (in a

13 manner not inconsistent with regulations pre14 scribed by the Secretary) to have—

15 ‘‘(i) a shortage (relative to the num16 ber of individuals needing such service) of

17 health professionals performing such serv18 ice, or

19 ‘‘(ii) a population group experiencing

20 such a shortage.

21 Such term includes a health professional short22 age area (as defined in section 332 of the Pub23 lic Health Service Act).

24 ‘‘(4) EXCEPTIONS.—This subsection shall not

25 apply to any organization which—
824

•S 2351 PCS

1 ‘‘(A) demonstrates, in a manner not incon2 sistent with regulations prescribed by the Sec3 retary, that one of its principal purposes is aca4 demic training or medical research, or

5 ‘‘(B) provides health care services exclu6 sively on an uncompensated basis, regardless of

7 ability to pay.

8 ‘‘(5) DISALLOWANCE OF CHARITABLE DEDUC9 TIONS.—No gift or bequest to an organization which

10 is not exempt from tax by reason of this subsection

11 shall be allowed as a deduction under section 170,

12 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or

13 2522.

14 ‘‘(6) REQUIREMENTS SUPPLEMENT OTHER RE15 QUIREMENTS.—The requirements of this subsection

16 are in addition to, and not in lieu of, the require17 ments otherwise applicable to an organization de18 scribed in paragraph (3) or (4) of subsection (c).’’

19 (b) REPORTING AND DISCLOSURE OF NEEDS AS20 SESSMENT AND PLAN.—

21 (1) REPORTING.—

22 (A) ORGANIZATIONS DESCRIBED IN SEC23 TION 501(C)(3).—Subsection (b) of section 6033

24 (relating to certain organizations described in

25 section 501(c)(3)) is amended by striking
825

•S 2351 PCS

1 ‘‘and’’ at the end of paragraph (9), by redesig2 nating paragraph (10) as paragraph (12), and

3 by inserting after paragraph (9) the following

4 new paragraphs:

5 ‘‘(10) in the case of an organization which pre6 pares a plan described in section 501(n)(1)(A) (re7 lating to community needs)—

8 ‘‘(A) a copy of such plan for the year, and

9 ‘‘(B) information on the implementation of

10 such plan for the year (including unrecovered

11 costs and revenues foregone in furtherance of

12 such plan),

13 ‘‘(11) such information as the Secretary may

14 require with respect to any taxable inurement (as

15 defined in section 4958(d)), and’’.

16 (B) ORGANIZATIONS DESCRIBED IN SEC17 TION 501(C)(4).—Section 6033 is amended by re18 designating subsection (f) as subsection (g) and

19 by inserting after subsection (e) the following

20 new subsection:

21 ‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SEC22 TION 501(c)(4).—Every organization described in section

23 501(c)(4) which is subject to the requirements of sub24 section (a) and which prepares a plan described in section
826

•S 2351 PCS

1 501(n)(1)(A) (relating to community needs) for the

2 year—

3 ‘‘(1) shall include a copy of such plan with the

4 return required under subsection (a) for the year,

5 and

6 ‘‘(2) shall include on such return the informa7 tion referred to in paragraphs (10)(B) and (11) of

8 subsection (b) with respect to such organization.’’

9 (2) DISCLOSURE.—

10 (A) IN GENERAL.—Subsection (e) of sec11 tion 6104 (relating to public inspection of cer12 tain annual returns and applications for exemp13 tion) is amended by adding at the end the fol14 lowing new paragraph:

15 ‘‘(3) COMMUNITY HEALTH CARE NEEDS AS16 SESSMENT AND PLAN.—

17 ‘‘(A) IN GENERAL.—Every organization

18 which is required to prepare a plan described in

19 section 501(n)(1)(A) (relating to community

20 needs)—

21 ‘‘(i) shall make a copy of such plan

22 (and the assessment on which such plan is

23 based) available for inspection during regu24 lar business hours by any individual at the

25 principal office of such organization and, if
827

•S 2351 PCS

1 such organization regularly maintains 1 or

2 more regional or district offices having 3

3 or more employees, at each such regional

4 or district office, and

5 ‘‘(ii) upon request of an individual

6 made at such principal office or such a re7 gional or district office, shall provide—

8 ‘‘(I) a copy of such plan (and as9 sessment), and

10 ‘‘(II) a copy of the annual return

11 filed under section 6033,

12 to such individual without charge other

13 than a reasonable fee for any reproduction

14 and mailing costs.

15 If the request under clause (ii) is made in per16 son, such copies shall be provided immediately

17 and, if made other than in person, shall be pro18 vided within 30 days.

19 ‘‘(B) PERIOD OF AVAILABILITY.—Subpara20 graph (A) shall apply—

21 ‘‘(i) with respect to any plan (and as22 sessment) during the 3-year period after

23 the close of the year for which such plan

24 is prepared, and
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•S 2351 PCS

1 ‘‘(ii) with respect to any return, dur2 ing the 3-year period beginning on the fil3 ing date (as defined in paragraph (1)(D)).

4 ‘‘(C) LIMITATION.—Subparagraph (A)(ii)

5 shall not apply to any request if the Secretary

6 determines, upon application by an organiza7 tion, that such request is part of a harassment

8 campaign and that compliance with such re9 quest is not in the public interest.’’

10 (B) TECHNICAL AMENDMENT.—The head11 ing for subsection (e) of section 6104 is amend12 ed by striking ‘‘AND APPLICATIONS FOR EX13 EMPTION’’ and inserting ‘‘, APPLICATIONS FOR

14 EXEMPTION, AND COMMUNITY NEEDS ASSESS15 MENT AND PLAN FOR HEALTH AND OUTREACH

16 SERVICES’’.

17 (c) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the amendments made by this section

20 shall take effect on January 1, 1995.

21 (2) HMO SERVICE REQUIREMENT.—So much of

22 the amendments made by this section as relates to

23 section 501(n)(2) of the Internal Revenue Code of

24 1986, as added by this section, shall take effect on

25 the date of the enactment of this Act.
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1 SEC. 742. EXCISE TAXES FOR PRIVATE INUREMENT BY TAX2 EXEMPT HEALTH CARE ORGANIZATIONS.

3 (a) IN GENERAL.—Chapter 42 (relating to private

4 foundations and certain other tax-exempt organizations)

5 is amended by redesignating subchapter D as subchapter

6 E and by inserting after subchapter C the following new

7 subchapter:

8 ‘‘Subchapter D—Private Inurement by Tax9 Exempt Health Care Organizations

‘‘Sec. 4958. Taxes on private inurement.

‘‘Sec. 4959. Other definitions.

10 ‘‘SEC. 4958. TAXES ON PRIVATE INUREMENT.

11 ‘‘(a) INITIAL TAXES.—

12 ‘‘(1) ON THE BENEFICIARY.—There is hereby

13 imposed on any taxable inurement a tax equal to 25

14 percent of the amount thereof. The tax imposed by

15 this paragraph shall be paid by any beneficiary of

16 such inurement.

17 ‘‘(2) ON THE MANAGEMENT.—In any case in

18 which there is a tax imposed by paragraph (1), there

19 is hereby imposed on the participation of any organi20 zation manager of an organization in any taxable

21 inurement which occurs with respect to such organi22 zation, knowing that it is taxable inurement, a tax

equal to 21 23 ⁄2 percent of the amount thereof, unless

24 such participation is not willful and is due to reason-
830

•S 2351 PCS

1 able cause. The tax imposed by this paragraph shall

2 be paid by any organization manager who partici3 pated in the taxable inurement.

4 ‘‘(b) ADDITIONAL TAXES.—

5 ‘‘(1) ON THE BENEFICIARY.—In any case in

6 which an initial tax is imposed by subsection (a)(1)

7 on any taxable inurement and such inurement is not

8 corrected within the taxable period, there is hereby

9 imposed a tax equal to 200 percent of the amount

10 of the taxable inurement. The tax imposed by this

11 paragraph shall be paid by any beneficiary of such

12 inurement.

13 ‘‘(2) ON THE MANAGEMENT.—In any case in

14 which an additional tax is imposed by paragraph (1),

15 if an organization manager refused to agree to part

16 or all of the correction, there is hereby imposed a

17 tax equal to 50 percent of the amount of the taxable

18 inurement. The tax imposed by this paragraph shall

19 be paid by any organization manager who refused to

20 agree to part or all of the correction.

21 ‘‘(c) SPECIAL RULES RELATING TO LIABILITY FOR

22 TAX.—For purposes of this section—

23 ‘‘(1) JOINT AND SEVERAL LIABILITY.—If more

24 than one person is liable under any paragraph of

25 subsection (a) or (b) with respect to any one taxable
831

•S 2351 PCS

1 inurement, all such persons shall be jointly and sev2 erally liable under such paragraph with respect to

3 such inurement.

4 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect

5 to any 1 taxable inurement, the maximum amount

6 of the tax imposed by subsection (a)(2) shall not ex7 ceed $10,000, and the maximum amount of the tax

8 imposed by subsection (b)(2) shall not exceed

9 $10,000.

10 ‘‘(d) TAXABLE INUREMENT.—For purposes of this

11 section, the term ‘taxable inurement’ means any

12 inurement not permitted under paragraph (3) or (4) of

13 section 501(c), as the case may be, in a transaction involv14 ing an applicable tax-exempt health care organization in

15 which—

16 ‘‘(1) the value of any economic benefit provided

17 to or for the use of a disqualified person exceeds the

18 value of the consideration (including the perform19 ance of services) received by the organization for

20 providing such benefit, or

21 ‘‘(2) the amount of any economic benefit pro22 vided to or for the use of a disqualified person is de23 termined in whole or in part by the gross or net rev24 enues of 1 or more activities of the organization.
832

•S 2351 PCS

1 The amount of any taxable inurement with respect to any

2 such transaction shall be the excess described in para3 graph (1) or the amount described in paragraph (2). For

4 purposes of paragraph (1), an economic benefit shall not

5 be treated as provided as consideration for the perform6 ance of services unless the organization clearly indicated

7 its intent to so treat such benefit.

8 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

9 section—

10 ‘‘(1) DISQUALIFIED PERSON.—The term ‘dis11 qualified person’ means, with respect to any trans12 action—

13 ‘‘(A) any person who was, at any time dur14 ing the 5-year period ending on the date of

15 such transaction—

16 ‘‘(i) an organization manager, or

17 ‘‘(ii) an individual (other than an or18 ganization manager)—

19 ‘‘(I) in a position to exercise sub20 stantial influence over the affairs of

21 the organization, or

22 ‘‘(II) performing substantial

23 medical services as a physician pursu24 ant to an employment or other con-
833

•S 2351 PCS

1 tractual relationship with the organi2 zation or a related organization,

3 ‘‘(B) a member of the family of an individ4 ual described in subparagraph (A), and

5 ‘‘(C) a 35-percent controlled entity.

6 ‘‘(2) ORGANIZATION MANAGER.—The term ‘or7 ganization manager’ means, with respect to any ap8 plicable tax-exempt health care organization, any of9 ficer, director, or trustee of such organization (or

10 any individual having powers or responsibilities simi11 lar to those of officers, directors, or trustees of the

12 organization).

13 ‘‘(3) 35-PERCENT CONTROLLED ENTITY.—

14 ‘‘(A) IN GENERAL.—The term ‘35-percent

15 controlled entity’ means—

16 ‘‘(i) a corporation in which persons

17 described in subparagraph (A) or (B) of

18 paragraph (1) own more than 35 percent

19 of the total combined voting power,

20 ‘‘(ii) a partnership in which such per21 sons own more than 35 percent of the

22 profits interest, and

23 ‘‘(iii) a trust or estate in which such

24 persons own more than 35 percent of the

25 beneficial interest.
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1 ‘‘(B) CONSTRUCTIVE OWNERSHIP

2 RULES.—Rules similar to the rules of para3 graphs (3) and (4) of section 4946(a) shall

4 apply for purposes of this subsection.

5 ‘‘(4) FAMILY MEMBERS.—The members of an

6 individual’s family shall be determined under section

7 4946(d); except that such members also shall in8 clude the brothers and sisters (whether by the whole

9 or halfblood) of the individual and their spouses.

10 ‘‘(f) TREATMENT OF PREVIOUSLY EXEMPT ORGANI11 ZATIONS.—

12 ‘‘(1) IN GENERAL.—For purposes of this sec13 tion, the status of any organization as an applicable

14 tax-exempt health care organization shall be termi15 nated only if—

16 ‘‘(A)(i) such organization notifies the Sec17 retary (at such time and in such manner as the

18 Secretary may by regulations prescribe) of its

19 intent to accomplish such termination, or

20 ‘‘(ii) there is a final determination by the

21 Secretary that such status has terminated, and

22 ‘‘(B)(i) such organization pays the tax im23 posed by paragraph (2) (or any portion not

24 abated pursuant to paragraph (3)), or
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•S 2351 PCS

1 ‘‘(ii) the entire amount of such tax is

2 abated pursuant to paragraph (3).

3 ‘‘(2) IMPOSITION OF TAX.—There is hereby im4 posed on each organization referred to in paragraph

5 (1) a tax equal to the lesser of—

6 ‘‘(A) the amount which the organization

7 substantiates by adequate records or other cor8 roborating evidence as the aggregate tax benefit

9 resulting from its exemption from tax under

10 section 501(a), or

11 ‘‘(B) the value of the net assets of such or12 ganization.

13 ‘‘(3) ABATEMENT OF TAX.—The Secretary may

14 abate the unpaid portion of the assessment of any

15 tax imposed by paragraph (2), or any liability in re16 spect thereof, if the applicable tax-exempt health

17 care organization distributes all of its net assets to

18 1 or more organizations each of which has been in

19 existence, and described in section 501(c)(3), for a

20 continuous period of at least 60 calendar months. If

21 the distributing organization is described in section

22 501(c)(4), the preceding sentence shall be applied by

23 treating the reference to section 501(c)(3) as includ24 ing a reference to section 501(c)(4).
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•S 2351 PCS

1 ‘‘(4) CERTAIN RULES MADE APPLICABLE.—

2 Rules similar to the rules of subsections (d), (e), and

3 (f) of section 507 shall apply for purposes of this

4 subsection.

5 ‘‘SEC. 4959. OTHER DEFINITIONS.

6 ‘‘(a) APPLICABLE TAX-EXEMPT HEALTH CARE OR7 GANIZATION.—For purposes of this subchapter, the term

8 ‘applicable tax-exempt health care organization’ means

9 any organization—

10 ‘‘(1) the predominant activity of which is the

11 provision of health care services (as defined in sec12 tion 501(n)(3)), and

13 ‘‘(2) which (without regard to any taxable

14 inurement) would be described in paragraph (3) or

15 (4) of section 501(c) and exempt from tax under

16 section 501(a).

17 Such term does not include a private foundation (as de18 fined in section 509(a)).

19 ‘‘(b) TAXABLE PERIOD; CORRECTION.—For purposes

20 of this subchapter—

21 ‘‘(1) TAXABLE PERIOD.—The term ‘taxable pe22 riod’ means, with respect to any taxable inurement,

23 the period beginning with the date on which the

24 inurement occurs and ending on the earliest of—
837

•S 2351 PCS

1 ‘‘(A) the date of mailing a notice of defi2 ciency under section 6212 with respect to the

3 tax imposed by subsection (a)(1) of section

4 4958, or

5 ‘‘(B) the date on which the tax imposed by

6 such subsection (a)(1) is assessed.

7 ‘‘(2) CORRECTION.—The terms ‘correction’ and

8 ‘correct’ mean, with respect to any taxable

9 inurement, undoing the inurement to the extent pos10 sible, establishing safeguards to prevent future such

11 inurement, and where fully undoing the inurement is

12 not possible, such additional corrective action as is

13 prescribed by the Secretary by regulations.’’

14 (b) APPLICATION OF PRIVATE INUREMENT RULE TO

15 TAX-EXEMPT HEALTH CARE ORGANIZATIONS DE16 SCRIBED IN SECTION 501(c)(4).—Paragraph (4) of sec17 tion 501(c) is amended by inserting ‘‘(A)’’ after ‘‘(4)’’ and

18 by adding at the end the following:

19 ‘‘(B) Subparagraph (A) shall not apply to an

20 entity the predominant activity of which is the provi21 sion of health care services (as defined in subsection

22 (n)(3)) unless no part of the net earnings of such

23 entity inures to the benefit of any private share24 holder or individual.’’

25 (c) TECHNICAL AND CONFORMING AMENDMENTS.—
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•S 2351 PCS

1 (1) Subsection (e) of section 4955 is amend2 ed—

3 (A) by striking ‘‘SECTION 4945’’ in the

4 heading and inserting ‘‘SECTIONS 4945 and

5 4958’’, and

6 (B) by inserting before the period ‘‘or a

7 taxable inurement for purposes of section

8 4958’’.

9 (2) Subsections (a), (b), and (c) of section 4963

10 are each amended by inserting ‘‘4958,’’ after

11 ‘‘4955,’’.

12 (3) Subsection (e) of section 6213 is amended

13 by inserting ‘‘4958 (relating to private inurement),’’

14 before ‘‘4971’’.

15 (4) Paragraphs (2) and (3) of section 7422(g)

16 are each amended by inserting ‘‘4958,’’ after

17 ‘‘4955,’’.

18 (5) Subsection (b) of section 7454 is amended

19 by inserting ‘‘or whether an organization manager

20 (as defined in section 4958(f)) has ‘knowingly’ par21 ticipated in taxable inurement (as defined in section

22 4958(d)),’’ after ‘‘section 4912(b),’’.

23 (6) The table of subchapters for chapter 42 is

24 amended by striking the last item and inserting the

25 following:
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•S 2351 PCS

‘‘SUBCHAPTER D. Private inurement by tax-exempt health care

organizations.

‘‘SUBCHAPTER E. Abatement of first and second tier taxes in certain cases.’’

1 (d) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to inurement occurring on or after June

5 30, 1994.

6 (2) APPLICATION OF BINDING CONTRACT RULE

7 TO TAX-EXEMPT HEALTH CARE ORGANIZATIONS DE8 SCRIBED IN SECTION 501(C)(4).—The amendments

9 made by this section shall not apply to any

10 inurement involving an organization described in

11 section 501(c)(4) of the Internal Revenue Code of

12 1986 occurring before July 1, 1996, pursuant to a

13 written contract which was binding on June 29,

14 1994, and at all times thereafter before such

15 inurement occurred.

16 SEC. 743. TREATMENT OF HEALTH MAINTENANCE ORGANI17 ZATIONS, PARENT ORGANIZATIONS, AND

18 HEALTH INSURANCE PURCHASING COOPERA19 TIVES.

20 (a) INSURANCE PROVIDED BY HEALTH MAINTE21 NANCE ORGANIZATIONS.—

22 (1) IN GENERAL.—Section 501(m) (relating to

23 certain organizations providing commercial-type in-
840

•S 2351 PCS

1 surance not exempt from tax) is amended by adding

2 at the end the following new paragraph:

3 ‘‘(6) CERTAIN ACTIVITIES PROVIDED BY

4 HEALTH MAINTENANCE ORGANIZATIONS NOT TREAT5 ED AS COMMERCIAL-TYPE INSURANCE.—For pur6 poses of this subsection, the provision of (or the ar7 ranging for the provision of) medical care on a pre8 paid basis by a health maintenance organization

9 shall not be treated as providing commercial-type in10 surance if (and only if) such care is—

11 ‘‘(A) care provided by such organization to

12 its members at its own facilities through health

13 care professionals who do not provide substan14 tial health care services other than on behalf of

15 such organization,

16 ‘‘(B) care provided by a health care profes17 sional to a member of such organization on a

18 basis under which substantially all of the risks

19 of the rates of utilization is assumed by the

20 provider of such care,

21 ‘‘(C) care (other than primary care) pro22 vided to a member of such organization pursu23 ant to a referral by such organization, or
841

•S 2351 PCS

1 ‘‘(D) emergency care provided to a member

2 of such organization at a location outside such

3 member’s area of residence.’’

4 (2) TECHNICAL AMENDMENTS.—

5 (A) Paragraph (3) of section 501(m) is

6 amended by striking subparagraph (B) and by

7 redesignating subparagraphs (C), (D), and (E)

8 as subparagraphs (B), (C), and (D), respec9 tively.

10 (B) Paragraph (5) of section 501(m) is

11 amended by striking ‘‘paragraph (3)(E)’’ and

12 inserting ‘‘paragraph (3)(D)’’.

13 (b) TREATMENT OF PARENT ORGANIZATIONS OF

14 HEALTH CARE PROVIDERS.—Section 509(a) (defining

15 private foundation) is amended by striking ‘‘and’’ at the

16 end of paragraph (3), by redesignating paragraph (4) as

17 paragraph (5), and by inserting after paragraph (3) the

18 following new paragraph:

19 ‘‘(4) an organization which is organized and op20 erated for the benefit of, and which directly or indi21 rectly controls, an organization described in section

22 170(b)(1)(A)(iii), and’’.

23 (c) PURCHASING COOPERATIVES EXEMPT FROM

24 TAX.—
842

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1 (1) IN GENERAL.—Subsection (c) of section

2 501 (relating to exemption from tax on corporations,

3 certain trusts, etc.) is amended by adding at the end

4 the following new paragraph:

5 ‘‘(26)(A) Any health insurance purchasing co6 operative described in part III of subtitle D of title

7 XXI of the Social Security Act.

8 ‘‘(B) Such a cooperative shall not be exempt

9 from tax pursuant to any provision other than this

10 paragraph.

11 ‘‘(C) Such a cooperative shall not be exempt

12 from tax unless—

13 ‘‘(i) no part of the net earnings of such co14 operative inures to the benefit of any private

15 shareholder or individual,

16 ‘‘(ii) no substantial part of the activities of

17 such cooperative is carrying on propaganda, or

18 otherwise attempting, to influence legislation

19 (except as otherwise provided in subsection (h)),

20 and

21 ‘‘(iii) such cooperative does not participate

22 in, or intervene in (including the publishing or

23 distributing of statements), any political cam24 paign on behalf of (or in opposition to) any can25 didate for public office.’’
843

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1 (2) CERTAIN PROVISIONS APPLICABLE TO OR2 GANIZATIONS DESCRIBED IN SECTION 501(C)(3) MADE

3 APPLICABLE TO PURCHASING COOPERATIVES.—Sec4 tion 501 is amended by redesignating subsection (o)

5 as subsection (p) and by inserting after subsection

6 (n) the following new subsection:

7 ‘‘(o) CERTAIN PROVISIONS MADE APPLICABLE TO

8 HEALTH INSURANCE PURCHASING COOPERATIVES.—A

9 health insurance purchasing cooperative described in sub10 section (c)(26) shall be treated—

11 ‘‘(1) as described in subsection (c)(3) for pur12 poses of applying subsection (h) (relating to expendi13 tures by public charities to influence legislation),

14 section 4955 (relating to taxes on political expendi15 tures of section 501(c)(3) organizations), and sec16 tion 4958 (relating to private inurement), and

17 ‘‘(2) as described in subsection (h)(4).’’

18 (d) EFFECTIVE DATE.—The amendments made by

19 this section shall take effect on the date of the enactment

20 of this Act.
844

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1 SEC. 744. TAX TREATMENT OF TAXABLE ORGANIZATIONS

2 PROVIDING HEALTH INSURANCE AND OTHER

3 PREPAID HEALTH CARE SERVICES.

4 (a) GENERAL RULE.—Section 831 is amended by re5 designating subsection (c) as subsection (d) and by insert6 ing after subsection (b) the following new subsection:

7 ‘‘(c) TREATMENT OF ORGANIZATIONS PROVIDING

8 HEALTH INSURANCE AND OTHER PREPAID HEALTH

9 CARE SERVICES.—

10 ‘‘(1) GENERAL RULE.—Any organization to

11 which this subsection applies shall be taxable under

12 this part in the same manner as if it were an insur13 ance company other than a life insurance company.

14 ‘‘(2) ORGANIZATIONS TO WHICH SUBSECTION

15 APPLIES.—This subsection shall apply to any organi16 zation—

17 ‘‘(A) which is not exempt from taxation

18 under this subtitle,

19 ‘‘(B) which is not taxable as a life insur20 ance company under part I of this subchapter,

21 ‘‘(C) which is not an organization to which

22 section 833 applies, and

23 ‘‘(D) the primary and predominant busi24 ness activity of which during the taxable year

25 consists of 1 or more of the following:
845

•S 2351 PCS

1 ‘‘(i) Issuing accident and health insur2 ance contracts or the reinsuring of risks

3 undertaken by other insurance companies

4 under such contracts.

5 ‘‘(ii) Operating as a health mainte6 nance organization.

7 ‘‘(iii) Entering into arrangements

8 under which—

9 ‘‘(I) fixed payments or premiums

10 are received as consideration for the

11 organization’s agreement to provide or

12 arrange for the provision of health

13 care services, regardless of how the

14 health care services are provided or

15 arranged to be provided, and

16 ‘‘(II) substantially all of the risks

17 of the rates of utilization of such serv18 ices is assumed by such organization

19 or the provider of such services.

20 In the case of an organization which has as a mate21 rial business activity the issuing of accident and

22 health insurance contracts or the reinsuring of risks

23 undertaken by other insurance companies under

24 such contracts, the administering of accident and

25 health insurance contracts by such organization shall
846

•S 2351 PCS

1 be treated as part of such business activity for pur2 poses of subparagraph (D)(i).’’

3 (b) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendment made by

5 this section shall apply to taxable years beginning

6 after December 31, 1994.

7 (2) TRANSITIONAL RULES.—

8 (A) ORGANIZATIONS TO WHICH PARA9 GRAPH APPLIES.—This paragraph shall apply

10 to any organization to which section 831(c) of

11 the Internal Revenue Code of 1986 (as added

12 by subsection (a)) applies for such organiza13 tion’s first taxable year beginning after Decem14 ber 31, 1994; except that this paragraph shall

15 not apply if such organization treated itself as

16 an insurance company taxable under part II of

17 subchapter L of chapter 1 of such Code on its

18 original Federal income tax return for its tax19 able year beginning in 1992 and for all of its

20 taxable years thereafter beginning before Janu21 ary 1, 1995.

22 (B) TREATMENT OF CURRENTLY TAXABLE

23 COMPANIES.—Except as provided in regulations

24 prescribed by the Secretary of the Treasury or
847

•S 2351 PCS

1 his delegate, in the case of any organization to

2 which this paragraph applies—

3 (i) the amendments made by this sec4 tion shall be treated as a change in the

5 method of accounting, and

6 (ii) all adjustments required to be

7 taken into account under section 481 of

8 the Internal Revenue Code of 1986 shall

9 be taken into account for such company’s

10 first taxable year beginning after Decem11 ber 31, 1994.

12 (C) TREATMENT OF CURRENTLY TAX-EX13 EMPT COMPANIES.—Except as provided in regu14 lations prescribed by the Secretary of the

15 Treasury or his delegates, in the case of any or16 ganization to which this paragraph applies and

17 which was exempt from tax under chapter 1 of

18 the Internal Revenue Code of 1986 for such or19 ganization’s last taxable year beginning before

20 January 1, 1995—

21 (i) no adjustment shall be made under

22 section 481 (or any other provision) of

23 such Code on account of a change in its

24 method of accounting required by this sec-
848

•S 2351 PCS

1 tion for its first taxable year beginning

2 after December 31, 1994, and

3 (ii) for purposes of determining gain

4 or loss, the adjusted basis of any asset

5 held by such organization on the first day

6 of such taxable year shall be treated as

7 equal to its fair market value as of such

8 day.

9 SEC. 745. ORGANIZATIONS SUBJECT TO SECTION 833.

10 (a) IN GENERAL.—Section 833(c) (relating to orga11 nization to which section applies) is amended by adding

12 at the end the following new paragraph:

13 ‘‘(4) TREATMENT AS EXISTING BLUE CROSS OR

14 BLUE SHIELD ORGANIZATION.—

15 ‘‘(A) IN GENERAL.—Paragraph (2) shall

16 be applied to an organization described in sub17 paragraph (B) as if it were a Blue Cross or

18 Blue Shield organization.

19 ‘‘(B) APPLICABLE ORGANIZATION.—An or20 ganization is described in this subparagraph if

21 it—

22 ‘‘(i) is organized under, and governed

23 by, State laws which are specifically and

24 exclusively applicable to not-for-profit
849

•S 2351 PCS

1 health insurance or health service type or2 ganizations, and

3 ‘‘(ii) is not a Blue Cross or Blue

4 Shield organization or health maintenance

5 organization.’’

6 (b) EFFECTIVE DATE.—The amendment made by

7 this section shall apply to taxable years beginning after

8 December 31, 1986.

9 SEC. 746. TAX EXEMPTION FOR HIGH-RISK INSURANCE

10 POOLS.

11 Subsection (c) of section 501 (relating to list of ex12 empt organizations) is amended by adding at the end the

13 following new paragraph:

14 ‘‘(27)(A) In the case of taxable years beginning after

15 December 31, 1989, and before January 1, 1997, a quali16 fied high risk health insurance pool.

17 ‘‘(B) For purposes of subparagraph (A), the term

18 ‘qualified high risk health insurance pool’ means an en19 tity—

20 ‘‘(i) which was established by a State or politi21 cal subdivision thereof to provide health insurance

22 on a nonprofit basis to persons unable to obtain

23 health insurance because of health conditions,

24 ‘‘(ii) with respect to which the State or political

25 subdivision—
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•S 2351 PCS

1 ‘‘(I) participates in the ongoing governance

2 of the entity, and

3 ‘‘(II) subsidizes the operation of the entity,

4 and

5 ‘‘(iii) no part of the net earnings of which inure

6 to the benefit of any private shareholder, member, or

7 individual.’’

8 PART II—TAX TREATMENT OF SECTION 501(c)(3)

9 BONDS

10 SEC. 748. TAX TREATMENT OF 501(c)(3) BONDS SIMILAR TO

11 GOVERNMENTAL BONDS.

12 (a) IN GENERAL.—Subsection (a) of section 150 (re13 lating to definitions and special rules) is amended by strik14 ing paragraphs (2) and (4), by redesignating paragraphs

15 (5) and (6) as paragraphs (4) and (5), respectively, and

16 by inserting after paragraph (1) the following new para17 graph:

18 ‘‘(2) EXEMPT PERSON.—

19 ‘‘(A) IN GENERAL.—The term ‘exempt per20 son’ means—

21 ‘‘(i) a governmental unit, or

22 ‘‘(ii) a 501(c)(3) organization, but

23 only with respect to its activities which do

24 not constitute unrelated trades or busi-
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1 nesses as determined by applying section

2 513(a).

3 ‘‘(B) GOVERNMENTAL UNIT NOT TO IN4 CLUDE FEDERAL GOVERNMENT.—The term

5 ‘governmental unit’ does not include the United

6 States or any agency or instrumentality thereof.

7 ‘‘(C) 501(c)(3) ORGANIZATION.—The term

8 ‘501(c)(3) organization’ means any organization

9 described in section 501(c)(3) and exempt from

10 tax under section 501(a).’’

11 (b) REPEAL OF QUALIFIED 501(c)(3) BOND DES12 IGNATION.—Section 145 (relating to qualified 501(c)(3)

13 bonds) is repealed.

14 (c) CONFORMING AMENDMENTS.—

15 (1) Paragraph (3) of section 141(b) is amend16 ed—

17 (A) by striking ‘‘government use’’ in sub18 paragraph (A)(ii)(I) and subparagraph (B)(ii)

19 and inserting ‘‘exempt person use’’,

20 (B) by striking ‘‘a government use’’ in sub21 paragraph (B) and inserting ‘‘an exempt person

22 use’’,

23 (C) by striking ‘‘related business use’’ in

24 subparagraph (A)(ii)(II) and subparagraph (B)

25 and inserting ‘‘related private business use’’,
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1 (D) by striking ‘‘RELATED BUSINESS USE’’

2 in the heading of subparagraph (B) and insert3 ing ‘‘RELATED PRIVATE BUSINESS USE’’, and

4 (E) by striking ‘‘GOVERNMENT USE’’ in the

5 heading thereof and inserting ‘‘EXEMPT PERSON

6 USE’’.

7 (2) Subparagraph (A) of section 141(b)(6) is

8 amended by striking ‘‘a governmental unit’’ and in9 serting ‘‘an exempt person’’.

10 (3) Paragraph (7) of section 141(b) is amend11 ed—

12 (A) by striking ‘‘government use’’ and in13 serting ‘‘exempt person use’’, and

14 (B) by striking ‘‘GOVERNMENT USE’’ in

15 the heading thereof and inserting ‘‘EXEMPT

16 PERSON USE’’.

17 (4) Section 141(b) is amended by striking para18 graph (9).

19 (5) Paragraph (1) of section 141(c) is amended

20 by striking ‘‘governmental units’’ and inserting ‘‘ex21 empt persons’’.

22 (6) Section 141 is amended by redesignating

23 subsection (e) as subsection (f) and by inserting

24 after subsection (d) the following new subsection:
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•S 2351 PCS

1 ‘‘(e) CERTAIN ISSUES USED TO PROVIDE RESIDEN2 TIAL RENTAL HOUSING FOR FAMILY UNITS.—

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (2), for purposes of this title, the term ‘pri5 vate activity bond’ includes any bond issued as part

6 of an issue if any portion of the net proceeds of the

7 issue are to be used (directly or indirectly) by an ex8 empt person described in section 150(a)(2)(A)(ii) to

9 provide residential rental property for family units.

10 This paragraph shall not apply if the bond would

11 not be a private activity bond if the section

12 501(c)(3) organization were not an exempt person.

13 ‘‘(2) EXCEPTION FOR BONDS USED TO PROVIDE

14 QUALIFIED RESIDENTIAL RENTAL PROJECTS.—

15 Paragraph (1) shall not apply to any bond issued as

16 part of an issue if the portion of such issue which

17 is to be used as described in paragraph (1) is to be

18 used to provide—

19 ‘‘(A) a residential rental property for fam20 ily units if the first use of such property is pur21 suant to such issue,

22 ‘‘(B) qualified residential rental projects

23 (as defined in section 142(d)), or

24 ‘‘(C) property which is to be substantially

25 rehabilitated in a rehabilitation beginning with-
854

•S 2351 PCS

1 in the 2-year period ending 1 year after the

2 date of the acquisition of such property.

3 ‘‘(3) SUBSTANTIAL REHABILITATION.—

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

5 subparagraph (B), rules similar to the rules of

6 section 47(c)(1)(C) shall apply in determining

7 for purposes of paragraph (2)(C) whether prop8 erty is substantially rehabilitated.

9 ‘‘(B) EXCEPTION.—For purposes of sub10 paragraph (A), clause (ii) of section 47(c)(1)(C)

11 shall not apply, but the Secretary may extend

12 the 24-month period in section 47(c)(1)(C)(i)

13 where appropriate due to circumstances not

14 within the control of the owner.

15 ‘‘(4) CERTAIN PROPERTY TREATED AS NEW

16 PROPERTY.—Solely for purposes of determining

17 under paragraph (2)(A) whether the 1st use of prop18 erty is pursuant to tax-exempt financing—

19 ‘‘(A) IN GENERAL.—If—

20 ‘‘(i) the 1st use of property is pursu21 ant to taxable financing,

22 ‘‘(ii) there was a reasonable expecta23 tion (at the time such taxable financing

24 was provided) that such financing would be

25 replaced by tax-exempt financing, and
855

•S 2351 PCS

1 ‘‘(iii) the taxable financing is in fact

2 so replaced within a reasonable period

3 after the taxable financing was provided,

4 then the 1st use of such property shall be treat5 ed as being pursuant to the tax-exempt financ6 ing.

7 ‘‘(B) SPECIAL RULE WHERE NO OPERAT8 ING STATE OR LOCAL PROGRAM FOR TAX-EX9 EMPT FINANCING.—If, at the time of the 1st

10 use of property, there was no operating State or

11 local program for tax-exempt financing of the

12 property, the 1st use of the property shall be

13 treated as pursuant to the 1st tax-exempt fi14 nancing of the property.

15 ‘‘(C) DEFINITIONS.—For purposes of this

16 paragraph—

17 ‘‘(i) TAX-EXEMPT FINANCING.—The

18 term ‘tax-exempt financing’ means financ19 ing provided by tax-exempt bonds.

20 ‘‘(ii) TAXABLE FINANCING.—The

21 term ‘taxable financing’ means financing

22 which is not tax-exempt financing.’’

23 (7) Section 141(f), as redesignated by para24 graph (6), is amended—
856

•S 2351 PCS

1 (A) by adding ‘‘or’’ at the end of subpara2 graph (E),

3 (B) by striking ‘‘, or’’ at the end of sub4 paragraph (F), and inserting in lieu thereof a

5 period, and

6 (C) by striking subparagraph (G).

7 (8) The last sentence of section 144(b)(1) is

8 amended by striking ‘‘(determined’’ and all that fol9 lows to the period.

10 (9) Clause (ii) of section 144(c)(2)(C) is

11 amended by striking ‘‘a governmental unit’’ and in12 serting ‘‘an exempt person’’.

13 (10) Section 146(g) is amended—

14 (A) by striking paragraph (2), and

15 (B) by redesignating the remaining para16 graphs after paragraph (1) as paragraphs (2)

17 and (3), respectively.

18 (11) The heading of section 146(k)(3) is

19 amended by striking ‘‘GOVERNMENTAL’’ and insert20 ing ‘‘EXEMPT PERSON’’.

21 (12) The heading of section 146(m) is amended

22 by striking ‘‘GOVERNMENT’’ and inserting ‘‘EXEMPT

23 PERSON’’.

24 (13) Subsection (h) of section 147 is amended

25 to read as follows:
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•S 2351 PCS

1 ‘‘(h) CERTAIN RULES NOT TO APPLY TO MORTGAGE

2 REVENUE BONDS AND QUALIFIED STUDENT LOAN

3 BONDS.—Subsections (a), (b), (c), and (d) shall not apply

4 to any qualified mortgage bond, qualified veterans’ mort5 gage bond, or qualified student loan bond.’’

6 (14) Section 147 is amended by striking para7 graph (4) of subsection (b) and redesignating para8 graph (5) of such subsection as paragraph (4).

9 (15) Subparagraph (F) of section 148(d)(3) is

10 amended—

11 (A) by striking ‘‘or which is a qualified

12 501(c)(3) bond’’, and

13 (B) by striking ‘‘GOVERNMENTAL USE

14 BONDS AND QUALIFIED 501(c)(3)’’ in the heading

15 thereof and inserting ‘‘EXEMPT PERSON’’.

16 (16) Subclause (II) of section 148(f)(4)(B)(ii)

17 is amended by striking ‘‘(other than a qualified

18 501(c)(3) bond)’’.

19 (17) Clause (iv) of section 148(f)(4)(C) is

20 amended—

21 (A) by striking ‘‘a governmental unit or a

22 501(c)(3) organization’’ each place it appears

23 and inserting ‘‘an exempt person’’,

24 (B) by striking ‘‘qualified 501(c)(3)

25 bonds,’’, and
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•S 2351 PCS

1 (C) by striking the comma after ‘‘private

2 activity bonds’’ the first place it appears.

3 (18) Subparagraph (A) of section 148(f)(7) is

4 amended by striking ‘‘(other than a qualified

5 501(c)(3) bond)’’.

6 (19) Paragraph (2) of section 149(d) is amend7 ed—

8 (A) by striking ‘‘(other than a qualified

9 501(c)(3) bond)’’, and

10 (B) by striking ‘‘CERTAIN PRIVATE’’ in the

11 heading thereof and inserting ‘‘PRIVATE’’.

12 (20) Section 149(e)(2) is amended—

13 (A) by striking ‘‘which is not a private ac14 tivity bond’’ in the second sentence and insert15 ing ‘‘which is a bond issued for an exempt per16 son described in section 150(a)(2)(A)(i)’’, and

17 (B) by adding at the end the following new

18 sentence: ‘‘Subparagraph (D) shall not apply to

19 any bond which is not a private activity bond

20 but which would be such a bond if the

21 501(c)(3) organization using the proceeds

22 thereof were not an exempt person.’’

23 (21) The heading of subsection (b) of section

24 150 is amended by striking ‘‘TAX-EXEMPT PRIVATE
859

•S 2351 PCS

1 ACTIVITY BONDS’’ and inserting ‘‘CERTAIN TAX-EX2 EMPT BONDS’’.

3 (22) Paragraph (3) of section 150(b) is amend4 ed—

5 (A) by inserting ‘‘owned by a 501(c)(3) or6 ganization’’ after ‘‘any facility’’ in subpara7 graph (A),

8 (B) by striking ‘‘any private activity bond

9 which, when issued, purported to be a tax-ex10 empt qualified 501(c)(3) bond’’ in subpara11 graph (A) and inserting ‘‘any bond which, when

12 issued, purported to be a tax-exempt bond, and

13 which would be a private activity bond if the

14 501(c)(3) organization using the proceeds

15 thereof were not an exempt person’’, and

16 (C) by striking the heading thereof and in17 serting ‘‘BONDS FOR EXEMPT PERSONS OTHER

18 THAN GOVERNMENTAL UNITS.—’’.

19 (23) Paragraph (5) of section 150(b) is amend20 ed—

21 (A) by striking ‘‘private activity’’ in sub22 paragraph (A),

23 (B) by inserting ‘‘and which would be a

24 private activity bond if the 501(c)(3) organiza25 tion using the proceeds thereof were not an ex-
860

•S 2351 PCS

1 empt person’’ after ‘‘tax-exempt bond’’ in sub2 paragraph (A),

3 (C) by striking subparagraph (B) and in4 serting the following new subparagraph:

5 ‘‘(B) such facility is required to be owned

6 by an exempt person, and’’, and

7 (D) by striking ‘‘GOVERNMENTAL UNITS

8 OR 501(c)(3) ORGANIZATIONS’’ in the heading

9 thereof and inserting ‘‘EXEMPT PERSONS’’.

10 (24) Section 150 is amended by adding at the

11 end the following new subsection:

12 ‘‘(f) CERTAIN RULES TO APPLY TO BONDS FOR EX13 EMPT PERSONS OTHER THAN GOVERNMENTAL UNITS.—

14 ‘‘(1) IN GENERAL.—Nothing in section 103(a)

15 or any other provision of law shall be construed to

16 provide an exemption from Federal income tax for

17 interest on any bond which would be a private activ18 ity bond if the 501(c)(3) organization using the pro19 ceeds thereof were not an exempt person unless such

20 bond satisfies the requirements of subsections (b)

21 and (f) of section 147.

22 ‘‘(2) SPECIAL RULE FOR POOLED FINANCING

23 OF 501(c)(3) ORGANIZATION.—

24 ‘‘(A) IN GENERAL.—At the election of the

25 issuer, a bond described in paragraph (1) shall
861

•S 2351 PCS

1 be treated as meeting the requirements of sec2 tion 147(b) if such bond meets the require3 ments of subparagraph (B).

4 ‘‘(B) REQUIREMENTS.—A bond meets the

5 requirements of this subparagraph if—

6 ‘‘(i) 95 percent or more of the net

7 proceeds of the issue of which such bond is

8 a part are to be used to make or finance

9 loans to 2 or more 501(c)(3) organizations

10 or governmental units for acquisition of

11 property to be used by such organizations,

12 ‘‘(ii) each loan described in clause (i)

13 satisfies the requirements of section 147(b)

14 (determined by treating each loan as a sep15 arate issue),

16 ‘‘(iii) before such bond is issued, a de17 mand survey was conducted which shows a

18 demand for financing greater than an

19 amount equal to 120 percent of the

20 lendable proceeds of such issue, and

21 ‘‘(iv) 95 percent or more of the net

22 proceeds of such issue are to be loaned to

23 501(c)(3) organizations or governmental

24 units within 1 year of issuance and, to the

25 extent there are any unspent proceeds
862

•S 2351 PCS

1 after such 1-year period, bonds issued as

2 part of such issue are to be redeemed as

3 soon as possible thereafter (and in no

4 event later than 18 months after issuance).

5 A bond shall not meet the requirements of this

6 subparagraph if the maturity date of any bond

7 issued as part of such issue is more than 30

8 years after the date on which the bond was is9 sued (or, in the case of a refunding or series of

10 refundings, the date on which the original bond

11 was issued).’’

12 (25) Section 1302 of the Tax Reform Act of

13 1986 is repealed.

14 (26) Subparagraph (C) of section 57(a)(5) is

15 amended by striking clause (ii) and redesignating

16 clauses (iii) and (iv) as clauses (ii) and (iii), respec17 tively.

18 (27) Paragraph (3) of section 103(b) is amend19 ed by inserting ‘‘and section 150(f)’’ after ‘‘section

20 149’’.

21 (28) Paragraph (3) of section 265(b) is amend22 ed—

23 (A) by striking clause (ii) of subparagraph

24 (B) and inserting the following:
863

•S 2351 PCS

1 ‘‘(ii) CERTAIN BONDS NOT TREATED

2 AS PRIVATE ACTIVITY BONDS.—For pur3 poses of clause (i)(II), there shall not be

4 treated as a private activity bond any obli5 gation issued to refund (or which is part of

6 a series of obligations issued to refund) an

7 obligation issued before August 8, 1986,

8 which was not an industrial development

9 bond (as defined in section 103(b)(2) as in

10 effect on the day before the date of the en11 actment of the Tax Reform Act of 1986)

12 or a private loan bond (as defined in sec13 tion 103(o)(2)(A), as so in effect, but with14 out regard to any exemption from such

15 definition other than section

16 103(o)(2)(A)).’’; and

17 (B) by striking ‘‘(other than a qualified

18 501(c)(3) bond, as defined in section 145)’’ in

19 subparagraph (C)(ii)(I).

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to bonds (including refunding

22 bonds) issued after December 31, 1994.
864

•S 2351 PCS

1 Subtitle E—Tax Treatment of Long2 Term Care Insurance and Services

3 SEC. 751. QUALIFIED LONG-TERM CARE SERVICES TREAT4 ED AS MEDICAL CARE.

5 (a) GENERAL RULE.—Paragraph (1) of section

6 213(d) (defining medical care) is amended by striking

7 ‘‘or’’ at the end of subparagraph (B), by redesignating

8 subparagraph (C) as subparagraph (D), and by inserting

9 after subparagraph (B) the following new subparagraph:

10 ‘‘(C) for qualified long-term care services

11 (as defined in subsection (g)), or’’.

12 (b) QUALIFIED LONG-TERM CARE SERVICES DE13 FINED.—Section 213 (relating to the deduction for medi14 cal, dental, etc., expenses) is amended by adding at the

15 end the following new subsection:

16 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For

17 purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified long19 term care services’ means necessary diagnostic, cur20 ing, mitigating, treating, preventive, therapeutic, and

21 rehabilitative services, and maintenance and per22 sonal care services (whether performed in a residen23 tial or nonresidential setting) which—
865

•S 2351 PCS

1 ‘‘(A) are required by an individual during

2 any period the individual is an incapacitated in3 dividual (as defined in paragraph (2)),

4 ‘‘(B) have as their primary purpose—

5 ‘‘(i) the provision of needed assistance

6 with 1 or more activities of daily living (as

7 defined in paragraph (3)), or

8 ‘‘(ii) protection from threats to health

9 and safety due to severe cognitive impair10 ment, and

11 ‘‘(C) are provided pursuant to a continuing

12 plan of care prescribed by a licensed profes13 sional (as defined in paragraph (4)).

14 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term

15 ‘incapacitated individual’ means any individual

16 who—

17 ‘‘(A) is unable to perform, without sub18 stantial assistance from another individual (in19 cluding assistance involving cueing or substan20 tial supervision), at least 2 activities of daily

21 living as defined in paragraph (3), or

22 ‘‘(B) has severe cognitive impairment as

23 defined by the Secretary in consultation with

24 the Secretary of Health and Human Services.
866

•S 2351 PCS

1 Such term shall not include any individual otherwise

2 meeting the requirements of the preceding sentence

3 unless a licensed professional within the preceding

4 12-month period has certified that such individual

5 meets such requirements.

6 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

7 the following is an activity of daily living:

8 ‘‘(A) Eating.

9 ‘‘(B) Toileting.

10 ‘‘(C) Transferring.

11 ‘‘(D) Bathing.

12 ‘‘(E) Dressing.

13 ‘‘(4) LICENSED PROFESSIONAL.—The term ‘li14 censed professional’ means—

15 ‘‘(A) a physician or registered professional

16 nurse, or

17 ‘‘(B) any other individual who meets such

18 requirements as may be prescribed by the Sec19 retary after consultation with the Secretary of

20 Health and Human Services.

21 ‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The

22 term ‘qualified long-term care services’ shall not in23 clude any services provided to an individual—

24 ‘‘(A) by a relative (directly or through a

25 partnership, corporation, or other entity) unless
867

•S 2351 PCS

1 the relative is a licensed professional with re2 spect to such services, or

3 ‘‘(B) by a corporation or partnership which

4 is related (within the meaning of section 267(b)

5 or 707(b)) to the individual.

6 For purposes of this paragraph, the term ‘relative’

7 means an individual bearing a relationship to the in8 dividual which is described in paragraphs (1)

9 through (8) of section 152(a).’’

10 (c) TECHNICAL AMENDMENTS.—

11 (1) Subparagraph (D) of section 213(d)(1) (as

12 redesignated by subsection (a)) is amended to read

13 as follows:

14 ‘‘(D) for insurance (including amounts

15 paid as premiums under part B of title XVIII

16 of the Social Security Act, relating to supple17 mentary medical insurance for the aged) cover18 ing medical care referred to in—

19 ‘‘(i) subparagraphs (A) and (B), or

20 ‘‘(ii) subparagraph (C), but only if

21 such insurance is provided under a quali22 fied long-term care insurance policy (as de23 fined in section 7702B(b)) and the amount

24 paid for such insurance is not disallowed

25 under section 7702B(d)(4).’’
868

•S 2351 PCS

1 (2) Paragraph (6) of section 213(d) is amend2 ed—

3 (A) by striking ‘‘subparagraphs (A) and

4 (B)’’ and inserting ‘‘subparagraph (A), (B),

5 and (C)’’, and

6 (B) by striking ‘‘paragraph (1)(C)’’ in sub7 paragraph (A) and inserting ‘‘paragraph

8 (1)(D)’’.

9 (d) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1995.

12 SEC. 752. TREATMENT OF LONG-TERM CARE INSURANCE.

13 (a) GENERAL RULE.—Chapter 79 (relating to defini14 tions) is amended by inserting after section 7702A the fol15 lowing new section:

16 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR17 ANCE.

18 ‘‘(a) IN GENERAL.—For purposes of this title—

19 ‘‘(1) a qualified long-term care insurance policy

20 (as defined in subsection (b)) shall be treated as an

21 accident or health insurance contract,

22 ‘‘(2) amounts (other than policyholder dividends

23 (as defined in section 808) or premium refunds) re24 ceived under a qualified long-term care insurance

25 policy shall be treated as amounts received for per-
869

•S 2351 PCS

1 sonal injuries and sickness and shall be treated as

2 reimbursement for expenses actually incurred for

3 medical care (as defined in section 213(d)),

4 ‘‘(3) except to the extent provided in section

5 106(c), any plan of an employer providing coverage

6 under a qualified long-term care insurance policy

7 shall be treated as an accident or health plan with

8 respect to such coverage,

9 ‘‘(4) except as provided in subsection (d)(4),

10 amounts paid for a qualified long-term care insur11 ance policy providing the benefits described in sub12 section (b)(6)(B) shall be treated as payments made

13 for insurance for purposes of section 213(d)(1)(D),

14 and

15 ‘‘(5) a qualified long-term care insurance policy

16 shall be treated as a guaranteed renewable contract

17 subject to the rules of section 816(e).

18 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL19 ICY.—For purposes of this title—

20 ‘‘(1) IN GENERAL.—The term ‘qualified long21 term care insurance policy’ means any certified long22 term care policy (as defined in section 21011(b)(2)

23 of the Social Security Act) that—

24 ‘‘(A) limits benefits under such policy to

25 individuals who are certified by a licensed pro-
870

•S 2351 PCS

1 fessional (as defined in section 213(g)(4)) with2 in the preceding 12-month period—

3 ‘‘(i) as being unable to perform, with4 out substantial assistance from another in5 dividual (including assistance involving

6 cueing or substantial supervision), 2 or

7 more activities of daily living (as defined in

8 section 213(g)(3)), or

9 ‘‘(ii) having a severe cognitive impair10 ment (as defined in section 213(g)(2)(B)),

11 and

12 ‘‘(B) satisfies the requirements of para13 graphs (2), (3), (4), (5), and (6).

14 ‘‘(2) PREMIUM REQUIREMENTS.—The require15 ments of this paragraph are met with respect to a

16 policy if such policy provides that premium pay17 ments may not be made earlier than the date such

18 payments would have been made if the contract pro19 vided for level annual payments over the life expect20 ancy of the insured or 20 years, whichever is short21 er. A policy shall not be treated as failing to meet

22 the requirements of the preceding sentence solely by

23 reason of a provision in the policy providing for a

24 waiver of premiums if the insured becomes an indi25 vidual certified in accordance with paragraph (1)(A).
871

•S 2351 PCS

1 ‘‘(3) PROHIBITION OF CASH VALUE.—The re2 quirements of this paragraph are met if the policy

3 does not provide for a cash value or other money

4 that can be paid, assigned, pledged as collateral for

5 a loan, or borrowed, other than as provided in para6 graph (4).

7 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI8 DENDS.—The requirements of this paragraph are

9 met with respect to a policy if such policy provides

10 that—

11 ‘‘(A) policyholder dividends are required to

12 be applied as a reduction in future premiums

13 or, to the extent permitted under paragraph

14 (6), to increase benefits described in subsection

15 (a)(2),

16 ‘‘(B) refunds of premiums upon a partial

17 surrender or a partial cancellation are required

18 to be applied as a reduction in future pre19 miums, and

20 ‘‘(C) any refund on the death of the in21 sured, or on a complete surrender or cancella22 tion of the policy, cannot exceed the aggregate

23 premiums paid under the contract.

24 Any refund on a complete surrender or cancellation

25 of the policy shall be includible in gross income to
872

•S 2351 PCS

1 the extent that any deduction or exclusion was allow2 able with respect to the premiums.

3 ‘‘(5) COORDINATION WITH OTHER ENTITLE4 MENTS.—The requirements of this paragraph are

5 met with respect to a policy if such policy does not

6 pay, or provide reimbursement for, expenses in7 curred to the extent that such expenses are also paid

8 or reimbursed under title XVIII of the Social Secu9 rity Act or are paid or reimbursed under a certified

10 standard health plan (as defined in section

11 21011(a)(2) of the Social Security Act).

12 ‘‘(6) MAXIMUM BENEFIT.—

13 ‘‘(A) IN GENERAL.—The requirements of

14 this paragraph are met if the benefits payable

15 under the policy for any period (whether on a

16 periodic basis or otherwise) may not exceed the

17 dollar amount in effect for such period.

18 ‘‘(B) NONREIMBURSEMENT PAYMENTS

19 PERMITTED.—Benefits shall include all pay20 ments described in subsection (a)(2) to or on

21 behalf of an insured individual without regard

22 to the expenses incurred during the period to

23 which the payments relate. For purposes of sec24 tion 213(a), such payments shall be treated as
873

•S 2351 PCS

1 compensation for expenses paid for medical

2 care.

3 ‘‘(C) DOLLAR AMOUNT.—The dollar

4 amount in effect under this paragraph shall be

5 $150 per day (or the equivalent amount within

6 the calendar year in the case of payments on

7 other than a per diem basis).

8 ‘‘(D) ADJUSTMENTS FOR INCREASED

9 COSTS.—

10 ‘‘(i) IN GENERAL.—In the case of any

11 calendar year after 1996, the dollar

12 amount in effect under subparagraph (C)

13 for any period or portion thereof occurring

14 during such calendar year shall be equal to

15 the sum of—

16 ‘‘(I) the amount in effect under

17 subparagraph (C) for the preceding

18 calendar year (after application of this

19 subparagraph), plus

20 ‘‘(II) the product of the amount

21 referred to in subclause (I) multiplied

22 by the cost-of-living adjustment for

23 the calendar year.

24 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

25 For purposes of clause (i), the cost-of-liv-
874

•S 2351 PCS

1 ing adjustment for any calendar year is the

2 percentage (if any) by which the cost index

3 under clause (iii) for the preceding cal4 endar year exceeds such index for the sec5 ond preceding calendar year.

6 ‘‘(iii) COST INDEX.—The Secretary, in

7 consultation with the Secretary of Health

8 and Human Services, shall before January

9 1, 1997, establish a cost index to measure

10 increases in costs of nursing home and

11 similar facilities. The Secretary may from

12 time to time revise such index to the extent

13 necessary to accurately measure increases

14 or decreases in such costs.

15 ‘‘(iv) SPECIAL RULE FOR CALENDAR

16 YEAR 1997.—Notwithstanding clause (ii),

17 for purposes of clause (i), the cost-of-living

18 adjustment for calendar year 1997 is the

19 sum of 1.5 percent plus the percentage by

20 which the CPI for calendar year 1996 (as

21 defined in section 1(f)(4)) exceeds the CPI

22 for calendar year 1995 (as so defined).

23 ‘‘(E) PERIOD.—For purposes of this para24 graph, a period begins on the date that an indi25 vidual has a condition which would qualify for
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•S 2351 PCS

1 certification under subsection (b)(1)(A) and

2 ends on the earlier of the date upon which—

3 ‘‘(i) such individual has not been so

4 certified within the preceding 12-months,

5 or

6 ‘‘(ii) the individual’s condition ceases

7 to be such as to qualify for certification

8 under subsection (b)(1)(A).

9 ‘‘(F) AGGREGATION RULE.—For purposes

10 of this paragraph, all policies issued with re11 spect to the same insured shall be treated as

12 one policy.

13 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

14 POLICIES.—For purposes of this title, any amount re15 ceived or coverage provided under a long-term care insur16 ance policy that is not a qualified long-term care insurance

17 policy shall not be treated as an amount received for per18 sonal injuries or sickness or provided under an accident

19 or health plan and shall not be treated as excludible from

20 gross income under any provision of this title.

21 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

22 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

23 provided in regulations prescribed by the Secretary, in the

24 case of any long-term care insurance coverage (whether
876

•S 2351 PCS

1 or not qualified) provided by rider on a life insurance con2 tract—

3 ‘‘(1) IN GENERAL.—This section shall apply as

4 if the portion of the contract providing such cov5 erage is a separate contract or policy.

6 ‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM

7 CARE COVERAGE.—Premium payments for coverage

8 under a long-term care insurance policy and charges

9 against the life insurance contract’s cash surrender

10 value (within the meaning of section 7702(f)(2)(A))

11 for such coverage shall be treated as premiums for

12 purposes of subsection (b)(2).

13 ‘‘(3) APPLICATION OF SECTION 7702.—Section

14 7702(c)(2) (relating to the guideline premium limi15 tation) shall be applied by increasing the guideline

16 premium limitation with respect to a life insurance

17 contract, as of any date—

18 ‘‘(A) by the sum of any charges (but not

19 premium payments) described in paragraph (2)

20 made to that date under the contract, less

21 ‘‘(B) any such charges the imposition of

22 which reduces the premiums paid for the con23 tract (within the meaning of section

24 7702(f)(1)).
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•S 2351 PCS

1 ‘‘(4) APPLICATION OF SECTION 213.—No deduc2 tion shall be allowed under section 213(a) for

3 charges against the life insurance contract’s cash

4 surrender value described in paragraph (2), unless

5 such charges are includible in income as a result of

6 the application of section 72(e)(10) and the coverage

7 provided by the rider is a qualified long-term care

8 insurance policy under subsection (b).

9 ‘‘(5) AMOUNT OF DISTRIBUTION UNDER

10 RIDER.—This subsection shall not apply to any rider

11 on a life insurance contract unless the percentage re12 duction in the cash surrender value of the contract

13 by reason of any payment under the rider does not

14 exceed the percentage reduction in the death benefit

15 payable under the contract by reason of the pay16 ment.

17 For purposes of this subsection, the term ‘portion’ means

18 only the terms and benefits under a life insurance contract

19 that are in addition to the terms and benefits under the

20 contract without regard to the coverage under a long-term

21 care insurance policy, except that the coverage under a

22 rider described in this subsection shall not fail to be treat23 ed as such an addition by reason of a reduction in the

24 contract’s death benefit or cash surrender value resulting

25 from any payment under the rider.
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•S 2351 PCS

1 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be necessary to carry out the re3 quirements of this section, including regulations to prevent

4 the avoidance of this section by providing long-term care

5 insurance coverage under a life insurance contract and to

6 provide for the proper allocation of amounts between the

7 long-term care and life insurance portions of a contract.’’

8 (b) EMPLOYER CONTRIBUTIONS TO LONG-TERM

9 CARE COVERAGE NOT EXCLUDED.—

10 (1) IN GENERAL.—Section 106 (relating to con11 tributions by employer to accident and health plans),

12 as amended by section 7202, is amended by adding

13 at the end the following new subsection:

14 ‘‘(c) EXCEPTION FOR LONG-TERM CARE INSUR15 ANCE.—Subsection (a) shall not apply to employer-pro16 vided coverage under any qualified long-term care insur17 ance policy.’’

18 (2) EMPLOYMENT TAX TREATMENT.—Each of

19 the following provisions, as amended by section

20 7202(b), is amended by striking ‘‘section 106(b)’’

21 and inserting ‘‘subsection (b) or (c) of section 106’’:

22 (A) The last sentence of section 3121(a).

23 (B) The last sentence of section 209(a) of

24 the Social Security Act.
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•S 2351 PCS

1 (C) The last sentence of section

2 3231(e)(1).

3 (D) The last sentence of section 3306(b).

4 (E) The last sentence of section 3401(a).

5 (c) CLERICAL AMENDMENT.—The table of sections

6 for chapter 79 is amended by inserting after the item re7 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’

8 (d) EFFECTIVE DATE.—

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

10 this section shall apply to policies issued after De11 cember 31, 1995, except that a policy issued before

12 January 1, 1996, which, on January 1, 1996, satis13 fies the requirements of a qualified long-term care

14 insurance policy as set forth in section 7702B(b) of

15 the Internal Revenue Code of 1986 shall be treated

16 as having been issued on January 1, 1996.

17 (2) TRANSITION RULE.—If, after the date of

18 enactment of this Act and before January 1, 1996,

19 a policy providing for long-term care insurance cov20 erage is exchanged solely for a qualified long-term

21 care insurance policy (as defined in section

22 7702B(b) of such code), no gain or loss shall be rec23 ognized on the exchange, except that gain (if any)

24 shall be recognized to the extent of the sum of the

25 money and the fair market value of the other prop-
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•S 2351 PCS

1 erty received. For purposes of this paragraph, the

2 cancellation of a policy providing for long-term care

3 insurance coverage and reinvestment of the cancella4 tion proceeds in a qualified long-term care insurance

5 policy within 60 days thereafter shall be treated as

6 an exchange.

7 (3) ISSUANCE OF RIDER NOT TREATED AS MA8 TERIAL CHANGE.—For purposes of applying section

9 101(f), 7702, or 7702A of such Code to any con10 tract, the issuance of a rider on a life insurance con11 tract providing long-term care insurance coverage

12 shall not be treated as a modification or material

13 change of such contract.

14 SEC. 753. TAX TREATMENT OF ACCELERATED DEATH BENE15 FITS UNDER LIFE INSURANCE CONTRACTS.

16 (a) GENERAL RULE.—Section 101 (relating to cer17 tain death benefits) is amended by adding at the end the

18 following new subsection:

19 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

20 DEATH BENEFITS.—

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, any amount received under a life insurance

23 contract on the life of an insured who is a terminally

24 ill individual shall be treated as an amount paid by

25 reason of the death of such insured.
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•S 2351 PCS

1 ‘‘(2) NECESSARY CONDITIONS.—

2 ‘‘(A) IN GENERAL.—Paragraph (1) shall

3 not apply to any amount received unless—

4 ‘‘(i) the total amount received is not

5 less than the present value (determined

6 under subparagraph (B)) of the reduction

7 in the death benefit otherwise payable in

8 the event of the death of the insured, and

9 ‘‘(ii) the percentage reduction in the

10 cash surrender value of the contract by

11 reason of the distribution does not exceed

12 the percentage reduction in the death ben13 efit payable under the contract by reason

14 of such distribution.

15 ‘‘(B) PRESENT VALUE.—The present value

16 of the reduction in the death benefit shall be

17 determined by—

18 ‘‘(i) using a discount rate which is

19 based on an interest rate which does not

20 exceed the highest interest rate set forth in

21 subparagraph (C), and

22 ‘‘(ii) assuming that the death benefit

23 (or the portion thereof) would have been

24 paid on the date which is 12 months after
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•S 2351 PCS

1 the date of the certification referred to in

2 paragraph (3).

3 ‘‘(C) RATES.—The interest rates set forth

4 in this subparagraph are the following:

5 ‘‘(i) the 90-day Treasury bill yield,

6 ‘‘(ii) the rate described as Moody’s

7 Corporate Bond Yield Average-Monthly

8 Average Corporates as published by

9 Moody’s Investors Service, Inc., or any

10 successor thereto, for the calendar month

11 ending 2 months before the date on which

12 the rate is determined, and

13 ‘‘(iii) the rate used to compute the

14 cash surrender values under the contract

15 during the applicable period plus 1 percent

16 per annum.

17 ‘‘(D) SPECIAL RULES RELATING TO

18 LIENS.—If a lien is imposed against a life in19 surance contract with respect to any amount re20 ferred to in paragraph (1)—

21 ‘‘(i) for purposes of subparagraph (A),

22 the amount of such lien shall be treated as

23 a reduction (at the time of receipt) in the

24 death benefit or cash surrender value to

25 the extent that such benefit or value, as
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•S 2351 PCS

1 the case may be, is (or may become) sub2 ject to the lien, and

3 ‘‘(ii) paragraph (1) shall not apply to

4 the amount received unless any rate of in5 terest with respect to any amount in con6 nection with which such lien is imposed

7 does not exceed the highest rate set forth

8 in subparagraph (C).

9 ‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur10 poses of this subsection, the term ‘terminally ill indi11 vidual’ means an individual who the insurer has de12 termined, after receipt of an acceptable certification

13 by a licensed physician, has an illness or physical

14 condition which can reasonably be expected to result

15 in death within 12 months after the date of certifi16 cation.

17 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI18 CIES.—This subsection shall not apply in the case of

19 any amount paid to any taxpayer other than the in20 sured if such taxpayer has an insurable interest with

21 respect to the life of the insured by reason of the in22 sured being a director, officer, or employee of the

23 taxpayer or by reason of the insured having a finan24 cial interest in any trade or business carried on by

25 the taxpayer.’’
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•S 2351 PCS

1 (b) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendment made by this section shall

4 apply to amounts received after the date of the en5 actment of this Act.

6 (2) DELAY IN APPLICATION OF DISCOUNT

7 RULES.—Clause (i) of section 101(g)(2)(A) of the

8 Internal Revenue Code of 1986 shall not apply to

9 any amount received before January 1, 1995.

10 (3) ISSUANCE OF RIDER NOT TREATED AS MA11 TERIAL CHANGE.—For purposes of applying section

12 101(f), 7702, or 7702A of the Internal Revenue

13 Code of 1986 to any contract, the issuance of a

14 qualified accelerated death benefit rider (as defined

15 in section 818(g) of such Code (as added by this

16 Act)) shall not be treated as a modification or mate17 rial change of such contract.

18 SEC. 754. TAX TREATMENT OF COMPANIES ISSUING QUALI19 FIED ACCELERATED DEATH BENEFIT RID20 ERS.

21 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID22 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat23 ing to other definitions and special rules) is amended by

24 adding at the end the following new subsection:
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•S 2351 PCS

1 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

2 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

3 this part—

4 ‘‘(1) IN GENERAL.—Any reference to a life in5 surance contract shall be treated as including a ref6 erence to a qualified accelerated death benefit rider

7 on such contract.

8 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE9 FIT RIDERS.—For purposes of this subsection, the

10 term ‘qualified accelerated death benefit rider’

11 means any rider on a life insurance contract which

12 provides for a distribution to an individual upon the

13 insured becoming a terminally ill individual (as de14 fined in section 101(g)(3)).’’

15 (b) EFFECTIVE DATE.—The amendments made by

16 this section shall take effect on January 1, 1995.

17 Subtitle F—Health Care Trust

18 Funds

19 SEC. 761. ESTABLISHMENT OF HEALTH CARE TRUST

20 FUNDS.

21 (a) IN GENERAL.—Subchapter A of chapter 98 (re22 lating to establishment of trust funds) is amended by add23 ing at the end the following new part:

24 ‘‘PART II—HEALTH CARE TRUST FUNDS

‘‘Sec. 9551. Health Security Trust Fund.
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‘‘Sec. 9552. Graduate Medical Education and Academic Health

Centers Trust Fund.

‘‘Sec. 9553. Biomedical and Behavioral Research Trust Fund.

1 ‘‘SEC. 9551. HEALTH SECURITY TRUST FUND.

2 ‘‘(a) CREATION OF TRUST FUND.—

3 ‘‘(1) IN GENERAL.—There is established in the

4 Treasury of the United States a trust fund to be

5 known as the ‘Health Security Trust Fund’, consist6 ing of such amounts as may be appropriated or cred7 ited to it under this section or section 9602(b).

8 ‘‘(2) ACCOUNTS IN THE TRUST FUND.—The

9 Health Security Trust Fund shall consist of—

10 ‘‘(A) the Health Insurance Account,

11 ‘‘(B) the Infrastructure Development Ac12 count,

13 ‘‘(C) the State Health Quality and

14 Consumer Protection Account,

15 ‘‘(D) the Long-Term Care Account, and

16 ‘‘(E) the Federal Outlay Program Fraud

17 and Abuse Control Account.

18 Each such account shall consist of such amounts as

19 may be allocated to it under this section.

20 ‘‘(b) TRANSFERS TO THE TRUST FUND.—

21 ‘‘(1) IN GENERAL.—There are hereby appro22 priated to the Health Security Trust Fund—

23 ‘‘(A) amounts equivalent to the taxes re24 ceived in the Treasury under section 5701 (re-
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•S 2351 PCS

1 lating to taxes imposed on tobacco products) to

2 the extent such amounts are attributable to the

3 rates of tax in excess of such rates of tax in ef4 fect on the day before the date of the enact5 ment of the Health Security Act,

6 ‘‘(B) amounts equivalent to the taxes re7 ceived in the Treasury under section 4511 (re8 lating to taxes on high cost health plans),

9 ‘‘(C) the amount determined by the Sec10 retary, after consultation with the Secretary of

11 Health and Human Services, to be equal to the

12 sum of—

13 ‘‘(i) the decrease in Federal expendi14 tures under title XIX of the Social Secu15 rity Act by reason of the provisions of, and

16 the amendments made by, the Health Se17 curity Act, and

18 ‘‘(ii) any reduction in payments to

19 States under such title by reason of the

20 State maintenance-of-effort requirement

21 under section 1931(d) of the Social Secu22 rity Act,

23 ‘‘(D) amounts determined by the Sec24 retary, after consultation with the Secretary of

25 Health and Human Services, to be equal to the
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•S 2351 PCS

1 decrease in Federal expenditures (other than

2 any decrease described in paragraph (2)) attrib3 utable to the provisions of subtitle G of title

4 XXI of the Social Security Act (relating to

5 automobile insurance coordination), and

6 ‘‘(E) amounts equivalent to the following

7 amounts received in the Treasury:

8 ‘‘(i) Criminal fines imposed and col9 lected, and amounts resulting from the for10 feiture of property, in cases involving a

11 Federal health care offense (as defined in

12 section 1128D of the Social Security Act).

13 ‘‘(ii) Penalties and damages imposed

14 and collected under the False Claims Act

15 (31 U.S.C. 3729 et seq.), in cases involving

16 claims related to the provision of health

17 care items and services (other than funds

18 awarded to a relator or for restitution).

19 ‘‘(iii) Administrative penalties and as20 sessments imposed and collected under sec21 tion 1128A of the Social Security Act (ex22 cept as otherwise provided by law).

23 ‘‘(2) TRANSFERS FROM OTHER TRUST

24 FUNDS.—The Secretary of Health and Human Serv25 ices shall transfer each fiscal year to the Health Se-
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•S 2351 PCS

1 curity Trust Fund from the Federal Hospital Insur2 ance Trust Fund and the Federal Supplementary

3 Medical Insurance Trust Fund the amount which

4 the Secretary estimates is equal to the decrease in

5 expenditures in each such trust fund attributable to

6 the provisions of subtitle G of title XXI of the Social

7 Security Act (relating to automobile insurance co8 ordination).

9 ‘‘(3) TRANSFERS FROM CERTAIN RECOVERED

10 AMOUNTS AND GIFTS.—The Secretary of Health and

11 Human Services shall transfer each fiscal year to

12 the Health Security Trust Fund—

13 ‘‘(A) the portion of amounts recovered

14 under section 1128A(a) of the Social Security

15 Act with respect to a certified health plan or

16 certified long-term care policy which is not re17 paid to the plan or policy, or

18 ‘‘(B) any money gifts or bequests made to

19 or on behalf of the United States for allocation

20 to the account described in subsection

21 (a)(2)(E).

22 ‘‘(c) HEALTH INSURANCE ACCOUNT.—

23 ‘‘(1) TRANSFERS TO THE ACCOUNT.—There

24 shall be allocated to the Health Insurance Account

25 all amounts received in the Health Security Trust
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1 Fund which are not allocated to any other account

2 under this section.

3 ‘‘(2) EXPENDITURES FROM ACCOUNT.—

4 Amounts in the Health Insurance Account are ap5 propriated to the Secretary of Health and Human

6 Services to carry out the health insurance premium

7 assistance program and the cost-sharing grant pro8 gram established under part B of title XIX of the

9 Social Security Act, and to the extent any such

10 amount is not expended during any fiscal year, such

11 amount shall be available for such purpose for sub12 sequent fiscal years.

13 ‘‘(d) INFRASTRUCTURE DEVELOPMENT ACCOUNT.—

14 ‘‘(1) TRANSFERS TO THE ACCOUNT.—

15 ‘‘(A) IN GENERAL.—There shall be allo16 cated to the Infrastructure Development Ac17 count from amounts received in the Health Se18 curity Trust Fund each fiscal year,

19 $1,300,000,000.

20 ‘‘(B) ADJUSTMENT.—In the case of any

21 fiscal year beginning after fiscal year 1999, the

22 dollar amount under subparagraph (A) in effect

23 for the preceding fiscal year (after application

24 of this subparagraph) shall be increased by an

25 amount equal to the product of—
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•S 2351 PCS

1 ‘‘(i) such dollar amount, and

2 ‘‘(ii) the estimated percent change in

3 the Consumer Price Index for all urban

4 consumers (United States city average)

5 during the 12-month period ending at the

6 midpoint of the fiscal year, with appro7 priate adjustments to reflect previous

8 underestimations or overestimations under

9 this subparagraph in the projected percent10 age change in such index.

11 ‘‘(2) EXPENDITURES FROM ACCOUNT.—

12 Amounts in the Infrastructure Development Account

13 are appropriated to carry out the programs estab14 lished under parts I and II of subtitle F of title XXI

15 of the Social Security Act, and to the extent any

16 such amount is not expended during any fiscal year,

17 such amount shall be available for such purpose for

18 subsequent fiscal years.

19 ‘‘(e) STATE HEALTH QUALITY AND CONSUMER PRO20 TECTION ACCOUNT.—

21 ‘‘(1) TRANSFERS TO ACCOUNT.—There is allo22 cated to the State Health Quality and Consumer

23 Protection Account from amounts received in the

24 Health Security Trust Fund each fiscal year the

25 amounts determined as follows:
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1 ‘‘(A) For fiscal year 1995, $200,000,000.

2 ‘‘(B) For fiscal years 1996, 1997, and

3 1998, $500,000,000.

4 ‘‘(C) For fiscal years 1999 through 2004,

5 $450,000,000.

6 ‘‘(2) EXPENDITURES FROM ACCOUNT.—

7 Amounts in the State Health Quality and Consumer

8 Protection Account are appropriated to carry out the

9 programs established by sections 21003(c)(3),

10 21503, and 21816 of the Social Security Act, and to

11 the extent any such amount is not expended during

12 any fiscal year, such amount shall be available for

13 such purpose for subsequent fiscal years.

14 ‘‘(f) LONG-TERM CARE ACCOUNT.—

15 ‘‘(1) TRANSFERS TO ACCOUNT.—There is allo16 cated to the Long-Term Care Account each fiscal

17 year amounts described in subsections (b)(1)(D) and

18 (2).

19 ‘‘(2) EXPENDITURES FROM ACCOUNT.—

20 Amounts in the Long-Term Care Account are appro21 priated to carry out the program established under

22 part C of title XIX of the Social Security Act, and

23 to the extent any such amount is not expended dur24 ing any fiscal year, such amount shall be available

25 for such purpose for subsequent fiscal years.
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•S 2351 PCS

1 ‘‘(g) FEDERAL OUTLAY PROGRAM FRAUD AND

2 ABUSE ACCOUNT.—

3 ‘‘(1) TRANSFERS TO ACCOUNT.—There is allo4 cated to the Federal Outlay Program Fraud and

5 Abuse Account each fiscal year an amount equal to

6 the sum of $75,000,000, plus 50 percent of the

7 amounts transferred to the Trust Fund under sub8 section (b)(1)(E), plus the amounts transferred to

9 the Trust Fund under subsection (b)(3)(B).

10 ‘‘(2) EXPENDITURES FROM ACCOUNT.—

11 ‘‘(A) IN GENERAL.—Amounts in the Fed12 eral Outlay Program Fraud and Abuse Account

13 are appropriated to carry out the program de14 scribed in section 1128C of the Social Security

15 Act.

16 ‘‘(B) MAINTENANCE OF EFFORT.—No

17 amounts in the Federal Outlay Program Fraud

18 and Abuse Account which are made available to

19 any Federal agency shall replace or reduce the

20 amount of appropriations otherwise made avail21 able under appropriation Acts for such agency.

22 ‘‘(h) ALLOCATION OF INTEREST.—Amounts credited

23 to the Health Security Trust Fund under section 9602(b)

24 for any fiscal year shall be allocated to each account rat-
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•S 2351 PCS

1 ably on the basis of the amounts allocated to the account

2 for the fiscal year (without regard to this subsection).

3 ‘‘SEC. 9552. GRADUATE MEDICAL EDUCATION AND ACA4 DEMIC HEALTH CENTERS TRUST FUND.

5 ‘‘(a) CREATION OF TRUST FUND.—

6 ‘‘(1) IN GENERAL.—There is established in the

7 Treasury of the United States a trust fund to be

8 known as the ‘Graduate Medical Education and Aca9 demic Health Centers Trust Fund’, consisting of

10 such amounts as may be appropriated or credited to

11 the Academic Health Centers Trust Fund as pro12 vided in this section or section 9602(b).

13 ‘‘(2) ACCOUNTS IN THE TRUST FUND.—The

14 Graduate Medical Education and Academic Health

15 Centers Trust Fund shall consist of the following 2

16 accounts:

17 ‘‘(A) The Graduate Medical and Nursing

18 Education Trust Fund.

19 ‘‘(B) The Academic Health Centers Trust

20 Fund.

21 Each such account shall consist of such amounts as

22 are allocated to it under this section.

23 ‘‘(b) TRANSFERS TO THE TRUST FUND.—

24 ‘‘(1) TAXES.—There are hereby appropriated to

25 the Graduate Medical Education and Academic
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1 Health Centers Trust Fund amounts received in the

2 Treasury under sections 4501 and 4502 (relating to

3 assessments on insured and self-insured health

4 plans), other than any portion of such amounts

5 transferred to the Biomedical and Behavioral Re6 search Trust Fund under section 9553(b).

7 ‘‘(2) TRANSFERS FROM OTHER TRUST

8 FUNDS.—The Secretary of Health and Human Serv9 ices shall transfer each fiscal year to the Graduate

10 Medical Education and Academic Health Centers

11 Trust Fund from the Federal Hospital Insurance

12 Trust Fund and the Federal Supplementary Medical

13 Insurance Trust Fund established under the Social

14 Security Act the sum of—

15 ‘‘(A) the amount that would have been

16 paid from the Federal Hospital Insurance Trust

17 Fund in such fiscal year under section

18 1886(d)(5)(B) of such Act (as in effect before

19 the date of the enactment of the Health Secu20 rity Act), plus

21 ‘‘(B) the amount that would have been

22 paid from such trust funds in such fiscal year

23 under section 1886(h) of such Act (as so in ef24 fect).
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1 ‘‘(c) GRADUATE MEDICAL AND NURSING EDUCATION

2 TRUST FUND.—

3 ‘‘(1) TRANSFERS.—There is allocated to the

4 Graduate Medical and Nursing Education Trust

5 Fund each fiscal year an amount equal to the sum

6 of—

7 ‘‘(A) amounts described in subsection

8 (b)(2)(B), plus

9 ‘‘(B) the excess of—

10 ‘‘(i) the amounts made available

11 under subpart I of part D of title XVIII of

12 the Social Security Act, over

13 ‘‘(ii) the amount described in subpara14 graph (A).

15 ‘‘(2) EXPENDITURES.—Amounts in the Grad16 uate Medical and Nursing Education Trust Fund

17 are appropriated to carry out the programs estab18 lished under subpart I of part D of title XVIII of

19 the Social Security Act, and to the extent any such

20 amount is not expended during any fiscal year, such

21 amount shall be available for such purpose for sub22 sequent fiscal years.

23 ‘‘(d) ACADEMIC HEALTH CENTERS TRUST FUND.—
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1 ‘‘(1) TRANSFERS.—There is allocated to the

2 Academic Health Centers Trust Fund each fiscal

3 year an amount equal to the sum of—

4 ‘‘(A) amounts described in subsection

5 (b)(2)(A), plus

6 ‘‘(B) the excess of—

7 ‘‘(i) the amounts made available

8 under subpart II of part D of title XVIII

9 of the Social Security Act, over

10 ‘‘(ii) the amount described in subpara11 graph (A).

12 ‘‘(2) EXPENDITURES.—Amounts in the Aca13 demic Health Centers Trust Fund are appropriated

14 to carry out the programs established under subpart

15 II of part D of title XVIII of the Social Security

16 Act, and to the extent any such amount is not ex17 pended during any fiscal year, such amount shall be

18 available for such purpose for subsequent fiscal

19 years.

20 ‘‘(e) RULES RELATING TO ACCOUNTS.—

21 ‘‘(1) INSUFFICIENT FUNDS.—If, for any fiscal

22 year, the sum of the amounts required to be allo23 cated under subsections (c) and (d) exceeds the

24 amounts received in the Graduate Medical Edu25 cation and Academic Health Centers Trust Fund,
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•S 2351 PCS

1 then each of such amounts required to be so allo2 cated shall be reduced to an amount which bears the

3 same ratio to such amount as the amounts received

4 in the trust fund bear to the amounts required to be

5 so allocated (without regard to this paragraph).

6 ‘‘(2) ALLOCATION OF EXCESS FUNDS AND IN7 TEREST.—Amounts received in the Graduate Medi8 cal Education and Academic Health Centers Trust

9 Fund in excess of the amounts required to be allo10 cated under subsections (c) and (d), and amounts

11 credited to such trust fund under section 9602(b),

12 for any fiscal year shall be allocated to each account

13 ratably on the basis of the amounts allocated to the

14 account for the fiscal year (without regard to this

15 paragraph).

16 ‘‘SEC. 9553. BIOMEDICAL AND BEHAVIORAL RESEARCH

17 TRUST FUND.

18 ‘‘(a) CREATION OF TRUST FUND.—There is estab19 lished in the Treasury of the United States a trust fund

20 to be known as the ‘Biomedical and Behavioral Research

21 Trust Fund’, consisting of such amounts as may be appro22 priated or credited to the Biomedical and Behavioral Re23 search Trust Fund as provided in this section or section

24 9602(b).
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1 ‘‘(b) TRANSFERS TO THE TRUST FUND.—There are

2 hereby appropriated to the Biomedical and Behavioral Re3 search Trust Fund amounts equivalent to 14.3 percent of

4 amounts received in the Treasury under sections 4501 and

5 4502 (relating to assessments on insured and self-insured

6 health plans).

7 ‘‘(c) EXPENDITURES FROM THE TRUST FUND.—

8 ‘‘(1) IN GENERAL.—The Secretary shall pay an9 nually, within 30 days after the President signs an

10 appropriations Act for the Departments of Labor,

11 Health and Human Services, and Education and re12 lated agencies, or by the end of the first quarter, to

13 the Secretary of Health and Human Services, an

14 amount equal to the amount in the Biomedical and

15 Behavioral Research Trust Fund at the time of such

16 payment.

17 ‘‘(2) DISTRIBUTION OF AMOUNTS.—The Sec18 retary of Health and Human Services shall distrib19 ute—

20 ‘‘(A) 3 percent of the amounts received

21 under paragraph (1) during any fiscal year to

22 the Office of the Director of the National Insti23 tutes of Health and for construction of intra24 mural and extramural buildings and facilities
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1 under section 1502 of the National Institutes of

2 Health Revitalization Act of 1993,

3 ‘‘(B) 20 percent of the amounts received

4 under paragraph (1) during any fiscal year to

5 the Agency for Health Care Policy and Re6 search for health care services research under

7 section 21502 of the Social Security Act, and

8 ‘‘(C) the remainder of the amounts re9 ceived under paragraph (1) during any fiscal

10 year to member institutes of the National Insti11 tutes of Health in the same proportion to the

12 total amount received under such paragraph, as

13 the amount of annual appropriations under ap14 propriations Acts for each member institute for

15 the fiscal year bears to the total amount of ap16 propriations under appropriations Acts for all

17 member institutes of the National Institutes of

18 Health for the fiscal year.

19 ‘‘(3) MAINTENANCE OF EFFORT.—No amounts

20 in the Biomedical and Behavioral Research Trust

21 Fund shall replace or reduce the amount of appro22 priations for the National Institutes of Health under

23 appropriations Acts.’’
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1 (b) CONFORMING AMENDMENT.—Subchapter A of

2 chapter 98 is amended by inserting after the subchapter

3 heading the following new items:

‘‘Part I. General trust funds.

‘‘Part II. Health care trust funds.

4 ‘‘PART I—GENERAL TRUST FUNDS’’.

5 Subtitle G—Other Revenue

6 Provisions

7 PART I—EMPLOYMENT STATUS PROVISIONS

8 SEC. 771. EMPLOYMENT STATUS PROPOSAL REQUIRED

9 FROM DEPARTMENT OF THE TREASURY.

10 Not later than January 1, 1996, the Secretary of the

11 Treasury shall submit to the Committee on Ways and

12 Means of the House of Representatives and the Committee

13 on Finance of the Senate a legislative proposal providing

14 statutory standards for the classification of workers as

15 employees or independent contractors.

16 SEC. 772. INCREASE IN SERVICES REPORTING PENALTIES.

17 (a) INCREASE IN PENALTY.—Section 6721(a) (relat18 ing to imposition of penalty) is amended by adding at the

19 end the following new paragraph:

20 ‘‘(3) INCREASED PENALTY FOR RETURNS IN21 VOLVING PAYMENTS FOR SERVICES.—

22 ‘‘(A) IN GENERAL.—Subject to the overall

23 limitation of paragraph (1), the amount of the

24 penalty under paragraph (1) for any failure
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1 with respect to any applicable return shall be

2 equal to the greater of $50 or 5 percent of the

3 amount required to be reported correctly but

4 not so reported.

5 ‘‘(B) EXCEPTION WHERE SUBSTANTIAL

6 COMPLIANCE.—Subparagraph (A) shall not

7 apply to failures with respect to applicable re8 turns required to be filed by a person during

9 any calendar year if the aggregate amount

10 which is timely and correctly reported on appli11 cable returns filed by the person for the cal12 endar year is at least 97 percent of the aggre13 gate amount which is required to be reported

14 on applicable returns by the person for the cal15 endar year.

16 ‘‘(C) APPLICABLE RETURN.—For purposes

17 of this paragraph, the term ‘applicable return’

18 means any information return required to be

19 filed under—

20 ‘‘(i) section 6041(a) but only if such

21 return relates to payments to any person

22 for services performed by such person

23 (other than as an employee), or

24 ‘‘(ii) section 6041A(a).’’
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1 (b) CONFORMING AMENDMENT.—Section 6721(a)(1)

2 is amended by striking ‘‘In’’ and inserting ‘‘Except as pro3 vided in paragraph (3), in’’.

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

5 this section shall apply to returns the due date for which

6 (without regard to extensions) is more than 30 days after

7 the date of the enactment of this Act.

8 PART II—TAX INCENTIVES FOR HEALTH

9 SERVICES PROVIDERS

10 SEC. 775. NONREFUNDABLE CREDIT FOR CERTAIN PRI11 MARY HEALTH SERVICES PROVIDERS.

12 (a) IN GENERAL.—Subpart A of part IV of sub13 chapter A of chapter 1 (relating to nonrefundable personal

14 credits) is amended by inserting after section 22 the fol15 lowing new section:

16 ‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

17 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al18 lowed as a credit against the tax imposed by this chapter

19 for the taxable year an amount equal to the product of—

20 ‘‘(1) the number of months during such taxable

21 year—

22 ‘‘(A) during which the taxpayer is a quali23 fied primary health services provider, and

24 ‘‘(B) which are within the taxpayer’s eligi25 ble service period, and
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1 ‘‘(2) $1,000 ($500 in the case of a qualified

2 practitioner who is not a physician).

3 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO4 VIDER.—For purposes of this section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified pri6 mary health services provider’ means, with respect to

7 any month, any qualified practitioner who—

8 ‘‘(A) has in effect a certification by the

9 Bureau as a provider of primary health services

10 and such certification is, when issued, for a

11 health professional shortage area in which the

12 qualified practitioner is providing primary

13 health services,

14 ‘‘(B) is providing primary health services

15 full time in the health professional shortage

16 area identified in such certification, and

17 ‘‘(C) has not received a scholarship under

18 the National Health Service Corps Scholarship

19 Program or any loan repayments under the

20 National Health Service Corps Loan Repay21 ment Program.

22 ‘‘(2) SPECIAL RULES RELATING TO SHORTAGE

23 AREAS.—

24 ‘‘(A) AREAS CEASING TO BE SHORTAGE

25 AREAS.—For purposes of paragraph (1)(B) and
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1 subsection (e)(2), a provider shall be treated as

2 providing services in a health professional

3 shortage area when such area ceases to be such

4 an area if it was such an area on the first day

5 of the provider’s eligible service period.

6 ‘‘(B) AREAS WITHIN METROPOLITAN

7 AREAS.—A qualified practitioner who is provid8 ing services within a metropolitan statistical

9 area (as defined in section 143(k)(2)) shall not

10 be treated as meeting the requirements of para11 graph (1)(B) unless such services are provided

12 for, or on behalf of, a governmental or non13 profit entity.

14 ‘‘(3) QUALIFIED PRACTITIONER.—The term

15 ‘qualified practitioner’ means a physician, a physi16 cian assistant, a nurse practitioner, or a certified

17 nurse-midwife.

18 ‘‘(c) ELIGIBLE SERVICE PERIOD.—For purposes of

19 this section, the term ‘eligible service period’ means the

20 period of 36 consecutive calendar months beginning with

21 the first month the taxpayer is a qualified primary health

22 services provider (as specified in the certification under

23 subsection (b)(1)(A)). A taxpayer shall not have more

24 than 1 eligible service period.
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1 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

2 For purposes of this section—

3 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

4 Bureau of Primary Health Care, Health Resources

5 and Services Administration of the United States

6 Public Health Service.

7 ‘‘(2) PHYSICIAN.—The term ‘physician’ has the

8 meaning given to such term by section 1861(r) of

9 the Social Security Act.

10 ‘‘(3) PHYSICIAN ASSISTANT; NURSE PRACTI11 TIONER.—The terms ‘physician assistant’ and ‘nurse

12 practitioner’ have the meanings given to such terms

13 by section 1861(aa)(5) of the Social Security Act.

14 ‘‘(4) CERTIFIED NURSE-MIDWIFE.—The term

15 ‘certified nurse-midwife’ has the meaning given to

16 such term by section 1861(gg)(2) of the Social Secu17 rity Act.

18 ‘‘(5) PRIMARY HEALTH SERVICES.—The term

19 ‘primary health services’ has the meaning given such

20 term by section 330(b)(1) of the Public Health Serv21 ice Act.

22 ‘‘(6) HEALTH PROFESSIONAL SHORTAGE

23 AREA.—The term ‘health professional shortage area’

24 has the meaning given such term by section

25 332(a)(1)(A) of the Public Health Service Act.
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1 ‘‘(7) PRACTITIONER CURRENTLY PRACTICING IN

2 SHORTAGE AREAS.—In the case of a qualified practi3 tioner who, on December 31, 1994, was providing

4 primary health services in any health professional

5 shortage area—

6 ‘‘(A) the practitioner’s eligible service pe7 riod shall begin on January 1, 1995, and

8 ‘‘(B) if such practitioner is a physician,

9 subsection (a)(2) shall be applied by substitut10 ing ‘$500’ for ‘$1,000’.

11 ‘‘(e) RECAPTURE OF CREDIT.—

12 ‘‘(1) IN GENERAL.—If there is a recapture

13 event during any taxable year, then—

14 ‘‘(A) no credit shall be allowed under sub15 section (a) for such taxable year and any suc16 ceeding taxable year, and

17 ‘‘(B) the tax of the taxpayer under this

18 chapter for such taxable year shall be increased

19 by an amount equal to the aggregate credits al20 lowed to such taxpayer under this section for all

21 prior taxable years.

22 ‘‘(2) RECAPTURE EVENT DEFINED.—

23 ‘‘(A) IN GENERAL.—For purposes of this

24 subsection, the term ‘recapture event’ means

25 the failure of the taxpayer to be a qualified pri-
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•S 2351 PCS

1 mary health services provider during any of the

2 first 24 months during the taxpayer’s eligible

3 service period.

4 ‘‘(B) SECRETARIAL WAIVER.—The Sec5 retary, in consultation with the Secretary of

6 Health and Human Services, may waive any re7 capture event caused by extraordinary cir8 cumstances.

9 ‘‘(3) NO CREDITS AGAINST TAX; MINIMUM

10 TAX.—Any increase in tax under this subsection

11 shall not be treated as a tax imposed by this chapter

12 for purposes of determining the amount of any cred13 it under subpart A, B, or D of this part or for pur14 poses of section 55.’’

15 (b) CLERICAL AMENDMENT.—The table of sections

16 for subpart A of part IV of subchapter A of chapter 1

17 is amended by inserting after the item relating to section

18 22 the following new item:

‘‘Sec. 23. Primary health services providers.’’

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

20 this section shall apply to taxable years beginning after

21 December 31, 1994.

22 SEC. 776. EXPENSING OF MEDICAL EQUIPMENT.

23 (a) IN GENERAL.—Paragraph (1) of section 179(b)

24 (relating to dollar limitation on expensing of certain depre25 ciable business assets) is amended to read as follows:
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1 ‘‘(1) DOLLAR LIMITATION.—

2 ‘‘(A) GENERAL RULE.—The aggregate cost

3 which may be taken into account under sub4 section (a) for any taxable year shall not exceed

5 $17,500.

6 ‘‘(B) HEALTH CARE PROPERTY.—The ag7 gregate cost which may be taken into account

8 under subsection (a) shall be increased by the

9 lesser of—

10 ‘‘(i) the cost of section 179 property

11 which is health care property placed in

12 service during the taxable year, or

13 ‘‘(ii) $15,000.’’

14 (b) DEFINITION.—Section 179(d) (relating to defini15 tions) is amended by adding at the end the following new

16 paragraph:

17 ‘‘(11) HEALTH CARE PROPERTY.—

18 ‘‘(A) IN GENERAL.—For purposes of this

19 section, the term ‘health care property’ means

20 section 179 property—

21 ‘‘(i) which is medical equipment used

22 in the screening, monitoring, observation,

23 diagnosis, or treatment of patients in a

24 laboratory, medical, or hospital environ25 ment,
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•S 2351 PCS

1 ‘‘(ii) which is owned (directly or indi2 rectly) and used by 1 or more physicians

3 (as defined in section 1861(r) of the Social

4 Security Act) in the active conduct of the

5 full-time trade or business of all such phy6 sicians of providing primary health services

7 (as defined in section 330(b)(1) of the

8 Public Health Service Act) in a health pro9 fessional shortage area (as defined in sec10 tion 332(a)(1)(A) of the Public Health

11 Service Act), and

12 ‘‘(iii) substantially all the use of which

13 is in such area.

14 ‘‘(B) SPECIAL RULE FOR METROPOLITAN

15 STATISTICAL AREAS.—A physician who is pro16 viding services within a metropolitan statistical

17 area (as defined in section 143(k)(2)) shall not

18 be treated as meeting the requirements of sub19 paragraph (A)(ii) unless such services are pro20 vided for, or on behalf of, a governmental or

21 nonprofit entity.’’

22 (c) RECAPTURE.—Paragraph (10) of section 179(d)

23 is amended by inserting ‘‘and with respect to any health

24 care property which ceases (other than by an area failing
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•S 2351 PCS

1 to be treated as a health professional shortage area) to

2 be health care property at any time’’ before the period.

3 (d) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to property placed in service in

5 taxable years beginning after December 31, 1994.

6 PART III—MISCELLANEOUS PROVISIONS

7 SEC. 781. POST-RETIREMENT MEDICAL AND LIFE INSUR8 ANCE RESERVES.

9 (a) MINIMUM PERIOD FOR WORKING LIVES.—Sec10 tion 419A(c)(2) (relating to additional reserves for post11 retirement medical and life insurance benefits) is amended

12 by inserting ‘‘(but not less than 10 years)’’ after ‘‘working

13 lives of the covered employees’’.

14 (b) SEPARATE ACCOUNTING.—

15 (1) REQUIREMENT.—Section 419A(c)(2) is

16 amended by adding at the end the following new

17 flush sentence:

18 ‘‘Such reserve shall be maintained as a separate account.’’

19 (2) USE OF RESERVE FOR OTHER PURPOSES.—

20 Paragraph (1) of section 4976(b) (defining disquali21 fied benefit) is amended by striking ‘‘and’’ at the

22 end of subparagraph (B), by striking the period at

23 the end of subparagraph (C) and inserting ‘‘, and’’,

24 and by adding after subparagraph (C) the following

25 new subparagraph:
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•S 2351 PCS

1 ‘‘(D) any payment to which subparagraph

2 (C) does not apply which is out of an account

3 described in section 419A(c)(2) and which is

4 not used to provide a post-retirement medical

5 benefit or life insurance benefit.’’

6 (c) EFFECTIVE DATES.—

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section

9 shall apply to contributions paid or accrued after

10 December 31, 1994, in taxable years ending after

11 such date.

12 (2) SEPARATE ACCOUNTING.—The amendments

13 made by subsection (b) shall apply to contributions

14 paid or accrued after the date of the enactment of

15 this Act, in taxable years ending after such date.

16 SEC. 782. COORDINATION WITH HEALTH CARE CONTINU17 ATION PROVISIONS.

18 (a) AMENDMENTS TO INTERNAL REVENUE CODE.—

19 (1) IN GENERAL.—Clause (i) of section

20 4980B(f)(2)(B) (defining period of coverage) is

21 amended to read as follows:

22 ‘‘(i) MAXIMUM PERIOD.—The later

23 of—
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1 ‘‘(I) the date which is 6 months

2 after the date of the qualifying event,

3 or

4 ‘‘(II) the last day of the calendar

5 year in which the qualifying event oc6 curs.’’

7 (2) CONFORMING AMENDMENTS.—Section

8 4980B(f)(2) is amended—

9 (A) by striking clause (v) of subparagraph

10 (B),

11 (B) by striking the last sentence of sub12 paragraph (C), and

13 (C) by striking subparagraph (E).

14 (b) AMENDMENTS TO ERISA.—

15 (1) IN GENERAL.—Section 602(2)(A) of the

16 Employee Retirement Income Security Act of 1974

17 (29 U.S.C. 1162(2)(A)) is amended to read as fol18 lows:

19 ‘‘(A) MAXIMUM REQUIRED PERIOD.—The

20 later of—

21 ‘‘(i) the date which is 6 months after

22 the date of the qualifying event, or

23 ‘‘(ii) the last day of the calendar year

24 in which the qualifying event occurs.’’
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•S 2351 PCS

1 (2) CONFORMING AMENDMENTS.—Section 602

2 of such Act (29 U.S.C. 1162) is amended—

3 (A) by striking subparagraph (E) of para4 graph (2),

5 (B) by striking the last sentence of para6 graph (3), and

7 (C) by striking paragraph (5).

8 (c) AMENDMENTS TO PHSA.—

9 (1) IN GENERAL.—Section 2202(2)(A) of the

10 Public Health Service Act (42 U.S.C. 300bb–

11 2(2)(A)) is amended to read as follows:

12 ‘‘(A) MAXIMUM REQUIRED PERIOD.—The

13 later of—

14 ‘‘(i) the date which is 6 months after

15 the date of the qualifying event, or

16 ‘‘(ii) the last day of the calendar year

17 in which the qualifying event occurs.’’

18 (2) CONFORMING AMENDMENTS.—Section 2202

19 of such Act (42 U.S.C. 300bb–2) is amended—

20 (A) by striking subparagraph (E) of para21 graph (2),

22 (B) by striking the last sentence of para23 graph (3), and

24 (C) by striking paragraph (5).
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•S 2351 PCS

1 (d) EFFECTIVE DATE.—The amendments made by

2 this section apply to qualifying events occurring after De3 cember 31, 1996.

4 SEC. 783. CREDIT FOR COST OF PERSONAL ASSISTANCE

5 SERVICES REQUIRED BY EMPLOYED INDIVID6 UALS.

7 (a) IN GENERAL.—Subpart A of part IV of sub8 chapter A of chapter 1 (relating to nonrefundable personal

9 credits), as amended by section 775, is amended by insert10 ing after section 23 the following new section:

11 ‘‘SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES RE12 QUIRED BY EMPLOYED INDIVIDUALS.

13 ‘‘(a) ALLOWANCE OF CREDIT.—

14 ‘‘(1) IN GENERAL.—In the case of an eligible

15 individual, there shall be allowed as a credit against

16 the tax imposed by this chapter for the taxable year

17 an amount equal to the applicable percentage of the

18 personal assistance expenses paid or incurred by the

19 taxpayer during such taxable year.

20 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

21 of paragraph (1), the term ‘applicable percentage’

22 means 50 percent reduced (but not below zero) by

23 10 percentage points for each $5,000 by which the

24 modified adjusted gross income (as defined in sec25 tion 59B(d)(2)) of the taxpayer for the taxable year
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1 exceeds $45,000. In the case of a married individual

2 filing a separate return, the preceding sentence shall

3 be applied by substituting ‘$2,500’ for ‘$5,000’ and

4 ‘$22,500’ for ‘$45,000’.

5 ‘‘(b) LIMITATION.—The amount of personal assist6 ance expenses for the benefit of an individual which may

7 be taken into account under subsection (a) for the taxable

8 year shall not exceed the lesser of—

9 ‘‘(1) $15,000, or

10 ‘‘(2) such individual’s earned income (as de11 fined in section 32(c)(2)) for the taxable year.

12 In the case of a joint return, the amount under the preced13 ing sentence shall be determined separately for each

14 spouse.

15 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

16 section, the term ‘eligible individual’ means any individual

17 (other than a nonresident alien) who, by reason of any

18 medically determinable physical impairment which can be

19 expected to result in death or which has lasted or can be

20 expected to last for a continuous period of not less than

21 12 months, is unable to engage in any substantial gainful

22 activity without personal assistance services appropriate to

23 carry out activities of daily living. An individual shall not

24 be treated as an eligible individual unless such individual
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1 furnishes such proof thereof (in such form and manner,

2 and at such times) as the Secretary may require.

3 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

4 section—

5 ‘‘(1) PERSONAL ASSISTANCE EXPENSES.—The

6 term ‘personal assistance expenses’ means expenses

7 for—

8 ‘‘(A) personal assistance services appro9 priate to carry out activities of daily living in or

10 outside the home,

11 ‘‘(B) homemaker/chore services incidental

12 to the provision of such personal assistance

13 services,

14 ‘‘(C) in the case of an individual with a

15 cognitive impairment, assistance with life skills,

16 ‘‘(D) communication services,

17 ‘‘(E) work-related support services,

18 ‘‘(F) coordination of services described in

19 this paragraph,

20 ‘‘(G) assistive technology and devices, in21 cluding assessment of the need for particular

22 technology and devices and training of family

23 members, and

24 ‘‘(H) modifications to the principal place of

25 abode of the individual to the extent the ex-
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1 penses for such modifications would (but for

2 subsection (e)(2)) be expenses for medical care

3 (as defined by section 213) of such individual.

4 ‘‘(2) ACTIVITIES OF DAILY LIVING.—The term

5 ‘activities of daily living’ means eating, toileting,

6 transferring, bathing, and dressing.

7 ‘‘(e) SPECIAL RULES.—

8 ‘‘(1) PAYMENTS TO RELATED PERSONS.—No

9 credit shall be allowed under this section for any

10 amount paid by the taxpayer to any person who is

11 related (within the meaning of section 267 or

12 707(b)) to the taxpayer.

13 ‘‘(2) COORDINATION WITH MEDICAL EXPENSE

14 DEDUCTION.—Any amount taken into account in de15 termining the credit under this section shall not be

16 taken into account in determining the amount of the

17 deduction under section 213.

18 ‘‘(3) BASIS REDUCTION.—For purposes of this

19 subtitle, if a credit is allowed under this section for

20 any expense with respect to any property, the in21 crease in the basis of such property which would

22 (but for this paragraph) result from such expense

23 shall be reduced by the amount of the credit so al24 lowed.
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1 ‘‘(f) COST-OF-LIVING ADJUSTMENT.—In the case of

2 any taxable year beginning after 1996, the $45,000 and

3 $22,500 amounts in subsection (a)(2) and the $15,000

4 amount in subsection (b) shall be increased by an amount

5 equal to—

6 ‘‘(1) such dollar amount, multiplied by

7 ‘‘(2) the cost-of-living adjustment determined

8 under section 1(f)(3) for the calendar year in which

9 the taxable year begins by substituting ‘calendar

10 year 1995’ for ‘calendar year 1992’ in subparagraph

11 (B) thereof.

12 If any increase determined under the preceding sentence

13 is not a multiple of $1,000, such increase shall be rounded

14 to the nearest multiple of $1,000.’’

15 (b) TECHNICAL AMENDMENT.—Subsection (a) of

16 section 1016 is amended by striking ‘‘and’’ at the end of

17 paragraph (24), by striking the period at the end of para18 graph (25) and inserting ‘‘, and’’, and by adding at the

19 end thereof the following new paragraph:

20 ‘‘(26) in the case of any property with respect

21 to which a credit has been allowed under section 24,

22 to the extent provided in section 24(e)(3).’’

23 (c) CLERICAL AMENDMENT.—The table of sections

24 for subpart A of part IV of subchapter A of chapter 1
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•S 2351 PCS

1 is amended by inserting after the item relating to section

2 23 the following new item:

‘‘Sec. 24. Cost of personal assistance services required by employed individuals.’’

3 (d) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years beginning after

5 December 31, 1995.

6 SEC. 784. DISCLOSURE OF RETURN INFORMATION FOR AD7 MINISTRATION OF CERTAIN PROGRAMS

8 UNDER THE HEALTH SECURITY ACT.

9 (a) IN GENERAL.—Section 6103(l) (relating to dis10 closure of returns and return information for purposes

11 other than tax administration) is amended by adding at

12 the end the following new paragraph:

13 ‘‘(15) DISCLOSURE OF RETURN INFORMATION

14 FOR PURPOSES OF HEALTH SECURITY ACT.—

15 ‘‘(A) IN GENERAL.—The Secretary shall,

16 upon written request, disclose current return in17 formation described in subparagraph (B) to any

18 Federal, State, or local agency administering an

19 assistance program under the Health Security

20 Act.

21 ‘‘(B) INFORMATION.—The information de22 scribed in this subparagraph is information

23 which consists only of adjusted gross income,

24 the untaxed portion of social security benefits,
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1 tax-exempt interest income, marital status, and

2 dependents.

3 ‘‘(C) RESTRICTION ON DISCLOSURE.—The

4 Secretary shall disclose return information

5 under subparagraph (A) only for purposes of,

6 and to the extent necessary in, determining eli7 gibility for, or the correct amount of, assistance

8 provided under the Health Security Act.

9 ‘‘(D) EXCLUSION FROM MATCHING PRO10 GRAM.—Any matches of information under this

11 paragraph shall not be treated as a matching

12 program for purposes of section 552a of title 5,

13 United States Code.’’

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 6103(a)(2) is amended by inserting

16 ‘‘or (15)’’ after ‘‘subsection (l)(7)(D)’’.

17 (2) Section 6103(p)(3)(A) is amended by strik18 ing ‘‘or (14)’’ and inserting ‘‘(14), or (15)’’.

19 (3) Section 6103(p)(4) is amended—

20 (A) by striking ‘‘or (12)’’ in the matter

21 preceding subparagraph (A) and inserting

22 ‘‘(12), or (15)’’, and

23 (B) by striking ‘‘or (14)’’ in subparagraph

24 (F)(ii) and inserting ‘‘(14), or (15)’’.
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1 (4) Section 7213(a)(2) is amended by striking

2 ‘‘or (12)’’ and inserting ‘‘(12), or (15)’’.

3 SEC. 785. SPECIAL RULE FOR DEFERRED COMPENSATION

4 PLANS OF GROUP MEDICAL PRACTICES.

5 (a) IN GENERAL.—Section 457(e) is amended by

6 adding at the end the following new paragraph:

7 ‘‘(14) TREATMENT OF EXCESS BENEFIT AR8 RANGEMENTS OF CERTAIN GROUP MEDICAL PRAC9 TICES.—

10 ‘‘(A) IN GENERAL.—In the case of an indi11 vidual who—

12 ‘‘(i) is a member of a group medical

13 practice which is exempt from taxation

14 under section 501(a) and which is de15 scribed in section 501(c)(3), and

16 ‘‘(ii) is a participant in an eligible de17 ferred compensation plan maintained by

18 such practice which is an excess benefit

19 plan,

20 subsections (b)(2) and (c)(1) shall not apply in de21 termining the maximum amount which may be de22 ferred under such plan for a taxable year.

23 ‘‘(B) EXCESS BENEFIT PLAN.—For pur24 poses of subparagraph (A), the term ‘excess

25 benefit plan’ means a plan (or separable part
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1 thereof) which is maintained by an employer

2 solely for purposes of providing benefits for cer3 tain employees in excess of the limitations on

4 contributions and benefits imposed by section

5 415.’’

6 (b) EFFECTIVE DATE.—The amendments made by

7 this section apply to taxable years beginning after Decem8 ber 31, 1994.

9 Subtitle H—Ensuring Health Care

10 Financing

11 SEC. 791. ENSURING HEALTH CARE FINANCING.

12 (a) PURPOSE.—

13 (1) IN GENERAL.—The purpose of this section

14 is to ensure that programs established under this

15 Act, and unanticipated increases in other Federal

16 health spending, do not increase the Federal deficit.

17 (2) DEFINITION.—For purposes of this sub18 section, the term ‘‘other Federal health spending’’

19 includes medicare expenditures, medicaid expendi20 tures, and the revenue losses associated with the em21 ployee exclusion of employer-provided accident and

22 health coverage and the deductibility of individual

23 medical expenses in excess of 7.5 percent of adjusted

24 gross income.
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1 (b) LEGAL ENTITLEMENTS CONTINGENT.—Any enti2 tlement provided by this Act to premium and cost-sharing

3 assistance, or to tax deductions for health insurance pre4 miums provided by section 731 of this Act, shall be subject

5 to the operation of this section.

6 (c) DETERMINATION OF UNFINANCED HEALTH

7 SPENDING.—

8 (1) CURRENT HEALTH SPENDING ESTIMATE.—

9 (A) FISCAL YEARS THROUGH 2004.—Not

10 later than the date that is 60 days after the

11 date of enactment of this Act, the President

12 shall issue an executive order setting forth the

13 current health spending estimate for fiscal year

14 1995 and for each subsequent fiscal year

15 through 2004, which shall consist of estimates

16 (for each year) projecting what Federal outlays

17 or revenues would have been if this Act had not

18 been enacted, for the following:

19 (i) total outlays under the Medicare

20 and Medicaid programs (including admin21 istrative costs and offsetting receipts); and

22 (ii) revenue losses associated with—

23 (I) the employee exclusion of em24 ployer-provided accident and health

25 coverage; and
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1 (II) the deductibility of individual

2 medical expenses in excess of 7.5 per3 cent of adjusted gross income.

4 (B) FISCAL YEARS AFTER 2004.—For each

5 fiscal year following fiscal year 2004, the cur6 rent health spending estimate is the estimate

7 set forth in the executive order for fiscal year

8 2004, modified by an annual adjustment factor

9 set forth in such order.

10 (2) PRESIDENT’S BUDGET TO INCLUDE

11 HEALTH REFORM ESTIMATES.—

12 (A) ESTIMATES FOR UPCOMING FISCAL

13 YEAR AND CURRENT YEAR.—When the Presi14 dent submits the budget for fiscal year 1996

15 (as required by section 1105 of title 31), and

16 for each fiscal year thereafter, the President

17 shall include a health reform estimate (as speci18 fied in paragraph (3)) with respect to the up19 coming fiscal year and the current fiscal year.

20 (B) DETERMINATIONS FOR PRIOR FISCAL

21 YEAR.—When the President submits the budget

22 for fiscal year 1997 (as required by section

23 1105 of title 31), and for each fiscal year there24 after, the President shall include determinations

25 for the fiscal year which ended the prior Sep-
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1 tember, with respect to the items specified in

2 the health reform estimate (as specified in

3 paragraph (3)).

4 (3) HEALTH REFORM ESTIMATE.—

5 (A) IN GENERAL.—The health reform esti6 mate is a calculation, for the applicable fiscal

7 year, of—

8 (i) updated projections for the appli9 cable fiscal year for each item set forth in

10 the current health estimate (as set forth in

11 paragraph (1)); plus

12 (ii) the health reform outlays set forth

13 in subparagraph (B); minus

14 (iii) the net health reform revenues

15 set forth in subparagraph (C).

16 (B) HEALTH REFORM OUTLAYS.—Health

17 reform outlays equal—

18 (i) total outlays for premium and cost

19 sharing assistance (including administra20 tive costs) projected for the fiscal year;

21 plus

22 (ii) other changes in outlays resulting

23 from this Act, including discretionary ap24 propriations enacted pursuant to this Act.
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1 (C) NET HEALTH REFORM REVENUES.—

2 Net health reform revenues equal—

3 (i) total new revenues projected for

4 the applicable fiscal year due to the in5 crease in the tobacco excise tax and the tax

6 on high cost health plans provided in this

7 Act; minus

8 (ii) total revenue losses projected for

9 the applicable fiscal year due to the deduc10 tion for purchase by individuals and the

11 self-employed of health insurance policies

12 provided by section 731 of this Act; plus or

13 minus

14 (iii) other changes in revenues result15 ing from this Act (which are not reflected

16 in the updated current health estimate as

17 set forth in subparagraph (A)(i)).

18 (4) DETERMINATION OF UNFINANCED HEALTH

19 SPENDING AND EXCESS HEALTH FINANCING.—Each

20 health reform estimate required by this subsection

21 shall be accompanied by a comparison of such esti22 mate with the current health spending estimate for

23 the applicable fiscal year. If the applicable health re24 form estimate exceeds the applicable current health

25 spending estimate, the President shall report the
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1 amount of the excess as unfinanced health spending

2 for the applicable fiscal year. If the applicable health

3 reform estimate is less than the applicable current

4 health spending estimate, the President shall report

5 such difference as excess health financing for the ap6 plicable fiscal year.

7 (d) OFFSETTING UNFINANCED HEALTH SPEND8 ING.—

9 (1) REQUIREMENT TO FULLY OFFSET

10 UNFINANCED HEALTH SPENDING.—If the Presi11 dent’s budget includes a determination of unfinanced

12 health spending pursuant to subsection (c)(4) for

13 the upcoming fiscal year, the current fiscal year, or

14 the fiscal year which ended the prior October, such

15 determination shall be accompanied by an executive

16 order effective on October 1 of that calendar year

17 which fully offsets in the fiscal year beginning Octo18 ber 1 the sum of such unfinanced health spending

19 (for the upcoming fiscal year, the current fiscal year,

20 and the prior fiscal year) in the manner provided in

21 this subsection. Such executive order shall be accom22 panied by such regulations as are required under

23 subsection (d)(4).
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1 (2) OFFSETS.—The offsets required by this

2 subsection shall be accomplished through a combina3 tion of—

4 (A) subject to the provisions of paragraph

5 (3)—

6 (i) in the case of the premium assist7 ance program, reducing the percentages

8 otherwise in effect for the fiscal year under

9 clauses (i) and (ii) of section 1952

10 (a)(2)(A) of the Social Security Act, and

11 (ii) in the case of the cost-sharing as12 sistance program, reducing payments to

13 the States under section 1957 of such Act;

14 (B) reducing the percentage specified in

15 section 213(f)(1) of the Internal Revenue Code

16 of 1986; and

17 (C) increasing out-of-pocket limits in the

18 standard and alternative benefits packages as

19 imposed by the National Health Benefits Board

20 pursuant to this Act, to the extent such actions

21 will produce measurable Federal outlay savings.

22 (3) ELIGIBILITY PERCENTAGE FOR PREGNANT

23 WOMEN AND CHILDREN REDUCED LAST.—Any re24 duction under paragraph (2)(A)—
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1 (A) shall be made first by reducing the

2 percentages under sections 1952(a)(2)(A)(i) of

3 the Social Security Act and by reducing the

4 payments to States under 1957 of such Act;

5 and

6 (B) to the extent sufficient offsets may not

7 be made under subparagraph (A), shall then be

8 made by reducing the percentage under section

9 1952(a)(2)(A)(ii) of such Act.

10 (4) PROPORTIONALITY.—The President shall

11 apply the offset mechanisms provided in paragraph

12 (2) (A), (B), and (C) proportionally, to the extent

13 possible, but in no case shall the total amount of off14 sets be less than the amount required by subsection

15 (d)(1).

16 (5) CONSULTATION.—In making the determina17 tions required by this subsection, the President shall

18 consult with the Director of the Office of Manage19 ment and Budget, the Secretary of the Treasury,

20 and the National Health Benefits Board. Any order

21 modifying the new tax deductions shall be accom22 panied by Treasury regulations implementing such

23 modification. Any order modifying out-of-pocket lim24 its shall be accompanied by National Health Bene-
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1 fits Board regulations implementing such modifica2 tion.

3 (e) CARRYOVER OF EXCESS HEALTH FINANCING.—

4 If the President’s budget includes a determination of ex5 cess health financing pursuant to subsection (c)(4) for a

6 fiscal year, such amount shall be included in calculating

7 the health reform estimate for the subsequent fiscal year,

8 by including such amount in the calculation of total net

9 revenues projected for that year under subsection

10 (c)(3)(C)(iii).

11 (f) RECOMMENDATIONS FOR ALTERNATIVE REDUC12 TIONS.—If the President’s budget for a fiscal year is ac13 companied by an executive order under subsection (d)(1),

14 the National Health Care Commission shall, within a rea15 sonable time, transmit to the Speaker of the House of

16 Representatives and the President of the Senate a report

17 including alternative proposals to offset the projected ex18 cess outlays.

19 (g) GAO AUDIT OF REDUCTIONS.—If the President

20 has issued an executive order under subsection (d)(1), the

21 General Accounting Office shall report to Congress, as

22 soon thereafter as possible following the date of transmit23 tal of the President’s budget, an analysis of whether the

24 executive order has fully complied with the requirements

25 of this section.