II

103D CONGRESS

2D SESSION S. 2374

To improve the United States private health care delivery system and Federal

health care programs, to control health care costs, to guarantee access

to health insurance coverage for all Americans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

AUGUST 9 (legislative day, AUGUST 8), 1994

Mr. DOLE (for himself and Mr. PACKWOOD) introduced the following bill;

which was read the first time

A BILL

To improve the United States private health care delivery

system and Federal health care programs, to control

health care costs, to guarantee access to health insurance

coverage for all Americans, 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,
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1 TITLE I—AFFORDABLE HEALTH

2 INSURANCE COVERAGE

3 Subtitle A—Tax Incentives

4 SEC. 100. AMENDMENT OF 1986 CODE.

5 Except as otherwise expressly provided, whenever in

6 this subtitle an amendment or repeal is expressed in terms

7 of an amendment to, or repeal of, a section or other provi8 sion, the reference shall be considered to be made to a

9 section or other provision of the Internal Revenue Code

10 of 1986.

11 PART I—EQUITABLE TAX TREATMENT OF

12 INDIVIDUALS PROVIDING OWN HEALTH CARE

13 SEC. 101. DEDUCTION FOR INDIVIDUALS AND SELF-EM14 PLOYED INDIVIDUALS PROVIDING OWN

15 HEALTH INSURANCE.

16 (a) GENERAL RULE.—Section 213 (relating to medi17 cal, dental, etc. expenses) is amended by adding at the

18 end the following new subsection:

19 ‘‘(f) HEALTH INSURANCE COSTS OF INDIVIDUALS.—

20 ‘‘(1) IN GENERAL.—The adjusted gross income

21 limitation under subsection (a) shall not apply to

22 amounts paid by an individual during the taxable

23 year for qualified health insurance costs (and such

24 amounts shall not be taken into account in deter-
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1 mining whether such limitation applies to other

2 amounts).

3 ‘‘(2) QUALIFIED HEALTH INSURANCE COSTS.—

4 For purposes of this subsection—

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

6 health insurance costs’ means amounts paid for

7 insurance described in subsection (d)(1)(D)(i)

8 for the taxpayer, the taxpayer’s spouse, or any

9 dependent (as defined in section 152).

10 ‘‘(B) LIMITATIONS.—For purposes of sub11 paragraph (A)—

12 ‘‘(i) NO DEDUCTION FOR EMPLOYER13 SUBSIDIZED HEALTH COSTS.—Qualified

14 health insurance costs shall not include

15 any amount paid for insurance coverage of

16 an individual for any month if the individ17 ual is eligible to participate for such month

18 in an employer-subsidized health plan

19 maintained by any employer of the tax20 payer, the taxpayer’s spouse, or any de21 pendent.

22 ‘‘(ii) PHASE-IN.—In the case of tax23 able years beginning after 1993 and before

24 2000, only the following percentages of the
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1 qualified health insurance costs shall be

2 taken into account:

‘‘If the taxable year The applicable

begins in: percentage is:

1994 or 1995 ........................................................................... 25 percent

1996 or 1997 ........................................................................... 50 percent

1998 or 1999 ........................................................................... 75 percent.

3 ‘‘(3) DEDUCTION NOT ALLOWED FOR SELF-EM4 PLOYMENT TAX PURPOSES.—The deduction allow5 able by reason of this subsection shall not be taken

6 into account in determining an individual’s net earn7 ings from self-employment (within the meaning of

8 section 1402(a)) for purposes of chapter 2.’’

9 (b) DEDUCTION ALLOWED AGAINST GROSS IN10 COME.—Section 62(a) (defining adjusted gross income) is

11 amended by inserting after paragraph (15) the following

12 new paragraph:

13 ‘‘(16) DEDUCTION FOR HEALTH INSURANCE

14 PREMIUMS.—The deduction allowed under section

15 213(a) for amounts described in section 213(f).’’

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

17 this section shall apply to taxable years beginning after

18 December 31, 1993.

19 PART II—MEDICAL SAVINGS ACCOUNTS

20 SEC. 111. DEDUCTION FOR CONTRIBUTIONS TO MEDICAL

21 SAVINGS ACCOUNTS.

22 (a) IN GENERAL.—Part VII of subchapter B of chap23 ter 1 (relating to additional itemized deductions for indi-
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1 viduals) is amended by redesignating section 220 as sec2 tion 221 and by inserting after section 219 the following

3 new section:

4 ‘‘SEC. 220. CONTRIBUTIONS TO MEDICAL SAVINGS AC5 COUNTS.

6 ‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi7 ble individual, there shall be allowed as a deduction the

8 amounts paid in cash during the taxable year by such indi9 vidual to a medical savings account for the benefit of such

10 individual or for the benefit of any spouse or dependent

11 of such individual who is an eligible individual.

12 ‘‘(b) LIMITATIONS.—

13 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

14 provided in regulations prescribed by the Secretary,

15 no deduction shall be allowed under subsection (a)

16 for amounts paid to any medical savings account for

17 the benefit of an individual, such individual’s spouse,

18 or any dependent of such individual if such individ19 ual, spouse, or dependent is a beneficiary of any

20 other medical savings account.

21 ‘‘(2) DOLLAR LIMITATION.—

22 ‘‘(A) IN GENERAL.—The amount allowable

23 as a deduction under subsection (a) with re24 spect to any individual for the taxable year

25 shall not exceed the lesser of—
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1 ‘‘(i) $2,000 ($4,000 in the case of a

2 medical savings account established on be3 half of more than 1 individual), or

4 ‘‘(ii) the high deductible health plan

5 differential.

6 In the case of a married individual filing a sep7 arate return, clause (i) shall be applied by sub8 stituting ‘$1,000’ for ‘$2,000’ and ‘$2,000’ for

9 ‘$4,000’.

10 ‘‘(B) HIGH DEDUCTIBLE HEALTH PLAN

11 DIFFERENTIAL.—For purposes of subparagraph

12 (A)(ii), the high deductible health plan differen13 tial with respect to any individual is the amount

14 by which the cost of the high deductible health

15 plan in which the individual is enrolled is less

16 than the cost of the health plan providing the

17 FedMed benefit package (within the meaning of

18 section 21115(b) of the Social Security Act).

19 ‘‘(3) PHASE-IN OF DEDUCTION.—In the case of

20 taxable years beginning after December 31, 1994,

21 and before January 1, 2000, only the following per22 centages of the deduction allowable under this sec23 tion (without regard to this paragraph) shall be al24 lowed:

‘‘If the taxable year The applicable

begins in: percentage is:

1995 ......................................................................................... 25 percent
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‘‘If the taxable year The applicable

begins in: percentage is:

1996 or 1997 ........................................................................... 50 percent

1998 or 1999 ........................................................................... 75 percent.

1 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

3 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible

4 individual’ means any individual—

5 ‘‘(A) who is covered under a high deduct6 ible health plan during any portion of the cal7 endar year with or within which the taxable

8 year begins, and

9 ‘‘(B) who is not eligible during such cal10 endar year—

11 ‘‘(i) to participate in an employer-sub12 sidized health plan maintained by an em13 ployer of the individual, the individual’s

14 spouse, or any dependent of either, or

15 ‘‘(ii) to receive any employer contribu16 tion to a medical savings account.

17 For purposes of subparagraph (B), a self-employed

18 individual (within the meaning of section 401(c))

19 shall not be treated as his own employer.

20 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The

21 term ‘high deductible health plan’ means a health

22 plan which has—
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1 ‘‘(A) a deductible for each individual cov2 ered by the plan which is not less than $1,000,

3 and

4 ‘‘(B) a family deductible which is not less

5 than $2,000.

6 ‘‘(3) MEDICAL SAVINGS ACCOUNT.—The term

7 ‘medical savings account’ has the meaning given

8 such term by section 7705.

9 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

10 MADE.—A contribution shall be deemed to be made

11 on the last day of the preceding taxable year if the

12 contribution is made on account of such taxable year

13 and is made not later than the time prescribed by

14 law for filing the return for such taxable year (not

15 including extensions thereof).’’

16 (b) DEDUCTION ALLOWED AGAINST GROSS IN17 COME.—Subsection (a) of section 62 (defining adjusted

18 gross income), as amended by section 101, is amended by

19 inserting after paragraph (16) the following new para20 graph:

21 ‘‘(17) MEDICAL SAVINGS ACCOUNTS.—The de22 duction allowed by section 220.’’

23 (c) CLERICAL AMENDMENT.—The table of sections

24 for part VII of subchapter B of chapter 1 is amended by

25 striking the last item and inserting the following new item:

‘‘Sec. 220. Contributions to medical savings accounts.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 SEC. 112. EXCLUSION FROM INCOME OF EMPLOYER CON5 TRIBUTIONS TO MEDICAL SAVINGS AC6 COUNTS.

7 (a) IN GENERAL.—Section 106 (relating to contribu8 tions by employers to accident and health plans) is amend9 ed by adding at the end the following new subsection:

10 ‘‘(b) CONTRIBUTIONS TO MEDICAL SAVINGS AC11 COUNTS.—

12 ‘‘(1) TREATMENT OF CONTRIBUTIONS.—

13 ‘‘(A) IN GENERAL.—Gross income of an

14 employee who is covered by a high deductible

15 health plan of an employer shall not include any

16 employer contribution to a medical savings ac17 count on behalf of the employee or the employ18 ee’s spouse or dependents.

19 ‘‘(B) NO CONSTRUCTIVE RECEIPT.—No

20 amount shall be included in the gross income of

21 any employee solely because the employee may

22 choose between the contributions described in

23 subparagraph (A) and employer contributions

24 to a health plan of the employer.
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1 ‘‘(2) DOLLAR LIMITATION.—The amount which

2 may be excluded under paragraph (1) for any tax3 able year shall not exceed the lesser of—

4 ‘‘(A) $2,000 ($4,000 in the case of a medi5 cal savings account established on behalf of

6 more than one individual), or

7 ‘‘(B) the high deductible health plan dif8 ferential.

9 ‘‘(3) HIGH DEDUCTIBLE HEALTH PLAN DIF10 FERENTIAL.—For purposes of paragraph (2)(B), the

11 high deductible health plan differential with respect

12 to any employee is the amount by which the cost of

13 the high deductible health plan in which the em14 ployee is enrolled is less than—

15 ‘‘(A) the cost of the health plan (for the

16 same class of enrollment) which—

17 ‘‘(i) the employee is eligible to enroll

18 in through the employer, and

19 ‘‘(ii) has the highest cost of all health

20 plans in which the employee may enroll in

21 through the employer, or

22 ‘‘(B) if the employee is not eligible to en23 roll in any such health plan through the em24 ployer, the cost of the health plan providing the

25 FedMed benefit package.
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1 ‘‘(4) DEFINITIONS.—For purposes of this sub2 section—

3 ‘‘(A) IN GENERAL.—The term ‘FedMed

4 benefit package’ has the meaning given such

5 term by section 21115(b) of the Social Security

6 Act.

7 ‘‘(B) HIGH DEDUCTIBLE HEALTH PLAN.—

8 The term ‘high deductible health plan’ has the

9 meaning given such term by section 220(c)(2).

10 ‘‘(C) MEDICAL SAVINGS ACCOUNT.—The

11 term ‘medical savings account’ has the meaning

12 given such term by section 7705.’’

13 (b) EMPLOYER PAYMENTS EXCLUDED FROM EM14 PLOYMENT TAX BASE.—

15 (1) SOCIAL SECURITY TAXES.—

16 (A) Subsection (a) of section 3121 is

17 amended by striking ‘‘or’’ at the end of para18 graph (20), by striking the period at the end of

19 paragraph (21) and inserting ‘‘; or’’, and by in20 serting after paragraph (21) the following new

21 paragraph:

22 ‘‘(22) any payment made to or for the benefit

23 of an employee if at the time of such payment it is

24 reasonable to believe that the employee will be able
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1 to exclude such payment from income under section

2 106(b).’’

3 (B) Subsection (a) of section 209 of the

4 Social Security Act is amended by striking ‘‘or’’

5 at the end of paragraph (18), by striking the

6 period at the end of paragraph (19) and insert7 ing ‘‘; or’’, and by inserting after paragraph

8 (19) the following new paragraph:

9 ‘‘(20) any payment made to or for the benefit

10 of an employee if at the time of such payment it is

11 reasonable to believe that the employee will be able

12 to exclude such payment from income under section

13 106(b) of the Internal Revenue Code of 1986.’’

14 (2) RAILROAD RETIREMENT TAX.—Subsection

15 (e) of section 3231 is amended by adding at the end

16 the following new paragraph:

17 ‘‘(10) MEDICAL SAVINGS ACCOUNT CONTRIBU18 TIONS.—The term ‘compensation’ shall not include

19 any payment made to or for the benefit of an em20 ployee if at the time of such payment it is reason21 able to believe that the employee will be able to ex22 clude such payment from income under section

23 106(b).’’

24 (3) UNEMPLOYMENT TAX.—Subsection (b) of

25 section 3306 is amended by striking ‘‘or’’ at the end
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1 of paragraph (15), by striking the period at the end

2 of paragraph (16) and inserting ‘‘; or’’, and by in3 serting after paragraph (16) the following new para4 graph:

5 ‘‘(17) any payment made to or for the benefit

6 of an employee if at the time of such payment it is

7 reasonable to believe that the employee will be able

8 to exclude such payment from income under section

9 106(b).’’

10 (4) WITHHOLDING TAX.—Subsection (a) of sec11 tion 3401 is amended by striking ‘‘or’’ at the end of

12 paragraph (19), by striking the period at the end of

13 paragraph (20) and inserting ‘‘; or’’, and by insert14 ing after paragraph (20) the following new para15 graph:

16 ‘‘(21) any payment made to or for the benefit

17 of an employee if at the time of such payment it is

18 reasonable to believe that the employee will be able

19 to exclude such payment from income under section

20 106(b).’’

21 (c) CONFORMING AMENDMENT.—Section 106 is

22 amended by striking ‘‘Gross’’ and inserting:

23 ‘‘(a) GENERAL RULE.—Gross’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 SEC. 113. MEDICAL SAVINGS ACCOUNTS.

5 (a) IN GENERAL.—Chapter 79 is amended by adding

6 at the end the following new section:

7 ‘‘SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

8 ‘‘(a) GENERAL RULE.—The term ‘medical savings

9 account’ means a trust created or organized in the United

10 States for the exclusive benefit of the beneficiaries of the

11 trust, but only if the written governing instrument creat12 ing the trust meets the following requirements:

13 ‘‘(1) Except in the case of a rollover contribu14 tion described in subsection (c)(4), no contribution

15 will be accepted unless—

16 ‘‘(A) it is in cash, and

17 ‘‘(B) it is made for a period during which

18 the individual on whose behalf it is made is cov19 ered under a high deductible health plan.

20 ‘‘(2) Contributions will not be accepted for any

21 calendar year in excess of $2,000 ($4,000 in the

22 case of an account established on behalf of the indi23 vidual and the individual’s spouse and dependents).

24 ‘‘(3) The trustee is a bank (as defined in sec25 tion 408(n)), insurance company (as defined in sec-
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1 tion 816), or another person who demonstrates to

2 the satisfaction of the Secretary that the manner in

3 which such person will administer the trust will be

4 consistent with the requirements of this section.

5 ‘‘(4) The assets of the trust will not be commin6 gled with other property except in a common trust

7 fund or common investment fund.

8 ‘‘(5) No part of the trust assets will be invested

9 in life insurance contracts.

10 ‘‘(6) The interest of an individual in the bal11 ance in the individual’s account is nonforfeitable.

12 ‘‘(b) TAX TREATMENT OF ACCOUNTS.—

13 ‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—

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

15 subparagraph (B), the account beneficiary of a

16 medical savings account shall be treated for

17 purposes of this title as the owner of such ac18 count and shall be subject to tax thereon in ac19 cordance with subpart E of part I of subchapter

20 J of this chapter (relating to grantors and oth21 ers treated as substantial owners).

22 ‘‘(B) TREATMENT OF CAPITAL LOSSES.—

23 With respect to assets held in a medical savings

24 account, any capital loss for a taxable year

25 from the sale or exchange of such an asset shall
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1 be allowed only to the extent of capital gains

2 from such assets for such taxable year. Any

3 capital loss which is disallowed under the pre4 ceding sentence shall be treated as a capital

5 loss from the sale or exchange of such an asset

6 in the next taxable year.

7 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN8 GAGES IN PROHIBITED TRANSACTION.—

9 ‘‘(A) IN GENERAL.—If, during any taxable

10 year of the account beneficiary, such beneficiary

11 engages in any transaction prohibited by section

12 4975 with respect to the account, the account

13 shall cease to be a medical savings account as

14 of the first day of such taxable year.

15 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

16 ALL ITS ASSETS.—In any case in which any ac17 count ceases to be a medical savings account by

18 reason of subparagraph (A) on the first day of

19 any taxable year, subsection (c) shall be applied

20 as if—

21 ‘‘(i) there were a distribution on such

22 first day in an amount equal to the fair

23 market value (on such first day) of all as24 sets in the account (on such first day), and
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1 ‘‘(ii) no portion of such distribution

2 were used to pay qualified medical ex3 penses.

4 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU5 RITY.—If, during any taxable year, the account ben6 eficiary uses the account or any portion thereof as

7 security for a loan, the portion so used is treated as

8 distributed and not used to pay qualified medical ex9 penses.

10 ‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.—

11 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

12 QUALIFIED MEDICAL EXPENSES.—

13 ‘‘(A) IN GENERAL.—Any amount paid or

14 distributed out of a medical savings account

15 which is not used exclusively to pay the quali16 fied medical expenses of the account beneficiary

17 or of the spouse or dependents of such bene18 ficiary shall be included in the gross income of

19 such beneficiary to the extent such amount does

20 not exceed the excess of—

21 ‘‘(i) the aggregate contributions to

22 such account which were not includible in

23 gross income by reason of section 106(b)

24 or which were deductible under section

25 220, over
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1 ‘‘(ii) the aggregate prior payments or

2 distributions from such account which were

3 includible in gross income under this para4 graph.

5 ‘‘(B) SPECIAL RULES.—For purposes of

6 subparagraph (A)—

7 ‘‘(i) all payments and distributions

8 during any taxable year shall be treated as

9 1 distribution, and

10 ‘‘(ii) any distribution of property shall

11 be taken into account at its fair market

12 value on the date of the distribution.

13 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE14 FORE DUE DATE OF RETURN.—Paragraph (1) shall

15 not apply to the distribution of any contribution paid

16 during a taxable year to a medical savings account

17 to the extent that such contribution exceeds the

18 amount under subsection (a)(2) if—

19 ‘‘(A) such distribution is received by the

20 individual on or before the last day prescribed

21 by law (including extensions of time) for filing

22 such individual’s return for such taxable year,

23 and
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1 ‘‘(B) such distribution is accompanied by

2 the amount of net income attributable to such

3 excess contribution.

4 Any net income described in subparagraph (B) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR QUALIFIED MEDICAL EXPENSES.—

9 ‘‘(A) IN GENERAL.—The tax imposed by

10 chapter 1 on the account beneficiary for any

11 taxable year in which there is a payment or dis12 tribution from a medical savings account of

13 such beneficiary which is includible in gross in14 come under paragraph (1) shall be increased by

15 10 percent of the amount which is so includible.

16 ‘‘(B) EXCEPTION FOR DISABILITY OR

17 DEATH.—Subparagraph (A) shall not apply if

18 the payment or distribution is made after the

19 account beneficiary becomes disabled within the

20 meaning of section 72(m)(7) or dies.

21 ‘‘(C) EXCEPTION FOR DISTRIBUTIONS

AFTER AGE 591 22 ⁄2.—Subparagraph (A) shall not

23 apply to any payment or distribution after the

24 date on which the account beneficiary attains

age 591 25 ⁄2.
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1 ‘‘(4) ROLLOVER CONTRIBUTION.—An amount is

2 described in this paragraph as a rollover contribu3 tion if it meets the requirements of subparagraphs

4 (A) and (B).

5 ‘‘(A) IN GENERAL.—Paragraph (1) shall

6 not apply to any amount paid or distributed

7 from a medical savings account to the account

8 beneficiary to the extent the amount received is

9 paid into a medical savings account for the ben10 efit of such beneficiary not later than the 60th

11 day after the day on which the beneficiary re12 ceives the payment or distribution.

13 ‘‘(B) LIMITATION.—This paragraph shall

14 not apply to any amount described in subpara15 graph (A) received by an individual from a

16 medical savings account if, at any time during

17 the 1-year period ending on the day of such re18 ceipt, such individual received any other amount

19 described in subparagraph (A) from a medical

20 savings account which was not includible in the

21 individual’s gross income because of the appli22 cation of this paragraph.

23 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

24 DEDUCTION.—For purposes of section 213, any pay25 ment or distribution out of a medical savings ac-
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1 count for qualified medical expenses shall not be

2 treated as an expense paid for medical care to the

3 extent of the amount of such payment or distribu4 tion which is excludable from gross income solely by

5 reason of paragraph (1)(A).

6 ‘‘(6) TRANSFER OF ACCOUNT INCIDENT TO DI7 VORCE.—The transfer of an individual’s interest in

8 a medical savings account to an individual’s spouse

9 or former spouse under a divorce or separation in10 strument described in subparagraph (A) of section

11 71(b)(2) shall not be considered a taxable transfer

12 made by such individual notwithstanding any other

13 provision of this subtitle, and such interest at the

14 time of the transfer shall be treated as a medical

15 savings account of such spouse, and not of such in16 dividual. Any such account or annuity shall, for pur17 poses of this subtitle, be treated as maintained for

18 the benefit of the spouse to whom the interest was

19 transferred.

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

21 ‘‘(1) QUALIFIED MEDICAL EXPENSES.—

22 ‘‘(A) IN GENERAL.—The term ‘qualified

23 medical expenses’ means any expense—

24 ‘‘(i) for medical care (as defined in

25 section 213(d)), or
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1 ‘‘(ii) for qualified long-term care serv2 ices (as defined in section 213(g)).

3 ‘‘(B) EXCEPTION FOR INSURANCE.—

4 ‘‘(i) IN GENERAL.—Such term shall

5 not include any expense for insurance.

6 ‘‘(ii) EXCEPTIONS.—Clause (i) shall

7 not apply to any expense for—

8 ‘‘(I) coverage under a qualified

9 long-term care contract (as defined in

10 section 7702B(b)),

11 ‘‘(II) coverage under a health

12 plan during a period of continuation

13 coverage described in section

14 4980B(f)(2)(B),

15 ‘‘(III) coverage under a medicare

16 supplemental policy (as defined in sec17 tion 1882(g)(1) of the Social Security

18 Act), or

19 ‘‘(IV) payment of premiums

20 under part A or B of title XVIII of

21 the Social Security Act.

22 ‘‘(2) ACCOUNT BENEFICIARY.—The term ‘ac23 count beneficiary’ means the individual for whose

24 benefit the medical savings account is maintained.
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1 ‘‘(e) CUSTODIAL ACCOUNTS.—For purposes of this

2 section, a custodial account shall be treated as a trust if—

3 ‘‘(1) the assets of such account are held by a

4 bank (as defined in section 408(n)), insurance com5 pany (as defined in section 816), or another person

6 who demonstrates to the satisfaction of the Sec7 retary that the manner in which such person will ad8 minister the account will be consistent with the re9 quirements of this section, and

10 ‘‘(2) the custodial account would, except for the

11 fact that it is not a trust, constitute a medical sav12 ings account described in subsection (a).

13 For purposes of this title, in the case of a custodial ac14 count treated as a trust by reason of the preceding sen15 tence, the custodian of such account shall be treated as

16 the trustee thereof.

17 ‘‘(f) REPORTS.—The trustee of a medical savings ac18 count shall make such reports regarding such account to

19 the Secretary and to the individual for whose benefit the

20 account is maintained with respect to contributions, dis21 tributions, and such other matters as the Secretary may

22 require under regulations. The reports required by this

23 subsection shall be filed at such time and in such manner

24 and furnished to such individuals at such time and in such

25 manner as may be required by those regulations.’’
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1 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

2 (relating to tax on excess contributions to individual re3 tirement accounts, certain section 403(b) contracts, and

4 certain individual retirement annuities) is amended—

5 (1) by inserting ‘‘MEDICAL SAVINGS AC6 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

7 such section,

8 (2) by striking ‘‘or’’ at the end of paragraph

9 (1) of subsection (a),

10 (3) by redesignating paragraph (2) of sub11 section (a) as paragraph (3) and by inserting after

12 paragraph (1) the following:

13 ‘‘(2) a medical savings account (within the

14 meaning of section 7705(a)), or’’, and

15 (4) by adding at the end the following new sub16 section:

17 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

18 ACCOUNTS.—For purposes of this section, in the case of

19 a medical savings account (within the meaning of section

20 7705(a)), the term ‘excess contributions’ means the

21 amount by which the amount contributed for the taxable

22 year to the account exceeds the amount which may be con23 tributed to the account under section 7705(a)(2) for such

24 taxable year. For purposes of this subsection, any con25 tribution which is distributed out of the medical savings
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1 account in a distribution to which section 7705(c)(2) ap2 plies shall be treated as an amount not contributed.’’

3 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

4 4975 (relating to prohibited transactions) is amended—

5 (1) by adding at the end of subsection (c) the

6 following new paragraph:

7 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC8 COUNTS.—An individual for whose benefit a medical

9 savings account (within the meaning of section

10 7705(a)) is established shall be exempt from the tax

11 imposed by this section with respect to any trans12 action concerning such account (which would other13 wise be taxable under this section) if, with respect

14 to such transaction, the account ceases to be a medi15 cal savings account by reason of the application of

16 section 7705(b)(2)(A) to such account.’’, and

17 (2) by inserting ‘‘or a medical savings account

18 described in section 7705(a)’’ in subsection (e)(1)

19 after ‘‘described in section 408(a)’’.

20 (d) FAILURE TO PROVIDE REPORTS ON MEDICAL

21 SAVINGS ACCOUNTS.—Section 6693 (relating to failure to

22 provide reports on individual retirement accounts or annu23 ities) is amended—
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1 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

2 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

3 such section, and

4 (2) by adding at the end of subsection (a) the

5 following: ‘‘The person required by section 7705(f)

6 to file a report regarding a medical savings account

7 at the time and in the manner required by such sec8 tion shall pay a penalty of $50 for each failure un9 less it is shown that such failure is due to reasonable

10 cause.’’

11 (e) CLERICAL AMENDMENTS.—

12 (1) The table of sections for chapter 43 is

13 amended by striking the item relating to section

14 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

15 (2) The table of sections for subchapter B of

16 chapter 68 is amended by inserting ‘‘or on medical

17 savings accounts’’ after ‘‘annuities’’ in the item re18 lating to section 6693.

19 Subtitle B—Premium Assistance

20 SEC. 121. PREMIUM ASSISTANCE.

21 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

22 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)),

23 as amended by section 201(a), is amended—
27

•S 2374 IS

1 (1) by striking ‘‘and’’ at the end of paragraph

2 (62);

3 (2) by striking the period at the end of para4 graph (63) and inserting ‘‘; and’’; and

5 (3) by adding at the end the following new

6 paragraph:

7 ‘‘(64) provide for a State program furnishing

8 premium assistance in accordance with part B.’’.

9 (b) STATE PROGRAMS FOR PREMIUM ASSISTANCE.—

10 Title XIX of the Social Security Act (42 U.S.C. 1396 et

11 seq.) is amended by adding at the end the following new

12 part:

13 ‘‘PART B—STATE PROGRAMS FOR PREMIUM

14 ASSISTANCE

15 ‘‘Subpart 1—Establishment of Premium Assistance

16 Programs

17 ‘‘SEC. 1951. REQUIREMENT TO OPERATE STATE PROGRAM.

18 ‘‘(a) IN GENERAL.—A State with a State plan ap19 proved under part A shall have in effect a program for

20 furnishing premium assistance under section 1952 to fam21 ilies with incomes below certain income thresholds in cal22 endar years beginning after 1996.

23 ‘‘(b) DESIGNATION OF STATE AGENCY.—A State

24 may designate any appropriate State agency to administer

25 the program under this part.
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1 ‘‘SEC. 1952. ASSISTANCE WITH CERTIFIED HEALTH PLAN

2 PREMIUMS.

3 ‘‘(a) ELIGIBILITY.—

4 ‘‘(1) IN GENERAL.—A family (as defined in sec5 tion 1957(4)) which has been determined by a State

6 under section 1953 to be a premium subsidy eligible

7 family (as defined in paragraph (2)) shall be entitled

8 to premium assistance in the amount determined

9 under subsection (b).

10 ‘‘(2) PREMIUM SUBSIDY ELIGIBLE FAMILY.—

11 ‘‘(A) IN GENERAL.—For purposes of this

12 part, the term ‘premium subsidy eligible family’

13 means a family which has a family income de14 termined under section 1957(2) which does not

15 exceed 150 percent of the poverty line (as de16 fined in section 1957(5)).

17 ‘‘(B) REDUCTION IN ELIGIBILITY PER18 CENTAGE.—For requirement that the President

19 reduce the percentage of the poverty line appli20 cable to family income under subparagraph (A),

21 see subpart 2.

22 ‘‘(b) AMOUNT OF ASSISTANCE.—

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (4), the amount of premium assistance for a

25 month for a premium subsidy eligible family is the

26 lesser of—
29

•S 2374 IS

1 ‘‘(A) the subsidy percentage specified in

paragraph (3) multiplied by 1 2 ⁄12th of the annual

3 premium for coverage under the certified health

4 plan in which the family is enrolled, or

5 ‘‘(B) the subsidy percentage specified in

paragraph (3) multiplied by 1 6 ⁄12th of the maxi7 mum subsidy amount for the year for the fam8 ily (determined under paragraph (2)).

9 ‘‘(2) MAXIMUM SUBSIDY AMOUNT.—

10 ‘‘(A) IN GENERAL.—The maximum subsidy

11 amount determined under this paragraph for a

12 year for a family is the maximum subscription

13 charge for the family’s class of enrollment

14 under all health benefits plans offered under

15 chapter 89 of title 5, United States Code for

16 the year, as adjusted under subparagraph (B).

17 ‘‘(B) ADJUSTMENTS.—The Secretary shall

18 adjust the maximum subscription charge for a

19 family determined under subparagraph (A) by

20 the age adjustment factors specified under sec21 tion 21114(b)(2)(C) and for geographic dif22 ferences in health care costs based on the com23 munity rating area in which the family resides.

24 ‘‘(3) SUBSIDY PERCENTAGE.—
30

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

2 subparagraph (B), the term ‘subsidy percent3 age’ means—

4 ‘‘(i) 100 percent if the family income

5 does not exceed 100 percent of the poverty

6 line;

7 ‘‘(ii) 90 percent if the family income

8 exceeds 100 percent of the poverty line but

9 does not exceed 110 percent of the poverty

10 line;

11 ‘‘(iii) 80 percent if the family income

12 exceeds 110 percent of the poverty line but

13 does not exceed 115 percent of the poverty

14 line;

15 ‘‘(iv) 70 percent if the family income

16 exceeds 115 percent of the poverty line but

17 does not exceed 125 percent of the poverty

18 line;

19 ‘‘(v) 60 percent if the family income

20 exceeds 120 percent of the poverty line but

21 does not exceed 125 percent of the poverty

22 line;

23 ‘‘(vi) 50 percent if the family income

24 exceeds 125 percent of the poverty line but
31

•S 2374 IS

1 does not exceed 130 percent of the poverty

2 line;

3 ‘‘(vii) 40 percent if the family income

4 exceeds 130 percent of the poverty line but

5 does not exceed 135 percent of the poverty

6 line;

7 ‘‘(viii) 30 percent if the family income

8 exceeds 135 percent of the poverty line but

9 does not exceed 140 percent of the poverty

10 line;

11 ‘‘(ix) 20 percent if the family income

12 exceeds 140 percent of the poverty line but

13 does not exceed 145 percent of the poverty

14 line; and

15 ‘‘(x) 10 percent if the family income

16 exceeds 145 percent of the poverty line but

17 does not exceed 150 percent of the poverty

18 line.

19 ‘‘(B) SPECIAL RULES.—

20 ‘‘(i) AFDC RECIPIENTS.—For a family

21 receiving aid to families with dependent

22 children under part A or E of title IV, the

23 subsidy percentage shall be 100 percent.

24 ‘‘(ii) NON-CASH MEDICAID ELIGI25 BLES.—For a family that would have been
32

•S 2374 IS

1 eligible for medical assistance under the

2 State plan under part A under the eligi3 bility rules in effect in the year preceding

4 the first year the State began integrating

5 individuals into the premium assistance

6 program under this part in accordance

7 with section 1932(a), the subsidy percent8 age shall be 100 percent.

9 ‘‘(C) REDUCTION IN SUBSIDY PERCENT10 AGE.—For requirement that the President re11 duce the subsidy percentages under subpara12 graph (A), see subpart 2.

13 ‘‘(c) PAYMENTS.—

14 ‘‘(1) IN GENERAL.—The amount of the pre15 mium assistance available to a premium subsidy eli16 gible family under subsection (b) shall be paid by

17 the State directly to the certified health plan in

18 which the family is enrolled. Payments under the

19 preceding sentence shall commence in the first

20 month during which the family is enrolled in a cer21 tified health plan and determined under section

22 1953 to be a premium subsidy eligible family.

23 ‘‘(2) ADMINISTRATIVE ERRORS.—A State is fi24 nancially responsible for premium assistance paid

25 based on an eligibility determination error to the ex-
33

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1 tent the State’s error rate for eligibility determina2 tions exceeds a maximum permissible error rate to

3 be specified by the Secretary.

4 ‘‘SEC. 1953. ELIGIBILITY DETERMINATIONS.

5 ‘‘(a) IN GENERAL.—The Secretary shall promulgate

6 regulations specifying requirements for State programs

7 under this part with respect to determining eligibility for

8 premium assistance, including requirements with respect

9 to—

10 ‘‘(1) application procedures;

11 ‘‘(2) information verification procedures;

12 ‘‘(3) timeliness of eligibility determinations;

13 ‘‘(4) procedures for applicants to appeal adverse

14 decisions; and

15 ‘‘(5) any other matters determined appropriate

16 by the Secretary.

17 ‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg18 ulations promulgated by the Secretary under subsection

19 (a) shall include the following requirements:

20 ‘‘(1) APPLICATIONS.—A State program shall

21 provide that a family may file an application for as22 sistance with an agency designated by the State at

23 any time, in person or by mail.
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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 make available applications for

6 assistance through employers and appropriate public

7 agencies or organizations.

8 ‘‘(4) DISTRIBUTION OF INFORMATION ON CER9 TIFIED HEALTH PLANS.—A State program shall pro10 vide that each family applying for assistance under

11 this part receives the information determined appro12 priate by the Secretary on each certified health plan

13 providing the FedMed benefits package as described

14 in section 21115(b) offered in the community rating

15 area in which the family resides.

16 ‘‘(5) REQUIREMENT TO SUBMIT REVISED AP17 PLICATION.—A State program shall, in accordance

18 with regulations promulgated by the Secretary, re19 quire families to submit revised applications during

20 a year to reflect increases in estimated family in21 comes during the year. The State shall revise the

22 amount of any premium assistance based on such a

23 revised application.

24 ‘‘(6) AFDC APPLICANTS.—A State program

25 shall include a procedure under which families ap-
35

•S 2374 IS

1 plying 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.

7 ‘‘(c) ADMINISTRATION OF STATE PROGRAMS.—

8 ‘‘(1) IN GENERAL.—The Secretary shall estab9 lish standards for States operating programs under

10 this part which ensure that such programs are oper11 ated in a uniform manner with respect to application

12 procedures, data processing systems, and such other

13 administrative activities as the Secretary determines

14 to be necessary.

15 ‘‘(2) APPLICATION FORMS.—The Secretary

16 shall develop a standard application form for assist17 ance which shall—

18 ‘‘(A) be simple in form and understandable

19 to the average individual;

20 ‘‘(B) require the provision of information

21 necessary to make a determination as to wheth22 er a family is a premium subsidy eligible family

23 including a declaration of estimated income by

24 the family based, at the election of the family—
36

•S 2374 IS

1 ‘‘(i) on multiplying by a factor of 4

2 the family’s family income for the 3-month

3 period immediately preceding the month in

4 which the application is made, or

5 ‘‘(ii) on estimated income for the en6 tire year for which the application is sub7 mitted; and

8 ‘‘(C) require attachment of such docu9 mentation as deemed necessary by the Sec10 retary in order to ensure eligibility for assist11 ance.

12 ‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM

13 SUBSIDIES.—A determination by a State that a family is

14 a premium subsidy eligible family shall be effective for the

15 calendar year for which such determination is made unless

16 a revised application submitted under subsection (b)(5) in17 dicates that a family is no longer eligible for premium as18 sistance.

19 ‘‘SEC. 1954. END-OF-YEAR RECONCILIATION FOR PREMIUM

20 ASSISTANCE.

21 ‘‘(a) IN GENERAL.—

22 ‘‘(1) REQUIREMENT TO FILE STATEMENT.—A

23 family which received premium assistance under this

24 part from a State for any month in a calendar year

25 shall file with the State an income reconciliation
37

•S 2374 IS

1 statement to verify the family’s family income for

2 the year. Such a statement shall be filed at such

3 time, and contain such information, as the State

4 may specify in accordance with regulations promul5 gated by the Secretary.

6 ‘‘(2) NOTICE OF REQUIREMENT.—A State shall

7 provide a written notice of the requirement under

8 paragraph (1) at the time a family submits an appli9 cation for premium assistance under this part and at

10 the end of the year to a family which received such

11 assistance from such State in any month during the

12 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 a family, the

18 State shall compute the amount of premium assist19 ance that should have been provided under this part

20 with respect to the family for the year involved.

21 ‘‘(2) OVERPAYMENT OF ASSISTANCE.—If the

22 total amount of the premium assistance provided

23 was greater than the amount computed under para24 graph (1), the family is liable to the State to pay an

25 amount equal to the amount of the excess payment.
38

•S 2374 IS

1 Any amount collected by a State under this para2 graph shall be submitted to the Secretary in a timely

3 manner.

4 ‘‘(3) STATE OPTION.—A State may, in accord5 ance with regulations promulgated by the Secretary,

6 establish a procedure under which any overpayments

7 of premium assistance determined under paragraph

8 (2) with respect to a family for a year may be col9 lected or paid, as appropriate, through adjustments

10 to the premium assistance furnished to such family

11 in the succeeding year.

12 ‘‘(c) VERIFICATION.—Each State may use such infor13 mation as it has available to verify income of families with

14 applications filed under this part.

15 ‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the

16 case of a family which is required to file a statement under

17 this section in a year who fails to file such a statement

18 by such date as the Secretary shall specify in regulations,

19 the entire amount of the premium assistance provided in

20 such year shall be considered an excess amount under sub21 section (b)(2) and such family shall not be eligible for pre22 mium assistance under this part until such statement is

23 filed. A State, using rules established by the Secretary,

24 shall waive the application of this subsection if the family

25 establishes, to the satisfaction of the State under such
39

•S 2374 IS

1 rules, good cause for the failure to file the statement on

2 a timely basis.

3 ‘‘SEC. 1955. PENALTIES FOR MATERIAL MISREPRESENTA4 TION AND FALSE INFORMATION.

5 ‘‘(a) IN GENERAL.—Any individual who knowingly

6 makes a material misrepresentation of information or pro7 vides false information in an application for assistance

8 under this part under section 1953 or an income reconcili9 ation statement under section 1954 shall be liable to the

10 Federal Government for the amount any premium assist11 ance received by the individual on the basis of such mis12 representation or false information and interest on such

13 amount at a rate specified by the Secretary, and shall,

14 in addition, be liable to the Federal Government for

15 $2,000 or, if greater, 3 times the amount of any premium

16 assistance received by the individual on the basis of such

17 misrepresentation or false information.

18 ‘‘(b) COLLECTION OF PENALTY AMOUNTS.—A State

19 which receives an application for assistance or an income

20 reconciliation statement with respect to which a material

21 misrepresentation has been made or false information has

22 been provided shall collect the penalty amount required

23 under subsection (a) and submit 50 percent of such

24 amount to the Secretary in a timely manner.
40

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1 ‘‘SEC. 1956. PAYMENTS TO STATES.

2 ‘‘(a) IN GENERAL.—

3 ‘‘(1) PAYMENTS FOR PREMIUM ASSISTANCE.—A

4 State operating a program for furnishing premium

5 assistance under this part shall be entitled to receive

6 payments in an amount equal to the amount of pre7 mium assistance paid on behalf of premium subsidy

8 eligible families. Such payments shall be made at

9 such time and in such form as provided in regula10 tions promulgated by the Secretary.

11 ‘‘(2) MATCHING PAYMENTS FOR ADMINISTRA12 TIVE EXPENSES.—The Secretary shall pay to each

13 State operating a program for furnishing premium

14 assistance under this part, for each quarter begin15 ning with the quarter commencing January 1, 1997,

16 an amount equal to 50 percent of the total amount

17 expended by the State during the quarter as found

18 necessary by the Secretary for the proper and effi19 cient administration of the program.

20 ‘‘(3) STATE ENTITLEMENT.—This subsection

21 constitutes budget authority in advance of appro22 priations Acts, and represents the obligation of the

23 Federal Government to provide payments to States

24 operating programs under this part in accordance

25 with this subsection.
41

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1 ‘‘(b) FUNDING.—The amount paid to States under

2 subsection (a) shall be paid by the Secretary from out of

3 any funds in the Treasury of the United States not other4 wise appropriated.

5 ‘‘(c) AUDITS.—The Secretary shall conduct regular

6 audits of the activities under the State programs con7 ducted under this part.

8 ‘‘SEC. 1957. DEFINITIONS AND DETERMINATIONS OF IN9 COME.

10 ‘‘For purposes of this part:

11 ‘‘(1) CERTIFIED HEALTH PLAN.—The term

12 ‘certified health plan’ means a certified health plan

13 (within the meaning of section 21003(b)) providing

14 the FedMed benefits package as described in section

15 21115(b).

16 ‘‘(2) DETERMINATIONS OF INCOME.—

17 ‘‘(A) IN GENERAL.—The term ‘income’

18 means adjusted gross income (as defined in sec19 tion 62(a) of the Internal Revenue Code of

20 1986)—

21 ‘‘(i) determined without regard to sec22 tions 135, 162(l), 911, 931, and 933 of

23 such Code; and

24 ‘‘(ii) increased by—
42

•S 2374 IS

1 ‘‘(I) the amount of interest re2 ceived or accrued which is exempt

3 from tax, plus

4 ‘‘(II) the amount of social secu5 rity benefits (described in section

6 86(d) of such Code) which is not in7 cludible in gross income under section

8 86 of such Code.

9 ‘‘(B) FAMILY INCOME.—The term ‘family

10 income’ means, with respect to a family, the

11 sum of the income for all members of the fam12 ily, not including the income of a dependent

13 child with respect to which no return is re14 quired under the Internal Revenue Code of

15 1986.

16 ‘‘(3) ELIGIBLE INDIVIDUAL.—

17 ‘‘(A) IN GENERAL.—The term ‘eligible in18 dividual’ means an individual who is residing in

19 the United States and who is—

20 ‘‘(i) a citizen or national of the United

21 States; or

22 ‘‘(ii) a lawful alien (as defined in sub23 paragraph (C)).

24 ‘‘(B) EXCLUSIONS.—The term ‘eligible in25 dividual’ shall not include—
43

•S 2374 IS

1 ‘‘(i) an individual who is eligible for

2 medical assistance under part A consisting

3 of acute medical services described in sec4 tion 1931(b)(1);

5 ‘‘(ii) an individual who is entitled to

6 benefits under part A of title XVIII;

7 ‘‘(iii) an individual with respect to

8 whom an employer contribution toward the

9 premium for coverage under the certified

10 health plan in which the individual is en11 rolled is paid (or offered to be paid) on be12 half of such individual; and

13 ‘‘(iv) an individual who is an inmate

14 of a public institution (except as a patient

15 of a medical institution).

16 ‘‘(C) LAWFUL ALIEN.—The term ‘lawful

17 alien’ means an individual who is—

18 ‘‘(i) an alien lawfully admitted for

19 permanent residence,

20 ‘‘(ii) an asylee,

21 ‘‘(iii) a refugee,

22 ‘‘(iv) an alien whose deportation has

23 been withheld under section 243(h) of the

24 Immigration and Nationality Act, or
44

•S 2374 IS

1 ‘‘(v) a parolee who has been paroled

2 for a period of 1 year or more.

3 ‘‘(4) FAMILY.—The term ‘family’—

4 ‘‘(A) means, with respect to an eligible in5 dividual who is not a child, the individual; and

6 ‘‘(B) includes the following persons (if

7 any):

8 ‘‘(i) The individual’s spouse if the

9 spouse is an eligible individual.

10 ‘‘(ii) The individual’s children (and, if

11 applicable, the children of the individual’s

12 spouse) if they are eligible individuals.

13 ‘‘(5) POVERTY LINE.—The term ‘poverty line’

14 means the income official poverty line (as defined by

15 the Office of Management and Budget, and revised

16 annually in accordance with section 673(2) of the

17 Omnibus Budget Reconciliation Act of 1981) that—

18 ‘‘(A) in the case of a family of less than

19 five individuals, is applicable to a family of the

20 size involved; and

21 ‘‘(B) in the case of a family of more than

22 four individuals, is applicable to a family of

23 four persons.
45

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1 ‘‘Subpart 2—Deficit Neutral Spending on Premium

2 Assistance

3 ‘‘SEC. 1960. ENSURING DEFICIT NEUTRAL SPENDING ON

4 PREMIUM ASSISTANCE.

5 ‘‘(a) LIMITATION ON PREMIUM ASSISTANCE SPEND6 ING.—In each fiscal year (beginning with 1996), spending

7 for premium assistance shall be limited to the excess of—

8 ‘‘(1) the aggregate limitation described in sub9 section (b), over

10 ‘‘(2) mandatory expenditures under title XVIII

11 and part A of XIX, including any offsetting receipts

12 required under title XVIII but excluding any discre13 tionary expenditures under such title or part A of

14 title XIX.

15 ‘‘(b) AGGREGATE LIMITATION.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion the aggregate limitation shall be—

18 ‘‘(A) for fiscal year 1996, $282 billion

19 ‘‘(B) for fiscal year 1997, $311 billion

20 ‘‘(C) for fiscal year 1998, $341 billion

21 ‘‘(D) for fiscal year 1999, $381 billion

22 ‘‘(E) for fiscal year 2000, $421 billion

23 ‘‘(F) for fiscal year 2001, $466 billion

24 ‘‘(G) for fiscal year 2002, $518 billion

25 ‘‘(H) for fiscal year 2003, $576 billion

26 ‘‘(I) for fiscal year 2004, $640 billion; and
46

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1 ‘‘(J) for fiscal year 2005 and succeeding

2 fiscal years, the amount in the preceding fiscal

3 year increased by the growth in the per capita

4 Gross Domestic Product.

5 ‘‘(2) ADJUSTMENT BASED ON MID-SESSION RE6 VIEW OF ESTIMATES.—If it is determined under the

7 mid-session review of estimates under subsection (d)

8 that expenditures under the provisions of title

9 XVIII, part A of title XIX, and the premium assist10 ance program under subpart 1 for the preceding fis11 cal year exceeded the estimates for such fiscal year

12 then the amount under paragraph (1) for the up13 coming fiscal year shall be decreased by the amount

14 of such excess.

15 ‘‘(c) PRESIDENT’S BUDGET TO INCLUDE PREMIUM

16 ASSISTANCE ESTIMATES.—

17 ‘‘(1) IN GENERAL.—When the President sub18 mits a budget (as required by section 1105 of title

19 31), the President shall include in such budget—

20 ‘‘(A) estimates of expenditures under the

21 provisions of title XVIII, part A of title XIX,

22 and the premium assistance program under

23 subpart 1 otherwise provided under such provi24 sions without regard to this section; and
47

•S 2374 IS

1 ‘‘(B) a comparison of the total of such ex2 penditures with the aggregate limitation estab3 lished under subsection (b); and

4 ‘‘(C) estimates of the income eligibility

5 amount (described in subsection (d)(1)) and

6 subsidy percentages (described in subsection

7 (d)(3)) under the premium assistance program

8 that are necessary to comply with enforcement

9 of the limitation on premium assistance spend10 ing under subsection (d).

11 ‘‘(2) FISCAL YEARS COVERED.—The President

12 shall submit such estimates for the upcoming fiscal

13 year and the following 4 fiscal years beginning with

14 the budget submitted for fiscal year 1996, and

15 ‘‘(A) beginning with the budget for fiscal

16 year 1997, the current fiscal year; and

17 ‘‘(B) beginning with the budget for fiscal

18 year 1998, the current fiscal year and the pre19 ceding fiscal year.

20 ‘‘(d) ENFORCING THE LIMITATION ON PREMIUM AS21 SISTANCE SPENDING.—

22 ‘‘(1) MID-SESSION REVIEW ESTIMATES.—As

23 part the President’s supplemental summary provid24 ing revised estimates of the budget (commonly called

25 the ‘mid-session review of the budget’), the Presi-
48

•S 2374 IS

1 dent shall issue estimates of expenditures under title

2 XVIII, part A of XIX, and the premium assistance

3 program under subpart 1 otherwise provided without

4 regard to this section for—

5 ‘‘(A) the upcoming fiscal year;

6 ‘‘(B) the current fiscal year (beginning

7 with the mid-session review for the fiscal year

8 1997 budget); and

9 ‘‘(C) the preceding fiscal year (beginning

10 with the mid-session review for the fiscal year

11 1998 budget).

12 ‘‘(2) MAXIMUM INCOME ELIGIBILITY.—Based

13 on the estimates provided pursuant to paragraph

14 (1), the Director of the Office of Management and

15 Budget (referred to in this section as the ‘‘Direc16 tor’’) shall, after consultation with the Secretary, de17 termine the maximum income amount (expressed as

18 a percentage of the poverty line (as defined in sec19 tion 1957(5))) under which families may be eligible

20 for premium assistance in the next calendar year

21 such that spending for premium assistance in the

22 upcoming fiscal year does not exceed the limitation

23 established under subsection (b), except that the Di24 rector shall not establish a maximum income amount
49

•S 2374 IS

1 for the next calendar year that is below such amount

2 for the current calendar year.

3 ‘‘(3) OTHER MODIFICATIONS.—If maintaining

4 the maximum income amount at the level that ap5 plies in the current calendar year in the next cal6 endar year would cause spending to exceed the limi7 tation for premium assistance in the upcoming fiscal

8 year, the Director shall order a uniform percentage

9 reduction in the subsidy percentages specified under

10 section 1952(a)(3) to ensure spending does not ex11 ceed the limitation.’’.

12 (c) CONFORMING AMENDMENTS.—(1) Title XIX of

13 the Social Security Act (42 U.S.C. 1396 et seq.) is amend14 ed by striking the title and inserting the following:

15 ‘‘TITLE XIX—MEDICAL ASSIST16 ANCE PROGRAMS AND STATE

17 PROGRAMS FOR PREMIUM

18 ASSISTANCE

19 ‘‘PART A—GRANTS TO STATES FOR MEDICAL

20 ASSISTANCE PROGRAMS’’.

21 (2) Title XIX of the Social Security Act (42 U.S.C.

22 1396 et seq.) is amended by striking each reference to

23 ‘‘this title’’ and inserting ‘‘this part’’.
50

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1 TITLE II—HEALTH INSURANCE

2 AND DELIVERY SYSTEMS RE3 FORM

4 Subtitle A—Federal Standards for

5 State Certification Programs

6 SEC. 201. STATE PLAN FOR CERTIFICATION OF HEALTH IN7 SURANCE AND DELIVERY SYSTEMS.

8 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

9 1902(a) of the Social Security Act (42 U.S.C. 1396a(a))

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

11 (61), by striking the period at the end of paragraph (62)

12 and inserting ‘‘; and’’, and by inserting after paragraph

13 (62) the following new paragraph:

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

15 under title XXI.’’

16 (b) PARTICIPATING STATE PLAN FOR CERTIFI17 CATION OF HEALTH INSURANCE AND DELIVERY SYS18 TEMS.—The Social Security Act is amended by adding at

19 the end the following new title:

20 ‘‘TITLE XXI—STATE PLAN FOR

21 CERTIFICATION OF HEALTH

22 INSURANCE AND DELIVERY

23 SYSTEMS

24 ‘‘TABLE OF CONTENTS

‘‘Subtitle A—Participating State Program
51

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‘‘PART I—GENERAL RESPONSIBILITIES

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

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

‘‘Sec. 21003. General definitions relating to health plans.

‘‘PART II—CERTIFICATION AND CONSUMER VALUE

‘‘Sec. 21011. Certification of health plans.

‘‘Sec. 21012. Consumer value program.

‘‘Sec. 21013. Establishment of community rating areas.

‘‘Sec. 21014. Risk adjustment programs.

‘‘Sec. 21015. Specification of initial general enrollment period.

‘‘PART III—TREATMENT OF CERTAIN STATE LAWS

‘‘Sec. 21021. Preemption of certain State law restrictions on health plans.

‘‘Sec. 21022. Preemption from State benefit mandates.

‘‘Sec. 21023. Preemption of State law regulating utilization management

and review.

‘‘Sec. 21024. State laws regarding end of life treatment.

‘‘PART IV—DEFINITIONS AND RULES

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

‘‘Subtitle B—Standards for Reform

‘‘PART I—ESTABLISHMENT AND APPLICATION OF STANDARDS AND

GUIDELINES

‘‘Sec. 21101. Insurance reform standards.

‘‘Sec. 21102. Delivery system guidelines.

‘‘Sec. 21103. Consumer value program.

‘‘Sec. 21104. Risk adjustment programs.

‘‘Sec. 21105. Standards and guidelines by Secretary of Labor.

‘‘Sec. 21106. General rules.

‘‘PART II—INSURANCE REFORM STANDARDS APPLICABLE TO HEALTH PLANS

‘‘Sec. 21111. Guaranteed issue and renewal.

‘‘Sec. 21112. Enrollment.

‘‘Sec. 21113. Nondiscrimination based on health status.

‘‘Sec. 21114. Rating limitations for community-rated market.

‘‘Sec. 21115. Benefits offered.

‘‘Sec. 21116. Risk adjustment.

‘‘Sec. 21117. Prohibition of discrimination.

‘‘PART III—MINIMUM DELIVERY SYSTEM GUIDELINES APPLICABLE TO

HEALTH PLANS

‘‘Sec. 21121. Minimum delivery system guidelines.

‘‘Subtitle C—Expanded Access to Health Plans

‘‘PART I—ACCESS THROUGH HEALTH INSURANCE PURCHASING

COOPERATIVES

‘‘Sec. 21201. Establishment and organization.
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‘‘PART II—ACCESS THROUGH FEHBP

‘‘Sec. 21211. Small business participation in FEHBP.

‘‘PART III—ACCESS THROUGH ASSOCIATION PLANS

‘‘SUBPART A—QUALIFIED ASSOCIATION PLANS

‘‘Sec. 21221. Treatment of qualified association plans.

‘‘Sec. 21222. Qualified association plan defined.

‘‘Sec. 21223. Definitions and special rules.

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

COOPERATIVE PLANS

‘‘Sec. 21225. Special rule for church, multiemployer, and cooperative

plans.

‘‘PART IV—ACCESS THROUGH EMPLOYERS

‘‘Sec. 21231. General employer responsibilities.

‘‘Sec. 21232. Development of large employer purchasing groups.

‘‘Sec. 21233. Report to employees on employer health care contributions.

‘‘Sec. 21334. Employer may not discriminate against subsidy eligible individuals.

‘‘Sec. 21235. Enforcement.

1 ‘‘Subtitle A—Participating State

2 Program

3 ‘‘PART I—GENERAL RESPONSIBILITIES

4 ‘‘SEC. 21001. ESTABLISHMENT OF PARTICIPATING STATE

5 PROGRAMS.

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

7 of this title if such State establishes by not later than Jan8 uary 1, 1998, a certification and consumer value program

9 (in this title referred to as a ‘State program’) to carry

10 out participating State responsibilities specified in this

11 title.

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

13 COVERAGE.

14 ‘‘(a) ACCESS TO STANDARDIZED COVERAGE.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), a State program shall require that each

3 insured health plan issued, sold, offered for sale, or

4 operated in the State shall be certified by the appro5 priate certifying authority as a certified health plan.

6 ‘‘(2) FEDERAL CERTIFICATION OF SELF-IN7 SURED PLANS.—In the case of self-insured health

8 plans, the Secretary of Labor shall carry out activi9 ties under this title in the same manner as a partici10 pating State would carry out such activities with re11 spect to an insured health plan subject to this title.

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

13 program shall require the following:

14 ‘‘(1) COMMUNITY RATING.—

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

16 subparagraph (B), all health plans shall be

17 community-rated health plans which cover only

18 community-rated individuals.

19 ‘‘(B) EXPERIENCE-RATED HEALTH

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

21 any health plan which—

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

23 experience-rated employer, or

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

25 is experience-rated,
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1 but any such plan may cover only experience2 rated individuals.

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

4 be entitled to such premium assistance as is pro5 vided under the program described in part B of title

6 XIX.

7 ‘‘(c) ACCESS THROUGH HEALTH PLAN SPONSORS.—

8 Subject to the requirements of part II of subtitle B—

9 ‘‘(1) a State program shall require each health

10 plan sponsor to make available to each community11 rated individual the opportunity to enroll, directly or

12 through a purchasing cooperative, in a certified

13 health plan which provides the FedMed benefits

14 package established under section 21115(b); and

15 ‘‘(2) each health plan sponsor may offer any

16 other certified health plan which provides any other

17 health benefits package, including a supplemental

18 benefit package to the FedMed benefits package, but

19 may not require an individual or group to purchase

20 supplemental coverage or link the pricing of the

21 FedMed benefits package to the purchase of a sup22 plemental benefits package.

23 ‘‘SEC. 21003. GENERAL DEFINITIONS RELATING TO HEALTH

24 PLANS.

25 ‘‘(a) HEALTH PLAN.—For purposes of this title—
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•S 2374 IS

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

2 means any plan or arrangement which provides, or

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

4 include the following, or any combination thereof:

5 ‘‘(A) Coverage only for accidental death,

6 dismemberment, dental, or vision.

7 ‘‘(B) Coverage providing wages or pay8 ments in lieu of wages for any period during

9 which the employee is absent from work on ac10 count of sickness or injury.

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

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

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

14 liability insurance.

15 ‘‘(E) Worker’s compensation or similar in16 surance.

17 ‘‘(F) Automobile medical-payment insur18 ance.

19 ‘‘(G) A long-term care insurance policy, in20 cluding a nursing home fixed indemnity policy

21 (unless the Secretary determines that such a

22 policy provides sufficiently comprehensive cov23 erage of a benefit so that it should be treated

24 as a health plan).

25 ‘‘(H) An equivalent health care program.
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1 ‘‘(I) Any plan or arrangement not de2 scribed in any preceding subparagraph which

3 provides for benefit payments, on a periodic

4 basis, for a specified disease or illness or period

5 of hospitalization without regard to the costs in6 curred or services rendered during the period to

7 which the payments relate.

8 ‘‘(J) Such other plan or arrangement as

9 the Secretary determines is not a health plan.

10 ‘‘(2) INSURED HEALTH PLAN.—

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

12 health plan’ means any health plan which is a

13 hospital or medical service policy or certificate,

14 hospital or medical service plan contract, or

15 health maintenance organization group contract

16 offered by an insurer.

17 ‘‘(B) INSURER.—The term ‘insurer’

18 means—

19 ‘‘(i) a licensed insurance company,

20 ‘‘(ii) a prepaid hospital or medical

21 service plan,

22 ‘‘(iii) a health maintenance organiza23 tion, or

24 ‘‘(iv) any other similar entity,
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•S 2374 IS

1 which is engaged in the business of providing a

2 plan of health insurance or health benefits or

3 services.

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

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

6 benefit plan, church plan, government plan, or other

7 arrangement which—

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

9 manner other than through the purchase of one

10 or more insured health plans, but

11 ‘‘(B) does not include any coverage or in12 surance described in subparagraphs (A)

13 through (J) of paragraph (1).

14 ‘‘(b) CERTIFIED HEALTH PLAN.—For purposes of

15 this title, the term ‘certified health plan’ means a health

16 plan which is certified by the appropriate certifying au17 thority as meeting the applicable requirements of this title.

18 ‘‘(c) TERMS AND RULES RELATING TO COMMUNITY

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

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

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

22 plan which meets the requirements of section 21114.

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

24 term ‘community-rated individual’ means an individ25 ual—
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1 ‘‘(A) who is not an experience-rated indi2 vidual, or

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

4 (determined without regard to this subpara5 graph) and whose employer does not provide an

6 employer-subsidized certified health plan.

7 Such term includes the spouse and dependents of

8 such individual.

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

10 term ‘experience-rated individual’ means an individ11 ual who is an employee of an experience-rated em12 ployer. Such term includes the spouse and depend13 ents of such individual.

14 ‘‘(4) EXPERIENCE-RATED EMPLOYER.—

15 ‘‘(A) IN GENERAL.—The term ‘experience16 rated employer’ means—

17 ‘‘(i) in the case of a self-insured

18 health plan, any employer, and

19 ‘‘(ii) in the case of an insured health

20 plan, with respect to any calendar year,

21 any employer if, on each of 20 days during

22 the preceding calendar year (each day

23 being in a different week), such employer

24 (or any predecessor) employed more than

25 50 employees for some portion of the day.
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1 ‘‘(B) CERTAIN OTHER PLANS.—Such term

2 shall include multiemployer plans, church asso3 ciation plans, and rural electric cooperative or

4 rural telephone cooperative association plans.

5 ‘‘(5) SPECIAL RULE FOR SPOUSES AND DE6 PENDENTS.—If any individual is offered coverage

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

8 a primary enrollee of such plan, such individual shall

9 have the status of such enrollee unless such individ10 ual is eligible to elect other coverage and so elects.

11 ‘‘PART II—CERTIFICATION AND CONSUMER

12 VALUE

13 ‘‘SEC. 21011. CERTIFICATION OF HEALTH PLANS.

14 ‘‘(a) IN GENERAL.—Each State program shall pro15 vide for the certification of health plans as certified health

16 plans in accordance with the insurance reform standards

17 and the delivery system guidelines established by the Sec18 retary under subtitle B.

19 ‘‘(b) USE OF PRIVATE ENTITIES.—

20 ‘‘(1) EXPERTS.—A State shall consult with ex21 perts in designing and implementing a State certifi22 cation program under this section.

23 ‘‘(2) ACCREDITATION.—A State program may

24 provide for the use of private accreditation entities
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•S 2374 IS

1 in carrying out all or part of the duties under sub2 section (a).

3 ‘‘(c) COORDINATION OF ACTIVITIES.—In designing

4 and implementing the State certification program under

5 this section, a State shall coordinate activities by State

6 public health offices with activities of the insurance com7 missioner of the State, and with other relevant State agen8 cies, with respect to the duties and responsibilities of each

9 such entity.

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

11 impose appropriate certification fees on health plans seek12 ing certification.

13 ‘‘(e) CERTIFICATION ENFORCEMENT.—A State pro14 gram shall provide for the monitoring and enforcement of

15 the certification of health plans.

16 ‘‘SEC. 21012. CONSUMER VALUE PROGRAM.

17 ‘‘(a) ESTABLISHMENT OF PROGRAM.—Each State, in

18 accordance with minimum guidelines established by the

19 Secretary under section 21103, shall establish and operate

20 a consumer value program to provide consumers in the

21 State with comparative value information on the perform22 ance of all health plans in each community rating area

23 in the State. State consumer value programs under this

24 section may exceed the guidelines established by the Sec25 retary.
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1 ‘‘(b) USE OF PRIVATE ORGANIZATIONS.—A State

2 may operate the consumer value program through a con3 tract with a private organization selected by the State.

4 ‘‘(c) ELIGIBILITY FOR GRANTS.—Each State with a

5 consumer value program shall be eligible for grants under

6 section 21103(b). To be eligible for such a grant, a State

7 shall prepare and submit to the Secretary an application

8 at such time, in such manner, and containing such infor9 mation as the Secretary may require.

10 ‘‘(d) ADDITIONAL REQUIREMENTS.—Each State pro11 gram shall meet the requirements specified under subtitles

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

13 ‘‘SEC. 21013. ESTABLISHMENT OF COMMUNITY RATING

14 AREAS.

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

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

17 1, 1998, provide for the inclusion of all areas of the State

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

19 revise the boundaries of such areas from time to time con20 sistent with this section.

21 ‘‘(b) MULTIPLE AREAS.—With respect to a commu22 nity rating area—

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

24 metropolitan statistical area in a State may be di-
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•S 2374 IS

1 vided into more than 1 community rating area in

2 such State;

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

4 a community rating area may not be less than

5 250,000; and

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

7 rating area may be incorporated into another com8 munity rating area.

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

10 community rating areas, a participating State may not

11 discriminate on the basis of, or otherwise take into ac12 count, disability, health status, or perceived need for

13 health services of a particular population. Such restric14 tions shall not prohibit participating States from establish15 ing such boundaries to ensure that underserved and vul16 nerable populations are better served.

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

18 participating States may provide for the establishment of

19 a community rating area that includes adjoining areas of

20 the States so long as all areas of any metropolitan statis21 tical area or primary metropolitan statistical area within

22 such States are within the same community rating area.

23 ‘‘SEC. 21014. RISK ADJUSTMENT PROGRAMS.

24 ‘‘Each participating State under the State program

25 shall provide a risk adjustment program meeting the
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•S 2374 IS

1 standards developed by the Secretary under section

2 21104.

3 ‘‘SEC. 21015. SPECIFICATION OF INITIAL GENERAL ENROLL4 MENT PERIOD.

5 ‘‘Upon the date of the commencement of the State

6 program, the participating State shall specify for the State

7 (or for each community rating area) an initial period, of

8 not less than 90 days, during which individuals in the

9 State (or area) may enroll in certified health plans.

10 ‘‘PART III—TREATMENT OF CERTAIN STATE

11 LAWS

12 ‘‘SEC. 21021. PREEMPTION OF CERTAIN STATE LAW RE13 STRICTIONS ON HEALTH PLANS.

14 ‘‘Effective as of January 1, 1996—

15 ‘‘(1) a State may not prohibit or limit a health

16 plan from including incentives for enrollees to use

17 the services of participating providers;

18 ‘‘(2) a State may not prohibit or limit a health

19 plan from requiring enrollees to obtain care from

20 participating providers;

21 ‘‘(3) a State may not prohibit or limit a health

22 plan from requiring enrollees to obtain referrals for

23 specialty treatment;
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1 ‘‘(4) a State may not prohibit or limit the es2 tablishment of different payment rates for partici3 pating and non-participating providers;

4 ‘‘(5) a State may not prohibit or limit a health

5 plan from limiting the number and types of partici6 pating providers;

7 ‘‘(6) a State may not prohibit or limit a health

8 plan from using single source suppliers for pharmacy

9 services, medical equipment, and other supplies and

10 services; and

11 ‘‘(7) a State may not prohibit or limit the cor12 porate practice of medicine.

13 ‘‘SEC. 21022. PREEMPTION FROM STATE BENEFIT MAN14 DATES.

15 ‘‘Effective as of January 1, 1996, no State shall es16 tablish or enforce any law or regulation that requires any

17 certified health plan to cover any specific item or service.

18 ‘‘SEC. 21023. PREEMPTION OF STATE LAW REGULATING

19 UTILIZATION MANAGEMENT AND REVIEW.

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

21 regulate utilization management and review programs of

22 any health plan to the extent not provided by this title.
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1 ‘‘SEC. 21024. STATE LAWS REGARDING END OF LIFE TREAT2 MENT.

3 ‘‘Nothing in this title shall be construed to invalidate

4 any State law that has the effect of preventing involuntary

5 denial of lifesaving medical treatment when such denial

6 would cause the involuntary death of the patient pending

7 transfer of the patient to a health care provider willing

8 to provide such treatment.

9 ‘‘PART IV—DEFINITIONS AND RULES

10 ‘‘SEC. 21100. DEFINITIONS AND RULES OF GENERAL APPLI11 CATION.

12 ‘‘Except as otherwise specifically provided, in this

13 title the following definitions and rules apply:

14 ‘‘(1) APPROPRIATE CERTIFYING AUTHORITY.—

15 The term ‘appropriate certifying authority’ means—

16 ‘‘(A) except as provided in subparagraph

17 (B), in the case of an insured health plan, the

18 State commissioner or superintendent of insur19 ance or other State authority in the participat20 ing State; or

21 ‘‘(B) in the case of a self-insured health

22 plan, the Secretary of Labor.

23 ‘‘(2) CHURCH ASSOCIATION PLAN.—The term

24 ‘church association plan’ means a church plan (as

25 defined in section 414(e) of the Internal Revenue

26 Code of 1986).
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1 ‘‘(3) DELIVERY SYSTEM.—The term ‘delivery

2 system’ with respect to a health plan includes a fee3 for-service, use of preferred providers, staff or group

4 model health maintenance organizations, and such

5 other arrangements as the Secretary may recognize.

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

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

8 ‘‘(A) who is a child or stepchild of the indi9 vidual; and

10 ‘‘(B) who is—

11 ‘‘(i) under 22 years of age (under 25

12 years of age in the case of a fulltime stu13 dent) and unmarried, or

14 ‘‘(ii) permanently and totally disabled

15 (within the meaning of section

16 151(c)(5)(C) of such Code).

17 ‘‘(5) EMPLOYER, EMPLOYEE, AND EMPLOY18 MENT DEFINED.—

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

20 provided in this subtitle—

21 ‘‘(i) the term ‘employment’ has the

22 meaning given such term under section

23 3121 of the Internal Revenue Code of

24 1986,
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1 ‘‘(ii) the term ‘employee’ has the

2 meaning given such term under section

3 3121 of such Code, subject to the provi4 sions of chapter 25 of such Code, and

5 ‘‘(iii) the term ‘employer’ has the

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

7 used in such section 3121.

8 ‘‘(B) EXCEPTIONS.—For purposes of sub9 paragraph (A)—

10 ‘‘(i) EMPLOYMENT.—

11 ‘‘(I) EMPLOYMENT INCLUDED.—

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

13 than clauses (i) through (iv) of sub14 paragraph (C) and clauses (i) through

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

16 (10), (11), (13), (15), (18), and (19)

17 of section 3121(b) of the Internal

18 Revenue Code of 1986 shall not apply.

19 ‘‘(II) EXCLUSION OF SEASONAL

20 OR TEMPORARY.—Employment shall

21 not include seasonal or temporary

22 services performed for an employer for

23 less than 6 months in a calendar year.

24 ‘‘(ii) EMPLOYEES.—
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1 ‘‘(I) TREATMENT OF SELF-EM2 PLOYED.—The term ‘employee’ in3 cludes a self-employed individual.

4 ‘‘(II) EXCLUSION OF CERTAIN

5 FOREIGN EMPLOYMENT.—The term

6 ‘employee’ does not include an individ7 ual with respect to service, if the indi8 vidual is not a citizen or resident of

9 the United States and the service is

10 performed outside the United States.

11 ‘‘(C) AGGREGATION RULES FOR EMPLOY12 ERS.—For purposes of this title—

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

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

15 section 52 of the Internal Revenue Code of

16 1986 shall be treated as a single employer,

17 and

18 ‘‘(ii) under regulations of the Sec19 retary of the Treasury, all employees of or20 ganizations which are under common con21 trol with one or more organizations which

22 are exempt from income tax under subtitle

23 A of the Internal Revenue Code of 1986

24 shall be treated as employed by a single

25 employer.
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1 The regulations prescribed under clause (ii)

2 shall be based on principles similar to the prin3 ciples which apply to taxable organizations

4 under clause (i).

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

6 The term ‘equivalent health care program’ means—

7 ‘‘(A) part A or part B of the medicare pro8 gram under title XVIII of the Social Security

9 Act,

10 ‘‘(B) the medicaid program under title

11 XIX of the Social Security Act,

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

13 military personnel under title 10, United States

14 Code,

15 ‘‘(D) the veterans health care program

16 under chapter 17 of title 38, United States

17 Code,

18 ‘‘(E) the Civilian Health and Medical Pro19 gram of the Uniformed Services (CHAMPUS),

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

21 States Code, and

22 ‘‘(F) the Indian health service program

23 under the Indian Health Care Improvement Act

24 (25 U.S.C. 1601 et seq.).
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1 ‘‘(7) FAMILY.—The term ‘family’ includes an

2 individual, the individual’s spouse, and the individ3 ual’s dependents (if any), as defined in paragraph

4 (4).

5 ‘‘(8) HEALTH PLAN SPONSOR.—The term

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

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

8 and

9 ‘‘(B) a self-insured health plan, the experi10 ence-rated employer sponsor.

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

13 section 3(37) of the Employee Retirement Income

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

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

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

18 ‘‘(11) PARTICIPATING STATE.—The term ‘par19 ticipating State’ means a State establishing a State

20 program under this title.

21 ‘‘(12) PURCHASING COOPERATIVE.—The term

22 ‘purchasing cooperative’ means a health insurance

23 purchasing cooperative described in section 21201.

24 ‘‘(13) RURAL ELECTRIC COOPERATIVE.—The

25 term ‘rural electric cooperative’ has the meaning
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•S 2374 IS

1 given such term in section 3(40)(A)(iv) of the Em2 ployee Retirement Income Security Act of 1974.

3 ‘‘(14) RURAL TELEPHONE COOPERATIVE ASSO4 CIATIONS.—The term ‘rural telephone cooperative

5 association’ has the meaning given such term in sec6 tion 3(40)(A)(v) of the Employee Retirement Income

7 Security Act of 1974.

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

9 means the Secretary of Health and Human Services

10 or the Secretary’s delegate.

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

12 the several States, the District of Columbia, the

13 Commonwealth of Puerto Rico, the United States

14 Virgin Islands, Guam, American Samoa, and the

15 Commonwealth of the Northern Mariana Islands.

16 ‘‘Subtitle B—Standards for Reform

17 ‘‘PART I—ESTABLISHMENT AND APPLICATION OF

18 STANDARDS AND GUIDELINES

19 ‘‘SEC. 21101. INSURANCE REFORM STANDARDS.

20 ‘‘Except as provided in section 21105, the Secretary,

21 in consultation with the NAIC, shall develop and publish

22 specific standards and evaluation criteria to implement the

23 insurance reform standards specified in part II by not

24 later than 9 months after the date of the enactment of

25 this title.
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1 ‘‘SEC. 21102. DELIVERY SYSTEM GUIDELINES.

2 ‘‘(a) ESTABLISHMENT.—Except as provided in sec3 tion 21105, not later than 9 months after the date of en4 actment of this title, the Secretary, in consultation with

5 the NAIC and other organizations with expertise in the

6 areas of quality assurance (including the Joint Commis7 sion on Accreditation of Health Care Organizations, the

8 National Committee for Quality Assurance, and peer re9 view organizations), shall establish minimum guidelines

10 specified in part III for the certification of health plan

11 delivery systems and the enforcement of such guidelines.

12 ‘‘(b) MINIMUM GUIDELINES.—Each participating

13 State through the State program may exceed the guide14 lines established by the Secretary under this section.

15 ‘‘SEC. 21103. CONSUMER VALUE PROGRAM.

16 ‘‘(a) DEVELOPMENT OF GUIDELINES.—The Sec17 retary shall develop and distribute to participating States

18 model minimum guidelines for the establishment of State

19 consumer value programs under section 21012. Such

20 guidelines shall include a description of a consumer report

21 card that is designed to standardize consumer information

22 among all States concerning certified health plans.

23 ‘‘(b) GRANT PROGRAM.—The Secretary may award

24 demonstration grants to States that establish consumer

25 value programs, with priority given by the Secretary to
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•S 2374 IS

1 States that exceed the minimum guidelines established by

2 the Secretary under this section.

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

4 are authorized to be appropriated such sums as are nec5 essary to carry out the purposes of this section.

6 ‘‘SEC. 21104. RISK ADJUSTMENT PROGRAMS.

7 ‘‘Except as provided in section 21105, the Secretary

8 shall develop standards for participating States to provide

9 risk adjustment programs for participation by community10 rated insured health plans and reinsurers of self-insured

11 health plans sponsored by employers which are not experi12 ence-rated employers as described in section 21116(b).

13 ‘‘SEC. 21105. STANDARDS AND GUIDELINES BY SECRETARY

14 OF LABOR.

15 ‘‘The Secretary of Labor shall develop for self-insured

16 health plans appropriate insurance reform standards and

17 minimum delivery system guidelines similar to such stand18 ards and guidelines described in sections 21101 and

19 21102.

20 ‘‘SEC. 21106. GENERAL RULES.

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

22 requirement or standard is imposed on a health plan, the

23 requirement or standard is deemed to have been imposed

24 on the insurer or sponsor of the plan in relation to that

25 plan.
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1 ‘‘(b) USE OF INTERIM, FINAL REGULATIONS.—In

2 order to permit the timely implementation of the provi3 sions of this title, the Secretary and the Secretary of

4 Labor are each authorized to issue regulations under this

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

6 of publication, subject to change based on subsequent pub7 lic comment.

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

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

10 the standards developed under this subtitle and applicable

11 under part II.

12 ‘‘PART II—INSURANCE REFORM STANDARDS

13 APPLICABLE TO HEALTH PLANS

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

15 ‘‘(a) ISSUE.—

16 ‘‘(1) IN GENERAL.—Except as otherwise pro17 vided in this section, a health plan sponsor—

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

19 plan shall offer such plan to any community20 rated individual applying for coverage; and

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

22 plan or a self-insured health plan shall offer

23 such plan to any experience-rated individual eli24 gible for coverage under the plan through the

25 individual’s experience-rated employer.
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1 ‘‘(2) AVAILABILITY.—

2 ‘‘(A) IN GENERAL.—A community-rated

3 health plan shall be made available throughout

4 the entire community rating area in which such

5 plan is offered, including through any purchas6 ing cooperative choosing to offer such plan.

7 ‘‘(B) GEOGRAPHIC LIMITATIONS.—A com8 munity-rated health plan may deny coverage

9 under the plan to a community-rated individual

10 who resides outside the community rating area

11 in which such plan is offered, but only if such

12 denial is applied uniformly, without regard to

13 health status or insurability of individuals.

14 ‘‘(C) APPLICABILITY TO NETWORK

15 PLANS.—Subparagraphs (A) and (B) shall each

16 be applied to a community-rated health plan

17 using a staff or group model health mainte18 nance organization or other network delivery

19 system by substituting ‘service area determined

20 by the appropriate certifying authority’ for

21 ‘community rating area’.

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

23 ‘‘(A) IN GENERAL.—Subject to subpara24 graph (B), an insured health plan may apply to
76

•S 2374 IS

1 the appropriate certifying authority to cease en2 rolling individuals under the plan if—

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

4 individuals; and

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

6 applicable certifying authority that its fi7 nancial or provider capacity to serve pre8 viously covered groups or individuals (and

9 additional individuals who will be expected

10 to enroll because of affiliation with such

11 previously covered groups or individuals)

12 will be impaired if it is required to enroll

13 other individuals.

14 ‘‘(B) FIRST-COME-FIRST-SERVED.—An in15 sured health plan is only eligible to exercise the

16 limitations provided for in subparagraph (A) if

17 such plan provides for enrollment of individuals

18 on a first-come-first-served basis (except in the

19 case of additional individuals described in sub20 paragraph (A)(ii)).

21 ‘‘(b) RENEWAL.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graphs (2) and (3), a health plan that is issued to

24 an individual shall be renewed at the option of the

25 individual.
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•S 2374 IS

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

2 health plan sponsor may refuse to renew, or may

3 terminate, a health plan under this title only for—

4 ‘‘(A) nonpayment of premiums;

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

6 ‘‘(C) misrepresentation of material facts on

7 the part of the individual relating to an applica8 tion for coverage or claim for benefits.

9 ‘‘(3) EXIT FROM MARKET.—

10 ‘‘(A) IN GENERAL.—An insurer shall

11 renew an insured health plan through a particu12 lar type of delivery system (as defined in sec13 tion 21100) with respect to a community-rated

14 employer or community-rated individual, unless

15 such insurer—

16 ‘‘(i) elects not to renew all of its insured

17 health plans using such delivery system issued

18 to all such employers and individuals in a State;

19 and

20 ‘‘(ii) provides notice to the appropriate cer21 tifying authority and to each such employer and

22 individual covered under the plan of such termi23 nation at least 180 days before the date of expi24 ration of the plan.
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•S 2374 IS

1 ‘‘(B) PROHIBITION ON MARKET RE2 ENTRY.—In the case of such a termination,

3 such insurer may not provide for the issuance

4 of any insured health plan using such a delivery

5 system to a community-rated employer or com6 munity-rated individual in such State during

7 the 5-year period beginning on the date of the

8 termination of the last plan not so renewed.

9 ‘‘(c) CERTAIN EXCLUDED PLANS.—The provisions of

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

11 shall not apply to any religious fraternal benefit society

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

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

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

15 Revenue Code of 1986 which is exempt from taxation

16 under section 501(a) of such Code.

17 ‘‘SEC. 21112. ENROLLMENT.

18 ‘‘(a) ENROLLMENT PROCESS.—A health plan shall

19 establish an enrollment process which consists of—

20 ‘‘(A) a general annual enrollment period of

21 at least 30 days; and

22 ‘‘(B) special enrollment periods for

23 changes in enrollment,

24 as specified by the reform standards, which shall in25 clude the circumstances under which such special en-
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•S 2374 IS

1 rollment periods are required and the duration of

2 such periods.

3 ‘‘(b) COMMENCEMENT OF COVERAGE.—

4 ‘‘(1) WAITING PERIODS.—An insurer or an em5 ployer may impose a waiting period of not more

6 than 30 days for coverage for a reasonable time nec7 essary to process an enrollment.

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

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

10 child under such enrollee’s health plan (regardless of

11 the class of enrollment) shall begin on the date of

12 such birth or adoption and shall continue, in the ab13 sence of any enrollment of such child during a spe14 cial enrollment period provided under subsection

15 (a)(1)(C), for at least 45 days.

16 ‘‘SEC. 21113. NONDISCRIMINATION BASED ON HEALTH STA17 TUS.

18 ‘‘(a) IN GENERAL.—Except as provided under sub19 section (b), a health plan may not—

20 ‘‘(1) deny, limit, or condition the coverage

21 under (or benefits of) the plan; and

22 ‘‘(2) in the case of an experience-rated health

23 plan, vary the premium,

24 based on the health status, medical condition, claims expe25 rience, receipt of health care, medical history, anticipated
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•S 2374 IS

1 need for health care expenses, disability, or lack of evi2 dence of insurability, of an individual.

3 ‘‘(b) TREATMENT OF PREEXISTING CONDITION EX4 CLUSIONS FOR ALL SERVICES.—

5 ‘‘(1) IN GENERAL.—Subject to paragraph (4), a

6 health plan may impose a limitation or exclusion of

7 benefits relating to treatment of a condition based

8 on the fact that the condition preexisted the effective

9 date of the plan with respect to an individual enroll10 ing as a member of a group only if—

11 ‘‘(A) the condition was diagnosed or treat12 ed during the 3-month period ending on the day

13 before the date of enrollment under the plan;

14 ‘‘(B) the limitation or exclusion extends for

15 a period not more than 6 months after the date

16 of enrollment under the plan;

17 ‘‘(C) the limitation or exclusion does not

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

19 birth, was covered under the plan; or

20 ‘‘(D) the limitation or exclusion does not

21 apply to pregnancy.

22 ‘‘(2) CREDITING OF PREVIOUS COVERAGE.—A

23 health plan shall provide that if an individual under

24 such plan is in a period of continuous coverage as

25 of the date of enrollment under such plan, any pe-
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•S 2374 IS

1 riod of exclusion of coverage with respect to a pre2 existing condition shall be reduced by 1 month for

3 each month in the period of continuous coverage.

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

5 ‘‘(A) PERIOD OF CONTINUOUS COV6 ERAGE.—The term ‘period of continuous cov7 erage’ means the period beginning on the date

8 an individual is enrolled under a certified health

9 plan or an equivalent health care program and

10 ends on the date the individual is not so en11 rolled for a continuous period of more than 3

12 months.

13 ‘‘(B) PREEXISTING CONDITION.—The term

14 ‘preexisting condition’ means, with respect to

15 coverage under a health plan, a condition which

16 was diagnosed, or which was treated, within the

17 3-month period ending on the day before the

18 date of enrollment (without regard to any wait19 ing period).

20 ‘‘(4) SPECIAL RULES FOR INDIVIDUALS.—In

21 the case of an individual who is not enrolling as a

22 member of a group in a health plan—

23 ‘‘(A) any reference to 3 months in para24 graph (1)(A) is deemed a reference to 6

25 months,
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•S 2374 IS

1 ‘‘(B) any reference to 6 months in para2 graphs (1)(B) and (2) is deemed a reference to

3 12 months, and

4 ‘‘(C) any reference to 3-month period in

5 paragraph (3)(B) is deemed a reference to 6-

6 month period.

7 ‘‘(5) PROHIBITION ON PREEXISTING CONDITION

8 EXCLUSION DURING AMNESTY PERIOD.—

9 ‘‘(A) IN GENERAL.—This subsection shall

10 not apply during an initial enrollment period

11 described in section 21015.

12 ‘‘(B) CAPACITY LIMITATION.—The partici13 pating State may establish a limit on the num14 ber of new enrollees a health plan must accept

15 during the period described in subparagraph

16 (A) based on the plan’s share of the applicable

17 community-rated or experience-rated popu18 lation.

19 ‘‘SEC. 21114. RATING LIMITATIONS FOR COMMUNITY-RATED

20 MARKET.

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

23 health plan shall establish within each community rating

24 area in which the plan is to be offered a standard premium

25 for individual enrollment for each benefits package of the
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•S 2374 IS

1 plan, including the FedMed benefits package established

2 under section 21115(b).

3 ‘‘(b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT4 ING AREAS.—

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

6 (3), and (4), the standard premium for each package

7 described in subsection (a) for all community-rated

8 individuals within a community rating area shall be

9 the same and shall not include the costs of premium

10 processing, enrollment, and marketing that would

11 vary depending on whether the method of enrollment

12 is through a purchasing cooperative, or directly

13 through a health plan sponsor, an employer, or a

14 broker.

15 ‘‘(2) APPLICATION TO ENROLLEES.—

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

17 for coverage in a community-rated health plan

18 shall be the product of—

19 ‘‘(i) the standard premium (estab20 lished under paragraph (1));

21 ‘‘(ii) in the case of enrollment other

22 than individual enrollment, the family ad23 justment factor specified under subpara24 graph (B); and
84

•S 2374 IS

1 ‘‘(iii) the age adjustment factor (spec2 ified under subparagraph (C)).

3 ‘‘(B) FAMILY ADJUSTMENT FACTOR.—The

4 reform standards shall specify family adjust5 ment factors that reflect the relative actuarial

6 costs of benefit packages based on family class7 es of enrollment (as compared with such costs

8 for individual enrollment).

9 ‘‘(C) AGE ADJUSTMENT FACTOR.—The re10 form standards shall specify uniform age cat11 egories for age adjustment factors that reflect

12 the relative actuarial costs of benefit packages

13 among enrollees. For individuals who have at14 tained age 18 but not age 65, the highest age

15 adjustment factor may not exceed the lowest

16 age adjustment factor by—

17 ‘‘(i) 4 times for the first 3 years be18 ginning with the first year of certification

19 by the appropriate certifying authority,

20 and

21 (ii) 3 times for years thereafter.

22 ‘‘(3) ADMINISTRATIVE CHARGES.—

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

24 the reform standards, a community-rated health

25 plan may add a separately-stated administrative
85

•S 2374 IS

1 charge not to exceed 15 percent of the plan’s

2 premium which is based on identifiable dif3 ferences in marketing and other legitimate ad4 ministrative costs which vary by size of the en5 rolling group and method of enrollment, includ6 ing enrollment directly through a health plan,

7 an employer, or a broker (as defined in such

8 standards).

9 ‘‘(B) APPLICATION.—The administrative

10 charge for any plan described in subparagraph

11 (A) shall be applied uniformly with respect to

12 group size and method of enrollment.

13 ‘‘(4) DISCOUNTS.—In accordance with the re14 form standards, an insurer may allow premium dis15 counts based on health promoting activities.

16 ‘‘SEC. 21115. BENEFITS OFFERED.

17 ‘‘(a) OFFERING OF PACKAGES INCLUDING

18 FEDMED.—Subject to the requirements of section

19 21002(c), a health plan may offer, in addition to a

20 FedMed benefits package, other benefits packages in a

21 community rating area, if the rates for all such packages

22 (including the FedMed) are based on the plan’s total en23 rollment in the community-rated population in such area

24 and the rating variations do not exceed the difference in
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•S 2374 IS

1 the actuarial value of the specific benefit variations for

2 such population.

3 ‘‘(b) FEDMED BENEFITS PACKAGE DESCRIBED.—

4 ‘‘(1) IN GENERAL.—

5 ‘‘(A) PACKAGE DESCRIBED.—A FedMed

6 benefits package described in this subsection is

7 a benefits package that covers all of the items

8 and services under the categories of health care

9 items and services specified by the Secretary

10 under paragraph (2) when medically necessary

11 or appropriate (as determined in accordance

12 with paragraph (3)) and provides for a cost13 sharing schedule specified by the Secretary

14 under paragraph (4).

15 ‘‘(B) ACTUARIAL VALUE.—

16 ‘‘(i) INITIAL PACKAGE.—For 1997,

17 the FedMed benefits package established

18 by the Secretary under this subsection that

19 has the lowest actuarial value of all the

20 FedMed benefits packages established by

21 the Secretary under this subsection, shall

22 have an actuarial value that equals the ac23 tuarial value of the benefits package pro24 vided under the health benefits plan of25 fered under chapter 89 of title 5, United
87

•S 2374 IS

1 States Code, during 1994 with the highest

2 enrollment, adjusted for a national popu3 lation under 65 years of age (as deter4 mined by the Secretary).

5 ‘‘(ii) SUCCEEDING YEARS.—For suc6 ceeding years, the FedMed benefits pack7 age established by the Secretary under this

8 subsection that has the lowest actuarial

9 value of all the FedMed benefits packages

10 established by the Secretary under this

11 subsection for the year, shall have an actu12 arial value that equals the actuarial value

13 of the FedMed benefits package that has

14 the lowest actuarial value of all the

15 FedMed benefits packages that existed in

16 the preceding year.

17 ‘‘(iii) DETERMINING ACTUARIAL

18 VALUE.—For purposes of clause (ii), the

19 Secretary shall use the same actuarial as20 sumptions in determining the actuarial

21 value of the FedMed benefits packages for

22 the current and preceding years.

23 ‘‘(2) CATEGORIES OF HEALTH CARE ITEMS AND

24 SERVICES.—
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•S 2374 IS

1 ‘‘(A) IN GENERAL.—The categories of

2 health care items and services specified by the

3 Secretary under this paragraph shall include at

4 least the categories described in section 1302(1)

5 of the Public Health Service Act and section

6 8904(a) of title 5, United States Code. The

7 Secretary may add or delete categories of health

8 care items and services under this paragraph as

9 medical practice changes.

10 ‘‘(B) SPECIFYING ITEMS AND SERVICES.—

11 ‘‘(i) IN GENERAL.—The Secretary

12 shall specify the items and services under

13 the categories specified under subpara14 graph (A).

15 ‘‘(ii) PRIORITIES FOR THE SEC16 RETARY.—In specifying items and services

17 under this subparagraph the Secretary

18 shall take into account the following:

19 ‘‘(I) MENTAL HEALTH AND SUB20 STANCE ABUSE SERVICES.—With re21 spect to mental health and substance

22 abuse services, the Secretary shall

23 give priority to—

24 ‘‘(aa) parity for such serv25 ices with other medical services
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•S 2374 IS

1 with respect to cost-sharing and

2 duration of treatment;

3 ‘‘(bb) management for such

4 services that ensures access to

5 medically appropriate treatment;

6 and

7 ‘‘(cc) encouraging the use of

8 outpatient treatments to the

9 greatest extent feasible.

10 ‘‘(II) VULNERABLE POPU11 LATIONS AND UNDERSERVED

12 AREAS.—The Secretary shall give pri13 ority to the needs of children and vul14 nerable populations, including those

15 populations in rural, frontier, and un16 derserved areas.

17 ‘‘(III) PREVENTION.—The Sec18 retary shall give priority to improving

19 the health of individuals through pre20 vention.

21 ‘‘(3) MEDICAL NECESSITY OR APPROPRIATE22 NESS.—

23 ‘‘(A) DETERMINATIONS BY HEALTH

24 PLANS.—
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•S 2374 IS

1 ‘‘(i) IN GENERAL.—The determination

2 of medical necessity or appropriateness of

3 specific treatments or procedures shall be

4 made by individual health plans with ref5 erence to criteria established under sub6 paragraph (B).

7 ‘‘(ii) NEW PROCEDURES AND TECH8 NOLOGIES.—Health plans may make cov9 erage decisions regarding new procedures

10 and technologies with reference to the cri11 teria established by the Secretary under

12 subparagraph (B).

13 ‘‘(B) CRITERIA ESTABLISHED.—The Sec14 retary shall establish general criteria for deter15 mining whether an item or service specified by

16 the Secretary under paragraph (2)(B) is medi17 cally necessary or appropriate.

18 ‘‘(4) COST-SHARING.—The Secretary shall es19 tablish cost-sharing schedules to be provided by a

20 FedMed benefits package. In establishing such cost21 sharing schedules, the Secretary shall meet the fol22 lowing requirements:

23 ‘‘(A) ANNUAL BASIS.—The Secretary shall

24 review and update cost-sharing schedules as de-
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•S 2374 IS

1 termined appropriate by the Secretary, but on

2 at least an annual basis.

3 ‘‘(B) DELIVERY SYSTEMS.—

4 ‘‘(i) IN GENERAL.—In establishing

5 cost-sharing schedules for FedMed benefits

6 packages, the Secretary shall ensure that

7 the schedules permit a variety of delivery

8 systems, including fee-for-service, preferred

9 provider organizations, point of service,

10 and health maintenance organizations.

11 ‘‘(ii) INITIAL COST-SHARING SCHED12 ULES.—The cost-sharing schedules initially

13 established by the Secretary shall meet the

14 following requirements:

15 ‘‘(I) MODERATE COST-SHAR16 ING.—A moderate cost-sharing sched17 ule shall be similar to the cost-sharing

18 schedule under the health benefits

19 plan offered under chapter 89 of title

20 5, United States Code, with the high21 est enrollment that uses a fee-for-serv22 ice delivery system.

23 ‘‘(II) LOW COST-SHARING.—A

24 low cost-sharing schedule shall be

25 similar to the cost-sharing schedule
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•S 2374 IS

1 under the health benefits plan offered

2 under chapter 89 of title 5, United

3 States Code, with the highest enroll4 ment that provides a health mainte5 nance organization.

6 ‘‘(III) INTERMEDIATE COST7 SHARING.—An intermediate cost-shar8 ing schedule for a preferred provider

9 system, point of service system, or

10 similar system, shall encourage use of

11 providers in the network by providing

12 for higher cost-sharing for out-of-net13 work, non-emergency services.

14 ‘‘(C) COST-SHARING RULES.—Cost-sharing

15 schedules established by the Secretary may in16 clude copayments, coinsurance, deductibles, and

17 out-of-pocket limits. The copayments, coinsur18 ance, deductibles and out-of-pocket limits on

19 cost-sharing for a year under the schedules

20 shall be applied based upon expenses incurred

21 for covered items and services furnished in the

22 year.

23 ‘‘(c) LIFETIME LIMITATION PROHIBITED.—No

24 health plan may impose a lifetime limitation on the provi25 sion of benefits.
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•S 2374 IS

1 ‘‘SEC. 21116. RISK ADJUSTMENT.

2 ‘‘(a) IN GENERAL.—Each community-rated health

3 plan shall participate in a risk adjustment program of the

4 State described in section 21014.

5 ‘‘(b) MANDATORY STOP-LOSS INSURANCE.—Each

6 employer which is not an experience-rated employer and

7 which sponsors a self-insured health plan shall carry stop8 loss insurance purchased from a reinsurer regulated by the

9 participating State.

10 ‘‘SEC. 21117. PROHIBITION OF DISCRIMINATION.

11 ‘‘(a) IN GENERAL.—No State, health plan, or health

12 plan sponsor may discriminate in participation, reimburse13 ment, or indemnification against a health care provider

14 who is acting within the scope of the provider’s license

15 or certification under applicable State or Federal law sole16 ly on the basis of such license or certification of such pro17 vider.

18 ‘‘(b) NUMBER AND TYPE.—Nothing in this title

19 shall—

20 ‘‘(1) prevent a health plan from matching the

21 number and type of health care providers to the

22 needs of the plan members; or

23 ‘‘(2) except as specifically provided in this title,

24 establish any other measure designed to maintain

25 quality or to control costs.
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•S 2374 IS

1 ‘‘PART III—MINIMUM DELIVERY SYSTEM

2 GUIDELINES APPLICABLE TO HEALTH PLANS

3 ‘‘SEC. 21121. MINIMUM DELIVERY SYSTEM GUIDELINES.

4 ‘‘(a) IN GENERAL.—The minimum guidelines for the

5 certification by a participating State of health plan deliv6 ery systems specified under this part are as follows:

7 ‘‘(1) Establishing and maintaining health plan

8 quality assurance, including—

9 ‘‘(A) quality management;

10 ‘‘(B) credentialing;

11 ‘‘(C) utilization management;

12 ‘‘(D) governance;

13 ‘‘(E) plan and quality processes;

14 ‘‘(F) health care provider selection and due

15 process in selection; and

16 ‘‘(G) practice guidelines and protocols.

17 ‘‘(2) Providing consumer protection for health

18 plan enrollees, including—

19 ‘‘(A) comparative consumer information

20 with respect to health plans in a form specified

21 in subtitle B of title XI;

22 ‘‘(B) marketing agents and materials;

23 ‘‘(C) nondiscrimination in plan enrollment,

24 disenrollment and service provision;

25 ‘‘(D) continuation of treatment with re26 spect to health plans that become insolvent;
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•S 2374 IS

1 ‘‘(E) grievance procedures;

2 ‘‘(F) advanced directives; and

3 ‘‘(G) financial practices of health plans

4 that interfere with quality of care.

5 ‘‘(3) Ensuring reasonable access to health care

6 services, including—

7 ‘‘(A) ensuring that vulnerable populations

8 have access to health care services, in accord9 ance with the recommendations of the Prospec10 tive Payment Assessment Commission under

11 subsection (c);

12 ‘‘(B) anti red-lining rules; and

13 ‘‘(C) prohibition on plan discrimination

14 against health care providers (including dis15 crimination solely on the basis of the academic

16 degree of the provider).

17 ‘‘(4) Health plan financial standards, includ18 ing—

19 ‘‘(A) plan solvency requirements;

20 ‘‘(B) financial standards relating to liquid21 ity, accounting and reporting; and

22 ‘‘(C) guaranty fund participation.

23 ‘‘(b) CUSTOMIZED GUIDELINES.—In establishing

24 guidelines under subsection (a), the Secretary shall rec-
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•S 2374 IS

1 ommend customized guidelines for the certification of dif2 ferent types of health plans, taking into consideration—

3 ‘‘(1) frontier, rural, and inner city factors; and

4 ‘‘(2) commercial insurance, managed-care plans,

5 and delivery-system or provider-based plans.

6 ‘‘(c) ACCESS TO VULNERABLE POPULATIONS.—Not

7 later than 1 year after the date of enactment of this title,

8 the Prospective Payment Assessment Commission shall

9 submit recommendations to the Secretary concerning

10 guidelines under subsection (a)(3)(A). In preparing such

11 recommendations, the Commission shall consider—

12 ‘‘(1) the anticipated impact of health care re13 form on access to health care services by individuals

14 in vulnerable populations; and

15 ‘‘(2) safeguards needed to ensure the continued

16 access to, and payment for, health care services pro17 vided to individuals in vulnerable populations.

18 ‘‘Subtitle C—Expanded Access to

19 Health Plans

20 ‘‘PART I—ACCESS THROUGH HEALTH INSURANCE

21 PURCHASING COOPERATIVES

22 ‘‘SEC. 21201. ESTABLISHMENT AND ORGANIZATION.

23 ‘‘(a) IN GENERAL.—Individual and small group mar24 ket purchasing cooperatives (in this title referred to as

25 ‘purchasing cooperatives’) may be established in accord-
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•S 2374 IS

1 ance with this part. Each purchasing cooperative shall be

2 chartered under State law. An insurer may not form, un3 derwrite, or possess a majority vote of a purchasing coop4 erative, but may administer such a cooperative.

5 ‘‘(b) DUTIES OF PURCHASING COOPERATIVES.—

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

7 each purchasing cooperative shall—

8 ‘‘(A) provide access to insured certified

9 health plans to members throughout the entire

10 community rating area served by the coopera11 tive;

12 ‘‘(B) enter into agreements with insured

13 certified health plans selected by the coopera14 tive;

15 ‘‘(C) enter into agreements with commu16 nity-rated employers located in the community

17 rating area served by the cooperative;

18 ‘‘(D) enroll community-rated individuals in

19 insured certified health plans; and

20 ‘‘(E) collect premiums from individuals en21 rolled in insured certified health plans through

22 the purchasing cooperative and forward such

23 premiums to the plans.

24 ‘‘(2) LIMITATION ON ACTIVITIES.—A purchas25 ing cooperative shall not—
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•S 2374 IS

1 ‘‘(A) perform any activity (including re2 view, approval, or enforcement) relating to pay3 ment rates for providers;

4 ‘‘(B) perform any activity (including cer5 tification or enforcement) relating to compliance

6 of insured certified health plans with the re7 quirements of part I or II of subtitle B; or

8 ‘‘(C) assume financial risk in relation to

9 any such plan.

10 ‘‘(d) RULES OF CONSTRUCTION.—

11 ‘‘(1) ESTABLISHMENT NOT REQUIRED.—Noth12 ing in this section shall be construed as requiring—

13 ‘‘(A) that a purchasing cooperative be es14 tablished in each community rating area; and

15 ‘‘(B) that there be only one purchasing co16 operative established with respect to a commu17 nity rating area.

18 ‘‘(2) SINGLE ORGANIZATION SERVING MUL19 TIPLE AREAS.—Nothing in this section shall be con20 strued as preventing a single entity from being the

21 purchasing cooperative for more than one commu22 nity rating area.
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•S 2374 IS

1 ‘‘PART II—ACCESS THROUGH FEHBP

2 ‘‘SEC. 21211. SMALL BUSINESS PARTICIPATION IN FEHBP.

3 ‘‘For access by small businesses to health benefits

4 plans offered by the Federal Employee Health Benefits

5 Program, see chapter 90 of title 5, United States Code.

6 ‘‘PART III—ACCESS THROUGH ASSOCIATION

7 PLANS

8 ‘‘Subpart A—Qualified Association Plans

9 ‘‘SEC. 21221. TREATMENT OF QUALIFIED ASSOCIATION

10 PLANS.

11 ‘‘(a) GENERAL RULE.—For purposes of this title, in

12 the case of a qualified association plan—

13 ‘‘(1) except as otherwise provided in this sub14 part, the plan shall meet all applicable requirements

15 of this title for certified health plans offered by ex16 perience-rated employers,

17 ‘‘(2) if such plan is certified as meeting such

18 requirements and the requirements of this subpart,

19 such plan shall be treated as a plan established and

20 maintained by an experience-rated employer which

21 meets the requirements of this title for experience22 rated plans, and individuals enrolled in such plan

23 shall be treated as experience-rated individuals, and

24 ‘‘(3) any individual who is a member of the as25 sociation not enrolling in the plan shall not be treat-
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•S 2374 IS

1 ed as an experience-rated individual solely by reason

2 of membership in such association.

3 ‘‘(b) ELECTION TO BE TREATED AS PURCHASING

4 COOPERATIVE.—Subsection (a) shall not apply to a quali5 fied association plan if—

6 ‘‘(1) the health plan sponsor makes an irrev7 ocable election to be treated as a purchasing cooper8 ative for purposes of this title, and

9 ‘‘(2) such sponsor meets all requirements of

10 this title applicable to a purchasing cooperative.

11 ‘‘SEC. 21222. QUALIFIED ASSOCIATION PLAN DEFINED.

12 ‘‘(a) GENERAL RULE.—For purposes of this subpart,

13 a plan is a qualified association plan if the plan is a mul14 tiple employer welfare arrangement or similar arrange15 ment—

16 ‘‘(1) which is maintained by a qualified associa17 tion,

18 ‘‘(2) which has at least 500 participants in the

19 United States,

20 ‘‘(3) under which the benefits provided consist

21 solely of medical care (as defined in section 213(d)

22 of the Internal Revenue Code of 1986),

23 ‘‘(4) which may not condition participation in

24 the plan, or terminate coverage under the plan, on

25 the basis of the health status or health claims expe-
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•S 2374 IS

1 rience of any employee or member or dependent of

2 either,

3 ‘‘(5) which provides for bonding, in accordance

4 with regulations providing rules similar to the rules

5 under section 412 of the Employee Retirement In6 come Security Act of 1974, of all persons operating

7 or administering the plan or involved in the financial

8 affairs of the plan, and

9 ‘‘(6) which notifies each participant or provider

10 that it is certified as meeting the requirements of

11 this title applicable to it.

12 ‘‘(b) SELF-INSURED PLANS.—In the case of a plan

13 which is not fully insured (within the meaning of section

14 514(b)(6)(D) of the Employee Retirement Income Secu15 rity Act of 1974), the plan shall be treated as a qualified

16 association plan only if—

17 ‘‘(1) the plan meets minimum financial solvency

18 and cash reserve requirements for claims which are

19 established by the Secretary of Labor and which

20 shall be in lieu of any other such requirements under

21 this title,

22 ‘‘(2) the plan provides an annual funding report

23 (certified by an independent actuary) and annual fi24 nancial statements to the Secretary of Labor and

25 other interested parties, and
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1 ‘‘(3) the plan appoints a plan sponsor who is

2 responsible for operating the plan and ensuring com3 pliance with applicable Federal and State laws.

4 ‘‘(c) CERTIFICATION.—

5 ‘‘(1) IN GENERAL.—A plan shall not be treated

6 as a qualified association plan for any period unless

7 there is in effect a certification by the Secretary of

8 Labor that the plan meets the requirements of this

9 subpart. For purposes of this title, the Secretary of

10 Labor shall be the appropriate certifying authority

11 with respect to the plan.

12 ‘‘(2) FEE.—The Secretary of Labor shall re13 quire a $5,000 fee for the original certification

14 under paragraph (1) and may charge a reasonable

15 annual fee to cover the costs of processing and re16 viewing the annual statements of the plan.

17 ‘‘(3) EXPEDITED PROCEDURES.—The Secretary

18 of Labor may by regulation provide for expedited

19 registration, certification, and comment procedures.

20 ‘‘(4) AGREEMENTS.—The Secretary of Labor

21 may enter into agreements with the States to carry

22 out the Secretary’s responsibilities under this sub23 part.

24 ‘‘(d) AVAILABILITY.—Notwithstanding any other

25 provision of this title, a qualified association plan may
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1 limit coverage to individuals who are members of the

2 qualified association establishing or maintaining the plan,

3 an employee of such member, or a spouse or dependent

4 of either.

5 ‘‘(e) SPECIAL RULES FOR EXISTING PLANS.—In the

6 case of a plan in existence on January 1, 1994—

7 ‘‘(1) the requirements of subsection (a) (other

8 than paragraph (4), (5), and (6) thereof) shall not

9 apply,

10 ‘‘(2) no original certification shall be required

11 under this subpart, and

12 ‘‘(3) no annual report or funding statement

13 shall be required before January 1, 1996, but the

14 plan shall file with the Secretary of Labor a descrip15 tion of the plan and the name of the plan sponsor.

16 ‘‘SEC. 21223. DEFINITIONS AND SPECIAL RULES.

17 ‘‘(a) QUALIFIED ASSOCIATION.—For purposes of this

18 subpart, the term ‘qualified association’ means any organi19 zation which—

20 ‘‘(1) is organized and maintained in good faith

21 by a trade association, an industry association, a

22 professional association, a chamber of commerce, a

23 religious organization, a public entity association, or

24 other business association serving a common or simi25 lar industry,
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1 ‘‘(2) is organized and maintained for substan2 tial purposes other than to provide a health plan,

3 ‘‘(3) has a constitution, bylaws, or other similar

4 governing document which states its purpose, and

5 ‘‘(4) receives a substantial portion of its finan6 cial support from its active, affiliated, or federation

7 members.

8 ‘‘(b) MULTIPLE EMPLOYER WELFARE ARRANGE9 MENT.—For purposes of this subchapter, the term ‘mul10 tiple employer welfare arrangement’ has the meaning

11 given such term by section 3(40) of the Employee Retire12 ment Income Security Act of 1974.

13 ‘‘(c) COORDINATION WITH SUBPART B.—The term

14 ‘qualified association plan’ shall not include a plan to

15 which subpart B applies.

16 ‘‘Subpart B—Special Rule for Church,

17 Multiemployer, and Cooperative Plans

18 ‘‘SEC. 21225. SPECIAL RULE FOR CHURCH, MULTIEM19 PLOYER, AND COOPERATIVE PLANS.

20 ‘‘(a) GENERAL RULE.—For purposes of this title, in

21 the case of a health plan to which this section applies—

22 ‘‘(1) except as otherwise provided in this sub23 part, the plan shall be required to meet all applicable

24 requirements of this title for certified health plans

25 offered by experience-rated employers,
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1 ‘‘(3) if such plan is certified as meeting such

2 requirements, such plan shall be treated as a plan

3 established and maintained by an experience-rated

4 employer which meets the requirements of this title

5 for experience-rated plans, and individuals enrolled

6 in such plan shall be treated as experience-rated in7 dividuals, and

8 ‘‘(3) any individual eligible to enroll in the plan

9 who does not enroll in the plan shall not be treated

10 as an experience-rated individual solely by reason of

11 being eligible to enroll in the plan.

12 ‘‘(b) MODIFIED STANDARDS.—

13 ‘‘(1) CERTIFYING AUTHORITY.—For purposes

14 of this title, the Secretary of Labor shall be the ap15 propriate certifying authority with respect to a plan

16 to which this section applies.

17 ‘‘(2) AVAILABILITY.—Rules similar to the rules

18 of subsection (d) of section 21222 shall apply to a

19 plan to which this section applies.

20 ‘‘(3) ACCESS.—An employer which, pursuant to

21 a collective bargaining agreement, offers an em22 ployee the opportunity to enroll in a plan described

23 in subsection (c)(2) shall not be required to make

24 any other plan available to the employee.
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1 ‘‘(4) TREATMENT UNDER STATE LAWS.—A

2 church plan described in subsection (c)(1) which is

3 certified as meeting the requirements of this section

4 shall not be deemed to be a multiple employer wel5 fare arrangement or an insurance company or other

6 insurer, or to be engaged in the business of insur7 ance, for purposes of any State law purporting to

8 regulate insurance companies or insurance contracts.

9 ‘‘(c) PLANS TO WHICH SECTION APPLIES.—This sec10 tion shall apply to a health plan which—

11 ‘‘(1) is a church plan (as defined in section

12 414(e) of the Internal Revenue Code of 1986) which

13 has at least 100 participants in the United States,

14 ‘‘(2) is a multiemployer plan (as defined in sec15 tion 3(37) of the Employee Retirement Income Se16 curity Act of 1974) which is maintained by a health

17 plan sponsor described in section 3(16)(B)(iii) of

18 such Act and which has at least 500 participants in

19 the United States, or

20 ‘‘(3) is a plan which is maintained by a rural

21 electric cooperative or a rural telephone cooperative

22 association (within the meaning of section 3(40) of

23 such Act and which has at least 500 participants in

24 the United States.
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1 ‘‘PART IV—ACCESS THROUGH EMPLOYERS

2 ‘‘SEC. 21231. GENERAL EMPLOYER RESPONSIBILITIES.

3 ‘‘(a) PAYROLL DEDUCTION.—

4 ‘‘(1) IN GENERAL.—If—

5 ‘‘(A) a certified health plan, or purchasing

6 cooperative on behalf of such a plan, requests

7 an employer under this section to withhold pre8 miums with respect to any employee enrolled in

9 the plan, or

10 ‘‘(B) an employee requests an employer to

11 withhold premiums to a certified health plan in

12 which the employee is enrolled or enrolling,

13 the employer shall deduct and withhold such pre14 miums (less any employer contribution) through

15 payroll deduction and pay the amounts deducted and

16 withheld to the plan or to the purchasing coopera17 tive.

18 ‘‘(2) PAYROLL DEDUCTIONS.—

19 ‘‘(A) FREQUENCY.—In the case of an em20 ployee who is paid wages or other compensa21 tion—

22 ‘‘(i) on a monthly or more frequent

23 basis, the employer shall deduct and with24 hold, and pay, such premiums at the same

25 time as the payment of such wages or

26 other compensation, or
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1 ‘‘(ii) less frequently than monthly, the

2 employer shall pay such premiums on a

3 monthly basis.

4 ‘‘(B) EMPLOYEE PROTECTIONS.—

5 ‘‘(i) WITHHOLDING CONSTITUTES

6 SATISFACTION OF OBLIGATION.—If an em7 ployee notifies the health plan sponsor that

8 the employee has requested the employer

9 withholding of a certain amount, the with10 holding of such an amount by the employer

11 under subparagraph (A) shall constitute

12 satisfaction of the employee’s obligation to

13 pay the health plan with respect to such

14 amount.

15 ‘‘(ii) DIRECT PAYMENT ALLOWED IN

16 CASE OF NONPAYMENT.—In the case of

17 the nonpayment to a health plan of any

18 amount withheld by an employer, the plan

19 shall notify such employee of such

20 nonpayment and shall allow the employee

21 to make direct payments to the plan effec22 tive with the next succeeding payment pe23 riod.

24 ‘‘(b) TIME PERIOD FOR EMPLOYERS.—An employer

25 shall meet the requirements of this section with respect
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1 to any new employee within the 30-day period beginning

2 on the date of hire.

3 ‘‘SEC. 21232. DEVELOPMENT OF LARGE EMPLOYER PUR4 CHASING GROUPS.

5 ‘‘Nothing in this title shall be construed as prohibit6 ing 2 or more experience-rated employers from joining to7 gether to purchase insurance for their employees, except

8 that each such employer shall be responsible for meeting

9 the employer’s requirements under this title with respect

10 to its employees.

11 ‘‘SEC. 21233. REPORT TO EMPLOYEES ON EMPLOYER

12 HEALTH CARE CONTRIBUTIONS.

13 ‘‘Each employer with more than 25 full-time employ14 ees shall report each year to each full-time employee the

15 amount of the employer contributions made on behalf of

16 the employee for health insurance coverage. An employer

17 may use any reasonable means to carry out its responsibil18 ities under this section (including the calculation of the

19 amount of the employer contribution).

20 ‘‘SEC. 21234. EMPLOYER MAY NOT DISCRIMINATE AGAINST

21 SUBSIDY ELIGIBLE INDIVIDUALS.

22 ‘‘(a) GENERAL RULE.—Any employer which elects to

23 make employer contributions on behalf of its employees

24 for health insurance coverage shall not condition, or vary,

25 such contributions with respect to any employee by reason
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1 of such employee’s status as an individual eligible for pre2 mium assistance under subtitle B of title I of the Ameri3 ca’s Health Care Option Act.

4 ‘‘(b) ELIMINATION OF CONTRIBUTIONS.—An em5 ployer shall not be treated as failing to meet the require6 ments of subsection (a) if the employer ceases to make

7 employer contributions for health insurance coverage for

8 all its employees.

9 ‘‘SEC. 21235. ENFORCEMENT.

10 ‘‘A State program shall provide for the monitoring

11 and enforcement of the requirements of this part.’’.

12 Subtitle B—Consolidation of

13 Federal Research

14 SEC. 211. CONSOLIDATION OF FEDERAL RESEARCH.

15 (a) AGENCY FOR QUALITY ASSURANCE AND

16 CONSUMER INFORMATION.—

17 (1) IN GENERAL.—There is established within

18 the Department of Health and Human Services an

19 agency to be known as the Agency for Quality As20 surance and Consumer Information (hereafter re21 ferred to in this section as the ‘‘Agency’’).

22 (2) PURPOSE.—The purpose of the Agency is to

23 act as the center for all Federal research activities

24 relating to quality and consumer information in

25 health care.
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1 (3) ADMINISTRATOR.—There shall be at the

2 head of the Agency an official to be known as the

3 Administrator for Quality Assurance and Consumer

4 Information (hereafter referred to in this section as

5 the ‘‘Administrator’’). The Administrator shall be

6 appointed by the Secretary of Health and Human

7 Services (hereafter referred to in this section as the

8 ‘‘Secretary’’).

9 (b) CONSOLIDATION.—

10 (1) ACTION BY SECRETARY.— The Secretary,

11 acting through the Administrator, shall consolidate

12 Federal research activities relating to quality and

13 consumer information in health care through the

14 Agency to enable States to gain access to the results

15 of such research from a central source.

16 (2) ACTION BY ADMINISTRATOR.—The Admin17 istrator shall assume the following responsibilities:

18 (A) Responsibilities of the Administrator

19 for Health Care Policy and Research under title

20 IX of the Public Health Service Act and under

21 section 1142 of the Social Security Act.

22 (B) Responsibilities of the Director of the

23 National Center for Health Statistics under sec24 tion 306 of the Public Health Service Act.
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1 (C) Responsibilities of the Director of the

2 Office of Medical Applications of Research at

3 the National Institutes of Health.

4 (D) Responsibilities of the Director of the

5 Office of Research and Demonstrations of the

6 Health Care Financing Administration, to the

7 extent such responsibilities relate to clinical

8 evaluations.

9 (c) DUTIES.—

10 (1) IN GENERAL.—In carrying out subsection

11 (b)(1), the Secretary, acting through the Adminis12 trator, shall conduct and support research, dem13 onstration projects, evaluations, training, guideline

14 development, and the dissemination of information,

15 on measures and standards of quality and consumer

16 information relating to health care services and on

17 systems for the delivery of such services. Activities

18 under this section shall include—

19 (A) research with respect to the effective20 ness and appropriateness of health care services

21 and procedures;

22 (B) research with respect to quality man23 agement and improvement efforts of health care

24 systems;
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1 (C) the conduct of consumer information

2 and surveys concerning—

3 (i) access to care;

4 (ii) use of health services;

5 (iii) health outcomes; and

6 (iv) patient satisfaction;

7 (D) the development, dissemination, appli8 cation, and evaluation of practice guidelines;

9 (E) the conduct, in partnership with ex10 perts, of information effectiveness trials in the

11 private sector; and

12 (F) the systematic evaluation of existing

13 and new treatments and diagnostic technologies

14 in an effort to improve the knowledge base to

15 assist in clinical decision-making and policy

16 choices.

17 (2) EXPERTS.—The Secretary, acting through

18 the Administrator, shall carry out the activities de19 scribed in paragraph (1) in consultation with private

20 and public experts in quality and consumer informa21 tion.

22 (3) GUIDELINES.—The Administrator shall de23 velop and recommend to the Secretary minimum

24 guidelines for health care quality measures,

25 consumer information categories, and access to
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1 health services. Such guidelines shall be utilized by

2 the Secretary in establishing guidelines for certifi3 cation under part III of subtitle B of title XXI of

4 the Social Security Act.

5 (4) DATA.—The Administrator shall rec6 ommend to the Secretary standards and procedures

7 for the administration of data and transactions re8 lating to health care quality, consumer information,

9 access, and effectiveness under subtitle B of title XI

10 of the Social Security Act.

11 (5) RESEARCH.—The Agency shall be respon12 sible for oversight with respect to basic and applied

13 research concerning the matters described in para14 graph (1).

15 (d) TRANSFERS.—There are hereby transferred to

16 the Agency the staff, funds, and other assets of the agen17 cies for which the Agency is assuming responsibilities

18 under subsection (b)(2).

19 (e) AUTHORIZATION OF APPROPRIATIONS.—For the

20 purpose of carrying out this section, there are authorized

21 to be appropriated $100,000,000 for fiscal year 1996,

22 $150,000,000 for fiscal year 1997, $200,000,000 for each

23 of the fiscal years 1998 and 1999, and $250,000,000 for

24 fiscal year 2000. Beginning with fiscal year 1997, at least

25 one-third of the funds for each year shall be used for im-
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1 plementing the results of quality and consumer informa2 tion research, such as grants to entities to test the use

3 of practice guidelines in the health care delivery system.

4 Subtitle C—Self-Employed Individ5 ual and Small Employer Partici6 pation in Federal Employees

7 Health Benefits Plans

8 SEC. 221. SELF-EMPLOYED INDIVIDUAL AND SMALL EM9 PLOYER PARTICIPATION IN FEDERAL EM10 PLOYEES HEALTH BENEFITS PLANS.

11 Part III of title 5, United States Code, is amended

12 by inserting after chapter 89 the following new chapter:

13 ‘‘CHAPTER 90—SMALL BUSINESS PARTICI14 PATION IN FEDERAL EMPLOYEE

15 HEALTH BENEFITS PLANS

‘‘Sec.

‘‘9001. Definition.

‘‘9002. Application to small business participants.

‘‘9003. Small business participation.

‘‘9004. Contributions.

‘‘9005. Continued coverage.

‘‘9006. Schedule of small business participation.

‘‘9007. Cost comparison reports and reductions.

16 ‘‘§ 9001. Definition

17 ‘‘(a) For purposes of this chapter, the term ‘small

18 business’ means any business entity which employs 50 or

19 less employees (including businesses with one self-em20 ployed individual).
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1 ‘‘(b) For purposes of subsection (a), the rules under

2 section 52 of the Internal Revenue Code of 1986 shall

3 apply.

4 ‘‘(c) No entity, the sole purpose of which is to provide

5 health care coverage for its members, shall be considered

6 a small business for purposes of this chapter.

7 ‘‘§ 9002. Application to small business participants

8 ‘‘(a) The Office of Personnel Management shall pro9 mulgate regulations to apply the provisions of chapter 89,

10 relating to health benefits plans, to the greatest extent

11 practicable to small businesses and individuals covered

12 under the provisions of this chapter.

13 ‘‘(b) Notwithstanding the provisions of subsection

14 (a), carriers shall offer the same health benefits plans for

15 the same premiums as are offered under chapter 89.

16 ‘‘(c) Notwithstanding the provisions of subsection (a),

17 the provisions of section 8907 shall not apply to individ18 uals covered under this chapter, except the Office of Per19 sonnel Management shall establish a method to dissemi20 nate information relating to health benefits plans (includ21 ing information concerning periods of open enrollment and

22 a summary of the information described in section 8908)

23 to such individuals through small business participants

24 and carriers.
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1 ‘‘(d)(1) A carrier offering a health benefits plan

2 under this chapter may charge a fee to participating small

3 businesses for the administrative expenses related to the

4 enrollment of such businesses in such plan, not to exceed

5 the lesser of—

6 ‘‘(A) 15 percent of the premiums charged each

7 such business, or

8 ‘‘(B) the amount charged each such business of

9 the same size.

10 ‘‘(2) A carrier shall consult with the Office of Person11 nel Management before setting or adjusting any fee under

12 this subsection.

13 ‘‘(e) A carrier offering a health benefits plan under

14 this chapter may impose group participation requirements

15 if such requirements are standard for all groups.

16 ‘‘§ 9003. Small business participation

17 ‘‘Any small business which desires to participate in

18 a health benefits plan under this chapter may enter into

19 a contract with a carrier in accordance with this chapter.

20 Such contract shall provide for—

21 ‘‘(1) a term of no less than 1 year, and

22 ‘‘(2) early termination for nonpayment of pre23 miums.
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1 ‘‘§ 9004. Contributions

2 ‘‘(a) Subject to the provisions of subsection (b), an

3 individual enrolled in a health benefits plan under this

4 chapter shall make contributions equal to the amount of

5 contributions made by—

6 ‘‘(1) a Federal enrollee in such plan under indi7 vidual, or self and family coverage, as the case may

8 be, as determined under section 8906;

9 ‘‘(2) the Federal agency making Government

10 contributions determined under section 8906 for

11 such Federal enrollee; and

12 ‘‘(3) the administrative charge applied by the

13 carrier under section 9002(d).

14 ‘‘(b)(1) A small business may by contract agree to

15 make any amount of the contribution required under sub16 section (a) on behalf of an enrollee under such subsection.

17 ‘‘(2) An agency of a State government may provide

18 any amount of the contribution required under subsection

19 (a) on behalf of an enrollee under such subsection.

20 ‘‘(c) A small business participating under this chap21 ter shall—

22 ‘‘(1) collect contributions from employees by

23 withholdings from pay or by another method or

24 schedule;

25 ‘‘(2) make payments of such contributions to

26 the contracted carrier;
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•S 2374 IS

1 ‘‘(3) maintain and make available such records

2 as the Office, applicable State insurance authority,

3 or carrier may require; and

4 ‘‘(4) provide any other related administrative

5 service in carrying out the provisions of this chapter.

6 ‘‘§ 9005. Continued coverage

7 ‘‘(a) Subject to subsection (b), the provisions of sec8 tion 8905a shall be made applicable to enrollees and indi9 viduals covered by such enrollments under this chapter

10 through section 9002 and the carrier contract entered into

11 under section 9003, except the enrollee shall pay all con12 tributions for continued coverage and the applicable

13 amount for administrative expenses unless the applicable

14 small business by contract agrees to pay any part of such

15 contributions or expenses.

16 ‘‘(b) An individual may be covered under continued

17 coverage as provided under subsection (a), only if such in18 dividual—

19 ‘‘(1) was covered by a health benefits plan

20 under this chapter for the 2-year period immediately

21 preceding the date on which continued coverage

22 under this section begins; and

23 ‘‘(2) remains in the same plan during the pe24 riod of continued coverage as such individual was
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1 enrolled in immediately before such period of contin2 ued coverage.’’.

3 ‘‘§ 9006. Schedule of small business participation

4 ‘‘(a) Subject to the succeeding subsections of this sec5 tion, each carrier enrolling individuals of small business

6 participants under this chapter shall ensure that—

7 ‘‘(1) in the first contract year in which such

8 carrier covers individuals of small business partici9 pants, the number of enrollees from small businesses

10 as provided under this chapter shall be no less than

11 5 percent of the number of Federal enrollees en12 rolled by such carrier under chapter 89; and

13 ‘‘(2) in the second such year, the number of

14 small business enrollees shall be no less than 10 per15 cent of the number of such Federal enrollees;

16 ‘‘(3) in the third such year, the number of

17 small business enrollees shall be no less than 10 per18 cent of the number of such Federal enrollees; and

19 ‘‘(4) in the fourth such year, the number of

20 small business enrollees shall be no less than 10 per21 cent of the number of such Federal enrollees.

22 ‘‘(b)(1) In the contract year described under sub23 section (a)(1), a small business may participate if such

24 business has between 5 and 50 employees.
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1 ‘‘(2) In the contract year described under subsection

2 (a)(2) small businesses with between 2 and 50 employees

3 may additionally participate.

4 ‘‘(3) In the contract year described under subsection

5 (a)(3) and each year thereafter, all small businesses may

6 participate.

7 ‘‘(c) If during any contract year described under sub8 section (a) (1) through (4), more small businesses apply

9 for participation than are required to participate under

10 such subsection, the carrier shall ensure that a small busi11 ness shall have a priority for selection for participation

12 if such business is not offering any type of health insur13 ance benefits to its employees.

14 ‘‘(d)(1) If a carrier that enrolls individuals of small

15 business participants under this chapter, ceases to offer

16 enrollment to individuals under this chapter in any con17 tract year, such carrier may not offer enrollment under

18 this chapter for the following 2 contract years.

19 ‘‘(2) The provisions of paragraph (1) shall not be con20 strued to require any carrier to terminate health coverage

21 of any individual who is enrolled under this chapter at the

22 time such carrier ceases to offer new enrollments under

23 this chapter.

24 ‘‘(e) A small business may participate in a health ben25 efits plan as provided under this section if such business
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1 meets all such requirements otherwise provided under this

2 chapter.

3 ‘‘(f) The Office may waive the requirements under

4 subsection (a), in whole or in part, after making a deter5 mination that—

6 ‘‘(1) there is insufficient interest in small busi7 nesses within the region in participating under this

8 chapter; or

9 ‘‘(2) a requirement is beyond the capacity of a

10 carrier to enroll individuals under this chapter.

11 ‘‘§ 9007. Cost comparison reports and reductions

12 ‘‘(a) No later than July 1 of the first contract year

13 implementing health care coverage under this chapter, and

14 on July 1 of each year thereafter, each carrier contracting

15 under chapter 89 or this chapter shall submit a report

16 to the Office of Personnel Management that compares the

17 aggregate cost experiences with respect to coverage be18 tween—

19 ‘‘(1) Federal employees and other individuals

20 covered under chapter 89; and

21 ‘‘(2) individuals covered under this chapter.

22 ‘‘(b) Based on the reports submitted under subsection

23 (a), the Office may reduce the percentage requirements

24 under section 9006(a) for any contract year (but not below

25 the percentage of the preceding contract year).’’.
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1 SEC. 222. PROHIBITION OF HEALTH BENEFITS PLANS EX2 CLUSIVELY FOR MEMBERS AND EMPLOYEES

3 OF CONGRESS.

4 No health benefits plan under chapter 89 or 90 of

5 title 5, United States Code, may be offered exclusively

6 to—

7 (1) Members of Congress (including members of

8 family);

9 (2) congressional employees as defined under

10 section 2107 of such title (including members of

11 family); or

12 (3) individuals described under paragraphs (1)

13 and (2).

14 SEC. 223. STUDY REGARDING NONWORKER AND

15 NONCOVERED EMPLOYEE BUY-INS.

16 The Secretary of Health and Human Services shall

17 study by what method nonworkers and employees of em18 ployers not covered under chapter 90 of title 5, United

19 States Code (as added by section 221 of this Act), may

20 be incorporated into the buy-in for coverage under the

21 Federal Employees Health Benefits Plan. The Secretary

22 shall report the results of such study and any appropriate

23 legislative recommendations to the Congress not later than

24 2 years after the date of the enactment of this Act.
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1 SEC. 224. EFFECTIVE DATE.

2 (a) IN GENERAL.—Except as provided under sub3 section (b), the provisions of this subtitle and the amend4 ments made by this subtitle shall be effective on and after

5 the first January 1 occurring after the date of the enact6 ment of this Act.

7 (b) EXCEPTION.—The provisions of chapters 89 and

8 90 of title 5, United States Code, as amended and effected

9 by this subtitle, relating to the establishment of or exercise

10 of authority (including the promulgation of regulations)

11 by the Office of Personnel Management, the Secretary of

12 Health and Human Services, the President, or any other

13 applicable Federal officer shall take effect on the date of

14 the enactment of this Act in order to establish health bene15 fits plans and fully implement the provisions and amend16 ments made by this Act no later than the first January

17 1 occurring after the date of the enactment of this Act.

18 Subtitle D—Report on Health Care

19 System

20 SEC. 231. REPORT ON HEALTH CARE SYSTEM.

21 (a) REPORT.—Not later than July 1, 1998, the Presi22 dent shall submit to the Congress findings and rec23 ommendations (if any) on each of the items described in

24 subsection (b).

25 (b) ITEMS TO BE STUDIED.—The items referred to

26 in subsection (a) are as follows:
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1 (1) The characteristics of the insured and unin2 sured, including demographic characteristics, work3 ing status, health status, and geographic distribu4 tion.

5 (2) Methods to improve access to health care

6 and to increase health insurance coverage of the

7 chronically uninsured.

8 (3) The effectiveness of the insurance reforms

9 under subtitle A on access to health care and the

10 costs of health care.

11 (4) The effectiveness of Federal efforts to as12 sess the impact of new technology on the cost and

13 availability of new products.

14 (5) The effectiveness of Federal, State, and pri15 vate cost containment strategies.

16 (6) The effectiveness of Federal, State, and pri17 vate efforts to measure and improve health care out18 comes.

19 (7) The effectiveness of the new Federal sub20 sidy programs, including recommendations to re21 strain future growth.

22 (8) The effectiveness of initiatives targeted to

23 underserved urban and rural populations.
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1 TITLE III—SPECIAL ASSISTANCE

2 FOR RURAL, FRONTIER AND

3 UNDERSERVED URBAN AREAS

4 SEC. 301. PURPOSE.

5 It is the purpose of this title to—

6 (1) establish safeguards to assist vulnerable

7 populations in accessing local health services and

8 practitioners;

9 (2) provide funding to certain areas to assist

10 health care providers and health plans in such areas

11 in reconfiguring services and establishing networks

12 and health plans to effectively compete in the chang13 ing market;

14 (3) provide funding to increase primary care ca15 pacity in underserved areas; and

16 (4) provide more flexibility in Medicare rules

17 for health care providers in underserved areas.

18 SEC. 302. DESIGNATED UNDERSERVED AREAS.

19 (a) STATE DESIGNATION.—A State may designate

20 certain rural, frontier or urban areas within the State as

21 underserved areas based on—

22 (1) the lack of access to health plans in such

23 areas; and

24 (2) the lack of access to quality health care pro25 viders and health care facilities in such areas.
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1 (b) ESTABLISHMENT OF PROCEDURE.—

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

3 a procedure under which the Secretary, upon the re4 quest of a State, may certify areas designated by the

5 State under subsection (a) as underserved areas.

6 (2) NONAPPLICABILITY OF OTHER REQUIRE7 MENTS.—The Secretary may certify a designated

8 area under paragraph (1) whether or not such area

9 meets the requirements for being considered a medi10 cally underserved area or a health professional

11 shortage area.

12 (c) EFFECT OF CERTIFICATION.—Except with re13 spect to provisions in this title that explicitly direct assist14 ance to those areas currently designated as underserved,

15 in awarding grants, contracts, loans, waivers, or any other

16 assistance under this title (or an amendment made by this

17 title) the Secretary shall give priority to applicants that

18 serve areas certified as underserved areas under sub19 section (b).

20 (d) LIMITATION AND REVOCATION.—A certification

21 provided under subsection (b) shall be valid for not more

22 than 3 years. Such a certification may be revoked by the

23 Secretary if the Secretary determines that the criteria de24 scribed in paragraphs (1) and (2) of subsection (a) no

25 longer support a certification under this section.
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1 Subtitle A—Planning,

2 Demonstrations, and Grants

3 SEC. 311. DEMONSTRATION WAIVERS FOR THE DEVELOP4 MENT OF HEALTH NETWORKS.

5 (a) WAIVERS.—

6 (1) ESTABLISHMENT.—

7 (A) IN GENERAL.—The Secretary may

8 conduct a demonstration project under which

9 public or private entities may apply for waivers

10 of any of the provisions of title XVIII and XIX

11 of the Social Security Act in order to operate

12 health networks (as defined in subsection

13 (c)(1)) which—

14 (i) improve the access of medicare

15 beneficiaries (as defined in subsection

16 (c)(2)) and medicaid beneficiaries (as de17 fined in subsection (c)(3)) to health care

18 services;

19 (ii) improve the quality of health care

20 services furnished to such beneficiaries;

21 (iii) improve the outcomes of health

22 care services furnished to such bene23 ficiaries; and

24 (iv) provide an incentive to private en25 tities to establish networks in areas cer-
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1 tified as underserved areas under section

2 302.

3 (B) NUMBER OF WAIVERS.—The Secretary

4 may grant waivers to operate health networks

5 under the demonstration project conducted

6 under this section to a number of public or pri7 vate entities determined appropriate by the Sec8 retary.

9 (2) APPLICATIONS.—

10 (A) IN GENERAL.—In order to participate

11 in the demonstration project conducted under

12 this subsection, a public or private entity desir13 ing to operate a health network shall submit an

14 application to the Secretary which meets the re15 quirements of subparagraph (B). Such applica16 tion shall be submitted in such manner and at

17 such time as the Secretary shall require.

18 (B) REQUIREMENTS.—An application sub19 mitted by a public or private entity under this

20 subsection must provide—

21 (i) a description of the health care

22 providers participating in the health net23 work;

24 (ii) a description of the geographic

25 area served by the health networks;
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1 (iii) information demonstrating that

2 the private entity has consulted with inter3 ested parties with respect to the operation

4 of the health network, including local gov5 ernment entities and community groups;

6 (iv) a description of the operational

7 structure of the health network, including

8 whether the network is a managed care en9 tity or a fee-for-service provider;

10 (v) a proposal for how payments

11 should be made to the health network

12 under titles XVIII and XIX of the Social

13 Security Act, including a statement as to

14 whether such payments should be made

15 pursuant to the provisions of such titles or

16 pursuant to an alternative payment meth17 odology described in the application;

18 (vi) assurances that medicare bene19 ficiaries served by the health network will

20 receive care and services of the same qual21 ity as the care and services received by

22 other beneficiaries under title XVIII of the

23 Social Security Act;

24 (vii) assurances that medicaid bene25 ficiaries served by the health network will
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1 receive care and services of the same qual2 ity as the care and services received by

3 other beneficiaries under title XIX of the

4 Social Security Act;

5 (viii) a description of how the health

6 network plans to handle any situation in

7 which a medicare beneficiary or medicaid

8 beneficiary served by the network receives

9 health care services from providers outside

10 the network;

11 (ix) assurances that the health net12 work is furnishing health care services to a

13 significant number of individuals who are

14 not receiving benefits under titles XVIII

15 and XIX of the Social Security Act;

16 (x) assurances that through sharing

17 of facilities, land, and equipment, the

18 health network will result in a reduction of

19 total capital costs for the area served by

20 the network;

21 (xi) a plan for cooperation in service

22 delivery by health care providers partici23 pating in the health network that dem24 onstrates the elimination of unnecessary

25 duplication and, when appropriate, the
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1 consolidation of specialized services within

2 the area served by the network;

3 (xii) evidence that the health network

4 furnishes services which address the special

5 access needs of the medicare beneficiaries

6 and medicaid beneficiaries served by the

7 network;

8 (xiii) evidence of capability and exper9 tise in network planning and management;

10 and

11 (xiv) such additional information as

12 the Secretary determines appropriate.

13 (C) APPROVAL OF APPLICATION.—

14 (i) INITIAL REVIEW.—Within 60 days

15 after an application is submitted by an en16 tity under this subsection, the Secretary

17 shall review and approve such application

18 or provide the entity with a list of the

19 modifications that are necessary for such

20 application to be approved.

21 (ii) ADDITIONAL REVIEW.—Within 60

22 days after an entity resubmits any applica23 tion under this subsection, the Secretary

24 shall review and approve such application

25 or provide the entity with a summary of
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1 which items included on the list provided

2 to the State under clause (i) remain

3 unsatisfied. An entity may resubmit an ap4 plication under this subparagraph as many

5 times as necessary to gain approval.

6 (3) COORDINATION WITH OTHER PROGRAMS.—

7 The Secretary shall coordinate the demonstration

8 project conducted under this subsection with any

9 other relevant Federal or State programs in order to

10 prevent duplication and improve the quality and de11 livery of health care services to medicare bene12 ficiaries and medicaid beneficiaries.

13 (4) PAYMENTS TO NETWORKS.—

14 (A) IN GENERAL.—The Secretary shall de15 termine the amount of payments to be made

16 under titles XVIII and XIX to a health network

17 participating in a demonstration project under

18 this subsection based on historic costs adjusted

19 based on population and geographic area as the

20 Secretary determines appropriate to take into

21 account the costs of furnishing health care serv22 ices in the area served by the network.

23 (B) BUDGET NEUTRALITY.—The Secretary

24 shall provide that in carrying out the dem25 onstration project under this section, the aggre-
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1 gate payments under titles XVIII and XIX of

2 the Social Security Act to providers participat3 ing in a health network shall be no greater or

4 lesser than what such payments would have

5 been if such providers were not participating in

6 such network.

7 (5) DURATION OF WAIVERS.—Any waiver

8 granted under the demonstration project conducted

9 under this subsection shall be granted for a period

10 determined appropriate by the Secretary. The Sec11 retary may terminate such a waiver at any time if

12 the Secretary determines that the health network

13 has failed to furnish health care services in accord14 ance with the terms of the waiver.

15 (6) REPORTS.—

16 (A) IN GENERAL.—Each entity receiving a

17 wavier to operate a health network under the

18 demonstration project conducted under this

19 subsection shall, through an independent entity,

20 evaluate the network and submit interim and

21 final reports to the Secretary at such times and

22 containing such information as the Secretary

23 shall require.

24 (B) REPORT TO CONGRESS.—Not later

25 than 60 days after the receipt of a final report
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1 by a health network under subparagraph (A)

2 the Secretary shall submit a report to Congress.

3 (b) DEVELOPMENTAL GRANTS.—

4 (1) IN GENERAL.—The Secretary shall award

5 grants to entities which have received a wavier under

6 the demonstration project conducted under sub7 section (a) for the purpose of planning and develop8 ing health networks.

9 (2) APPLICATION PROCESS.—

10 (A) SUBMISSION OF APPLICATION.—Each

11 entity desiring to receive a grant under this

12 subsection shall submit an application to the

13 Secretary at such time and containing such in14 formation as the Secretary determines appro15 priate.

16 (B) CONSIDERATION OF APPLICATIONS.—

17 The Secretary shall develop a system for deter18 mining the priority for distributing grants

19 under this subsection and such grants shall be

20 distributed in accordance with such system.

21 (3) AUTHORIZATION OF APPROPRIATIONS.—

22 There are authorized to be appropriated such sums

23 as may be necessary for the purposes of awarding

24 grants under this subsection.

25 (c) DEFINITIONS.—For purposes of this section:
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1 (1) FRONTIER AREA.—The term ‘‘frontier

2 area’’ means an area in which 6 or fewer individuals

3 reside per square mile.

4 (2) HEALTH NETWORK.—The term ‘‘health net5 work’’ means a formal cooperative arrangement be6 tween participating hospitals, physicians, and other

7 health care providers which—

8 (A) furnishes health care services to mem9 bers of the community, including medicare

10 beneficiaries and medicaid beneficiaries;

11 (B) is located in a rural, frontier or under12 served urban area; and

13 (C) is governed by a board of directors se14 lected by participating health care providers.

15 (3) MEDICAID BENEFICIARY.—The term ‘‘med16 icaid beneficiary’’ means an individual receiving ben17 efits under this XIX of the Social Security Act who

18 resides in a rural, frontier or underserved urban

19 area or who receives health care services from a

20 health care provider located in a rural, frontier or

21 underserved urban area.

22 (4) MEDICARE BENEFICIARY.—The term ‘‘med23 icare beneficiary’’ means an individual receiving ben24 efits under title XVIII of the Social Security Act

25 who resides in a rural, frontier or underserved urban
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1 area or who receives health care services from a

2 health care provider located in a rural, frontier or

3 underserved urban area.

4 (5) RURAL AREA.—The term ‘‘rural area’’

5 means a rural area as described in section

6 1886(d)(2)(D) of the Social Security Act.

7 (6) UNDERSERVED URBAN AREA.—The term

8 ‘‘underserved urban area’’ means an area (other

9 than a rural area) determined to be underserved by

10 the Secretary.

11 SEC. 312. GRANTS FOR THE PLANNING OF HEALTH NET12 WORKS OR HEALTH PLANS.

13 Title XX of the Social Security Act (42 U.S.C. 1397

14 et seq.) is amended—

15 (1) in the title heading, by adding at the end

16 thereof the following: ‘‘AND MISCELLANEOUS

17 PROVISIONS’’;

18 (2) by inserting after the title heading the fol19 lowing:

20 ‘‘Subtitle A—Block Grants’’; and

21 (3) by adding at the end thereof the following:
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1 ‘‘Subtitle B—Health Plans and Net2 works Initiated by Private Enti3 ties

4 ‘‘GRANTS FOR THE PLANNING OF HEALTH NETWORKS

5 AND HEALTH PLANS

6 ‘‘SEC. 2011. (a) IN GENERAL.—The Secretary shall

7 award grants to private entities submitting applications

8 that are approved under subsection (b) for the purpose

9 of planning and developing health networks or health

10 plans to serve underserved areas certified under section

11 302 of the America’s Health Care Option Act.

12 ‘‘(b) APPLICATION PROCESS.—

13 ‘‘(1) SUBMISSION OF APPLICATION.—Each pri14 vate entity desiring to receive a grant under this sec15 tion shall submit an application to the Secretary at

16 such time and containing such information as the

17 Secretary determines appropriate, including—

18 ‘‘(A) a description of the health care pro19 viders that will participate in the health net20 work or serve through the health plan;

21 ‘‘(B) a description of the geographic area

22 to be served by the health network or plan;

23 ‘‘(C) information demonstrating that the

24 private entity has consulted with interested par25 ties with respect to the operation of the health
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•S 2374 IS

1 network or plan, including local government en2 tities and community groups;

3 ‘‘(D) a description of the operational struc4 ture of the health network or plan, including

5 whether the network is a managed care entity

6 or a fee-for-service provider;

7 ‘‘(E) assurances that through sharing of

8 facilities, land, and equipment, the health net9 work will result in a reduction of total capital

10 costs for the area served by the network;

11 ‘‘(F) a plan for cooperation in service de12 livery by health care providers participating in

13 the health network or plan that demonstrates

14 the elimination of unnecessary duplication and,

15 when appropriate, the consolidation of special16 ized services within the area served by the net17 work or plan;

18 ‘‘(G) evidence that the health network will

19 furnish services which address the special ac20 cess needs of the individuals served by the net21 work;

22 ‘‘(H) a demonstration that the health plan

23 developed will improve access to services for the

24 community served; and
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•S 2374 IS

1 ‘‘(I) evidence of capability and expertise in

2 network planning, health plans and manage3 ment.

4 ‘‘(2) CONSIDERATION OF APPLICATIONS.—The

5 Secretary shall develop a system for determining the

6 priority for distributing grants under this section

7 and such grants shall be distributed in accordance

8 with such system.

9 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There

10 are authorized to be appropriated such sums as may be

11 necessary for the purposes of awarding grants under this

12 section.

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

14 term ‘‘health network’’ has the same meaning given such

15 term in section 311(c)(1) of the America’s Health Care

16 Option Act.’’.

17 SEC. 313. COMMUNITY-BASED PRIMARY HEALTH CARE

18 GRANT PROGRAM.

19 Subpart I of part D of title III of the Public Health

20 Service Act (42 U.S.C. 254b et seq.) is amended by adding

21 at the end the following new section:

22 ‘‘SEC. 330A. COMMUNITY-BASED PRIMARY HEALTH CARE

23 GRANT PROGRAM.

24 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab25 lish and administer a program to provide allotments to
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1 States to enable such States to provide grants for the cre2 ation or enhancement of community-based primary health

3 care entities that provide services to low-income or medi4 cally underserved populations.

5 ‘‘(b) ALLOTMENTS TO STATES.—

6 ‘‘(1) IN GENERAL.—From the amount available

7 for allotment under subsection (h) for a fiscal year,

8 the Secretary shall allot to each State an amount

9 equal to the product of the grant share of the State

10 (as determined under paragraph (2)) multiplied by

11 such amount available.

12 ‘‘(2) GRANT SHARE.—

13 ‘‘(A) IN GENERAL.—For purposes of para14 graph (1), the grant share of a State shall be

15 the product of the need-adjusted population of

16 the State (as determined under subparagraph

17 (B)) multiplied by the Federal matching per18 centage of the State (as determined under sub19 paragraph (C)), expressed as a percentage of

20 the sum of the products of such factors for all

21 States.

22 ‘‘(B) NEED-ADJUSTED POPULATION.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 subparagraph (A), the need-adjusted popu25 lation of a State shall be the product of
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1 the total population of the State (as esti2 mated by the Secretary of Commerce) mul3 tiplied by the need index of the State (as

4 determined under clause (ii)).

5 ‘‘(ii) NEED INDEX.—For purposes of

6 clause (i), the need index of a State shall

7 be the ratio of—

8 ‘‘(I) the weighted sum of the geo9 graphic percentage of the State (as

10 determined under clause (iii)), the

11 poverty percentage of the State (as

12 determined under clause (iv)), and the

13 multiple grant percentage of the State

14 (as determined under clause (v)); to

15 ‘‘(II) the general population per16 centage of the State (as determined

17 under clause (vi)).

18 ‘‘(iii) GEOGRAPHIC PERCENTAGE.—

19 ‘‘(I) IN GENERAL.—For purposes

20 of clause (ii)(I), the geographic per21 centage of the State shall be the esti22 mated population of the State that is

23 residing in nonurbanized areas (as de24 termined under subclause (II)) ex-
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1 pressed as a percentage of the total

2 nonurbanized population of all States.

3 ‘‘(II) NONURBANIZED POPU4 LATION.—For purposes of subclause

5 (I), the estimated population of the

6 State that is residing in nonurbanized

7 areas shall be one minus the urban8 ized population of the State (as deter9 mined using the most recent decennial

10 census), expressed as a percentage of

11 the total population of the State (as

12 determined using the most recent de13 cennial census), multiplied by the cur14 rent estimated population of the

15 State.

16 ‘‘(III) STATE OF ALASKA.—Not17 withstanding subclause (I), the geo18 graphic percentage for the State of

19 Alaska shall be the relative population

20 density of the State expressed as the

21 ratio of—

22 ‘‘(aa) the average number of

23 individuals residing in Alaska per

24 square mile; to
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1 ‘‘(bb) the average number of

2 individuals residing in the United

3 States per square mile.

4 ‘‘(iv) POVERTY PERCENTAGE.—For

5 purposes of clause (ii)(I), the poverty per6 centage of the State shall be the estimated

7 number of people residing in the State

8 with incomes below 200 percent of the in9 come official poverty line (as adjusted for

10 actual costs and incomes in each State and

11 as determined by the Office of Manage12 ment and Budget) expressed as a percent13 age of the total number of such people re14 siding in all States.

15 ‘‘(v) MULTIPLE GRANT PERCENT16 AGE.—For purposes of clause (ii)(I), the

17 multiple grant percentage of the State

18 shall be the amount of Federal funding re19 ceived by the State under grants awarded

20 under sections 329, 330, and 340, ex21 pressed as a percentage of the total

22 amounts received under such grants by all

23 States. With respect to a State, such per24 centage shall not exceed twice the general

25 population percentage of the State under
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1 clause (vi) or be less than one-half of the

2 States general population percentage.

3 ‘‘(vi) GENERAL POPULATION PER4 CENTAGE.—For purposes of clause (ii)(II),

5 the general population percentage of the

6 State shall be the total population of the

7 State (as determined by the Secretary of

8 Commerce) expressed as a percentage of

9 the total population of all States.

10 ‘‘(C) FEDERAL MATCHING PERCENTAGE.—

11 ‘‘(i) IN GENERAL.—For purposes of

12 subparagraph (A), the Federal matching

13 percentage of the State shall be equal to

14 one, less the State matching percentage (as

15 determined under clause (ii)).

16 ‘‘(ii) STATE MATCHING PERCENT17 AGE.—For purposes of clause (i), the State

18 matching percentage of the State shall be

19 0.25 multiplied by the ratio of the total

20 taxable resource percentage (as determined

21 under clause (iii)) to the need-adjusted

22 population of the State (as determined

23 under subparagraph (B)).

24 ‘‘(iii) TOTAL TAXABLE RESOURCE

25 PERCENTAGE.—For purposes of clause (ii),
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1 the total taxable resources percentage of

2 the State shall be the total taxable re3 sources of a State (as determined by the

4 Secretary of the Treasury) expressed as a

5 percentage of the sum of the total taxable

6 resources of all States.

7 ‘‘(3) ANNUAL ESTIMATES.—

8 ‘‘(A) IN GENERAL.—If the Secretary of

9 Commerce does not produce the annual esti10 mates required under paragraph (2)(B)(iv),

11 such estimates shall be determined by multiply12 ing the percentage of the population of the

13 State that is below 200 percent of the income

14 official poverty line as determined using the

15 most recent decennial census by the most recent

16 estimate of the total population of the State.

17 Except as provided in subparagraph (B), the

18 calculations required under this subparagraph

19 shall be made based on the most recent 3-year

20 average of the total taxable resources of individ21 uals within the State.

22 ‘‘(B) DISTRICT OF COLUMBIA.—Notwith23 standing subparagraph (A), the calculations re24 quired under such subparagraph with respect to

25 the District of Columbia shall be based on the
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•S 2374 IS

1 most recent 3-year average of the personal in2 come of individuals residing within the District

3 as a percentage of the personal income for all

4 individuals residing within the District, as de5 termined by the Secretary of Commerce.

6 ‘‘(C) STATE OF ALASKA.—Notwithstanding

7 subparagraph (A), the calculations required

8 under such subparagraph with respect to the

9 State of Alaska shall be based on the quotient

10 of—

11 ‘‘(i) the most recent 3-year average of

12 the per capita income of individuals resid13 ing in the State; divided by

14 ‘‘(ii) 1.25.

15 ‘‘(4) MATCHING REQUIREMENT.—A State that

16 receives an allotment under this section shall make

17 available State resources (either directly or indi18 rectly) to carry out this section in an amount that

19 shall equal the State matching percentage for the

20 State (as determined under paragraph (2)(C)(ii)) di21 vided by the Federal matching percentage (as deter22 mined under paragraph (2)(C)).

23 ‘‘(c) APPLICATION.—

24 ‘‘(1) IN GENERAL.—To be eligible to receive an

25 allotment under this section, a State shall prepare
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1 and submit an application to the Secretary at such

2 time, in such manner, and containing such informa3 tion as the Secretary may by regulation require.

4 ‘‘(2) ASSURANCES.—A State application sub5 mitted under paragraph (1) shall contain an assur6 ance that—

7 ‘‘(A) the State will use amounts received

8 under its allotment consistent with the require9 ments of this section; and

10 ‘‘(B) the State will provide, from non-Fed11 eral sources, the amounts required under sub12 section (b)(4).

13 ‘‘(d) USE OF FUNDS.—

14 ‘‘(1) IN GENERAL.—The State shall use

15 amounts received under this section to award grants

16 to eligible public and nonprofit private entities, or

17 consortia of such entities, within the State to enable

18 such entities or consortia to provide services of the

19 type described in paragraph (2) of section 329(h) to

20 low-income or medically underserved populations.

21 ‘‘(2) ELIGIBILITY.—To be eligible to receive a

22 grant under paragraph (1), an entity or consortium

23 shall—

24 ‘‘(A) prepare and submit to the admin25 istering entity of the State, an application at
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1 such time, in such manner, and containing such

2 information as such administering entity may

3 require, including a plan for the provision of

4 services of the type described in paragraph (3);

5 ‘‘(B) provide assurances that services will

6 be provided under the grant at fee rates estab7 lished or determined in accordance with section

8 330(e)(3)(F); and

9 ‘‘(C) provide assurances that in the case of

10 services provided to individuals with health in11 surance, such insurance shall be used as the

12 primary source of payment for such services.

13 ‘‘(3) SERVICES.—The services to be provided

14 under a grant awarded under paragraph (1) shall in15 clude—

16 ‘‘(A) one or more of the types of primary

17 health services described in section 330(b)(1);

18 ‘‘(B) one or more of the types of supple19 mental health services described in section

20 330(b)(2); and

21 ‘‘(C) any other services determined appro22 priate by the administering entity of the State.

23 ‘‘(4) TARGET POPULATIONS.—Entities or con24 sortia receiving grants under paragraph (1) shall, in

25 providing the services described in paragraph (3),
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1 substantially target populations of low-income or

2 medically underserved populations within the State

3 who reside in medically underserved or health pro4 fessional shortage areas, areas certified as under5 served under the rural health clinic program, or

6 other areas determined appropriate by the admin7 istering entity of the State, within the State.

8 ‘‘(5) PRIORITY.—In awarding grants under

9 paragraph (1), the State shall—

10 ‘‘(A) give priority to entities or consortia

11 that can demonstrate through the plan submit12 ted under paragraph (2) that—

13 ‘‘(i) the services provided under the

14 grant will expand the availability of pri15 mary care services to the maximum num16 ber of low-income or medically underserved

17 populations who have no access to such

18 care on the date of the grant award; and

19 ‘‘(ii) the delivery of services under the

20 grant will be cost-effective; and

21 ‘‘(B) ensure that an equitable distribution

22 of funds is achieved among urban and rural en23 tities or consortia.

24 ‘‘(e) REPORTS AND AUDITS.—Each State shall pre25 pare and submit to the Secretary annual reports concern-
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1 ing the State’s activities under this section which shall be

2 in such form and contain such information as the Sec3 retary determines appropriate. Each such State shall es4 tablish fiscal control and fund accounting procedures as

5 may be necessary to assure that amounts received under

6 this section are being disbursed properly and are ac7 counted for, and include the results of audits conducted

8 under such procedures in the reports submitted under this

9 subsection.

10 ‘‘(f) PAYMENTS.—

11 ‘‘(1) ENTITLEMENT.—Each State for which an

12 application has been approved by the Secretary

13 under this section shall be entitled to payments

14 under this section for each fiscal year in an amount

15 not to exceed the State’s allotment under subsection

16 (b) to be expended by the State in accordance with

17 the terms of the application for the fiscal year for

18 which the allotment is to be made.

19 ‘‘(2) METHOD OF PAYMENTS.—The Secretary

20 may make payments to a State in installments, and

21 in advance or by way of reimbursement, with nec22 essary adjustments on account of overpayments or

23 underpayments, as the Secretary may determine.

24 ‘‘(3) STATE SPENDING OF PAYMENTS.—Pay25 ments to a State from the allotment under sub-
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1 section (b) for any fiscal year must be expended by

2 the State in that fiscal year or in the succeeding fis3 cal year.

4 ‘‘(g) DEFINITION.—As used in this section, the term

5 ‘administering entity of the State’ means the agency or

6 official designated by the chief executive officer of the

7 State to administer the amounts provided to the State

8 under this section.

9 ‘‘(h) FUNDING.—Notwithstanding any other provi10 sion of law, the Secretary shall use 50 percent of the

11 amounts that the Secretary is required to utilize under

12 section 330B(h) in each fiscal year to carry out this sec13 tion.’’.

14 Subtitle B—Technical Assistance

15 Grants

16 SEC. 321. TECHNICAL ASSISTANCE GRANTS.

17 (a) IN GENERAL.—The Secretary shall award grants

18 to public and private entities submitting applications that

19 are approved under subsection (b) for the purpose of pro20 viding technical assistance in the establishment of the in21 frastructure for health networks and plans in underserved

22 areas certified under section 302.

23 (b) APPLICATION PROCESS.—

24 (1) SUBMISSION OF APPLICATION.—Each entity

25 desiring to receive a grant under this section shall
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1 submit an application to the Secretary at such time

2 and containing such information as the Secretary

3 determines appropriate, including—

4 (A) a description of the infrastructure uses

5 to which amounts awarded under a grant will

6 be allocated;

7 (B) a description of the area to be served

8 by the entity; and

9 (C) information demonstrating that the en10 tity has consulted with interested parties with

11 respect to the activities that the entity intends

12 to carry out with amounts received under the

13 grant, including local government entities and

14 community groups.

15 (2) CONSIDERATION OF APPLICATIONS.—The

16 Secretary shall develop a system for determining the

17 priority for distributing grants under this section

18 and such grants shall be distributed in accordance

19 with such system. The Secretary shall give priority

20 to applications that demonstrate partnerships among

21 health care providers and services (both public and

22 private) and effective coordination of all sources of

23 grants and other funding sources under this Act.

24 (c) AUTHORIZED USES.—Amounts received under a

25 grant awarded under this section may be used—
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1 (1) for the design and establishment of the in2 frastructure necessary for the operation of a health

3 network or health plan in a rural, frontier or urban

4 underserved area;

5 (2) to assist health plans operating in rural,

6 frontier or urban underserved areas in meeting the

7 requirements of any subsidy program;

8 (3) to carry out activities to assist health care

9 providers in forming partnerships or health plans to

10 serve rural, frontier or urban underserved areas, in11 cluding assistance with the establishment of finan12 cial systems, computer systems, and telecommuni13 cations systems; and

14 (4) to carry out any other activity determined

15 appropriate by the Secretary.

16 (d) AUTHORIZATION OF APPROPRIATIONS.—There

17 are authorized to be appropriated such sums as may be

18 necessary for the purposes of awarding grants under this

19 section.

20 (e) DEFINITIONS.—For purposes of this section, the

21 terms ‘‘health network’’, ‘‘rural area’’, ‘‘frontier area’’,

22 and ‘‘urban underserved area’’ have the same meanings

23 given such terms in section 311(c).
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1 Subtitle C—Capital Assistance

2 Loans and Loan Guarantees

3 SEC. 331. RURAL, FRONTIER AND URBAN UNDERSERVED

4 AREA HEALTH LOAN PROGRAM.

5 (a) IN GENERAL.—The Secretary shall make loans

6 to—

7 (1) health networks (as defined in section

8 311(c));

9 (2) health plans (as defined in section 21003(a)

10 of the Social Security Act) that cover individuals re11 siding in rural, frontier or urban underserved areas;

12 or

13 (3) health care providers that serve rural, fron14 tier or underserved urban areas;

15 for the capital costs of developing health delivery systems

16 and expanding existing health delivery sites to make

17 health care services available to individuals residing in un18 derserved areas certified under section 302.

19 (b) USE OF ASSISTANCE.—

20 (1) IN GENERAL.—The capital costs for which

21 loans made pursuant to subsection (a) may be ex22 pended are, subject to paragraphs (2) and (3), the

23 following:

24 (A) The modernization or expansion of fa25 cilities to reduce the inpatient characteristics of
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1 such facilities while expanding the ambulatory

2 capabilities of such facilities, to enhance the

3 provision and accessibility of health care serv4 ices and practitioners to underserved popu5 lations.

6 (B) The conversion of unneeded facilities

7 to facilities that will assure or enhance the pro8 vision and accessibility of health care services

9 and practitioners to underserved populations, or

10 the closure of such facilities in an effort to con11 solidate clinical and administrative activities for

12 network purposes.

13 (C) The acquisition or modernization of fa14 cilities or purchase of land to facilitate the serv15 ice of rural, frontier and urban underserved

16 populations through health care networks or

17 health plans.

18 (D) The purchase of major equipment, in19 cluding equipment necessary for the support of

20 information systems, for the operation of a

21 health care network or a health care plan serv22 ing residents of rural, frontier and urban un23 derserved areas.

24 (E) The development and implementation

25 of systems (financial, quality assurance and
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•S 2374 IS

1 other systems) necessary to establish health

2 care networks.

3 (F) The development of appropriate pri4 mary care services and practitioners.

5 (G) The implementation of measures nec6 essary to enable a health care network, health

7 plan, or health care provider that serves rural,

8 frontier or urban underserved areas to comply

9 with applicable quality, safety or environmental

10 requirements.

11 (H) Such other capital costs as the Sec12 retary may determine are necessary to achieve

13 the objectives of this section, including start-up

14 expenses, reserve funds, and other financial re15 quirements applicable to networks, plans or pro16 viders.

17 (2) PRIORITIES REGARDING USE OF FUNDS.—

18 In providing loans under subsection (a) for an en19 tity, the Secretary shall give priority to authorizing

20 the use of amounts for projects for the renovation

21 and modernization of medical facilities necessary to

22 prevent or eliminate safety hazards, avoid non23 compliance with licensure or accreditation standards,

24 or projects to replace obsolete facilities.
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1 (3) LIMITATION.—The Secretary may authorize

2 the use of loans under subsection (a) for the con3 struction of new buildings only if the Secretary de4 termines that appropriate facilities are not available

5 through acquiring, modernizing, expanding or con6 verting existing buildings, or that construction new

7 buildings will cost less.

8 (c) AMOUNT OF ASSISTANCE.—The principal amount

9 of loans under subsection (a) may cover up to 100 percent

10 of the costs involved.

11 SEC. 332. CERTAIN REQUIREMENTS.

12 (a) IN GENERAL.—The Secretary may approve a loan

13 under section 331 only if—

14 (1) an application for such assistance is submit15 ted to the Secretary in such form, is made in such

16 manner, and contains such agreements, assurances,

17 and information as the Secretary determines to be

18 necessary to carry out this subtitle;

19 (2) the Secretary is reasonably satisfied that

20 the applicant for the project for which the loan

21 would be made will be able to make payments of

22 principal and interest thereon when due; and

23 (3) the applicant provides the Secretary with

24 reasonable assurances that there will be available to

25 it such additional funds as may be necessary to com-
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•S 2374 IS

1 plete the project or undertaking with respect to

2 which such loan is requested.

3 (b) TERMS AND CONDITIONS.—Any loan made under

4 section 331 shall, subject to the Federal Credit Reform

5 Act of 1990, meet such terms and conditions (including

6 provisions for recovery in case of default) as the Secretary,

7 in consultation with the Secretary of the Treasury, deter8 mines to be necessary to carry out the purposes of such

9 section while adequately protecting the financial interests

10 of the United States. Terms and conditions for such loans

11 shall include provisions regarding the following:

12 (1) Security.

13 (2) Maturity date.

14 (3) Amount and frequency of installments.

15 (4) Rate of interest, which shall be at a rate

16 comparable to the rate of interest prevailing on the

17 date the loan is made.

18 SEC. 333. DEFAULTS.

19 (a) IN GENERAL.—The Secretary may take such ac20 tion as may be necessary to prevent a default on loans

21 under section 331, including the waiver of regulatory con22 ditions, deferral of loan payments, renegotiation of loans,

23 and the expenditure of funds for technical and consultative

24 assistance, for the temporary payment of the interest and

25 principal on such a loan, and for other purposes.
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1 (b) FORECLOSURE.—The Secretary may take such

2 action, consistent with State law respecting foreclosure

3 procedures, as the Secretary deems appropriate to protect

4 the interest of the United States in the event of a default

5 on a loan made pursuant to section 331, including selling

6 real property pledged as security for such a loan and for

7 a reasonable period of time taking possession of, holding,

8 and using real property pledged as security for such a

9 loan.

10 (c) WAIVERS.—The Secretary may, for good cause,

11 but with due regard to the financial interests of the United

12 States, waive any right of recovery which the Secretary

13 has by reasons of the failure of a borrower to make pay14 ments of principal of and interest on a loan made pursu15 ant to section 331, except that if such loan is sold and

16 guaranteed, any such waiver shall have no effect upon the

17 Secretary’s guarantee of timely payment of principal and

18 interest.

19 Subtitle D—Increasing Primary

20 Care Providers

21 SEC. 341. NONREFUNDABLE CREDIT FOR CERTAIN PRI22 MARY HEALTH SERVICES PROVIDERS.

23 (a) IN GENERAL.—Subpart A of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of

25 1986 (relating to nonrefundable personal credits) is
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1 amended by inserting after section 22 the following new

2 section:

3 ‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al5 lowed as a credit against the tax imposed by this chapter

6 for the taxable year an amount equal to the product of—

7 ‘‘(1) the number of months during such taxable

8 year—

9 ‘‘(A) during which the taxpayer is a quali10 fied primary health services provider, and

11 ‘‘(B) which are within the taxpayer’s man12 datory service period, and

13 ‘‘(2) $1,000 ($500 in the case of a qualified

14 practitioner who is not a physician).

15 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO16 VIDER.—For purposes of this section, the term ‘qualified

17 primary health services provider’ means, with respect to

18 any month, any qualified practitioner who—

19 ‘‘(1) has in effect a certification by the Bureau

20 as a provider of primary health services and such

21 certification is, when issued, for a health profes22 sional shortage area in which the qualified practi23 tioner is commencing the providing of primary

24 health services,
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1 ‘‘(2) is providing primary health services full

2 time in the health professional shortage area identi3 fied in such certification, and

4 ‘‘(3) has not received a scholarship under the

5 National Health Service Corps Scholarship Program

6 or any loan repayments under the National Health

7 Service Corps Loan Repayment Program.

8 For purposes of paragraph (2) and subsection (e)(3), a

9 provider shall be treated as providing services in a health

10 professional shortage area when such area ceases to be

11 such an area if it was such an area when the provider

12 commenced providing services in the area.

13 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

14 of this section, the term ‘mandatory service period’ means

15 the period of 60 consecutive calendar months beginning

16 with the first month the taxpayer is a qualified primary

17 health services provider. A taxpayer shall not have more

18 than 1 mandatory service period.

19 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur20 poses of this section—

21 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

22 Bureau of Primary Health Care, Health Resources

23 and Services Administration of the United States

24 Public Health Service.
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1 ‘‘(2) QUALIFIED PRACTITIONER.—The term

2 ‘qualified practitioner’ means a physician, a physi3 cian assistant, a nurse practitioner, or a certified

4 nurse-midwife.

5 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the

6 meaning given to such term by section 1861(r) of

7 the Social Security Act.

8 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI9 TIONER.—The terms ‘physician assistant’ and ‘nurse

10 practitioner’ have the meanings given to such terms

11 by section 1861(aa)(5) of the Social Security Act.

12 ‘‘(5) CERTIFIED NURSE-MIDWIFE.—The term

13 ‘certified nurse-midwife’ has the meaning given to

14 such term by section 1861(gg)(2) of the Social Secu15 rity Act.

16 ‘‘(6) PRIMARY HEALTH SERVICES.—The term

17 ‘primary health services’ has the meaning given such

18 term by section 330(b)(1) of the Public Health Serv19 ice Act.

20 ‘‘(7) HEALTH PROFESSIONAL SHORTAGE

21 AREA.—The term ‘health professional shortage area’

22 has the meaning given such term by section

23 332(a)(1)(A) of the Public Health Service Act.

24 ‘‘(e) RECAPTURE OF CREDIT.—
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1 ‘‘(1) IN GENERAL.—If there is a recapture

2 event during any taxable year, then—

3 ‘‘(A) no credit shall be allowed under sub4 section (a) for such taxable year and any suc5 ceeding taxable year, and

6 ‘‘(B) the tax of the taxpayer under this

7 chapter for such taxable year shall be increased

8 by an amount equal to the product of—

9 ‘‘(i) the applicable percentage, and

10 ‘‘(ii) the aggregate unrecaptured cred11 its allowed to such taxpayer under this sec12 tion for all prior taxable years.

13 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

14 ‘‘(A) IN GENERAL.—For purposes of this

15 subsection, the applicable recapture percentage

16 shall be determined from the following table:

‘‘If the recapture The applicable recapevent occurs during: true percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Month 61 or thereafter .............................. 0.

17 ‘‘(B) TIMING.—For purposes of subpara18 graph (A), month 1 shall begin on the first day

19 of the mandatory service period.

20 ‘‘(3) RECAPTURE EVENT DEFINED.—

21 ‘‘(A) IN GENERAL.—For purposes of this

22 subsection, the term ‘recapture event’ means
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1 the failure of the taxpayer to be a qualified pri2 mary health services provider for any month

3 during the taxpayer’s mandatory 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 ‘‘(4) 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 of such Code is amended by inserting after the item relat18 ing to section 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. 342. EXPENSING OF MEDICAL EQUIPMENT.

23 (a) IN GENERAL.—Paragraph (1) of section 179(b)

24 of the Internal Revenue Code of 1986 (relating to dollar
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1 limitation on expensing of certain depreciable business as2 sets) is amended to read as follows:

3 ‘‘(1) DOLLAR LIMITATION.—

4 ‘‘(A) GENERAL RULE.—The aggregate cost

5 which may be taken into account under sub6 section (a) for any taxable year shall not exceed

7 $17,500.

8 ‘‘(B) HEALTH CARE PROPERTY.—The ag9 gregate cost which may be taken into account

10 under subsection (a) shall be increased by the

11 lesser of—

12 ‘‘(i) the cost of section 179 property

13 which is health care property placed in

14 service during the taxable year, or

15 ‘‘(ii) $10,000.’’

16 (b) DEFINITION.—Section 179(d) of such Code (re17 lating to definitions) is amended by adding at the end the

18 following new paragraph:

19 ‘‘(11) HEALTH CARE PROPERTY.—For purposes

20 of this section, the term ‘health care property’

21 means section 179 property—

22 ‘‘(A) which is medical equipment used in

23 the screening, monitoring, observation, diag24 nosis, or treatment of patients in a laboratory,

25 medical, or hospital environment,
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1 ‘‘(B) which is owned (directly or indirectly)

2 and used by a physician (as defined in section

3 1861(r) of the Social Security Act) in the active

4 conduct of such physician’s full-time trade or

5 business of providing primary health services

6 (as defined in section 330(b)(1) of the Public

7 Health Service Act) in a health professional

8 shortage area (as defined in section

9 332(a)(1)(A) of the Public Health Service Act),

10 and

11 ‘‘(C) substantially all the use of which is in

12 such area.’’

13 (c) RECAPTURE.—Paragraph (10) of section 179(d)

14 of such Code is amended by inserting before the period

15 ‘‘and with respect to any health care property which ceases

16 (other than by an area failing to be treated as a health

17 professional shortage area) to be health care property at

18 any time’’.

19 (d) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to property placed in service in

21 taxable years beginning after December 31, 1994.

22 SEC. 343. EXPANDED SERVICES FOR MEDICALLY UNDER23 SERVED INDIVIDUALS.

24 (a) IN GENERAL.—Subpart I of part D of title III

25 of the Public Health Service Act (42 U.S.C. 254b et seq.)
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1 (as amended by section 313) is amended by adding at the

2 end the following new section:

3 ‘‘SEC. 330B. EXPANDED SERVICES FOR MEDICALLY UNDER4 SERVED INDIVIDUALS.

5 ‘‘(a) ESTABLISHMENT OF HEALTH SERVICES AC6 CESS PROGRAM.—From amounts appropriated under this

7 section, the Secretary shall, acting through the Bureau of

8 Health Care Delivery Assistance, award grants under this

9 section to federally qualified health centers (hereinafter re10 ferred to in this section as ‘FQHC’s’) and other entities

11 and organizations submitting applications under this sec12 tion (as described in subsection (c)) for the purpose of

13 providing access to services for medically underserved pop14 ulations (as defined in section 330(b)(3)) or in high im15 pact areas (as defined in section 329(a)(5)) not currently

16 being served by a FQHC.

17 ‘‘(b) ELIGIBILITY FOR GRANTS.—

18 ‘‘(1) IN GENERAL.—The Secretary shall award

19 grants under this section to entities or organizations

20 described in this paragraph and paragraph (2) which

21 have submitted a proposal to the Secretary to ex22 pand such entities or organizations operations (in23 cluding expansions to new sites (as determined nec24 essary by the Secretary)) to serve medically under-
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•S 2374 IS

1 served populations or high impact areas not cur2 rently served by a FQHC and which—

3 ‘‘(A) have as of January 1, 1991, been cer4 tified by the Secretary as a FQHC under sec5 tion 1905(l)(2)(B) of the Social Security Act;

6 or

7 ‘‘(B) have submitted applications to the

8 Secretary to qualify as FQHC’s under such sec9 tion 1905(l)(2)(B); or

10 ‘‘(C) have submitted a plan to the Sec11 retary which provides that the entity will meet

12 the requirements to qualify as a FQHC when

13 operational.

14 ‘‘(2) NON FQHC ENTITIES.—

15 ‘‘(A) ELIGIBILITY.—The Secretary shall

16 also make grants under this section to public or

17 private nonprofit agencies, health care entities

18 or organizations which meet the requirements

19 necessary to qualify as a FQHC except, the re20 quirement that such entity have a consumer

21 majority governing board and which have sub22 mitted a proposal to the Secretary to provide

23 those services provided by a FQHC as defined

24 in section 1905(l)(2)(B) of the Social Security

25 Act and which are designed to promote access
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•S 2374 IS

1 to primary care services or to reduce reliance on

2 hospital emergency rooms or other high cost

3 providers of primary health care services, pro4 vided such proposal is developed by the entity

5 or organizations (or such entities or organiza6 tions acting in a consortium in a community)

7 with the review and approval of the Governor of

8 the State in which such entity or organization

9 is located.

10 ‘‘(B) LIMITATION.—The Secretary shall

11 provide in making grants to entities or organi12 zations described in this paragraph that no

13 more than 10 percent of the funds provided for

14 grants under this section shall be made avail15 able for grants to such entities or organizations.

16 ‘‘(c) APPLICATION REQUIREMENTS.—

17 ‘‘(1) IN GENERAL.—In order to be eligible to

18 receive a grant under this section, a FQHC or other

19 entity or organization must submit an application in

20 such form and at such time as the Secretary shall

21 prescribe and which meets the requirements of this

22 subsection.

23 ‘‘(2) REQUIREMENTS.—An application submit24 ted under this section must provide—
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•S 2374 IS

1 ‘‘(A)(i) for a schedule of fees or payments

2 for the provision of the services provided by the

3 entity designed to cover its reasonable costs of

4 operations; and

5 ‘‘(ii) for a corresponding schedule of dis6 counts to be applied to such fees or payments,

7 based upon the patient’s ability to pay (deter8 mined by using a sliding scale formula based on

9 the income of the patient);

10 ‘‘(B) assurances that the entity or organi11 zation provides services to persons who are eli12 gible for benefits under title XVIII of the Social

13 Security Act, for medical assistance under title

14 XIX of such Act or for assistance for medical

15 expenses under any other public assistance pro16 gram or private health insurance program; and

17 ‘‘(C) assurances that the entity or organi18 zation has made and will continue to make

19 every reasonable effort to collect reimbursement

20 for services—

21 ‘‘(i) from persons eligible for assist22 ance under any of the programs described

23 in subparagraph (B); and

24 ‘‘(ii) from patients not entitled to ben25 efits under any such programs.
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1 ‘‘(d) LIMITATIONS ON USE OF FUNDS.—

2 ‘‘(1) IN GENERAL.—From the amounts award3 ed to an entity or organization under this section,

4 funds may be used for purposes of planning but may

5 only be expended for the costs of—

6 ‘‘(A) assessing the needs of the populations

7 or proposed areas to be served;

8 ‘‘(B) preparing a description of how the

9 needs identified will be met; and

10 ‘‘(C) development of an implementation

11 plan that addresses—

12 ‘‘(i) recruitment and training of per13 sonnel; and

14 ‘‘(ii) activities necessary to achieve

15 operational status in order to meet FQHC

16 requirements under 1905(l)(2)(B) of the

17 Social Security Act.

18 ‘‘(2) RECRUITING, TRAINING AND COMPENSA19 TION OF STAFF.—From the amounts awarded to an

20 entity or organization under this section, funds may

21 be used for the purposes of paying for the costs of

22 recruiting, training and compensating staff (clinical

23 and associated administrative personnel (to the ex24 tent such costs are not already reimbursed under

25 title XIX of the Social Security Act or any other
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•S 2374 IS

1 State or Federal program)) to the extent necessary

2 to allow the entity to operate at new or expended ex3 isting sites.

4 ‘‘(3) FACILITIES AND EQUIPMENT.—From the

5 amounts awarded to an entity or organization under

6 this section, funds may be expended for the purposes

7 of acquiring facilities and equipment but only for the

8 cost of—

9 ‘‘(A) construction of new buildings (to the

10 extent that new construction is found to be the

11 most cost-efficient approach by the Secretary);

12 ‘‘(B) acquiring, expanding, and moderniz13 ing of existing facilities;

14 ‘‘(C) purchasing essential (as determined

15 by the Secretary) equipment; and

16 ‘‘(D) amortization of principal and pay17 ment of interest on loans obtained for purposes

18 of site construction, acquisition, modernization,

19 or expansion, as well as necessary equipment.

20 ‘‘(4) SERVICES.—From the amounts awarded

21 to an entity or organization under this section, funds

22 may be expanded for the payment of services but

23 only for the costs of—

24 ‘‘(A) providing or arranging for the provi25 sion of all services through the entity necessary
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•S 2374 IS

1 to qualify such entity as a FQHC under section

2 1905(l)(2)(B) of the Social Security Act;

3 ‘‘(B) providing or arranging for any other

4 service that a FQHC may provide and be reim5 bursed for under title XIX of such Act; and

6 ‘‘(C) providing any unreimbursed costs of

7 providing services as described in section 330(a)

8 to patients.

9 ‘‘(e) PRIORITIES IN THE AWARDING OF GRANTS.—

10 ‘‘(1) CERTIFIED FQHC’s.—The Secretary shall

11 give priority in awarding grants under this section

12 to entities which have, as of January 1, 1991, been

13 certified as a FQHC under section 1905(l)(2)(B) of

14 the Social Security Act and which have submitted a

15 proposal to the Secretary to expand their operations

16 (including expansion to new sites) to serve medically

17 underserved populations for high impact areas not

18 currently served by a FQHC. The Secretary shall

19 give first priority in awarding grants under this sec20 tion to those FQHCs or other entities which propose

21 to serve populations with the highest degree of

22 unmet need, and which can demonstrate the ability

23 to expand their operations in the most efficient man24 ner.
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1 ‘‘(2) QUALIFIED FQHC’s.—The Secretary shall

2 give second priority in awarding grants to entities

3 which have submitted applications to the Secretary

4 which demonstrate that the entity will qualify as a

5 FQHC under section 1905(l)(2)(B) of the Social Se6 curity Act before it provides or arranges for the pro7 vision of services supported by funds awarded under

8 this section, and which are serving or proposing to

9 serve medically underserved populations or high im10 pact areas which are not currently served (or pro11 posed to be served) by a FQHC.

12 ‘‘(3) EXPANDED SERVICES AND PROJECTS.—

13 The Secretary shall give third priority in awarding

14 grants in subsequent years to those FQHCs or other

15 entities which have provided for expanded services

16 and project and are able to demonstrate that such

17 entity will incur significant unreimbursed costs in

18 providing such expanded services.

19 ‘‘(f) RETURN OF FUNDS TO SECRETARY FOR COSTS

20 REIMBURSED FROM OTHER SOURCES.—To the extent

21 that an entity or organization receiving funds under this

22 section is reimbursed from another source for the provi23 sion of services to an individual, and does not use such

24 increased reimbursement to expand services furnished,

25 areas served, to compensate for costs of unreimbursed
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1 services provided to patients, or to promote recruitment,

2 training, or retention of personnel, such excess revenues

3 shall be returned to the Secretary.

4 ‘‘(g) TERMINATION OF GRANTS.—

5 ‘‘(1) FAILURE TO MEET FQHC REQUIRE6 MENTS.—

7 ‘‘(A) IN GENERAL.—With respect to any

8 entity that is receiving funds awarded under

9 this section and which subsequently fails to

10 meet the requirements to qualify as a FQHC

11 under section 1905(l)(2)(B) or is an entity that

12 is not required to meet the requirements to

13 qualify as a FQHC under section 1905(l)(2)(B)

14 of the Social Security Act but fails to meet the

15 requirements of this section, the Secretary shall

16 terminate the award of funds under this section

17 to such entity.

18 ‘‘(B) NOTICE.—Prior to any termination

19 of funds under this section to an entity, the en20 tities shall be entitled to 60 days prior notice of

21 termination and, as provided by the Secretary

22 in regulations, an opportunity to correct any de23 ficiencies in order to allow the entity to con24 tinue to receive funds under this section.
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1 ‘‘(2) REQUIREMENTS.—Upon any termination

2 of funding under this section, the Secretary may (to

3 the extent practicable)—

4 ‘‘(A) sell any property (including equip5 ment) acquired or constructed by the entity

6 using funds made available under this section

7 or transfer such property to another FQHC,

8 provided, that the Secretary shall reimburse

9 any costs which were incurred by the entity in

10 acquiring or constructing such property (includ11 ing equipment) which were not supported by

12 grants under this section; and

13 ‘‘(B) recoup any funds provided to an en14 tity terminated under this section.

15 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

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

17 $100,000,000 for each of the fiscal years 1996 through

18 1999.’’.

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) shall become effective with respect to serv21 ices furnished by a federally qualified health center or

22 other qualifying entity described in this section beginning

23 on or after October 1, 1995.
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1 SEC. 344. ACCUMULATION OF RESERVES BY CERTAIN ENTI2 TIES.

3 Any organization referred to in section 329, 330, or

4 340 of the Public Health Service Act may accumulate re5 serves.

6 SEC. 345. MATERNAL AND INFANT CARE COORDINATION.

7 (a) PURPOSE.—It is the purpose of this section to

8 assist States in the development and implementation of

9 coordinated, multidisciplinary, and comprehensive primary

10 health care and social services, and health and nutrition

11 education programs, designed to improve maternal and

12 child health.

13 (b) GRANTS FOR IMPLEMENTATION OF PROGRAMS.—

14 (1) AUTHORITY.—The Secretary of Health and

15 Human Services (hereafter referred to in this section

16 as the ‘‘Secretary’’) is authorized to award grants to

17 States to enable such States to plan and implement

18 coordinated, multidisciplinary, and comprehensive

19 primary health care and social service programs tar20 geted to pregnant women and infants.

21 (2) ELIGIBILITY.—To be eligible to receive a

22 grant under this section, a State shall—

23 (A) prepare and submit to the Secretary

24 an application at such time, in such manner,

25 and containing such information as the Sec26 retary may require;
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1 (B) as part of the State application, pro2 vide assurances that under the program estab3 lished with amounts received under a grant, in4 dividuals will have access to a broad range of

5 primary health care services, social services,

6 and health and nutrition programs designed to

7 improve maternal and child health and a de8 scription of how coordination of such services

9 will improve maternal and child health based

10 upon the goals of ‘‘Healthy People 2000: Na11 tional Health Promotion and Disease Preven12 tion Objectives’’;

13 (C) as part of the State application, sub14 mit a plan for the coordination of existing and

15 proposed Federal and State resources, as ap16 propriate, including amounts provided under

17 the medicaid program under title XIX of the

18 Social Security Act, the special supplemental

19 food program under section 17 of the Child Nu20 trition Act of 1966, family planning programs,

21 substance abuse programs, State maternal and

22 child health programs funded under title V of

23 the Social Security Act, community and mi24 grant health center programs under the Public
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•S 2374 IS

1 Health Service Act, and other publicly, or where

2 practicable, privately supported programs;

3 (D) demonstrate that the major service

4 providers to be involved, including private non5 profit entities committed to improving maternal

6 and infant health, are committed to and in7 volved in the program to be funded with

8 amounts received under the grant;

9 (E) with respect to States with high infant

10 mortality rates among minority populations,

11 demonstrate the involvement of major health,

12 multiservice, professional, or civic group rep13 resentatives of such minority groups in the

14 planning and implementation of the State pro15 gram; and

16 (F) demonstrate that activities under the

17 State program are targeted to women of child18 bearing age, particularly those at risk for hav19 ing low birth weight babies.

20 (3) TERM OF GRANT.—A grant awarded under

21 this subsection shall be for a period of 5 years.

22 (4) USE OF AMOUNTS.—Amounts received by a

23 State under a grant awarded under this subsection

24 shall be used to establish a State program to provide

25 coordinated, multidisciplinary, and comprehensive
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1 primary health care and social services, and health

2 and nutrition education program services, that are

3 designed to improve maternal and child health. Such

4 amounts shall not be used for the construction of

5 buildings or the purchase of medical equipment.

6 (5) MAINTENANCE OF EFFORT.—Any funds re7 ceived by a State under this subsection shall supple8 ment, and shall not supplant, funds that are ex9 pended for similar purposes by the State.

10 (6) AUTHORIZATION OF APPROPRIATIONS.—

11 There are authorized to be appropriated such sums

12 as may be necessary to carry out the purposes of

13 this subsection for fiscal years 1995 through 1998.

14 SEC. 346. PRE-SCHOOL AND ELEMENTARY SCHOOL HEALTH

15 EDUCATION PROGRAMS.

16 Section 4605 of the Elementary and Secondary Edu17 cation Act of 1965 (20 U.S.C. 3155) is amended to read

18 as follows:

19 ‘‘SEC. 4605. PRE-SCHOOL AND ELEMENTARY SCHOOL

20 HEALTH EDUCATION PROGRAMS.

21 ‘‘(a) PURPOSE.—It is the purpose of this section to

22 establish a comprehensive school health education and pre23 vention program for pre-school and elementary school stu24 dents.
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1 ‘‘(b) PROGRAM AUTHORIZED.—The Secretary shall

2 award grants to States to enable such States to—

3 ‘‘(1) award grants to local or intermediate edu4 cational agencies, and consortia thereof, to enable

5 such agencies or consortia to establish, operate and

6 improve local programs of comprehensive health edu7 cation and prevention, early health intervention, and

8 health education, in pre-school and elementary

9 schools; and

10 ‘‘(2) develop training, technical assistance and

11 coordination activities for the programs assisted pur12 suant to paragraph (1).

13 ‘‘(c) USE OF FUNDS.—Grant funds under this sec14 tion may be used to improve pre-school and elementary

15 school education in the areas of—

16 ‘‘(1) personal health and fitness;

17 ‘‘(2) prevention of chronic diseases;

18 ‘‘(3) prevention and control of communicable

19 diseases;

20 ‘‘(4) nutrition;

21 ‘‘(5) substance use and abuse;

22 ‘‘(6) accident prevention and safety;

23 ‘‘(7) community and environmental health;

24 ‘‘(8) mental and emotional health; and
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1 ‘‘(9) the effective use of the health services de2 livery system.

3 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—

4 ‘‘(1) IN GENERAL.—There are authorized to be

5 appropriated such sums as may be necessary to

6 carry out the purposes of this section for fiscal years

7 1996 through 2000.

8 ‘‘(2) AVAILABILITY.—Funds appropriated pur9 suant to the authority of paragraph (1) in any fiscal

10 year shall remain available for obligation and ex11 penditure until the end of the fiscal year succeeding

12 the fiscal year for which such funds were appro13 priated.’’.

14 SEC. 347. FRONTIER STATES.

15 (a) IN GENERAL.—Frontier States (including Alaska,

16 Wyoming and Montana) may implement proposals to offer

17 preventive services, including mobile preventive health cen18 ters which may include centers equipped with various pre19 ventive health services, such as mammography, eye care,

20 X-ray, and other advanced equipment, and which may be

21 located on aircraft, watercraft, or other forms of transpor22 tation.

23 (b) DEMONSTRATION PROJECTS.—Frontier States

24 may participate in demonstration projects under this or

25 any other Act to improve recruitment, retention, and
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1 training of rural providers, including nurse practitioners

2 and physician assistants. Such demonstration projects

3 shall give special consideration to the diverse needs of

4 Frontier States, and shall involve cooperative agreements

5 with a range of service delivery systems and teaching hos6 pitals.

7 SEC. 348. INCREASE IN NATIONAL HEALTH SERVICE CORPS

8 AND AREA HEALTH EDUCATION CENTER

9 FUNDING.

10 (a) NATIONAL HEALTH SERVICE CORPS.—Section

11 338H(b)(1) of the Public Health Service Act (42 U.S.C.

12 254q(b)(1)) is amended—

13 (1) by striking ‘‘1991, and’’ and inserting

14 ‘‘1991,’’; and

15 (2) by striking ‘‘through 2000’’ and inserting ‘‘,

16 1993, and 1994, and $20,000,000 for each of the

17 fiscal years 1995 through 2000’’.

18 (b) AREA HEALTH EDUCATION CENTERS.—Section

19 746(i)(1) of such Act (42 U.S.C. 293j(i)(1)) is amended—

20 (1) in subparagraph (A), by striking ‘‘1995’’

21 and inserting ‘‘1995, and $20,000,000 for each of

22 the fiscal years 1996 through 2000’’; and

23 (2) in subparagraph (C), by striking ‘‘and

24 1995’’ and inserting ‘‘1995, and $20,000,000 for

25 each of the fiscal years 1996 through 2000’’.
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1 SEC. 349. TELEMEDICINE FEDERAL INTERAGENCY TASK

2 FORCE.

3 (a) ESTABLISHMENT.—Not later than 90 days after

4 the date of the enactment of this section, the Secretary

5 of Health and Human Services shall establish a Federal

6 interagency task force to be known as the ‘Interagency

7 Task Force on Rural Telemedicine’ (hereafter in this sec8 tion referred to as the ‘‘Task Force’’).

9 (b) DUTIES.—

10 (1) IN GENERAL.—The Task Force shall—

11 (A) identify specific uses for telemedicine

12 that have been proven to be effective to be used

13 in the evaluation of applications for federally

14 funded telemedicine demonstration projects, in15 cluding any application submitted under this

16 part;

17 (B) review and coordinate evaluations of

18 all federally funded telemedicine and tele19 communications infrastructure demonstration

20 projects, including any demonstration project

21 established under this subtitle;

22 (C) establish mechanisms to facilitate a

23 local area needs assessment and consortium de24 velopment process to assist entities conducting

25 federally funded telemedicine demonstration
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•S 2374 IS

1 projects, including demonstration projects

2 under this part; and

3 (D) review the provision of telemedicine

4 services under the demonstration projects estab5 lished under section 350.

6 (2) PUBLICATION OF RESULTS.—Not later than

7 2 years after the Task Force is established, and an8 nually thereafter, the Task Force shall analyze and

9 publish a report of its findings under subparagraphs

10 (A) through (D) of paragraph (1) and shall make

11 such publications available to the Congress and the

12 general public.

13 (c) MEMBERSHIP.—

14 (1) IN GENERAL.—The Task Force shall con15 sist of representatives of—

16 (A) the Department of Health and Human

17 Services;

18 (B) the Rural Electrification Administra19 tion;

20 (C) the National Telecommunications In21 formation Agency;

22 (D) the National Institutes of Health; and

23 (E) other agencies and departments that

24 have responsibility for overseeing telemedicine

25 projects.
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1 (2) CHAIRPERSON.—A representative of the De2 partment of Health and Human Services shall serve

3 as the chairperson of the Task Force.

4 (d) BASIC PAY.—Each member of the Task Force

5 shall serve without pay.

6 (e) MEETINGS.—The Task Force shall meet at the

7 call of the chairperson.

8 (f) QUORUM.—A majority of the members shall con9 stitute a quorum for the transaction of business.

10 SEC. 350. DEMONSTRATION PROJECTS TO PROMOTE

11 TELEMEDICINE.

12 (a) DEFINITIONS.—For purposes of this section:

13 (1) RURAL HEALTH CARE PROVIDER.—The

14 term ‘‘rural health care provider’’ means any public

15 or private health care provider located in a rural

16 area.

17 (2) NONHEALTH CARE ENTITY.—The term

18 ‘‘nonhealth care entity’’ means any entity that is not

19 involved in the provision of health care, including a

20 business, educational institution, library, and prison.

21 (b) ESTABLISHMENT.—The Secretary, acting

22 through the Office of Rural Health, shall award grants

23 to eligible entities to establish demonstration projects

24 under which an eligible entity establishes a rural-based
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1 consortium that enables members of the consortium to uti2 lize the telecommunications network—

3 (1) to strengthen the delivery of health care

4 services in the rural area through the use of

5 telemedicine;

6 (2) to provide for consultations involving trans7 missions of detailed data about the patient that

8 serves as a reasonable substitute for face-to-face

9 interaction between the patient and consultant; and

10 (3) to make outside resources or business inter11 action more available to the rural area.

12 (c) ELIGIBLE ENTITY.—To be eligible to receive a

13 grant under this section an applicant entity shall propose

14 a consortium that includes as members at least—

15 (1) one rural health care provider; and

16 (2) one nonhealth care entity located in the

17 same rural area as the rural health care provider de18 scribed in paragraph (1).

19 The Secretary may waive the membership requirement

20 under paragraph (2) if the members described in para21 graph (1) are unable to locate a nonhealth care entity lo22 cated in the same rural area to participate in the dem23 onstration project.

24 (d) APPLICATION.—To be eligible to receive a grant

25 under this section, an eligible entity described in sub-
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•S 2374 IS

1 section (c) shall prepare and submit to the Secretary an

2 application at such time, in such manner, and containing

3 such information as the Secretary may require, including

4 a description of the use to which the eligible entity would

5 apply any amounts received under such grant, the source

6 and amount of non-Federal funds the entity would pledge

7 for the project, and a showing of the long-term sustain8 ability of the project.

9 (e) GRANTS.—Grants under this section shall be dis10 tributed in accordance with the following requirements:

11 (1) GRANT LIMIT.—The Secretary may not

12 make a grant to an eligible entity under this section

13 in excess of $500,000 for each fiscal year in which

14 an eligible entity conducts a project under this sec15 tion.

16 (2) MATCHING FUNDS.—

17 (A) IN GENERAL.—The Secretary may not

18 make a grant to an eligible entity under this

19 section unless the eligible entity agrees to pro20 vide non-Federal funds in an amount equal to

21 not less than 20 percent of the total amount to

22 be expended by the eligible entity in any fiscal

23 year for the purpose of conducting the project

24 under this section.
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1 (B) ADJUSTMENTS.—The Secretary shall

2 make necessary adjustments to the amount that

3 an eligible entity may receive in a subsequent

4 fiscal year if the eligible entity does not meet

5 the requirements of subparagraph (A) in the

6 preceding fiscal year.

7 (f) USE OF GRANT AMOUNTS.—

8 (1) IN GENERAL.—Amounts received under a

9 grant awarded under this section shall be utilized for

10 the development and operation of telemedicine sys11 tems that serve rural areas. All such grant funds

12 must be used to further the provision of health serv13 ices to rural areas.

14 (2) RULES OF USE.—

15 (A) PERMISSIBLE USAGES.—Grant funds

16 awarded under this section—

17 (i) shall primarily be used to support

18 the costs of establishing and operating a

19 telemedicine system that provides specialty

20 consultations to rural communities;

21 (ii) may be used to demonstrate the

22 application of telemedicine for preceptor23 ship of medical students, residents, and

24 other health professions students in rural

25 training sites;
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•S 2374 IS

1 (iii) may be used for transmission

2 costs, salaries, maintenance of equipment,

3 and compensation of specialists and refer4 ring practitioners;

5 (iv) may be used to pay the fees of

6 consultants, but only to the extent that the

7 total of such fees do not exceed 5 percent

8 of the amount of the grant;

9 (v) may be used to demonstrate the

10 use of telemedicine to facilitate collabora11 tion between non-physician primary care

12 practitioners (including physician assist13 ants, nurse practitioners, certified nurse14 midwives, and clinical nurse specialists)

15 and physicians; and

16 (vi) may be used to test reimburse17 ment methodologies under the medicare

18 program under title XVIII of the Social

19 Security Act and the medicaid program

20 under title XIX of such Act for practition21 ers participating in telemedicine activities.

22 (B) PROHIBITED USE OF FUNDS.—Grant

23 funds shall not be used by members of a rural24 based consortium for any of the following:
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1 (i) Expenditures to purchase or lease

2 equipment.

3 (ii) In the case of a member of a con4 sortium that is an isolated rural facility,

5 purchase of high-cost telecommunications

6 technologies for the furnishing of

7 telemedicine services that—

8 (I) incur high cost per minute of

9 usage charges; or

10 (II) require consultants to be

11 available at the same time as the pa12 tient and the referring physician.

13 (iii) Purchase or installation of trans14 mission equipment or establishment or op15 eration of a telecommunications common

16 carrier network.

17 (iv) Expenditures for indirect costs

18 (as determined by the Secretary) to the ex19 tent the expenditures would exceed more

20 than 20 percent of the total grant funds.

21 (v) Construction (except for minor

22 renovations related to the installation of

23 equipment), or the acquisition or building

24 of real property.
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1 (g) MAINTENANCE OF EFFORT.—Any funds available

2 for the activities covered by a demonstration project con3 ducted under this section shall supplement, and shall not

4 supplant, funds that are expended for similar purposes

5 under any State, regional, or local program.

6 (h) EVALUATIONS.—Each eligible entity that con7 ducts a demonstration project under this section shall sub8 mit to the Secretary such information and interim evalua9 tions as the Secretary may require. The Secretary shall

10 provide the Interagency Task Force on Rural

11 Telemedicine with such evaluations and information sub12 mitted under the previous sentence as the Task Force may

13 required to carry out its duties under section 345(b).

14 (i) AUTHORIZATION OF APPROPRIATIONS.—There

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

16 $10,000,000 for each of the fiscal years 1995 through

17 1997.

18 Subtitle E—Payment Flexibility

19 SEC. 351. ESSENTIAL ACCESS COMMUNITY HOSPITAL

20 (EACH) AMENDMENTS.

21 (a) UNLIMITED PARTICIPATING STATES; ELIMI22 NATION OF GRANT TIE-IN.—

23 (1) IN GENERAL.—Section 1820(a) of the So24 cial Security Act (42 U.S.C. 1395i–4(a)) is amended

25 to read as follows:
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1 ‘‘(a) IN GENERAL.—

2 ‘‘(1) PROGRAM DESCRIBED.—There is hereby

3 established a program under which the Secretary—

4 ‘‘(A) shall permit States that have submit5 ted an application in accordance with subsection

6 (b) to carry out the activities described in sub7 sections (e) and (f); and

8 ‘‘(B) shall designate (under subsection (i))

9 hospitals and facilities located in States partici10 pating in a program under this section as es11 sential access community hospitals or rural pri12 mary care hospitals.

13 ‘‘(2) AVAILABILITY OF GRANTS.—

14 ‘‘(A) STATES.—The Secretary shall make

15 grants available to selected States described in

16 paragraph (1)(A) to carry out the activities de17 scribed in subsection (d)(1).

18 ‘‘(B) ELIGIBLE HOSPITALS AND FACILI19 TIES.—The Secretary shall make grants avail20 able to selected eligible hospitals and facilities

21 (or consortia of hospitals and facilities) to carry

22 out the activities described in subsection

23 (d)(2).’’.

24 (2) CONFORMING AMENDMENTS.—
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•S 2374 IS

1 (A) Section 1820(b) of such Act (42

2 U.S.C. 1395i–4(b)) is amended by striking

3 ‘‘ELIGIBILITY OF STATES FOR GRANTS.—’’

4 through ‘‘subsection (a)(1)’’ and inserting ‘‘AP5 PLICATION.—A State is eligible to participate in

6 the program described in this section’’.

7 (B) Section 1820(c) of such Act (42

8 U.S.C. 1395i–4(c)) is amended—

9 (i) in paragraph (1)—

10 (I) in the matter preceding sub11 paragraph (A), by striking ‘‘(a)(2)’’

12 and inserting ‘‘(a)(2)(B)’’, and

13 (II) in subparagraph (A), by

14 striking ‘‘receiving a grant under sub15 section (a)(1)’’ and inserting ‘‘partici16 pating in the program under this sec17 tion’’; and

18 (ii) in paragraph (3)—

19 (I) by striking ‘‘STATE RECEIV20 ING GRANT.—’’ and inserting ‘‘STATE

21 PARTICIPATING IN THE PROGRAM.—’’,

22 and

23 (II) by striking ‘‘(a)(2)’’ and in24 serting ‘‘(a)(2)(B)’’.
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•S 2374 IS

1 (C) Section 1820(d) of such Act (42

2 U.S.C. 1395i–4(d)) is amended—

3 (i) in paragraph (1), by striking

4 ‘‘(a)(1)’’ and inserting ‘‘(a)(2)(A)’’; and

5 (ii) in paragraph (2), by striking

6 ‘‘(a)(2)’’ each place it appears and and in7 serting ‘‘(a)(2)(B)’’.

8 (C) Section 1820(i) of such Act (42 U.S.C.

9 1395i–4(i)) is amended—

10 (i) in paragraph (1)(A)(i), by striking

11 ‘‘receiving a grant under subsection

12 (a)(1)’’ and inserting ‘‘participating in the

13 program under this section’’; and

14 (ii) in paragraph (2)(A)(i), by striking

15 ‘‘receiving a grant under subsection

16 (a)(1)’’ and inserting ‘‘participating in the

17 program under this section’’.

18 (b) TREATMENT OF INPATIENT HOSPITAL SERVICES

19 PROVIDED IN RURAL PRIMARY CARE HOSPITALS.—

20 (1) IN GENERAL.—Section 1820(f)(1)(F) of the

21 Social Security Act (42 U.S.C. 1395i–4(f)(1)(F)) is

22 amended to read as follows:

23 ‘‘(F) subject to paragraph (4), provides not

24 more than 6 inpatient beds (meeting such con25 ditions as the Secretary may establish) for pro-
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1 viding inpatient care to patients requiring sta2 bilization before discharge or transfer to a hos3 pital, except that the facility may not provide

4 any inpatient hospital services consisting of sur5 gery or any other service requiring the use of

6 general anesthesia (other than surgical proce7 dures specified by the Secretary under section

8 1833(i)(1)(A)) unless the attending physician

9 certifies that the risk associated with transfer10 ring the patient to a hospital for such services

11 outweighs the benefits of transferring the pa12 tient to a hospital for such services.’’.

13 (2) LIMITATION ON AVERAGE LENGTH OF

14 STAY.—Section 1820(f) of such Act (42 U.S.C.

15 1395i–4(f)) is amended by adding at the end the fol16 lowing new paragraph:

17 ‘‘(4) LIMITATION ON AVERAGE LENGTH OF IN18 PATIENT STAYS.—The Secretary may terminate a

19 designation of a rural primary care hospital under

20 paragraph (1) if the Secretary finds that the average

21 length of stay for inpatients at the facility during

22 the previous year in which the designation was in ef23 fect exceeded 72 hours. In determining the compli24 ance of a facility with the requirement of the pre25 vious sentence, there shall not be taken into account
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•S 2374 IS

1 periods of stay of inpatients in excess of 72 hours

2 to the extent such periods exceed 72 hours because

3 transfer to a hospital is precluded because of inclem4 ent weather or other emergency conditions.’’.

5 (3) CONFORMING AMENDMENT.—Section

6 1814(a)(8) of such Act (42 U.S.C. 1395f(a)(8)) is

7 amended by striking ‘‘such services’’ and all that fol8 lows and inserting ‘‘the individual may reasonably be

9 expected to be discharged or transferred to a hos10 pital within 72 hours after admission to the rural

11 primary care hospital.’’.

12 (4) GAO REPORTS.—Not later than 2 years

13 after the date of the enactment of this Act, the

14 Comptroller General shall submit reports to Con15 gress on—

16 (A) the application of the requirement

17 under section 1820(f) of the Social Security Act

18 (as amended by this subsection) that rural pri19 mary care hospitals maintain an average length

20 of inpatient stay during a year that does not

21 exceed 72 hours; and

22 (B) the extent to which such requirement

23 has resulted in such hospitals providing inpa24 tient care beyond their capabilities or have lim-
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•S 2374 IS

1 ited the ability of such hospitals to provide

2 needed services.

3 (c) DESIGNATION OF HOSPITALS.—

4 (1) PERMITTING DESIGNATION OF HOSPITALS

5 LOCATED IN URBAN AREAS.—

6 (A) IN GENERAL.—Section 1820 of the So7 cial Security Act (42 U.S.C. 1395i–4) is

8 amended—

9 (i) by striking paragraph (1) of sub10 section (e) and redesignating paragraphs

11 (2) through (6) as paragraphs (1) through

12 (5);

13 (ii) in subsection (e)(1)(A) (as redes14 ignated by subparagraph (A))—

15 (I) by striking ‘‘is located’’ and

16 inserting ‘‘except in the case of a hos17 pital located in an urban area, is lo18 cated’’,

19 (II) by striking ‘‘, (ii)’’ and in20 serting ‘‘or (ii)’’, and

21 (III) by striking ‘‘or (iii)’’ and all

22 that follows through ‘‘section,’’; and

23 (iii) in subsection (i)(1)(B), by strik24 ing ‘‘paragraph (3)’’ and inserting ‘‘para25 graph (2)’’.
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1 (B) NO CHANGE IN MEDICARE PROSPEC2 TIVE PAYMENT.—Section 1886(d)(5)(D) of

3 such Act (42 U.S.C. 1395ww(d)(5)(D)) is

4 amended—

5 (i) in clause (iii)(III), by inserting ‘‘lo6 cated in a rural area and’’ after ‘‘that is’’,

7 and

8 (ii) in clause (v), by inserting ‘‘located

9 in a rural area and’’ after ‘‘in the case of

10 a hospital’’.

11 (2) PERMITTING HOSPITALS LOCATED IN AD12 JOINING STATES TO PARTICIPATE IN STATE PRO13 GRAM.—

14 (A) IN GENERAL.—Section 1820 of such

15 Act (42 U.S.C. 1395i–4) is amended—

16 (i) by redesignating subsection (k) as

17 subsection (l); and

18 (ii) by inserting after subsection (j)

19 the following new subsection:

20 ‘‘(k) ELIGIBILITY OF HOSPITALS NOT LOCATED IN

21 PARTICIPATING STATES.—Notwithstanding any other

22 provision of this section—

23 ‘‘(1) for purposes of including a hospital or fa24 cility as a member institution of a rural health net25 work, a State may designate a hospital or facility
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•S 2374 IS

1 that is not located in the State as an essential access

2 community hospital or a rural primary care hospital

3 if the hospital or facility is located in an adjoining

4 State and is otherwise eligible for designation as

5 such a hospital;

6 ‘‘(2) the Secretary may designate a hospital or

7 facility that is not located in a State receiving a

8 grant under subsection (a)(1) as an essential access

9 community hospital or a rural primary care hospital

10 if the hospital or facility is a member institution of

11 a rural health network of a State receiving a grant

12 under such subsection; and

13 ‘‘(3) a hospital or facility designated pursuant

14 to this subsection shall be eligible to receive a grant

15 under subsection (a)(2).’’.

16 (B) CONFORMING AMENDMENTS.—(i) Sec17 tion 1820(c)(1) of such Act (42 U.S.C. 1395i–

18 4(c)(1)) is amended by striking ‘‘paragraph

19 (3)’’ and inserting ‘‘paragraph (3) or subsection

20 (k)’’.

21 (ii) Paragraphs (1)(A) and (2)(A) of sec22 tion 1820(i) of such Act (42 U.S.C. 1395i–4(i))

23 are each amended—
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1 (I) in clause (i), by striking ‘‘(a)(1)’’

2 and inserting ‘‘(a)(1) (except as provided

3 in subsection (k))’’, and

4 (II) in clause (ii), by striking ‘‘sub5 paragraph (B)’’ and inserting ‘‘subpara6 graph (B) or subsection (k)’’.

7 (d) SKILLED NURSING SERVICES IN RURAL PRIMARY

8 CARE HOSPITALS.—Section 1820(f)(3) of the Social Secu9 rity Act (42 U.S.C. 1395i–4(f)(3)) is amended by striking

10 ‘‘because the facility’’ and all that follows and inserting

11 the following: ‘‘because, at the time the facility applies to

12 the State for designation as a rural primary care hospital,

13 there is in effect an agreement between the facility and

14 the Secretary under section 1883 under which the facili15 ty’s inpatient hospital facilities are used for the furnishing

16 of extended care services, except that the number of beds

17 used for the furnishing of such services may not exceed

18 the total number of licensed inpatient beds at the time

19 the facility applies to the State for such designation

20 (minus the number of inpatient beds used for providing

21 inpatient care pursuant to paragraph (1)(F)). For pur22 poses of the previous sentence, the number of beds of the

23 facility used for the furnishing of extended care services

24 shall not include any beds of a unit of the facility that

25 is licensed as a distinct-part skilled nursing facility at the
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•S 2374 IS

1 time the facility applies to the State for designation as

2 a rural primary care hospital.’’.

3 (e) DEADLINE FOR DEVELOPMENT OF PROSPECTIVE

4 PAYMENT SYSTEM FOR INPATIENT RURAL PRIMARY

5 CARE HOSPITAL SERVICES.—Section 1814(l)(2) of the

6 Social Security Act (42 U.S.C. 1395f(l)(2)) is amended

7 by striking ‘‘January 1, 1993’’ and inserting ‘‘January 1,

8 1996’’.

9 (f) PAYMENT FOR OUTPATIENT RURAL PRIMARY

10 CARE HOSPITAL SERVICES.—

11 (1) IMPLEMENTATION OF PROSPECTIVE PAY12 MENT SYSTEM.—Section 1834(g) of the Social Secu13 rity Act (42 U.S.C. 1395m(g)) is amended—

14 (A) in paragraph (1), by striking ‘‘during

15 a year before 1993’’ and inserting ‘‘during a

16 year before the prospective payment system de17 scribed in paragraph (2) is in effect’’; and

18 (B) in paragraph (2), by striking ‘‘January

19 1, 1993,’’ and inserting ‘‘January 1, 1996,’’.

20 (2) NO USE OF CUSTOMARY CHARGE IN DETER21 MINING PAYMENT.—Section 1834(g)(1) of such Act

22 (42 U.S.C. 1395m(g)(1)) is amended by adding at

23 the end the following new flush sentence:
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1 ‘‘The amount of payment shall be determined under

2 either method without regard to the amount of the

3 customary or other charge.’’.

4 (g) CLARIFICATION OF PHYSICIAN STAFFING RE5 QUIREMENT FOR RURAL PRIMARY CARE HOSPITALS.—

6 Section 1820(f)(1)(H) of the Social Security Act (42

7 U.S.C. 1395i–4(f)(1)(H)) is amended by striking the pe8 riod and inserting the following: ‘‘, except that in deter9 mining whether a facility meets the requirements of this

10 subparagraph, subparagraphs (E) and (F) of that para11 graph shall be applied as if any reference to a ‘physician’

12 is a reference to a physician as defined in section

13 1861(r)(1).’’.

14 (h) TECHNICAL AMENDMENTS RELATING TO PART

15 A DEDUCTIBLE, COINSURANCE, AND SPELL OF ILL16 NESS.—(1) Section 1812(a)(1) of the Social Security Act

17 (42 U.S.C. 1395d(a)(1)) is amended—

18 (A) by striking ‘‘inpatient hospital services’’ the

19 first place it appears and inserting ‘‘inpatient hos20 pital services or inpatient rural primary care hos21 pital services’’;

22 (B) by striking ‘‘inpatient hospital services’’ the

23 second place it appears and inserting ‘‘such serv24 ices’’; and
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•S 2374 IS

1 (C) by striking ‘‘and inpatient rural primary

2 care hospital services’’.

3 (2) Sections 1813(a) and 1813(b)(3)(A) of such Act

4 (42 U.S.C. 1395e(a), 1395e(b)(3)(A)) are each amended

5 by striking ‘‘inpatient hospital services’’ each place it ap6 pears and inserting ‘‘inpatient hospital services or inpa7 tient rural primary care hospital services’’.

8 (3) Section 1813(b)(3)(B) of such Act (42 U.S.C.

9 1395e(b)(3)(B)) is amended by striking ‘‘inpatient hos10 pital services’’ and inserting ‘‘inpatient hospital services,

11 inpatient rural primary care hospital services’’.

12 (4) Section 1861(a) of such Act (42 U.S.C. 1395x(a))

13 is amended—

14 (A) in paragraph (1), by striking ‘‘inpatient

15 hospital services’’ and inserting ‘‘inpatient hospital

16 services, inpatient rural primary care hospital serv17 ices’’; and

18 (B) in paragraph (2), by striking ‘‘hospital’’

19 and inserting ‘‘hospital or rural primary care hos20 pital’’.

21 (i) AUTHORIZATION OF APPROPRIATIONS.—Section

22 1820(e) of the Social Security Act (42 U.S.C. 1395i–4(e)),

23 as redesignated by subsection (c)(2)(A), is amended—
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1 (1) in the matter preceding paragraph (1), by

2 striking ‘‘1990, 1991, and 1992’’ and inserting

3 ‘‘1990 through 1998’’;

4 (2) in paragraph (1), by striking

5 ‘‘$10,000,000’’ and ‘‘(a)(1)’’ and inserting

6 ‘‘$30,000,000’’ and ‘‘(a)(2)(A)’’, respectively; and

7 (3) in paragraph (2), by striking

8 ‘‘$15,000,000’’ and ‘‘(a)(2)’’ and inserting

9 ‘‘$45,000,000’’ and ‘‘(a)(2)(B)’’, respectively.

10 (j) NO LIMITATION ON NUMBER OF RURAL PRIMARY

11 CARE HOSPITALS IN NON-EACH STATES.—Section

12 1820(i)(2)(C) of the Social Security Act (42 U.S.C.

13 1395i–4(i)(2)(C)) is amended—

14 (1) by striking ‘‘15’’; and

15 (2) by striking ‘‘(f)(1), except that nothing’’

16 and inserting ‘‘(f)(1) and establishes a relationship

17 with a full-service rural hospital that meets the re18 quirements described in paragraph (1) through (6)

19 of subsection (e), except that such hospital need not

20 meet the 75 bed requirement described in paragraph

21 (3) of such subsection. Nothing’’.

22 (k) EFFECTIVE DATE.—The amendments made by

23 this section shall take effect on the date of the enactment

24 of this Act.
207

•S 2374 IS

1 SEC. 352. DEMONSTRATION PROJECTS TO IMPROVE AC2 CESS IN RURAL AREAS.

3 (a) IN GENERAL.—Part A of title XVIII of the Social

4 Security Act (42 U.S.C. 1395 et seq.) is amended by add5 ing at the end the following new section:

6 ‘‘DEMONSTRATION PROJECTS TO IMPROVE ACCESS IN

7 RURAL AREAS

8 ‘‘SEC. 1821. (a) MEDICAL ASSISTANCE FACILITY

9 DEMONSTRATION PROJECT.—

10 (1) ESTABLISHMENT.—The Secretary shall pro11 vide for the establishment of demonstration projects

12 in States providing that medical assistance facilities

13 located in such States may receive payment in ac14 cordance with paragraph (4).

15 ‘‘(2) APPLICATIONS.—

16 ‘‘(A) IN GENERAL.—Each State desiring to

17 conduct a demonstrationproject under this sub18 section shall prepare and submit to the Sec19 retary an application, at such time, in such

20 manner, and containing such information as the

21 Secretary may require, including an explanation

22 of a plan for evaluating the project.

23 ‘‘(B) APPROVAL OF APPLICATIONS.—A

24 State that submits an application under sub25 paragraph (A) may begin a demonstration

26 project under this subsection—
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•S 2374 IS

1 ‘‘(i) upon approval of such application

2 by the Secretary; or

3 ‘‘(ii) at the end of the 60-day period

4 beginning on the date such application is

5 submitted, unless the Secretary denies the

6 application during such period.

7 ‘‘(3) MEDICAL ASSISTANCE FACILITY.—The

8 term ‘medical assistance facility’ means for a fiscal

9 year, a facility with respect to which the Secretary

10 finds the following:

11 ‘‘(A) The facility is located in a county (or

12 equivalent unit of local government) with fewer

13 than 6 residents per square mile or is located

14 more than a 35 mile drive from a hospital, a

15 rural primary care hospital, or another facility

16 described in this subsection.

17 ‘‘(B) The facility furnishes services to ill or

18 injured individuals prior to the transportation

19 of such individuals to a hospital or furnishes in20 patient care to individuals needing such care for

21 a period not longer than 96 hours.

22 ‘‘(C) The facility permits a physician as23 sistant or nurse practitioner to admit and treat

24 patients under the supervision of a physician

25 not present in such facility.
209

•S 2374 IS

1 ‘‘(D) The facility meets the requirements

2 of section 1861(e) that are applicable to a hos3 pital located in a rural area except that—

4 ‘‘(i) with respect to any requirements

5 relating to the number of hours that the

6 facility must be open on a daily or weekly

7 basis, the facility is only required to meet

8 the requirement to provide emergency care

9 on a 24-hour basis;

10 ‘‘(ii) with respect to any services re11 quired under such section to be furnished

12 by a dietician, pharmacist, laboratory tech13 nician, medical technologist, and radiologi14 cal technologist, the facility may furnish

15 such services on a part-time, off-site basis;

16 and

17 ‘‘(iii) the inpatient care described in

18 subparagraph (B) may be furnished by a

19 physician assistant or nurse practitioner as

20 provided in subparagraph (C).

21 ‘‘(E) The facility receives a certification of

22 medical necessity and appropriateness by a peer

23 review organization (or the equivalent of a peer

24 review organization) upon admitting each pa25 tient on an inpatient basis or, in the case of ad-
210

•S 2374 IS

1 missions that do not occur during regular busi2 ness hours, receives such a certification at the

3 earliest possible time.

4 ‘‘(F) The facility may enter into an agree5 ment with the Secretary under section 1883

6 under which the facility’s inpatient hospital fa7 cilities may be used for the furnishing of serv8 ices of the type which, if furnished by a skilled

9 nursing facility, would constitute extended care

10 services.

11 ‘‘(4) PAYMENT FOR SERVICES.—Each medical

12 assistance facility located in a State participating in

13 a demonstration project under this subsection shall

14 receive payment for inpatient medical assistance fa15 cility services (as defined in section 1861(oo)(2)) in

16 accordance with section 1814(m) and outpatient

17 medical assistance facility services (as defined in sec18 tion 1861(oo)(3)) in accordance with section

19 1834(i).

20 ‘‘(5) GRANTS.—The Secretary shall award

21 grants to—

22 ‘‘(A) selected States participating in a

23 demonstration project under this subsection for

24 the purpose of assisting such States in promot-
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•S 2374 IS

1 ing the establishment of medical assistance fa2 cilities; and

3 ‘‘(B) selected facilities in States participat4 ing in a demonstration project under this sec5 tion for the purpose of financing the costs a fa6 cility incurs in converting itself to a medical as7 sistance facility.

8 ‘‘(6) MAINTENANCE OF EFFORT.—Any funds

9 available for the activities covered by a demonstra10 tion project conducted under this subsection shall

11 supplement, and shall not supplant, funds that are

12 expended for similar purposes under any State, re13 gional, or local program.

14 ‘‘(7) DURATION.—A demonstration project

15 under this subsection shall be conducted for a period

16 not to exceed 8 years.

17 ‘‘(8) EVALUATIONS AND REPORTS.—

18 ‘‘(A) EVALUATIONS.—Each State that con19 ducts a demonstration project under this sub20 section shall submit to the Secretary a final

21 evaluation of such project within 360 days of

22 the termination of such project and such in23 terim evaluations as the Secretary may require.

24 ‘‘(B) REPORTS TO CONGRESS.—Not later

25 than 360 days after the first demonstration
212

•S 2374 IS

1 project under this subsection begins, and annu2 ally thereafter for each year in which a project

3 is conducted under this subsection, the Sec4 retary shall submit a report to the appropriate

5 committees of the Congress which evaluates the

6 effectiveness of the demonstration projects con7 ducted under this subsection and includes any

8 legislative recommendations determined appro9 priate by the Secretary.

10 ‘‘(9) AUTHORIZATION OF APPROPRIATIONS.—

11 There are authorized to be appropriated for each of

12 the fiscal years 1995 through 2000 from the Federal

13 Hospital Insurance Trust Fund—

14 ‘‘(A) $20,000,000 for grants to States

15 under paragraph (5)(A); and

16 ‘‘(B) $20,000,000 for grants to facilities

17 under paragraph (5)(B).

18 ‘‘(b) RURAL EMERGENCY ACCESS CARE HOSPITAL

19 DEMONSTRATION PROJECT.—

20 ‘‘(1) IN GENERAL.—

21 ‘‘(A) ESTABLISHMENT.—The Secretary

22 shall provide for the establishment of dem23 onstration projects in States providing that

24 rural emergency access care hospitals located in

25 such States may receive payment in accordance
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•S 2374 IS

1 with paragraph (5) for rural emergency access

2 care hospital services provided to medicare

3 beneficiaries.

4 ‘‘(2) APPLICATIONS.—

5 ‘‘(A) IN GENERAL.—Each State desiring to

6 conduct a demonstration project under this sub7 section shall prepare and submit to the Sec8 retary an application, at such time, in such

9 manner, and containing such information as the

10 Secretary may require, including an explanation

11 of a plan for evaluating the project.

12 ‘‘(B) APPROVAL OF APPLICATIONS.—A

13 State that submits an application under sub14 paragraph (A) may begin a demonstration

15 project under this subsection—

16 ‘‘(i) upon approval of such application

17 by the Secretary; or

18 ‘‘(ii) at the end of the 60-day period

19 beginning on the date such application is

20 submitted, unless the Secretary denies the

21 application during such period.

22 ‘‘(3) RURAL EMERGENCY ACCESS CARE HOS23 PITAL.—For purposes of this subsection, the term

24 ‘rural emergency access care hospital’ means, for a
214

•S 2374 IS

1 fiscal year, a facility with respect to which the Sec2 retary finds the following:

3 ‘‘(A) The facility is located in a rural area

4 (as defined in section 1886(d)(2)(D)).

5 ‘‘(B) The facility was a hospital under this

6 title at any time during the 5-year period that

7 ends on the date of the enactment of this sub8 section.

9 ‘‘(C) The facility is in danger of closing

10 due to low inpatient utilization rates and nega11 tive operating losses, and the closure of the fa12 cility would limit the access of individuals resid13 ing in the facility’s service area to emergency

14 services.

15 ‘‘(D) The facility has entered into (or

16 plans to enter into) an agreement with a hos17 pital with a participation agreement in effect

18 under section 1866(a), and under such agree19 ment the hospital shall accept patients trans20 ferred to the hospital from the facility and re21 ceive data from and transmit data to the facil22 ity.

23 ‘‘(E) There is a practitioner who is quali24 fied to provide advanced cardiac life support

25 services (as determined by the State in which
215

•S 2374 IS

1 the facility is located) on-site at the facility on

2 a 24-hour basis.

3 ‘‘(F) A physician is available on-call to

4 provide emergency medical services on a 24-

5 hour basis.

6 ‘‘(G) The facility meets such staffing re7 quirements as would apply under section

8 1861(e) to a hospital located in a rural area,

9 except that—

10 ‘‘(i) the facility need not meet hospital

11 standards relating to the number of hours

12 during a day, or days during a week, in

13 which the facility must be open, except in14 sofar as the facility is required to provide

15 emergency care on a 24-hour basis under

16 subparagraphs (E) and (F); and

17 ‘‘(ii) the facility may provide any serv18 ices otherwise required to be provided by a

19 full-time, on-site dietician, pharmacist, lab20 oratory technician, medical technologist, or

21 radiological technologist on a part-time,

22 off-site basis.

23 ‘‘(H) The facility meets the requirements

24 applicable to clinics and facilities under sub25 paragraphs (C) through (J) of paragraph (2) of
216

•S 2374 IS

1 section 1861(aa) and of clauses (ii) and (iv) of

2 the second sentence of such paragraph (or, in

3 the case of the requirements of subparagraph

4 (E), (F), or (J) of such paragraph, would meet

5 the requirements if any reference in such sub6 paragraph to a ‘nurse practitioner’ or to ‘nurse

7 practitioners’ was deemed to be a reference to

8 a ‘nurse practitioner or nurse’ or to ‘nurse

9 practitioners or nurses’), except that in deter10 mining whether a facility meets the require11 ments of this subparagraph, subparagraphs (E)

12 and (F) of that paragraph shall be applied as

13 if any reference to a ‘physician’ is a reference

14 to a physician as defined in section 1861(r)(1).

15 ‘‘(4) RURAL EMERGENCY ACCESS CARE HOS16 PITAL SERVICES.—For purposes of this subsection,

17 the term ‘rural emergency access care hospital serv18 ices’ means the following services provided by a rural

19 emergency access care hospital:

20 ‘‘(A) An appropriate medical screening ex21 amination (as described in section 1867(a)).

22 ‘‘(B) Necessary stabilizing examination

23 and treatment services for an emergency medi24 cal condition and labor (as described in section

25 1867(b)).’’.
217

•S 2374 IS

1 ‘‘(5) PAYMENT FOR SERVICES.—Each rural

2 emergency access care hospital located in a State

3 participating in a demonstration project under this

4 subsection shall receive payment for rural emergency

5 access care hospital services in accordance with sec6 tion 1833(a)(6).

7 ‘‘(6) GRANTS.—The Secretary shall award

8 grants to—

9 ‘‘(A) selected States participating in a

10 demonstration project under this subsection for

11 the purpose of assisting such States in promot12 ing the establishment of rural emergency access

13 care hospitals; and

14 ‘‘(B) selected facilities in States participat15 ing in a demonstration project under this sec16 tion for the purpose of financing the costs a fa17 cility incurs in converting itself to a rural emer18 gency access care hospitals.

19 ‘‘(7) MAINTENANCE OF EFFORT.—Any funds

20 available for the activities covered by a demonstra21 tion project conducted under this subsection shall

22 supplement, and shall not supplant, funds that are

23 expended for similar purposes under any State, re24 gional, or local program.
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•S 2374 IS

1 ‘‘(8) DURATION.—A demonstration project

2 under this subsection shall be conducted for a period

3 not to exceed 8 years.

4 ‘‘(9) EVALUATIONS AND REPORTS.—

5 ‘‘(A) EVALUATIONS.—Each State that con6 ducts a demonstration project under this sub7 section shall submit to the Secretary a final

8 evaluation of such project within 360 days of

9 the termination of such project and such in10 terim evaluations as the Secretary may require.

11 ‘‘(B) REPORTS TO CONGRESS.—Not later

12 than 360 days after the first demonstration

13 project under this subsection begins, and annu14 ally thereafter for each year in which a project

15 is conducted under this subsection, the Sec16 retary shall submit a report to the appropriate

17 committees of the Congress which evaluates the

18 effectiveness of the demonstration projects con19 ducted under this subsection and includes any

20 legislative recommendations determined appro21 priate by the Secretary.

22 ‘‘(10) AUTHORIZATION OF APPROPRIATIONS.—

23 There are authorized to be appropriated for each of

24 the fiscal years 1995 through 2000 from the Federal

25 Hospital Insurance Trust Fund—
219

•S 2374 IS

1 ‘‘(A) $20,000,000 for grants to States

2 under paragraph (6)(A); and

3 ‘‘(B) $20,000,000 for grants to facilities

4 under paragraph (6)(B).

5 (b) COVERAGE OF, AND PAYMENT FOR, MEDICAL AS6 SISTANCE FACILITY SERVICES.

7 (1) AMENDMENTS TO PART A.—

8 (A) DEFINITIONS.—Section 1861 of the

9 Social Security Act (42 U.S.C. 1395x) is

10 amended by adding at the end the following

11 new subsection:

12 ‘‘Medical Assistance Facility; Medical Assistance Facility

13 Services

14 ‘‘(oo)(1) The term ‘medical assistance facility’ means

15 a facility which is located in a State that is participating

16 in a demonstration project under section 1820(a) and for

17 which the Secretary finds that the criteria described in

18 subparagraphs (A) through (F) of section 1820(a) are met

19 with respect to the facility.

20 (2) The term ‘inpatient medical assistance facil21 ity services’ means items and services furnished to

22 an inpatient of a medical assistance facility by such

23 facility that would be inpatient hospital services if

24 furnished to an inpatient of a hospital by a hos25 pital.’’.
220

•S 2374 IS

1 (B) COVERAGE AND PAYMENT.—(i) Sec2 tion 1812(a)(1) of such Act (42 U.S.C.

3 1395d(a)(1)) is amended by striking ‘‘and inpa4 tient rural primary care hospital services’’ and

5 inserting ‘‘, inpatient rural primary care hos6 pital services, and inpatient medical assistance

7 facility services’’.

8 (ii) Section 1814 of such Act (42 U.S.C.

9 1395f) is amended—

10 (I) in subsection (a)—

11 (aa) by striking ‘‘and’’ at the end

12 of paragraph (7),

13 (bb) by striking the period at the

14 end of paragraph (8) and inserting ‘‘;

15 and’’, and

16 (cc) by inserting after paragraph

17 (8) the following new paragraph:

18 ‘‘(9) in the case of inpatient medical assistance

19 facility services, a physician certifies that such serv20 ices were required to be immediately furnished on a

21 temporary, inpatient basis.’’;

22 (ii) in subsection (b), by striking ‘‘inpa23 tient rural primary care hospital services,’’ and

24 inserting ‘‘inpatient rural primary care hospital

25 services, other than a medical assistance facility
221

•S 2374 IS

1 providing inpatient medical assistance facility

2 services,’’; and

3 (III) by adding at the end the follow4 ing new subsection:

5 ‘‘Payment for Inpatient Medical Assistance Facility

6 Services

7 ‘‘(m) The amount of payment under this part for in8 patient medical assistance facility services is the reason9 able costs of the medical assistance facility in providing

10 such services.’’.

11 (C) TREATMENT OF MEDICAL ASSISTANCE

12 FACILITIES AS PROVIDERS OF SERVICES.—(i)

13 Section 1861(u) of such Act (42 U.S.C.

14 1395x(u)) is amended by inserting ‘‘medical as15 sistance facility,’’ after ‘‘rural primary care hos16 pital,’’.

17 (ii) The first sentence of section 1864(a) of

18 such Act (42 U.S.C. 1395aa(a)) is amended by

19 inserting ‘‘a medical assistance facility, as de20 fined in section 1861(oo)(1),’’ after

21 ‘‘1861(mm)(1),’’.

22 (iii) The third sentence of section 1865(a)

23 of such Act (42 U.S.C. 1395bb(a)) is amended

24 by striking ‘‘or 1861(mm)(1)’’ and inserting

25 ‘‘1861(mm)(1), or 1861(oo)(1),’’.
222

•S 2374 IS

1 (D) CONFORMING AMENDMENTS.—(i) Sec2 tion 1128A(b)(1) of such Act (42 U.S.C.

3 1320a–7a(b)(1)) is amended—

4 (I) by striking ‘‘or a rural primary

5 care hospital’’ the first place it appears

6 and inserting ‘‘, a rural primary care hos7 pital, or a medical assistance facility’’; and

8 (II) by striking ‘‘or a rural primary

9 care hospital’’ the second place it appears

10 and inserting ‘‘, the rural primary care

11 hospital, or the medical assistance facil12 ity’’.

13 (ii) Section 1128B(c) of such Act (42

14 U.S.C. 1320a–7b(c)) is amended by inserting

15 ‘‘medical assistance facility,’’ after ‘‘rural pri16 mary care hospital,’’.

17 (iii) Section 1134 of such Act (42 U.S.C.

18 1320b–4) is amended by striking ‘‘or rural pri19 mary care hospitals’’ each place it appears and

20 inserting ‘‘, rural primary care hospitals, or

21 medical assistance facilities’’.

22 (iv) Section 1138(a)(1) of such Act (42

23 U.S.C. 1320b–8(a)(1)) is amended—

24 (I) in the matter preceding subpara25 graph (A), by striking ‘‘or rural primary
223

•S 2374 IS

1 care hospital’’ and inserting ‘‘, rural pri2 mary care hospital, or medical assistance

3 facility’’, and

4 (II) in the matter preceding clause (i)

5 of subparagraph (A), by striking ‘‘or rural

6 primary care hospital’’ and inserting ‘‘,

7 rural primary care hospital, or medical as8 sistance facility’’.

9 (v) Section 1164(e) of such Act (42 U.S.C.

10 1320c–13(e)) is amended by inserting ‘‘medical

11 assistance facilities,’’ after ‘‘rural primary care

12 hospitals,’’.

13 (vi) Section 1816(c)(2)(C) of such Act (42

14 U.S.C. 1395h(c)(2)(C)) is amended by inserting

15 ‘‘medical assistance facility,’’ after ‘‘rural pri16 mary care hospital,’’.

17 (vii) Section 1833 of such Act (42 U.S.C.

18 1395l) is amended—

19 (I) in subsection (h)(5)(A)(iii)—

20 (aa) by striking ‘‘or rural pri21 mary care hospital’’ and inserting

22 ‘‘rural primary care hospital, or medi23 cal assistance facility’’; and
224

•S 2374 IS

1 (bb) by striking ‘‘to the hospital’’

2 and inserting ‘‘to the hospital or the

3 facility’’;

4 (II) in subsection (i)(1)(A), by insert5 ing ‘‘medical assistance facility,’’ after

6 ‘‘rural primary care hospital,’’;

7 (III) in subsection (i)(3)(A), by strik8 ing ‘‘or rural primary care hospital serv9 ices’’ and inserting ‘‘rural primary care

10 hospital services, or medical assistance fa11 cility services’’;

12 (IV) in subsection (l)(5)(A), by insert13 ing ‘‘medical assistance facility,’’ after

14 ‘‘rural primary care hospital,’’ each place it

15 appears; and

16 (V) in subsection (l)(5)(C), by striking

17 ‘‘or rural primary care hospital’’ each place

18 it appears and inserting ‘‘, rural primary

19 care hospital, or medical assistance facil20 ity’’.

21 (viii) Section 1835(c) of such Act (42

22 U.S.C. 1395n(c)) is amended by adding at the

23 end the following: ‘‘A medical assistance facility

24 shall be considered a hospital for purposes of

25 this subsection.’’.
225

•S 2374 IS

1 (ix) Section 1842(b)(6)(A)(ii) of such Act

2 (42 U.S.C. 1395u(b)(6)(A)(ii)) is amended by

3 inserting ‘‘medical assistance facility,’’ after

4 ‘‘rural primary care hospital,’’.

5 (x) Section 1861 of such Act (42 U.S.C.

6 1395x) is amended—

7 (I) in the last sentence of subsection

8 (e), by striking ‘‘1861(mm)(1))’’ and in9 serting ‘‘1861(mm)(1)) or a medical assist10 ance facility (as defined in section

11 1861(oo)(1)).’’,

12 (II) in subsection (w)(1) by inserting

13 ‘‘medical assistance facility,’’ after ‘‘rural

14 primary care hospital,’’, and

15 (III) in subsection (w)(2), by striking

16 ‘‘or rural primary care hospital’’ each place

17 it appears and inserting ‘‘, rural primary

18 care hospital, or medical assistance facil19 ity’’.

20 (xi) Section 1862(a)(14) of such Act (42

21 U.S.C. 1395y(a)(14)) is amended by striking

22 ‘‘or rural primary care hospital’’ each place it

23 appears and inserting ‘‘, rural primary care

24 hospital, or medical assistance facility’’.
226

•S 2374 IS

1 (xii) Section 1866(a)(1) of such Act (42

2 U.S.C 1395cc(a)(1)) is amended—

3 (I) in subparagraph (F)(ii), by insert4 ing ‘‘medical assistance facilities,’’ after

5 ‘‘rural primary care hospitals,’’;

6 (II) in subparagraph (H)—

7 (aa) in the matter preceding

8 clause (i), by inserting ‘‘and in the

9 case of medical assistance facilities

10 which provide inpatient medical assist11 ance facility services’’ after ‘‘rural pri12 mary care hospital services’’; and

13 (bb) in clauses (i) and (ii), by

14 striking ‘‘hospital’’ each place it ap15 pears and inserting ‘‘hospital or facil16 ity’’;

17 (III) in subparagraph (I)—

18 (aa) in the matter preceding

19 clause (i), by striking ‘‘or rural pri20 mary care hospital’’ and inserting ‘‘, a

21 rural primary care hospital, or a med22 ical assistance facility’’; and

23 (bb) in clause (ii), by striking

24 ‘‘the hospital’’ and inserting ‘‘the hos25 pital or the facility’’; and
227

•S 2374 IS

1 (IV) in subparagraph (N)—

2 (aa) in the matter preceding

3 clause (i), by striking ‘‘and rural pri4 mary hospitals’’ and inserting ‘‘, rural

5 primary care hospitals, and medical

6 assistance facilities’’;

7 (bb) in clause (i), by striking ‘‘or

8 rural primary care hospital,’’ and in9 serting ‘‘, rural primary care hospital,

10 or medical assistance facility,’’; and

11 (cc) in clause (ii), by striking

12 ‘‘hospital’’ and inserting ‘‘hospital or

13 facility’’.

14 (xiii) Section 1866(a)(3) of such Act (42

15 U.S.C 1395cc(a)(3)) is amended—

16 (I) by striking ‘‘rural primary care

17 hospital,’’ each place it appears in sub18 paragraphs (A) and (B) and inserting

19 ‘‘rural primary care hospital, medical as20 sistance facility,’’, and

21 (II) in subparagraph (C)(ii)(II), by

22 striking ‘‘rural primary care hospitals,’’

23 each place it appears and inserting ‘‘rural

24 primary care hospitals, medical assistance

25 facilities’’.
228

•S 2374 IS

1 (xiv) Section 1867(e)(5) of such Act (42

2 U.S.C. 1395dd(e)(5)) is amended by striking

3 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1))

4 or a medical assistance facility (as defined in

5 section 1861(oo)(1)).’’.

6 (2) AMENDMENTS TO PART B.—

7 (A) COVERAGE.—(i) Section 1861(oo) of

8 the Social Security Act (42 U.S.C. 1395x(oo)),

9 as added by paragraph (1)(A), is amended by

10 adding at the end the following new paragraph:

11 ‘‘(3) The term ‘outpatient medical assistance facility

12 services’ means medical and other health services fur13 nished by a medical assistance facility on an outpatient

14 basis.’’.

15 (ii) Section 1832(a)(2) of such Act (42

16 U.S.C. 1395k(a)(2)) is amended—

17 (I) in subparagraph (I), by striking

18 ‘‘and’’ at the end;

19 (II) in subparagraph (J), by striking

20 the period at the end and inserting ‘‘;

21 and’’; and

22 (III) by adding at the end the follow23 ing new subparagraph:

24 ‘‘(K) outpatient medical assistance facility

25 services (as defined in section 1861(oo)(3)).’’.
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•S 2374 IS

1 (B) PAYMENT.—(i) Section 1833(a) of

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

3 (I) in paragraph (2), in the matter

4 preceding subparagraph (A), by striking

5 ‘‘and (I)’’ and inserting ‘‘(I), and (K)’’;

6 (II) in paragraph (6), by striking

7 ‘‘and’’ at the end;

8 (III) in paragraph (7), by striking the

9 period at the end and inserting ‘‘; and’’;

10 and

11 (IV) by adding at the end the follow12 ing new paragraph:

13 ‘‘(8) in the case of outpatient medical assist14 ance facility services, the amounts described in sec15 tion 1834(i).’’.

16 (ii) Section 1834 of such Act (42 U.S.C.

17 1395m) is amended by adding at the end the

18 following new subsection:

19 ‘‘(i) PAYMENT FOR OUTPATIENT MEDICAL ASSIST20 ANCE FACILITY SERVICES.—The amount of payment for

21 outpatient medical assistance facility services provided in

22 a medical assistance facility under this part shall be deter23 mined by one of the two following methods, as elected by

24 the medical assistance facility:
230

•S 2374 IS

1 ‘‘(1) COST-BASED FACILITY FEE PLUS PROFES2 SIONAL CHARGES.—

3 ‘‘(A) FACILITY FEE.—With respect to fa4 cility services, not including any services for

5 which payment may be made under subpara6 graph (B), there shall be paid amounts equal to

7 the amounts described in section 1833(a)(2)(B)

8 (describing amounts paid for hospital out9 patient services).

10 ‘‘(B) REASONABLE CHARGES FOR PROFES11 SIONAL SERVICES.—In electing treatment under

12 this paragraph, payment for professional medi13 cal services otherwise included within outpatient

14 medical assistance facility services shall be

15 made under such other provisions of this part

16 as would apply to payment for such services if

17 they were not included in outpatient medical as18 sistance facility services.

19 ‘‘(2) ALL-INCLUSIVE RATE.—

20 ‘‘(A) IN GENERAL.—With respect to both

21 facility services and professional medical serv22 ices, there shall be paid amounts equal to the

23 excess of—

24 ‘‘(i) the costs which are reasonable

25 and related to the cost of furnishing such
231

•S 2374 IS

1 services or which are based on such other

2 tests of reasonableness as the Secretary

3 may prescribe in regulations, over

4 ‘‘(ii) the amount the facility may

5 charge as described in clause (i) of section

6 1866(a)(2)(A).

7 ‘‘(B) LIMITATION.—

8 ‘‘(i) IN GENERAL.—The payment

9 amount determined under subparagraph

10 (A) with respect to items and services shall

11 not exceed 80 percent of the amount deter12 mined under clause (i) of such subpara13 graph with respect to such items and serv14 ices.

15 ‘‘(ii) CERTAIN ITEMS AND SERV16 ICES.—Clause (i) shall not apply to—

17 ‘‘(I) items and services described

18 in section 1861(s)(10)(A), and

19 ‘‘(II) items and services fur20 nished in connection with obtaining a

21 second opinion required under section

22 1164(c)(2), or third opinion, if the

23 second opinion was in disagreement

24 with the first opinion.’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall be effective for services pro3 vided on or after the October 1, 1995.

4 (c) RURAL EMERGENCY ACCESS CARE HOSPITALS.—

5 (1) RURAL EMERGENCY ACCESS CARE HOS6 PITALS DESCRIBED.—Section 1861 of the Social Se7 curity Act (42 U.S.C. 1395x) is amended by adding

8 at the end the following new subsection:

9 ‘‘Rural Emergency Access Care Hospital; Rural

10 Emergency Access Care Hospital Services

11 ‘‘(pp)(1) The term ‘rural emergency access care hos12 pital’ means, for a fiscal year, a facility in a State partici13 pating in a demonstration project under section 1820(b)

14 and that meets the criteria described in subparagraphs (A)

15 through (H) of section 1820(b)(3).

16 ‘‘(2) The term ‘rural emergency access care hospital

17 services’ means the following services provided by a rural

18 emergency access care hospital:

19 ‘‘(A) An appropriate medical screening exam20 ination (as described in section 1867(a)).

21 ‘‘(B) Necessary stabilizing examination and

22 treatment services for an emergency medical condi23 tion and labor (as described in section 1867(b)).’’.

24 (2) REQUIRING RURAL EMERGENCY ACCESS

25 CARE HOSPITALS TO MEET HOSPITAL ANTI-DUMPING
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1 REQUIREMENTS.—Section 1867(e)(5) of such Act

2 (42 U.S.C. 1395(e)(5)) is amended by striking

3 ‘‘1861(mm)(1)’’ and inserting ‘‘1861(mm)(1)) and a

4 rural emergency access care hospital (as defined in

5 section 1861(pp)(1))’’.

6 (3) COVERAGE OF AND PAYMENT FOR SERV7 ICES.—Section 1832(a)(2) of the Social Security Act

8 (42 U.S.C. 1395k(a)(2)), as amended in subsection

9 (b)(2)(A)(ii), is amended—

10 (A) by striking ‘‘and’’ at the end of sub11 paragraph (J);

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

13 subparagraph (K) and inserting ‘‘; and’’; and

14 (C) by adding at the end the following new

15 subparagraph:

16 ‘‘(L) rural emergency access care hospital

17 services (as defined in section 1861(pp)(2)).’’

18 (4) PAYMENT BASED ON PAYMENT FOR OUT19 PATIENT RURAL PRIMARY CARE HOSPITAL SERV20 ICES.—

21 (A) IN GENERAL.—Section 1833(a)(6) of

22 the Social Security Act (42 U.S.C. 1395l(a)(6))

23 is amended by striking ‘‘services,’’ and inserting

24 ‘‘services and rural emergency access care hos25 pital services,’’.
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•S 2374 IS

1 (B) PAYMENT METHODOLOGY DE2 SCRIBED.—Section 1834(g) of such Act (42

3 U.S.C. 1395m(g)) is amended—

4 (i) in the heading, by striking ‘‘SERV5 ICES’’ and inserting ‘‘SERVICES AND

6 RURAL EMERGENCY ACCESS CARE HOS7 PITAL SERVICES’’; and

8 (ii) by adding at the end the following

9 new paragraph:

10 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

11 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

12 SERVICES.—The amount of payment for rural emer13 gency access care hospital services provided during

14 a year shall be determined using the applicable

15 method provided under this subsection for determin16 ing payment for outpatient rural primary care hos17 pital services during the year.’’.

18 (5) EFFECTIVE DATE.—The amendments made

19 by this subsection shall be effective for services pro20 vided on or after the October 1, 1995.

21 SEC. 353. MEDICARE-DEPENDENT, SMALL RURAL HOS22 PITALS.

23 (a) CLARIFICATION OF ADDITIONAL PAYMENT.—

24 Section 1886(d)(5)(G)(ii)(I) of the Social Security Act (42

25 U.S.C. 1395ww(d)(5)(G)(ii)(I)) is amended by striking
235

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1 ‘‘the first 3 12-month cost reporting periods that begin’’

2 and inserting ‘‘the 36-month period beginning with the

3 first day of the cost reporting period that begins’’.

4 (b) SPECIAL TREATMENT EXTENDED.—Section

5 1886(d)(5)(G) of such Act (42 U.S.C. 1395ww(d)(5)(G))

6 is amended—

7 (1) in clause (i), by striking ‘‘October 1, 1994’’

8 and inserting ‘‘October 1, 1999’’; and

9 (2) in clause (ii)(II), by striking ‘‘October 1,

10 1994’’ and inserting ‘‘October 1, 1999’’.

11 (c) EXTENSION OF TARGET AMOUNT.—Section

12 1886(b)(3)(D) of such Act (42 U.S.C. 1395ww(b)(3)(D))

13 is amended—

14 (1) in the matter preceding clause (i), by strik15 ing ‘‘March 31, 1993’’ and inserting ‘‘September 30,

16 1999’’; and

17 (2) by amending clause (iii) to read as follows:

18 ‘‘(iii) with respect to discharges occurring in fis19 cal years 1994 through 1999, the target amount for

20 the cost reporting period beginning in the previous

21 fiscal year increased by the applicable percentage in22 crease under subparagraph (B)(iv).’’.
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1 SEC. 354. EXPANDED COVERAGE FOR PHYSICIAN ASSIST2 ANTS AND NURSE PRACTITIONERS.

3 (a) COVERAGE IN OUTPATIENT SETTINGS.—(1) Sec4 tion 1861(s)(2)(K) of the Social Security Act (42 U.S.C.

5 1395x(s)(2)(K)) is amended—

6 (A) in clause (i)—

7 (i) by striking ‘‘or’’ at the end of

8 subclause (II); and

9 (ii) by inserting ‘‘or (IV) in an out10 patient setting as defined by the Sec11 retary’’ following ‘‘shortage area,’’; and

12 (B) in clause (ii), by striking ‘‘in a skilled

13 nursing facility or nursing facility (as defined in

14 section 1919(a)’’ and inserting ‘‘(I) in a skilled

15 nursing facility or nursing facility (as defined in

16 section 1919(a)), or (II) in an outpatient set17 ting as defined by the Secretary’’.

18 (2) Section 1833(r)(1) of such Act (42 U.S.C.

19 1395l(r)(1)) is amended by striking ‘‘rural area)’’

20 and inserting ‘‘rural area), or for services described

21 in section 1861(s)(2)(K)(ii)(II) (relating to nurse

22 practitioner services in an outpatient settings)’’.

23 (3) Section 1842(b)(6)(C) (42 U.S.C.

24 1395u(b)(6)(C)) is amended by striking ‘‘(ii)’’ and

25 inserting ‘‘(ii)(II)’’.
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•S 2374 IS

1 (b) PAYMENT BASED ON PHYSICIAN FEE SCHED2 ULE.—

3 (1) Section 1833(a)(1)(O) of such Act (42

4 U.S.C. 1395l(a)(1)(O)) is amended—

5 (A) by striking ‘‘section 1861(s)(2)(K)(iii)

6 (relating to nurse practitioner and clinical nurse

7 specialist services provided in a rural area)’’

8 and inserting ‘‘section 1861(s)(2)(K)’’;

9 (B) by striking ‘‘for services furnished on

10 or after January 1, 1992,’’ and inserting ‘‘for

11 services described in section 1861(s)(2)(K)(iii)

12 furnished on or after January 1, 1992, and for

13 services described in clauses (i), (ii), and (iv) of

14 section 1861(s)(2)(K) furnished on or after

15 January 1, 1997,’’; and

16 (C) by striking ‘‘subsection (r)(2)’’ and in17 serting ‘‘subsection (r)(2) or subparagraph (A)

18 or (B) of section 1842(b)(12)’’.

19 (2) Section 1842(b)(12)(A) of such Act (42

20 U.S.C. 1395u(b)(12)(A)) is amended—

21 (A) by striking ‘‘and’’ at the end of clause

22 (i);

23 (B) in clause (ii) in the matter preceding

24 subclause (I), by striking ‘‘the prevailing’’ and
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•S 2374 IS

1 inserting ‘‘for services furnished before January

2 1, 1997, the prevailing’’;

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

4 clause (ii)(II) and inserting ‘‘; and’’; and

5 (D) by inserting at the end the following

6 clause:

7 ‘‘(iii) in the case of services furnished

8 on or after January 1, 1997, the fee sched9 ule amount shall be equal to—

10 ‘‘(I) in the case of services per11 formed as an assistant at surgery, 65

12 percent of the amount that would oth13 erwise be recognized if performed by a

14 physician who is serving as an assist15 ance at surgery,

16 ‘‘(II) in the case of services per17 formed (other than as an assistant at

18 surgery) in a hospital, 75 percent of

19 the fee schedule amount specified

20 under section 1848, and

21 ‘‘(III) in the case of other serv22 ices, 85 percent of the fee schedule

23 amount specified under section 1848.

24 (c) RURAL NURSE PRACTITIONERS AS ASSISTANTS

25 AT SURGERY IN URBAN AREAS.—Section
239

•S 2374 IS

1 1861(s)(2)(K)(ii) of such Act (42 U.S.C.

2 1395x(s)(2)(K)(ii)), as amended by subsection (a)(2), is

3 further amended by adding ‘‘or services as an assistant

4 at surgery furnished by a nurse practitioner whose pri5 mary practice location (as defined by the Secretary) is in

6 a rural area (as defined in section 1886(d)(2)(D)) to an

7 individual who resides in a rural area when the service

8 is furnished to such individual in an urban area by such

9 practitioner when such practitioner refers such individual

10 to an urban area for the furnishing of services’’ after ‘‘as

11 defined by the Secretary’’.

12 (d) CONFORMING AMENDMENTS.—

13 (1) Section 1861(b)(4) of such Act (42 U.S.C.

14 1395x(b)(4)) is amended by striking ‘‘subsection

15 (s)(2)(K)(i)’’ and inserting ‘‘subsection (s)(2)(K)’’.

16 (2) Section 1862(a)(14) of such Act (42 U.S.C.

17 1395y(a)(14)), as amended by section 620(b)(4)(K),

18 is amended by striking ‘‘section 1861(s)(2)(K)(i)’’

19 and inserting ‘‘section 1861(s)(2)(K)’’.

20 (3) Section 1866(a)(1)(H) of such Act (42

21 U.S.C. 1395cc(a)(1)(H)), is amended by striking

22 ‘‘section 1861(s)(2)(K)(i)’’ and inserting ‘‘section

23 1861(s)(2)(K)’’.
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to services furnished on or after

3 January 1, 1997.

4 Subtitle F—Emergency Medical

5 Systems

6 SEC. 361. GRANTS TO STATES REGARDING AIRCRAFT FOR

7 TRANSPORTING RURAL VICTIMS OF MEDICAL

8 EMERGENCIES.

9 Part E of title XII of the Public Health Service Act

10 (42 U.S.C. 300d–51 et seq.) is amended by adding at the

11 end thereof the following new section:

12 ‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

13 VICTIMS OF MEDICAL EMERGENCIES.

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

15 to States to assist such States in the creation or enhance16 ment of air medical transport systems that provide victims

17 of medical emergencies in rural areas with access to treat18 ments for the injuries or other conditions resulting from

19 such emergencies.

20 ‘‘(b) APPLICATION AND PLAN.—

21 ‘‘(1) APPLICATION.—To be eligible to receive a

22 grant under subsection (a), a State shall prepare

23 and submit to the Secretary an application in such

24 form, made in such manner, and containing such

25 agreements, assurances, and information, including
241

•S 2374 IS

1 a State plan as required in paragraph (2), as the

2 Secretary determines to be necessary to carry out

3 this section.

4 ‘‘(2) STATE PLAN.—An application submitted

5 under paragraph (1) shall contain a State plan that

6 shall—

7 ‘‘(A) describe the intended uses of the

8 grant proceeds and the geographic areas to be

9 served;

10 ‘‘(B) demonstrate that the geographic

11 areas to be served, as described under subpara12 graph (A), are rural in nature;

13 ‘‘(C) demonstrate that there is a lack of

14 facilities available and equipped to deliver ad15 vanced levels of medical care in the geographic

16 areas to be served;

17 ‘‘(D) demonstrate that in utilizing the

18 grant proceeds for the establishment or en19 hancement of air medical services the State

20 would be making a cost-effective improvement

21 to existing ground-based or air emergency medi22 cal service systems;

23 ‘‘(E) demonstrate that the State will not

24 utilize the grant proceeds to duplicate the capa25 bilities of existing air medical systems that are
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•S 2374 IS

1 effectively meeting the emergency medical needs

2 of the populations they serve;

3 ‘‘(F) demonstrate that in utilizing the

4 grant proceeds the State is likely to achieve a

5 reduction in the morbidity and mortality rates

6 of the areas to be served, as determined by the

7 Secretary;

8 ‘‘(G) demonstrate that the State, in utiliz9 ing the grant proceeds, will—

10 ‘‘(i) maintain the expenditures of the

11 State for air and ground medical transport

12 systems at a level equal to not less than

13 the level of such expenditures maintained

14 by the State for the fiscal year preceding

15 the fiscal year for which the grant is re16 ceived; and

17 ‘‘(ii) ensure that recipients of direct

18 financial assistance from the State under

19 such grant will maintain expenditures of

20 such recipients for such systems at a level

21 at least equal to the level of such expendi22 tures maintained by such recipients for the

23 fiscal year preceding the fiscal year for

24 which the financial assistance is received;
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•S 2374 IS

1 ‘‘(H) demonstrate that persons experienced

2 in the field of air medical service delivery were

3 consulted in the preparation of the State plan;

4 and

5 ‘‘(I) contain such other information as the

6 Secretary may determine appropriate.

7 ‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In

8 determining whether to award a grant to a State under

9 this section, the Secretary shall—

10 ‘‘(1) consider the rural nature of the areas to

11 be served with the grant proceeds and the services

12 to be provided with such proceeds, as identified in

13 the State plan submitted under subsection (b); and

14 ‘‘(2) give preference to States with State plans

15 that demonstrate an effective integration of the pro16 posed air medical transport systems into a com17 prehensive network or plan for regional or statewide

18 emergency medical service delivery.

19 ‘‘(d) STATE ADMINISTRATION AND USE OF

20 GRANT.—

21 ‘‘(1) IN GENERAL.—The Secretary may not

22 make a grant to a State under subsection (a) unless

23 the State agrees that such grant will be adminis24 tered by the State agency with principal responsibil25 ity for carrying out programs regarding the provi-
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•S 2374 IS

1 sion of medical services to victims of medical emer2 gencies or trauma.

3 ‘‘(2) PERMITTED USES.—A State may use

4 amounts received under a grant awarded under this

5 section to award subgrants to public and private en6 tities operating within the State.

7 ‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—

8 The Secretary may not make a grant to a State

9 under subsection (a) unless that State agrees that,

10 in developing and carrying out the State plan under

11 subsection (b)(2), the State will provide public notice

12 with respect to the plan (including any revisions

13 thereto) and facilitate comments from interested

14 persons.

15 ‘‘(e) NUMBER OF GRANTS.—The Secretary shall

16 award grants under this section to not less than 7 States.

17 ‘‘(f) REPORTS.—

18 ‘‘(1) REQUIREMENT.—A State that receives a

19 grant under this section shall annually (during each

20 year in which the grant proceeds are used) prepare

21 and submit to the Secretary a report that shall con22 tain—

23 ‘‘(A) a description of the manner in which

24 the grant proceeds were utilized;
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•S 2374 IS

1 ‘‘(B) a description of the effectiveness of

2 the air medical transport programs assisted

3 with grant proceeds; and

4 ‘‘(C) such other information as the Sec5 retary may require.

6 ‘‘(2) TERMINATION OF FUNDINGS.—In review7 ing reports submitted under paragraph (1), if the

8 Secretary determines that a State is not using

9 amounts provided under a grant awarded under this

10 section in accordance with the State plan submitted

11 by the State under subsection (b), the Secretary may

12 terminate the payment of amounts under such grant

13 to the State until such time as the Secretary deter14 mines that the State comes into compliance with

15 such plan.

16 ‘‘(g) DEFINITION.—As used in this section, the term

17 ‘rural areas’ means geographic areas that are located out18 side of standard metropolitan statistical areas, as identi19 fied by the Secretary.

20 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to make grants under

22 this section, $15,000,000 for fiscal year 1995, and such

23 sums as may be necessary for each for fiscal years 1996

24 and 1997.’’.
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1 Subtitle G—Studies and Reports

2 SEC. 371. ASSISTANT SECRETARY FOR RURAL HEALTH.

3 (a) APPOINTMENT OF ASSISTANT SECRETARY.—

4 (1) IN GENERAL.—Section 711(a) of the Social

5 Security Act (42 U.S.C. 912(a)) is amended—

6 (A) by striking ‘‘by a Director, who shall

7 advise the Secretary’’ and inserting ‘‘by an As8 sistant Secretary for Rural Health (in this sec9 tion referred to as the ‘Assistant Secretary’),

10 who shall report directly to the Secretary’’; and

11 (B) by adding at the end the following new

12 sentence: ‘‘The Office shall not be a component

13 of any other office, service, or component of the

14 Department.’’.

15 (2) CONFORMING AMENDMENTS.—(A) Section

16 711(b) of the Social Security Act (42 U.S.C. 912(b))

17 is amended by striking ‘‘the Director’’ and inserting

18 ‘‘the Assistant Secretary’’.

19 (B) Section 338J(a) of the Public Health Serv20 ice Act (42 U.S.C. 254r(a)) is amended by striking

21 ‘‘Director of the Office of Rural Health Policy’’ and

22 inserting ‘‘Assistant Secretary for Rural Health’’.

23 (C) Section 464T(b) of the Public Health Serv24 ice Act (42 U.S.C. 285p–2(b)) is amended in the

25 matter preceding paragraph (1) by striking ‘‘Direc-
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•S 2374 IS

1 tor of the Office of Rural Health Policy’’ and insert2 ing ‘‘Assistant Secretary for Rural Health’’.

3 (D) Section 6213 of the Omnibus Budget Rec4 onciliation Act of 1989 (42 U.S.C. 1395x note) is

5 amended in subsection (e)(1) by striking ‘‘Director

6 of the Office of Rural Health Policy’’ and inserting

7 ‘‘Assistant Secretary for Rural Health’’.

8 (E) Section 403 of the Ryan White Comprehen9 sive AIDS Resources Emergency Act of 1990 (42

10 U.S.C. 300ff–11 note) is amended in the matter pre11 ceding paragraph (1) of subsection (a) by striking

12 ‘‘Director of the Office of Rural Health Policy’’ and

13 inserting ‘‘Assistant Secretary for Rural Health’’.

14 (3) AMENDMENT TO THE EXECUTIVE SCHED15 ULE.—Section 5315 of title 5, United States Code,

16 is amended by striking ‘‘Assistant Secretaries of

17 Health and Human Services (5)’’ and inserting ‘‘As18 sistant Secretaries of Health and Human Services

19 (6)’’.

20 (b) EXPANSION OF DUTIES.—Section 711(a) of the

21 Social Security Act (42 U.S.C. 912(a)) is amended by

22 striking ‘‘and access to (and the quality of) health care

23 in rural areas’’ and inserting ‘‘access to, and quality of,

24 health care in rural areas, and reforms to the health care
248

•S 2374 IS

1 system and the implications of such reforms for rural

2 areas’’.

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

4 this section shall take effect on January 1, 1996.

5 SEC. 372. STUDY ON TRANSITIONAL MEASURES TO ENSURE

6 ACCESS.

7 (a) IN GENERAL.—The Prospective Payment Assess8 ment Commission shall conduct a study concerning the

9 need for legislation or regulations to ensure that vulner10 able populations have adequate access to health plans and

11 health care providers and services.

12 (b) REPORT.—Not later than 1 year after the date

13 of enactment of this Act, the Prospective Payment Assess14 ment Commission shall prepare and submit to Congress

15 a report concerning the findings and recommendations of

16 the Commission based on the study conducted under sub17 section (a).

18 SEC. 373. STUDY ON EXPANDING BENEFITS UNDER HEALTH

19 PLANS FOR INDIVIDUALS RESIDING IN

20 RURAL AREAS.

21 (a) STUDY.—

22 (1) IN GENERAL.—The Secretary shall conduct

23 a study on the possible benefits of a program under

24 which issuers of health plans covering individuals

25 who reside in rural areas may—
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•S 2374 IS

1 (A) develop a package of benefits targeted

2 at improving access to health care services

3 which would supplement the benefits included

4 under such plan; and

5 (B) receive premium payments for such

6 package of benefits from the Secretary under

7 the Medicare or Medicaid programs.

8 (2) CONSULTATION WITH CERTAIN ENTITIES.—

9 In conducting the study under paragraph (1), the

10 Secretary shall consult with the Office of Rural

11 Health Policy and private and public entities with

12 expertise in rural health issues.

13 (b) REPORT.—Not later than 1 year after the date

14 of the enactment of this Act the Secretary shall submit

15 a report to Congress containing the results of the study

16 conducted under subsection (a) and any legislative rec17 ommendations determined appropriate by the Secretary.

18 TITLE IV—LONG-TERM CARE

19 PROVISIONS

20 SEC. 400. AMENDMENT OF INTERNAL REVENUE CODE OF

21 1986.

22 Except as otherwise expressly provided, whenever in

23 this title an amendment or repeal is expressed in terms

24 of an amendment to, or repeal of, a section or other provi25 sion, the reference shall be considered to be made to a
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1 section or other provision of the Internal Revenue Code

2 of 1986.

3 Subtitle A—Long-Term Care

4 Services and Contracts

5 PART I—GENERAL PROVISIONS

6 SEC. 401. QUALIFIED LONG-TERM CARE SERVICES TREAT7 ED AS MEDICAL CARE.

8 (a) GENERAL RULE.—Paragraph (1) of section

9 213(d) (defining medical care) is amended by striking

10 ‘‘or’’ at the end of subparagraph (B), by redesignating

11 subparagraph (C) as subparagraph (D), and by inserting

12 after subparagraph (B) the following new subparagraph:

13 ‘‘(C) for qualified long-term care services

14 (as defined in subsection (g)), or’’.

15 (b) QUALIFIED LONG-TERM CARE SERVICES DE16 FINED.—Section 213 (relating to deduction for medical,

17 dental, etc. expenses), as amended by section 101, is

18 amended by adding at the end the following new sub19 section:

20 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For

21 purposes of this section—

22 ‘‘(1) IN GENERAL.—The term ‘qualified long23 term care services’ means necessary diagnostic, pre24 ventive, therapeutic, rehabilitative, and maintenance

25 (including personal care) services—
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1 ‘‘(A) which are required by an individual

2 during any period during which such individual

3 is a functionally impaired individual,

4 ‘‘(B) which have as their primary purpose

5 the provision of needed assistance with 1 or

6 more activities of daily living which a function7 ally impaired individual is certified as being un8 able to perform under paragraph (2)(A), and

9 ‘‘(C) which are provided pursuant to a con10 tinuing plan of care prescribed by a licensed

11 health care practitioner (other than a relative of

12 such individual).

13 ‘‘(2) FUNCTIONALLY IMPAIRED INDIVIDUAL.—

14 ‘‘(A) IN GENERAL.—The term ‘functionally

15 impaired individual’ means any individual who

16 is certified by a licensed health care practitioner

17 (other than a relative of such individual) as

18 being unable to perform, without substantial as19 sistance from another individual (including as20 sistance involving verbal reminding, physical

21 cueing, or substantial supervision), at least 3

22 activities of daily living described in paragraph

23 (3).

24 ‘‘(B) SPECIAL RULE FOR HOME HEALTH

25 CARE SERVICES.—In the case of services which
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1 are provided during any period during which an

2 individual is residing within the individual’s

3 home (whether or not the services are provided

4 within the home), subparagraph (A) shall be

5 applied by substituting ‘2’ for ‘3’. For purposes

6 of this subparagraph, a nursing home or similar

7 facility shall not be treated as a home.

8 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

9 the following is an activity of daily living:

10 ‘‘(A) Eating.

11 ‘‘(B) Transferring.

12 ‘‘(C) Toileting.

13 ‘‘(D) Dressing.

14 ‘‘(E) Bathing.

15 ‘‘(4) LICENSED HEALTH CARE PRACTI16 TIONER.—

17 ‘‘(A) IN GENERAL.—The term ‘licensed

18 health care practitioner’ means—

19 ‘‘(i) a physician or registered profes20 sional nurse,

21 ‘‘(ii) a qualified community care case

22 manager (as defined in subparagraph (B)),

23 or

24 ‘‘(iii) any other individual who meets

25 such requirements as may be prescribed by
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1 the Secretary after consultation with the

2 Secretary of Health and Human Services.

3 ‘‘(B) QUALIFIED COMMUNITY CARE CASE

4 MANAGER.—The term ‘qualified community

5 care case manager’ means an individual or en6 tity which—

7 ‘‘(i) has experience or has been

8 trained in providing case management

9 services and in preparing individual care

10 plans;

11 ‘‘(ii) has experience in assessing indi12 viduals to determine their functional and

13 cognitive impairment;

14 ‘‘(iii) is not a relative of the individual

15 receiving case management services; and

16 ‘‘(iv) meets such requirements as may

17 be prescribed by the Secretary after con18 sultation with the Secretary of Health and

19 Human Services.

20 ‘‘(5) RELATIVE.—The term ‘relative’ means an

21 individual bearing a relationship to another individ22 ual which is described in paragraphs (1) through (8)

23 of section 152(a).’’

24 (c) TECHNICAL AMENDMENTS.—
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1 (1) Subparagraph (D) of section 213(d)(1) (as

2 redesignated by subsection (a)) is amended to read

3 as follows:

4 ‘‘(D) for insurance (including amounts

5 paid as premiums under part B of title XVIII

6 of the Social Security Act, relating to supple7 mentary medical insurance for the aged)—

8 ‘‘(i) covering medical care referred to

9 in subparagraphs (A) and (B), or

10 ‘‘(ii) covering medical care referred to

11 in subparagraph (C), but only if such cov12 erage is provided under a qualified long13 term care insurance contract (as defined in

14 section 7702B(b)).’’

15 (2) Paragraph (6) of section 213(d) is amend16 ed—

17 (A) by striking ‘‘subparagraphs (A) and

18 (B)’’ in the matter preceding subparagraph (A)

19 and inserting ‘‘subparagraphs (A), (B), and

20 (C)’’, and

21 (B) by striking ‘‘paragraph (1)(C)’’ in sub22 paragraph (A) and inserting ‘‘paragraph

23 (1)(D)’’.
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•S 2374 IS

1 (3) Paragraph (7) of section 213(d) is amended

2 by striking ‘‘subparagraphs (A) and (B)’’ and insert3 ing ‘‘subparagraphs (A), (B), and (C)’’.

4 SEC. 402. TREATMENT OF LONG-TERM CARE INSURANCE

5 OR PLANS.

6 (a) GENERAL RULE.—Chapter 79 (relating to defini7 tions) is amended by inserting after section 7702A the fol8 lowing new section:

9 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE

10 OR PLANS.

11 ‘‘(a) GENERAL RULE.—For purposes of this title—

12 ‘‘(1) a qualified long-term care insurance con13 tract shall be treated as an accident or health insur14 ance contract,

15 ‘‘(2) any plan of an employer providing cov16 erage of qualified long-term care services shall be

17 treated as an accident or health plan with respect to

18 such services,

19 ‘‘(3) amounts received under such a contract or

20 plan with respect to qualified long-term care services

21 shall be treated as amounts received for personal in22 juries or sickness, and

23 ‘‘(4) payments described in subsection (b)(5)

24 shall be treated as payments made with respect to

25 qualified long-term care services.
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1 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

2 CONTRACT.—

3 ‘‘(1) IN GENERAL.—For purposes of this title,

4 the term ‘qualified long-term care insurance con5 tract’ means any insurance contract if—

6 ‘‘(A) the only insurance protection pro7 vided under such contract is coverage of quali8 fied long-term care services,

9 ‘‘(B) such contract meets the requirements

10 of paragraphs (2), (3), and (4), and

11 ‘‘(C) such contract is issued by a qualified

12 issuer.

13 ‘‘(2) PREMIUM REQUIREMENTS.—

14 ‘‘(A) IN GENERAL.—The requirements of

15 this paragraph are met with respect to a con16 tract if such contract provides that—

17 ‘‘(i) premium payments may not be

18 made earlier than the date such payments

19 would have been made if the contract pro20 vided for level annual payments over the

21 life of the contract (or, if shorter, 20

22 years), and

23 ‘‘(ii) all refunds of premiums, and all

24 policyholder dividends or similar amounts,

25 under such contract are to be applied as a
257

•S 2374 IS

1 reduction in future premiums or to in2 crease future benefits.

3 A contract shall not be treated as failing to

4 meet the requirements of clause (i) solely by

5 reason of a provision providing for a waiver of

6 premiums if the policyholder becomes a func7 tionally impaired individual.

8 ‘‘(B) REFUNDS UPON DEATH OR COM9 PLETE SURRENDER OR CANCELLATION.—Sub10 paragraph (A)(ii) shall not apply to any refund

11 on the death of the policyholder, or on any com12 plete surrender or cancellation of the contract,

13 if, under the contract, the amount refunded

14 may not exceed the amount of the premiums

15 paid under the contract. For purposes of this

16 title, any refund described in the preceding sen17 tence shall be includible in gross income to the

18 extent that any deduction or exclusion was al19 lowed with respect to the refund.

20 ‘‘(3) BORROWING, PLEDGING, OR ASSIGNING

21 PROHIBITED.—The requirements of this paragraph

22 are met with respect to a contract if such contract

23 provides that no money may be borrowed under such

24 contract and that such contract (or any portion
258

•S 2374 IS

1 thereof) may not be assigned or pledged as collateral

2 for a loan.

3 ‘‘(4) PROHIBITION OF DUPLICATE PAYMENT.—

4 The requirements of this paragraph are met with re5 spect to a contract if such contract does not cover

6 expenses incurred to the extent that such expenses

7 are reimbursable under title XVIII of the Social Se8 curity Act.

9 ‘‘(5) PER DIEM AND OTHER PERIODIC PAY10 MENTS PERMITTED.—

11 ‘‘(A) IN GENERAL.—For purposes of sub12 section (a)(4), and except as provided in sub13 paragraph (B), payments are described in this

14 paragraph for any calendar year if, under the

15 contract, such payments are made to (or on be16 half of) a functionally impaired individual on a

17 per diem or other periodic basis without regard

18 to the expenses incurred or services rendered

19 during the period to which the payments relate.

20 ‘‘(B) EXCEPTION WHERE AGGREGATE PAY21 MENTS EXCEED LIMIT.—If the aggregate pay22 ments under the contract for any period

23 (whether on a periodic basis or otherwise) ex24 ceed the dollar amount in effect for such pe25 riod—
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•S 2374 IS

1 ‘‘(i) subparagraph (A) shall not apply

2 for such period, and

3 ‘‘(ii) the requirements of paragraph

4 (1)(A) shall be met only if such payments

5 are made with respect to qualified long6 term care services provided during such

7 period.

8 ‘‘(C) DOLLAR AMOUNT.—The dollar

9 amount in effect under this paragraph shall be

10 $150 per day (or the equivalent amount in the

11 case of payments on another periodic basis).

12 ‘‘(D) ADJUSTMENTS FOR INCREASED

13 COSTS.—

14 ‘‘(i) IN GENERAL.—In the case of any

15 calendar year after 1995, the dollar

16 amount in effect under subparagraph (C)

17 for any period occurring during such cal18 endar year shall be equal to the sum of—

19 ‘‘(I) the amount in effect under

20 subparagraph (C) for the preceding

21 calendar year (after application of this

22 subparagraph), plus

23 ‘‘(II) the applicable percentage of

24 the amount under subclause (I).
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•S 2374 IS

1 ‘‘(ii) APPLICABLE PERCENTAGE.—For

2 purposes of clause (i), the term ‘applicable

3 percentage’ means, with respect to any cal4 endar year, the greater of—

5 ‘‘(I) 5 percent, or

6 ‘‘(II) the cost-of-living adjust7 ment for such calendar year.

8 ‘‘(iii) COST-OF-LIVING ADJUST9 MENT.—For purposes of clause (ii), the

10 cost-of-living adjustment for any calendar

11 year is the percentage (if any) by which

12 the cost index under clause (iv) for the

13 preceding calendar year exceeds such index

14 for the second preceding calendar year. In

15 the case of any calendar year beginning be16 fore 1997, this clause shall be applied by

17 substituting the Consumer Price Index (as

18 defined in section 1(f)(5)) for the cost

19 index under clause (iv).

20 ‘‘(iv) COST INDEX.—The Secretary, in

21 consultation with the Secretary of Health

22 and Human Services, shall before January

23 1, 1997, establish a cost index to measure

24 increases in costs of nursing home and

25 similar facilities. The Secretary may from
261

•S 2374 IS

1 time to time revise such index to the extent

2 necessary to accurately measure increases

3 or decreases in such costs.

4 ‘‘(E) AGGREGATION RULE.—For purposes

5 of this paragraph, all contracts issued with re6 spect to the same policyholder by the same

7 company shall be treated as 1 contract.

8 ‘‘(c) QUALIFIED ISSUER.—For purposes of this sec9 tion, the term ‘qualified issuer’ means any person which

10 at the time of the issuance of a long-term care insurance

11 contract—

12 ‘‘(1) uses a one year preliminary term method

13 for setting up reserves, and

14 ‘‘(2) maintains a capital ratio equal to not less

15 than 25 percent of long-term care insurance pre16 mium receivables.

17 ‘‘(d) SPECIAL RULES FOR TAX TREATMENT OF POL18 ICYHOLDERS.—For purposes of this title, solely with re19 spect to the policyholder under any qualified long-term

20 care insurance contract—

21 ‘‘(1) AGGREGATE PAYMENTS IN EXCESS OF

22 LIMITS.—If the aggregate payments under all quali23 fied long-term care insurance contracts with respect

24 to an policyholder for any period (whether on a peri-
262

•S 2374 IS

1 odic basis or otherwise) exceed the dollar amount in

2 effect for such period under subsection (b)(5)—

3 ‘‘(A) subsection (b)(5) shall not apply for

4 such period, and

5 ‘‘(B) such payments shall be treated as

6 made for qualified long-term care services only

7 if made with respect to such services provided

8 during such period.

9 ‘‘(2) ASSIGNMENT OR PLEDGE.—Such contract

10 shall not be treated as a qualified long-term care in11 surance contract during any period on or after the

12 date on which the contract (or any portion thereof)

13 is assigned or pledged as collateral for a loan.

14 ‘‘(e) TREATMENT OF COVERAGE AS PART OF A LIFE

15 INSURANCE CONTRACT.—Except as provided in regula16 tions, in the case of coverage of qualified long-term care

17 services provided as part of a life insurance contract, the

18 requirements of this section shall apply as if the portion

19 of the contract providing such coverage was a separate

20 contract.

21 ‘‘(f) QUALIFIED LONG-TERM CARE SERVICES.—For

22 purposes of this section—

23 ‘‘(1) IN GENERAL.—The term ‘qualified long24 term care services’ has the meaning given such term

25 by section 213(g).
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•S 2374 IS

1 ‘‘(2) RECERTIFICATION.—If an individual has

2 been certified as a functionally impaired individual

3 under section 213(g)(2)(A), services shall not be

4 treated as qualified long-term care services with re5 spect to the individual unless such individual is

6 recertified no less frequently than annually as a

7 functionally impaired individual in the same manner

8 as under such section, except that such

9 recertification may be made by any licensed health

10 care practitioner (as defined in section 213(g)(4)),

11 other than a relative (as defined by section

12 213(g)(5)) of such individual.

13 ‘‘(g) CONTINUATION COVERAGE EXCISE TAX NOT

14 TO APPLY.—Section 4980B shall not apply to—

15 ‘‘(1) qualified long-term care insurance con16 tracts, or

17 ‘‘(2) plans described in subsection (a)(2).

18 ‘‘(h) REGULATIONS.—The Secretary shall prescribe

19 such regulations as may be necessary to carry out the re20 quirements of this section, including regulations to prevent

21 the avoidance of this section by providing qualified long22 term care services under a life insurance contract.’’

23 (b) CAFETERIA PLANS.—Section 125(f) is amended

24 by adding at the end the following new sentence: ‘‘Such

25 term does not include any coverage or benefits under a
264

•S 2374 IS

1 qualified long-term care insurance contract (as defined in

2 section 7702B).’’

3 (c) RESERVES.—Clause (iii) of section 807(d)(3)(A)

4 is amended by inserting ‘‘(other than a qualified long-term

5 care insurance contract within the meaning of section

6 7702B)’’ after ‘‘contract’’.

7 (d) CLERICAL AMENDMENT.—The table of sections

8 for chapter 79 is amended by inserting after the item re9 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance or plans.’’

10 SEC. 403. EFFECTIVE DATES.

11 (a) SECTION 401.—The amendments made by section

12 401 shall apply to taxable years beginning after December

13 31, 1994.

14 (b) SECTION 402.—The amendments made by sec15 tion 402 shall apply to contracts issued after December

16 31, 1994.

17 (c) TRANSITION RULE.—If, after the date of the en18 actment of this Act and before January 1, 1995, a con19 tract providing coverage for services which are similar to

20 qualified long-term care services (as defined in section

21 213(g) of the Internal Revenue Code of 1986) and issued

22 on or before January 1, 1994, is exchanged for a qualified

23 long-term care insurance contract (as defined in section

24 7702B(b) of such Code), such exchange shall be treated
265

•S 2374 IS

1 as an exchange to which section 1035 of such Code ap2 plies.

3 PART II—CONSUMER PROTECTION PROVISIONS

4 SEC. 406. POLICY REQUIREMENTS.

5 (a) IN GENERAL.—Section 7702B (as added by sec6 tion 402) is amended by redesignating subsection (h) as

7 subsection (i) and by inserting after subsection (g) the fol8 lowing new subsection:

9 ‘‘(h) CONSUMER PROTECTION PROVISIONS.—

10 ‘‘(1) IN GENERAL.—The requirements of this

11 subsection are met with respect to any contract if

12 any long-term care insurance policy issued under the

13 contract meets—

14 ‘‘(A) the requirements of the model regula15 tion and model Act described in paragraph (2),

16 ‘‘(B) the disclosure requirement of para17 graph (3),

18 ‘‘(C) the requirements relating to

19 nonforfeitability under paragraph (4), and

20 ‘‘(D) the requirements relating to rate sta21 bilization under paragraph (5).

22 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

23 AND ACT.—
266

•S 2374 IS

1 ‘‘(A) IN GENERAL.—The requirements of

2 this paragraph are met with respect to any pol3 icy if such policy meets—

4 ‘‘(i) MODEL REGULATION.—The fol5 lowing requirements of the model regula6 tion:

7 ‘‘(I) Section 7A (relating to guar8 anteed renewal or noncancellability),

9 and the requirements of section 6B of

10 the model Act relating to such section

11 7A.

12 ‘‘(II) Section 7B (relating to pro13 hibitions on limitations and exclu14 sions).

15 ‘‘(III) Section 7C (relating to ex16 tension of benefits).

17 ‘‘(IV) Section 7D (relating to

18 continuation or conversion of cov19 erage).

20 ‘‘(V) Section 7E (relating to dis21 continuance and replacement of poli22 cies).

23 ‘‘(VI) Section 8 (relating to unin24 tentional lapse).
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•S 2374 IS

1 ‘‘(VII) Section 9 (relating to dis2 closure), other than section 9F there3 of.

4 ‘‘(VIII) Section 10 (relating to

5 prohibitions against post-claims un6 derwriting).

7 ‘‘(IX) Section 11 (relating to

8 minimum standards).

9 ‘‘(X) Section 12 (relating to re10 quirement to offer inflation protec11 tion), except that any requirement for

12 a signature on a rejection of inflation

13 protection shall permit the signature

14 to be on an application or on a sepa15 rate form.

16 ‘‘(XI) Section 23 (relating to pro17 hibition against preexisting conditions

18 and probationary periods in replace19 ment policies or certificates).

20 ‘‘(ii) MODEL ACT.—The following re21 quirements of the model Act:

22 ‘‘(I) Section 6C (relating to pre23 existing conditions).

24 ‘‘(II) Section 6D (relating to

25 prior hospitalization).
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•S 2374 IS

1 ‘‘(B) DEFINITIONS.—For purposes of this

2 paragraph—

3 ‘‘(i) MODEL PROVISIONS.—The terms

4 ‘model regulation’ and ‘model Act’ mean

5 the long-term care insurance model regula6 tion, and the long-term care insurance

7 model Act, respectively, promulgated by

8 the National Association of Insurance

9 Commissioners (as adopted in January of

10 1993).

11 ‘‘(ii) COORDINATION.—Any provision

12 of the model regulation or model Act listed

13 under clause (i) or (ii) of subparagraph

14 (A) shall be treated as including any other

15 provision of such regulation or Act nec16 essary to implement the provision.

17 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re18 quirement of this paragraph is met with respect to

19 any policy if such policy meets the requirements of

20 section 4980C(d)(1).

21 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

22 ‘‘(A) IN GENERAL.—The requirements of

23 this paragraph are met with respect to any level

24 premium long-term care insurance policy, if the

25 issuer of such policy offers to the policyholder,
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•S 2374 IS

1 including any group policyholder, a

2 nonforfeiture provision meeting the require3 ments of subparagraph (B).

4 ‘‘(B) REQUIREMENTS OF PROVISION.—The

5 nonforfeiture provision required under subpara6 graph (A) shall meet the following require7 ments:

8 ‘‘(i) The nonforfeiture provision shall

9 be appropriately captioned.

10 ‘‘(ii) The nonforfeiture provision shall

11 provide for a benefit available in the event

12 of a default in the payment of any pre13 miums and the amount of the benefit may

14 be adjusted subsequent to being initially

15 granted only as necessary to reflect

16 changes in claims, persistency, and interest

17 as reflected in changes in rates for pre18 mium paying policies approved by the Sec19 retary for the same policy form.

20 ‘‘(iii) The nonforfeiture provision shall

21 provide at least one of the following:

22 ‘‘(I) Reduced paid-up insurance.

23 ‘‘(II) Extended term insurance.

24 ‘‘(III) Shortened benefit period.
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•S 2374 IS

1 ‘‘(IV) Other similar offerings ap2 proved by the Secretary.

3 ‘‘(5) RATE STABILIZATION.—

4 ‘‘(A) IN GENERAL.—The requirements of

5 this paragraph are met with respect to any

6 long-term care insurance policy, including any

7 group master policy, if—

8 ‘‘(i) such policy contains the minimum

9 rate guarantees specified in subparagraph

10 (B), and

11 ‘‘(ii) the issuer of such policy meets

12 the requirements specified in subparagraph

13 (C).

14 ‘‘(B) MINIMUM RATE GUARANTEES.—The

15 minimum rate guarantees specified in this sub16 paragraph are as follows:

17 ‘‘(i) Rates under the policy shall be

18 guaranteed for a period of at least 3 years

19 from the date of issue of the policy.

20 ‘‘(ii) After the expiration of the 3-year

21 period required under clause (i), any rate

22 increase shall be guaranteed for a period of

23 at least 2 years from the effective date of

24 such rate increase.
271

•S 2374 IS

1 ‘‘(iii) In the case of any individual age

2 75 or older who has maintained coverage

3 under a long-term care insurance policy for

4 10 years, rate increases under such policy

5 shall not exceed 10 percent in any 12-

6 month period.

7 ‘‘(C) INCREASES IN PREMIUMS.—The re8 quirements specified in this subparagraph are

9 as follows:

10 ‘‘(i) IN GENERAL.—If an issuer of any

11 long-term care insurance policy, including

12 any group master policy, plans to increase

13 the premium rates for a policy, such issuer

14 shall, at least 90 days before the effective

15 date of the rate increase, offer to each in16 dividual policyholder under such policy the

17 option to remain insured under the policy

18 at a reduced level of benefits which main19 tains the premium rate at the rate in effect

20 on the day before the effective date of the

21 rate increase.

22 ‘‘(ii) INCREASES OF MORE THAN 50

23 PERCENT.—

24 ‘‘(I) IN GENERAL.—If an issuer

25 of any long-term care insurance pol-
272

•S 2374 IS

1 icy, including any group master pol2 icy, increases premium rates for a pol3 icy by more than 50 percent in any 3-

4 year period—

5 ‘‘(aa) in the case of a group

6 master long-term care insurance

7 policy, the issuer shall dis8 continue issuing all group master

9 long-term care insurance policies

10 in any State in which the issuer

11 issues such policy for a period of

12 2 years from the effective date of

13 such premium increase; and

14 ‘‘(bb) in the case of an indi15 vidual long-term care insurance

16 policy, the issuer shall dis17 continue issuing all individual

18 long-term care policies in any

19 State in which the issuer issues

20 such policy for a period of 2

21 years from the effective date of

22 such premium increase.

23 ‘‘(II) APPLICABILITY.—Subclause

24 (I) shall apply to any issuer of long25 term care insurance policies or any
273

•S 2374 IS

1 other person that purchases or other2 wise acquires any long-term care in3 surance policies from another issuer

4 or person.

5 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE6 QUIREMENTS.—The Secretary may modify or

7 waive any of the requirements under this para8 graph if—

9 ‘‘(i) such requirements will adversely

10 affect an issuer’s solvency;

11 ‘‘(ii) such modification or waiver is re12 quired for the issuer to meet other State or

13 Federal requirements;

14 ‘‘(iii) medical developments, new dis15 abling diseases, changes in long-term care

16 delivery, or a new method of financing

17 long-term care will result in changes to

18 mortality and morbidity patterns or as19 sumptions;

20 ‘‘(iv) judicial interpretation of a pol21 icy’s benefit features results in unintended

22 claim liabilities; or

23 ‘‘(v) in the case of a purchase or other

24 acquisition of long-term care insurance

25 policies of an issuer or other person, the
274

•S 2374 IS

1 continued sale of other long-term care in2 surance policies by the purchasing issuer

3 or person is in the best interests of individ4 ual consumers.

5 ‘‘(6) LONG-TERM CARE INSURANCE POLICY DE6 FINED.—For purposes of this subsection, the term

7 ‘long-term care insurance policy’ has the meaning

8 given such term by section 4980C(e).’’

9 (b) CONFORMING AMENDMENT.—Section

10 7702B(b)(1)(B) (as added by section 402) is amended by

11 inserting ‘‘and of subsection (h)’’ after ‘‘and (4)’’.

12 SEC. 407. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

13 LONG-TERM CARE INSURANCE POLICIES.

14 (a) IN GENERAL.—Chapter 43 is amended by adding

15 at the end the following new section:

16 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG17 TERM CARE INSURANCE POLICIES.

18 ‘‘(a) GENERAL RULE.—There is hereby imposed on

19 any person failing to meet the requirements of subsection

20 (c) or (d) a tax in the amount determined under sub21 section (b).

22 ‘‘(b) AMOUNT OF TAX.—

23 ‘‘(1) IN GENERAL.—The amount of the tax im24 posed by subsection (a) shall be $100 per policy for

25 each day any requirements of subsection (c), (d), or
275

•S 2374 IS

1 (e) are not met with respect to each long-term care

2 insurance policy.

3 ‘‘(2) WAIVER.—In the case of a failure which is

4 due to reasonable cause and not to willful neglect,

5 the Secretary may waive part or all of the tax im6 posed by subsection (a) to the extent that payment

7 of the tax would be excessive relative to the failure

8 involved.

9 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require10 ments of this subsection are as follows:

11 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

12 ‘‘(A) MODEL REGULATION.—The following

13 requirements of the model regulation must be

14 met:

15 ‘‘(i) Section 13 (relating to application

16 forms and replacement coverage).

17 ‘‘(ii) Section 14 (relating to reporting

18 requirements), except that the issuer shall

19 also report at least annually the number of

20 claims denied during the reporting period

21 for each class of business (expressed as a

22 percentage of claims denied), other than

23 claims denied for failure to meet the wait24 ing period or because of any applicable

25 pre-existing condition.
276

•S 2374 IS

1 ‘‘(iii) Section 20 (relating to filing re2 quirements for marketing).

3 ‘‘(iv) Section 21 (relating to standards

4 for marketing), including inaccurate com5 pletion of medical histories, other than sec6 tions 21C(1) and 21C(6) thereof, except

7 that—

8 ‘‘(I) in addition to such require9 ments, no person shall, in selling or

10 offering to sell a long-term care insur11 ance policy, misrepresent a material

12 fact; and

13 ‘‘(II) no such requirements shall

14 include a requirement to inquire or

15 identify whether a prospective appli16 cant or enrollee for long-term care in17 surance has accident and sickness in18 surance.

19 ‘‘(v) Section 22 (relating to appro20 priateness of recommended purchase).

21 ‘‘(vi) Section 24 (relating to standard

22 format outline of coverage).

23 ‘‘(vii) Section 25 (relating to require24 ment to deliver shopper’s guide).
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•S 2374 IS

1 ‘‘(B) MODEL ACT.—The following require2 ments of the model Act must be met:

3 ‘‘(i) Section 6F (relating to right to

4 return), except that such section shall also

5 apply to denials of applications and any re6 fund shall be made within 30 days of the

7 return or denial.

8 ‘‘(ii) Section 6G (relating to outline of

9 coverage).

10 ‘‘(iii) Section 6H (relating to require11 ments for certificates under group plans).

12 ‘‘(iv) Section 6I (relating to policy

13 summary).

14 ‘‘(v) Section 6J (relating to monthly

15 reports on accelerated death benefits).

16 ‘‘(vi) Section 7 (relating to incontest17 ability period).

18 ‘‘(C) DEFINITIONS.—For purposes of this

19 paragraph, the terms ‘model regulation’ and

20 ‘model Act’ have the meanings given such terms

21 by section 7702B(h)(2)(B).

22 ‘‘(2) DELIVERY OF POLICY.—If an application

23 for a long-term care insurance policy (or for a cer24 tificate under a group long-term care insurance pol25 icy) is approved, the issuer shall deliver to the appli-
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•S 2374 IS

1 cant (or policyholder or certificate-holder) the policy

2 (or certificate) of insurance not later than 30 days

3 after the date of the approval.

4 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—

5 If a claim under a long-term care insurance policy

6 is denied, the issuer shall, within 60 days of the date

7 of a written request by the policyholder or certifi8 cate-holder (or representative)—

9 ‘‘(A) provide a written explanation of the

10 reasons for the denial, and

11 ‘‘(B) make available all information di12 rectly relating to such denial.

13 ‘‘(d) DISCLOSURE.—The requirements of this sub14 section are met if either of the following statements,

15 whichever is applicable, is prominently displayed on the

16 front page of any long-term care insurance policy and in

17 the outline of coverage required under subsection

18 (c)(1)(B)(ii):

19 ‘‘(1) A statement that: ‘This policy is intended

20 to be a qualified long-term care insurance contract

21 under section 7702B(b) of the Internal Revenue

22 Code of 1986.’.

23 ‘‘(2) A statement that: ‘This policy is not in24 tended to be a qualified long-term care insurance
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•S 2374 IS

1 contract under section 7702B(b) of the Internal

2 Revenue Code of 1986.’.

3 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE4 FINED.—For purposes of this section, the term ‘long-term

5 care insurance policy’ means any product which is adver6 tised, marketed, or offered as long-term care insurance.’’

7 (b) CONFORMING AMENDMENT.—The table of sec8 tions for chapter 43 is amended by adding at the end the

9 following new item:

‘‘Sec. 4980C. Failure to meet requirements for long-term care insurance policies.’’

10 SEC. 408. COORDINATION WITH STATE REQUIREMENTS.

11 Nothing in this part shall be construed as preventing

12 a State from applying standards that provide greater pro13 tection of policyholders of long-term care insurance poli14 cies (as defined in section 4980C(e) of the Internal Reve15 nue Code of 1986).

16 SEC. 409. UNIFORM LANGUAGE AND DEFINITIONS.

17 (a) IN GENERAL.—The National Association of In18 surance Commissioners shall not later than January 1,

19 1996, promulgate standards for the use of uniform lan20 guage and definitions in long-term care insurance policies

21 (as defined in section 4980C(e) of the Internal Revenue

22 Code 1986).

23 (b) VARIATIONS.—Standards under subsection (a)

24 may permit the use of nonuniform language to the extent
280

•S 2374 IS

1 required to take into account differences among States in

2 the licensing of nursing facilities and other providers of

3 long-term care.

4 SEC. 410. EFFECTIVE DATES.

5 (a) IN GENERAL.—The provisions of, and amend6 ments made by, this part shall apply to contracts issued

7 after December 31, 1994. The provisions of section 403(c)

8 of this Act shall apply to such contracts.

9 (b) ISSUERS.—The amendments made by section 407

10 shall apply to actions taken after December 31, 1994.

11 Subtitle B—Tax Treatment of

12 Accelerated Death Benefits

13 SEC. 411. TAX TREATMENT OF ACCELERATED DEATH BENE14 FITS UNDER LIFE INSURANCE CONTRACTS.

15 (a) GENERAL RULE.—Section 101 (relating to cer16 tain death benefits) is amended by adding at the end the

17 following new subsection:

18 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

19 DEATH BENEFITS.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, any amount received under a life insurance

22 contract on the life of an insured who is a terminally

23 ill individual shall be treated as an amount paid by

24 reason of the death of such insured.

25 ‘‘(2) NECESSARY CONDITIONS.—
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1 ‘‘(A) IN GENERAL.—Paragraph (1) shall

2 not apply to any amount received unless—

3 ‘‘(i) the total amount received is not

4 less than the present value (determined

5 under subparagraph (B)) of the reduction

6 in the death benefit otherwise payable in

7 the event of the death of the insured, and

8 ‘‘(ii) the percentage reduction in the

9 cash surrender value of the contract by

10 reason of the distribution does not exceed

11 the percentage reduction in the death ben12 efit payable under the contract by reason

13 of such distribution.

14 ‘‘(B) PRESENT VALUE.—The present value

15 of the reduction in the death benefit shall be

16 determined by—

17 ‘‘(i) using a discount rate which is

18 based on an interest rate which does not

19 exceed the highest interest rate set forth in

20 subparagraph (C), and

21 ‘‘(ii) assuming that the death benefit

22 (or the portion thereof) would have been

23 paid on the date which is 12 months after

24 the date of the certification referred to in

25 paragraph (3).
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1 ‘‘(C) RATES.—The interest rates set forth

2 in this subparagraph are the following:

3 ‘‘(i) the 90-day Treasury bill yield,

4 ‘‘(ii) the rate described as Moody’s

5 Corporate Bond Yield Average-Monthly

6 Average Corporates as published by

7 Moody’s Investors Service, Inc., or any

8 successor thereto, for the calendar month

9 ending 2 months before the date on which

10 the rate is determined, and

11 ‘‘(iii) the rate used to compute the

12 cash surrender values under the contract

13 during the applicable period plus 1 percent

14 per annum.

15 ‘‘(D) SPECIAL RULES RELATING TO

16 LIENS.—If a lien is imposed against a life in17 surance contract with respect to any amount re18 ferred to in paragraph (1)—

19 ‘‘(i) for purposes of subparagraph (A),

20 the amount of such lien shall be treated as

21 a reduction (at the time of receipt) in the

22 death benefit or cash surrender value to

23 the extent that such benefit or value, as

24 the case may be, is (or may become) sub25 ject to the lien, and
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1 ‘‘(ii) paragraph (1) shall not apply to

2 the amount received unless any rate of in3 terest with respect to any amount in con4 nection with which such lien is imposed

5 does not exceed the highest rate set forth

6 in subparagraph (C).

7 ‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur8 poses of this subsection, the term ‘terminally ill indi9 vidual’ means an individual who the insurer has de10 termined, after receipt of an acceptable certification

11 by a licensed physician, has an illness or physical

12 condition which can reasonably be expected to result

13 in death within 12 months after the date of certifi14 cation.

15 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI16 CIES.—This subsection shall not apply in the case of

17 any amount paid to any taxpayer other than the in18 sured if such taxpayer has an insurable interest with

19 respect to the life of the insured by reason of the in20 sured being a director, officer, or employee of the

21 taxpayer or by reason of the insured having a finan22 cial interest in any trade or business carried on by

23 the taxpayer.’’

24 (b) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendment made by this section shall

3 apply to amounts received after the date of the en4 actment of this Act.

5 (2) DELAY IN APPLICATION OF DISCOUNT

6 RULES.—Clause (i) of section 101(g)(2)(A) of the

7 Internal Revenue Code of 1986 shall not apply to

8 any amount received before January 1, 1995.

9 (3) ISSUANCE OF RIDER NOT TREATED AS MA10 TERIAL CHANGE.—For purposes of applying section

11 101(f), 7702, or 7702A of the Internal Revenue

12 Code of 1986 to any contract, the issuance of a

13 qualified accelerated death benefit rider (as defined

14 in section 818(g) of such Code (as added by this

15 Act)) shall not be treated as a modification or mate16 rial change of such contract.

17 SEC. 412. TAX TREATMENT OF COMPANIES ISSUING QUALI18 FIED ACCELERATED DEATH BENEFIT RID19 ERS.

20 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID21 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat22 ing to other definitions and special rules) is amended by

23 adding at the end the following new subsection:
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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 C—Credit for Personal

18 Assistance

19 SEC. 421. CREDIT FOR COST OF PERSONAL ASSISTANCE

20 SERVICES REQUIRED BY EMPLOYED INDIVID21 UALS.

22 (a) IN GENERAL.—Subpart A of part IV of sub23 chapter A of chapter 1 (relating to nonrefundable personal

24 credits) is amended by inserting after section 23 the fol25 lowing new section:
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1 ‘‘SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES RE2 QUIRED BY EMPLOYED INDIVIDUALS.

3 ‘‘(a) ALLOWANCE OF CREDIT.—

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

5 individual, there shall be allowed as a credit against

6 the tax imposed by this chapter for the taxable year

7 an amount equal to the applicable percentage of the

8 personal assistance expenses paid or incurred by the

9 taxpayer during such taxable year.

10 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

11 of paragraph (1), the term ‘applicable percentage’

12 means 50 percent reduced (but not below zero) by

13 10 percentage points for each $5,000 by which the

14 modified adjusted gross income (as defined in sec15 tion 59B(d)(2)) of the taxpayer for the taxable year

16 exceeds $45,000. In the case of a married individual

17 filing a separate return, the preceding sentence shall

18 be applied by substituting ‘$2,500’ for ‘$5,000’ and

19 ‘$22,500’ for ‘$45,000’.

20 ‘‘(b) LIMITATION.—The amount of personal assist21 ance expenses for the benefit of an individual which may

22 be taken into account under subsection (a) for the taxable

23 year shall not exceed the lesser of—

24 ‘‘(1) $15,000, or

25 ‘‘(2) such individual’s earned income (as de26 fined in section 32(c)(2)) for the taxable year.
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1 In the case of a joint return, the amount under the preced2 ing sentence shall be determined separately for each

3 spouse.

4 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

5 section, the term ‘eligible individual’ means any individual

6 (other than a nonresident alien) who, by reason of any

7 medically determinable physical impairment which can be

8 expected to result in death or which has lasted or can be

9 expected to last for a continuous period of not less than

10 12 months, is unable to engage in any substantial gainful

11 employment activity without personal assistance services

12 appropriate to carry out activities of daily living. An indi13 vidual shall not be treated as an eligible individual unless

14 such individual furnishes such proof thereof (in such form

15 and manner, and at such times) as the Secretary may re16 quire.

17 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

18 section—

19 ‘‘(1) PERSONAL ASSISTANCE EXPENSES.—The

20 term ‘personal assistance expenses’ means expenses

21 for—

22 ‘‘(A) personal assistance services appro23 priate to carry out activities of daily living in or

24 outside the home,
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1 ‘‘(B) homemaker/chore services incidental

2 to the provision of such personal assistance

3 services,

4 ‘‘(C) communication services,

5 ‘‘(D) work-related support services,

6 ‘‘(E) coordination of services described in

7 this paragraph,

8 ‘‘(F) technology and devices necessary to

9 assist an individual in carrying out the activi10 ties of daily living or gainful employment activi11 ties, including assessment of the need for par12 ticular technology and devices and training of

13 family members, and

14 ‘‘(G) modifications to the principal place of

15 abode of the individual to the extent the ex16 penses for such modifications would (but for

17 subsection (e)(2)) be expenses for medical care

18 (as defined by section 213) of such individual.

19 ‘‘(2) ACTIVITIES OF DAILY LIVING.—The term

20 ‘activities of daily living’ means eating, toileting,

21 transferring, bathing, and dressing.

22 ‘‘(e) SPECIAL RULES.—

23 ‘‘(1) PAYMENTS TO RELATED PERSONS.—No

24 credit shall be allowed under this section for any

25 amount paid by the taxpayer to any person who is
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1 related (within the meaning of section 267 or

2 707(b)) to the taxpayer.

3 ‘‘(2) COORDINATION WITH MEDICAL EXPENSE

4 DEDUCTION.—Any amount taken into account in de5 termining the credit under this section shall not be

6 taken into account in determining the amount of the

7 deduction under section 213.

8 ‘‘(3) BASIS REDUCTION.—For purposes of this

9 subtitle, if a credit is allowed under this section for

10 any expense with respect to any property, the in11 crease in the basis of such property which would

12 (but for this paragraph) result from such expense

13 shall be reduced by the amount of the credit so al14 lowed.

15 ‘‘(f) COST-OF-LIVING ADJUSTMENT.—In the case of

16 any taxable year beginning after 1996, the $45,000 and

17 $22,500 amounts in subsection (a)(2) and the $15,000

18 amount in subsection (b) shall be increased by an amount

19 equal to—

20 ‘‘(1) such dollar amount, multiplied by

21 ‘‘(2) the cost-of-living adjustment determined

22 under section 1(f)(3) for the calendar year in which

23 the taxable year begins by substituting ‘calendar

24 year 1995’ for ‘calendar year 1992’ in subparagraph

25 (B) thereof.
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1 If any increase determined under the preceding sentence

2 is not a multiple of $1,000, such increase shall be rounded

3 to the nearest multiple of $1,000.’’

4 (b) TECHNICAL AMENDMENT.—Subsection (a) of

5 section 1016 is amended by striking ‘‘and’’ at the end of

6 paragraph (24), by striking the period at the end of para7 graph (25) and inserting ‘‘, and’’, and by adding at the

8 end thereof the following new paragraph:

9 ‘‘(26) in the case of any property with respect

10 to which a credit has been allowed under section 24,

11 to the extent provided in section 24(e)(3).’’

12 (c) CLERICAL AMENDMENT.—The table of sections

13 for subpart A of part IV of subchapter A of chapter 1

14 is amended by inserting after the item relating to section

15 23 the following new item:

‘‘Sec. 24. Cost of personal assistance services required by employed individuals.’’

16 (d) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to taxable years beginning after

18 December 31, 1995.
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1 TITLE V—HEALTH CARE

2 PROVIDERS

3 Subtitle A—Education and

4 Research

5 SEC. 501. ADVISORY COMMISSION ON WORKFORCE.

6 (a) IN GENERAL.—Section 1886 of the Social Secu7 rity Act (42 U.S.C. 1395ww) is amended by adding at the

8 end the following new subsection:

9 ‘‘(j) ADVISORY COMMISSION ON WORK FORCE.—

10 ‘‘(1) ESTABLISHMENT.—The Director of the

11 Congressional Office of Technology Assessment (in

12 this subsection referred to as the ‘Director’ and the

13 ‘Office’, respectively) shall provide for the appoint14 ment of an Advisory Commission on Workforce (in

15 this subsection referred to as the ‘Advisory Commis16 sion’) without regard to the provisions of title 5,

17 United States Code, governing appointments in the

18 competitive service.

19 ‘‘(2) MEMBERSHIP.—

20 ‘‘(A) COMPOSITION.—The Commission

21 shall consist of 17 individuals with expertise in

22 medical education, the operation of teaching

23 hospitals, the operation of health plans, and

24 other interested individuals.
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1 ‘‘(B) TERMS.—Members of the Commis2 sion shall first be appointed by no later than

3 October 1, 1995, for a term of 3 years, except

4 that the Director may provide initially for such

5 shorter terms as will ensure that (on a continu6 ing basis) the terms of no more than 4 mem7 bers expire in any 1 year.

8 ‘‘(C) CHAIR AND VICE CHAIR.—The Com9 mission shall select a Chair and Vice Chair

10 from among its members.

11 ‘‘(3) MEETINGS.—

12 ‘‘(A) IN GENERAL.—The Commission shall

13 meet at the call of the Chair.

14 ‘‘(B) INITIAL MEETING.—No later than 30

15 days after the date on which all members of the

16 Commission have been appointed, the Commis17 sion shall hold its first meeting.

18 ‘‘(C) QUORUM.—A majority of the mem19 bers of the Commission shall constitute a

20 quorum, but a lesser number of members may

21 hold hearings.

22 ‘‘(4) DUTIES OF THE COMMISSION.—

23 ‘‘(A) IN GENERAL.—The Commission shall

24 not later than October 1, 1996, submit to the

25 Committee on Finance and the Committee on
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•S 2374 IS

1 Labor and Human Resources of the Senate and

2 the Committee on Ways and Means, the Com3 mittee on Education and Labor, and the Com4 mittee on Energy and Commerce of the House

5 of Representatives a report on national health

6 care workforce policy and payment that in7 cludes—

8 ‘‘(i) assessments and recommenda9 tions, as appropriate, in the following

10 areas:

11 ‘‘(I) The composition of the phy12 sician and non-physician national

13 health care workforce and how such

14 composition addresses the needs of

15 the health care market.

16 ‘‘(II) Sources and uses of funds

17 related to graduate medical education

18 and options for future payment policy.

19 (III) Current payment distribu20 tion methods related to graduate med21 ical education and options for future

22 distribution policy.

23 ‘‘(IV) Current incentives to en24 courage health care practitioners to

25 enter primary health care specialty
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1 areas and to provide services in un2 derserved areas and options for future

3 policies.

4 ‘‘(V) Current role, composition,

5 distribution, and costs related to for6 eign medical graduates in the national

7 health care workforce and options for

8 future policies;

9 ‘‘(ii) recommendations for a coordi10 nated policy for the future direction and

11 distribution of grants, demonstration

12 projects, and other funding affecting the

13 health care workforce; and

14 (iii) recommendations and a schedule

15 for topics to be addressed in subsequent

16 quarterly reports, based on the findings

17 and recommendations of the Commission

18 described in the previous clauses.

19 ‘‘(5) CONSULTATION.—The Commission shall

20 develop its recommendations and assessments under

21 this subsection in consultation with the Physician

22 Payment Review Commission, the Prospective Pay23 ment Assessment Commission, and private expert

24 entities as appropriate.
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1 ‘‘(6) CERTAIN PROVISIONS APPLICABLE.—Sec2 tion 1845(c)(1) shall apply to the Commission in the

3 same manner as it applies to the Physician Payment

4 Review Commission.

5 ‘‘(7) AUTHORIZATION OF APPROPRIATIONS.—In

6 addition to any amounts made available by the

7 amendment made by subsection (b) of section 501 of

8 the America’s Health Care Option Act, there are au9 thorized to be appropriated such sums as may be

10 necessary to carry out the provisions of this sub11 section.’’.

12 (b) CONFORMING AMENDMENT REPEALING THE

13 COUNCIL ON GRADUATE MEDICAL EDUCATION.—Effec14 tive October 1, 1995, section 30 of the Health Professions

15 Extension Amendments of 1992 (Public Law 102-408) is

16 repealed.

17 SEC. 502. GRADUATE MEDICAL EDUCATION CONSORTIUM

18 DEMONSTRATION PROJECTS.

19 (a) IN GENERAL.—Section 1886 of the Social Secu20 rity Act (42 U.S.C. 1395ww), as amended by section 501,

21 is amended by adding at the end the following new sub22 section:

23 ‘‘(k) CONSORTIUM DEMONSTRATION PROGRAM.—

24 ‘‘(1) IN GENERAL.—The Secretary, in consulta25 tion with the Advisory Commission on Workforce
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1 (established under subsection (j)), shall provide for

2 the establishment of demonstration projects for no

3 more than 10 health care training consortia which

4 are located in a State or are multi-State consortia

5 for the purpose of testing and evaluating mecha6 nisms to increase the number and percentage of

7 medical students entering primary care practice rel8 ative to those entering nonprimary care practice

9 through the use of funds otherwise available for di10 rect graduate medical education costs under sub11 section (h).

12 ‘‘(2) APPLICATIONS.—

13 ‘‘(A) IN GENERAL.—Each health care

14 training consortium desiring to conduct a dem15 onstration project under this subsection shall

16 prepare and submit to the Secretary an applica17 tion, at such time, in such manner, and con18 taining such information as the Secretary may

19 require, including an explanation of a plan for

20 evaluating the project.

21 ‘‘(B) APPROVAL OF APPLICATIONS.—A

22 consortium that submits an application under

23 subparagraph (A) may begin a demonstration

24 project under this subsection—
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1 ‘‘(i) upon approval of such application

2 by the Secretary; or

3 ‘‘(ii) at the end of the 60-day period

4 beginning on the date such application is

5 submitted, unless the Secretary denies the

6 application during such period.

7 ‘‘(3) FUNDING FOR DEMONSTRATION

8 PROJECTS.—

9 ‘‘(A) ALLOCATION OF GME FUNDS.—

10 ‘‘(i) IN GENERAL.—For each year a

11 consortium conducts a demonstration

12 project under this subsection the Secretary

13 shall pay to such consortium an amount

14 equal to the total amount available to hos15 pitals that are members of the consortium

16 under subsection (h). The consortium shall

17 designate a teaching hospital for each resi18 dent assigned to the consortium which the

19 Secretary shall use to calculate the consor20 tium’s payment amount under such sec21 tion. Such teaching hospital shall be the

22 hospital where the resident receives the

23 majority of the resident’s hospital-based,

24 nonambulatory training experience.
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1 ‘‘(ii) ADDITIONAL INCENTIVE PAY2 MENT.—For each year a consortium con3 ducts a demonstration project under this

4 subsection the Secretary shall also pay to

5 selected consortium an amount equal to an

6 incentive amount according to a formula to

7 be determined by the Secretary that would

8 allocate the amount made available pursu9 ant to subsection (d)(5)(B)(v) in such year

10 among the consortia conducting a dem11 onstration project under this subsection.

12 ‘‘(iii) USE OF FUNDS.—

13 ‘‘(I) TESTING AND EVALUA14 TION.—Each consortium that receives

15 a payment under clause (i) shall use

16 such funds to conduct activities which

17 test and evaluate mechanisms to in18 crease the number and percentage of

19 medical students entering primary

20 care practice relative to those entering

21 nonprimary care practice.

22 ‘‘(II) ESTABLISHMENT AND OP23 ERATION.—Each consortium that re24 ceives a payment under clause (i) may

25 also use such funds for the establish-
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1 ment and operation of the consortium.

2 The Secretary shall make payments to

3 the consortium through an entity

4 identified by the consortium as appro5 priate for receiving payment on behalf

6 of the consortium. The consortium

7 shall have discretion in determining

8 the purposes for which such payments

9 may be used.

10 ‘‘(B) GRANTS FOR PLANNING AND EVAL11 UATIONS.—

12 ‘‘(i) IN GENERAL.—The Secretary

13 may award grants to consortia conducting

14 demonstration projects under this sub15 section for the purpose of developing and

16 evaluating such projects. Each consortium

17 desiring to receive a grant under this sub18 paragraph shall prepare and submit to the

19 Secretary an application, at such time, in

20 such manner, and containing such infor21 mation as the Secretary may require.

22 ‘‘(ii) AUTHORIZATION OF APPROPRIA23 TIONS.—There are authorized to be appro24 priated such sums as may be necessary to
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1 carry out the purposes of this subpara2 graph for fiscal years 1995 through 2003.

3 ‘‘(4) MAINTENANCE OF EFFORT.—Any funds

4 available for the activities covered by a demonstra5 tion project conducted under this subsection shall

6 supplement, and shall not supplant, funds that are

7 expended for similar purposes under any State, re8 gional, or local program.

9 ‘‘(5) DURATION.—A demonstration project

10 under this subsection shall be conducted for a period

11 not to exceed 8 years. The Secretary may terminate

12 a project if the Secretary determines that the con13 sortium conducting the project is not in substantial

14 compliance with the terms of the application ap15 proved by the Secretary under this subsection.

16 ‘‘(6) EVALUATIONS AND REPORTS.—

17 ‘‘(A) EVALUATIONS.—Each consortium

18 that conducts a demonstration project under

19 this subsection shall submit to the Secretary

20 and the Advisory Commission on Workforce a

21 final evaluation of such project within 360 days

22 of the termination of such project and such in23 terim evaluations as the Secretary may require.

24 ‘‘(B) REPORTS TO CONGRESS.—Not later

25 than 360 days after the first demonstration
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1 project under this subsection begins, and annu2 ally thereafter for each year in which a project

3 is conducted under this subsection, the Sec4 retary shall submit a report to the appropriate

5 committees of the Congress which evaluates the

6 effectiveness of the demonstration projects con7 ducted under this subsection and includes any

8 legislative recommendations determined appro9 priate by the Secretary.

10 ‘‘(7) DEFINITIONS.—For purposes of this sub11 section:

12 ‘‘(A) AMBULATORY TRAINING SITES.—The

13 term ‘ambulatory training sites’ includes, but is

14 not limited to, health maintenance organiza15 tions, federally qualified health centers, commu16 nity health centers, migrant health centers,

17 rural health clinics, nursing homes, hospice, and

18 other community-based providers, including pri19 vate practices.

20 ‘‘(B) HEALTH CARE TRAINING CONSOR21 TIUM.—The term ‘health care training consor22 tium’ includes a State, regional, or local entity

23 which—

24 ‘‘(i) includes, but is not limited to

25 partnerships of teaching hospitals, ambula-
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1 tory training sites, and one or more schools

2 of medicine; and

3 ‘‘(ii) is operated in a manner intended

4 to ensure that by the end of the 8-year

5 demonstration project there will be an in6 crease in the number and percentage of

7 medical school students entering primary

8 care practice relative to those entering

9 nonprimary care practice.

10 ‘‘(C) PRIMARY CARE.—The term ‘primary

11 care’ means family practice, general internal

12 medicine, and general pediatrics, and obstetrics

13 and gynecology.’’.

14 (b) SOURCE OF INCENTIVE PAYMENTS.—Section

15 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is amended

16 by adding at the end the following new clause:

17 ‘‘(v) For the purpose of making payments pur18 suant to subsection (k)(3)(A)(ii) for fiscal years

19 1996, 1997, 1998, 1999, and 2000, there shall be

20 available from the Federal Hospital Insurance Trust

21 Fund $200,000,000 of the amount that would have

22 been expended under this subparagraph if the

23 amendments made by section 816 of the America’s

24 Health Care Option Act had not been in effect.’’.
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1 SEC. 503. FUNDING UNDER MEDICARE FOR TRAINING IN

2 NONHOSPITAL-OWNED FACILITIES.

3 (a) RESIDENCY TRAINING TIME IN NONHOSPITAL4 OWNED FACILITIES COUNTED IN DETERMINING FULL5 TIME-EQUIVALENT RESIDENTS FOR DIRECT GRADUATE

6 MEDICAL EDUCATION PAYMENTS.—Section

7 1886(h)(4)(E) of the Social Security Act (42 U.S.C.

8 1395ww(h)(4)(E)) is amended by striking ‘‘, if the hos9 pital incurs all, or substantially all, of the costs for the

10 training program in that setting’’.

11 (b) RESIDENCY TRAINING TIME IN NONHOSPITAL12 OWNED FACILITIES COUNTED IN DETERMINING FULL13 TIME-EQUIVALENT RESIDENTS FOR INDIRECT MEDICAL

14 EDUCATION PAYMENTS.—

15 (1) IN GENERAL.—Section 1886(d)(5)(B)(iv) of

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

17 1395ww(d)(5)(B)(iv)) is amended to read as follows:

18 ‘‘(iv) In determining such adjustment,

19 the Secretary shall—

20 ‘‘(I) count interns and residents

21 assigned to any patient service envi22 ronment which is part of the hos23 pital’s approved medical residency

24 training program (as defined in sub25 section (h)(5)(A)); and
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1 ‘‘(II) count interns and residents

2 providing services at any entity receiv3 ing a grant under section 330 of the

4 Public Health Service Act that is

5 under the ownership or control of a

6 hospital (if the hospital incurs all, or

7 substantially all, of the costs of the

8 services furnished by such interns and

9 residents),

10 as part of the calculation of the full-time11 equivalent number of interns and resi12 dents.’’.

13 (2) ADJUSTMENT OF INDIRECT TEACHING AD14 JUSTMENT FACTOR TO ACHIEVE BUDGET NEUTRAL15 ITY.—Section 1886(d)(5)(B) of the Social Security

16 Act (42 U.S.C. 1395ww(d)(5)(B)) is amended by

17 adding at the end the following new clause:

18 ‘‘(vi) The Secretary shall reduce all payments

19 under this subparagraph by such percentage as the

20 Secretary determines necessary so that, beginning on

21 the date of the enactment of the America’s Health

22 Care Option Act, the amendments made by section

23 503(b)(1) of such Act would not result in expendi24 tures under this subparagraph that exceed the
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1 amount of such expenditures that would have been

2 made if such amendments had not been made.’’.

3 SEC. 504. NATIONAL FUND FOR MEDICAL RESEARCH.

4 (a) DESIGNATION OF OVERPAYMENTS AND CON5 TRIBUTIONS FOR THE NATIONAL FUND FOR MEDICAL

6 RESEARCH.—

7 (1) IN GENERAL.—Subchapter A of chapter 61

8 of the Internal Revenue Code of 1986 (relating to

9 returns and records) is amended by adding at the

10 end the following new part:

11 ‘‘PART IX—DESIGNATION OF OVERPAYMENTS

12 AND CONTRIBUTIONS FOR THE NATIONAL

13 FUND FOR MEDICAL RESEARCH

‘‘Sec. 6097. Amounts for the National Fund for Medical Research.

14 ‘‘SEC. 6097. AMOUNTS FOR THE NATIONAL FUND FOR MEDI15 CAL RESEARCH.

16 ‘‘(a) IN GENERAL.—Every individual (other than a

17 nonresident alien) may designate that—

18 ‘‘(1) a portion (not less than $1) of any over19 payment of the tax imposed by chapter 1 for the

20 taxable year, and

21 ‘‘(2) a cash contribution (not less than $1),

22 be paid over to the National Fund for Medical Research.

23 In the case of a joint return of a husband and wife, each
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1 spouse may designate one-half of any such overpayment

2 of tax (not less than $2).

3 ‘‘(b) MANNER AND TIME OF DESIGNATION.—Any

4 designation under subsection (a) may be made with re5 spect to any taxable year only at the time of filing the

6 original return of the tax imposed by chapter 1 for such

7 taxable year. Such designation shall be made either on the

8 1st page of the return or on the page bearing the tax9 payer’s signature.

10 ‘‘(c) OVERPAYMENTS TREATED AS REFUNDED.—For

11 purposes of this section, any overpayment of tax des12 ignated under subsection (a) shall be treated as being re13 funded to the taxpayer as of the last day prescribed for

14 filing the return of tax imposed by chapter 1 (determined

15 with regard to extensions) or, if later, the date the return

16 is filed.

17 ‘‘(d) DESIGNATED AMOUNTS NOT DEDUCTIBLE.—

18 No deduction shall be allowed under subtitle A with re19 spect to any amount designated pursuant to subsection (a)

20 for any taxable year.

21 ‘‘(e) TERMINATION.—This section shall not apply to

22 taxable years beginning in a calendar year after a deter23 mination by the Secretary that the sum of all designations

24 under subsection (a) for taxable years beginning in the
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1 second and third calendar years preceding the calendar

2 year is less than $5,000,000.’’.

3 (2) CLERICAL AMENDMENT.—The table of

4 parts for subchapter A of chapter 61 of such Code

5 is amended by adding at the end the following new

6 item:

‘‘Part IX. Designation of overpayments and contributions for the

National Fund for Medical Research.’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to taxable years begin9 ning after December 31, 1994.

10 (b) ESTABLISHMENT OF THE NATIONAL FUND FOR

11 MEDICAL RESEARCH.—

12 (1) IN GENERAL.—Subchapter A of chapter 98

13 of the Internal Revenue Code of 1986 (relating to

14 the trust fund code) is amended by adding at the

15 end the following new section:

16 ‘‘SEC. 9512. NATIONAL FUND FOR MEDICAL RESEARCH.

17 ‘‘(a) CREATION OF FUND.—There is established in

18 the Treasury of the United States a fund to be known

19 as the ‘‘National Fund for Medical Research’’, consisting

20 of such amounts as may be credited or paid to such Fund

21 as provided in this section or section 9602(b).

22 ‘‘(b) TRANSFERS TO FUND.—There is hereby trans23 ferred to the National Fund for Medical Research

24 amounts equivalent to the amounts designated under sec-
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1 tion 6097 (relating to designation of overpayments and

2 contributions to the Fund).

3 ‘‘(c) EXPENDITURES FROM FUND.—

4 ‘‘(1) IN GENERAL.—The Secretary shall pay an5 nually, within 30 days after the President signs an

6 appropriations Act for the Departments of labor,

7 Health and Human Services, and Education, and re8 lated agencies, or by the end of the first quarter of

9 the fiscal year, to the Secretary of Health and

10 Human Services on behalf of the National Institutes

11 of Health, an amount equal to the amount in the

12 National Fund for Medical Research at the time of

13 such payment, to carry out the purposes of section

14 404F of the Public Health Service Act, less any ad15 ministrative expenses which may be paid under para16 graph (2).

17 ‘‘(2) ADMINISTRATIVE EXPENSES.—Amounts in

18 the National Fund for Medical Research shall be

19 available to pay the administrative expenses of the

20 Department of the Treasury directly allocable to—

21 ‘‘(A) modifying the individual income tax

22 return forms to carry out section 6097,

23 ‘‘(B) carrying out this chapter with respect

24 to such Fund, and
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1 ‘‘(C) processing amounts received under

2 section 6097 and transferring such amounts to

3 such Fund.

4 ‘‘(d) BUDGET TREATMENT OF AMOUNTS IN FUND.—

5 The amounts in the National Fund for Medical Research

6 shall be excluded from, and shall not be taken into ac7 count, for purposes of any budget enforcement procedure

8 under the Congressional Budget Act of 1974 or the Bal9 anced Budget and Emergency Deficit Control Act of

10 1985.’’.

11 (2) CLERICAL AMENDMENT.—The table of sec12 tions for subchapter A of chapter 98 of the Internal

13 Revenue Code of 1986 is amended by adding at the

14 end the following new item:

‘‘Sec. 9512. National Fund for Medical Research.’’.

15 (c) PURPOSES FOR EXPENDITURES FROM FUND.—

16 Part A of title IV of the Public Health Service Act is

17 amended by adding at the end the following new section:

18 ‘‘SEC. 404F. EXPENDITURES FROM THE NATIONAL FUND

19 FOR MEDICAL RESEARCH.

20 ‘‘(a) DISTRIBUTION OF AMOUNTS.—From amounts

21 received for any fiscal year from the National Fund for

22 Medical Research, the Secretary shall distribute—

23 ‘‘(1) 3 percent of such amounts to the Director

24 of NIH to be allocated at the Director’s discretion

25 for—
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1 ‘‘(A) carrying out the responsibilities of the

2 Director of NIH, including the Office of Re3 search on Women’s Health, the Office of Re4 search on Minority Health, the Office on Alter5 native Medicine, and the Office of Rare Disease

6 Research;

7 ‘‘(B) construction of, and acquisition of

8 equipment for, facilities of or used by the Na9 tional Institutes of Health; and

10 ‘‘(C) transfer to the National Center for

11 Research Resources to carry out section 481A

12 concerning biomedical and behavioral research

13 facilities;

14 ‘‘(2) 1 percent of such amounts for carrying out

15 section 301 and part D of this title with respect to

16 health information communications; and

17 ‘‘(3) the remainder of such amounts to member

18 institutes and centers of the National Institutes of

19 Health in the same proportion to the total amount

20 received under this subsection, as the amount of an21 nual appropriations under appropriations Acts for

22 each member institute or center for the fiscal year

23 bears to the total amount of appropriations under

24 appropriations Acts for all member institutes and
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•S 2374 IS

1 centers of the National Institutes of Health for the

2 fiscal year.

3 ‘‘(b) PLANS OF ALLOCATION.—The amounts trans4 ferred under subsection (a) shall be allocated by the Direc5 tor of NIH or the various directors of the institutes and

6 centers, as the case may be, pursuant to allocation plans

7 developed by the various advisory councils to such direc8 tors, after consultation with such directors.

9 ‘‘(c) GRANTS AND CONTRACTS FULLY FUNDED IN

10 FIRST YEAR.—With respect to any grant or contract

11 funded by amounts distributed under subsection (a), the

12 full amount of the total obligation of such grant or con13 tract shall be funded in the first year of such grant or

14 contract, and shall remain available until expended.

15 ‘‘(d) MAINTENANCE OF EFFORT.—No amounts

16 transferred under subsection (a) shall replace or reduce

17 the amount of appropriations for the National Institutes

18 of Health under appropriations Acts.’’.

19 Subtitle B—Health Care Liability

20 Reform

21 SEC. 511. HEALTH CARE LIABILITY 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.) is

24 amended by inserting after section 1128B the following

25 new section:
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•S 2374 IS

1 ‘‘SEC. 1129. HEALTH CARE LIABILITY REFORM.

2 ‘‘(a) DEFINITIONS.—As used in this section:

3 ‘‘(1) CLAIMANT.—The term ‘claimant’ means

4 any person who commences a health care liability ac5 tion, and any person on whose behalf such an action

6 is commenced, including the decedent in the case of

7 an action brought through or on behalf of an estate.

8 ‘‘(2) CLEAR AND CONVINCING EVIDENCE.—The

9 term ‘clear and convincing evidence’ is that measure

10 or degree of proof that will produce in the mind of

11 the trier of fact a firm belief or conviction as to the

12 truth of the allegations sought to be established, ex13 cept that such measure or degree of proof is more

14 than that required under preponderance of the evi15 dence, but less than that required for proof beyond

16 a reasonable doubt.

17 ‘‘(3) HEALTH CARE LIABILITY ACTION.—The

18 term ‘‘health care liability action’’ means a civil ac19 tion in a State or Federal court—

20 ‘‘(A) against a health care provider, health

21 care professional, or other defendant joined in

22 the action (regardless of the theory of liability

23 on which the action is based) in which the

24 claimant alleges injury related to the provision

25 of, or the failure to provide, health care serv26 ices; or
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•S 2374 IS

1 ‘‘(B) against a health care payor, a health

2 maintenance organization, insurance company,

3 or any other individual, organization, or entity

4 that provides payment for health care benefits

5 in which the claimant alleges that injury was

6 caused by the payment for, or the failure to

7 make payment for, health care benefits, except

8 to the extent such actions are subject to the

9 Employee Retirement Income Security Act of

10 1974.

11 ‘‘(3) HEALTH CARE PROFESSIONAL.—The term

12 ‘health care professional’ means any individual who

13 provides health care services in a State and who is

14 required by Federal or State laws or regulations to

15 be licensed, registered or certified to provide such

16 services or who is certified to provide health care

17 services pursuant to a program of education, train18 ing and examination by an accredited institution,

19 professional board, or professional organization.

20 ‘‘(4) HEALTH CARE PROVIDER.—The term

21 ‘health care provider’ means any organization or in22 stitution that is engaged in the delivery of health

23 care services in a State and that is required by Fed24 eral or State laws or regulations to be licensed, reg-
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•S 2374 IS

1 istered or certified to engage in the delivery of such

2 services.

3 ‘‘(5) HEALTH CARE SERVICES.—The term

4 ‘health care services’ means any services provided by

5 a health care professional or health care provider, or

6 any individual working under the supervision of a

7 health care professional, that relate to the diagnosis,

8 prevention, or treatment of any disease or impair9 ment, or the assessment of the health of human

10 beings.

11 ‘‘(6) INJURY.—The term ‘injury’ means any ill12 ness, disease, or other harm that is the subject of

13 a health care liability action.

14 ‘‘(7) NONECONOMIC LOSSES.—The term ‘non15 economic losses’ means losses for physical and emo16 tional pain, suffering, inconvenience, physical im17 pairment, mental anguish, disfigurement, loss of en18 joyment of life, loss of consortium, and other

19 nonpecuniary losses incurred by an individual with

20 respect to which a health care liability action is

21 brought.

22 ‘‘(8) PUNITIVE DAMAGES.—The term ‘punitive

23 damages’ means damages awarded, for the purpose

24 of punishment or deterrence, and not for compen25 satory purposes, against a health care provider,
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•S 2374 IS

1 health care organization, or other defendant in a

2 health care liability action. Punitive damages are

3 neither economic nor noneconomic damages.

4 ‘‘(b) APPLICABILITY.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (3), this section shall apply with respect to

7 any health care liability action brought in any Fed8 eral or State court, except that this section shall not

9 apply to an action for damages arising from a vac10 cine-related injury or death to the extent that title

11 XXI of the Public Health Service Act applies to the

12 action.

13 ‘‘(2) PREEMPTION.—The provisions of this sec14 tion shall preempt any State law to the extent such

15 law is inconsistent with the limitations contained in

16 such provisions. The provisions of this section shall

17 not preempt any State law that—

18 ‘‘(A) provides for defenses in addition to

19 those contained in this section, places greater

20 limitations on the amount of attorneys’ fees

21 that can be collected, or otherwise imposes

22 greater restrictions on non-economic or punitive

23 damages than those provided in this section;
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•S 2374 IS

1 ‘‘(B) permits State officials to commence

2 health care liability actions as a representative

3 of an individual; or

4 ‘‘(C) permits provider-based dispute resolu5 tion.

6 ‘‘(3) EFFECT ON SOVEREIGN IMMUNITY AND

7 CHOICE OF LAW OR VENUE.—Nothing in this section

8 shall be construed to—

9 ‘‘(A) waive or affect any defense of sov10 ereign immunity asserted by any State under

11 any provision of law;

12 ‘‘(B) waive or affect any defense of sov13 ereign immunity asserted by the United States;

14 ‘‘(C) affect the applicability of any provi15 sion of the Foreign Sovereign Immunities Act

16 of 1976;

17 ‘‘(D) preempt State choice-of-law rules

18 with respect to actions brought by a foreign na19 tion or a citizen of a foreign nation; or

20 ‘‘(E) affect the right of any court to trans21 fer venue or to apply the law of a foreign nation

22 or to dismiss an action of a foreign nation or

23 of a citizen of a foreign nation on the ground

24 of inconvenient forum.
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•S 2374 IS

1 ‘‘(4) FEDERAL COURT JURISDICTION NOT ES2 TABLISHED ON FEDERAL QUESTION GROUNDS.—

3 Nothing in this section shall be construed to estab4 lish any jurisdiction in the district courts of the

5 United States over health care liability actions on

6 the basis of sections 1331 or 1337 of title 28, Unit7 ed States Code.

8 ‘‘(c) STATUTE OF LIMITATIONS.—

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), no health care liability action may be ini11 tiated after the expiration of the 2-year period that

12 begins on the date on which the alleged injury and

13 its cause should reasonably have been discovered,

14 but in no event later than 5 years after the date of

15 the alleged occurrence of the injury.

16 ‘‘(2) EXCEPTION FOR MINORS.—In the case of

17 an alleged injury suffered by a minor who has not

18 attained 6 years of age, no health care liability ac19 tion may be initiated after the expiration of the 2-

20 year period that begins on the date on which the al21 leged injury and its cause should reasonably have

22 been discovered, but in no event later than 6 years

23 after the date of the alleged occurrence of the injury

24 and its cause or the date on which the minor attains

25 11 years of age, whichever is later.
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•S 2374 IS

1 ‘‘(d) REFORM OF NONECONOMIC DAMAGES.—

2 ‘‘(1) IN GENERAL.—With respect to a health

3 care liability action brought in any forum, the total

4 amount of damages that may be awarded to an indi5 vidual and the family members of such individual for

6 noneconomic losses resulting from an injury alleged

7 under such action may not exceed $250,000, regard8 less of the number of health care professionals,

9 health care providers, and other defendants against

10 whom the action is brought or the number of actions

11 brought with respect to the injury. If the jury’s

12 damage award exceeds such limitation, a reduction

13 in such award shall be made by the court.

14 ‘‘(2) STUDY.—The Secretary, in consultation

15 with the Attorney General, shall conduct a study to

16 determine an appropriate schedule with respect to

17 an increase in the limitation described in paragraph

18 (1) in years subsequent to the calendar year in

19 which this section is enacted. Not later than Janu20 ary 1, 1997, the Secretary shall submit such a

21 schedule to Congress.

22 ‘‘(3) JOINT RESOLUTION AND CONSIDERATION

23 BY CONGRESS.—

24 ‘‘(A) IN GENERAL.—The schedule under

25 paragraph (2) shall be implemented unless a
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•S 2374 IS

1 joint resolution (described in subparagraph (B))

2 disapproving such recommendations is enacted

3 in accordance with the provisions of subpara4 graph (C), before the end of the 45-day period

5 beginning on the date on which such schedule

6 was submitted. For purposes of applying the

7 preceding sentence and subparagraphs (B) and

8 (C), the days on which either House of Con9 gress is not in session because of an adjourn10 ment of more than three days to a day certain

11 shall be excluded in the computation of a pe12 riod.

13 ‘‘(B) JOINT RESOLUTION OF DIS14 APPROVAL.—A joint resolution described in this

15 subparagraph means only a joint resolution

16 which is introduced within the 10-day period

17 beginning on the date on which the Secretary

18 submits the schedule under paragraph (2)

19 and—

20 ‘‘(i) which does not have a preamble;

21 ‘‘(ii) the matter after the resolving

22 clause of which is as follows: ‘‘That Con23 gress disapproves the schedule of the Sec24 retary of Health and Human Services con25 cerning adjustments in limitations on non-
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•S 2374 IS

1 economic damages with respect to health

2 care liability actions, as submitted by the

3 Secretary on lllllll.’’, the blank

4 space being filled in with the appropriate

5 date; and

6 ‘‘(iii) the title of which is as follows:

7 ‘‘Joint resolution disapproving the schedule

8 of the Secretary of Health and Human

9 Services concerning adjustments in limita10 tions on noneconomic damages with re11 spect to health care liability actions, as

12 submitted by the Secretary on

13 lllllll.’’, the blank space being

14 filled in with the appropriate date.

15 ‘‘(C) PROCEDURES FOR CONSIDERATION

16 OF RESOLUTION OF DISAPPROVAL.—Subject to

17 subparagraph (D), the provisions of section

18 2908 (other than subsection (a)) of the Defense

19 Base Closure and Realignment Act of 1990

20 shall apply to the consideration of a joint reso21 lution described in subparagraph (B) in the

22 same manner as such provisions apply to a joint

23 resolution described in section 2908(a) of such

24 Act.
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•S 2374 IS

1 ‘‘(D) SPECIAL RULES.—For purposes of

2 applying subparagraph (C) with respect to such

3 provisions—

4 ‘‘(i) any reference to the Committee

5 on Armed Services of the House of Rep6 resentatives shall be deemed a reference to

7 an appropriate Committee of the House of

8 Representatives (specified by the Speaker

9 of the House of Representatives at the

10 time of submission of recommendations

11 under paragraph (1)) and any reference to

12 the Committee on Armed Services of the

13 Senate shall be deemed a reference to an

14 appropriate Committee of the Senate

15 (specified by the Majority Leader of the

16 Senate at the time of submission of rec17 ommendations under paragraph (1)); and

18 ‘‘(ii) any reference to the date on

19 which the President transmits a report

20 shall be deemed a reference to the date on

21 which the Secretary submits a rec22 ommendation under paragraph (1).

23 ‘‘(e) REFORM OF PUNITIVE DAMAGES.—

24 ‘‘(1) LIMITATION.—With respect to a health

25 care liability action, an award for punitive damages
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•S 2374 IS

1 may only be made, if otherwise permitted by applica2 ble law, if it is proven by clear and convincing evi3 dence—

4 ‘‘(A) that the defendant intended to injure

5 the claimant for a reason unrelated to the pro6 vision of health care services;

7 ‘‘(B) that the defendant understood the

8 claimant was substantially certain to suffer un9 necessary injury, yet the defendant in providing

10 or failing to provide health care services, delib11 erately failed to avoid such injury; or

12 ‘‘(C) that the defendant acted with a con13 scious disregard of a substantial and unjustifi14 able risk of unnecessary injury which the de15 fendant failed to avoid in a manner which con16 stitutes a gross deviation from the normal

17 standard of conduct in such circumstances.

18 ‘‘(2) PUNITIVE DAMAGES NOT PERMITTED.—

19 Notwithstanding the provisions of paragraph (1),

20 punitive damages may not be awarded against a de21 fendant with respect to any health care liability ac22 tion if—

23 ‘‘(A) no judgment for compensatory dam24 ages, including nominal damages (under $500),

25 is rendered against the defendant; or
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•S 2374 IS

1 ‘‘(B) the underlying health care liability

2 action arises out of the same act or course of

3 conduct by the defendant that resulted in a

4 prior award of punitive damages to any individ5 ual.

6 ‘‘(3) REQUIREMENTS FOR PLEADING OF PUNI7 TIVE DAMAGES.—

8 ‘‘(A) IN GENERAL.—The claimant’s com9 plaint or initial pleading in any health care li10 ability action may not include a demand for pu11 nitive damages.

12 ‘‘(B) AMENDED PLEADING.—A court may

13 allow a claimant to file an amended complaint

14 or pleading for punitive damages if—

15 ‘‘(i) the claimant submits a motion to

16 amend the complaint or pleading within

17 the earlier of—

18 ‘‘(I) 2 years after the complaint

19 or initial pleading is filed, or

20 ‘‘(II) 9 months before the date

21 the matter is first set for trial; and

22 ‘‘(ii) after a finding by a court upon

23 review of supporting and opposing affida24 vits or after a hearing, that after weighing

25 the evidence the claimant has established
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•S 2374 IS

1 by a substantial probability that the claim2 ant will prevail on the claim for punitive

3 damages.

4 ‘‘(4) SEPARATE PROCEEDING.—

5 ‘‘(A) IN GENERAL.—At the request of any

6 defendant in a health care liability action, the

7 trier of fact shall consider in a separate pro8 ceeding—

9 ‘‘(i) whether punitive damages are to

10 be awarded and the amount of such award,

11 or

12 ‘‘(ii) the amount of punitive damages

13 following a determination of punitive liabil14 ity.

15 ‘‘(B) ONLY RELEVANT EVIDENCE ADMISSI16 BLE.—If a defendant requests a separate pro17 ceeding under subparagraph (A), evidence rel18 evant only to the claim of punitive damages, as

19 determined by applicable State law, shall be in20 admissible in any proceeding to determine

21 whether compensatory damages are to be

22 awarded.

23 ‘‘(5) DETERMINING AMOUNT OF PUNITIVE DAM24 AGES.—
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•S 2374 IS

1 ‘‘(A) IN GENERAL.—In determining the

2 amount of punitive damages, the trier of fact

3 shall consider only the following:

4 ‘‘(i) The severity of the harm caused

5 by the conduct of the defendant.

6 ‘‘(ii) The duration of the conduct or

7 any concealment of it by the defendant.

8 ‘‘(iii) The profitability of the conduct

9 of the defendant.

10 ‘‘(iv) The number of products sold or

11 medical procedures rendered for compensa12 tion, as the case may be, by the defendant

13 of the kind causing the harm complained

14 of by the claimant.

15 ‘‘(v) Awards of punitive or exemplary

16 damages to persons similarly situated to

17 the claimant, when offered by the defend18 ant.

19 ‘‘(vi) Prospective awards of compen20 satory damages to persons similarly situ21 ated to the claimant.

22 ‘‘(vii) Any criminal penalties imposed

23 on the defendant as a result of the conduct

24 complained of by the claimant, when of25 fered by the defendant.
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•S 2374 IS

1 ‘‘(viii) The amount of any civil fines

2 assessed against the defendant as a result

3 of the conduct complained of by the claim4 ant, when offered by the defendant.

5 ‘‘(B) LIMITATION ON AMOUNT OF PUNI6 TIVE DAMAGES.—In no event shall the amount

7 of punitive damages awarded exceed the lesser

8 of 2 times the amount of compensatory dam9 ages awarded or $500,000. The jury shall not

10 be informed of this limitation.

11 ‘‘(6) RESTRICTIONS PERMITTED.—Nothing in

12 this section shall be construed to imply a right to

13 seek punitive damages where none exists under Fed14 eral or State law.

15 ‘‘(7) HEALTH CARE QUALITY ASSURANCE PRO16 GRAM.—

17 ‘‘(A) FUND.—Each participating State

18 shall establish a health care quality assurance

19 program, to be approved by the Secretary, and

20 a fund consisting of such amounts as are trans21 ferred to the fund under subparagraph (B).

22 ‘‘(B) TRANSFER OF AMOUNTS.—Each par23 ticipating State shall require that 50 percent of

24 all awards of punitive damages resulting from

25 all health care liability actions in that State be
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•S 2374 IS

1 transferred to the fund established under sub2 paragraph (B) in the State.

3 ‘‘(C) OBLIGATIONS FROM FUND.—The

4 chief executive officer of a participating State

5 shall obligate such sums as are available in the

6 fund established in that State under subpara7 graph (A) to—

8 ‘‘(A) license and certify health care profes9 sionals in the State;

10 ‘‘(B) implement health care quality assur11 ance programs; and

12 ‘‘(C) carry out programs to reduce mal13 practice-related costs for health care providers

14 volunteering to provide health care services in

15 medically underserved areas.

16 ‘‘(f) PERIODIC PAYMENTS.—With respect to a health

17 care liability action, no person may be required to pay

18 more than $100,000 for future damages in a single pay19 ment of a damages award, but a person shall be permitted

20 to make such payments of the award on a periodic basis.

21 The periods for such payments shall be determined by the

22 adjudicating body, based upon projections of future losses

23 and shall be reduced to present value. The adjudicating

24 body may waive the requirements of this subsection if such
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•S 2374 IS

1 body determines that such a waiver is in the interests of

2 justice.

3 ‘‘(g) SCOPE OF LIABILITY.—

4 ‘‘(1) IN GENERAL.—With respect to punitive

5 and noneconomic damages, the liability of each de6 fendant in a health care liability action shall be sev7 eral only and may not be joint. Such a defendant

8 shall be liable only for the amount of punitive or

9 noneconomic damages allocated to the defendant in

10 direct proportion to such defendant’s percentage of

11 fault or responsibility for the injury suffered by the

12 claimant.

13 ‘‘(2) DETERMINATION OF PERCENTAGE OF LI14 ABILITY.—The trier of fact in a health care liability

15 action shall determine the extent of each defendant’s

16 fault or responsibility for injury suffered by the

17 claimant, and shall assign a percentage of respon18 sibility for such injury to each such defendant.

19 ‘‘(3) PROHIBITION ON VICARIOUS LIABILITY.—

20 A defendant in a health care liability action may not

21 be held vicariously liable for the direct actions or

22 omissions of other individuals.

23 ‘‘(h) MANDATORY OFFSETS FOR DAMAGES PAID BY

24 A COLLATERAL SOURCE.—
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•S 2374 IS

1 ‘‘(1) IN GENERAL.—With respect to a health

2 care liability action, the total amount of damages re3 ceived by an individual under such action shall be

4 reduced, in accordance with paragraph (2), by any

5 other payment that has been, or will be, made to an

6 individual to compensate such individual for the in7 jury that was the subject of such action.

8 ‘‘(2) AMOUNT OF REDUCTION.—The amount by

9 which an award of damages to an individual for an

10 injury shall be reduced under paragraph (1) shall

11 be—

12 ‘‘(A) the total amount of any payments

13 (other than such award) that have been made

14 or that will be made to such individual to pay

15 costs of or compensate such individual for the

16 injury that was the subject of the action; minus

17 ‘‘(B) the amount paid by such individual

18 (or by the spouse, parent, or legal guardian of

19 such individual) to secure the payments de20 scribed in subparagraph (A) and any portion of

21 the award subject to a subrogation lien or

22 claim.

23 ‘‘(i) TREATMENT OF ATTORNEYS’ FEES AND OTHER

24 COSTS.—
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•S 2374 IS

1 ‘‘(1) LIMITATION ON AMOUNT OF CONTINGENCY

2 FEES.—

3 ‘‘(A) IN GENERAL.—An attorney who rep4 resents, on a contingency fee basis, a claimant

5 in a health care liability action may not charge,

6 demand, receive, or collect for services rendered

7 in connection with such action in excess of the

8 following amount recovered by judgment or set9 tlement under such action:

‘‘(i) 331 10 ⁄3 percent of the first

11 $150,000 (or portion thereof) recovered,

12 based on after-tax recovery, plus

13 ‘‘(ii) 25 percent of any amount in ex14 cess of $150,000 recovered, based on after15 tax recovery.

16 ‘‘(B) CALCULATION OF PERIODIC PAY17 MENTS.—In the event that a judgment or set18 tlement includes periodic or future payments of

19 damages, the amount recovered for purposes of

20 computing the limitation on the contingency fee

21 under subparagraph (A) shall be based on the

22 cost of the annuity or trust established to make

23 the payments. In any case in which an annuity

24 or trust is not established to make such pay-
331

•S 2374 IS

1 ments, such amount shall be based on the

2 present value of the payments.

3 ‘‘(3) CONTINGENCY FEE DEFINED.—As used in

4 this subsection, the term ‘contingency fee’ means

5 any fee for professional legal services which is, in

6 whole or in part, contingent upon the recovery of

7 any amount of damages, whether through judgment

8 or settlement.

9 ‘‘(j) OBSTETRIC CASES.—With respect to a health

10 care liability action relating to services provided during

11 labor or the delivery of a baby, if the health care profes12 sional against whom the action is brought did not pre13 viously treat the pregnant woman for the pregnancy, the

14 trier of fact may not find that the defendant committed

15 malpractice and may not assess damages against the

16 health care professional unless the malpractice is proven

17 by clear and convincing evidence.

18 ‘‘(k) REQUIREMENTS FOR RISK MANAGEMENT PRO19 GRAMS.—

20 ‘‘(1) REQUIREMENTS FOR PROVIDERS.—Each

21 State shall require each health care professional and

22 health care provider providing services in the State

23 to participate in a risk management program to pre24 vent and provide early warning of practices which
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•S 2374 IS

1 may result in injuries to patients or which otherwise

2 may endanger patient safety.

3 ‘‘(2) REQUIREMENTS FOR INSURERS.—Each

4 State shall require each entity which provides health

5 care professional or provider liability insurance to

6 health care professionals and health care providers

7 in the State to—

8 ‘‘(A) establish risk management programs

9 based on data available to such entity or sanc10 tion programs of risk management for health

11 care professionals and health care providers

12 provided by other entities; and

13 ‘‘(B) require each such professional or pro14 vider, as a condition of maintaining insurance,

15 to participate in one program described in sub16 paragraph (A) at least once in each 3-year pe17 riod.

18 ‘‘(l) PERMITTING STATE PROFESSIONAL SOCIETIES

19 TO PARTICIPATE IN DISCIPLINARY ACTIVITIES.—

20 ‘‘(1) ROLE OF PROFESSIONAL SOCIETIES.—

21 Notwithstanding any other provision of State or

22 Federal law, a State agency responsible for the con23 duct of disciplinary actions for a type of health care

24 provider may enter into agreements with State or

25 county professional societies of such type of health
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•S 2374 IS

1 care professional to permit such societies to partici2 pate in the licensing of such health care professional,

3 and to review any health care liability action, health

4 care liability allegation, or other information con5 cerning the practice patterns of any such health care

6 professional. Any such agreement shall comply with

7 paragraph (2).

8 ‘‘(2) REQUIREMENTS OF AGREEMENTS.—Any

9 agreement entered into under paragraph (1) for li10 censing activities or the review of any health care li11 ability action, health care liability allegation, or

12 other information concerning the practice patterns

13 of a health care professional shall provide that—

14 ‘‘(A) the health care professional society

15 conducts such activities or review as expedi16 tiously as possible;

17 ‘‘(B) after the completion of such review,

18 such society shall report its findings to the

19 State agency with which it entered into such

20 agreement;

21 ‘‘(C) the conduct of such activities or re22 view and the reporting of such findings be con23 ducted in a manner which assures the preserva24 tion of confidentiality of health care information

25 and of the review process; and
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•S 2374 IS

1 ‘‘(D) no individual affiliated with such so2 ciety is liable for any damages or injury directly

3 caused by the individual’s actions in conducting

4 such activities or review.

5 ‘‘(3) AGREEMENTS NOT MANDATORY.—Nothing

6 in this subsection may be construed to require a

7 State to enter into agreements with societies de8 scribed in paragraph (1) to conduct the activities de9 scribed in such paragraph.

10 ‘‘(4) EFFECT OF AGREEMENT.—

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to health care liability actions

13 arising on or after January 1, 1995.

14 Subtitle C—Health Care Antitrust

15 Improvements

16 SEC. 521. PROTECTION FROM ANTITRUST LAWS FOR CER17 TAIN COMPETITIVE AND COLLABORATIVE

18 ACTIVITIES.

19 (a) PROTECTIONS DESCRIBED.—An activity relating

20 to the provision of health care services shall receive the

21 following protection from the antitrust laws:

22 (1) If the activity is within a safe harbor des23 ignated by the Attorney General under section 522,

24 the safe harbor shall be a defense to all antitrust

25 claims, except for claims for injunctive relief as-
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1 serted by the Attorney General or the Chair in ex2 traordinary circumstances.

3 (2) If the activity is specified in and in compli4 ance with the terms of a certificate of review issued

5 by the Attorney General under section 523 and the

6 activity occurs while the certificate is in effect, the

7 certificate shall be a defense to antitrust claims,

8 other than claims for injunctive relief.

9 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

10 SUIT.—

11 (1) IN GENERAL.—If any person brings an ac12 tion alleging a claim under the antitrust laws and

13 the activity on which the claim is based is found by

14 the court to be protected from such laws under sub15 section (a), the court shall, at the conclusion of the

16 action—

17 (A) award to a substantially prevailing

18 claimant the cost of suit attributable to such

19 claim, including a reasonable attorney’s fee, or

20 (B) award to a substantially prevailing

21 party defending against such claim the cost of

22 such suit attributable to such claim, including

23 reasonable attorney’s fee, if the claim, or the

24 claimant’s conduct during litigation of the
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1 claim, was frivolous, unreasonable, without

2 foundation, or in bad faith.

3 (2) OFFSET IN CASES OF BAD FAITH.—The

4 court may reduce an award made pursuant to para5 graph (1) in whole or in part by an award in favor

6 of another party for any part of the cost of suit (in7 cluding a reasonable attorney’s fee) attributable to

8 conduct during the litigation by any prevailing party

9 that the court finds to be frivolous, unreasonable,

10 without foundation, or in bad faith.

11 SEC. 522. DESIGNATION OF SAFE HARBORS.

12 (a) IN GENERAL.—

13 (1) DESIGNATION BY ATTORNEY GENERAL.—

14 The Attorney General, in consultation with the Sec15 retary and the Chair, shall develop and designate

16 pursuant to paragraph (C) safe harbors for purposes

17 of section 521(a)(1) relating to—

18 (A) each category of activities referred to

19 in paragraph (2); and

20 (B) such other categories of activities as

21 the Attorney General may designate in accord22 ance with the process described in this section.

23 (2) REQUIRED CATEGORIES OF ACTIVITIES SUB24 JECT TO SAFE HARBORS.—The categories of activi25 ties referred to in this paragraph are as follows:
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1 (A) JOINT PURCHASING OF HEALTH CARE

2 SERVICES.—Providing the terms under which

3 consumers of health care services (patients or

4 others acting on their behalf) may jointly nego5 tiate and purchase health care services.

6 (B) SMALL HOSPITAL MERGERS.—Provid7 ing for small hospitals lawfully to merge under

8 the antitrust laws without undue delay or re9 view, taking into account the special needs and

10 circumstances of rural health care markets.

11 (C) NETWORK FORMATION AND OPER12 ATION.—Permitting activities related to the

13 startup and operation of collaborations between

14 State-licensed providers through partial or full

15 integration, including multi-provider networks,

16 hospital networks, physician-hospital organiza17 tions, and other efforts to provide health care

18 services more efficiently.

19 (D) ACTIVITIES OF MEDICAL SELF-REGU20 LATORY ENTITIES.—Permitting standard set21 ting and enforcement activities by medical self22 regulatory entities (such as hospital boards and

23 medical societies) to promote health care qual24 ity, except that a safe harbor under this para25 graph may not provide protection for any activ-
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•S 2374 IS

1 ity undertaken for financial gain or for anti2 competitive reasons.

3 (E) PROVISION OF INFORMATION TO BUY4 ERS AND CONSUMERS.—Permitting health care

5 providers collectively to supply non-price medi6 cal information to buyers and consumers relat7 ing to the type, quality and efficiency of treat8 ment, including joint views on procedures that

9 should be covered by purchasers and medical

10 protocols, except that a safe harbor under this

11 subparagraph may not provide protection for

12 any collective refusals to deal or collective at13 tempts at coercion.

14 (F) PARTICIPATION IN SURVEYS.—Provid15 ing the terms under which health care providers

16 may lawfully participate in written surveys of

17 prices of services, reimbursements received, em18 ployee compensation, and other relevant areas.

19 (G) HIGH-TECHNOLOGY AND TERTIARY

20 CARE JOINT VENTURES.—Permitting activities

21 of health care joint ventures to purchase or use

22 new or existing high technology or costly equip23 ment, or to provide advanced tertiary care serv24 ices.
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•S 2374 IS

1 (H) MARKET POWER SCREENS.—Providing

2 market power screens at appropriate levels

3 below which combinations of health care provid4 ers are too small to pose a realistic antitrust

5 threat. There may be different levels for dif6 ferent activities and markets, taking into ac7 count the special needs of rural health care

8 markets.

9 (I) JOINT PURCHASING ARRANGEMENTS.—

10 Providing the terms under which health care

11 providers may make joint purchases of products

12 and services.

13 (J) GOOD FAITH NEGOTIATIONS.—Provid14 ing the terms under which health care providers

15 may engage in discussions relating to legitimate

16 collaborative activities contemplated by the safe

17 harbors.

18 (b) PROCESS FOR DESIGNATION OF ADDITIONAL

19 CATEGORIES OF ACTIVITIES.—

20 (1) SOLICITATION OF PROPOSALS.—Not later

21 than 30 days after the date of the enactment of this

22 Act, the Attorney General shall publish a notice in

23 the Federal Register soliciting proposals for safe

24 harbors.
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1 (2) REVIEW OF PROPOSED SAFE HARBORS.—

2 Not later than 180 days after the date of the enact3 ment of this Act, the Attorney General (in consulta4 tion with the Secretary and the Chair) shall review

5 the proposed safe harbors submitted under para6 graph (1) and include a description of the safe har7 bors in the report under subsection (d).

8 (3) ADDITIONAL SAFE HARBORS.—After sub9 mitting the report under subsection (d), the Attor10 ney General (in consultation with the Secretary and

11 the Chair) may from time to time add additional

12 safe harbors in accordance with the procedures de13 scribed in this subsection.

14 (c) EFFECTIVE DATE OF SAFE HARBORS.—

15 (1) PUBLICATION.—Not later than 180 days

16 after the date of the enactment of this Act, the At17 torney General shall publish in the Federal Register

18 for public comment the safe harbors proposed for

19 designation under this section. Not later than 180

20 days after publishing such proposed safe harbors in

21 the Federal Register, the Attorney General shall

22 issue final rules establishing such safe harbors.

23 (2) EFFECTIVE DATE.—The safe harbors estab24 lished under the final rules issued under paragraph
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•S 2374 IS

1 (1) shall take effect 90 days after issuance, unless

2 disapproved by the Congress.

3 (d) REPORT ON PROPOSED SAFE HARBORS.—Not

4 later than 180 days after the date of the enactment of

5 this Act, the Attorney General (in consultation with the

6 Secretary and the Chair) shall submit a report to Congress

7 describing the proposals from subsections (a) and (b)(1)

8 to be included in the publication of safe harbors described

9 in subsection (c)(1) and the proposals from subsection

10 (b)(1) that are not to be so included, together with expla11 nations therefor.

12 (e) MODIFICATION OR REMOVAL OF SAFE HAR13 BORS.—The Attorney General (in consultation with the

14 Secretary and the Chair) may modify or remove a safe

15 harbor following notice and comment upon a determina16 tion that the safe harbor does not meet the criteria of sub17 section (f).

18 (f) CRITERIA FOR SAFE HARBORS.—In establishing

19 safe harbors under this section, the Attorney General shall

20 take into account the following:

21 (1) The extent to which a competitive or col22 laborative activity will accomplish any of the follow23 ing:

24 (A) An increase in access to health care

25 services.
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•S 2374 IS

1 (B) The enhancement of the quality of

2 health care services.

3 (C) The establishment of cost efficiencies

4 that will be passed on to consumers, including

5 economies of scale and reduced transaction and

6 administrative costs.

7 (D) An increase in the ability of health

8 care facilities to provide services in medically

9 underserved areas or to medically underserved

10 populations.

11 (E) An improvement in the utilization of

12 health care resources or the reduction in the in13 efficient duplication of the use of such re14 sources.

15 (2) Whether the designation of an activity as a

16 safe harbor will result in the following outcomes:

17 (A) Health plans and other health care in18 surers, consumers of health care services, and

19 health care providers will be better able to ne20 gotiate payment and service arrangements

21 which will reduce costs to consumers.

22 (B) Taking into consideration the charac23 teristics of the particular purchasers and pro24 viders involved, competition will not be unduly

25 restricted.
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•S 2374 IS

1 (C) Equally efficient and less restrictive al2 ternatives do not exist to meet the criteria de3 scribed in paragraph (1).

4 (D) The activity will not unreasonably

5 foreclose competition by denying competitors a

6 necessary element of competition.

7 SEC. 523. CERTIFICATES OF REVIEW.

8 (a) ESTABLISHMENT OF PROGRAM.—In consultation

9 with the Secretary and the Chair, the Attorney General

10 shall (not later than 180 days after the date of the enact11 ment of this Act) issue certificates of review in accordance

12 with this section for providers of health care services and

13 advise and assist any person with respect to applying for

14 such a certificate of review.

15 (b) PROCEDURES FOR APPLICATION FOR CERTIFI16 CATE.—

17 (1) SUBMISSION OF APPLICATION.—

18 (A) FORM; CONTENT.—To apply for a cer19 tificate of review, a person shall submit to the

20 Attorney General a written application which—

21 (i) specifies the activities relating to

22 the provision of health care services which

23 satisfy the criteria described in section

24 522(f) and which will be included in the

25 certificate; and
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•S 2374 IS

1 (ii) is in a form and contains any in2 formation, including information pertain3 ing to the overall market in which the ap4 plicant operates, required by rule or regu5 lation promulgated under section 526.

6 (B) FILING FEE.—The Attorney General

7 may require a filing fee to be submitted with

8 the application to cover the cost of publication

9 and the cost of review required by this section.

10 The amount of the filing fee shall be deter11 mined on a sliding scale established by the At12 torney General in consultation with the Chair

13 (based on the monetary size of the transaction

14 involved), except that such fee may not exceed

15 $5,000.

16 (2) PUBLICATION OF NOTICE IN FEDERAL REG17 ISTER.—Within 10 days after an application submit18 ted under paragraph (1) is received by the Attorney

19 General, the Attorney General shall publish in the

20 Federal Register a notice that announces that an

21 application for a certificate of review has been sub22 mitted, identifies each person submitting the appli23 cation, and describes the conduct for which the ap24 plication is submitted.
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•S 2374 IS

1 (3) ESTABLISHMENT OF PROCEDURES FOR IS2 SUANCE OF CERTIFICATE.—In consultation with the

3 Chair and the Secretary, the Attorney General shall

4 establish procedures to be used in applying for and

5 in determining whether to approve an application for

6 a certificate of review under this subtitle. Under

7 such procedures the Attorney General, in consulta8 tion with the Secretary, shall approve an application

9 if the Attorney General determines that the activities

10 to be covered under the certificate will satisfy the

11 criteria described in section 522(f) for safe harbors

12 designated under such section and that the benefits

13 of the issuance of the certificate will outweigh any

14 disadvantages that may result from reduced com15 petition. If the Attorney General, with the concur16 rence of the Secretary, determines that the require17 ments for a certificate are met, the Attorney General

18 shall issue to the applicant a certificate of review.

19 The certificate of review shall specify—

20 (i) the health care market activities to

21 which the certificate applies,

22 (ii) the person to whom the certificate

23 of review is issued, and

24 (iii) any terms and conditions the At25 torney General or the Secretary deems nec-
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•S 2374 IS

1 essary to assure compliance with the appli2 cable procedures described in paragraph

3 (3).

4 (4) TIMING FOR DECISION ON APPLICATION.—

5 Within 90 days after the Attorney General receives

6 an application for a certificate of review, the Attor7 ney General shall determine whether to grant or

8 deny the certificate.

9 (5) NOTIFICATION OF DECISION.—The Attor10 ney General shall notify the applicant of the Attor11 ney General’s determination and, if the application

12 is denied, the reasons for the denial.

13 (6) FRAUDULENT PROCUREMENT.—A certifi14 cate of review shall be void ab initio with respect to

15 any health care market activities for which the cer16 tificate was procured by fraud.

17 (c) AMENDMENT AND REVOCATION OF CERTIFI18 CATES.—

19 (1) NOTIFICATION OF CHANGES.—Any appli20 cant who receives a certificate of review—

21 (A) shall promptly report to the Attorney

22 General any change relevant to the matters

23 specified in the certificate; and

24 (B) may submit to the Attorney General

25 an application to amend the certificate to re-
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•S 2374 IS

1 flect the effect of the change on the conduct

2 specified in the certificate.

3 (2) AMENDMENT TO CERTIFICATE.—An appli4 cation for an amendment to a certificate of review

5 shall be treated as an application for the issuance of

6 a certificate. The effective date of an amendment

7 shall be the date on which the application for the

8 amendment is received by the Attorney General.

9 (3) REVOCATION.—

10 (A) GROUNDS FOR REVOCATION.—In ac11 cordance with this paragraph, the Attorney

12 General, in consultation with the Secretary,

13 may revoke in whole or in part a certificate of

14 review issued under this section based on one or

15 more of the following grounds:

16 (i) After the expiration of the 2-year

17 period beginning on the date a person’s

18 certificate is issued, the activities of the

19 person have not substantially accomplished

20 the purposes for the issuance of the certifi21 cate.

22 (ii) The person has failed to comply

23 with any of the terms or conditions im24 posed under the certificate by the Attorney
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•S 2374 IS

1 General or the Secretary under subsection

2 (b)(4).

3 (iii) The activities covered under the

4 certificate no longer satisfy the criteria set

5 forth in section 522(f).

6 (B) REQUEST FOR COMPLIANCE INFORMA7 TION.—If the Attorney General or the Sec8 retary has reason to believe that any of the

9 grounds for revocation of a certificate of review

10 described in subparagraph (A) may apply to a

11 person holding the certificate, the Attorney

12 General shall request such information from

13 such person as the Attorney General or the Sec14 retary deems necessary to resolve the matter of

15 compliance. Failure to comply with such request

16 shall be grounds for revocation of the certificate

17 under this paragraph.

18 (C) PROCEDURES FOR REVOCATION.—If

19 the Attorney General or the Secretary deter20 mines that any of the grounds for revocation of

21 a certificate of review described in subpara22 graph (A) apply to a person holding the certifi23 cate, or that such person has failed to comply

24 with a request made under subparagraph (B),

25 the Attorney General shall give written notice of
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•S 2374 IS

1 the determination to such person. The notice

2 shall include a statement of the circumstances

3 underlying, and the reasons in support of, the

4 determination. In the 60-day period beginning

5 30 days after the notice is given, the Attorney

6 General shall revoke the certificate or modify it

7 as the Attorney General or the Secretary deems

8 necessary to cause the certificate to apply only

9 to activities that meet the criteria set forth in

10 section 522(f).

11 (D) INVESTIGATION AUTHORITY.—For

12 purposes of carrying out this paragraph, the

13 Attorney General may conduct investigations in

14 the same manner as the Attorney General con15 ducts investigations under section 3 of the Anti16 trust Civil Process Act, except that no civil in17 vestigative demand may be issued to a person

18 to whom a certificate of review is issued if such

19 person is the target of such investigation.

20 (d) REVIEW OF DETERMINATIONS.—

21 (1) AVAILABILITY OF REVIEW FOR CERTAIN AC22 TIONS.—If the Attorney General denies, in whole or

23 in part, an application for a certificate of review or

24 for an amendment to a certificate, or revokes or

25 modifies a certificate pursuant to paragraph (3), the
350

•S 2374 IS

1 applicant or certificate holder (as the case may be)

2 may, within 30 days of the denial or revocation,

3 bring an action in the United States District Court

4 for the District of Columbia to set aside the deter5 mination on the ground that such determination is

6 clearly erroneous.

7 (2) NO OTHER REVIEW PERMITTED.—Except

8 as provided in paragraph (1), no action by the At9 torney General, the Chair, or the Secretary pursuant

10 to this subtitle shall be subject to judicial review.

11 (3) EFFECT OF REJECTED APPLICATION.—If

12 the Attorney General denies, in whole or in part, an

13 application for a certificate of review or for an

14 amendment to a certificate, or revokes or amends a

15 certificate, neither the negative determination nor

16 the statement of reasons therefore shall be admissi17 ble in evidence, in any administrative or judicial pro18 ceeding, concerning any claim under the antitrust

19 laws.

20 (e) PUBLICATION OF DECISIONS.—The Attorney

21 General shall publish a notice in the Federal Register on

22 a timely basis of each decision made with respect to an

23 application for a certificate of review under this section

24 or the amendment or revocation of such a certificate, in
351

•S 2374 IS

1 a manner that protects the confidentiality of any propri2 etary information relating to the application.

3 (f) ANNUAL REPORTS.—Every person to whom a cer4 tificate of review is issued shall submit to the Attorney

5 General an annual report, in such form and at such time

6 as the Attorney General may require, that contains any

7 necessary updates to the information required under sub8 section (b) and a description of the activities of the holder

9 under the certificate during the preceding year.

10 (g) RESTRICTIONS ON DISCLOSURE OF INFORMA11 TION.—

12 (1) WAIVER OF DISCLOSURE REQUIREMENTS

13 UNDER ADMINISTRATIVE PROCEDURE ACT.—Infor14 mation submitted by any person in connection with

15 the issuance, amendment, or revocation of a certifi16 cate of review shall be exempt from disclosure under

17 section 552 of title 5, United States Code.

18 (2) RESTRICTIONS ON DISCLOSURE OF COM19 MERCIAL OR FINANCIAL INFORMATION.—

20 (A) IN GENERAL.—Except as provided in

21 subparagraph (B), no officer or employee of the

22 United States shall disclose commercial or fi23 nancial information submitted in connection

24 with the issuance, amendment, or revocation of

25 a certificate of review if the information is priv-
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•S 2374 IS

1 ileged or confidential or if disclosure of the in2 formation would cause harm to the person who

3 submitted the information.

4 (B) EXCEPTIONS.—Subparagraph (A)

5 shall not apply with respect to information dis6 closed—

7 (i) upon a request made by the Con8 gress or any committee of the Congress,

9 (ii) in a judicial or administrative pro10 ceeding, subject to appropriate protective

11 orders,

12 (iii) with the consent of the person

13 who submitted the information,

14 (iv) in the course of making a deter15 mination with respect to the issuance,

16 amendment, or revocation of a certificate

17 of review, if the Attorney General deems

18 disclosure of the information to be nec19 essary in connection with making the de20 termination,

21 (v) in accordance with any require22 ment imposed by a statute of the United

23 States, or

24 (vi) in accordance with any rule or

25 regulation promulgated under subsection
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•S 2374 IS

1 (i) permitting the disclosure of the infor2 mation to an agency of the United States

3 or of a State on the condition that the

4 agency will disclose the information only

5 under the circumstances specified in

6 clauses (i) through (v).

7 (3) PROHIBITION AGAINST USE OF INFORMA8 TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI9 TRUST LAWS.—Any information disclosed in an ap10 plication for a certificate of review under this section

11 shall only be admissible into evidence in a judicial or

12 administrative proceeding for the sole purpose of es13 tablishing whether a person is entitled to the protec14 tions provided by such a certificate.

15 SEC. 524. NOTIFICATIONS PROVIDING REDUCTION IN CER16 TAIN PENALTIES UNDER ANTITRUST LAW

17 FOR HEALTH CARE JOINT VENTURES.

18 (a) NOTIFICATIONS DESCRIBED.—

19 (1) SUBMISSION OF NOTIFICATION BY VEN20 TURE.—Any party to a health care joint venture,

21 acting on such venture’s behalf, may, not later than

22 90 days after entering into a written agreement to

23 form such venture or not later than 90 days after

24 the date of the enactment of this Act, whichever is
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•S 2374 IS

1 later, file with the Attorney General a written notifi2 cation disclosing—

3 (A) the identities of the parties to such

4 venture,

5 (B) the nature and objectives of such ven6 ture, and

7 (C) such additional information as the At8 torney General may require by regulation.

9 (2) FILING FEE.—The Attorney General may

10 require a filing fee to be submitted with the notifica11 tion to cover the cost of publication and the cost of

12 administering this section, except that the amount of

13 such fee shall not exceed $250.

14 (3) SUBMISSION OF ADDITIONAL INFORMA15 TION.—

16 (A) REQUEST OF ATTORNEY GENERAL.—

17 At any time after receiving a notification filed

18 under paragraph (1), the Attorney General may

19 require the submission of additional information

20 or documentary material relevant to the pro21 posed health care joint venture.

22 (B) PARTIES TO VENTURE.—Any party to

23 a health care joint venture may submit such ad24 ditional information on the venture’s behalf as

25 may be appropriate to ensure that the venture
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•S 2374 IS

1 will receive the protections provided under sub2 section (b).

3 (C) REQUIRED SUBMISSION OF INFORMA4 TION ON CHANGES TO VENTURE.—A health

5 care joint venture for which a notification is in

6 effect under this section shall submit informa7 tion on any change in the membership of the

8 venture not later than 90 days after such

9 change occurs.

10 (4) PUBLICATION OF NOTIFICATION.—

11 (A) INFORMATION MADE PUBLICLY AVAIL12 ABLE.—Not later than 30 days after receiving

13 a notification with respect to a venture under

14 paragraph (1), the Attorney General shall pub15 lish in the Federal Register a notice with re16 spect to the venture that identifies the parties

17 to the venture and generally describes the pur18 pose and planned activity of the venture. Prior

19 to its publication, the contents of the notice

20 shall be made available to the parties to the

21 venture.

22 (B) RESTRICTION ON DISCLOSURE OF

23 OTHER INFORMATION.—All information and

24 documentary material submitted pursuant to

25 this section and all information obtained by the
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•S 2374 IS

1 Attorney General in the course of any investiga2 tion or case with respect to a potential violation

3 of the antitrust laws by the health care joint

4 venture (other than information and material

5 described in subparagraph (A)) shall be exempt

6 from disclosure under section 552 of title 5,

7 United States Code, and shall not be made pub8 licly available by any agency of the United

9 States to which such section applies except in

10 a judicial proceeding in which such information

11 and material is subject to any protective order.

12 (5) WITHDRAWAL OF NOTIFICATION.—Any per13 son who files a notification pursuant to this section

14 may withdraw such notification before a publication

15 by the Attorney General pursuant to paragraph (4).

16 (6) NO JUDICIAL REVIEW PERMITTED.—Any

17 action taken or not taken by the Attorney General

18 with respect to notifications filed pursuant to this

19 subsection shall not be subject to judicial review.

20 (b) PROTECTIONS FOR VENTURES SUBJECT TO NO21 TIFICATION.—

22 (1) IN GENERAL.—

23 (A) PROTECTIONS DESCRIBED.—Except as

24 provided in subsection (c), the provisions of

25 paragraphs (2), (3), (4), and (5) shall apply
357

•S 2374 IS

1 with respect to any action under the antitrust

2 laws challenging conduct within the scope of a

3 notification which is in effect pursuant to sub4 section (a)(1).

5 (B) TIMING OF PROTECTIONS.—The pro6 tections described in this subsection shall apply

7 to the venture that is the subject of a notifica8 tion under subsection (a)(1) as of the earlier

9 of—

10 (i) the date of the publication in the

11 Federal Register of the notice published

12 with respect to the notification; or

13 (ii) if such notice is not published dur14 ing the period required under subsection

15 (a)(4), the expiration of the 30-day period

16 that begins on the date the Attorney Gen17 eral receives any necessary information re18 quired to be submitted under subsection

19 (a)(1) or any additional information re20 quired by the Attorney General under sub21 section (a)(3)(A).

22 (2) APPLICABILITY OF RULE OF REASON

23 STANDARD.—In any action under the antitrust laws,

24 the conduct of any person which is within the scope

25 of a notification filed under subsection (a) shall not
358

•S 2374 IS

1 be deemed illegal per se, but shall be judged on the

2 basis of its reasonableness, taking into account all

3 relevant factors affecting competition, including, but

4 not limited to, effects on competition in relevant

5 markets.

6 (3) LIMITATION ON RECOVERY TO ACTUAL

7 DAMAGES AND INTEREST.—Notwithstanding section

8 4 of the Clayton Act, any person who is entitled to

9 recovery under the antitrust laws for conduct that is

10 within the scope of a notification filed under sub11 section (a) shall recover the actual damages sus12 tained by such person and interest calculated at the

13 rate specified in section 1961 of title 28, United

14 States Code, for the period beginning on the earliest

15 date for which injury can be established and ending

16 on the date of judgment, unless the court finds that

17 the award of all or part of such interest is unjust

18 under the circumstances.

19 (4) AWARD OF ATTORNEY’S FEES AND COSTS

20 OF SUIT.—

21 (A) IN GENERAL.—In any action under the

22 antitrust laws brought against a health care

23 joint venture for conduct that is within the

24 scope of a notification filed under subsection
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•S 2374 IS

1 (a), the court shall, at the conclusion of the ac2 tion—

3 (i) award to a substantially prevailing

4 claimant the cost of suit attributable to

5 such claim, including a reasonable attor6 ney’s fee, or

7 (ii) award to a substantially prevailing

8 party defending against such claim the

9 cost of such suit attributable to such claim,

10 including reasonable attorney’s fee, if the

11 claim, or the claimant’s conduct during

12 litigation of the claim, was frivolous, un13 reasonable, without foundation, or in bad

14 faith.

15 (B) OFFSET IN CASES OF BAD FAITH.—

16 The court may reduce an award made pursuant

17 to subparagraph (A) in whole or in part by an

18 award in favor of another party for any part of

19 the cost of suit (including a reasonable attor20 ney’s fee) attributable to conduct during the

21 litigation by any prevailing party that the court

22 finds to be frivolous, unreasonable, without

23 foundation, or in bad faith.

24 (5) RESTRICTIONS ON ADMISSIBILITY OF IN25 FORMATION.—
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•S 2374 IS

1 (A) IN GENERAL.—Any information dis2 closed in a notification submitted under sub3 section (a)(1) and the fact of the publication of

4 a notification by the Attorney General under

5 subsection (a)(4) shall only be admissible into

6 evidence in a judicial or administrative proceed7 ing for the sole purpose of establishing whether

8 a party to a health care joint venture is entitled

9 to the protections described in this subsection.

10 (B) ACTIONS OF ATTORNEY GENERAL.—

11 No action taken by the Attorney General pursu12 ant to this section shall be admissible into evi13 dence in any judicial or administrative proceed14 ing for the purpose of supporting or answering

15 any claim under the antitrust laws.

16 (c) EXCEPTION FOR CERTAIN ACTIVITIES.—In the

17 event the parties cannot show procompetitive aspects nec18 essary to the success of the joint venture, the protections

19 described in subsection (b) should not be construed to

20 apply to conduct which constitutes per se price-fixing, bid21 rigging, or market allocation.

22 SEC. 525. REVIEW AND REPORTS ON SAFE HARBORS, CER23 TIFICATES OF REVIEW, AND NOTIFICATIONS.

24 (a) IN GENERAL.—The Attorney General, in con25 sultation with the Secretary and the Chair, shall periodi-
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•S 2374 IS

1 cally review the safe harbors designated under section 522,

2 the certificates of review issued under section 523, and

3 notification received under section 524, and—

4 (1) with respect to the safe harbors, issue modi5 fications to such safe harbors in such manner as the

6 Attorney General considers appropriate in accord7 ance with the requirements of section 522(f), which

8 modifications shall take effect 90 days after issu9 ance, unless disapproved by the Congress; and

10 (2) with respect to the certificates of review and

11 notifications, submit a report to Congress on the is12 suance of such certificates and receipt of notifica13 tions, including a description of the effect of such

14 certificates and notifications on increasing access to

15 high quality health care services at reduced costs.

16 (b) RECOMMENDATIONS FOR LEGISLATION.—The

17 Attorney General shall include in the reports submitted

18 under subsection (a)(2) any recommendations of the At19 torney General for legislation to improve the programs for

20 the issuance of certificates of review and receipt of notifi21 cations established under this subtitle.

22 SEC. 526. RULES, REGULATIONS, AND GUIDELINES.

23 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA24 TIONS.—The Attorney General, in consultation with the

25 Secretary and the Chair, shall promulgate such rules, reg-
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1 ulations, and guidelines as are necessary to carry out sec2 tions 522, 523, and 524.

3 (b) GUIDANCE FOR PROVIDERS.—

4 (1) IN GENERAL.—To promote greater cer5 tainty regarding the application of the antitrust laws

6 to activities in the health care market, the Attorney

7 General, in consultation with the Secretary and the

8 Chair, shall (not later than 1 year after the date of

9 the enactment of this Act), taking into account the

10 criteria used to designate safe harbors under section

11 522 and to grant certificates of review under section

12 523, publish guidelines—

13 (A) to define or provide assistance in de14 termining relevant geographic and product mar15 kets for health care services and providers of

16 health care services;

17 (B) to further collaborative activities which

18 may be helpful to enhance services in under19 served and geographically disadvantaged areas

20 such as rural markets and inner cities;

21 (C) to assist collaboration between provid22 ers (such as hospital networks, physician-hos23 pital organizations, and other groups of provid24 ers) which will help provide health care services

25 more efficiently;
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1 (D) to further activities by which public

2 health clinics (including community health cen3 ters and migrant health centers under title III

4 of the Public Health Service Act) may partici5 pate in networks and other collaborative activi6 ties in order to enhance services in underserved

7 areas;

8 (E) to assist providers of health care serv9 ices in analyzing whether the activities of such

10 providers may be subject to a safe harbor under

11 section 522;

12 (F) to provide clarification for activities in

13 the general subject matter areas described in

14 the safe harbors in section 522, but which fall

15 outside the safe harbors; and

16 (G) to describe specific types of activities

17 which would meet the requirements for issuance

18 of a certificate of review under section 523, and

19 summarizing the factual and legal bases on

20 which the activities would meet the require21 ments.

22 (2) PERIODIC UPDATE.—The Attorney General

23 shall periodically update the guidelines published

24 under paragraph (1) as the Attorney General consid25 ers appropriate.
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1 (3) WAIVER OF ADMINISTRATIVE PROCEDURE

2 ACT.—Section 553 of title 5, United States Code,

3 shall not apply to the issuance of guidelines under

4 paragraph (1).

5 SEC. 527. DEFINITIONS.

6 In this subtitle, the following definitions shall apply:

7 (1) The term ‘‘antitrust laws’’—

8 (A) has the meaning given it in subsection

9 (a) of the first section of the Clayton Act (15

10 U.S.C. 12(a)), except that such term includes

11 section 5 of the Federal Trade Commission Act

12 (15 U.S.C. 45) to the extent such section ap13 plies to unfair methods of competition; and

14 (B) includes any State law similar to the

15 laws referred to in subparagraph (A).

16 (2) The term ‘‘Chair’’ means the Chair of the

17 Federal Trade Commission.

18 (3) The term ‘‘health benefit plan’’ means any

19 hospital or medical expense incurred policy or certifi20 cate, hospital or medical service plan contract, or

21 health maintenance subscriber contract, or a mul22 tiple employer welfare arrangement or employee ben23 efit plan (as defined under the Employee Retirement

24 Income Security Act of 1974) which provides bene25 fits with respect to health care services.
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1 (4) The term ‘‘health care joint venture’’ means

2 a joint venture of 2 or more persons formed for the

3 purpose of providing health care services, including

4 attempts to enter into or perform a contract or

5 agreement to provide such services.

6 (5) The term ‘‘health care services’’ means any

7 services for which payment may be made under a

8 health benefit plan, including services related to the

9 delivery or administration of such services.

10 (6) The term ‘‘medical self-regulatory entity’’

11 means a medical society or association, a specialty

12 board, a recognized accrediting agency, or a hospital

13 medical staff, and includes the members, officers,

14 employees, consultants, and volunteers or commit15 tees of such an entity.

16 (7) The term ‘‘person’’ includes a State or unit

17 of local government.

18 (8) The term ‘‘provider of health care services’’

19 means any individual or entity that is engaged in the

20 delivery of health care services in a State and that

21 is required by State law or regulation to be licensed

22 or certified by the State to engage in the delivery of

23 such services in the State.

24 (9) The term ‘‘Secretary’’ means the Secretary

25 of Health and Human Services.
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1 (10) The term ‘‘specialty group’’ means a medi2 cal specialty or subspecialty in which a provider of

3 health care services may be licensed to practice by

4 a State (as determined by the Secretary in consulta5 tion with the certification boards for such specialties

6 and subspecialties).

7 (11) The term ‘‘standard setting and enforce8 ment activities’’ means—

9 (A) accreditation of health care practition10 ers, health care providers, medical education in11 stitutions, or medical education programs,

12 (B) technology assessment and risk man13 agement activities,

14 (C) the development and implementation of

15 practice guidelines or practice parameters, or

16 (D) official peer review proceedings under17 taken by a hospital medical staff (or committee

18 thereof) or a medical society or association for

19 purposes of evaluating the professional conduct

20 or quality of health care provided by a medical

21 professional.

22 TITLE VI—ADMINISTRATIVE

23 SIMPLIFICATION AND PRIVACY

24 SEC. 601. ADMINISTRATIVE SIMPLIFICATION.

25 (a) HEALTH INFORMATION NETWORK.—
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1 (1) IN GENERAL.—Title XI of the Social Secu2 rity Act (42 U.S.C. 1301 et seq.) is amended by

3 adding at the end the following new subtitle:

4 ‘‘Subtitle B—Administrative

5 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.

‘‘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.
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‘‘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. 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:

12 ‘‘(1) CODE SET.—The term ‘code set’ means

13 any set of codes used for encoding data elements,

14 such as tables of terms, medical concepts, medical

15 diagnostic codes, or medical procedure codes.

16 ‘‘(2) COORDINATION OF BENEFITS.—The term

17 ‘coordination of benefits’ means determining and co18 ordinating the financial obligations of health plans
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1 when health care benefits are payable under 2 or

2 more health plans.

3 ‘‘(3) HEALTH CARE PROVIDER.—The term

4 ‘health care provider’ includes a provider of services

5 (as defined in section 1861(u)), a provider of medi6 cal or other health services (as defined in section

7 1861(s)), and any other person furnishing health

8 care services or supplies.

9 ‘‘(4) HEALTH INFORMATION.—The term ‘health

10 information’ means any information, whether oral or

11 recorded in any form or medium that—

12 ‘‘(A) is created or received by a health care

13 provider, health plan, health oversight agency

14 (as defined in section 11802), health re15 searcher, public health authority (as defined in

16 section 11802), employer, life insurer, school or

17 university, or health information network serv18 ice certified under section 11741; and

19 ‘‘(B) relates to the past, present, or future

20 physical or mental health or condition of an in21 dividual, the provision of health care to an indi22 vidual, or the past, present, or future payment

23 for the provision of health care to an individual.

24 ‘‘(5) HEALTH INFORMATION NETWORK.—The

25 term ‘health information network’ means the health
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1 information system that is formed through the appli2 cation of the requirements and standards established

3 under this subtitle.

4 ‘‘(6) HEALTH INFORMATION PROTECTION OR5 GANIZATION.—The term ‘health information protec6 tion organization’ means a private entity or an en7 tity operated by a State that accesses standard data

8 elements of health information through the health

9 information network, processes such information

10 into non-identifiable health information, and may

11 store such information.

12 ‘‘(7) HEALTH INFORMATION NETWORK SERV13 ICE.—The term ‘health information network serv14 ice’—

15 ‘‘(A) means a private entity or an entity

16 operated by a State that enters into contracts

17 to—

18 ‘‘(i) process or facilitate the process19 ing of nonstandard data elements of health

20 information into standard data elements;

21 ‘‘(ii) provide the means by which per22 sons are connected to the health informa23 tion network for purposes of meeting the

24 requirements of this subtitle, including the
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1 holding of standard data elements of

2 health information;

3 ‘‘(iii) provide authorized access to

4 health information through the health in5 formation network; or

6 ‘‘(iv) provide specific information

7 processing services, such as automated co8 ordination of benefits and claims trans9 action routing; and

10 ‘‘(B) includes a health information protec11 tion organization.

12 ‘‘(8) HEALTH PLAN.—The term ‘health plan’

13 has the meaning given such term in section

14 21003(a)(1) except that such term shall include sub15 paragraphs (C), (D), (E), (F), and (H) of such sec16 tion.

17 ‘‘(9) NON-IDENTIFIABLE HEALTH INFORMA18 TION.—The term ‘non-identifiable health informa19 tion’ means health information that is not protected

20 health information as defined in section 11802.

21 ‘‘(10) HEALTH RESEARCHER.—The term

22 ‘health researcher’ shall have the meaning given

23 such term under section 11802.

24 ‘‘(11) PATIENT MEDICAL RECORD INFORMA25 TION.—The term ‘patient medical record informa-
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1 tion’ means health information derived from a clini2 cal encounter that relates to the physical or mental

3 condition of an individual.

4 ‘‘(12) STANDARD.—The term ‘standard’ when

5 referring to an information transaction or to data

6 elements of health information means the trans7 action or data elements meet any standard adopted

8 by the Secretary under part II that applies to such

9 information transaction or data elements.

10 ‘‘PART II—STANDARDS FOR DATA ELEMENTS

11 AND INFORMATION TRANSACTIONS

12 ‘‘SEC. 11711. GENERAL REQUIREMENTS ON SECRETARY.

13 ‘‘(a) IN GENERAL.—The Secretary shall adopt stand14 ards and modifications to standards under this subtitle

15 that are—

16 ‘‘(1) consistent with the objective of reducing

17 the costs of providing and paying for health care;

18 and

19 ‘‘(2) in use and generally accepted or developed

20 or modified by the standards setting organizations

21 accredited by the American National Standard Insti22 tute (ANSI).

23 ‘‘(b) INITIAL STANDARDS.—The Secretary may de24 velop an expedited process for the adoption of initial

25 standards under this subtitle.
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1 ‘‘(c) PAPER FORMATS.—The Secretary may develop

2 methods by which a person may use the standards adopted

3 by the Secretary under this subtitle with respect to health

4 information that is in written rather than electronic form.

5 ‘‘SEC. 11712. STANDARDS FOR DATA ELEMENTS OF HEALTH

6 INFORMATION.

7 ‘‘(a) IN GENERAL.—The Secretary shall adopt stand8 ards necessary to make data elements of the following

9 health information uniform and compatible for electronic

10 transmission through the health information network:

11 ‘‘(1) the health information that is appropriate

12 for transmission in connection with transactions de13 scribed in subsections (a) and (b) of section 11721;

14 ‘‘(2) any quality information required to be sub15 mitted by a health plan to a State under title XXI;

16 and

17 ‘‘(3) patient medical record information.

18 ‘‘(b) ADDITIONS.—The Secretary may make addi19 tions to the sets of data elements adopted under sub20 section (a) as the Secretary determines appropriate in a

21 manner that minimizes the disruption and cost of compli22 ance with such additions.

23 ‘‘(c) CERTAIN DATA ELEMENTS.—

24 ‘‘(1) UNIQUE HEALTH IDENTIFIERS.—The Sec25 retary shall adopt standards for a standard unique
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1 health identifier for each individual, employer, health

2 plan, and health care provider for use in the health

3 care system.

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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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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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 5 years and not later

9 than 10 years after the date of the enactment of this

10 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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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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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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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 ‘‘(3) 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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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 quality information required to

6 be submitted by a health plan to a State under title XXI

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 WITH RESPECT TO DISCLOSURE

11 OF INFORMATION.—

12 ‘‘(1) IN GENERAL.—A health plan or health

13 care provider shall make the standard data elements

14 transmitted or received by such plan or provider in

15 connection with the transactions described in sub16 sections (a), (b), and (c) or acquired under section

17 11764(a) available for disclosure as authorized by

18 this subtitle.

19 ‘‘(2) SPECIAL RULE.—In the case of a health

20 care provider that does not file claims, such provider

21 shall be responsible for making standard data ele22 ments for encounter information available for disclo23 sure as authorized by this subtitle.

24 ‘‘(e) SATISFACTION OF REQUIREMENTS.—A health

25 care provider or health plan may satisfy the requirement
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1 imposed on such provider or plan under subsection (a),

2 (b), (c), or (d) by—

3 ‘‘(1) directly transmitting standard data ele4 ments;

5 ‘‘(2) submitting nonstandard data elements to a

6 health information network service certified under

7 section 11741 for processing into standard data ele8 ments and transmission; or

9 ‘‘(3) in the case of a provider, submitting data

10 elements to a plan which satisfies the requirements

11 imposed on such provider on the provider’s behalf.

12 ‘‘(f) TIMELINESS.—A health care provider or health

13 plan shall be determined to have satisfied a requirement

14 imposed under this section only if the action required is

15 completed in a timely manner, as determined by the Sec16 retary. In setting standards for timeliness, the Secretary

17 shall take into consideration the age and the amount of

18 information being requested.

19 ‘‘SEC. 11722. TIMETABLES FOR COMPLIANCE WITH RE20 QUIREMENTS.

21 ‘‘(a) INITIAL COMPLIANCE.—

22 ‘‘(1) IN GENERAL.—Not later than 12 months

23 after the date on which standards are adopted under

24 part II with respect to a type of transaction or data

25 elements for a type of health information, a health
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1 plan or health care provider shall comply with the

2 requirements of this subtitle with respect to such

3 transaction or information.

4 ‘‘(2) ADDITIONAL DATA ELEMENTS.—Not later

5 than 12 months after the date on which the Sec6 retary adopts an addition to a set of data elements

7 for health information under part II, a health plan

8 or health care provider shall comply with the re9 quirements of this subtitle using such data elements.

10 ‘‘(b) COMPLIANCE WITH MODIFIED STANDARDS.—

11 ‘‘(1) IN GENERAL.—If the Secretary adopts a

12 modified standard under part II, a health plan or

13 health care provider shall be required to comply with

14 the modified standard at such time as the Secretary

15 determines appropriate taking into account the time

16 needed to comply due to the nature and extent of

17 the modification.

18 ‘‘(2) SPECIAL RULE.—In the case of modifica19 tions to standards that do not occur within the 12-

20 month period beginning on the date such standards

21 are adopted, the time determined appropriate by the

22 Secretary under paragraph (1) shall be no sooner

23 than the last day of the 90-day period beginning on

24 the date such modified standard is adopted and no
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1 later than the last day of the 12 month period begin2 ning on the date such modified standard is adopted.

3 ‘‘PART IV—ACCESSING HEALTH INFORMATION

4 ‘‘SEC. 11731. ACCESSING HEALTH INFORMATION FOR AU5 THORIZED PURPOSES.

6 ‘‘(a) IN GENERAL.—The Secretary shall adopt tech7 nical standards for appropriate persons, including health

8 plans, health care providers, health information network

9 services certified under section 11741, health researchers,

10 and Federal and State agencies, to locate and access the

11 health information that is available through the health in12 formation network due to the requirements of this subtitle.

13 Such technical standards shall ensure that any request to

14 locate or access information shall be authorized under sub15 title C.

16 ‘‘(b) PROCUREMENT RULE FOR GOVERNMENT AGEN17 CIES.—

18 ‘‘(1) IN GENERAL.—Health information protec19 tion organizations certified under section 11741

20 shall make available to a Federal or State agency

21 pursuant to a Federal Acquisition Regulation (or an

22 equivalent State system), any non-identifiable health

23 information that is requested by such agency.

24 ‘‘(2) CERTAIN INFORMATION AVAILABLE AT

25 LOW COST.—If a health information protection orga-
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1 nization described in paragraph (1) needs informa2 tion from a health plan or health care provider in

3 order to comply with a request of a Federal or State

4 agency that is necessary to comply with a require5 ment under this Act, such plan or provider shall

6 make such information available to such organiza7 tion for a charge that does not exceed the reasonable

8 cost of transmitting the information. If requested, a

9 health information protection organization that re10 ceives information under the preceding sentence

11 must make such information available to any other

12 such organization that is certified under section

13 11741 for a charge that does not exceed the reason14 able cost of transmitting the information.

15 ‘‘(c) FUNCTIONAL SEPARATION.—The standards

16 adopted by the Secretary under subsection (a) shall ensure

17 that any health information disclosed under such sub18 section shall not, after such disclosure, be used or released

19 for an administrative, regulatory, or law enforcement pur20 pose unless such disclosure was made for such purpose.

21 ‘‘(d) PUBLIC USE FUNCTIONS.—Nothing in this sub22 title shall be construed to limit the authority of a Federal

23 or State agency to make non-identifiable health informa24 tion available for public use functions.
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1 ‘‘SEC. 11732. RESPONDING TO ACCESS REQUESTS.

2 ‘‘(a) IN GENERAL.—The Secretary may adopt, and

3 modify as appropriate, standards under which a health

4 care provider or health plan shall respond to requests for

5 access to health information consistent with this subtitle

6 and subtitle C.

7 ‘‘(b) STANDARDS DESCRIBED.—The standards under

8 subsection (a) shall provide—

9 ‘‘(1) for a standard format under which a pro10 vider or plan will respond to each request either by

11 satisfying the request or responding with an expla12 nation of the specific restriction which results in a

13 failure to satisfy the request; and

14 ‘‘(2) that any restrictions will not prevent a

15 plan or provider from responding to a request in a

16 timely manner taking into account the age and

17 amount of the information being requested.

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

19 be construed as permitting a health care provider or health

20 plan to refuse to disclose any health information that is

21 required to be disclosed by law.

22 ‘‘SEC. 11733. LENGTH OF TIME INFORMATION SHOULD BE

23 ACCESSIBLE.

24 ‘‘The Secretary shall adopt standards with respect to

25 the length of time any standard data elements for a type
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1 of health information should be accessible through the

2 health information network.

3 ‘‘SEC. 11734. TIMETABLES FOR ADOPTION OF STANDARDS

4 AND COMPLIANCE.

5 ‘‘(a) INITIAL STANDARDS.—The Secretary shall

6 adopt standards under this part not later than 9 months

7 after the date of the enactment of this subtitle and such

8 standards shall be effective upon adoption.

9 ‘‘(b) MODIFICATIONS TO STANDARDS.—

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), the Secretary shall review the standards

12 adopted under this part and shall adopt modified

13 standards as determined appropriate, but no more

14 frequently than once every 6 months. Any modifica15 tion to standards shall be completed in a manner

16 which minimizes the disruption and cost of compli17 ance. Any modifications to standards adopted under

18 this part shall be effective upon adoption.

19 ‘‘(2) SPECIAL RULE.—The Secretary shall not

20 adopt modifications to any standards adopted under

21 this part during the 12-month period beginning on

22 the date such standards are adopted unless the Sec23 retary determines that a modification is necessary in

24 order to permit compliance with the requirements of

25 this part.
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1 ‘‘PART V—STANDARDS AND CERTIFICATION FOR

2 HEALTH INFORMATION NETWORK

3 ‘‘SEC. 11741. STANDARDS AND CERTIFICATION FOR HEALTH

4 INFORMATION NETWORK SERVICES.

5 ‘‘(a) STANDARDS FOR OPERATION.—The Secretary

6 shall adopt standards with respect to the operation of

7 health information network services to ensure that—

8 ‘‘(1) such services cooperate with one another

9 to form the health information network;

10 ‘‘(2) such services meet all of the requirements

11 under subtitle C that are applicable to such services;

12 ‘‘(3) such services make public information con13 cerning their performance, as measured by uniform

14 indicators such as accessibility, transaction respon15 siveness, administrative efficiency, reliability, de16 pendability, and any other indicator determined ap17 propriate by the Secretary;

18 ‘‘(4) such services have security procedures that

19 are consistent with the privacy requirements under

20 subtitle C, including secure methods of access to and

21 transmission of data;

22 ‘‘(5) such services, if they are part of a larger

23 organization, have policies and procedures in place

24 which isolate their activities with respect to process25 ing information in a manner that prevents unauthor-
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1 ized access to such information by such larger orga2 nization.

3 ‘‘(b) CERTIFICATION BY THE SECRETARY.—

4 ‘‘(1) ESTABLISHMENT.—Not later than 12

5 months after the date of the enactment of this sub6 title, the Secretary shall establish a certification pro7 cedure for health information network services which

8 ensures that certified services are qualified to meet

9 the requirements of this subtitle and the standards

10 established by the Secretary under this section. Such

11 certification procedure shall be implemented in a

12 manner that minimizes the costs and delays of oper13 ations for such services.

14 ‘‘(2) APPLICATION.—Each entity desiring to be

15 certified as a health information network service

16 shall apply to the Secretary for certification in a

17 form and manner determined appropriate by the

18 Secretary.

19 ‘‘(3) AUDITS AND REPORTS.—The procedure

20 established under paragraph (1) shall provide for au21 dits by the Secretary and reports by an entity cer22 tified under this section as the Secretary determines

23 appropriate in order to monitor such entity’s compli24 ance with the requirements of this subtitle, subtitle
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1 C, and the standards established by the Secretary

2 under this section.

3 ‘‘(c) LOSS OF CERTIFICATION.—

4 ‘‘(1) MANDATORY TERMINATION.—Except as

5 provided in paragraph (3), if a health information

6 network service violates a requirement imposed on

7 such service under subtitle C, its certification under

8 this section shall be terminated unless the Secretary

9 determines that appropriate corrective action has

10 been taken.

11 ‘‘(2) DISCRETIONARY TERMINATION.—If a

12 health information network service violates a re13 quirement or standard imposed under this subtitle

14 and a penalty has been imposed under section

15 11751, the Secretary shall review the certification of

16 such service and may terminate such certification.

17 ‘‘(3) CONDITIONAL CERTIFICATION—The Sec18 retary may establish a procedure under which a

19 health information network service may remain cer20 tified on a conditional basis if the service is operat21 ing consistently with a plan intended to correct any

22 violations described in paragraphs (1) or (2). Such

23 procedure may provide for the appointment of a

24 trustee to continue operation of the service until the

25 requirements for full certification are met.
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1 ‘‘(d) CERTIFICATION BY PRIVATE ENTITIES.—The

2 Secretary shall designate private entities to conduct the

3 certification procedures established by the Secretary under

4 this section. A health information network service certified

5 by such an entity in accordance with such designation

6 shall be considered to be certified by the Secretary.

7 ‘‘SEC. 11742. ENSURING AVAILABILITY OF INFORMATION.

8 ‘‘The Secretary shall establish a procedure under

9 which a health plan or health care provider which does

10 not have the ability to transmit standard data elements

11 directly or does not have access to a health information

12 network service certified under section 11741 shall be able

13 to make health information available for disclosure as au14 thorized by this subtitle.

15 ‘‘PART VI—PENALTIES

16 ‘‘SEC. 11751. GENERAL PENALTY FOR FAILURE TO COMPLY

17 WITH REQUIREMENTS AND STANDARDS.

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

19 (b), the Secretary shall impose on any person that violates

20 a requirement or standard imposed under this subtitle a

21 penalty of not more than $1,000 for each violation. The

22 provisions of section 1128A (other than subsections (a)

23 and (b) and the second sentence of subsection (f)) shall

24 apply to the imposition of a civil money penalty under this
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1 subsection in the same manner as such provisions apply

2 to the imposition of a penalty under section 1128A.

3 ‘‘(b) LIMITATIONS.—

4 ‘‘(1) NONCOMPLIANCE NOT DISCOVERED EXER5 CISING REASONABLE DILIGENCE.—A penalty may

6 not be imposed under subsection (a) if it is estab7 lished to the satisfaction of the Secretary that the

8 person liable for the penalty did not know, and by

9 exercising reasonable diligence would not have

10 known, that such person failed to comply with the

11 requirement or standard described in subsection (a).

12 ‘‘(2) FAILURES DUE TO REASONABLE CAUSE.—

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

14 subparagraphs (B) and (C), a penalty may not

15 be imposed under subsection (a) if—

16 ‘‘(i) the failure to comply was due to

17 reasonable cause and not to willful neglect;

18 and

19 ‘‘(ii) the failure to comply is corrected

20 during the 30-day period beginning on the

21 1st date the person liable for the penalty

22 knew, or by exercising reasonable diligence

23 would have known, that the failure to com24 ply occurred.

25 ‘‘(B) EXTENSION OF PERIOD.—
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1 ‘‘(i) NO PENALTY.—The period re2 ferred to in subparagraph (A)(ii) may be

3 extended as determined appropriate by the

4 Secretary based on the nature and extent

5 of the failure to comply.

6 ‘‘(ii) ASSISTANCE.—If the Secretary

7 determines that a health plan or health

8 care provider failed to comply because such

9 person was unable to comply, the Secretary

10 may provide technical assistance to such

11 person. Such assistance shall be provided

12 in any manner determined appropriate by

13 the Secretary.

14 ‘‘(3) REDUCTION.—In the case of a failure to

15 comply which is due to reasonable cause and not to

16 willful neglect, any penalty under subsection (a) that

17 is not entirely waived under paragraph (2) may be

18 waived to the extent that the payment of such pen19 alty would be excessive relative to the compliance

20 failure involved.

21 ‘‘PART VII—MISCELLANEOUS PROVISIONS

22 ‘‘SEC. 11761. IMPOSITION OF ADDITIONAL REQUIREMENTS.

23 ‘‘(a) DATA ELEMENT STANDARDS.—A person may

24 not impose a standard on another person that is in addi-
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1 tion to the standards adopted by the Secretary under sec2 tion 11712 unless—

3 ‘‘(1) such person voluntarily agrees to such

4 standard; or

5 ‘‘(2) a waiver is granted under subsection (c) to

6 impose such standard.

7 ‘‘(b) TRANSACTIONS AND ACCESS STANDARDS.—A

8 person may not impose a standard on another person that

9 is in addition to the standards adopted by the Secretary

10 under section 11713 or 11731 unless such person volun11 tarily agrees to such standard.

12 ‘‘(c) CONDITIONS FOR WAIVERS.—

13 ‘‘(1) IN GENERAL.—A person may request a

14 waiver from the Secretary in order to require an15 other person to comply with a standard that is in

16 addition to the standards adopted by the Secretary

17 under section 11712.

18 ‘‘(2) CONSIDERATION OF WAIVER REQUESTS.—

19 No waiver may be granted unless the Secretary de20 termines that the value of the data to be exchanged

21 for research or other purposes significantly out22 weighs the administrative cost of the additional

23 standard taking into consideration the burden of the

24 timing of the imposition of the additional standard.
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1 ‘‘(3) ANONYMOUS REPORTING.—If a person at2 tempts to impose a standard in addition to the

3 standards adopted by the Secretary under section

4 11712, the person on whom such additional stand5 ard is being imposed may contact the Secretary. The

6 Secretary shall develop a procedure under which the

7 contacting person shall remain anonymous. The Sec8 retary shall notify the person imposing the addi9 tional standard that the additional standard may not

10 be imposed unless the other person voluntarily

11 agrees to such standard or a waiver is obtained

12 under this subsection.

13 ‘‘SEC. 11762. EFFECT ON STATE LAW.

14 ‘‘(a) IN GENERAL.—A provision, requirement, or

15 standard under this subtitle shall supersede any contrary

16 provision of State law, including—

17 ‘‘(1) a provision of State law that requires med18 ical or health plan records (including billing informa19 tion) to be maintained or transmitted in written

20 rather than electronic form, and

21 ‘‘(2) a provision of State law which provides for

22 requirements or standards that are more stringent

23 than the requirements or standards under this sub24 title;
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1 except where the Secretary determines that the provision

2 is necessary to prevent fraud and abuse, with respect to

3 controlled substances, or for other purposes.

4 ‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this

5 subtitle shall be construed to invalidate or limit the au6 thority, power, or procedures established under any law

7 providing for the reporting of disease or injury, child

8 abuse, birth, or death, public health surveillance, or public

9 health investigation or intervention.

10 ‘‘SEC. 11764. HEALTH INFORMATION CONTINUITY.

11 ‘‘(a) INFORMATION HELD BY HEALTH PLANS AND

12 PROVIDERS.—If a health plan or health care provider

13 takes any action that would threaten the continued avail14 ability of the standard data elements of health information

15 held by such plan or provider, such data elements shall

16 be obtained by the State in which such plan or provider

17 is located. The State shall ensure that such data elements

18 are transferred to a health plan or health care provider

19 in accordance with procedures established by the Sec20 retary.

21 ‘‘(b) INFORMATION HELD BY HEALTH INFORMATION

22 NETWORK SERVICES.—If a health information network

23 service certified under section 11741 loses its certified sta24 tus or takes any action that would threaten the continued

25 availability of the standard data elements of health infor-
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1 mation held by such service, such data elements shall be

2 transferred to another health information network service

3 certified under section 11741, as designated by the Sec4 retary.

5 ‘‘SEC. 11765. PROTECTION OF COMMERCIAL INFORMATION.

6 ‘‘In adopting standards under this subtitle, the Sec7 retary shall not require disclosure of trade secrets and

8 confidential commercial information by entities operating

9 in the health information network except as required by

10 law.

11 ‘‘SEC. 11766. PAYMENT FOR HEALTH CARE SERVICES OR

12 HEALTH PLAN PREMIUMS.

13 ‘‘Nothing in this subtitle shall be construed to pro14 hibit payments for health care services or health plan pre15 miums from being made by debit, credit, or other payment

16 cards or numbers or other electronic payment means.

17 ‘‘SEC. 11767. HEALTH SECURITY CARDS.

18 ‘‘The Secretary shall adopt standards relating to the

19 form of any health security cards that a health plan may

20 issue and the information to be encoded electronically on

21 such cards.

22 ‘‘SEC. 11768. AUTHORIZATION OF APPROPRIATIONS.

23 ‘‘There are authorized to be appropriated such sums

24 as may be necessary to carry out the purposes of this sub25 title.
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1 ‘‘PART VIII—ASSISTANCE TO THE SECRETARY

2 ‘‘SEC. 11771. GENERAL REQUIREMENT ON SECRETARY.

3 ‘‘In complying with any requirements imposed under

4 this subtitle, the Secretary shall rely on recommendations

5 of the Health Information Advisory Committee established

6 under section 11772 and shall consult with appropriate

7 Federal agencies.

8 ‘‘SEC. 11772. HEALTH INFORMATION ADVISORY COMMIT9 TEE.

10 ‘‘(a) ESTABLISHMENT.—There is established a com11 mittee to be known as the Health Care Information Advi12 sory Committee.

13 ‘‘(b) DUTY.—

14 ‘‘(1) IN GENERAL.—The committee shall—

15 ‘‘(A) provide assistance to the Secretary in

16 complying with the requirements imposed on

17 the Secretary under this subtitle and subtitle C;

18 ‘‘(B) be generally responsible for advising

19 the Secretary and the Congress on the status of

20 the health information network; and

21 ‘‘(C) make recommendations to correct any

22 problems that may occur in the network’s im23 plementation and ongoing operations and to re24 fine and improve the network.

25 ‘‘(2) TECHNICAL ASSISTANCE.—In performing

26 its duties under this subsection, the committee shall
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1 receive technical assistance from appropriate Federal

2 agencies.

3 ‘‘(c) MEMBERSHIP.—

4 ‘‘(1) IN GENERAL.—The committee shall con5 sist of 15 members to be appointed by the President

6 not later than 60 days after the date of the enact7 ment of this subtitle. The President shall designate

8 1 member as the Chair.

9 ‘‘(2) EXPERTISE.—The membership of the com10 mittee shall consist of individuals who are of recog11 nized standing and distinction and who possess the

12 demonstrated capacity to discharge the duties im13 posed on the committee.

14 ‘‘(3) TERMS.—Each member of the committee

15 shall be appointed for a term of 5 years, except that

16 the members first appointed shall serve staggered

17 terms such that the terms of no more than 3 mem18 bers expire at one time.

19 ‘‘(4) VACANCIES.—

20 ‘‘(A) IN GENERAL.—A vacancy on the

21 committee shall be filled in the manner in which

22 the original appointment was made and shall be

23 subject to any conditions which applied with re24 spect to the original appointment.
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1 ‘‘(B) FILLING UNEXPIRED TERM.—An in2 dividual chosen to fill a vacancy shall be ap3 pointed for the unexpired term of the member

4 replaced.

5 ‘‘(C) EXPIRATION OF TERMS.—The term

6 of any member shall not expire before the date

7 on which the member’s successor takes office.

8 ‘‘(5) CONFLICTS OF INTEREST.—Members of

9 the committee shall disclose upon appointment to

10 the committee or at any subsequent time that it may

11 occur, conflicts of interest.

12 ‘‘(d) MEETINGS.—

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), the committee shall meet at the call of

15 the Chair.

16 ‘‘(2) INITIAL MEETING.—Not later than 30

17 days after the date on which all members of the

18 committee have been appointed, the committee shall

19 hold its first meeting.

20 ‘‘(3) QUORUM.—A majority of the members of

21 the committee shall constitute a quorum, but a less22 er number of members may hold hearings.

23 ‘‘(e) POWER TO HOLD HEARINGS.—The committee

24 may hold such hearings, sit and act at such times and

25 places, take such testimony, and receive such evidence as
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1 the committee considers advisable to carry out the pur2 poses of this section.

3 ‘‘(f) OTHER ADMINISTRATIVE PROVISIONS.—Sub4 paragraphs (C), (D), and (H) of section 1886(e)(6) shall

5 apply to the committee in the same manner as they apply

6 to the Prospective Payment Assessment Commission.

7 ‘‘(g) REPORTS.—

8 ‘‘(1) IN GENERAL.—The committee shall annu9 ally prepare and submit to Congress and the Sec10 retary a report including at least an analysis of—

11 ‘‘(A) the status of the health information

12 network established under this subtitle, includ13 ing whether the network is fulfilling the pur14 pose described in section 11701;

15 ‘‘(B) the savings and costs of the network;

16 ‘‘(C) the activities of health information

17 network services certified under section 11741,

18 health care providers, health plans, and other

19 entities using the network to exchange health

20 information;

21 ‘‘(D) the extent to which entities described

22 in subparagraph (C) are meeting the standards

23 adopted under this subtitle and working to24 gether to form an integrated network that

25 meets the needs of its users;
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1 ‘‘(E) the extent to which entities described

2 in subparagraph (C) are meeting the privacy

3 and security protections of subtitle C;

4 ‘‘(F) the number and types of penalties as5 sessed for noncompliance with the standards

6 adopted under this subtitle;

7 ‘‘(G) whether the Federal Government and

8 State Governments are receiving information of

9 sufficient quality to meet their responsibilities

10 under the America’s Health Care Option Act;

11 ‘‘(H) any problems with respect to imple12 mentation of the network;

13 ‘‘(I) the extent to which timetables under

14 this subtitle for the adoption and implementa15 tion of standards are being met; and

16 ‘‘(J) any legislative recommendations relat17 ed to the health information network.

18 ‘‘(2) AVAILABILITY TO THE PUBLIC.—Any in19 formation in the report submitted to Congress under

20 paragraph (1) shall be made available to the public

21 unless such information may not be disclosed by law.

22 ‘‘(h) DURATION.—Notwithstanding section 14(a) of

23 the Federal Advisory Committee Act, the committee shall

24 continue in existence until otherwise provided by law.

25 ‘‘(i) AUTHORIZATION OF APPROPRIATIONS.—
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1 ‘‘(1) IN GENERAL.—There are authorized to be

2 appropriated such sums as may be necessary to

3 carry out the purposes of this section.

4 ‘‘(2) AVAILABILITY.—Any sums appropriated

5 under the authorization contained in this subsection

6 shall remain available, without fiscal year limitation,

7 until expended.

8 ‘‘PART IX—DEMONSTRATION PROJECTS FOR

9 COMMUNITY-BASED CLINICAL INFORMATION

10 SYSTEMS

11 ‘‘SEC. 11781. GRANTS FOR DEMONSTRATION PROJECTS.

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

13 for demonstration projects to promote the development

14 and use of electronically integrated community-based clini15 cal information systems and computerized patient medical

16 records.

17 ‘‘(b) APPLICATIONS.—

18 ‘‘(1) SUBMISSION.—To apply for a grant under

19 this part for any fiscal year, an applicant shall sub20 mit an application to the Secretary in accordance

21 with the procedures established by the Secretary.

22 ‘‘(2) CRITERIA FOR APPROVAL.—The Secretary

23 may not approve an application submitted under

24 paragraph (1) unless the application includes assur-
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1 ances satisfactory to the Secretary regarding the fol2 lowing:

3 ‘‘(A) USE OF EXISTING TECHNOLOGY.—

4 Funds received under this part will be used to

5 apply telecommunications and information sys6 tems technology that is in existence on the date

7 the application is submitted in a manner that

8 improves the quality of health care, reduces the

9 costs of such care, and protects the privacy and

10 confidentiality of information relating to the

11 physical or mental condition of an individual.

12 ‘‘(B) USE OF EXISTING INFORMATION SYS13 TEMS.—Funds received under this part will be

14 used—

15 ‘‘(i) to enhance telecommunications or

16 information systems that are operating on

17 the date the application is submitted;

18 ‘‘(ii) to integrate telecommunications

19 or information systems that are operating

20 on the date the application is submitted; or

21 ‘‘(iii) to connect additional users to

22 telecommunications or information net23 works or systems that are operating on the

24 date the application is submitted.
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1 ‘‘(C) MATCHING FUNDS.—The applicant

2 shall make available funds for the demonstra3 tion project in an amount that equals at least

4 20 percent of the cost of the project.

5 ‘‘(c) GEOGRAPHIC DIVERSITY.—In making any

6 grants under this part, the Secretary shall, to the extent

7 practicable, make grants to persons representing different

8 geographic areas of the United States, including urban

9 and rural areas.

10 ‘‘(d) REVIEW AND SANCTIONS.—The Secretary shall

11 review at least annually the compliance of a person receiv12 ing a grant under this part with the provisions of this

13 part. The Secretary shall establish a procedure for deter14 mining whether such a person has failed to comply sub15 stantially within the provisions of this part and the sanc16 tions to be imposed for any such noncompliance.

17 ‘‘(e) ANNUAL REPORT.—The Secretary shall submit

18 an annual report to the President for transmittal to Con19 gress containing a description of the activities carried out

20 under this part.

21 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There

22 are authorized to be appropriated such sums as may be

23 necessary to carry out the purposes of this section.’’.

24 (2) Conforming amendments.—(A) Title XI of

25 the Social Security Act (42 U.S.C. 1301 et seq.) is
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1 amended by striking the title and inserting the fol2 lowing:

3 ‘‘TITLE XI—GENERAL PROVI4 SIONS, PEER REVIEW, AND

5 ADMINISTRATIVE SIM6 PLIFICATION

7 ‘‘Subtitle A—General Provisions

8 and Peer Review’’

9 (B) Title XI of the Social Security Act (42

10 U.S.C. 1301 et seq.) is amended by striking each

11 reference to ‘‘this title’’ and inserting ‘‘this subtitle’’.

12 (b) MEDICARE AND MEDICAID COVERAGE DATA

13 BANK AND RELATED IDENTIFICATION PROCESSES.—

14 (1) DELAY OF EMPLOYER REPORTING RE15 QUIREMENT.—

16 (A) IN GENERAL.—Section 1144(c)(1)(A)

17 of the Social Security Act (42 U.S.C. 1320–

18 14(c)(1)(A)) is amended by striking ‘‘January

19 1, 1994’’ and inserting ‘‘January 1, 1996’’.

20 (B) EFFECTIVE DATE.—The amendment

21 made by this paragraph shall be effective on the

22 date of the enactment of this Act.

23 (2) REPEAL OF DATA BANK.—

24 (A) IN GENERAL.—Section 1144 of the So25 cial Security Act (42 U.S.C. 1320b–14) and
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1 section 101(f) of the Employee Retirement In2 come Security Act of 1974 (29 U.S.C. 1021(f))

3 are repealed.

4 (B) INTERNAL REVENUE CODE PROVI5 SION.—Section 6103(l) of the Internal Revenue

6 Code of 1986 is amended by striking paragraph

7 (12).

8 (C) IDENTIFICATION OF MEDICARE SEC9 ONDARY PAYER SITUATIONS.—Section 1862(b)

10 of the Social Security Act (42 U.S.C. 1395y(b))

11 is amended by striking paragraph (5).

12 (D) CONFORMING AMENDMENTS.—(i) Sec13 tion 1902(a)(25)(A)(i) of the Social Security

14 Act (42 U.S.C. 1396a(a)(25)(A)(i)) is amended

15 by striking ‘‘including the use of information

16 collected by the Medicare and Medicaid Cov17 erage Data Bank under section 1144 and any

18 additional measures’’.

19 (ii) Subsection (a)(8)(B) of section 552a of

20 title 5, United States Code, is amended—

21 (I) in clause (v), by inserting ‘‘; or’’ at

22 the end;

23 (II) in clause (vi), by striking ‘‘or’’ at

24 the end; and

25 (III) by striking clause (vii).
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1 (E) EFFECTIVE DATE.—The amendments

2 made by this paragraph apply after the date on

3 which the health information network estab4 lished under subsection (a) is capable of replac5 ing the activities performed under the provi6 sions affected by such amendments, as certified

7 by the Secretary of Health and Human Serv8 ices.

9 SEC. 602. PRIVACY OF HEALTH INFORMATION UNDER THE

10 SOCIAL SECURITY ACT.

11 (a) IN GENERAL.—Title XI of the Social Security Act

12 (42 U.S.C. 1301 et seq.), as amended by section 601, is

13 amended by adding at the end the following new subtitle:

14 ‘‘Subtitle C—Privacy of Health

15 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.

‘‘Sec. 11823. Emergency circumstances.
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‘‘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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•S 2374 IS

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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•S 2374 IS

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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•S 2374 IS

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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•S 2374 IS

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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•S 2374 IS

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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•S 2374 IS

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 2374 IS

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 (b)(1).

12 ‘‘(9) DISCLOSURE TIMELY MADE.—The disclo13 sure occurs during a period described in subsection

14 (b)(2).

15 ‘‘(b) TIME LIMITATIONS ON AUTHORIZATIONS.—

16 ‘‘(1) RECEIPT BY TRUSTEE.—For purposes of

17 subsection (a)(8), an authorization is timely received

18 if it is received by the trustee during—

19 ‘‘(A) the 1-year 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 who provides health counseling or so24 cial services to individuals; or
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•S 2374 IS

1 ‘‘(B) the 30-day period beginning on the

2 date on which the authorization is signed under

3 subsection (a)(1), if the authorization permits

4 the disclosure of protected health information to

5 a person other than a person described in sub6 paragraph (A).

7 ‘‘(2) DISCLOSURE BY TRUSTEE.—For purposes

8 of subsection (a)(9), a disclosure is timely made if

9 it occurs before the date or event specified in the au10 thorization upon which the authorization expires.

11 ‘‘(c) REVOCATION OR AMENDMENT OF AUTHORIZA12 TION.—

13 ‘‘(1) IN GENERAL.—An individual may in writ14 ing revoke or amend an authorization described in

15 subsection (a), in whole or in part, at any time, ex16 cept when—

17 ‘‘(A) disclosure of protected health infor18 mation has been authorized to permit validation

19 of expenditures for health care; or

20 ‘‘(B) action has been taken in reliance on

21 the authorization.

22 ‘‘(2) NOTICE OF REVOCATION.—A health infor23 mation trustee who discloses protected health infor24 mation pursuant to an authorization that has been
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•S 2374 IS

1 revoked shall not be subject to any liability or pen2 alty under this subtitle if—

3 ‘‘(A) the reliance was in good faith;

4 ‘‘(B) the trustee had no notice of the rev5 ocation; and

6 ‘‘(C) the disclosure was otherwise in ac7 cordance with the requirements of this subtitle.

8 ‘‘(d) DECEASED INDIVIDUAL.—The Secretary shall

9 develop and establish through regulation a procedure for

10 obtaining protected health information relating to a de11 ceased individual when there is no individual representa12 tive for such individual.

13 ‘‘(e) MODEL AUTHORIZATIONS.—The Secretary,

14 after notice and opportunity for public comment, shall de15 velop and disseminate model written authorizations of the

16 type described in subsection (a) and model statements of

17 intended disclosures of the type described in subsection

18 (a)(5).

19 ‘‘(f) COPY.—A health information trustee who dis20 closes protected health information pursuant to an author21 ization under this section shall maintain a copy of the au22 thorization.
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•S 2374 IS

1 ‘‘SEC. 11813. CERTIFIED HEALTH INFORMATION NETWORK

2 SERVICES.

3 ‘‘(a) IN GENERAL.—A health information trustee

4 may disclose protected health information to a certified

5 health information network service acting as an agent of

6 the trustee for any purpose permitted by this subtitle.

7 Such a service, acting as an agent of a trustee, may dis8 close protected health information to another person as

9 permitted under this subtitle to facilitate the completion

10 of the purpose for which such information was disclosed

11 to the service.

12 ‘‘(b) CERTIFIED HEALTH INFORMATION PROTEC13 TION ORGANIZATIONS.—A health information trustee may

14 disclose protected health information to a certified health

15 information protection organization for the purpose of cre16 ating non-identifiable health information (as defined in

17 section 11702).

18 ‘‘Subpart B—Specific Disclosures Relating to Patient

19 ‘‘SEC. 11821. DISCLOSURES FOR TREATMENT AND FINAN20 CIAL AND ADMINISTRATIVE TRANSACTIONS.

21 ‘‘(a) HEALTH CARE TREATMENT.—A health care

22 provider, health plan, employer, or person who receives

23 protected health information under section 11823, may

24 disclose protected health information to a health care pro25 vider for the purpose of providing health care to an indi26 vidual if the individual who is the subject of the informa-
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•S 2374 IS

1 tion has not previously objected in writing to the disclo2 sure.

3 ‘‘(b) DISCLOSURE TO HEALTH PLANS FOR FINAN4 CIAL AND ADMINISTRATIVE PURPOSES.—A health care

5 provider or employer may disclose protected health infor6 mation to a health plan for the purpose of providing for

7 the payment for, or reviewing the payment of, health care

8 furnished to an individual.

9 ‘‘(c) DISCLOSURE BY HEALTH PLANS FOR FINAN10 CIAL AND ADMINISTRATIVE PURPOSES.—A health plan

11 may disclose protected health information to a health care

12 provider or a health plan for the purpose of providing for

13 the payment for, or reviewing the payment of, health care

14 furnished to an individual.

15 ‘‘SEC. 11822. NEXT OF KIN AND DIRECTORY INFORMATION.

16 ‘‘(a) NEXT OF KIN.—A health care provider or per17 son who receives protected health information under sec18 tion 11823 may disclose protected health information to

19 the next of kin, an individual representative of the individ20 ual who is the subject of the information, or an individual

21 with whom that individual has a close personal relation22 ship if—

23 ‘‘(1) the individual who is the subject of the in24 formation—
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•S 2374 IS

1 ‘‘(A) has been notified of the individual’s

2 right to object and has not objected to the dis3 closure;

4 ‘‘(B) is not competent to be notified about

5 the right to object; or

6 ‘‘(C) exigent circumstances exist such that

7 it would not be practicable to notify the individ8 ual of the right to object; and

9 ‘‘(2) the information disclosed relates to health

10 care currently being provided to that individual.

11 ‘‘(b) DIRECTORY INFORMATION.—A health care pro12 vider and a person receiving protected health information

13 under section 11823 may disclose protected health infor14 mation to any person if—

15 ‘‘(1) the information does not reveal specific in16 formation about the physical or mental condition of

17 the individual who is the subject of the information

18 or health care provided to that person;

19 ‘‘(2) the individual who is the subject of the in20 formation—

21 ‘‘(A) has been notified of the individual’s

22 right to object and has not objected to the dis23 closure;

24 ‘‘(B) is not competent to be notified about

25 the right to object; or
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•S 2374 IS

1 ‘‘(C) exigent circumstances exist such that

2 it would not be practicable to notify the individ3 ual of the right to object; and

4 ‘‘(3) the information consists only of 1 or more

5 of the following items:

6 ‘‘(A) The name of the individual who is the

7 subject of the information.

8 ‘‘(B) If the individual who is the subject of

9 the information is receiving health care from a

10 health care provider on a premises controlled by

11 the provider—

12 ‘‘(i) the location of the individual on

13 the premises; and

14 ‘‘(ii) the general health status of the

15 individual, described as critical, poor, fair,

16 stable, or satisfactory or in terms denoting

17 similar conditions.

18 ‘‘(d) IDENTIFICATION OF DECEASED INDIVIDUAL.—

19 A health care provider, health plan, employer, or life in20 surer, may disclose protected health information if nec21 essary to assist in the identification of a deceased individ22 ual.

23 ‘‘SEC. 11823. EMERGENCY CIRCUMSTANCES.

24 ‘‘(a) IN GENERAL.—A health care provider, health

25 plan, employer, or person who receives protected health
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•S 2374 IS

1 information under this section may disclose protected

2 health information in emergency circumstances when nec3 essary to protect the health or safety of an individual from

4 imminent harm.

5 ‘‘(b) SCOPE OF DISCLOSURE.—The disclosure of pro6 tected health information under this section shall be lim7 ited to persons who need the information to take action

8 to protect the health or safety of the individual.

9 ‘‘Subpart C—Disclosure for Oversight, Public Health,

10 and Research Purposes

11 ‘‘SEC. 11831. OVERSIGHT.

12 ‘‘(a) IN GENERAL.—A health information trustee

13 may disclose protected health information to a health over14 sight agency for an oversight function authorized by law.

15 ‘‘(b) USE IN ACTION AGAINST INDIVIDUALS.—Not16 withstanding section 11811(e), protected health informa17 tion about an individual that is disclosed under this sec18 tion may be used in, or disclosed to any person for use

19 in, any administrative, civil, or criminal action or inves20 tigation directed against the individual who is the subject

21 of the information if the action or investigation arises out

22 of and is directly related to receipt of health care or pay23 ment for health care or an action involving a fraudulent

24 claim related to health.
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•S 2374 IS

1 ‘‘SEC. 11832. PUBLIC HEALTH.

2 ‘‘A health care provider, health plan, public health

3 authority, employer, or person who receives protected

4 health information under section 11823 may disclose pro5 tected health information to a public health authority or

6 other person authorized by law for use in a legally author7 ized—

8 ‘‘(1) disease or injury reporting;

9 ‘‘(2) public health surveillance; or

10 ‘‘(3) public health investigation or intervention.

11 ‘‘SEC. 11833. HEALTH RESEARCH.

12 ‘‘(a) IN GENERAL.—A health information trustee

13 may disclose protected health information to a health re14 searcher if an institutional review board determines that

15 the research project engaged in by the health researcher—

16 ‘‘(1) requires use of the protected health infor17 mation for the effectiveness of the project; and

18 ‘‘(2) is of sufficient importance to outweigh the

19 intrusion into the privacy of the individual who is

20 the subject of the information that would result from

21 the disclosure.

22 ‘‘(b) RESEARCH REQUIRING DIRECT CONTACT.—A

23 health information trustee may disclose protected health

24 information to a health researcher for a research project

25 that includes direct contact with an individual who is the
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•S 2374 IS

1 subject of protected health information if an institutional

2 review board determines that—

3 ‘‘(1) the research project meets the require4 ments of paragraphs (1) and (2) of subsection (a);

5 ‘‘(2) direct contact is necessary to accomplish

6 the research purpose; and

7 ‘‘(3) the direct contact will be made in a man8 ner that minimizes the risk of harm, embarrassment,

9 or other adverse consequences to the individual.

10 ‘‘(c) USE OF HEALTH INFORMATION NETWORK.—

11 ‘‘(1) IN GENERAL.—A health information trust12 ee may disclose protected health information to a

13 health researcher using the health information net14 work (as defined in section 11702) only if an institu15 tional review board certified by the Secretary under

16 paragraph (2) determines that the research project

17 engaged in by the health researcher meets the re18 quirements of this section.

19 ‘‘(2) CERTIFICATION OF INSTITUTIONAL RE20 VIEW BOARDS.—

21 ‘‘(A) REGULATIONS.—The Secretary, after

22 notice and opportunity for public comment,

23 shall issue regulations establishing certification

24 requirements for institutional review boards

25 under this subtitle. Such regulations shall be
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•S 2374 IS

1 based on regulations issued under section

2 491(a) of the Public Health Service Act and

3 shall ensure that institutional review boards

4 certified under this paragraph have the quali5 fications to access and protect the confidential6 ity of research subjects.

7 ‘‘(B) CERTIFICATION.—The Secretary

8 shall certify an institutional review board that

9 meets the certification requirements established

10 by the Secretary under subparagraph (A).

11 ‘‘(d) OBLIGATIONS OF RECIPIENT.—A person who

12 receives protected health information pursuant to sub13 section (a)—

14 ‘‘(1) shall remove or destroy, at the earliest op15 portunity consistent with the purposes of the project,

16 information that would enable an individual to be

17 identified, unless—

18 ‘‘(A) an institutional review board has de19 termined that there is a health or research jus20 tification for retention of such identifiers; and

21 ‘‘(B) there is an adequate plan to protect

22 the identifiers from disclosure that is inconsist23 ent with this section; and
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•S 2374 IS

1 ‘‘(2) shall use protected health information sole2 ly for purposes of the health research project for

3 which disclosure was authorized under this section.

4 ‘‘Subpart D—Disclosure For Judicial, Administrative,

5 and Law Enforcement Purposes

6 ‘‘SEC. 11841. JUDICIAL AND ADMINISTRATIVE PURPOSES.

7 A health care provider, health plan, health oversight

8 agency, or employer may disclose protected health infor9 mation—

10 ‘‘(1) pursuant to the Federal Rules of Civil

11 Procedure, the Federal Rules of Criminal Procedure,

12 or comparable rules of other courts or administrative

13 agencies in connection with litigation or proceedings

14 to which the individual who is the subject of the in15 formation is a party and in which the individual has

16 placed the individual’s physical or mental condition

17 in issue;

18 ‘‘(2) to a court, and to others ordered by a

19 court, if the protected health information is devel20 oped in response to a court-ordered physical or men21 tal examination; or

22 ‘‘(3) pursuant to a law requiring the reporting

23 of specific medical information to law enforcement

24 authorities.
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•S 2374 IS

1 ‘‘SEC. 11842. LAW ENFORCEMENT.

2 ‘‘(a) IN GENERAL.—A health care provider, health

3 plan, health oversight agency, employer, or person who re4 ceives protected health information under section 11823

5 may disclose protected health information to a law en6 forcement agency (other than a health oversight agency

7 governed by section 11831) if the information is requested

8 for use—

9 ‘‘(1) in an investigation or prosecution of a

10 health information trustee;

11 ‘‘(2) in the identification of a victim or witness

12 in a law enforcement inquiry; or

13 ‘‘(3) in connection with the investigation of

14 criminal activity committed against the trustee or on

15 premises controlled by the trustee.

16 ‘‘(b) CERTIFICATION.—When a law enforcement

17 agency (other than a health oversight agency) requests

18 that a health information trustee disclose protected health

19 information under this section, the law enforcement agen20 cy shall provide the trustee with a written certification

21 that—

22 ‘‘(1) specifies the information requested;

23 ‘‘(2) states that the information is needed for a

24 lawful purpose under this section; and

25 ‘‘(3) is signed by a supervisory official of a rank

26 designated by the head of the agency.
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•S 2374 IS

1 ‘‘(c) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

2 Notwithstanding section 11811(e), protected health infor3 mation about an individual that is disclosed to a law en4 forcement agency under this section may be used in, or

5 disclosed for, an administrative, civil, or criminal action

6 or investigation against the individual if the action or in7 vestigation arises out of and is directly related to the ac8 tion or investigation for which the information was ob9 tained.

10 ‘‘Subpart E—Disclosure Pursuant to Government

11 Subpoena or Warrant

12 ‘‘SEC. 11851. GOVERNMENT SUBPOENAS AND WARRANTS.

13 ‘‘(a) IN GENERAL.—A health care provider, health

14 plan, health oversight agency, employer, or person who re15 ceives protected health information under section 11823

16 may disclose protected health information under this sec17 tion if the disclosure is pursuant to—

18 ‘‘(1) a subpoena issued under the authority of

19 a grand jury, and the trustee is provided a written

20 certification by the grand jury seeking the informa21 tion that the grand jury has complied with the appli22 cable access provisions of section 11852;

23 ‘‘(2) an administrative subpoena or a judicial

24 subpoena or warrant, and the trustee is provided a

25 written certification by the person seeking the infor-
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•S 2374 IS

1 mation that the person has complied with the appli2 cable access provisions of section 11852; or

3 ‘‘(3) an administrative subpoena or a judicial

4 subpoena or warrant, and the disclosure otherwise

5 meets the conditions of section 11831, 11832,

6 11841, or 11842.

7 ‘‘(b) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

8 ‘‘(1) ACTIONS OR INVESTIGATIONS.—Notwith9 standing section 11811(c), protected health informa10 tion about an individual that is received under sub11 section (a) may be disclosed for, or used in, any ad12 ministrative, civil, or criminal action or investigation

13 against the individual if the action or investigation

14 arises out of and is directly related to the inquiry for

15 which the information was obtained.

16 ‘‘(2) SPECIAL RULE.—Protected health infor17 mation about an individual that is received under

18 subsection (a)(3) may not be disclosed by the recipi19 ent unless the recipient complies with the conditions

20 and restrictions on disclosure with which the recipi21 ent would have been required to comply if the disclo22 sure had been made under section 11831, 11832,

23 11841, or 11842.
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1 ‘‘SEC. 11852. ACCESS PROCEDURES FOR LAW ENFORCE2 MENT SUBPOENAS AND WARRANTS.

3 ‘‘(a) PROBABLE CAUSE REQUIREMENT.—A govern4 ment authority may not obtain protected health informa5 tion about an individual under paragraph (1) or (2) of

6 section 11851(a) for use in a law enforcement inquiry un7 less there is probable cause to believe that the information

8 is relevant to a legitimate law enforcement inquiry being

9 conducted by the government authority.

10 ‘‘(b) WARRANTS.—A government authority that ob11 tains protected health information about an individual

12 under circumstances described in subsection (a) and pur13 suant to a warrant shall, not later than 30 days after the

14 date the warrant was executed, serve the individual with,

15 or mail to the last known address of the individual, a no16 tice that protected health information about the individual

17 was so obtained, together with a notice of the individual’s

18 right to challenge the warrant in accordance with section

19 11853.

20 ‘‘(c) SUBPOENAS.—Except as provided in subsection

21 (d), a government authority may not obtain protected

22 health information about an individual under cir23 cumstances described in subsection (a) and pursuant to

24 a subpoena unless a copy of the subpoena has been served

25 on the individual on or before the date of return of the

26 subpoena, together with a notice of the individual’s right
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•S 2374 IS

1 to challenge the subpoena in accordance with section

2 11853, and—

3 ‘‘(1) 30 days have passed since the date of serv4 ice on the individual and within that time period the

5 individual has not initiated a challenge in accordance

6 with section 11853; or

7 ‘‘(2) disclosure is ordered by a court after chal8 lenge under section 11853.

9 ‘‘(d) APPLICATION FOR DELAY.—

10 ‘‘(1) IN GENERAL.—A government authority

11 may apply ex parte and under seal to an appropriate

12 court to delay (for an initial period of not longer

13 than 90 days) serving a notice or copy of a subpoena

14 required under subsection (b) or (c) with respect to

15 a law enforcement inquiry. The government author16 ity may apply to the court for extensions of the

17 delay.

18 ‘‘(2) REASONS FOR DELAY.—An application for

19 a delay, or extension of a delay, under this sub20 section shall state, with reasonable specificity, the

21 reasons why the delay or extension is being sought.

22 ‘‘(3) EX PARTE ORDER.—The court shall enter

23 an ex parte order delaying or extending the delay of

24 notice, an order prohibiting the disclosure of the re25 quest for, or disclosure of, the protected health in-
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1 formation, and an order requiring the disclosure of

2 the protected health information if the court finds

3 that—

4 ‘‘(A) the inquiry being conducted is within

5 the lawful jurisdiction of the government au6 thority seeking the protected health informa7 tion;

8 ‘‘(B) there is probable cause to believe that

9 the protected health information being sought is

10 relevant to a legitimate law enforcement in11 quiry;

12 ‘‘(C) the government authority’s need for

13 the information outweighs the privacy interest

14 of the individual who is the subject of the infor15 mation; and

16 ‘‘(D) there is reasonable ground to believe

17 that receipt of notice by the individual will re18 sult in—

19 ‘‘(i) endangering the life or physical

20 safety of any individual;

21 ‘‘(ii) flight from prosecution;

22 ‘‘(iii) destruction of or tampering with

23 evidence or the information being sought;

24 or
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1 ‘‘(iv) intimidation of potential wit2 nesses.

3 ‘‘SEC. 11853. CHALLENGE PROCEDURES FOR LAW EN4 FORCEMENT WARRANTS AND SUBPOENAS.

5 ‘‘(a) MOTION TO QUASH.—Within 30 days after the

6 date of service of a notice of execution or a copy of a sub7 poena of a government authority seeking protected health

8 information about an individual under paragraph (1) or

9 (2) of section 11851(a), the individual may file a motion

10 to quash—

11 ‘‘(1) in the case of a State judicial warrant or

12 subpoena, in the court which issued the warrant or

13 subpoena;

14 ‘‘(2) in the case of a warrant or subpoena is15 sued under the authority of a State that is not a

16 State judicial warrant or subpoena, in a court of

17 competent jurisdiction; or

18 ‘‘(3) in the case of any other warrant or sub19 poena issued under the authority of a Federal court

20 or the United States, in the United States district

21 court for the district in which the individual resides

22 or in which the warrant or subpoena was issued.

23 ‘‘(b) COPY.—A copy of the motion shall be served by

24 the individual upon the government authority by reg25 istered or certified mail.
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1 ‘‘(c) PROCEEDINGS.—The government authority may

2 file with the court such papers, including affidavits and

3 other sworn documents, as sustain the validity of the war4 rant or subpoena. The individual may file with the court

5 reply papers in response to the government authority’s fil6 ing. The court, upon the request of the individual or the

7 government authority or both, may proceed in camera.

8 The court may conduct such proceedings as it deems ap9 propriate to rule on the motion, but shall endeavor to ex10 pedite its determination.

11 ‘‘(d) STANDARD FOR DECISION.—A court may deny

12 a motion under subsection (a) if it finds there is probable

13 cause to believe the protected health information is rel14 evant to a legitimate law enforcement inquiry being con15 ducted by the government authority, unless the court finds

16 the individual’s privacy interest outweighs the government

17 authority’s need for the information. The individual shall

18 have the burden of demonstrating that the individual’s pri19 vacy interest outweighs the need by the government au20 thority for the information.

21 ‘‘(e) SPECIFIC CONSIDERATIONS WITH RESPECT TO

22 PRIVACY INTEREST.—In reaching its determination, the

23 court shall consider—

24 ‘‘(1) the particular purpose for which the infor25 mation was collected;
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•S 2374 IS

1 ‘‘(2) the degree to which disclosure of the infor2 mation will embarrass, injure, or invade the privacy

3 of the individual;

4 ‘‘(3) the effect of the disclosure on the individ5 ual’s future health care;

6 ‘‘(4) the importance of the inquiry being con7 ducted by the government authority, and the impor8 tance of the information to that inquiry; and

9 ‘‘(5) any other factor deemed relevant by the

10 court.

11 ‘‘(f) ATTORNEY’S FEES.—In the case of a motion

12 brought under subsection (a) in which the individual has

13 substantially prevailed, the court may assess against the

14 government authority a reasonable attorney’s fee and

15 other litigation costs (including expert’s fees) reasonably

16 incurred.

17 ‘‘(g) NO INTERLOCUTORY APPEAL.—A ruling deny18 ing a motion to quash under this section shall not be

19 deemed to be a final order, and no interlocutory appeal

20 may be taken therefrom by the individual. An appeal of

21 such a ruling may be taken by the individual within such

22 period of time as is provided by law as part of any appeal

23 from a final order in any legal proceeding initiated against

24 the individual arising out of or based upon the protected

25 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) 30 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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•S 2374 IS

1 ‘‘SEC. 11856. CHALLENGE PROCEDURES FOR PRIVATE

2 PARTY SUBPOENAS.

3 ‘‘(a) MOTION TO QUASH SUBPOENA.—Within 30

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 2374 IS

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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•S 2374 IS

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. In developing such regulations, the

7 Secretary shall consult with appropriate private parties

8 with expertise in safeguarding health information.

9 ‘‘SEC. 11862. ACCOUNTING FOR DISCLOSURES.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) REQUIREMENT TO CREATE OR MAINTAIN

12 RECORD.—A health information trustee shall create

13 and maintain, with respect to any protected health

14 information disclosed in exceptional circumstances

15 (as described in paragraph (2)), a record of—

16 ‘‘(A) the date and purpose of the disclo17 sure;

18 ‘‘(B) the name of the person to whom or

19 to which the disclosure was made;

20 ‘‘(C) the address of the person to whom or

21 to which the disclosure was made or the loca22 tion to which the disclosure was made; and

23 ‘‘(D) the information disclosed, if the re24 cording of the information disclosed is prac25 ticable, taking into account the technical capa-
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•S 2374 IS

1 bilities of the system used to maintain the

2 record and the costs of such maintenance.

3 ‘‘(2) EXCEPTIONAL CIRCUMSTANCES DE4 SCRIBED.—For purposes of paragraph (1) protected

5 health information is disclosed in exceptional cir6 cumstances if the disclosure—

7 ‘‘(A) is not a routine part of doing busi8 ness, as determined in accordance with guide9 lines promulgated by the Secretary; or

10 ‘‘(B) is permitted under sections 11823

11 and 11832.

12 ‘‘(b) DISCLOSURE RECORD PART OF INFORMATION.—

13 A record created and maintained under paragraph (a)

14 shall be maintained as part of the protected health infor15 mation to which the record pertains.

16 ‘‘Subpart B—Review of Protected Health Information

17 By Subjects of the Information

18 ‘‘SEC. 11871. INSPECTION OF PROTECTED HEALTH INFOR19 MATION.

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

21 (c), a health care provider or health plan—

22 ‘‘(1) shall permit an individual who is the sub23 ject of protected health information to inspect any

24 such information that the provider or plan main25 tains;
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•S 2374 IS

1 ‘‘(2) shall permit the individual to have a copy

2 of the information;

3 ‘‘(3) shall permit a person who has been des4 ignated in writing by the individual who is the sub5 ject of the information to inspect the information on

6 behalf of the individual or to accompany the individ7 ual during the inspection; and

8 ‘‘(4) may offer to explain or interpret informa9 tion that is inspected or copied under this sub10 section.

11 ‘‘(b) ADDITIONAL REQUESTS.—Except as provided in

12 subsection (c), a health plan or health care provider shall,

13 upon written request of an individual—

14 ‘‘(1) determine the identity of previous provid15 ers to the individual; and

16 ‘‘(2) obtain protected health information re17 garding the individual.

18 ‘‘(c) EXCEPTIONS.—A health care provider or health

19 plan is not required by this section to permit inspection

20 or copying of protected health information if any of the

21 following conditions apply:

22 ‘‘(1) MENTAL HEALTH TREATMENT NOTES.—

23 The information consists of psychiatric, psycho24 logical, or mental health treatment notes, and the

25 provider or plan determines, based on reasonable
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•S 2374 IS

1 medical judgment, that inspection or copying of the

2 notes would cause sufficient harm to the individual

3 who is the subject of the notes so as to outweigh the

4 desirability of permitting access, and the provider or

5 plan has not disclosed the notes to any person not

6 directly engaged in treating the individual, except

7 with the authorization of the individual or under

8 compulsion of law.

9 ‘‘(2) INFORMATION ABOUT OTHERS.—The in10 formation relates to an individual other than the in11 dividual seeking to inspect or have a copy of the in12 formation and the provider or plan determines,

13 based on reasonable medical judgment, that inspec14 tion or copying of the information would cause suffi15 cient harm to 1 or both of the individuals so as to

16 outweigh the desirability of permitting access.

17 ‘‘(3) ENDANGERMENT TO LIFE OR SAFETY.—

18 The provider or plan determines that disclosure of

19 the information could reasonably be expected to en20 danger the life or physical safety of any individual.

21 ‘‘(4) CONFIDENTIAL SOURCE.—The information

22 identifies or could reasonably lead to the identifica23 tion of a person (other than a health care provider)

24 who provided information under a promise of con-
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•S 2374 IS

1 fidentiality to a health care provider concerning the

2 individual who is the subject of the information.

3 ‘‘(5) ADMINISTRATIVE PURPOSES.—The infor4 mation—

5 ‘‘(A) is used by the provider or plan solely

6 for administrative purposes and not in the pro7 vision of health care to the individual who is the

8 subject of the information; and

9 ‘‘(B) has not been disclosed by the pro10 vider or plan to any other person.

11 ‘‘(d) INSPECTION AND COPYING OF SEGREGABLE

12 PORTION.—A health care provider or health plan shall

13 permit inspection and copying under subsection (a) of any

14 reasonably segregable portion of a record after deletion of

15 any portion that is exempt under subsection (c).

16 ‘‘(e) CONDITIONS.—A health care provider or health

17 plan may require a written request for the inspection and

18 copying of protected health information under this sub19 section. The health care provider or health plan may re20 quire a reasonable cost reimbursement for such inspection

21 and copying.

22 ‘‘(f) STATEMENT OF REASONS FOR DENIAL.—If a

23 health care provider or health plan denies a request for

24 inspection or copying under this section, the provider or

25 plan shall provide the individual who made the request (or
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•S 2374 IS

1 the individual’s designated representative) with a written

2 statement of the reasons for the denial.

3 ‘‘(g) DEADLINE.—A health care provider or health

4 plan shall comply with or deny a request for inspection

5 or copying of protected health information under this sec6 tion within the 30-day period beginning on the date on

7 which the provider or plan receives the request.

8 ‘‘SEC. 11872. AMENDMENT OF PROTECTED HEALTH INFOR9 MATION.

10 ‘‘(a) IN GENERAL.—A health care provider or health

11 plan shall, within the 45-day period beginning on the date

12 on which the provider or plan receives from an individual

13 a written request that the provider or plan correct or

14 amend the information—

15 ‘‘(1) make the correction or amendment re16 quested;

17 ‘‘(2) inform the individual of the correction or

18 amendment that has been made; and

19 ‘‘(3) inform any person who is identified by the

20 individual, who is not an officer, employee or agent

21 of the provider or plan, and to whom the uncor22 rected or unamended portion of the information was

23 previously disclosed, of the correction or amendment

24 that has been made.
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•S 2374 IS

1 ‘‘(b) REFUSAL TO CORRECT.—If the provider or plan

2 refuses to make the corrections, the provider or plan shall

3 inform the individual of—

4 ‘‘(1) the reasons for the refusal of the provider

5 or plan to make the correction or amendment;

6 ‘‘(2) any procedures for further review of the

7 refusal; and

8 ‘‘(3) the individual’s right to file with the pro9 vider or plan a concise statement setting forth the

10 requested correction or amendment and the individ11 ual’s reasons for disagreeing with the refusal of the

12 provider or plan.

13 ‘‘(c) BASES FOR REQUEST TO CORRECT OR AMEND.—

14 An individual may request correction or amendment of

15 protected health information about the individual under

16 paragraph (a) if the information is not timely, accurate,

17 relevant to the system of records, or complete.

18 ‘‘(d) STATEMENT OF DISAGREEMENT.—After an in19 dividual has filed a statement of disagreement under para20 graph (b)(3), the provider or plan, in any subsequent dis21 closure of the disputed portion of the information—

22 ‘‘(1) shall include a copy of the individual’s

23 statement; and
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•S 2374 IS

1 ‘‘(2) may include a concise statement of the

2 reasons of the provider or plan for not making the

3 requested correction or amendment.

4 ‘‘(e) RULE OF CONSTRUCTION.—This section shall

5 not be construed to require a health care provider or

6 health plan to conduct a formal, informal, or other hearing

7 or proceeding concerning a request for a correction or

8 amendment to protected health information the provider

9 or plan maintains.

10 ‘‘(f) CORRECTION.—For purposes of paragraph (a),

11 a correction is deemed to have been made to protected

12 health information when information that is not timely,

13 accurate, relevant to the system of records, or complete

14 is clearly marked as incorrect or when supplementary cor15 rect information is made part of the information.

16 ‘‘SEC. 11873. NOTICE OF INFORMATION PRACTICES.

17 ‘‘(a) PREPARATION OF WRITTEN NOTICE.—A health

18 care provider or health plan shall prepare a written notice

19 of information practices describing the following:

20 ‘‘(1) PERSONAL RIGHTS OF AN INDIVIDUAL.—

21 The rights under this subpart of an individual who

22 is the subject of protected health information, in23 cluding the right to inspect and copy such informa24 tion and the right to seek amendments to such infor25 mation, and the procedures for authorizing disclo-
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•S 2374 IS

1 sures of protected health information and for revok2 ing such authorizations.

3 ‘‘(2) PROCEDURES OF PROVIDER OR PLAN.—

4 The procedures established by the provider or plan

5 for the exercise of the rights of individuals about

6 whom protected health information is maintained.

7 ‘‘(3) AUTHORIZED DISCLOSURES.—The disclo8 sures of protected health information that are au9 thorized.

10 ‘‘(b) DISSEMINATION OF NOTICE.—A health care

11 provider or health plan—

12 ‘‘(1) shall, upon request, provide any individual

13 with a copy of the notice of information practices de14 scribed in subsection (a); and

15 ‘‘(2) shall make reasonable efforts to inform in16 dividuals in a clear and conspicuous manner of the

17 existence and availability of the notice.

18 ‘‘(c) MODEL NOTICE.—The Secretary, after notice

19 and opportunity for public comment, shall develop and dis20 seminate a model notice of information practices for use

21 by health care providers and health plans under this sec22 tion.
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1 ‘‘Subpart C—Standards for Electronic Disclosures

2 ‘‘SEC. 11882. STANDARDS FOR ELECTRONIC DISCLOSURES.

3 ‘‘The Secretary shall promulgate standards for dis4 closing protected health information in accordance with

5 this subtitle in electronic form. Such standards shall in6 clude standards relating to the creation, transmission, re7 ceipt, and maintenance, of any written document required

8 or authorized under this subtitle.

9 ‘‘PART IV—SANCTIONS

10 ‘‘Subpart A—No Sanctions for Permissible Actions

11 ‘‘SEC. 11891. NO LIABILITY FOR PERMISSIBLE DISCLO12 SURES.

13 ‘‘A health information trustee who makes a disclosure

14 of protected health information about an individual that

15 is permitted by this subtitle shall not be liable to the indi16 vidual for the disclosure under common law.

17 ‘‘SEC. 11892. NO LIABILITY FOR INSTITUTIONAL REVIEW

18 BOARD DETERMINATIONS.

19 ‘‘If the members of an institutional review board

20 make a determination in good faith that—

21 ‘‘(1) a health research project is of sufficient

22 importance to outweigh the intrusion into the pri23 vacy of an individual; and

24 ‘‘(2) the effectiveness of the project requires use

25 of protected health information,
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•S 2374 IS

1 the members, the board, and the parent institution of the

2 board shall not be liable to the individual as a result of

3 the determination.

4 ‘‘SEC. 11893. RELIANCE ON CERTIFIED ENTITY.

5 ‘‘If a health information trustee contracts with a cer6 tified health information network service to make a disclo7 sure of any protected health information on behalf of such

8 trustee in accordance with this subtitle and such service

9 makes a disclosure of such information that is in violation

10 of this subtitle, the trustee shall not be liable for to the

11 individual who is the subject of the information for such

12 unlawful disclosure.

13 ‘‘Subpart B—Civil Sanctions

14 ‘‘SEC. 11901. CIVIL PENALTY.

15 ‘‘(a) VIOLATION.—Any health information trustee

16 who the Secretary determines has substantially failed to

17 comply with this subtitle shall be subject, in addition to

18 any other penalties that may be prescribed by law, to a

19 civil penalty of not more than $10,000 for each such viola20 tion.

21 ‘‘(b) PROCEDURES FOR IMPOSITION OF PEN22 ALTIES.—Section 1128A, other than subsections (a) and

23 (b) and the second sentence of subsection (f) of that sec24 tion, shall apply to the imposition of a civil monetary pen25 alty under this section in the same manner as such provi-
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•S 2374 IS

1 sions apply with respect to the imposition of a penalty

2 under section 1128A.

3 ‘‘SEC. 11902. CIVIL ACTION.

4 ‘‘(a) IN GENERAL.—An individual who is aggrieved

5 by conduct in violation of this subtitle may bring a civil

6 action to recover—

7 ‘‘(1) the greater of actual damages or liquidated

8 damages of $5,000;

9 ‘‘(2) punitive damages;

10 ‘‘(3) a reasonable attorney’s fee and expenses of

11 litigation;

12 ‘‘(4) costs of litigation; and

13 ‘‘(5) such preliminary and equitable relief as

14 the court determines to be appropriate.

15 ‘‘(b) LIMITATION.—No action may be commenced

16 under this section more than 3 years after the date on

17 which the violation was or should reasonably have been

18 discovered.

19 ‘‘Subpart C—Criminal Sanctions

20 ‘‘SEC. 11911. WRONGFUL DISCLOSURE OF PROTECTED

21 HEALTH INFORMATION.

22 ‘‘(a) OFFENSE.—A person who knowingly—

23 ‘‘(1) obtains protected health information relat24 ing to an individual in violation of this subtitle; or
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•S 2374 IS

1 ‘‘(2) discloses protected health information to

2 another person in violation of this subtitle,

3 shall be punished as provided in subsection (b).

4 ‘‘(b) PENALTIES.—A person described in subsection

5 (a) shall—

6 ‘‘(1) be fined not more than $50,000, impris7 oned not more than 1 year, or both;

8 ‘‘(2) if the offense is committed under false pre9 tenses, be fined not more than $100,000, imprisoned

10 not more than 5 years, or both; and

11 ‘‘(3) if the offense is committed with intent to

12 sell, transfer, or use protected health information for

13 commercial advantage, personal gain, or malicious

14 harm, fined not more than $250,000, imprisoned not

15 more than 10 years, or both.

16 ‘‘PART V—ADMINISTRATIVE PROVISIONS

17 ‘‘SEC. 11921. RELATIONSHIP TO OTHER LAWS.

18 ‘‘(a) STATE LAW.—Except as provided in subsections

19 (b), (c), and (d), this subtitle preempts State law.

20 ‘‘(b) LAWS RELATING TO PUBLIC OR MENTAL

21 HEALTH.—Nothing in this subtitle shall be construed to

22 preempt or operate to the exclusion of any State law relat23 ing to public health or mental health that prevents or reg24 ulates disclosure of protected health information otherwise

25 allowed under this subtitle.
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•S 2374 IS

1 ‘‘(c) PRIVILEGES.—Nothing in this subtitle is in2 tended to preempt or modify State common or statutory

3 law to the extent such law concerns a privilege of a witness

4 or person in a court of the State. This subtitle does not

5 supersede or modify Federal common or statutory law to

6 the extent such law concerns a privilege of a witness or

7 person in a court of the United States. Authorizations

8 pursuant to section 11812 shall not be construed as a

9 waiver of any such privilege.

10 ‘‘(d) CERTAIN DUTIES UNDER STATE OR FEDERAL

11 LAW.—This subtitle shall not be construed to preempt,

12 supersede, or modify the operation of—

13 ‘‘(1) any law that provides for the reporting of

14 vital statistics such as birth or death information;

15 ‘‘(2) any law requiring the reporting of abuse or

16 neglect information about any individual;

17 ‘‘(3) subpart II of part E of title XXVI of the

18 Public Health Service Act (relating to notifications

19 of emergency response employees of possible expo20 sure to infectious diseases); or

21 ‘‘(4) any Federal law or regulation governing

22 confidentiality of alcohol and drug patient records.

23 ‘‘SEC. 11922. RIGHTS OF INCOMPETENTS.

24 ‘‘(a) EFFECT OF DECLARATION OF INCOM25 PETENCE.—Except as provided in section 11923, if an in-
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1 dividual has been declared to be incompetent by a court

2 of competent jurisdiction, the rights of the individual

3 under this subtitle shall be exercised and discharged in

4 the best interests of the individual through the individual’s

5 representative.

6 ‘‘(b) NO COURT DECLARATION.—Except as provided

7 in section 11923, if a health care provider determines that

8 an individual, who has not been declared to be incom9 petent by a court of competent jurisdiction, suffers from

10 a medical condition that prevents the individual from act11 ing knowingly or effectively on the individual’s own behalf,

12 the right of the individual to authorize disclosure may be

13 exercised and discharged in the best interest of the individ14 ual by the individual’s representative.

15 ‘‘SEC. 11923. EXERCISE OF RIGHTS.

16 ‘‘(a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA17 BLE.—In the case of an individual—

18 ‘‘(1) who is 18 years of age or older, all rights

19 of the individual shall be exercised by the individual;

20 or

21 ‘‘(2) who, acting alone, has the legal right, as

22 determined by State law, to apply for and obtain a

23 type of medical examination, care, or treatment and

24 who has sought such examination, care, or treat25 ment, the individual shall exercise all rights of an in-
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1 dividual under this subtitle with respect to protected

2 health information relating to such examination,

3 care, or treatment.

4 ‘‘(b) INDIVIDUALS UNDER 18.—Except as provided

5 in subsection (a)(2), in the case of an individual who is—

6 ‘‘(1) under 14 years of age, all the individual’s

7 rights under this subtitle shall be exercised through

8 the parent or legal guardian of the individual; or

9 ‘‘(2) 14, 15, 16, or 17 years of age, the rights

10 of inspection and amendment, and the right to au11 thorize disclosure of protected health information of

12 the individual may be exercised either by the individ13 ual or by the parent or legal guardian of the individ14 ual.’’.

15 (b) CONFORMING AMENDMENT.—Title XI of the So16 cial Security Act (42 U.S.C. 1301 et seq.), as amended

17 by section 601, is amended by striking the title and insert18 ing the following:
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1 ‘‘TITLE XI—GENERAL PROVI2 SIONS, PEER REVIEW, ADMIN3 ISTRATIVE SIMPLIFICATION,

4 AND PRIVACY’’.

5 TITLE VII—ENHANCED PEN6 ALTIES FOR HEALTH CARE

7 FRAUD

8 Subtitle A—All-Payer Fraud and

9 Abuse Control Program

10 SEC. 701. ALL-PAYER FRAUD AND ABUSE CONTROL PRO11 GRAM.

12 (a) ESTABLISHMENT OF PROGRAM.—

13 (1) IN GENERAL.—Not later than January 1,

14 1995, the Secretary of Health and Human Services

15 (in this title referred to as the ‘‘Secretary’’), acting

16 through the Office of the Inspector General of the

17 Department of Health and Human Services, and the

18 Attorney General shall establish a program—

19 (A) to coordinate Federal, State, and local

20 law enforcement programs to control fraud and

21 abuse with respect to the delivery of and pay22 ment for health care in the United States,

23 (B) to conduct investigations, audits, eval24 uations, and inspections relating to the delivery
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1 of and payment for health care in the United

2 States,

3 (C) to facilitate the enforcement of the

4 provisions of sections 1128, 1128A, and 1128B

5 of the Social Security Act and other statutes

6 applicable to health care fraud and abuse, and

7 (D) to provide for the modification and es8 tablishment of safe harbors and to issue inter9 pretative rulings and special fraud alerts pursu10 ant to section 703.

11 (2) COORDINATION WITH HEALTH CARE

12 PLANS.—In carrying out the program established

13 under paragraph (1), the Secretary and the Attorney

14 General shall consult with, and arrange for the shar15 ing of data with representatives of health care plans.

16 (3) REGULATIONS.—

17 (A) IN GENERAL.—The Secretary and the

18 Attorney General shall by regulation establish

19 standards to carry out the program under para20 graph (1).

21 (B) INFORMATION STANDARDS.—

22 (i) IN GENERAL.—Such standards

23 shall include standards relating to the fur24 nishing of information by health care

25 plans, providers, and others to enable the
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1 Secretary and the Attorney General to

2 carry out the program (including coordina3 tion with health care plans under para4 graph (2)).

5 (ii) CONFIDENTIALITY.—Such stand6 ards shall include procedures to assure

7 that such information is provided and uti8 lized in a manner that appropriately pro9 tects the confidentiality of the information

10 and the privacy of individuals receiving

11 health care services and items.

12 (iii) QUALIFIED IMMUNITY FOR PRO13 VIDING INFORMATION.—The provisions of

14 section 1157(a) of the Social Security Act

15 (relating to limitation on liability) shall

16 apply to a person providing information to

17 the Secretary or the Attorney General in

18 conjunction with their performance of du19 ties under this section, in the same manner

20 as such section applies to information pro21 vided to organizations with a contract

22 under part B of title XI of such Act, with

23 respect to the performance of such a con24 tract.
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1 (C) DISCLOSURE OF OWNERSHIP INFOR2 MATION.—

3 (i) IN GENERAL.—Such standards

4 shall include standards relating to the dis5 closure of ownership information described

6 in clause (ii) by any entity providing health

7 care services and items.

8 (ii) OWNERSHIP INFORMATION DE9 SCRIBED.—The ownership information de10 scribed in this clause includes—

11 (I) a description of such items

12 and services provided by such entity;

13 (II) the names and unique physi14 cian identification numbers of all phy15 sicians with a financial relationship

16 (as defined in section 1877(a)(2) of

17 the Social Security Act) with such en18 tity;

19 (III) the names of all other indi20 viduals with such an ownership or in21 vestment interest in such entity; and

22 (IV) any other ownership and re23 lated information required to be dis24 closed by such entity under section
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•S 2374 IS

1 1124 or section 1124A of the Social

2 Security Act.

3 (4) AUTHORIZATION OF APPROPRIATIONS FOR

4 INVESTIGATORS AND OTHER PERSONNEL.—In addi5 tion to any other amounts authorized to be appro6 priated to the Secretary and the Attorney General

7 for health care anti-fraud and abuse activities for a

8 fiscal year, there are authorized to be appropriated

9 additional amounts as may be necessary to enable

10 the Secretary and the Attorney General to conduct

11 investigations and audits of allegations of health

12 care fraud and abuse and otherwise carry out the

13 program established under paragraph (1) in a fiscal

14 year.

15 (5) ENSURING ACCESS TO DOCUMENTATION.—

16 The Inspector General of the Department of Health

17 and Human Services is authorized to exercise the

18 authority described in paragraphs (4) and (5) of sec19 tion 6 of the Inspector General Act of 1978 (relating

20 to subpoenas and administration of oaths) with re21 spect to the activities under the all-payer fraud and

22 abuse control program established under this sub23 section to the same extent as such Inspector General

24 may exercise such authorities to perform the func25 tions assigned by such Act.
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1 (6) HEALTH CARE PLAN DEFINED.—For the

2 purposes of this subsection, the term ‘‘health care

3 plan’’ shall have the meaning given such term in sec4 tion 1128(i) of the Social Security Act.

5 (b) ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

6 TRUST FUND.—

7 (1) ESTABLISHMENT.—

8 (A) IN GENERAL.—There is hereby created

9 on the books of the Treasury of the United

10 States a trust fund to be known as the ‘‘Anti11 Fraud and Abuse Trust Fund’’ (in this section

12 referred to as the ‘‘Trust Fund’’). The Trust

13 Fund shall consist of such gifts and bequests as

14 may be made as provided in subparagraph (B)

15 and such amounts as may be deposited in, or

16 appropriated to, such Trust Fund as provided

17 in subsection (a)(4), sections 731(b), 732(b),

18 and 741(b) of this Act, and title XI of the So19 cial Security Act.

20 (B) AUTHORIZATION TO ACCEPT GIFTS.—

21 The Managing Trustee of the Trust Fund is

22 authorized to accept on behalf of the United

23 States money gifts and bequests made uncondi24 tionally to the Trust Fund, for the benefit of
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•S 2374 IS

1 the Trust Fund, or any activity financed

2 through the Trust Fund.

3 (2) MANAGEMENT.—

4 (A) IN GENERAL.—The Trust Fund shall

5 be managed by the Secretary and the Attorney

6 General through a Managing Trustee des7 ignated by the Secretary and the Attorney Gen8 eral.

9 (B) INVESTMENT OF FUNDS.—

10 (i) IN GENERAL.—It shall be the duty

11 of the Managing Trustee to invest such

12 portion of the Trust Fund as is not, in the

13 Managing Trustee’s judgment, required to

14 meet current withdrawals.

15 (ii) GENERAL FORM OF INVEST16 MENT.—Investments described in clause (i)

17 may be made only in interest-bearing obli18 gations of the United States or in obliga19 tions guaranteed as to both principal and

20 interest by the United States. For such

21 purpose such obligations may be ac22 quired—

23 (I) on original issue at the issue

24 price, or
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•S 2374 IS

1 (II) by purchase of outstanding

2 obligations at market price.

3 (iii) ISSUANCE OF PUBLIC-DEBT OBLI4 GATIONS.—The purposes for which obliga5 tions of the United States may be issued

6 under chapter 31 of title 31, United States

7 Code, are hereby extended to authorize the

8 issuance at par of public-debt obligations

9 for purchase by the Trust Fund. Such obli10 gations issued for purchase by the Trust

11 Fund shall have maturities fixed with due

12 regard for the needs of the Trust Fund

13 and shall bear interest at a rate equal to

14 the average market yield (computed by the

15 Managing Trustee on the basis of market

16 quotations as of the end of the calendar

17 month next preceding the date of such

18 issue) on all marketable interest-bearing

19 obligations of the United States then form20 ing a part of the public debt which are not

21 due or callable until after the expiration of

22 4 years from the end of such calendar

23 month, except that where such average is

not a multiple of 1 24 ⁄8 of 1 percent, the rate

25 of interest on such obligations shall be the
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•S 2374 IS

multiple of 1 1 ⁄8 of 1 percent nearest such

2 market yield.

3 (iv) PURCHASES OF OTHER OBLIGA4 TIONS.—The Managing Trustee may pur5 chase other interest-bearing obligations of

6 the United States or obligations guaran7 teed as to both principal and interest by

8 the United States, on original issue or at

9 the market price, only where the Managing

10 Trustee determines that the purchase of

11 such other obligations is in the public in12 terest.

13 (C) SALE OF OBLIGATIONS.—Any obliga14 tions acquired by the Trust Fund (except pub15 lic-debt obligations issued exclusively to the

16 Trust Fund) may be sold by the Managing

17 Trustee at the market price, and such public18 debt obligations may be redeemed at par plus

19 accrued interest.

20 (D) INTEREST ON OBLIGATIONS AND PRO21 CEEDS FROM SALE OR REDEMPTION OF OBLI22 GATIONS.—The interest on, and the proceeds

23 from the sale or redemption of, any obligations

24 held in the Trust Fund shall be credited to and

25 form a part of the Trust Fund.
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•S 2374 IS

1 (E) RECEIPTS AND DISBURSEMENTS NOT

2 INCLUDED IN UNITED STATES GOVERNMENT

3 BUDGET TOTALS.—The receipts and disburse4 ments of the Secretary and the Attorney Gen5 eral in the discharge of the functions of the

6 Secretary and the Attorney General under the

7 all-payer fraud and abuse control program es8 tablished under subsection (a) shall not be in9 cluded in the totals of the budget of the United

10 States Government. For purposes of part C of

11 the Balanced Budget and Emergency Deficit

12 Control Act of 1985, the Secretary, the Attor13 ney General, and the Trust Fund shall be treat14 ed in the same manner as the Federal Retire15 ment Thrift Investment Board and the Thrift

16 Savings Fund, respectively. The United States

17 is not liable for any obligation or liability in18 curred by the Trust Fund.

19 (3) USE OF FUNDS.—

20 (A) IN GENERAL.—Amounts in the Trust

21 Fund shall be used without regard to fiscal year

22 limitation to assist the Inspector General of the

23 Department of Health and Human Services and

24 the Attorney General in carrying out the all-
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•S 2374 IS

1 payer fraud and abuse control program estab2 lished under subsection (a).

3 (B) OVERALL ADMINISTRATION.—The

4 Managing Trustee shall also pay from time to

5 time from the Trust Fund such amounts as the

6 Secretary and the Attorney General certify are

7 necessary to carry out the all-payer fraud and

8 abuse control program established under sub9 section (a).

10 (4) ANNUAL REPORT.—The Managing Trustee

11 shall be required to submit an annual report to Con12 gress on the amount of revenue which is generated

13 and disbursed by the Trust Fund in each fiscal year.

14 Such report shall include an estimate of the amount

15 of additional appropriations authorized under sub16 section (a)(4) necessary for the Secretary and the

17 Attorney General to conduct the all-payer fraud and

18 abuse program established under subsection (a) in

19 the next fiscal year.

20 SEC. 702. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

21 AND ABUSE SANCTIONS TO ALL FRAUD AND

22 ABUSE AGAINST ANY HEALTH CARE PLAN.

23 (a) CIVIL MONETARY PENALTIES.—Section 1128A

24 of the Social Security Act (42 U.S.C. 1320a–7a) is amend25 ed as follows:
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•S 2374 IS

1 (1) In subsection (a)(1), by inserting ‘‘or of any

2 health care plan (as defined in section 1128(i)),’’

3 after ‘‘subsection (i)(1)),’’.

4 (2) In subsection (b)(1)(A), by inserting ‘‘or

5 under a health care plan’’ after ‘‘title XIX’’.

6 (3) In subsection (f)—

7 (A) by redesignating paragraph (3) as

8 paragraph (4); and

9 (B) by inserting after paragraph (2) the

10 following new paragraphs:

11 ‘‘(3) With respect to amounts recovered arising

12 out of a claim under a health care plan, the portion

13 of such amounts as is determined to have been paid

14 by the plan shall be repaid to the plan, and the por15 tion of such amounts attributable to the amounts re16 covered under this section by reason of the amend17 ments made by title VII of the America’s Health

18 Care Option Act (as estimated by the Secretary)

19 shall be deposited into the Anti-Fraud and Abuse

20 Trust Fund established under section 701(b) of such

21 Act.’’.

22 (4) In subsection (i)—

23 (A) in paragraph (2), by inserting ‘‘or

24 under a health care plan’’ before the period at

25 the end, and
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•S 2374 IS

1 (B) in paragraph (5), by inserting ‘‘or

2 under a health care plan’’ after ‘‘or XX’’.

3 (b) CRIMES.—

4 (1) SOCIAL SECURITY ACT.—Section 1128B of

5 such Act (42 U.S.C. 1320a–7b) is amended as fol6 lows:

7 (A) In the heading, by adding at the end

8 the following: ‘‘OR HEALTH CARE PLANS’’.

9 (B) In subsection (a)(1)—

10 (i) by striking ‘‘title XVIII or’’ and

11 inserting ‘‘title XVIII,’’, and

12 (ii) by adding at the end the follow13 ing: ‘‘or a health care plan (as defined in

14 section 1128(i)),’’.

15 (C) In subsection (a)(5), by striking ‘‘title

16 XVIII or a State health care program’’ and in17 serting ‘‘title XVIII, a State health care pro18 gram, or a health care plan’’.

19 (D) In the second sentence of subsection

20 (a)—

21 (i) by inserting after ‘‘title XIX’’ the

22 following: ‘‘or a health care plan’’, and

23 (ii) by inserting after ‘‘the State’’ the

24 following: ‘‘or the plan’’.
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•S 2374 IS

1 (E) In subsection (b)(1), by striking ‘‘title

2 XVIII or a State health care program’’ each

3 place it appears and inserting ‘‘title XVIII, a

4 State health care program, or a health care

5 plan’’.

6 (F) In subsection (b)(2), by striking ‘‘title

7 XVIII or a State health care program’’ each

8 place it appears and inserting ‘‘title XVIII, a

9 State health care program, or a health care

10 plan’’.

11 (G) In subsection (b)(3), by striking ‘‘title

12 XVIII or a State health care program’’ each

13 place it appears in subparagraphs (A) and (C)

14 and inserting ‘‘title XVIII, a State health care

15 program, or a health care plan’’.

16 (H) In subsection (d)(2)—

17 (i) by striking ‘‘title XIX,’’ and insert18 ing ‘‘title XIX or under a health care

19 plan,’’, and

20 (ii) by striking ‘‘State plan,’’ and in21 serting ‘‘State plan or the health care

22 plan,’’.

23 (2) IDENTIFICATION OF COMMUNITY SERVICE

24 OPPORTUNITIES.—Section 1128B of such Act (42
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•S 2374 IS

1 U.S.C. 1320a–7b) is further amended by adding at

2 the end the following new subsection:

3 ‘‘(f) The Secretary may—

4 ‘‘(1) in consultation with State and local health

5 care officials, identify opportunities for the satisfac6 tion of community service obligations that a court

7 may impose upon the conviction of an offense under

8 this section, and

9 ‘‘(2) make information concerning such oppor10 tunities available to Federal and State law enforce11 ment officers and State and local health care

12 officials.’’.

13 (c) HEALTH CARE PLAN DEFINED.—Section 1128 of

14 such Act (42 U.S.C. 1320a–7) is amended by redesignat15 ing subsection (i) as subsection (j) and by inserting after

16 subsection (h) the following new subsection:

17 ‘‘(i) HEALTH CARE PLAN DEFINED.—For purposes

18 of sections 1128A and 1128B, the term ‘health care plan’

19 means a public or private program for the delivery of or

20 payment for health care items or services other than the

21 medicare program, the medicaid program, or a State

22 health care program.’’.

23 (d) EFFECTIVE DATE.—The amendments made by

24 this section shall take effect on January 1, 1995.
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•S 2374 IS

1 SEC. 703. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

2 (a) SOLICITATION AND PUBLICATION OF MODIFICA3 TIONS TO EXISTING SAFE HARBORS AND NEW SAFE

4 HARBORS.—

5 (1) IN GENERAL.—

6 (A) SOLICITATION OF PROPOSALS FOR

7 SAFE HARBORS.—Not later than January 1,

8 1995, and not less than annually thereafter, the

9 Secretary shall publish a notice in the Federal

10 Register soliciting proposals, which will be ac11 cepted during a 60-day period, for—

12 (i) modifications to existing safe har13 bors issued pursuant to section 14(a) of

14 the Medicare and Medicaid Patient and

15 Program Protection Act of 1987 (42

16 U.S.C. 1320a–7b note);

17 (ii) additional safe harbors specifying

18 payment practices that shall not be treated

19 as a criminal offense under section

20 1128B(b) of the Social Security Act the

21 (42 U.S.C. 1320a–7b(b)) and shall not

22 serve as the basis for an exclusion under

23 section 1128(b)(7) of such Act (42 U.S.C.

24 1320a–7(b)(7));

25 (iii) interpretive rulings to be issued

26 pursuant to subsection (b); and
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•S 2374 IS

1 (iv) special fraud alerts to be issued

2 pursuant to subsection (c).

3 (B) PUBLICATION OF PROPOSED MODI4 FICATIONS AND PROPOSED ADDITIONAL STATE

5 HARBORS.—After considering the proposals de6 scribed in clauses (i) and (ii) of subparagraph

7 (A), the Secretary, in consultation with the At8 torney General, shall publish in the Federal

9 Register proposed modifications to existing safe

10 harbors and proposed additional safe harbors, if

11 appropriate, with a 60-day comment period.

12 After considering any public comments received

13 during this period, the Secretary shall issue

14 final rules modifying the existing safe harbors

15 and establishing new safe harbors, as appro16 priate.

17 (C) REPORT.—The Inspector General of

18 the Department of Health and Human Services

19 (hereafter in this section referred to as the ‘‘In20 spector General’’) shall, in an annual report to

21 Congress or as part of the year-end semiannual

22 report required by section 5 of the Inspector

23 General Act of 1978 (5 U.S.C. App.), describe

24 the proposals received under clauses (i) and (ii)

25 of subparagraph (A) and explain which propos-
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•S 2374 IS

1 als were included in the publication described in

2 subparagraph (B), which proposals were not in3 cluded in that publication, and the reasons for

4 the rejection of the proposals that were not in5 cluded.

6 (2) CRITERIA FOR MODIFYING AND ESTABLISH7 ING SAFE HARBORS.—In modifying and establishing

8 safe harbors under paragraph (1)(B), the Secretary

9 may consider the extent to which providing a safe

10 harbor for the specified payment practice may result

11 in any of the following:

12 (A) An increase or decrease in access to

13 health care services.

14 (B) An increase or decrease in the quality

15 of health care services.

16 (C) An increase or decrease in patient free17 dom of choice among health care providers.

18 (D) An increase or decrease in competition

19 among health care providers.

20 (E) An increase or decrease in the ability

21 of health care facilities to provide services in

22 medically underserved areas or to medically un23 derserved populations.

24 (F) An increase or decrease in the cost to

25 Government health care programs.
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•S 2374 IS

1 (G) An increase or decrease in the poten2 tial overutilization of health care services.

3 (H) The existence or nonexistence of any

4 potential financial benefit to a health care pro5 fessional or provider which may vary based on

6 their decisions of—

7 (i) whether to order a health care

8 item or service; or

9 (ii) whether to arrange for a referral

10 of health care items or services to a par11 ticular practitioner or provider.

12 (I) Any other factors the Secretary deems

13 appropriate in the interest of preventing fraud

14 and abuse in Government health care programs.

15 (b) INTERPRETIVE RULINGS.—

16 (1) IN GENERAL.—

17 (A) REQUEST FOR INTERPRETIVE RUL18 ING.—Any person may present, at any time, a

19 request to the Inspector General for a state20 ment of the Inspector General’s current inter21 pretation of the meaning of a specific aspect of

22 the application of sections 1128A and 1128B of

23 the Social Security Act (hereafter in this sec24 tion referred to as an ‘‘interpretive ruling’’).
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•S 2374 IS

1 (B) ISSUANCE AND EFFECT OF INTERPRE2 TIVE RULING.—

3 (i) IN GENERAL.—If appropriate, the

4 Inspector General shall in consultation

5 with the Attorney General, issue an inter6 pretive ruling in response to a request de7 scribed in subparagraph (A). Interpretive

8 rulings shall not have the force of law and

9 shall be treated as an interpretive rule

10 within the meaning of section 553(b) of

11 title 5, United States Code. All interpretive

12 rulings issued pursuant to this provision

13 shall be published in the Federal Register

14 or otherwise made available for public in15 spection.

16 (ii) REASONS FOR DENIAL.—If the In17 spector General does not issue an interpre18 tive ruling in response to a request de19 scribed in subparagraph (A), the Inspector

20 General shall notify the requesting party of

21 such decision and shall identify the reasons

22 for such decision.

23 (2) CRITERIA FOR INTERPRETIVE RULINGS.—
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1 (A) IN GENERAL.—In determining whether

2 to issue an interpretive ruling under paragraph

3 (1)(B), the Inspector General may consider—

4 (i) whether and to what extent the re5 quest identifies an ambiguity within the

6 language of the statute, the existing safe

7 harbors, or previous interpretive rulings;

8 and

9 (ii) whether the subject of the re10 quested interpretive ruling can be ade11 quately addressed by interpretation of the

12 language of the statute, the existing safe

13 harbor rules, or previous interpretive rul14 ings, or whether the request would require

15 a substantive ruling not authorized under

16 this subsection.

17 (B) NO RULINGS ON FACTUAL ISSUES.—

18 The Inspector General shall not give an inter19 pretive ruling on any factual issue, including

20 the intent of the parties or the fair market

21 value of particular leased space or equipment.

22 (c) SPECIAL FRAUD ALERTS.—

23 (1) IN GENERAL.—

24 (A) REQUEST FOR SPECIAL FRAUD

25 ALERTS.—Any person may present, at any
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•S 2374 IS

1 time, a request to the Inspector General for a

2 notice which informs the public of practices

3 which the Inspector General considers to be

4 suspect or of particular concern under section

5 1128B(b) of the Social Security Act (42 U.S.C.

6 1320a–7b(b)) (hereafter in this subsection re7 ferred to as a ‘‘special fraud alert’’).

8 (B) ISSUANCE AND PUBLICATION OF SPE9 CIAL FRAUD ALERTS.—Upon receipt of a re10 quest described in subparagraph (A), the In11 spector General shall investigate the subject

12 matter of the request to determine whether a

13 special fraud alert should be issued. If appro14 priate, the Inspector General shall in consulta15 tion with the Attorney General, issue a special

16 fraud alert in response to the request. All spe17 cial fraud alerts issued pursuant to this sub18 paragraph shall be published in the Federal

19 Register.

20 (2) CRITERIA FOR SPECIAL FRAUD ALERTS.—

21 In determining whether to issue a special fraud alert

22 upon a request described in paragraph (1), the In23 spector General may consider—

24 (A) whether and to what extent the prac25 tices that would be identified in the special
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•S 2374 IS

1 fraud alert may result in any of the con2 sequences described in subsection (a)(2); and

3 (B) the volume and frequency of the con4 duct that would be identified in the special

5 fraud alert.

6 SEC. 704. REPORTING OF FRAUDULENT ACTIONS UNDER

7 MEDICARE.

8 Not later than 1 year after the date of the enactment

9 of this Act, the Secretary shall establish a program

10 through which individuals entitled to benefits under the

11 medicare program may report to the Secretary on a con12 fidential basis (at the individual’s request) instances of

13 suspected fraudulent actions arising under the program by

14 providers of items and services under the program.

15 Subtitle B—Revisions to Current

16 Sanctions for Fraud and Abuse

17 SEC. 711. MANDATORY EXCLUSION FROM PARTICIPATION

18 IN MEDICARE AND STATE HEALTH CARE PRO19 GRAMS.

20 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

21 TO FRAUD.—

22 (1) IN GENERAL.—Section 1128(a) of the

23 Social Security Act (42 U.S.C. 1320a–7(a)) is

24 amended by adding at the end the following new

25 paragraph:
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•S 2374 IS

1 ‘‘(3) FELONY CONVICTION RELATING TO

2 FRAUD.—Any individual or entity that has been con3 victed, under Federal or State law, in connection

4 with the delivery of a health care item or service or

5 with respect to any act or omission in a program

6 (other than those specifically described in paragraph

7 (1)) operated by or financed in whole or in part by

8 any Federal, State, or local government agency, of

9 a criminal offense consisting of a felony relating to

10 fraud, theft, embezzlement, breach of fiduciary re11 sponsibility, or other financial misconduct.’’.

12 (2) CONFORMING AMENDMENT.—Section

13 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

14 is amended—

15 (A) in the heading, by striking ‘‘CONVIC16 TION’’ and inserting ‘‘MISDEMEANOR CONVIC17 TION’’; and

18 (B) by striking ‘‘criminal offense’’ and in19 serting ‘‘criminal offense consisting of a mis20 demeanor’’.

21 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

22 TO CONTROLLED SUBSTANCE.—

23 (1) IN GENERAL.—Section 1128(a) of the So24 cial Security Act (42 U.S.C. 1320a–7(a)), as amend-
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•S 2374 IS

1 ed by subsection (a), is amended by adding at the

2 end the following new paragraph:

3 ‘‘(4) FELONY CONVICTION RELATING TO CON4 TROLLED SUBSTANCE.—Any individual or entity

5 that has been convicted, under Federal or State law,

6 of a criminal offense consisting of a felony relating

7 to the unlawful manufacture, distribution, prescrip8 tion, or dispensing of a controlled substance.’’.

9 (2) CONFORMING AMENDMENT.—Section

10 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

11 is amended—

12 (A) in the heading, by striking ‘‘CONVIC13 TION’’ and inserting ‘‘MISDEMEANOR CONVIC14 TION’’; and

15 (B) by striking ‘‘criminal offense’’ and in16 serting ‘‘criminal offense consisting of a mis17 demeanor’’.

18 SEC. 712. ESTABLISHMENT OF MINIMUM PERIOD OF EX19 CLUSION FOR CERTAIN INDIVIDUALS AND

20 ENTITIES SUBJECT TO PERMISSIVE EXCLU21 SION FROM MEDICARE AND STATE HEALTH

22 CARE PROGRAMS.

23 Section 1128(c)(3) of the Social Security Act (42

24 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

25 the following new subparagraphs:
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•S 2374 IS

1 ‘‘(D) In the case of an exclusion of an individual or

2 entity under paragraph (1), (2), or (3) of subsection (b),

3 the period of the exclusion shall be 3 years, unless the

4 Secretary determines in accordance with published regula5 tions that a shorter period is appropriate because of miti6 gating circumstances or that a longer period is appro7 priate because of aggravating circumstances.

8 ‘‘(E) In the case of an exclusion of an individual or

9 entity under subsection (b)(4) or (b)(5), the period of the

10 exclusion shall not be less than the period during which

11 the individual’s or entity’s license to provide health care

12 is revoked, suspended, or surrendered, or the individual

13 or the entity is excluded or suspended from a Federal or

14 State health care program.

15 ‘‘(F) In the case of an exclusion of an individual or

16 entity under subsection (b)(6)(B), the period of the exclu17 sion shall be not less than 1 year.’’.

18 SEC. 713. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

19 OWNERSHIP OR CONTROL INTEREST IN

20 SANCTIONED ENTITIES.

21 Section 1128(b) of the Social Security Act (42 U.S.C.

22 1320a–7(b)) is amended by adding at the end the follow23 ing new paragraph:

24 ‘‘(15) INDIVIDUALS CONTROLLING A SANC25 TIONED ENTITY.—Any individual who has a direct
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•S 2374 IS

1 or indirect ownership or control interest of 5 percent

2 or more, or an ownership or control interest (as de3 fined in section 1124(a)(3)) in, or who is an officer,

4 director, agent, or managing employee (as defined in

5 section 1126(b)) of, an entity—

6 ‘‘(A) that has been convicted of any of7 fense described in subsection (a) or in para8 graph (1), (2), or (3) of this subsection;

9 ‘‘(B) against which a civil monetary pen10 alty has been assessed under section 1128A; or

11 ‘‘(C) that has been excluded from partici12 pation under a program under title XVIII or

13 under a State health care program.’’.

14 SEC. 714. CIVIL MONETARY PENALTIES.

15 (a) PROHIBITION AGAINST OFFERING INDUCEMENTS

16 TO INDIVIDUALS ENROLLED UNDER OR EMPLOYED BY

17 PROGRAMS OR PLANS.—

18 (1) INDUCEMENTS TO INDIVIDUALS ENROLLED

19 UNDER MEDICARE.—

20 (A) OFFER OF REMUNERATION.—Section

21 1128A(a) of the Social Security Act (42 U.S.C.

22 1320a–7a(a)) is amended—

23 (i) by striking ‘‘or’’ at the end of

24 paragraph (1)(D);
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1 (ii) by striking ‘‘, or’’ at the end of

2 paragraph (2) and inserting a semicolon;

3 (iii) by striking the semicolon at the

4 end of paragraph (3) and inserting ‘‘; or’’;

5 and

6 (iv) by inserting after paragraph (3)

7 the following new paragraph:

8 ‘‘(4) offers to or transfers remuneration to any

9 individual eligible for benefits under title XVIII of

10 this Act, or under a State health care program (as

11 defined in section 1128(h)) that such person knows

12 or should know is likely to influence such individual

13 to order or receive from a particular provider, practi14 tioner, or supplier any item or service for which pay15 ment may be made, in whole or in part, under title

16 XVIII, or a State health care program;’’.

17 (B) REMUNERATION DEFINED.—Section

18 1128A(i) is amended by adding the following

19 new paragraph:

20 ‘‘(6) The term ‘remuneration’ includes the waiv21 er of coinsurance and deductible amounts (or any

22 part thereof), and transfers of items or services for

23 free or for other than fair market value. The term

24 ‘remuneration’ does not include the waiver of coin25 surance and deductible amounts by a person, if—
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1 ‘‘(A) the waiver is not offered as part of

2 any advertisement or solicitation;

3 ‘‘(B) the person does not routinely waive

4 coinsurance or deductible amounts; and

5 ‘‘(C) the person—

6 ‘‘(i) waives the coinsurance and de7 ductible amounts after determining in good

8 faith that the individual is in financial

9 need;

10 ‘‘(ii) fails to collect coinsurance or de11 ductible amounts after making reasonable

12 collection efforts; or

13 ‘‘(iii) provides for any permissible

14 waiver as specified in section 1128B(b)(3)

15 or in regulations issued by the Secretary.’’.

16 (2) INDUCEMENTS TO EMPLOYEES.—Section

17 1128A(a) of such Act (42 U.S.C. 1320a–7a(a)), as

18 amended by paragraph (1), is further amended—

19 (A) by striking ‘‘or’’ at the end of para20 graph (3);

21 (B) by striking the semicolon at the end of

22 paragraph (4) and inserting ‘‘; or’’; and

23 (C) by inserting after paragraph (4) the

24 following new paragraph:
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1 ‘‘(5) pays a bonus, reward, or any other remu2 neration, directly or indirectly, to an employee to in3 duce the employee to encourage individuals to seek

4 or obtain covered items or services for which pay5 ment may be made under the medicare program, or

6 a State health care program where the amount of

7 the remuneration is determined in a manner that

8 takes into account (directly or indirectly) the value

9 or volume of any referrals by the employee to the

10 employer for covered items or services;’’.

11 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

12 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

13 Section 1128A(a) of such Act, as amended by subsection

14 (a), is further amended—

15 (1) by striking ‘‘or’’ at the end of paragraph

16 (4);

17 (2) by striking the semicolon at the end of

18 paragraph (5) and inserting ‘‘; or’’; and

19 (3) by inserting after paragraph (5) the follow20 ing new paragraph:

21 ‘‘(6) in the case of a person who is not an orga22 nization, agency, or other entity, is excluded from

23 participating in a program under title XVIII or a

24 State health care program in accordance with this

25 subsection or under section 1128 and who, at the
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1 time of a violation of this subsection, retains a direct

2 or indirect ownership or control interest of 5 percent

3 or more, or an ownership or control interest (as de4 fined in section 1124(a)(3)) in, or who is an officer,

5 director, agent, or managing employee (as defined in

6 section 1126(b)) of, an entity that is participating in

7 a program under title XVIII or a State health care

8 program;’’.

9 (c) MISUSE OF HEALTH SECURITY CARD OR UNIQUE

10 HEALTH IDENTIFIER.—Section 1128A(a) of such Act, as

11 amended by subsection (b), is further amended—

12 (1) by striking ‘‘or’’ at the end of paragraph

13 (5);

14 (2) by striking the semicolon at the end of

15 paragraph (6) and inserting ‘‘; or’’; and

16 (3) by inserting after paragraph (6) the follow17 ing new paragraphs:

18 ‘‘(7) requires the display of, requires the use of,

19 or uses a health security card that is issued under

20 subtitle B of this title for any purpose other than a

21 purpose described in such subtitle;

22 ‘‘(8) requires the disclosure of, requires the use

23 of, or uses an individual’s unique health identifier

24 established under subtitle B of this title for any pur25 pose that is not authorized by the Secretary;’’.
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1 (d) MODIFICATIONS OF AMOUNTS OF PENALTIES

2 AND ASSESSMENTS.—Section 1128A(a) of such Act (42

3 U.S.C. 1320a–7a(a)), as amended by subsections (a) and

4 (b), is amended in the matter following paragraph (6)—

5 (1) by striking ‘‘$2,000’’ and inserting

6 ‘‘$10,000’’;

7 (2) by inserting ‘‘; in cases under paragraph

8 (4), $10,000 for each such offer or transfer; in cases

9 under paragraph (5), $10,000 for each such pay10 ment; in cases under paragraph (6), $10,000 for

11 each day the prohibited relationship occurs; in cases

12 under paragraph (7) or (8), $10,000 per violation’’

13 after ‘‘false or misleading information was given’’;

14 (3) by striking ‘‘twice the amount’’ and insert15 ing ‘‘3 times the amount’’; and

16 (4) by inserting ‘‘(or, in cases under paragraphs

17 (4) and (5), 3 times the amount of the illegal remu18 neration)’’ after ‘‘for each such item or service’’.

19 (e) CLAIM FOR ITEM OR SERVICE BASED ON INCOR20 RECT CODING OR MEDICALLY UNNECESSARY SERV21 ICES.—Section 1128A(a)(1) of such Act (42 U.S.C.

22 1320a–7a(a)(1)) is amended—

23 (1) in subparagraph (A) by striking ‘‘claimed,’’

24 and inserting the following: ‘‘claimed, including any

25 person who presents or causes to be presented a
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1 claim for an item or service that is based on a code

2 that the person knows or should know will result in

3 a greater payment to the person than the code the

4 person knows or should know is applicable to the

5 item or service actually provided,’’;

6 (2) in subparagraph (C), by striking ‘‘or’’ at

7 the end;

8 (3) in subparagraph (D), by striking ‘‘; or’’ and

9 inserting ‘‘, or’’; and

10 (4) by inserting after subparagraph (D) the fol11 lowing new subparagraph:

12 ‘‘(E) is for a medical or other item or serv13 ice that a person knows or should know is not

14 medically necessary; or’’.

15 SEC. 715. ACTIONS SUBJECT TO CRIMINAL PENALTIES.

16 (a) PERMITTING SECRETARY TO IMPOSE CIVIL MON17 ETARY PENALTY.—Section 1128A(b) of the Social Secu18 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

19 the following new paragraph:

20 ‘‘(3) Any person (including any organization,

21 agency, or other entity, but excluding a beneficiary

22 as defined in subsection (i)(5)) who the Secretary

23 determines has violated section 1128B(b) of this

24 title shall be subject to a civil monetary penalty of

25 not more than $10,000 for each such violation. In
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1 addition, such person shall be subject to an assess2 ment of not more than twice the total amount of the

3 remuneration offered, paid, solicited, or received in

4 violation of section 1128B(b). The total amount of

5 remuneration subject to an assessment shall be cal6 culated without regard to whether some portion

7 thereof also may have been intended to serve a pur8 pose other than one proscribed by section

9 1128B(b).’’.

10 (b) RESTRICTION ON APPLICATION OF EXCEPTION

11 FOR AMOUNTS PAID TO EMPLOYEES.—Section

12 1128B(b)(3)(B) of such Act (42 U.S.C. 1320a–

13 7b(b)(3)(B)) is amended by striking ‘‘services;’’ and in14 serting the following: ‘‘services, but only if the amount of

15 remuneration under the arrangement is (i) consistent with

16 fair market value; (ii) not determined in a manner that

17 takes into account (directly or indirectly) the volume or

18 value of any referrals by the employee to the employer for

19 the furnishing (or arranging for the furnishing) of such

20 items or services; and (iii) provided pursuant to an ar21 rangement that would be commercially reasonable even if

22 no referrals were made;’’.
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1 SEC. 716. SANCTIONS AGAINST PRACTITIONERS AND PER2 SONS FOR FAILURE TO COMPLY WITH STATU3 TORY OBLIGATIONS.

4 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI5 TIONERS AND PERSONS FAILING TO MEET STATUTORY

6 OBLIGATIONS.—

7 (1) IN GENERAL.—The second sentence of sec8 tion 1156(b)(1) of the Social Security Act (42

9 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may

10 prescribe)’’ and inserting ‘‘may prescribe, except

11 that such period may not be less than 1 year)’’.

12 (2) CONFORMING AMENDMENT.—Section

13 1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is

14 amended by striking ‘‘shall remain’’ and inserting

15 ‘‘shall (subject to the minimum period specified in

16 the second sentence of paragraph (1)) remain’’.

17 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI18 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

19 of such Act (42 U.S.C. 1320c–5(b)(1)) is amended—

20 (1) in the second sentence, by striking ‘‘and de21 termines’’ and all that follows through ‘‘such obliga22 tions,’’; and

23 (2) by striking the third sentence.

24 (c) AMOUNT OF CIVIL MONEY PENALTY.—Section

25 1156(b)(3) of such Act (42 U.S.C. 1320c–5(b)(3)) is
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1 amended by striking ‘‘the actual or estimated cost’’ and

2 inserting the following: ‘‘up to $10,000 for each instance’’.

3 SEC. 717. INTERMEDIATE SANCTIONS FOR MEDICARE

4 HEALTH MAINTENANCE ORGANIZATIONS.

5 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

6 ANY PROGRAM VIOLATIONS.—

7 (1) IN GENERAL.—Section 1876(i)(1) of the

8 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

9 amended by striking ‘‘the Secretary may terminate’’

10 and all that follows and inserting the following: ‘‘in

11 accordance with procedures established under para12 graph (9), the Secretary may at any time terminate

13 any such contract or may impose the intermediate

14 sanctions described in paragraph (6)(B) or (6)(C)

15 (whichever is applicable) on the eligible organization

16 if the Secretary determines that the organization—

17 ‘‘(A) has failed substantially to carry out

18 the contract;

19 ‘‘(B) is carrying out the contract in a man20 ner inconsistent with the efficient and effective

21 administration of this section;

22 ‘‘(C) is operating in a manner that is not

23 in the best interests of the individuals covered

24 under the contract; or
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1 ‘‘(D) no longer substantially meets the ap2 plicable conditions of subsections (b), (c), (e),

3 and (f).’’.

4 (2) OTHER INTERMEDIATE SANCTIONS FOR

5 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

6 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

7 amended by adding at the end the following new

8 subparagraph:

9 ‘‘(C) In the case of an eligible organization for which

10 the Secretary makes a determination under paragraph (1)

11 the basis of which is not described in subparagraph (A),

12 the Secretary may apply the following intermediate sanc13 tions:

14 ‘‘(i) Civil money penalties of not more than

15 $25,000 for each determination under paragraph (1)

16 if the deficiency that is the basis of the determina17 tion has directly adversely affected (or has the sub18 stantial likelihood of adversely affecting) an individ19 ual covered under the organization’s contract.

20 ‘‘(ii) Civil money penalties of not more than

21 $10,000 for each week beginning after the initiation

22 of procedures by the Secretary under paragraph (9)

23 during which the deficiency that is the basis of a de24 termination under paragraph (1) exists.
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1 ‘‘(iii) Suspension of enrollment of individuals

2 under this section after the date the Secretary noti3 fies the organization of a determination under para4 graph (1) and until the Secretary is satisfied that

5 the deficiency that is the basis for the determination

6 has been corrected and is not likely to recur.’’.

7 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

8 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

9 is amended by adding at the end the following new

10 paragraph:

11 ‘‘(9) The Secretary may terminate a contract with an

12 eligible organization under this section or may impose the

13 intermediate sanctions described in paragraph (6) on the

14 organization in accordance with formal investigation and

15 compliance procedures established by the Secretary under

16 which—

17 ‘‘(A) the Secretary provides the organization

18 with the opportunity to develop and implement a

19 corrective action plan to correct the deficiencies that

20 were the basis of the Secretary’s determination

21 under paragraph (1);

22 ‘‘(B) in deciding whether to impose sanctions,

23 the Secretary considers aggravating factors such as

24 whether an entity has a history of deficiencies or has
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1 not taken action to correct deficiencies the Secretary

2 has brought to their attention;

3 ‘‘(C) there are no unreasonable or unnecessary

4 delays between the finding of a deficiency and the

5 imposition of sanctions; and

6 ‘‘(D) the Secretary provides the organization

7 with reasonable notice and opportunity for hearing

8 (including the right to appeal an initial decision) be9 fore imposing any sanction or terminating the con10 tract.’’.

11 (4) CONFORMING AMENDMENTS.—

12 (A) IN GENERAL.—Section 1876(i)(6)(B)

13 of such Act (42 U.S.C. 1395mm(i)(6)(B)) is

14 amended by striking the second sentence.

15 (B) PROCEDURAL PROVISIONS.—Section

16 1876(i)(6) of such Act (42 U.S.C.

17 1395mm(i)(6)) is further amended by adding at

18 the end the following new subparagraph:

19 ‘‘(D) The provisions of section 1128A (other than

20 subsections (a) and (b)) shall apply to a civil money pen21 alty under subparagraph (A) or (B) in the same manner

22 as they apply to a civil money penalty or proceeding under

23 section 1128A(a).’’.

24 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA25 TIONS.—
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1 (1) REQUIREMENT FOR WRITTEN AGREE2 MENT.—Section 1876(i)(7)(A) of the Social Security

3 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by

4 striking ‘‘an agreement’’ and inserting ‘‘a written

5 agreement’’.

6 (2) DEVELOPMENT OF MODEL AGREEMENT.—

7 Not later than July 1, 1995, the Secretary shall de8 velop a model of the agreement that an eligible orga9 nization with a risk-sharing contract under section

10 1876 of the Social Security Act must enter into with

11 an entity providing peer review services with respect

12 to services provided by the organization under sec13 tion 1876(i)(7)(A) of such Act.

14 (3) REPORT BY GAO.—

15 (A) STUDY.—The Comptroller General of

16 the United States shall conduct a study of the

17 costs incurred by eligible organizations with

18 risk-sharing contracts under section 1876(b) of

19 such Act of complying with the requirement of

20 entering into a written agreement with an en21 tity providing peer review services with respect

22 to services provided by the organization, to23 gether with an analysis of how information gen24 erated by such entities is used by the Secretary
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1 to assess the quality of services provided by

2 such eligible organizations.

3 (B) REPORT TO CONGRESS.—Not later

4 than July 1, 1997, the Comptroller General

5 shall submit a report to the Committee on

6 Ways and Means and the Committee on Energy

7 and Commerce of the House of Representatives

8 and the Committee on Finance and the Special

9 Committee on Aging of the Senate on the study

10 conducted under subparagraph (A).

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

12 this section shall apply with respect to contract years be13 ginning on or after January 1, 1995.

14 SEC. 718. EFFECTIVE DATE.

15 The amendments made by this subtitle shall take ef16 fect January 1, 1995.

17 Subtitle C—Administrative and

18 Miscellaneous Provisions

19 SEC. 721. ESTABLISHMENT OF THE HEALTH CARE FRAUD

20 AND ABUSE DATA COLLECTION PROGRAM.

21 (a) FINDINGS.—The Congress finds the following:

22 (1) Fraud and abuse with respect to the deliv23 ery of and payment for health care services is a sig24 nificant contributor to the growing costs of the Na25 tion’s health care.
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1 (2) Control of fraud and abuse in health care

2 services warrants greater efforts of coordination

3 than those that can be undertaken by individual

4 States or the various Federal, State, and local law

5 enforcement programs.

6 (3) There is a national need to coordinate infor7 mation about health care providers and entities that

8 have engaged in fraud and abuse in the delivery of

9 and payment for health care services.

10 (4) There is no comprehensive national data

11 collection program for the reporting of public infor12 mation about final adverse actions against health

13 care providers, suppliers, or licensed health care

14 practitioners that have engaged in fraud and abuse

15 in the delivery of and payment for health care serv16 ices.

17 (5) A comprehensive national data collection

18 program for the reporting of public information

19 about final adverse actions will facilitate the enforce20 ment of the provisions of the Social Security Act and

21 other statutes applicable to health care fraud and

22 abuse.

23 (b) GENERAL PURPOSE.—Not later than January 1,

24 1995, the Secretary shall establish a national health care

25 fraud and abuse data collection program for the reporting
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1 of final adverse actions (not including settlements in which

2 no findings of liability have been made) against health

3 care providers, suppliers, or practitioners as required by

4 subsection (c), with access as set forth in subsection (d).

5 (c) REPORTING OF INFORMATION.—

6 (1) IN GENERAL.—Each government agency

7 and health care plan shall report any final adverse

8 action (not including settlements in which no find9 ings of liability have been made) taken against a

10 health care provider, supplier, or practitioner.

11 (2) INFORMATION TO BE REPORTED.—The in12 formation to be reported under paragraph (1) in13 cludes:

14 (A) The name of any health care provider,

15 supplier, or practitioner who is the subject of a

16 final adverse action.

17 (B) The name (if known) of any health

18 care entity with which a health care provider,

19 supplier, or practitioner is affiliated or associ20 ated.

21 (C) The nature of the final adverse action.

22 (D) A description of the acts or omissions

23 and injuries upon which the final adverse action

24 was based, and such other information as the

25 Secretary determines by regulation is required
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1 for appropriate interpretation of information re2 ported under this section.

3 (3) CONFIDENTIALITY.—In determining what

4 information is required, the Secretary shall include

5 procedures to assure that the privacy of individuals

6 receiving health care services is appropriately pro7 tected.

8 (4) TIMING AND FORM OF REPORTING.—The

9 information required to be reported under this sub10 section shall be reported regularly (but not less often

11 than monthly) and in such form and manner as the

12 Secretary prescribes. Such information shall first be

13 required to be reported on a date specified by the

14 Secretary.

15 (5) TO WHOM REPORTED.—The information re16 quired to be reported under this subsection shall be

17 reported to the Secretary.

18 (d) DISCLOSURE AND CORRECTION OF INFORMA19 TION.—

20 (1) DISCLOSURE.—With respect to the informa21 tion about final adverse actions (not including settle22 ments in which no findings of liability have been

23 made) reported to the Secretary under this section

24 respecting a health care provider, supplier, or practi-
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1 tioner, the Secretary shall, by regulation, provide

2 for—

3 (A) disclosure of the information, upon re4 quest, to the health care provider, supplier, or

5 licensed practitioner, and

6 (B) procedures in the case of disputed ac7 curacy of the information.

8 (2) CORRECTIONS.—Each Government agency

9 and health care plan shall report corrections of in10 formation already reported about any final adverse

11 action taken against a health care provider, supplier,

12 or practitioner, in such form and manner that the

13 Secretary prescribes by regulation.

14 (e) ACCESS TO REPORTED INFORMATION.—

15 (1) AVAILABILITY.—The information in this

16 database shall be available to Federal and State gov17 ernment agencies and health care plans pursuant to

18 procedures that the Secretary shall provide by regu19 lation.

20 (2) FEES FOR DISCLOSURE.—The Secretary

21 may establish or approve reasonable fees for the dis22 closure of information in this database. The amount

23 of such a fee may not exceed the costs of processing

24 the requests for disclosure and of providing such in25 formation. Such fees shall be available to the Sec-
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1 retary or, in the Secretary’s discretion to the agency

2 designated under this section to cover such costs.

3 (f) PROTECTION FROM LIABILITY FOR REPORT4 ING.—No person or entity, including the agency des5 ignated by the Secretary in subsection (c)(5) shall be held

6 liable in any civil action with respect to any report made

7 as required by this section, without knowledge of the fal8 sity of the information contained in the report.

9 (g) DEFINITIONS AND SPECIAL RULES.—For pur10 poses of this section:

11 (1) The term ‘‘final adverse action’’ includes:

12 (A) Civil judgments against a health care

13 provider in Federal or State court related to the

14 delivery of a health care item or service.

15 (B) Federal or State criminal convictions

16 related to the delivery of a health care item or

17 service.

18 (C) Actions by Federal or State agencies

19 responsible for the licensing and certification of

20 health care providers, suppliers, and licensed

21 health care practitioners, including—

22 (i) formal or official actions, such as

23 revocation or suspension of a license (and

24 the length of any such suspension), rep25 rimand, censure or probation,
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1 (ii) any other loss of license of the

2 provider, supplier, or practitioner, by oper3 ation of law, or

4 (iii) any other negative action or find5 ing by such Federal or State agency that

6 is publicly available information.

7 (D) Exclusion from participation in Fed8 eral or State health care programs.

9 (E) Any other adjudicated actions or deci10 sions that the Secretary shall establish by regu11 lation.

12 (2) The terms ‘‘licensed health care practi13 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

14 mean, with respect to a State, an individual who is

15 licensed or otherwise authorized by the State to pro16 vide health care services (or any individual who,

17 without authority holds himself or herself out to be

18 so licensed or authorized).

19 (3) The term ‘‘health care provider’’ means a

20 provider of services as defined in section 1861(u) of

21 the Social Security Act, and any entity, including a

22 health maintenance organization, group medical

23 practice, or any other entity listed by the Secretary

24 in regulation, that provides health care services.
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1 (4) The term ‘‘supplier’’ means a supplier of

2 health care items and services described in section

3 1819 (a) and (b), and section 1861 of the Social Se4 curity Act.

5 (5) The term ‘‘Government agency’’ shall in6 clude:

7 (A) The Department of Justice.

8 (B) The Department of Health and

9 Human Services.

10 (C) Any other Federal agency that either

11 administers or provides payment for the deliv12 ery of health care services, including, but not

13 limited to the Department of Defense and the

14 Veterans’ Administration.

15 (D) State law enforcement agencies.

16 (E) State medicaid fraud and abuse units.

17 (F) Federal or State agencies responsible

18 for the licensing and certification of health care

19 providers and licensed health care practitioners.

20 (6) The term ‘‘health care plan’’ has the mean21 ing given to such term by section 1128(i) of the So22 cial Security Act.

23 (7) For purposes of paragraph (2), the exist24 ence of a conviction shall be determined under para-
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1 graph (4) of section 1128(j) of the Social Security

2 Act.

3 (h) CONFORMING AMENDMENT.—Section 1921(d) of

4 the Social Security Act is amended by inserting ‘‘and sec5 tion 721 of the America’s Health Care Option Act’’ after

6 ‘‘section 422 of the Health Care Quality Improvement Act

7 of 1986’’.

8 Subtitle D—Amendments to

9 Criminal Law

10 SEC. 731. HEALTH CARE FRAUD.

11 (a) IN GENERAL.—

12 (1) FINES AND IMPRISONMENT FOR HEALTH

13 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

14 United States Code, is amended by adding at the

15 end the following new section:

16 ‘‘§ 1347. Health care fraud

17 ‘‘(a) Whoever knowingly executes, or attempts to exe18 cute, a scheme or artifice—

19 ‘‘(1) to defraud any health care plan or other

20 person, in connection with the delivery of or pay21 ment for health care benefits, items, or services; or

22 ‘‘(2) to obtain, by means of false or fraudulent

23 pretenses, representations, or promises, any of the

24 money or property owned by, or under the custody

25 or control of, any health care plan, or person in con-
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1 nection with the delivery of or payment for health

2 care benefits, items, or services;

3 shall be fined under this title or imprisoned not more than

4 10 years, or both. If the violation results in serious bodily

5 injury (as defined in section 1365(g)(3) of this title), such

6 person shall be imprisoned for any term of years.

7 ‘‘(b) For purposes of this section, the term ‘health

8 care plan’ means a federally funded public program, or

9 a private plan or other arrangement for the delivery of

10 or payment for health care items or services.’’.

11 (2) CLERICAL AMENDMENT.—The table of sec12 tions at the beginning of chapter 63 of title 18,

13 United States Code, is amended by adding at the

14 end the following:

‘‘1347. Health care fraud.’’.

15 (b) CRIMINAL FINES DEPOSITED IN THE ANTI16 FRAUD AND ABUSE TRUST FUND.—The Secretary of the

17 Treasury shall deposit into the Anti-Fraud and Abuse

18 Trust Fund established under section 701(b) an amount

19 equal to the criminal fines imposed under section 1347

20 of title 18, United States Code (relating to health care

21 fraud).
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1 SEC. 732. FORFEITURES FOR FEDERAL HEALTH CARE OF2 FENSES.

3 (a) IN GENERAL.—Section 982(a) of title 18, United

4 States Code, is amended by adding after paragraph (5)

5 the following new paragraph:

6 ‘‘(6)(A) The court, in imposing sentence on a person

7 convicted of a Federal health care offense, shall order the

8 person to forfeit property, real or personal, that—

9 ‘‘(i) is used in the commission of the offense if

10 the offense results in a financial loss or gain of

11 $50,000 or more; or

12 ‘‘(ii) constitutes or is derived from proceeds

13 traceable to the commission of the offense.

14 ‘‘(B) For purposes of this paragraph, the term ‘Fed15 eral health care offense’ means a violation of, or a criminal

16 conspiracy to violate—

17 ‘‘(i) section 1347 of this title;

18 ‘‘(ii) section 1128B of the Social Security Act;

19 ‘‘(iii) sections 287, 371, 664, 666, 1001, 1027,

20 1341, 1343, or 1954 of this title if the violation or

21 conspiracy relates to health care fraud; and

22 ‘‘(iv) section 501 or 511 of the Employee Re23 tirement Income Security Act of 1974, if the viola24 tion or conspiracy relates to health care fraud.’’.

25 (b) PROPERTY FORFEITED DEPOSITED IN ANTI26 FRAUD AND ABUSE TRUST FUND.—The Secretary of the
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1 Treasury shall deposit into the Anti-Fraud and Abuse

2 Trust Fund established under section 701(b) an amount

3 equal to amounts resulting from forfeiture of property by

4 reason of a Federal health care offense pursuant to section

5 982(a)(6) of title 18, United States Code.

6 SEC. 733. INJUNCTIVE RELIEF RELATING TO FEDERAL

7 HEALTH CARE OFFENSES.

8 Section 1345(a)(1) of title 18, United States Code,

9 is amended—

10 (1) by striking ‘‘or’’ at the end of subparagraph

11 (A);

12 (2) by inserting ‘‘or’’ at the end of subpara13 graph (B); and

14 (3) by adding at the end the following:

15 ‘‘(C) committing or about to commit a

16 Federal health care offense (as defined in sec17 tion 982(a)(6)(B) of this title);’’.

18 Subtitle E—Amendments to Civil

19 False Claims Act

20 SEC. 741. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

21 (a) IN GENERAL.—Section 3729 of title 31, United

22 States Code, is amended—

23 (1) in subsection (a)(7), by inserting ‘‘or to a

24 health care plan,’’ after ‘‘property to the Govern25 ment,’’;
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1 (2) in the matter following subsection (a)(7), by

2 inserting ‘‘or health care plan’’ before ‘‘sustains be3 cause of the act of that person,’’;

4 (3) at the end of the first sentence of sub5 section (a), by inserting ‘‘or health care plan’’ before

6 ‘‘sustains because of the act of the person.’’;

7 (4) in subsection (c)—

8 (A) by inserting ‘‘the term’’ after ‘‘sec9 tion,’’; and

10 (B) by adding at the end the following:

11 ‘‘The term also includes any request or demand,

12 whether under contract or otherwise, for money

13 or property which is made or presented to a

14 health care plan.’’; and

15 (5) by adding at the end the following:

16 ‘‘(f) HEALTH CARE PLAN DEFINED.—For purposes

17 of this section, the term ‘health care plan’ means a feder18 ally funded public program for the delivery of or payment

19 for health care items or services.’’.

20 (b) PENALTIES AND DAMAGES DEPOSITED INTO THE

21 ANTI-FRAUD AND ABUSE TRUST FUND.—The Secretary

22 of the Treasury shall deposit into the Anti-Fraud and

23 Abuse Trust Fund established under section 701(b) an

24 amount equal to penalties and damages imposed under

25 section 3729 of title 31, United States Code, in cases in-
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1 volving claims related to the provision of health care items

2 and services (other than funds awarded to a relator or

3 for restitution).

4 TITLE VIII—MEDICARE AND

5 MEDICAID

6 SEC. 800. REFERENCES TO SOCIAL SECURITY ACT.

7 Except as otherwise specifically provided, whenever in

8 this title an amendment is expressed in terms of an

9 amendment to or repeal of a section or other provision,

10 the reference shall be considered to be made to that sec11 tion or other provision of the Social Security Act.

12 Subtitle A—Medicare

13 PART I—INTEGRATION OF MEDICARE

14 BENEFICIARIES INTO THE PRIVATE MARKET

15 SEC. 801. STUDY ON INTEGRATION OF MEDICARE BENE16 FICIARIES.

17 (a) IN GENERAL.—The Secretary of Health and

18 Human Services (hereafter in this section referred to as

19 the ‘‘Secretary’’) shall study—

20 (1) allowing payment under title XVIII of the

21 Social Security Act on behalf of medicare bene22 ficiaries that opt—

23 (A) to enroll in certified health plans (as

24 defined in section 21003(b) of the Social Secu25 rity Act); and
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1 (B) to establish medical savings accounts

2 (in accordance with section 213 of the Ameri3 ca’s Health Care Option Act); and

4 (2) allowing payment under title XVIII of the

5 Social Security Act on behalf of medicare bene6 ficiaries who are military retirees that opt to enroll

7 in health plans sponsored by the Department of De8 fense or other appropriate Federal health care pro9 grams.

10 (b) RECOMMENDATIONS.—Not later than 1 year

11 after the date of the enactment of this Act, the Secretary

12 shall submit recommendations to Congress on each of the

13 matters studied under subsection (a).

14 SEC. 802. IMPROVEMENTS TO RISK CONTRACTS.

15 (a) RATING AREAS.—Section 1876(a)(1)(F)(ii) (42

16 U.S.C. 1395mm(a)(1)(F)(ii)) is amended by striking

17 ‘‘county (or equivalent area)’’ and inserting ‘‘Metropolitan

18 Statistical Area (as defined by the Office of Management

19 and Budget), New England County Metropolitan Area, or

20 other appropriate geographic area outside a Metropolitan

21 Statistical Area or a New England County Metropolitan

22 Area (hereafter in this section referred to as a ‘rating

23 area’)’’.

24 (b) PERIOD OF ENROLLMENT.—Section 1876(c)(3)

25 (42 U.S.C. 1395mm(c)(3)) is amended—
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1 (1) in subparagraph (A)(i), after ‘‘of at least 30

2 days duration every year’’, by inserting ‘‘(which may

3 be specified by the Secretary)’’;

4 (2) in subparagraph (B), by striking ‘‘as of’’

5 and inserting ‘‘, at the option of the organization, (i)

6 during an annual period as approved by the Sec7 retary, or (ii) as of’’;

8 (3) in subparagraph (E)—

9 (A) by striking ‘‘and’’ in clause (iv),

10 (B) by striking the period in clause (v) and

11 inserting ‘‘, and’’, and

12 (C) by adding at the end the following new

13 clause:

14 ‘‘(vi) the option chosen by the plan

15 under clause (i) or (ii) of subparagraph

16 (B) with respect to termination of enroll17 ment by an individual.’’.

18 (c) MARKETING MATERIALS.—Section 1876(c)(3)(C)

19 (42 U.S.C. 1395mm(c)(3)(C)) is amended by adding at

20 the end the following: ‘‘The Secretary shall develop com21 parative materials with respect to all eligible organizations

22 in an area (and with respect to the program established

23 under this title for individuals not enrolled with such an

24 organization) for distribution by such organizations or the
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1 Secretary to individuals eligible to enroll under this sec2 tion.’’.

3 (d) FIFTY-FIFTY RULE.—Section 1876(f) (42 U.S.C.

4 1395mm(f)) is amended—

5 (1) by amending paragraph (2) to read as fol6 lows:

7 ‘‘(2) The Secretary may modify or waive the re8 quirement imposed by paragraph (1) if an eligible

9 organization demonstrates that it provides for ade10 quate quality of care for individuals enrolled under

11 this section by—

12 ‘‘(A) meeting the quality standards for or13 ganizations with contracts under this section;

14 ‘‘(B) meeting the fiscal soundness require15 ments under this section;

16 ‘‘(C) demonstrating successful operational

17 experience as an eligible organization under this

18 section for at least the 3 years immediately pre19 ceding an application for a waiver under this

20 paragraph; and

21 ‘‘(D) demonstrating that the number of in22 dividuals enrolled in the plan or its parent orga23 nization is at least 50,000 at the time of appli24 cation for a waiver under this paragraph.
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1 In making a determination under subparagraph (A)

2 with respect to an eligible organization, the Sec3 retary may accept quality performance standards as

4 measured by private organizations acceptable to the

5 Secretary or organizations designated by the Sec6 retary, including peer review organizations.’’; and

7 (2) by adding at the end the following new

8 paragraph:

9 ‘‘(4) The Secretary may terminate the require10 ment under paragraph (1) when the Secretary deter11 mines that health plans have established alternative

12 quality assurance mechanisms that effectively pro13 vide sufficient quality safeguards.’’.

14 (e) REBATES.—Section 1876(g)(2) (42 U.S.C.

15 1395mm(g)(2)) is amended in the matter following sub16 paragraph (B) by striking ‘‘community rate (as so re17 duced); except’’ and inserting ‘‘community rate (as so re18 duced) or, at the election of the plan, a cash rebate equal

19 to such difference; except’’.

20 (f) DIRECT CALCULATION OF AAPCC.—Section

21 1876(a)(4) (42 U.S.C. 1395mm(a)(4)) is amended by

22 striking ‘‘actual experience’’ and all that follows through

23 ‘‘actuarial equivalence)’’ and inserting ‘‘actual experience

24 in a rating area’’.

25 (g) DEMONSTRATION PROJECT.—
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1 (1) IN GENERAL.—Not later than 18 months

2 after the date of the enactment of this Act, the Sec3 retary of Health and Human Services shall establish

4 a demonstration project under which any eligible or5 ganization that—

6 (A) has a risk contract under section 1876

7 of the Social Security Act (42 U.S.C. 1395mm),

8 and

9 (B) serves individuals enrolled under such

10 section in a rating area (as defined under sec11 tion 1876(a)(1)(F)(ii) of such Act),

12 is paid, with respect to such individuals, on the basis

13 of a payment methodology that blends market-based

14 premiums and the average per capita fee-for-service

15 costs for individuals eligible to enroll under such sec16 tion for the area and gives greater weight to market17 based premiums in areas in which a greater propor18 tion of such individuals are enrolled with such orga19 nizations.

20 (2) DESIGNATION OF AREAS.—The Secretary

21 may designate a rating area (as defined by the Sec22 retary under section 1876(a)(1)(F)(ii) of the Social

23 Security Act (42 U.S.C. 1395mm(a)(1)(F)(ii))) for

24 participation in the demonstration established under

25 paragraph (1) only if—
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1 (A) the eligible organizations with a con2 tract under section 1876 of the Social Security

3 Act serving such area submit an application to

4 participate in the demonstration project in such

5 form and manner, and at such time, as the Sec6 retary may designate, and

7 (B)(i) the rating area has more than one

8 eligible organization with a contract serving

9 such area,

10 (ii) the rating area has adequate enroll11 ment of individuals who are entitled to benefits

12 under part A of title XVIII of such Act in eligi13 ble organizations with a contract under section

14 1876 of such Act (as determined by the Sec15 retary), and

16 (iii) the adjusted average per capita cost

17 for such rating area for part B services under

18 title XVIII of such Act as determined in ac19 cordance with such section is less than the

20 United States per capita cost for part B serv21 ices under such title.

22 (h) EXTENSION OF SOCIAL HEALTH MAINTENANCE

23 ORGANIZATIONS.—Section 4018(b) of the Omnibus Budg24 et Reconciliation Act of 1987, as amended by section

25 4207(b)(4)(B) of the Omnibus Budget Reconciliation Act
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1 of 1990 and section 13567(a) of the Omnibus Budget Rec2 onciliation Act of 1993, is amended—

3 (1) in paragraph (1), by striking ‘‘December

4 31, 1997’’ and inserting ‘‘December 31, 1999’’; and

5 (2) in paragraph (4), by striking ‘‘March 31,

6 1998’’ and inserting ‘‘March 31, 2000’’.

7 (i) MILITARY ADJUSTMENT.—Section 1876(a)(1)(B)

8 (42 U.S.C. 1395mm(a)(1)(B)) is amended by inserting

9 ‘‘use or nonuse of Veteran’s Administration, military

10 treatment and uniformed services treatment facilities, and

11 associated physicians, providers, and suppliers,’’ after

12 ‘‘disability status,’’.

13 (j) EFFECTIVE DATE.—The amendments made by

14 subsections (a), (b), (c), (d), (e), (f), and (i) shall apply

15 to contracts entered into or renewed on or after January

16 1, 1996.

17 SEC. 803. MEDICARE SELECT.

18 (a) AMENDMENTS TO PROVISIONS RELATING TO

19 MEDICARE SELECT POLICIES.—

20 (1) PERMITTING MEDICARE SELECT POLICIES

21 IN ALL STATES.—Subsection (c) of section 4358 of

22 the Omnibus Budget Reconciliation Act of 1990 is

23 hereby repealed.
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1 (2) REQUIREMENTS OF MEDICARE SELECT

2 POLICIES.—Section 1882(t)(1) (42 U.S.C.

3 1395ss(t)(1)) is amended to read as follows:

4 ‘‘(1)(A) If a medicare supplemental policy meets the

5 requirements of the 1991 NAIC Model Regulation or 1991

6 Federal Regulation and otherwise complies with the re7 quirements of this section except that—

8 ‘‘(i) the benefits under such policy are re9 stricted to items and services furnished by certain

10 entities (or reduced benefits are provided when items

11 or services are furnished by other entities), and

12 ‘‘(ii) in the case of a policy described in sub13 paragraph (C)(i)—

14 ‘‘(I) the benefits under such policy are not

15 one of the groups or packages of benefits de16 scribed in subsection (p)(2)(A),

17 ‘‘(II) except for nominal copayments im18 posed for services covered under part B of this

19 title, such benefits include at least the core

20 group of basic benefits described in subsection

21 (p)(2)(B), and

22 ‘‘(III) an enrollee’s liability under such pol23 icy for physician’s services covered under part

24 B of this title is limited to the nominal

25 copayments described in subclause (II),
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1 the policy shall nevertheless be treated as meeting

2 those requirements if the policy meets the require3 ments of subparagraph (B).

4 ‘‘(B) A policy meets the requirements of this sub5 paragraph if—

6 ‘‘(i) full benefits are provided for items and

7 services furnished through a network of entities

8 which have entered into contracts or agreements

9 with the issuer of the policy,

10 ‘‘(ii) full benefits are provided for items and

11 services furnished by other entities if the services are

12 medically necessary and immediately required be13 cause of an unforeseen illness, injury, or condition

14 and it is not reasonable given the circumstances to

15 obtain the services through the network,

16 ‘‘(iii) the network offers sufficient access,

17 ‘‘(iv) the issuer of the policy has arrangements

18 for an ongoing quality assurance program for items

19 and services furnished through the network,

20 ‘‘(v)(I) the issuer of the policy provides to each

21 enrollee at the time of enrollment an explanation

22 of—

23 ‘‘(aa) the restrictions on payment under

24 the policy for services furnished other than by

25 or through the network,
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1 ‘‘(bb) out of area coverage under the pol2 icy,

3 ‘‘(cc) the policy’s coverage of emergency

4 services and urgently needed care, and

5 ‘‘(dd) the availability of a policy through

6 the entity that meets the 1991 Model NAIC

7 Regulation or 1991 Federal Regulation without

8 regard to this subsection and the premium

9 charged for such policy, and

10 ‘‘(II) each enrollee prior to enrollment acknowl11 edges receipt of the explanation provided under

12 subclause (I), and

13 ‘‘(vi) the issuer of the policy makes available to

14 individuals, in addition to the policy described in this

15 subsection, any policy (otherwise offered by the is16 suer to individuals in the State) that meets the 1991

17 Model NAIC Regulation or 1991 Federal Regulation

18 and other requirements of this section without re19 gard to this subsection.

20 ‘‘(C)(i) A policy described in this subparagraph—

21 ‘‘(I) is offered by an eligible organization (as

22 defined in section 1876(b)),

23 ‘‘(II) is not a policy or plan providing benefits

24 pursuant to a contract under section 1876 or an ap25 proved demonstration project described in section
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1 603(c) of the Social Security Amendments of 1983,

2 section 2355 of the Deficit Reduction Act of 1984,

3 or section 9412(b) of the Omnibus Budget Reconcili4 ation Act of 1986, and

5 ‘‘(III) provides benefits which, when combined

6 with benefits which are available under this title, are

7 substantially similar to benefits under policies of8 fered to individuals who are not entitled to benefits

9 under this title.

10 ‘‘(ii) In making a determination under subclause (III)

11 of clause (i) as to whether certain benefits are substan12 tially similar, there shall not be taken into account, except

13 in the case of preventive services, benefits provided under

14 policies offered to individuals who are not entitled to bene15 fits under this title which are in addition to the benefits

16 covered by this title and which are benefits an entity must

17 provide in order to meet the definition of an eligible orga18 nization under section 1876(b)(1).’’.

19 (b) RENEWABILITY OF MEDICARE SELECT POLI20 CIES.—Section 1882(q)(1) (42 U.S.C. 1395ss(q)(1)) is

21 amended—

22 (1) by striking ‘‘(1) Each’’ and inserting

23 ‘‘(1)(A) Except as provided in subparagraph (B),

24 each’’;
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1 (2) by redesignating subparagraphs (A) and

2 (B) as clauses (i) and (ii), respectively; and

3 (3) by adding at the end the following new sub4 paragraph:

5 ‘‘(B)(i) In the case of a policy that meets the

6 requirements of subsection (t), an issuer may cancel

7 or nonrenew such policy with respect to an individ8 ual who leaves the service area of such policy; except

9 that, if such individual moves to a geographic area

10 where such issuer, or where an affiliate of such is11 suer, is issuing medicare supplemental policies, such

12 individual must be permitted to enroll in any medi13 care supplemental policy offered by such issuer or

14 affiliate that provides benefits comparable to or less

15 than the benefits provided in the policy being can16 celed or nonrenewed. An individual whose coverage

17 is canceled or nonrenewed under this subparagraph

18 shall, as part of the notice of termination or

19 nonrenewal, be notified of the right to enroll in other

20 medicare supplemental policies offered by the issuer

21 or its affiliates.

22 ‘‘(ii) For purposes of this subparagraph, the

23 term ‘affiliate’ shall have the meaning given such

24 term by the 1991 NAIC Model Regulation.’’.
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1 (c) CIVIL PENALTY.—Section 1882(t)(2) (42 U.S.C.

2 1395ss(t)(2)) is amended—

3 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

4 (2) by redesignating subparagraphs (A), (B),

5 (C), and (D) as clauses (i), (ii), (iii), and (iv), re6 spectively;

7 (3) in clause (iv), as redesignated—

8 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

9 inserting ‘‘paragraph (1)(B)(v)(I); and

10 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

11 inserting ‘‘paragraph (1)(B)(v)(II)’’;

12 (4) by striking ‘‘the previous sentence’’ and in13 serting ‘‘this subparagraph’’; and

14 (5) by adding at the end the following new sub15 paragraph:

16 ‘‘(B) If the Secretary determines that an issuer of

17 a policy approved under paragraph (1) has made a mis18 representation to the Secretary or has provided the Sec19 retary with false information regarding such policy, the

20 issuer is subject to a civil money penalty in an amount

21 not to exceed $100,000 for each such determination. The

22 provisions of section 1128A (other than the first sentence

23 of subsection (a) and other than subsection (b)) shall

24 apply to a civil money penalty under this subparagraph
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1 in the same manner as such provisions apply to a penalty

2 or proceeding under section 1128A(a).’’.

3 (d) 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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•S 2374 IS

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 (3) DATE SPECIFIED.—

13 (A) IN GENERAL.—Subject to subpara14 graph (B), the date specified in this paragraph

15 for a State is the earlier of—

16 (i) the date the State adopts the 1995

17 NAIC Model Regulation or the 1995 Fed18 eral Regulation, or

19 (ii) 1 year after the date the NAIC or

20 the Secretary first adopts such regulations.

21 (B) ADDITIONAL LEGISLATIVE ACTION RE22 QUIRED.—In the case of a State which the Sec23 retary identifies, in consultation with the NAIC,

24 as—
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1 (i) requiring State legislation (other

2 than legislation appropriating funds) in

3 order for medicare supplemental policies to

4 meet the 1995 NAIC Model Regulation or

5 the 1995 Federal Regulation, but

6 (ii) having a legislature which is not

7 scheduled to meet in 1995 in a legislative

8 session in which such legislation may be

9 considered,

10 the date specified in this paragraph is the first

11 day of the first calendar quarter beginning after

12 the close of the first legislative session of the

13 State legislature that begins on or after Janu14 ary 1, 1996. For purposes of the previous sen15 tence, in the case of a State that has a 2-year

16 legislative session, each year of such session

17 shall be deemed to be a separate regular session

18 of the State legislature.

19 PART II—PROVISIONS RELATED TO PART A

20 SEC. 811. INPATIENT HOSPITAL SERVICES UPDATE FOR

21 PPS HOSPITALS.

22 Section 1886(b)(3)(B)(i) (42 U.S.C.

23 1395ww(b)(3)(B)(i)) is amended—

24 (1) by amending subclause (XII) to read as fol25 lows:
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1 ‘‘(XII) for fiscal years 1997 through 2000, the

2 market basket percentage minus 1.0 percentage

3 points for hospitals in all areas, and’’; and

4 (2) in subclause (XIII), by striking ‘‘1998’’ and

5 inserting ‘‘2001’’.

6 SEC. 812. REDUCTION IN PAYMENTS FOR CAPITAL-RELAT7 ED COSTS FOR INPATIENT HOSPITAL SERV8 ICES.

9 (a) REDUCTION IN BASE PAYMENT RATES FOR PPS

10 HOSPITALS.—Section 1886(g)(1)(A) (42 U.S.C.

11 1395ww(g)(1)(A)) is amended by adding at the end the

12 following new sentence: ‘‘In addition to the reduction de13 scribed in the preceding sentence, for discharges occurring

14 after September 30, 1995, the Secretary shall reduce by

15 7.31 percent the unadjusted standard Federal capital pay16 ment rate (as described in 42 CFR 412.308(c), as in effect

17 on the date of the enactment of the America’s Health Care

18 Option Act) and shall reduce by 10.41 percent the

19 unadjusted hospital-specific rate (as described in 42 CFR

20 412.328(e)(1), as in effect on the date of the enactment

21 of the America’s Health Care Option Act).’’.

22 (b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT

23 HOSPITALS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1))

24 is amended by adding at the end the following new sub25 paragraph:
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1 ‘‘(T) Such regulations shall provide that, in determin2 ing the amount of the payments that may be made under

3 this title with respect to the capital-related costs of inpa4 tient hospital services furnished by a hospital that is not

5 a subsection (d) hospital (as defined in section

6 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital

7 (as defined in section 1886(d)(9)(A)), the Secretary shall

8 reduce the amounts of such payments otherwise estab9 lished under this title by 15 percent for payments attrib10 utable to portions of cost reporting periods occurring dur11 ing each of the fiscal years 1996 through 2003.’’.

12 SEC. 813. REVISIONS TO PAYMENT ADJUSTMENTS FOR DIS13 PROPORTIONATE SHARE HOSPITALS IN PAR14 TICIPATING STATES.

15 (a) APPLICATION OF ALTERNATIVE ADJUST16 MENTS.—Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is

17 amended—

18 (1) by redesignating subparagraphs (H) and (I)

19 as subparagraphs (I) and (J); and

20 (2) by inserting after subparagraph (G) the fol21 lowing new subparagraph:

22 ‘‘(H)(i) In accordance with this subparagraph, the

23 Secretary shall provide for an additional payment for each

24 subsection (d) hospital that is located in a participating

25 State under the America’s Health Care Option Act during
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1 a cost reporting period and that meets the eligibility re2 quirements described in clause (iii).

3 ‘‘(ii) The amount of the additional payment made

4 under clause (i) for each discharge shall be determined

5 by multiplying—

6 ‘‘(I) the sum of the amount determined under

7 paragraph (1)(A)(ii)(II) (or, if applicable, the

8 amount determined under paragraph (1)(A)(iii)) and

9 the amount paid to the hospital under subparagraph

10 (A) for the discharge, by

11 ‘‘(II) the SSI adjustment percentage for the

12 cost reporting period in which the discharge occurs

13 (as defined in clause (iv)).

14 ‘‘(iii) A hospital meets the eligibility requirements de15 scribed in this clause with respect to a cost reporting pe16 riod if—

17 ‘‘(I) in the case of a hospital that is located in

18 an urban area and that has more than 100 beds, the

19 hospital’s SSI patient percentage (as defined in

20 clause (v)) for the cost reporting period is not less

21 than 5.5 percent;

22 ‘‘(II) in the case of a hospital that is located in

23 an urban area and that has less than 100 beds, the

24 hospital’s SSI patient percentage is not less than 17

25 percent;
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1 ‘‘(III) in the case of a hospital that is classified

2 as a rural referral center under subparagraph (C) or

3 a sole community hospital under subparagraph (D),

4 the hospital’s SSI patient percentage for the cost re5 porting period is not less than 23 percent; and

6 ‘‘(IV) in the case of any other hospital, the hos7 pital’s SSI patient percentage is not less than 23

8 percent.

9 ‘‘(iv) For purposes of clause (ii), the ‘SSI adjustment

10 percentage’ applicable to a hospital for a cost reporting

11 period is equal to—

12 ‘‘(I) in the case of a hospital described in clause

13 (iii)(I), the percentage determined in accordance

14 with the following formula: e to the nth power ¥ 1,

15 where ‘e’ is the natural antilog of 1 and where ‘n’

16 is equal to (1.37 * (the hospital’s SSI patient per17 centage for the cost reporting period ¥ .055));

18 ‘‘(II) in the case of a hospital described in

19 clause (iii)(II) or clause (iii)(IV), 2 percent; and

20 ‘‘(III) in the case of a hospital described in

21 clause (iii)(III), the sum of 2 percent and .30 per22 cent of the difference between the hospital’s SSI pa23 tient percentage for the cost reporting period and 23

24 percent.
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1 ‘‘(v) In this subparagraph, a hospital’s ‘SSI patient

2 percentage’ with respect to a cost reporting period is equal

3 to the fraction (expressed as a percentage)—

4 ‘‘(I) the numerator of which is the number of

5 the hospital’s patient days for such period which

6 were made up of patients who (for such days) were

7 entitled to benefits under part A and were entitled

8 to supplementary security income benefits (excluding

9 State supplementation) under title XVI; and

10 ‘‘(II) the denominator of which is the number

11 of the hospital’s patient days for such period which

12 were made up of patients who (for such days) were

13 entitled to benefits under part A.’’.

14 (b) NO STANDARDIZATION RESULTING FROM RE15 DUCTION.—Section 1886(d)(2)(C)(iv) (42 U.S.C.

16 1395ww(d)(2)(C)(iv)) is amended—

17 (1) by striking ‘‘exclude additional payments’’

18 and inserting ‘‘adjust such estimate for changes in

19 payments’’;

20 (2) by striking ‘‘1989 or’’ and inserting

21 ‘‘1989,’’; and

22 (3) by striking the period at the end and insert23 ing the following: ‘‘, or the enactment of section 813

24 of the America’s Health Care Option Act.’’.
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1 (c) CONFORMING AMENDMENT.—Section

2 1886(d)(5)(F)(i) (42 U.S.C. 1395ww(d)(5)(F)(i)) is

3 amended in the matter preceding subclause (I) by insert4 ing after ‘‘hospital’’ the following: ‘‘that is not located in

5 a State that is a participating State under the America’s

6 Health Care Option Act’’.

7 SEC. 814. MORATORIUM ON DESIGNATION OF NEW LONG8 TERM HOSPITALS.

9 Effective October 1, 1994, notwithstanding clause

10 (iv) of section 1886(d)(1)(B) of the Social Security Act

11 (42 U.S.C. 1395ww(d)(1)(B)), a hospital which has an av12 erage inpatient length of stay (as determined by the Sec13 retary of Health and Human Services) of greater than 25

14 days shall not be treated as a hospital described in such

15 clause for purposes of such title unless such hospital was

16 treated as a hospital described in such clause for purposes

17 of such title as of the date of the enactment of this Act.

18 SEC. 815. REDUCTION IN ADJUSTMENT FOR INDIRECT MED19 ICAL EDUCATION.

20 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42

21 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as fol22 lows:

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

24 teaching adjustment factor is equal to c * (((1+r)

25 to the nth power) ¥ 1), where ‘r’ is the ratio of the
536

•S 2374 IS

1 hospital’s full-time equivalent interns and residents

2 to beds and ‘n’ equals .405. For discharges occur3 ring on or after—

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

5 1995, ‘c’ is equal to 1.89, and

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

7 1.65.’’.

8 (b) NO RESTANDARDIZATION OF PAYMENT

9 AMOUNTS REQUIRED.—Section 1886(d)(2)(C)(i) (42

10 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ‘‘of

11 1985’’ and inserting ‘‘of 1985, but not taking into account

12 the amendments made by section 816(a) of the America’s

13 Health Care Option Act’’.

14 SEC. 816. REDUCTION IN ROUTINE SERVICE COST LIMITS

15 FOR SKILLED NURSING FACILITIES.

16 (a) PAYMENTS BASED ON COST LIMITS.—Section

17 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking

18 ‘‘112 percent’’ each place it appears and inserting ‘‘106

19 percent (adjusted by such amount as the Secretary deter20 mines to be necessary to preserve the savings resulting

21 from the enactment of section 13503(a)(1) of the Omni22 bus Budget Reconciliation Act of 1993)’’.

23 (b) EFFECTIVE DATE.—The amendments made by

24 subsection (a) shall apply to cost reporting periods begin25 ning on or after October 1, 1995.
537

•S 2374 IS

1 PART III—PROVISIONS RELATING TO PART B

2 SEC. 821. UPDATES FOR PHYSICIANS’ SERVICES.

3 Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is

4 amended—

5 (1) in subparagraph (A), by inserting after

6 ‘‘subparagraph (B)’’ the following: ‘‘and, in the case

7 of 1995, specified in subparagraph (C)’’;

8 (2) by redesignating subparagraph (C) as sub9 paragraph (D); and

10 (3) by inserting after subparagraph (B) the fol11 lowing new subparagraph:

12 ‘‘(C) SPECIAL PROVISION FOR 1995.—For

13 purposes of subparagraph (A), the conversion

14 factor specified in this subparagraph for 1995

15 is in the case of physicians’ services (not in16 cluded in the category of primary care services

17 (as defined for purposes of subsection (j)(1))),

18 the conversion factor established under this

19 subsection for 1994 reduced by 3 percent and

20 adjusted by the update established under para21 graph (3) for 1995.’’.
538

•S 2374 IS

1 SEC. 822. SUBSTITUTION OF REAL GDP TO ADJUST FOR

2 VOLUME AND INTENSITY; REPEAL OF RE3 STRICTION ON MAXIMUM REDUCTION PER4 MITTED IN DEFAULT UPDATE.

5 (a) USE OF REAL GDP TO ADJUST FOR VOLUME

6 AND INTENSITY.—Section 1848(f)(2)(A)(iii) (42 U.S.C.

7 1395w–4(f)(2)(A)(iii)) is amended to read as follows:

8 ‘‘(iii) 1 plus the average per capita

9 growth in the real gross domestic product

10 (divided by 100) for the 5-fiscal-year pe11 riod ending with the previous fiscal year

12 (increased by 1.5 percentage points for the

13 category of services consisting of primary

14 care services), and’’.

15 (b) REPEAL OF RESTRICTION ON MAXIMUM REDUC16 TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w–

17 4(d)(3)(B)(ii)) is amended—

18 (1) in the heading, by inserting ‘‘IN CERTAIN

19 YEARS’’ after ‘‘ADJUSTMENT’’;

20 (2) in the matter preceding subclause (I), by

21 striking ‘‘for a year’’;

22 (3) in subclause (I), by adding ‘‘and’’ at the

23 end;

24 (4) in subclause (II), by striking ‘‘, and’’ and

25 inserting a period; and

26 (5) by striking subclause (III).
539

•S 2374 IS

1 (c) REPEAL OF PERFORMANCE STANDARD FAC2 TOR.—

3 (1) IN GENERAL.—Section 1848(f)(2) is

4 amended by striking subparagraph (B) and redesig5 nating subparagraph (C) as subparagraph (B).

6 (2) CONFORMING AMENDMENT.—Section

7 1848(f)(2)(A) is amended in the matter following

8 clause (iv) by striking ‘‘1, multiplied by 100’’ and all

9 that follows through ‘‘subparagraph (B))’’ and in10 serting ‘‘1 and multiplied by 100’’.

11 (d) EFFECTIVE DATE.—

12 (1) VOLUME PERFORMANCE STANDARDS.—The

13 amendments made by subsections (a) and (c) shall

14 apply with respect to volume performance standards

15 established beginning with fiscal year 1995.

16 (2) REPEAL OF RESTRICTION ON MAXIMUM RE17 DUCTION.—The amendments made by subsection (b)

18 shall apply to services furnished on or after January

19 1, 1997.

20 SEC. 823. ESTABLISHMENT OF CUMULATIVE EXPENDITURE

21 GOALS FOR PHYSICIAN SERVICES.

22 (a) USE OF CUMULATIVE PERFORMANCE STAND23 ARD.—Section 1848(f)(2) (42 U.S.C. 1395w–4(f)(2)) is

24 amended—

25 (1) in subparagraph (A)—
540

•S 2374 IS

1 (A) in the heading, by striking ‘‘IN GEN2 ERAL’’ and inserting ‘‘FISCAL YEARS 1991

3 THROUGH 1994.—’’,

4 (B) in the matter preceding clause (i), by

5 striking ‘‘a fiscal year (beginning with fiscal

6 year 1991)’’ and inserting ‘‘fiscal years 1991,

7 1992, 1993, and 1994’’, and

8 (C) in the matter following clause (iv), by

9 striking ‘‘subparagraph (B)’’ and inserting

10 ‘‘subparagraph (C)’’;

11 (2) in subparagraph (B), by striking ‘‘subpara12 graph (A)’’ and inserting ‘‘subparagraphs (A) and

13 (B)’’;

14 (3) by redesignating subparagraphs (B) and

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

16 (4) by inserting after subparagraph (A) the fol17 lowing new subparagraph:

18 ‘‘(B) FISCAL YEARS BEGINNING WITH FIS19 CAL YEAR 1995.—Unless Congress otherwise

20 provides, the performance standard rate of in21 crease, for all physicians’ services and for each

22 category of physicians’ services, for a fiscal year

23 beginning with fiscal year 1995 shall be equal

24 to the performance standard rate of increase
541

•S 2374 IS

1 determined under this paragraph for the pre2 vious fiscal year, increased by the product of—

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

4 the weighted average percentage increase

5 (divided by 100) in the fees for all physi6 cians’ services or for the category of physi7 cians’ services, respectively, under this part

8 for portions of calendar years included in

9 the fiscal year involved,

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

11 the percentage increase or decrease (di12 vided by 100) in the average number of in13 dividuals enrolled under this part (other

14 than HMO enrollees) from the previous fis15 cal year to the fiscal year involved,

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

17 of the average annual percentage growth

18 (divided by 100) in volume and intensity of

19 all physicians’ services or of the category

20 of physicians’ services, respectively, under

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

22 with the preceding fiscal year (based upon

23 information contained in the most recent

24 annual report made pursuant to section

25 1841(b)(2)), and
542

•S 2374 IS

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

2 of the percentage increase or decrease (di3 vided by 100) in expenditures for all physi4 cians’ services or of the category of physi5 cians’ services, respectively, in the fiscal

6 year (compared with the previous fiscal

7 year) which are estimated to result from

8 changes in law or regulations affecting the

9 percentage increase described in clause (i)

10 and which is not taken into account in the

11 percentage increase described in clause (i),

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

13 performance standard factor (specified in sub14 paragraph (C)).’’.

15 (b) TREATMENT OF DEFAULT UPDATE.—

16 (1) IN GENERAL.—Section 1848(d)(3)(B) (42

17 U.S.C. 1395w–4(d)(3)(B)) is amended—

18 (A) in clause (i)—

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

20 GENERAL’’ and inserting ‘‘1992 THROUGH

21 1996’’, and

22 (ii) by striking ‘‘for a year’’ and in23 serting ‘‘for 1992, 1993, 1994, 1995, and

24 1996’’; and
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•S 2374 IS

1 (B) by adding after clause (ii) the follow2 ing new clause:

3 ‘‘(iii) YEARS BEGINNING WITH 1997.—

4 ‘‘(I) IN GENERAL.—The update

5 for a category of physicians’ services

6 for a year beginning with 1997 pro7 vided under subparagraph (A) shall be

8 increased or decreased by the same

9 percentage by which the cumulative

10 percentage increase in actual expendi11 tures for such category of physicians’

12 services for such year was less or

13 greater, respectively, than the per14 formance standard rate of increase

15 (established under subsection (f)) for

16 such category of services for such

17 year.

18 ‘‘(II) CUMULATIVE PERCENTAGE

19 INCREASE DEFINED.—In subclause

20 (I), the ‘cumulative percentage in21 crease in actual expenditures’ for a

22 year shall be equal to the product of

23 the adjusted increases for each year

24 beginning with 1995 up to and includ25 ing the year involved, minus 1 and
544

•S 2374 IS

1 multiplied by 100. In the previous

2 sentence, the ‘adjusted increase’ for a

3 year is equal to 1 plus the percentage

4 increase in actual expenditures for the

5 year.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 1848(d)(3)(A)(i) (42 U.S.C. 1395w–4(d)(3)(A)(i)) is

8 amended by striking ‘‘subparagraph (B)’’ and insert9 ing ‘‘subparagraphs (B) and (C)’’.

10 SEC. 824. ESTABLISHMENT OF HOSPITAL OUTPATIENT PRO11 SPECTIVE PAYMENT SYSTEM FOR HOSPITAL

12 OUTPATIENT DEPARTMENTS.

13 (a) IN GENERAL.—Section 1833(a)(2)(B) of the So14 cial Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended

15 by striking ‘‘section 1886)—’’ and all that follows and in16 serting the following: ‘‘section 1886), an amount equal to

17 a prospectively determined payment rate established by

18 the Secretary that provides for payments for such items

19 and services to be based upon a national rate adjusted

20 to take into account the relative costs of furnishing such

21 items and services in various geographic areas, except that

22 for items and services furnished during cost reporting pe23 riods (or portions thereof) beginning on or after January

24 1, 1995, such amount shall not exceed 90 percent of the

25 amount that would otherwise have been determined under
545

•S 2374 IS

1 this subparagraph had the amendment made by section

2 824(a) of the America’s Health Care Option Act had not

3 taken effect;’’.

4 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

5 SYSTEM.—Not later than January 1, 1995, the Secretary

6 of Health and Human Services shall establish the prospec7 tive payment system for hospital outpatient services nec8 essary to carry out section 1833(a)(2)(B) of the Social

9 Security Act (as amended by subsection (a)). Such pro10 spective payment system shall provide that an individual

11 have a cost-sharing requirement of 20 percent of the al12 lowable amount on which the prospectively determined

13 rate for such service is based.

14 (c) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to items and services furnished

16 on or after January 1, 1995.

17 SEC. 825. GENERAL PART B PREMIUM.

18 Section 1839(e) (42 U.S.C. 1395r(e)) is amended—

19 (1) in paragraph (1)(A), by striking ‘‘and prior

20 to January 1999’’; and

21 (2) in paragraph (2), by striking ‘‘prior to Jan22 uary 1998’’.
546

•S 2374 IS

1 PART IV—PROVISIONS RELATED TO PARTS A

2 AND B

3 SEC. 831. 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. 832. INCREASE IN MEDICARE SECONDARY PAYER COV22 ERAGE FOR END STAGE RENAL DISEASE

23 SERVICES TO 24 MONTHS.

24 (a) IN GENERAL.—Section 1862(b)(1)(C) (42 U.S.C.

25 1395y(b)(1)(C)), as amended by section 831(c), is amend26 ed by striking the last sentence and inserting: ‘‘Effective
547

•S 2374 IS

1 for items and services furnished on or after January 1,

2 1996 (with respect to periods beginning on or after July

3 1, 1994), this subparagraph shall be applied by substitut4 ing ‘24-month’ for ‘12-month’ each place it appears.’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 subsection (a) shall apply to items and services provided

7 on or after January 1, 1996.

8 SEC. 833. REDUCTION IN ROUTINE COST LIMITS FOR HOME

9 HEALTH SERVICES.

10 Section 1861(v)(1)(L)(i) (42 U.S.C.

11 1395x(v)(1)(L)(i)) is amended—

12 (1) in subclause (II), by striking ‘‘or’’ at the

13 end;

14 (2) in subclause (III), by striking ‘‘112 per15 cent,’’ and inserting ‘‘and before July 1, 1996, 112

16 percent, or’’; and

17 (3) by inserting after subclause (III) the follow18 ing new subclause:

19 ‘‘(IV) July 1, 1996, 106 percent (adjusted by

20 such amount as the Secretary determines to be nec21 essary to preserve the savings resulting from the en22 actment of section 13564(a)(1) of the Omnibus

23 Budget Reconciliation Act of 1993),’’.
548

•S 2374 IS

1 Subtitle B—Medicaid Program

2 PART I—COORDINATION OF THE MEDICAID PRO3 GRAM WITH REFORMED HEALTH CARE SYS4 TEM

5 SEC. 851. STATE PLAN REQUIREMENT REGARDING ELIGI6 BILITY FOR MEDICAL ASSISTANCE.

7 (a) IN GENERAL.—Section 1902(a) (42 U.S.C.

8 1369a(a)), as amended by sections 121 and 201(a), is

9 amended—

10 (1) by striking ‘‘and’’ at the end of paragraph

11 (63);

12 (2) by striking the period at the end of para13 graph (64) and inserting ‘‘; and ’’; and

14 (3) by adding at the end the following new

15 paragraph:

16 ‘‘(65) provide that the State will continue to

17 make eligible for medical assistance under section

18 1902(a)(10) any class or category of individuals eli19 gible for medical assistance under such section as of

20 the date of the enactment of the America’s Health

21 Care Option Act.’’.

22 (b) EFFECTIVE DATE.—The amendment made by

23 subsection (a) shall be effective with respect to calendar

24 quarters beginning on or after the date of the enactment

25 of this Act.
549

•S 2374 IS

1 SEC. 852. CAP ON PAYMENTS MADE FOR CERTAIN ACUTE

2 MEDICAL SERVICES FURNISHED UNDER THE

3 MEDICAID PROGRAM.

4 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

5 seq.) is amended by redesignating section 1931 as section

6 1932 and by inserting after section 1930 the following new

7 section:

8 ‘‘CAP ON PAYMENTS MADE FOR CERTAIN ACUTE MEDICAL

9 SERVICES

10 ‘‘SEC. 1931. (a) FEDERAL CAP.—

11 ‘‘(1) IN GENERAL.—Notwithstanding any provi12 sion of this part, the amount of any payment to a

13 State under section 1903(a)(1) with respect to ex14 penditures made by a State for furnishing acute

15 medical services (as defined in subsection (c)(1)) of

16 the type included in the FedMed benefits package

17 (as described in section 21115(b)) to integration eli18 gible individuals (as defined in subsection (c)(2)) in

19 any calendar quarter shall not be in excess of the

20 amount determined under paragraph (2) for the

21 quarter.

22 ‘‘(2) AMOUNT DETERMINED.—The amount de23 termined under this paragraph for a quarter is an

amount equal to 1 24 ⁄4 of the product of—

25 ‘‘(A) the State’s Federal medical assist26 ance percentage (as defined in section 1905(b))
550

•S 2374 IS

1 of the weighted average maximum premium

2 subsidy amount (as defined in subsection

3 (c)(4)) for the State for the year; multiplied by

4 ‘‘(B) the average number of integration eli5 gible individuals receiving medical assistance

6 under the State plan consisting of acute medi7 cal services of the type included in the FedMed

8 benefits package in any month in the quarter.

9 ‘‘(b) STATE CAP.—

10 ‘‘(1) IN GENERAL.—Notwithstanding any provi11 sion of this part, a State shall not be obligated to

12 expend an amount in excess of the amount deter13 mined under paragraph (2) in any calendar quarter

14 for furnishing acute medical services of the type in15 cluded in the FedMed benefits package to integra16 tion eligible individuals.

17 ‘‘(2) AMOUNT DETERMINED.—The amount de18 termined under this paragraph for a quarter is an

amount equal to 1 19 ⁄4 of the product of—

20 ‘‘(A) the State matching percentage (as de21 fined in subsection (a)(3)) of weighted average

22 maximum premium subsidy amount for the

23 State for the year; multiplied by

24 ‘‘(B) the average number of integration eli25 gible individuals receiving medical assistance
551

•S 2374 IS

1 under the State plan consisting of acute medi2 cal services of the type included in the FedMed

3 benefits package in any month in the quarter.

4 ‘‘(c) DEFINITIONS.—

5 ‘‘(1) ACUTE MEDICAL SERVICES.—The term

6 ‘acute medical services’ means items and services de7 scribed in section 1905(a) other than the following:

8 ‘‘(A) Nursing facility services (as defined

9 in section 1905(f)).

10 ‘‘(B) Intermediate care facility for the

11 mentally retarded services (as defined in section

12 1905(d)).

13 ‘‘(C) Personal care services (as described

14 in section 1905(a)(24)).

15 ‘‘(D) Private duty nursing services (as re16 ferred to in section 1905(a)(8)).

17 ‘‘(E) Home or community-based services

18 furnished under a waiver granted under sub19 section (c), (d), or (e) of section 1915.

20 ‘‘(F) Home and community care furnished

21 to functionally disabled elderly individuals

22 under section 1929.

23 ‘‘(G) Community supported living arrange24 ments services under section 1930.
552

•S 2374 IS

1 ‘‘(H) Case-management services (as de2 scribed in section 1915(g)(2)).

3 ‘‘(I) Home health care services (as referred

4 to in section 1905(a)(7)), clinic services, and re5 habilitation services that are furnished to an in6 dividual who has a condition or disability that

7 qualifies the individual to receive any of the

8 services described in a previous subparagraph.

9 ‘‘(J) Services furnished in an institution

10 for mental diseases (as defined in section

11 1905(i)).

12 ‘‘(2) INTEGRATION ELIGIBLE INDIVIDUAL.—

13 The term ‘integration eligible individual’ means, with

14 respect to any calendar quarter, an individual who

15 would not be eligible for medical assistance consist16 ing of acute medical services of the type included in

17 the FedMed benefits package if the provisions of

18 section 1932(a) were in effect during such quarter.

19 ‘‘(3) STATE MATCHING PERCENTAGE.—The

20 term ‘State matching percentage’ means, with re21 spect to a State, the amount (expressed as a per22 centage) equal to 1 minus the State’s Federal medi23 cal assistance percentage.

24 ‘‘(4) WEIGHTED AVERAGE MAXIMUM PREMIUM

25 SUBSIDY AMOUNT.—
553

•S 2374 IS

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

2 average maximum premium subsidy amount’

3 for a State for a year means an amount equal

4 to—

5 ‘‘(i) the sum of—

6 ‘‘(I) the amount determined

7 under subparagraph (B) for each

8 community-rating area in the State;

9 multiplied by

10 ‘‘(II) the number of individuals

11 in such community rating area; di12 vided by

13 ‘‘(ii) the total number of individuals in

14 the State.

15 ‘‘(B) WEIGHTED AVERAGE MAXIMUM SUB16 SIDY AMOUNT IN A COMMUNITY-RATING

17 AREA.—The weighted average maximum sub18 sidy amount in a community-rating area is an

19 amount equal to—

20 ‘‘(i) the sum of—

21 ‘‘(I) the weighted average age ad22 justed maximum subsidy amount for

23 an enrollment class (as determined

24 under subparagraph (C)) in the com25 munity-rating area; multiplied by
554

•S 2374 IS

1 ‘‘(II) the number of individuals

2 in the enrollment class in the commu3 nity-rating area; divided by

4 ‘‘(ii) the total number of individuals in

5 the community-rating area.

6 ‘‘(C) WEIGHTED AVERAGE AGE ADJUSTED

7 MAXIMUM SUBSIDY AMOUNT FOR AN ENROLL8 MENT CLASS.—The weighted average age ad9 justed maximum subsidy amount for an enroll10 ment class is an amount equal to—

11 ‘‘(i) the sum of—

12 ‘‘(I) the age adjusted maximum

13 subsidy amount determined under sec14 tion 1952(b)(2)) for each category of

15 primary insurer in the enrollment

16 class; multiplied by

17 ‘‘(II) the number of individuals

18 in each category; divided by

19 ‘‘(ii) the total number of individuals in

20 all such categories.’’.

21 (b) EFFECTIVE DATE.—The amendment made by

22 subsection (a) shall be effective with respect to calendar

23 quarters beginning on or after January 1, 1997.
555

•S 2374 IS

1 SEC. 853. INTEGRATION OF CERTAIN MEDICAID ELIGIBLES

2 INTO REFORMED HEALTH CARE SYSTEM

3 THROUGH STATE PREMIUM ASSISTANCE

4 PROGRAM.

5 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

6 seq.), as amended by section 852, is amended by redesig7 nating section 1932 as section 1933 and by inserting after

8 section 1931 the following new section:

9 ‘‘INTEGRATION OF CERTAIN MEDICAID ELIGIBLES INTO

10 REFORMED HEALTH CARE SYSTEM

11 ‘‘SEC. 1932. (a) IN GENERAL.—

12 ‘‘(1) REQUIREMENT ON STATES.—With respect

13 to calendar quarters beginning on or after January

14 1, 2000, a State with a State plan under this part—

15 ‘‘(A) shall not furnish medical assistance

16 consisting of acute medical services described in

17 section 1931(b)(1) to any individuals not de18 scribed in subsection (b) who are otherwise eli19 gible for medical assistance under the plan; and

20 ‘‘(B) shall integrate such individuals into

21 the State’s premium assistance program under

22 part B.

23 ‘‘(2) STATE OPTION.—

24 ‘‘(A) IN GENERAL.—For 1997, 1998, and

25 1999, a State may elect to integrate individuals

26 into the State’s premium assistance program
556

•S 2374 IS

1 under part B as described in paragraph (1) if

2 the State notifies the Secretary of such election

3 not later than October 1 of the year preceding

4 the year the State intends to begin such inte5 gration.

6 ‘‘(B) STATES FURNISHING SERVICES

7 UNDER A WAIVER.—If a State making an elec8 tion under subparagraph (A) is furnishing med9 ical assistance consisting of acute medical serv10 ices described in section 1931(b)(1) under a

11 waiver under section 1115 granted on or before

12 December 31, 1996, to individuals who would

13 otherwise be integrated into the State’s pre14 mium assistance program, such State may con15 tinue to furnish such services to such individ16 uals until the earlier of the termination of the

17 waiver by the State or the Secretary or January

18 1, 2000.

19 ‘‘(b) INDIVIDUALS DESCRIBED.—The individuals de20 scribed in this subsection are—

21 ‘‘(1) SSI-eligible individuals (as defined in sec22 tion 1933(d)(2));

23 ‘‘(2) individuals who are eligible for benefits

24 under part A of title XVIII; and
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•S 2374 IS

1 ‘‘(3) certain aliens with respect to whom emer2 gency services are furnished under section

3 1903(v)(2).

4 ‘‘(c) STATE MAINTENANCE OF EFFORT.—

5 ‘‘(1) IN GENERAL.—

6 ‘‘(A) REDUCTION IN QUARTERLY PAY7 MENTS.—For any calendar quarter in an inte8 gration year (as defined in subparagraph (B)),

9 the amount otherwise payable to a State under

10 section 1903 for the quarter shall be reduced by

11 the State maintenance of effort amount for the

12 quarter determined under paragraph (2).

13 ‘‘(B) INTEGRATION YEAR.—For purposes

14 of this paragraph, the term ‘integration year’

15 means the first year that the State integrates

16 individuals into the State’s premium assistance

17 program under part B and any succeeding year.

18 ‘‘(2) MAINTENANCE OF EFFORT AMOUNT.—

19 ‘‘(A) IN GENERAL.—The maintenance of

20 effort amount for a State for a calendar quarter

21 in an integration year shall be equal to 25 per22 cent of the State’s base payment amount (de23 termined under subparagraph (B)) updated by

24 the percentage change in the inflation index de25 scribed in subparagraph (C)(i) and the State
558

•S 2374 IS

1 population index described in subparagraph

2 (C)(ii) during the period beginning on January

3 1 of the first integration year and ending on

4 December 31 of the applicable integration year

5 (as determined by the Secretary).

6 ‘‘(B) STATE BASE PAYMENT AMOUNT.—

7 The base payment amount for a State for an

8 integration year shall be an amount, as deter9 mined by the Secretary, equal to the total ex10 penditures from State funds made under the

11 State plan during the year preceding the first

12 integration year with respect to medical assist13 ance consisting of acute medical services of the

14 type included in the FedMed benefits package

15 (as described in section 21115(b)) furnished to

16 individuals who would not have received such

17 assistance if the provisions of subsection (a)

18 were in effect during such year.

19 ‘‘(C) INDEXES DESCRIBED.—

20 ‘‘(i) INFLATION INDEX.—The Sec21 retary shall establish an index which meas22 ures the percentage change in the weighted

23 average maximum premium subsidy

24 amount (as defined in section 1931(c)(4))

25 for the State from year to year.
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•S 2374 IS

1 ‘‘(ii) STATE POPULATION INDEX.—

2 The Secretary shall establish a State popu3 lation index which measures the change in

4 the number of individuals residing in a

5 State from year to year.’’

6 (b) NO FEDERAL FINANCIAL PARTICIPATION.—Sec7 tion 1903(i) (42 U.S.C. 1396b(i)) is amended—

8 (1) by striking ‘‘or’’ at the end of paragraph

9 (14),

10 (2) by striking the period at the end of para11 graph (15) and inserting ‘‘; or’’, and

12 (3) by inserting after paragraph (15) the fol13 lowing new paragraph:

14 ‘‘(16) with respect any medical assistance con15 sisting of acute medical services described in section

16 1931(b) furnished to individuals who are not de17 scribed in section 1932(b).’’.

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

19 this section shall be effective with respect calendar quar20 ters beginning on or after January 1, 1997.

21 SEC. 854. STATE PROGRAMS FOR PROVIDING SUPPLE22 MENTAL BENEFITS.

23 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

24 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)),
560

•S 2374 IS

1 as amended by sections 121, 201(a), and 851, is amend2 ed—

3 (1) by striking ‘‘and’’ at the end of paragraph

4 (64);

5 (2) by striking the period at the end of para6 graph (65) and inserting ‘‘; and’’; and

7 (3) by adding at the end the following new

8 paragraph:

9 ‘‘(66) provide for a State program furnishing

10 supplemental benefits in accordance with part C.’’.

11 (b) STATE PROGRAMS FOR SUPPLEMENTAL BENE12 FITS.—Title XIX (42 U.S.C. 1396 et seq.), as amended

13 by section 121, is amended by adding at the end the fol14 lowing new part:

15 ‘‘PART C—STATE PROGRAMS FOR

16 SUPPLEMENTAL BENEFITS

17 ‘‘SEC. 1961. REQUIREMENT TO OPERATE STATE PROGRAM.

18 ‘‘(a) IN GENERAL.—A State with a State plan ap19 proved under part A shall have in effect a program for

20 furnishing supplemental benefits (as defined in section

21 1962(c)) in accordance with this part in calendar years

22 beginning after 1996.

23 ‘‘(b) DESIGNATION OF STATE AGENCY.—A State

24 may designate any appropriate State agency to administer

25 the program under this part.
561

•S 2374 IS

1 ‘‘SEC. 1962. PROGRAM DESCRIBED.

2 ‘‘(a) IN GENERAL.—A State program under this part

3 shall furnish supplemental benefits to such classes and

4 categories of the individuals eligible for premium assist5 ance under part B as determined appropriate by the State.

6 ‘‘(b) PRIORITIES.—A State may give priority to chil7 dren, pregnant women, and individuals residing in medi8 cally underserved areas in furnishing services under this

9 part.

10 ‘‘(c) SUPPLEMENTAL BENEFITS DEFINED.—The

11 term ‘supplemental benefits’ means the acute medical

12 services described in section 1931(b) that—

13 ‘‘(1) were furnished under the State plan in the

14 year preceding the first year that the State inte15 grates individuals into the State’s premium assist16 ance program under part B in accordance with sec17 tion 1932(a); and

18 ‘‘(2) are not included in the items and services

19 provided under the FedMed benefits package (as de20 scribed in 21115(b)).

21 ‘‘SEC. 1963. PAYMENTS TO STATES.

22 ‘‘From its allotment under section 1964(b), the Sec23 retary shall pay to each State for each quarter beginning

24 with the quarter commencing January 1, 1997, an amount

25 equal to—
562

•S 2374 IS

1 ‘‘(1) an amount equal to the State’s Federal

2 medical assistance percentage (as defined in section

3 1905(b)) of the amount demonstrated by State

4 claims to have been expended during the quarter for

5 furnishing services to eligible individuals under this

6 part; plus

7 ‘‘(2) an amount equal to 50 percent of the re8 mainder of the amounts expended during the quar9 ter as found necessary by the Secretary for the prop10 er and efficient administration of the State program.

11 ‘‘SEC. 1964. FUNDING.

12 ‘‘(a) IN GENERAL.—The total amount of Federal

13 funds available for State programs under this part for

14 each fiscal year is—

15 ‘‘(1) for fiscal year 1997, $12,000,000,000; and

16 ‘‘(2) for succeeding fiscal years, the amount de17 termined under this subsection for the preceding fis18 cal year updated by the estimated percentage change

19 in the inflation index described in section

20 1932(c)(2)(C)(i) and the State population index de21 scribed in secton 1932(c)(2)(C)(ii).

22 ‘‘(b) ALLOTMENTS TO STATES.—

23 ‘‘(1) IN GENERAL.—The Secretary shall allot

24 the amounts available under subsection (a) for the

25 fiscal year to the States in accordance with an allo-
563

•S 2374 IS

1 cation formula developed by the Secretary which

2 takes into account—

3 ‘‘(A) the percentage of all individuals with

4 incomes at or below 150 percent of the official

5 poverty line (as defined in section 1957(6)) in

6 all States that reside in a particular State; and

7 ‘‘(B) a State’s matching percentage (as de8 fined in section 1932(c)(4)(B)).

9 ‘‘(2) REALLOCATIONS.—Any amounts allotted

10 to States under this subsection for a year that are

11 not expended in such year shall remain available for

12 State programs under this part and may be reallo13 cated to States as the Secretary determines appro14 priate.

15 ‘‘(c) STATE ENTITLEMENT.—This part constitutes

16 budget authority in advance of appropriations Acts, and

17 represents the obligation of the Federal Government to

18 provide for the payment to States of amounts described

19 in subsection (a).’’.

20 (c) CONFORMING AMENDMENTS.—Title XIX (42

21 U.S.C. 1396 et seq.), as amended by section 121, is

22 amended by striking the title and inserting the following:
564

•S 2374 IS

1 ‘‘TITLE XIX—MEDICAL ASSIST2 ANCE PROGRAMS, STATE

3 PROGRAMS FOR PREMIUM

4 ASSISTANCE, AND STATE

5 PROGRAMS FOR SUPPLE6 MENTAL BENEFITS’’.

7 SEC. 855. OPTIONAL COVERAGE UNDER CERTIFIED

8 HEALTH PLANS OF SSI-ELIGIBLE INDIVID9 UALS.

10 (a) STATE OPTION.—Section 1902(a) (42 U.S.C.

11 1396a(a)), as amended by sections 121, 201(a), 851, and

12 854, is amended—

13 (1) by striking ‘‘and’’ at the end of paragraph

14 (65);

15 (2) by striking the period at the end of para16 graph (66) and inserting ‘‘; and’’; and

17 (3) by adding at the end the following new

18 paragraph:

19 ‘‘(67) at the option of the State, provide that

20 a SSI-eligible individual (as defined in section

21 1933(d)) has the option to receive medical assistance

22 consisting of the items or services covered under the

23 FedMed benefits package (as described in section

24 21115(b)) through enrollment with a certified health

25 plan (as defined in 21003(b)) providing such pack-
565

•S 2374 IS

1 age instead of through enrollment in the State plan,

2 in accordance with the requirements of section

3 1933.’’.

4 (b) REQUIREMENTS DESCRIBED.—Title XIX (42

5 U.S.C. 1396 et seq.) is amended by redesignating section

6 1933 as section 1934 and by inserting after section 1932

7 the following new section:

8 ‘‘REQUIREMENTS FOR STATES PROVIDING OPTIONAL COV9 ERAGE UNDER CERTIFIED HEALTH PLANS TO SSI10 ELIGIBLE INDIVIDUALS

11 ‘‘SEC. 1933. (a) IN GENERAL.—For purposes of sec12 tion 1902(a)(67), a State meets the requirements of this

13 section with respect to SSI-eligible individuals if the State

14 meets the following requirements:

15 ‘‘(1) CHOICE OF PLANS.—The State must offer

16 individuals a choice of a certified health plans under

17 such section, except that nothing in this paragraph

18 may be construed to waive any limits on the capacity

19 of a certified health plan applicable under title XXI.

20 ‘‘(2) INFORMED CHOICE.—The State shall en21 sure that each SSI-eligible individual is provided suf22 ficient information to make an informed choice

23 about enrolling in a certified health plan under such

24 section and selecting such a plan.

25 ‘‘(3) PAYMENTS TO CERTIFIED HEALTH PLANS

26 BY STATES.—The State shall make all necessary
566

•S 2374 IS

1 payments of premiums, copayments, and deductibles

2 applicable under a certified health plan on behalf of

3 a SSI-eligible individual who enrolls in a certified

4 health plan under such section.

5 ‘‘(b) TREATMENT OF PAYMENTS AS MEDICAL AS6 SISTANCE.—For purposes of determining the amount of

7 Federal financial participation for a State under section

8 1903 in a quarter, any payments made by a State under

9 subsection (a)(3) shall be treated as expenditures for med10 ical assistance under the State plan for such quarter.

11 ‘‘(c) LIMITATION ON NUMBER OF INDIVIDUALS PER12 MITTED TO MAKE ELECTION.—

13 ‘‘(1) IN GENERAL.—

14 ‘‘(A) LIMITATION.—The number of SSI-el15 igible individuals electing to enroll in a certified

16 health plan under section 1902(a)(67) in a

17 State during a year may not exceed the applica18 ble percentage determined under subparagraph

19 (B) of the Secretary’s estimate of the number

20 of such individuals in the State who are eligible

21 to enroll in certified health plans under such

22 section during the year.

23 ‘‘(B) APPLICABLE PERCENTAGE DE24 SCRIBED.—The ‘applicable percentage’ deter-
567

•S 2374 IS

1 mined under this subparagraph with respect to

2 a State for a year—

3 ‘‘(i) for each of the first 3 years for

4 which the State exercises the option de5 scribed in such section, 15 percent; and

6 ‘‘(ii) for each succeeding year for

7 which the State exercises such option, the

8 applicable percentage under this subpara9 graph for the preceding year, increased by

10 10 percent.

11 ‘‘(2) WAIVER OF LIMITATION.—The limit on

12 the number of individuals provided in paragraph (1)

13 may be waived by the Secretary with respect to a

14 State if the Secretary determines that such a waiver

15 is appropriate.

16 ‘‘(d) DEFINITIONS.—

17 ‘‘(1) CERTIFIED HEALTH PLAN.—The term

18 ‘certified health plan’ means a certified health plan

19 (as defined in section 21003(b)) that provides a

20 FedMed benefits package (as described in section

21 21115(b)).

22 ‘‘(2) SSI-ELIGIBLE INDIVIDUAL.—The term

23 ‘SSI-eligible individual’ means an individual who is

24 eligible for medical assistance under the State plan

25 and—
568

•S 2374 IS

1 ‘‘(A) with respect to whom supplemental

2 security income benefits are being paid under

3 title XVI,

4 ‘‘(B) who is receiving a supplementary

5 payment under section 1616 or under section

6 212 of Public Law 93–66, or

7 ‘‘(C) who is receiving monthly benefits

8 under section 1619(a) (whether or not pursuant

9 to section 1616(c)(3)).’’.

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

11 this section shall be effective with respect to calendar

12 quarters beginning on or after January 1, 1997.

13 PART II—STATE ELIGIBILITY TO CONTRACT FOR

14 COORDINATED CARE SERVICES

15 SEC. 861. MODIFICATION OF FEDERAL REQUIREMENTS TO

16 ALLOW STATES MORE FLEXIBILITY IN CON17 TRACTING FOR COORDINATED CARE SERV18 ICES UNDER MEDICAID.

19 (a) IN GENERAL.—

20 (1) PAYMENT PROVISIONS.—Section 1903(m)

21 (42 U.S.C. 1396b(m)) is amended to read as follows:

22 ‘‘(m)(1) No payment shall be made under this title

23 to a State with respect to expenditures incurred by such

24 State for payment to an entity which is at risk (as defined

25 in section 1931(a)(4)) for services provided by such entity
569

•S 2374 IS

1 to individuals eligible for medical assistance under the

2 State plan under this title, unless the entity is a risk con3 tracting entity (as defined in section 1931(a)(3)) and the

4 State and such entity comply with the applicable provi5 sions of section 1931.

6 ‘‘(2) No payment shall be made under this title to

7 a State with respect to expenditures incurred by such

8 State for payment for services provided to an individual

9 eligible for medical assistance under the State plan under

10 this title if such payment by the State is contingent upon

11 the individual receiving such services from a specified

12 health care provider or subject to the approval of a speci13 fied health care provider, unless the entity receiving pay14 ment is a primary care case management entity (as de15 fined in section 1931(a)(2)) and the State and such entity

16 comply with the applicable provisions of section 1931.’’.

17 (2) REQUIREMENTS FOR COORDINATED CARE

18 SERVICES.—Title XIX (42 U.S.C. 1396 et seq.) is

19 amended by adding at the end the following new sec20 tion:

21 ‘‘REQUIREMENTS FOR COORDINATED CARE SERVICES

22 ‘‘SEC. 1931. (a) DEFINITIONS.—For purposes of this

23 title—

24 ‘‘(1) PRIMARY CARE CASE MANAGEMENT PRO25 GRAM.—The term ‘primary care case management

26 program’ means a program operated by a State
570

•S 2374 IS

1 agency under which such State agency enters into

2 contracts with primary care case management enti3 ties for the provision of health care items and serv4 ices which are specified in such contracts and the

5 provision of case management services to individuals

6 who are—

7 ‘‘(A) eligible for medical assistance under

8 the State plan,

9 ‘‘(B) enrolled with such primary care case

10 management entities, and

11 ‘‘(C) entitled to receive such specified

12 health care items and services and case man13 agement services only as approved and ar14 ranged for, or provided, by such entities.

15 ‘‘(2) PRIMARY CARE CASE MANAGEMENT EN16 TITY.—The term ‘primary care case management

17 entity’ means a health care provider which—

18 ‘‘(A) must be a physician, group of physi19 cians, a Federally qualified health center, a

20 rural health clinic, or an entity employing or

21 having other arrangements with physicians op22 erating under a contract with a State to provide

23 services under a primary care case management

24 program,
571

•S 2374 IS

1 ‘‘(B) receives payment on a fee for service

2 basis (or, in the case of a Federally qualified

3 health center or a rural health clinic, on a rea4 sonable cost per encounter basis) for the provi5 sion of health care items and services specified

6 in such contract to enrolled individuals,

7 ‘‘(C) receives an additional fixed fee per

8 enrollee for a period specified in such contract

9 for providing case management services (includ10 ing approving and arranging for the provision

11 of health care items and services specified in

12 such contract on a referral basis) to enrolled in13 dividuals, and

14 ‘‘(D) is not an entity that is at risk (as de15 fined in paragraph (4)) for such case manage16 ment services.

17 ‘‘(3) RISK CONTRACTING ENTITY.—The term

18 ‘risk contracting entity’ means an entity, including a

19 certified health plan (as defined in section 21003(b))

20 that provides a FedMed benefits package (as de21 scribed in section 21115(b)), which has a contract

22 with the State agency (or a health insuring organi23 zation described in subsection (l)(2)) under which

24 the entity—
572

•S 2374 IS

1 ‘‘(A) provides or arranges for the provision

2 of health care items or services which are speci3 fied in such contract to individuals eligible for

4 medical assistance under the State plan, and

5 ‘‘(B) is at risk (as defined in paragraph

6 (4)) for part or all of the cost of such items or

7 services furnished to individuals eligible for

8 medical assistance under such plan.

9 ‘‘(4) AT RISK.—The term ‘at risk’ means an

10 entity which—

11 ‘‘(A) has a contract with the State agency

12 under which such entity is paid a fixed amount

13 for providing or arranging for the provision of

14 health care items or services specified in such

15 contract to an individual eligible for medical as16 sistance under the State plan and enrolled with

17 such entity, regardless of whether such items or

18 services are furnished to such individual, and

19 ‘‘(B) is liable for all or part of the cost of

20 furnishing such items or services, regardless of

21 whether such cost exceeds such fixed payment.

22 ‘‘(5) FEDERALLY QUALIFIED HEALTH CEN23 TER.—The term ‘Federally qualified health center’

24 means a Federally qualified health center as defined

25 in section 1905(l)(2)(B).
573

•S 2374 IS

1 ‘‘(6) RURAL HEALTH CLINIC.—The term ‘rural

2 health clinic’ means a rural health clinic as defined

3 in section 1905(l)(1).

4 ‘‘(b) GENERAL REQUIREMENTS FOR RISK CON5 TRACTING ENTITIES.—

6 ‘‘(1) ORGANIZATION.—A risk contracting entity

7 meets the requirements of this section only if such

8 entity—

9 ‘‘(A)(i) is a qualified health maintenance

10 organization as defined in section 1310(d) of

11 the Public Health Service Act, as determined by

12 the Secretary pursuant to section 1312 of such

13 Act; or

14 ‘‘(ii) is described in subparagraph (C), (D),

15 (E), (F), or (G) of subsection (e)(4);

16 ‘‘(B) is a Federally qualified health center

17 or a rural health clinic which has made ade18 quate provision against the risk of insolvency

19 (pursuant to the guidelines and regulations is20 sued by the Secretary under this section), and

21 ensures that individuals eligible for medical as22 sistance under the State plan are not held liable

23 for such entity’s debts in case of such entity’s

24 insolvency; or
574

•S 2374 IS

1 ‘‘(C) is an entity which meets all applicable

2 State licensing requirements and has made ade3 quate provision against the risk of insolvency

4 (pursuant to the guidelines and regulations is5 sued by the Secretary under this section), and

6 ensures that individuals eligible for medical as7 sistance under the State plan are not held liable

8 for such entity’s debts in case of such entity’s

9 insolvency.

10 ‘‘(2) GUARANTEES OF ENROLLEE ACCESS.—A

11 risk contracting entity meets the requirements of

12 this section only if—

13 ‘‘(A) the geographic locations, hours of op14 eration, patient to staff ratios, and other rel15 evant characteristics of such entity are suffi16 cient to afford individuals eligible for medical

17 assistance under the State plan access to such

18 entities that is at least equivalent to the access

19 to health care providers that would be available

20 to such individuals if such individuals were not

21 enrolled with such entity;

22 ‘‘(B) such entity has reasonable and ade23 quate hours of operation, including 24-hour

24 availability of—
575

•S 2374 IS

1 ‘‘(i)(I) treatment for an unforeseen ill2 ness, injury, or condition of an individual

3 eligible for medical assistance under the

4 State plan and enrolled with such entity;

5 or

6 ‘‘(II) referral to other health care pro7 viders for such treatment; and

8 ‘‘(ii) other information, as determined

9 by the Secretary or the State; and

10 ‘‘(C) such entity complies with such other

11 requirements relating to access to care as the

12 Secretary or the State may impose.

13 ‘‘(3) CONTRACT WITH STATE AGENCY.—A risk

14 contracting entity meets the requirements of this

15 section only if such entity has a written contract

16 with the State agency which provides—

17 ‘‘(A) that the entity will comply with all

18 applicable provisions of this section, that the

19 State has the right to penalize the entity for

20 failure to comply with such requirements and to

21 terminate the contract in accordance with sub22 section (i), and that the entity will be subject

23 to penalties imposed by the Secretary under

24 subsection (h) for failure to comply with such

25 requirements;
576

•S 2374 IS

1 ‘‘(B) for a payment methodology based on

2 experience rating or another actuarially sound

3 methodology approved by the Secretary, which

4 guarantees (as demonstrated by such models or

5 formulas as the Secretary may approve) that—

6 ‘‘(i) payments to the entity under the

7 contract shall not exceed an amount equal

8 to 100 percent of the costs (which shall in9 clude administrative costs and which may

10 include costs for inpatient hospital services

11 that would have been incurred in the ab12 sence of such contract) that would have

13 been incurred by the State agency in the

14 absence of the contract; and

15 ‘‘(ii) the financial risk for inpatient

16 hospital services is limited to an extent es17 tablished by the State;

18 ‘‘(C) that the Secretary and the State (or

19 any person or organization designated by ei20 ther) shall have the right to audit and inspect

21 any books and records of the entity (and of any

22 subcontractor) that pertain—

23 ‘‘(i) to the ability of the entity (or a

24 subcontractor) to bear the risk of potential

25 financial losses; or
577

•S 2374 IS

1 ‘‘(ii) to services performed or deter2 minations of amounts payable under the

3 contract;

4 ‘‘(D) that in the entity’s enrollment,

5 reenrollment, or disenrollment of individuals eli6 gible for medical assistance under the State

7 plan and eligible to enroll, reenroll, or disenroll

8 with the entity pursuant to the contract, the en9 tity will not discriminate among such individ10 uals on the basis of such individuals’ health sta11 tus or requirements for health care services;

12 ‘‘(E)(i) individuals eligible for medical as13 sistance under the State plan who have enrolled

14 with the entity are permitted to terminate such

15 enrollment without cause as of the beginning of

16 the first calendar month (or in the case of an

17 entity described in subsection (e)(4), as of the

18 beginning of the first enrollment period) follow19 ing a full calendar month after a request is

20 made for such termination;

21 ‘‘(ii) that when an individual has relocated

22 outside the entity’s service area, and the entity

23 has been notified of the relocation, services

24 (within reasonable limits) furnished by a health

25 care provider outside the service area will be re-
578

•S 2374 IS

1 imbursed either by the entity or by the State

2 agency; and

3 ‘‘(iii) for written notification of each such

4 individual’s right to terminate enrollment,

5 which shall be provided at the time of such indi6 vidual’s enrollment;

7 ‘‘(F) in the case of services immediately re8 quired to treat an unforeseen illness, injury, or

9 condition, of an individual eligible for medical

10 assistance under the State plan and enrolled

11 with the entity—

12 ‘‘(i) that such services shall not be

13 subject to a preapproval requirement; and

14 ‘‘(ii) where such services are furnished

15 by a health care provider other than the

16 entity, for reimbursement of such provider

17 either by the entity or by the State agency;

18 ‘‘(G) for disclosure of information in ac19 cordance with subsection (g) and section 1124;

20 ‘‘(H) that any physician incentive plan op21 erated by the entity meets the requirements of

22 section 1876(i)(8);

23 ‘‘(I) for maintenance of sufficient patient

24 encounter data to identify the physician who de25 livers services to patients;
579

•S 2374 IS

1 ‘‘(J) that the entity will comply with the

2 requirement of section 1902(w) with respect to

3 each enrollee;

4 ‘‘(K) that the entity will implement a

5 grievance system, inform enrollees in writing

6 about how to use such grievance system, ensure

7 that grievances are addressed in a timely man8 ner, and report grievances to the State at inter9 vals to be determined by the State;

10 ‘‘(L) that contracts between the entity and

11 each subcontractor of such entity will require

12 each subcontractor—

13 ‘‘(i) to cooperate with the entity in the

14 implementation of its internal quality as15 surance program under paragraph (4) and

16 adhere to the standards set forth in the

17 quality assurance program, including

18 standards with respect to access to care,

19 facilities in which patients receive care,

20 and availability, maintenance, and review

21 of medical records;

22 ‘‘(ii) to cooperate with the Secretary,

23 the State agency and any contractor to the

24 State in monitoring and evaluating the

25 quality and appropriateness of care pro-
580

•S 2374 IS

1 vided to enrollees as required by Federal or

2 State laws and regulations; and

3 ‘‘(iii) where applicable, to adhere to

4 regulations and program guidance with re5 spect to reporting requirements under sec6 tion 1905(r);

7 ‘‘(M) that, where the State deems it nec8 essary to ensure the timely provision to enroll9 ees of the services listed in subsection

10 (f)(2)(C)(ii), the State may arrange for the pro11 vision of such services by health care providers

12 other than the entity and may adjust its pay13 ments to the entity accordingly;

14 ‘‘(N) that the entity and the State will

15 comply with guidelines and regulations issued

16 by the Secretary with respect to procedures for

17 marketing and information that must be pro18 vided to individuals eligible for medical assist19 ance under the State plan;

20 ‘‘(O) that the entity shall report to the

21 State, at such time and in such manner as the

22 State shall require, on the rates paid for hos23 pital services (by type of hospital and type of

24 service) furnished to individuals enrolled with

25 the entity;
581

•S 2374 IS

1 ‘‘(P) detailed information regarding the

2 relative responsibilities of the entity and the

3 State, for providing (or arranging for the provi4 sion of), and making payment for, the following

5 items and services:

6 ‘‘(i) immunizations;

7 ‘‘(ii) the purchase of vaccines;

8 ‘‘(iii) lead screening and treatment

9 services;

10 ‘‘(iv) screening and treatment for tu11 berculosis;

12 ‘‘(v) screening and treatment for, and

13 preventive services related to, sexually

14 transmitted diseases, including HIV infec15 tion;

16 ‘‘(vi) screening, diagnostic, and treat17 ment services required under section

18 1905(r);

19 ‘‘(vii) family planning services;

20 ‘‘(viii) services prescribed under—

21 ‘‘(I) an Individual Education

22 Plan or Individualized Family Service

23 Plan under part B or part H of the

24 Individuals with Disabilities Edu25 cation Act; and
582

•S 2374 IS

1 ‘‘(II) any other individual plan of

2 care or treatment developed under

3 this title or title V;

4 ‘‘(ix) transportation needed to obtain

5 services to which the enrollee is entitled

6 under the State plan or pursuant to an in7 dividual plan of care or treatment de8 scribed in subclauses (I) and (II) of clause

9 (viii); and

10 ‘‘(x) such other services as the Sec11 retary may specify;

12 ‘‘(Q) detailed information regarding the

13 procedures for coordinating the relative respon14 sibilities of the entity and the State to ensure

15 prompt delivery of, compliance with any appli16 cable reporting requirements related to, and ap17 propriate recordkeeping with respect to, the

18 items and services described in subparagraph

19 (P); and

20 ‘‘(R) such other provisions as the Sec21 retary may require.

22 ‘‘(4) INTERNAL QUALITY ASSURANCE.—A risk

23 contracting entity meets the requirements of this

24 section only if such entity has in effect a written in25 ternal quality assurance program which includes a
583

•S 2374 IS

1 systematic process to achieve specified and measur2 able goals and objectives for access to, and quality

3 of, care, which—

4 ‘‘(A) identifies the organizational units re5 sponsible for performing specific quality assur6 ance functions, and ensures that such units are

7 accountable to the governing body of the entity

8 and that such units have adequate supervision,

9 staff, and other necessary resources to perform

10 these functions effectively,

11 ‘‘(B) if any quality assurance functions are

12 delegated to other entities, ensures that the risk

13 contracting entity remains accountable for all

14 quality assurance functions and has mecha15 nisms to ensure that all quality assurance ac16 tivities are carried out,

17 ‘‘(C) includes methods to ensure that phy18 sicians and other health care professionals

19 under contract with the entity are licensed or

20 certified as required by State law, or are other21 wise qualified to perform the services such phy22 sicians and other professionals provide, and

23 that these qualifications are ensured through

24 appropriate credentialing and recredentialing

25 procedures,
584

•S 2374 IS

1 ‘‘(D) provides for continuous monitoring of

2 the delivery of health care, through—

3 ‘‘(i) identification of clinical areas to

4 be monitored, including immunizations,

5 prenatal care, services required under sec6 tion 1905(r), and other appropriate clinical

7 areas, to reflect care provided to enrollees

8 eligible for medical assistance under the

9 State plan,

10 ‘‘(ii) use of quality indicators and

11 standards for assessing the quality and ap12 propriateness of care delivered, and the

13 availability and accessibility of all services

14 for which the entity is responsible under

15 such entity’s contract with the State,

16 ‘‘(iii) use of epidemiological data or

17 chart review, as appropriate, and patterns

18 of care overall,

19 ‘‘(iv) patient surveys, spot checks, or

20 other appropriate methods to determine

21 whether—

22 ‘‘(I) enrollees are able to obtain

23 timely appointments with primary

24 care providers and specialists, and
585

•S 2374 IS

1 ‘‘(II) enrollees are otherwise

2 guaranteed access and care as pro3 vided under paragraph (2),

4 ‘‘(v) provision of written information

5 to health care providers and other person6 nel on the outcomes, quality, availability,

7 accessibility, and appropriateness of care,

8 and

9 ‘‘(vi) implementation of corrective ac10 tions,

11 ‘‘(E) includes standards for timely enrollee

12 access to information and care which at a mini13 mum shall incorporate standards used by the

14 State or professional or accreditation bodies for

15 facilities furnishing perinatal and neonatology

16 care and other forms of specialized medical and

17 surgical care,

18 ‘‘(F) includes standards for the facilities in

19 which patients receive care,

20 ‘‘(G) includes standards for managing and

21 treating medical conditions prevalent among

22 such entity’s enrollees eligible for medical as23 sistance under the State plan,

24 ‘‘(H) includes mechanisms to ensure that

25 enrollees eligible for medical assistance under
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•S 2374 IS

1 the State plan receive services for which the en2 tity is responsible under the contract which are

3 consistent with standards established by the ap4 plicable professional societies or government

5 agencies,

6 ‘‘(I) includes standards for the availability,

7 maintenance, and review of medical records

8 consistent with generally accepted medical prac9 tice,

10 ‘‘(J) provides for dissemination of quality

11 assurance procedures to health care providers

12 under contract with the entity, and

13 ‘‘(K) meets any other requirements pre14 scribed by the Secretary or the State.

15 ‘‘(c) GENERAL REQUIREMENTS FOR PRIMARY CARE

16 CASE MANAGEMENT PROGRAMS.—A primary care case

17 management program implemented by a State under this

18 section shall—

19 ‘‘(1) provide that each primary care case man20 agement entity participating in such program has a

21 written contract with the State agency,

22 ‘‘(2) include methods for selection and monitor23 ing of participating primary care case management

24 entities to ensure—
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•S 2374 IS

1 ‘‘(A) that the geographic locations, hours

2 of operation, patient to staff ratio, and other

3 relevant characteristics of such entities are suf4 ficient to afford individuals eligible for medical

5 assistance under the State plan access to such

6 entities that is at least equivalent to the access

7 to health care providers that would be available

8 to such individuals if such individuals were not

9 enrolled with such entity,

10 ‘‘(B) that such entities and their profes11 sional personnel are licensed as required by

12 State law and qualified to provide case manage13 ment services, through methods such as ongo14 ing monitoring of compliance with applicable re15 quirements and providing information and tech16 nical assistance, and

17 ‘‘(C) that such entities—

18 ‘‘(i) provide timely and appropriate

19 primary care to such enrollees consistent

20 with standards established by applicable

21 professional societies or governmental

22 agencies, or such other standards pre23 scribed by the Secretary or the State, and

24 ‘‘(ii) where other items and services

25 are determined to be medically necessary,
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•S 2374 IS

1 give timely approval of such items and

2 services and referral to appropriate health

3 care providers,

4 ‘‘(3) provide that no preapproval shall be re5 quired for emergency health care items or services,

6 and

7 ‘‘(4) permit individuals eligible for medical as8 sistance under the State plan who have enrolled with

9 a primary care case management entity to terminate

10 such enrollment without cause not later than the be11 ginning of the first calendar month following a full

12 calendar month after the request is made for such

13 termination.

14 ‘‘(d) EXEMPTIONS FROM STATE PLAN REQUIRE15 MENTS.—A State plan may permit or require an individ16 ual eligible for medical assistance under such plan to en17 roll with a risk contracting entity or a primary care case

18 management entity without regard to the requirements set

19 forth in the following paragraphs of section 1902(a):

20 ‘‘(1) Paragraph (1) (concerning statewideness).

21 ‘‘(2) Paragraph (10)(B) (concerning com22 parability of benefits), to the extent benefits not in23 cluded in the State plan are provided.

24 ‘‘(3) Paragraph (23) (concerning freedom of

25 choice of provider), except with respect to services
589

•S 2374 IS

1 described in section 1905(a)(4)(C) and except as re2 quired under subsection (e).

3 ‘‘(e) STATE OPTIONS WITH RESPECT TO ENROLL4 MENT AND DISENROLLMENT.—

5 ‘‘(1) MANDATORY ENROLLMENT.—A State plan

6 may require an individual eligible for medical assist7 ance under such plan to enroll with a risk contract8 ing entity or a primary care case management entity

9 only if the individual is permitted a choice within a

10 reasonable service area (as defined by the State)—

11 ‘‘(A) between or among 2 or more risk

12 contracting entities,

13 ‘‘(B) among a risk contracting entity and

14 a primary care case management program, or

15 ‘‘(C) among primary care case manage16 ment entities.

17 ‘‘(2) REENROLLMENT OF INDIVIDUALS WHO

18 REGAIN ELIGIBILITY.—In the case of an individual

19 who—

20 ‘‘(A) in a month is eligible for medical as21 sistance under the State plan and enrolled with

22 a risk contracting entity with a contract under

23 this section,

24 ‘‘(B) in the next month (or next 2 months)

25 is not eligible for such medical assistance, but
590

•S 2374 IS

1 ‘‘(C) in the succeeding month is again eli2 gible for such benefits,

3 the State agency (subject to subsection (b)(3)(E))

4 may enroll the individual for that succeeding month

5 with such entity, if the entity continues to have a

6 contract with the State agency under this sub7 section.

8 ‘‘(3) DISENROLLMENT.—

9 ‘‘(A) RESTRICTIONS ON DISENROLLMENT

10 WITHOUT CAUSE.—Except as provided in sub11 paragraph (C), a State plan may restrict the

12 period in which individuals enrolled with risk

13 contracting entities described in paragraph (4)

14 may terminate such enrollment without cause to

15 the first month of each period of enrollment (as

16 defined in subparagraph (B)), but only if the

17 State provides notification, at least once during

18 each such enrollment period, to individuals en19 rolled with such entity of the right to terminate

20 such enrollment and the restriction on the exer21 cise of this right. Such restriction shall not

22 apply to requests for termination of enrollment

23 for cause.
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•S 2374 IS

1 ‘‘(B) PERIOD OF ENROLLMENT.—For pur2 poses of this paragraph, the term ‘period of en3 rollment’ means—

4 ‘‘(i) a period not to exceed 6 months

5 in duration, or

6 ‘‘(ii) a period not to exceed 1 year in

7 duration, in the case of a State that, on

8 the effective date of this paragraph, had in

9 effect a waiver under section 1115 of re10 quirements under this title under which

11 the State could establish a 1-year mini12 mum period of enrollment with risk con13 tracting entities.

14 ‘‘(4) ENTITIES ELIGIBLE FOR DISENROLLMENT

15 RESTRICTIONS.—A risk contracting entity described

16 in this paragraph is—

17 ‘‘(A) a qualified health maintenance orga18 nization as defined in section 1310(d) of the

19 Public Health Service Act,

20 ‘‘(B) an eligible organization with a con21 tract under section 1876,

22 ‘‘(C) an entity that is receiving (and has

23 received during the previous 2 years) a grant of

24 at least $100,000 under section 329(d)(1)(A)

25 or 330(d)(1) of the Public Health Service Act,
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•S 2374 IS

1 ‘‘(D) an entity that—

2 ‘‘(i) received a grant of at least

3 $100,000 under section 329(d)(1)(A) or

4 section 330(d)(1) of the Public Health

5 Service Act in the fiscal year ending June

6 30, 1976, and has been a grantee under ei7 ther such section for all periods after that

8 date, and

9 ‘‘(ii) provides to its enrollees, on a

10 prepaid capitation or other risk basis, all

11 of the services described in paragraphs (1),

12 (2), (3), (4)(C), and (5) of section 1905(a)

13 (and the services described in section

14 1905(a)(7), to the extent required by sec15 tion 1902(a)(10)(D)),

16 ‘‘(E) an entity that is receiving (and has

17 received during the previous 2 years) at least

18 $100,000 (by grant, subgrant, or subcontract)

19 under the Appalachian Regional Development

20 Act of 1965,

21 ‘‘(F) a nonprofit primary health care en22 tity located in a rural area (as defined by the

23 Appalachian Regional Commission)—

24 ‘‘(i) which received in the fiscal year

25 ending June 30, 1976, at least $100,000
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•S 2374 IS

1 (by grant, subgrant, or subcontract) under

2 the Appalachian Regional Development Act

3 of 1965, and

4 ‘‘(ii) which, for all periods after such

5 date, either has been the recipient of a

6 grant, subgrant, or subcontract under such

7 Act or has provided services on a prepaid

8 capitation or other risk basis under a con9 tract with the State agency initially en10 tered into during a year in which the entity

11 was the recipient of such a grant,

12 subgrant, or subcontract,

13 ‘‘(G) an entity that had contracted with

14 the State agency prior to 1970 for the provi15 sion, on a prepaid risk basis, of services (which

16 did not include inpatient hospital services) to

17 individuals eligible for medical assistance under

18 the State plan,

19 ‘‘(H) a program pursuant to an undertak20 ing described in subsection (l)(3) in which at

21 least 25 percent of the membership enrolled on

22 a prepaid basis are individuals who—

23 ‘‘(i) are not insured for benefits under

24 part B of title XVIII or eligible for medical

25 assistance under the State plan, and
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•S 2374 IS

1 ‘‘(ii) (in the case of such individuals

2 whose prepayments are made in whole or

3 in part by any government entity) had the

4 opportunity at the time of enrollment in

5 the program to elect other coverage of

6 health care costs that would have been

7 paid in whole or in part by any govern8 mental entity,

9 ‘‘(I) an entity that, on the date of enact10 ment of this provision, had a contract with the

11 State agency under a waiver under section 1115

12 or 1915(b) and was not subject to a require13 ment under this title to permit disenrollment

14 without cause, or

15 ‘‘(J) an entity that has a contract with the

16 State agency under a waiver under section

17 1915(b)(5).

18 ‘‘(f) STATE MONITORING AND EXTERNAL REVIEW.—

19 ‘‘(1) STATE GRIEVANCE PROCEDURE.—A State

20 contracting with a risk contracting entity or a pri21 mary care case management entity under this sec22 tion shall provide for a grievance procedure for en23 rollees of such entity with at least the following ele24 ments:
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•S 2374 IS

1 ‘‘(A) a toll-free telephone number for en2 rollee questions and grievances,

3 ‘‘(B) periodic notification of enrollees of

4 their rights with respect to such entity or pro5 gram,

6 ‘‘(C) periodic sample reviews of grievances

7 registered with such entity or program or with

8 the State, and

9 ‘‘(D) periodic survey and analysis of en10 rollee satisfaction with such entity or program,

11 including interviews with individuals who

12 disenroll from the entity or program.

13 ‘‘(2) STATE MONITORING OF QUALITY AND AC14 CESS.—

15 ‘‘(A) RISK CONTRACTING ENTITIES.—A

16 State contracting with a risk contracting entity

17 under this section shall provide for ongoing

18 monitoring of such entity’s compliance with the

19 requirements of subsection (b), including com20 pliance with the requirements of such entity’s

21 contract under subsection (b)(3), and shall un22 dertake appropriate followup activities to ensure

23 that any problems identified are rectified and

24 that compliance with the requirements of sub-
596

•S 2374 IS

1 section (b) and the requirements of the contract

2 under subsection (b)(3) is maintained.

3 ‘‘(B) PRIMARY CARE CASE MANAGEMENT

4 ENTITIES.—A State electing to implement a

5 primary care case management program shall

6 provide for ongoing monitoring of the pro7 gram’s compliance with the requirements of

8 subsection (c) and shall undertake appropriate

9 followup activities to ensure that any problems

10 identified are rectified and that compliance with

11 subsection (c) is maintained.

12 ‘‘(C) SERVICES.—

13 ‘‘(i) IN GENERAL.—The State shall

14 establish procedures (in addition to those

15 required under subparagraphs (A) and

16 (B)) to ensure that the services listed in

17 clause (ii) are available in a timely manner

18 to an individual enrolled with a risk con19 tracting entity or a primary care case man20 agement entity. Where necessary to ensure

21 the timely provision of such services, the

22 State shall arrange for the provision of

23 such services by health care providers

24 other than the risk contracting entity or
597

•S 2374 IS

1 the primary care case management entity

2 in which an individual is enrolled.

3 ‘‘(ii) SERVICES LISTED.—The services

4 listed in this clause are:

5 ‘‘(I) prenatal care;

6 ‘‘(II) immunizations;

7 ‘‘(III) lead screening and treat8 ment;

9 ‘‘(IV) prevention, diagnosis and

10 treatment of tuberculosis, sexually

11 transmitted diseases (including HIV

12 infection), and other communicable

13 diseases; and

14 ‘‘(V) such other services as the

15 Secretary may specify.

16 ‘‘(iii) REPORT.—The procedures re17 ferred to in clause (i) shall be described in

18 an annual report to the Secretary provided

19 by the State.

20 ‘‘(3) EXTERNAL INDEPENDENT REVIEW.—

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

22 paragraph (4), a State contracting with a risk

23 contracting entity under this section shall pro24 vide for an annual external independent review

25 of the quality and timeliness of, and access to,
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•S 2374 IS

1 the items and services specified in such entity’s

2 contract with the State agency. Such review

3 shall be conducted by a utilization control and

4 peer review organization with a contract under

5 section 1153 or another organization unaffili6 ated with the State government or with any

7 risk contracting entity and approved by the

8 Secretary.

9 ‘‘(B) CONTENTS OF REVIEW.—An external

10 independent review conducted under this para11 graph shall include the following:

12 ‘‘(i) a review of the entity’s medical

13 care, through sampling of medical records

14 or other appropriate methods, for indica15 tions of quality of care and inappropriate

16 utilization (including overutilization) and

17 treatment,

18 ‘‘(ii) a review of enrollee inpatient and

19 ambulatory data, through sampling of

20 medical records or other appropriate meth21 ods, to determine trends in quality and ap22 propriateness of care,

23 ‘‘(iii) notification of the entity and the

24 State when the review under this para25 graph indicates inappropriate care, treat-
599

•S 2374 IS

1 ment, or utilization of services (including

2 overutilization), and

3 ‘‘(iv) other activities as prescribed by

4 the Secretary or the State.

5 ‘‘(C) AVAILABILITY.—The results of each

6 external independent review conducted under

7 this paragraph shall be available to the public

8 consistent with the requirements for disclosure

9 of information contained in section 1160.

10 ‘‘(4) DEEMED COMPLIANCE WITH EXTERNAL

11 INDEPENDENT QUALITY OF CARE REVIEW REQUIRE12 MENTS.—

13 ‘‘(A) IN GENERAL.—The Secretary may

14 deem the State to have fulfilled the requirement

15 for independent external review of quality of

16 care with respect to an entity which has been

17 accredited by an organization described in sub18 paragraph (B) and approved by the Secretary.

19 ‘‘(B) ACCREDITING ORGANIZATION.—An

20 accrediting organization described in this sub21 paragraph must—

22 ‘‘(i) exist for the primary purpose of

23 accrediting coordinated care organizations;

24 ‘‘(ii) be governed by a group of indi25 viduals representing health care providers,
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•S 2374 IS

1 purchasers, regulators, and consumers (a

2 minority of which shall be representatives

3 of health care providers);

4 ‘‘(iii) have substantial experience in

5 accrediting coordinated care organizations,

6 including an organization’s internal quality

7 assurance program;

8 ‘‘(iv) be independent of health care

9 providers or associations of health care

10 providers;

11 ‘‘(v) be a nonprofit organization; and

12 ‘‘(vi) have an accreditation process

13 which meets requirements specified by the

14 Secretary.

15 ‘‘(5) FEDERAL MONITORING RESPONSIBIL16 ITIES.—The Secretary shall review the external inde17 pendent reviews conducted pursuant to paragraph

18 (3) and shall monitor the effectiveness of the State’s

19 monitoring and followup activities required under

20 subparagraph (A) of paragraph (2). If the Secretary

21 determines that a State’s monitoring and followup

22 activities are not adequate to ensure that the re23 quirements of paragraph (2) are met, the Secretary

24 shall undertake appropriate followup activities to en-
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•S 2374 IS

1 sure that the State improves its monitoring and fol2 lowup activities.

3 ‘‘(g) TRANSACTIONS WITH PARTIES IN INTEREST.—

4 ‘‘(1) IN GENERAL.—Each risk contracting en5 tity which is not a qualified health maintenance or6 ganization (as defined in section 1310(d) of the

7 Public Health Service Act) must report to the State

8 and, upon request, to the Secretary, the Inspector

9 General of the Department of Health and Human

10 Services, and the Comptroller General of the United

11 States a description of transactions between the en12 tity and a party in interest (as defined in section

13 1318(b) of such Act), including the following trans14 actions:

15 ‘‘(A) Any sale or exchange, or leasing of

16 any property between the entity and such a

17 party.

18 ‘‘(B) Any furnishing for consideration of

19 goods, services (including management serv20 ices), or facilities between the entity and such

21 a party, but not including salaries paid to em22 ployees for services provided in the normal

23 course of their employment.
602

•S 2374 IS

1 ‘‘(C) Any lending of money or other exten2 sion of credit between the entity and such a

3 party.

4 The State or the Secretary may require that infor5 mation reported with respect to a risk contracting

6 entity which controls, or is controlled by, or is under

7 common control with, another entity be in the form

8 of a consolidated financial statement for the risk

9 contracting entity and such entity.

10 ‘‘(2) AVAILABILITY OF INFORMATION.—Each

11 risk contracting entity shall make the information

12 reported pursuant to paragraph (1) available to its

13 enrollees upon reasonable request.

14 ‘‘(h) REMEDIES FOR FAILURE TO COMPLY.—

15 ‘‘(1) IN GENERAL.—If the Secretary determines

16 that a risk contracting entity or a primary care case

17 management entity—

18 ‘‘(A) fails substantially to provide services

19 required under section 1905(r), when such an

20 entity is required to do so, or provide medically

21 necessary items and services that are required

22 to be provided to an individual enrolled with

23 such an entity, if the failure has adversely af24 fected (or has substantial likelihood of adversely

25 affecting) the individual;
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•S 2374 IS

1 ‘‘(B) imposes premiums on individuals en2 rolled with such an entity in excess of the pre3 miums permitted under this title;

4 ‘‘(C) acts to discriminate among individ5 uals in violation of the provision of subsection

6 (b)(3)(D), including expulsion or refusal to

7 reenroll an individual or engaging in any prac8 tice that would reasonably be expected to have

9 the effect of denying or discouraging enrollment

10 (except as permitted by this section) by eligible

11 individuals with the entity whose medical condi12 tion or history indicates a need for substantial

13 future medical services;

14 ‘‘(D) misrepresents or falsifies information

15 that is furnished—

16 ‘‘(i) to the Secretary or the State

17 under this section; or

18 ‘‘(ii) to an individual or to any other

19 entity under this section; or

20 ‘‘(E) fails to comply with the requirements

21 of section 1876(i)(8),

22 the Secretary may provide, in addition to any other

23 remedies available under law, for any of the rem24 edies described in paragraph (2).
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•S 2374 IS

1 ‘‘(2) ADDITIONAL REMEDIES.—The remedies

2 described in this paragraph are—

3 ‘‘(A) civil money penalties of not more

4 than $25,000 for each determination under

5 paragraph (1), or, with respect to a determina6 tion under subparagraph (C) or (D)(i) of such

7 paragraph, of not more than $100,000 for each

8 such determination, plus, with respect to a de9 termination under paragraph (1)(B), double the

10 excess amount charged in violation of such

11 paragraph (and the excess amount charged

12 shall be deducted from the penalty and returned

13 to the individual concerned), and plus, with re14 spect to a determination under paragraph

15 (1)(C), $15,000 for each individual not enrolled

16 as a result of a practice described in such para17 graph, or

18 ‘‘(B) denial of payment to the State for

19 medical assistance furnished by a risk contract20 ing entity or a primary care case management

21 entity under this section for individuals enrolled

22 after the date the Secretary notifies the entity

23 of a determination under paragraph (1) and

24 until the Secretary is satisfied that the basis for
605

•S 2374 IS

1 such determination has been corrected and is

2 not likely to recur.

3 The provisions of section 1128A (other than sub4 sections (a) and (b)) shall apply to a civil money

5 penalty under subparagraph (A) in the same manner

6 as such provisions apply to a penalty or proceeding

7 under section 1128A(a).

8 ‘‘(i) TERMINATION OF CONTRACT BY STATE.—Any

9 State which has a contract with a risk contracting entity

10 or a primary care case management entity may terminate

11 such contract if such entity fails to comply with the terms

12 of such contract or any applicable provision of this section.

13 ‘‘(j) FAIR HEARING.—Nothing in this section shall

14 affect the rights of an individual eligible to receive medical

15 assistance under the State plan to obtain a fair hearing

16 under section 1902(a)(3) or under applicable State law.

17 ‘‘(k) REFERRAL PAYMENTS.—For 1 year following

18 the date on which individuals eligible for medical assist19 ance under the State plan in a service area are required

20 to enroll with a risk contracting entity or a primary care

21 case management entity, Federally qualified health cen22 ters and rural health centers located in such service area

23 or providing care to such enrollees, shall receive a fee for

24 educating such enrollees about the availability of services
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•S 2374 IS

1 from the risk contracting entity or primary care case man2 agement entity with which such enrollees are enrolled.

3 ‘‘(l) SPECIAL RULES.—

4 ‘‘(1) NONAPPLICABILITY OF CERTAIN PROVI5 SIONS TO CERTAIN RISK CONTRACTING ENTITIES.—

6 In the case of any risk contracting entity which—

7 ‘‘(A)(i) is an individual physician or a phy8 sician group practice of less than 50 physicians,

9 and

10 ‘‘(ii) is not described in paragraphs (A)

11 and (B) of subsection (b)(1), and

12 ‘‘(B) is at risk only for the health care

13 items and services directly provided by such en14 tity,

15 paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4)

16 of subsection (b), and paragraph (3) of subsection

17 (f), shall not apply to such entity.

18 ‘‘(2) EXCEPTION FROM DEFINITION OF RISK

19 CONTRACTING ENTITY.—For purposes of this sec20 tion, the term ‘risk contracting entity’ shall not in21 clude a health insuring organization which was used

22 by a State before April 1, 1986, to administer a por23 tion of the State plan of such State on a statewide

24 basis.
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•S 2374 IS

1 ‘‘(3) NEW JERSEY.—The rules under section

2 1903(m)(6) as in effect on the day before the effec3 tive date of this section shall apply in the case of an

4 undertaking by the State of New Jersey (as de5 scribed in such section 1903(m)(6)).

6 ‘‘(m) CONTINUATION OF CERTAIN COORDINATED

7 CARE PROGRAMS.—The Secretary may provide for the

8 continuation of any coordinated care program operating

9 under section 1115 or 1915 without requiring compliance

10 with any provision of this section which conflicts with the

11 continuation of such program and without requiring any

12 additional waivers under such sections 1115 and 1915 if

13 the program has been successful in assuring quality and

14 containing costs (as determined by the Secretary) and is

15 likely to continue to be successful in the future.

16 ‘‘(n) GUIDELINES AND MODEL CONTRACT.—

17 ‘‘(1) GUIDELINES ON SOLVENCY.—At the earli18 est practicable time after the date of enactment of

19 this section, the Secretary shall issue guidelines con20 cerning solvency standards for risk contracting enti21 ties and subcontractors of such risk contracting enti22 ties. Such guidelines shall take into account charac23 teristics that may differ among risk contracting enti24 ties including whether such an entity is at risk for

25 inpatient hospital services.
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•S 2374 IS

1 ‘‘(2) GUIDELINES ON MARKETING.—At the ear2 liest practicable time after the date of enactment of

3 this section, the Secretary shall issue guidelines con4 cerning—

5 ‘‘(A) marketing undertaken by any risk

6 contracting entity or any primary care case

7 management program to individuals eligible for

8 medical assistance under the State plan, and

9 ‘‘(B) information that must be provided by

10 States or any such entity to individuals eligible

11 for medical assistance under the State plan

12 with respect to—

13 ‘‘(i) the options and rights of such in14 dividuals to enroll with, and disenroll from,

15 any such entity, as provided in this section,

16 and

17 ‘‘(ii) the availability of services from

18 any such entity (including a list of services

19 for which such entity is responsible or

20 must approve and information on how to

21 obtain services for which such entity is not

22 responsible).

23 In developing the guidelines under this paragraph,

24 the Secretary shall address the special circumstances

25 of children with special health care needs (as defined
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•S 2374 IS

1 in subsection (e)(1)(B)(ii)) and other individuals

2 with special health care needs.

3 ‘‘(3) MODEL CONTRACT.—The Secretary shall

4 develop a model contract to reflect the requirements

5 of subsection (b)(3) and such other requirements as

6 the Secretary determines appropriate.’’

7 (b) WAIVERS FROM REQUIREMENTS ON COORDI8 NATED CARE PROGRAMS.—Section 1915(b) (42 U.S.C.

9 1396n) is amended—

10 (1) in the matter preceding paragraph (1), by

11 striking ‘‘as may be necessary’’ and inserting ‘‘, and

12 section 1931 as may be necessary’’;

13 (2) in paragraph (1), by striking ‘‘a primary

14 care case management system or’’;

15 (3) by striking ‘‘and’’ at the end of paragraph

16 (3);

17 (4) by striking the period at the end of para18 graph (4) and inserting ‘‘, and’’; and

19 (5) by inserting after paragraph (4) the follow20 ing new paragraph:

21 ‘‘(5) to permit a risk contracting entity (as de22 fined in section 1931(a)(3)) to restrict the period in

23 which individuals enrolled with such entity may ter24 minate such enrollment without cause in accordance

25 with section 1931(e)(3)(A).’’.
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•S 2374 IS

1 (c) STATE OPTION TO GUARANTEE MEDICAID ELIGI2 BILITY.—Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is

3 amended—

4 (1) in subparagraph (A), by striking all that

5 precedes ‘‘(but for this paragraph)’’ and inserting

6 ‘‘In the case of an individual who is enrolled—

7 ‘‘(i) with a qualified health maintenance

8 organization (as defined in title XIII of the

9 Public Health Service Act) or with a risk con10 tracting entity (as defined in section

11 1931(a)(3)), or

12 ‘‘(ii) with any risk contracting entity (as

13 defined in section 1931(a)(3)) in a State that,

14 on the effective date of this provision, had in ef15 fect a waiver under section 1115 of require16 ments under this title under which the State

17 could extend eligibility for medical assistance

18 for enrollees of such entity, or

19 ‘‘(iii) with an eligible organization with a

20 contract under section 1876,

21 and who would’’,

22 (2) in subparagraph (B), by striking ‘‘organiza23 tion or’’ each place it appears, and

24 (3) by adding at the end the following new sub25 paragraph:
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•S 2374 IS

1 ‘‘(C) The State plan may provide, notwith2 standing any other provision of this title, that

3 an individual shall be deemed to continue to be

4 eligible for benefits under this title until the end

5 of the month following the month in which such

6 individual would (but for this paragraph) lose

7 such eligibility because of excess income and re8 sources, if the individual is enrolled with a risk

9 contracting entity or primary care case manage10 ment entity (as those terms are defined in sec11 tion 1931(a)).’’.

12 (d) ENHANCED MATCH RELATED TO QUALITY RE13 VIEW.—Section 1903(a)(3)(C) (42 U.S.C.

14 1396b(a)(3)(C)) is amended—

15 (1) by striking ‘‘organization or by’’ and insert16 ing ‘‘organization, by’’; and

17 (2) by striking ‘‘section 1152, as determined by

18 the Secretary,’’ and inserting ‘‘section 1152, as de19 termined by the Secretary, or by another organiza20 tion approved by the Secretary which is unaffiliated

21 with the State government or with any risk contract22 ing entity (as defined in section 1931(a)(3)),’’.

23 (e) CONFORMING AMENDMENTS.—

24 (1) Section 1128(b)(6)(C)(i) (42 U.S.C. 1320a–

25 7(b)(6)(C)(i)) is amended by striking ‘‘health main-
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•S 2374 IS

1 tenance organization’’ and inserting ‘‘risk contract2 ing entity’’.

3 (2) Section 1902(a)(23) (42 U.S.C.

4 1396a(a)(23)) is amended by striking ‘‘primary

5 care-case management system (described in section

6 1915(b)(1)), a health maintenance organization,’’

7 and inserting ‘‘primary care case management pro8 gram (as defined in section 1931(a)(1)), a risk con9 tracting entity (as defined in section 1931(a)(3)),’’.

10 (3) Section 1902(a)(30)(C) (42 U.S.C.

11 1396a(a)(30)(C)) is amended by striking ‘‘use a uti12 lization’’ and all that follows through ‘‘with the re13 sults’’ and inserting ‘‘provide for independent review

14 and quality assurance of entities with contracts

15 under section 1931, in accordance with subsection

16 (f) of such section 1931, with the results’’.

17 (4) Section 1902(a)(57) (42 U.S.C.

18 1396a(a)(57)) is amended by striking ‘‘or health

19 maintenance organization (as defined in section

20 1903(m)(1)(A))’’ and inserting ‘‘risk contracting en21 tity, or primary care case management entity (as de22 fined in section 1931(a))’’.

23 (5) Section 1902(a) (42 U.S.C. 1396a), as

24 amended by sections 121, 201(a), 851, 854, and

25 855, is amended—
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1 (A) by striking ‘‘and’’ at the end of para2 graph (66);

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

4 paragraph (67) and inserting ‘‘; and’’; and

5 (C) by adding at the end the following new

6 paragraphs:

7 ‘‘(68) at State option, provide for a primary

8 care case management program in accordance with

9 section 1931; and

10 ‘‘(69) at State option, provide for a program

11 under which the State contracts with risk contract12 ing entities in accordance with section 1931.’’.

13 (6) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2))

14 is amended by striking ‘‘health maintenance organi15 zation (as defined in section 1903(m))’’ and insert16 ing ‘‘risk contracting entity (as defined in section

17 1931(a)(3))’’.

18 (7) Section 1902(w) (42 U.S.C. 1396a(w)) is

19 amended—

20 (A) in paragraph (1), by striking ‘‘section

21 1903(m)(1)(A)’’ and inserting ‘‘section

22 1931(a)(3)’’, and

23 (B) in paragraph (2)(E)—
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1 (i) by striking ‘‘health maintenance

2 organization’’ and inserting ‘‘risk contract3 ing entity’’, and

4 (ii) by striking ‘‘organization’’ and in5 serting ‘‘entity’’.

6 (8) Section 1903(k) (42 U.S.C. 1396b(k)) is

7 amended by striking ‘‘health maintenance organiza8 tion which meets the requirements of subsection (m)

9 of this section’’ and inserting ‘‘risk contracting en10 tity which meets the requirements of section 1931’’.

11 (9) Section 1903(w)(7)(A)(viii) (42 U.S.C.

12 1396b(w)(7)(A)(viii)) is amended by striking ‘‘health

13 maintenance organizations (and other organizations

14 with contracts under section 1903(m))’’ and insert15 ing ‘‘risk contracting entities with contracts under

16 section 1931’’.

17 (10) Section 1905(a) (42 U.S.C. 1396d(a)) is

18 amended, in the matter preceding clause (i), by in19 serting ‘‘(which may be on a prepaid capitation or

20 other risk basis)’’ after ‘‘payment’’.

21 (11) Section 1916(b)(2)(D) (42 U.S.C.

22 1396o(b)(2)(D)) is amended by striking ‘‘health

23 maintenance organization (as defined in section

24 1903(m))’’ and inserting ‘‘risk contracting entity (as

25 defined in section 1931(a)(3))’’.
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1 (12) Section 1925(b)(4)(D)(iv) (42 U.S.C.

2 1396r–6(b)(4)(D)(iv)) is amended—

3 (A) in the heading, by striking ‘‘HMO’’

4 and inserting ‘‘RISK CONTRACTING ENTITY’’,

5 (B) by striking ‘‘health maintenance orga6 nization (as defined in section 1903(m)(1)(A))’’

7 and inserting ‘‘risk contracting entity (as de8 fined in section 1931(a)(3)’’, and

9 (C) by striking ‘‘health maintenance orga10 nization in accordance with section 1903(m)’’

11 and inserting ‘‘risk contracting entity in accord12 ance with section 1931’’.

13 (13) Paragraphs (1) and (2) of section 1926(a)

14 (42 U.S.C. 1396r–7(a)) are each amended by strik15 ing ‘‘health maintenance organizations under section

16 1903(m)’’ and inserting ‘‘risk contracting entities

17 under section 1931’’.

18 (13) Section 1927(j)(1) is amended by striking

19 ‘‘* * * Health Maintenance Organizations, includ20 ing those organizations that contract under section

21 1903(m)’’ and inserting ‘‘risk contracting entities

22 (as defined in section 1931(a)(3))’’.

23 (f) EFFECTIVE DATE.—The amendments made by

24 this section shall become effective with respect to calendar

25 quarters beginning on or after January 1, 1995.
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1 PART III—LONG-TERM CARE PROVISIONS

2 SEC. 871. STATE OPTION TO PROVIDE HOME OR COMMU3 NITY BASED CARE SERVICES.

4 (a) PROVISION AS OPTIONAL SERVICE.—Section

5 1905(a) (42 U.S.C. 1396d(a)) is amended—

6 (1) by striking ‘‘and’’ at the end of paragraph

7 (24);

8 (2) by redesignating paragraph (25) as para9 graph (26); and

10 (3) by inserting after paragraph (24) the fol11 lowing new paragraph:

12 ‘‘(25) home or community based services (as

13 defined in section 1905(t)).’’.

14 (b) DEFINITION.—Section 1905 (42 U.S.C. 1396d)

15 is amended by adding at the end the following new sub16 section:

17 ‘‘(t) The term ‘home or community based services’

18 means services (other than room and board) approved by

19 the Secretary which are provided pursuant to a written

20 plan of care to individuals who require the level of care

21 provided in a hospital, nursing facility, or intermediate

22 care facility for the mentally retarded, the cost of which

23 could be reimbursed under the State plan. For purposes

24 of this subsection, the term ‘room and board’ shall not

25 include an amount established under a method determined

26 by the State to reflect the portion of costs of rent and
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•S 2374 IS

1 food attributable to an unrelated personal caregiver who

2 is residing in the same household with an individual who,

3 but for assistance of such caregiver, would require admis4 sion to a hospital, nursing facility, or intermediate care

5 facility for the mentally retarded.’’.

6 (c) CONFORMING AMENDMENTS.—(1) Section

7 1902(a)(10)(C)(iv) (42 U.S.C. 1396a(a)(10)(C)(iv)) is

8 amended by striking ‘‘through (24)’’ and inserting

9 ‘‘through (25)’’.

10 (2) Section 1902(j) (42 U.S.C. 1396a(j)) is amended

11 by striking ‘‘through (25)’’ and inserting ‘‘through (26)’’.

12 SEC. 872. ELIMINATION OF RULE REGARDING AVAILABIL13 ITY OF BEDS IN CERTAIN INSTITUTIONS.

14 (a) IN GENERAL.—The first sentence of section

15 1915(c)(1) (42 U.S.C. 1396n(c)(1)) is amended by insert16 ing the following before the end period: ‘‘(at the option

17 of the State, such determination may be made without re18 gard to the availability of beds in such a hospital, nursing

19 facility, or intermediate care facility for the mentally re20 tarded located in the State)’’.

21 (b) EFFECTIVE DATE.—The amendment made by

22 subsection (a) shall be effective with respect to waivers

23 granted or renewed on or after January 1, 1995.
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1 SEC. 873. CERTAIN DEMONSTRATION PROJECTS PER2 MITTED UNDER THE MEDICAID PROGRAM.

3 (a) IN GENERAL.—Section 1917(b) of the Social Se4 curity Act (42 U.S.C. 1396p(b)) is amended—

5 (1) in paragraph (1), by striking subparagraph

6 (C);

7 (2) in paragraph (3), by striking ‘‘(other than

8 paragraph (1)(C))’’; and

9 (3) in paragraph (4)(B), by striking ‘‘(and shall

10 include, in the case of an individual to whom para11 graph (1)(C)(i) applies)’’.

12 (b) EFFECTIVE DATE.—Section 1917(b) of the So13 cial Security Act (42 U.S.C. 1396p(b)) shall be applied

14 and administered as if the provisions stricken by para15 graph (1) had not been enacted.

16 SEC. 874. ELIMINATION OF REQUIREMENT OF PRIOR INSTI17 TUTIONALIZATION WITH RESPECT TO HA18 BILITATION SERVICES FURNISHED UNDER A

19 WAIVER FOR HOME OR COMMUNITY-BASED

20 SERVICES.

21 (a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C.

22 1396n(c)(5)) is amended in the matter preceding subpara23 graph (A) by striking ‘‘, with respect to individuals who

24 receive such services after discharge from a nursing facil25 ity or intermediate care facility for the mentally retarded’’.
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•S 2374 IS

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. 875. RELIEF FROM THIRD PARTY LIABILITY REQUIRE5 MENTS WHEN COST-EFFECTIVE.

6 (a) IN GENERAL.—Section 1902(a)(25)(B) (42

7 U.S.C. 1396a(a)(25)(B)) is amended to read as follows—

8 ‘‘(B) that in any case where such a legal liabil9 ity is found to exist after medical assistance has

10 been made available, the State or local agency will

11 seek reimbursement for such assistance to the extent

12 of such legal liability, unless—

13 ‘‘(i) the amount of reimbursement the

14 State can reasonably expect to recover for medi15 cal assistance furnished to an individual does

16 not exceed the costs of such recovery, or

17 ‘‘(ii) with respect to case management

18 services (as defined in section 1915(g)(2)), the

19 State demonstrates to the satisfaction of the

20 Secretary that it is not cost-effective in the ag21 gregate to seek such recovery with respect to

22 such services furnished to individuals covered

23 under the State plan, using methods specified

24 by the Secretary which may include a dem-
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1 onstration that such services are not generally

2 covered by health insurers in the State;’’.

3 (b) EFFECTIVE DATE.—The amendments made by

4 this section shall become effective on January 1, 1995.

5 SEC. 876. STATE EXPENDITURES FOR MEDICAL ASSIST6 ANCE WITH RESPECT TO HOME AND COMMU7 NITY-BASED SERVICES PROVIDED UNDER A

8 WAIVER.

9 (a) IN GENERAL.—Section 1915(d)(5)(B) (42 U.S.C.

10 1396n(d)(5)(B)) is amended—

11 (1) in clause (i), by striking ‘‘times the number

12 of years’’ and inserting ‘‘compounded annually for

13 years’’;

14 (2) in clause (ii), by striking ‘‘times the number

15 of years’’ and inserting ‘‘compounded annually for

16 years’’; and

17 (3) in clause (iv), by striking ‘‘December 22,

18 1987’’ and inserting ‘‘the date of the enactment of

19 the Omnibus Budget Reconciliation Act of 1986’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 subsection (a) shall be effective as if included in the enact22 ment of the Omnibus Budget Reconciliation Act of 1987.
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•S 2374 IS

1 SEC. 877. EXTENSION AND CONSOLIDATION OF FRAIL EL2 DERLY DEMONSTRATION PROJECT WAIVERS.

3 (a) ELIMINATION OF LIMIT ON NUMBER OF WAIV4 ERS.—

5 (1) IN GENERAL.—Section 9412(b)(1) of the

6 Omnibus Budget Reconciliation Act of 1986 is

7 amended by striking ‘‘not more than 15’’.

8 (2) TRANSITION.—The Secretary of Health and

9 Human Services shall grant waivers under section

10 9412(b) of the Omnibus Budget Reconciliation Act

11 of 1986 to not more than—

12 (A) 50 organizations before July 1, 1995,

13 or

14 (B) 75 organizations before July 1, 1996.

15 (b) INDEFINITE EXTENSION OF PARTICIPATION AND

16 STATUS AS PROVIDERS.—Section 9412(b)(2) of the Om17 nibus Budget Reconciliation Act of 1986 is amended—

18 (1) in subparagraph (A), by striking ‘‘subpara19 graph (B)’’ and inserting ‘‘this paragraph’’,

20 (2) in subparagraph (A), by adding at the end

21 the following: ‘‘Except as otherwise provided by law

22 or regulation, such terms and conditions, with re23 spect to an organization, shall be substantially equiv24 alent to the terms and conditions provided under the

25 Protocol for the Program of All-inclusive Care for

26 the Elderly (PACE), as published by On Lok, Inc.
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•S 2374 IS

1 (and as recognized by the Health Care Financing

2 Administration) as of June 30, 1994, and made gen3 erally available.’’;

4 (2) in subparagraph (C), by striking ‘‘may ex5 tend’’ and inserting ‘‘shall extend for an indefinite

6 period’’; and

7 (3) by adding at the end the following:

8 ‘‘(D) Upon successful completion of the initial period

9 of the waiver under this subsection, an organization shall

10 be afforded regular provider status under titles XVIII and

11 XIX of the Social Security Act in accordance with appro12 priate regulations to be promulgated by the Secretary.

13 This subparagraph shall apply to organizations operating

14 under a waiver on or after July 1, 1997.

15 ‘‘(E) The provisions of this paragraph also shall

16 apply to the organization under the On Lok waiver de17 scribed in subparagraph (A).

18 ‘‘(F) Organizations under this paragraph shall ordi19 narily be reimbursed on a capitation basis. The organiza20 tions may provide additional services as may be deemed

21 appropriate by the organizations without regard to wheth22 er such services are specifically reimbursable through capi23 tation payments.’’.

24 (c) TREATMENT OF APPLICATIONS.—Section

25 9412(b)(1) of such Act is amended by adding at the end
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•S 2374 IS

1 the following: ‘‘An appropriately completed application for

2 a waiver under this subsection is deemed approved unless

3 the Secretary specifically disapproves it in writing within

4 90 days of the date of its filing (or, if the Secretary re5 quests reasonable and substantial additional information

6 within such 90 day period, within 90 days of the date of

7 providing such additional information). The Secretary

8 shall have sole authority to approve or disapprove the ini9 tial and subsequent eligibility of an organization for a

10 waiver and shall make such determinations in a timely

11 manner.’’.

12 (d) PROMOTION OF ADDITIONAL APPLICATIONS.—

13 Section 9412(b) of such Act is amended by adding at the

14 end the following:

15 ‘‘(5) The Secretary shall institute an organized

16 effort to promote the development of organizations

17 under this subsection.’’.

18 (e) PROVISION OF ADDITIONAL SERVICES.—Section

19 9412(b) of such Act, as amended by subsection (d), is fur20 ther amended by adding at the end the following:

21 ‘‘(6) Nothing in this subsection shall prevent an

22 organization with a waiver under this subsection

23 from developing and providing appropriate services

24 to frail populations that may not be elderly, except

25 where the Secretary finds that such an extension im-
624

•S 2374 IS

1 pair the ability of the organization to provide serv2 ices required under the waiver.’’.

3 SEC. 878. CERTAIN IMPROVEMENTS IN MEDICAID CASE

4 MANAGEMENT SERVICES AND HOME AND

5 COMMUNITY-BASED WAIVERS.

6 (a) IN GENERAL.—Section 1902(a) (42 U.S.C.

7 1396a) is amended—

8 (1) in paragraph (23), by inserting ‘‘(including

9 case management services under subsections (c), (d),

10 and (g) of such section)’’ after ‘‘in section 1915’’;

11 and

12 (2) in paragraph (32)—

13 (A) by striking the period at the end of

14 subparagraph (C) and inserting ‘‘; and’’; and

15 (B) by adding at the end the following new

16 subparagraph:

17 ‘‘(D) in the case of services arranged

18 through the case management agency under

19 subsections (c), (d), or (g) of section 1915, pay20 ments made by the case management agency to

21 providers of services shall be permitted provided

22 that—

23 ‘‘(i) the case management entity is a

24 nonprofit entity;
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•S 2374 IS

1 ‘‘(ii) the case management entity

2 maintains a clear system of records dem3 onstrating conformity between payments

4 made and services required under the indi5 vidual’s plan of care; and

6 ‘‘(iii) the entity makes assurances sat7 isfactory to the State that providers paid

8 by the entity, for covered services to indi9 viduals eligible under this title, are eligible

10 for payments under the provisions of this

11 title;’’.

12 (b) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to payments for medical assistance

14 for calendar quarters beginning on or after January 1,

15 1995.

16 PART IV—OTHER PROVISIONS

17 SEC. 881. AMENDMENTS TO PROVISIONS REQUIRING

18 STATES TO MAKE DSH PAYMENT ADJUST19 MENTS.

20 (a) IN GENERAL.—

21 (1) ADJUSTMENT TO NATIONAL DSH PAYMENT

22 LIMIT.—Section 1923(f)(1)(B) (42 U.S.C. 1396r–

23 4(f)(1)(B)) is amended by striking ‘‘12 percent’’ and

24 inserting ‘‘9 percent’’.
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•S 2374 IS

1 (2) ADJUSTMENTS TO STATE ALLOTMENT LIM2 ITS.—Section 1923(f)(2)(B)(i) (42 U.S.C. 1396r–

3 4(f)(2)(B)(i)) is amended by striking ‘‘12 percent’’

4 and inserting ‘‘9 percent’’.

5 (3) ADJUSTMENT RELATING TO HIGH DSH

6 STATES.—

7 (A) IN GENERAL.—Section

8 1923(f)(2)(B)(i) (42 U.S.C. 1396r–

9 4(f)(2)(B)(i)) is amended by striking ‘‘the State

10 DSH allotment shall equal the State based al11 lotment’’ and inserting ‘‘the State DSH allot12 ment shall be an amount equal to the State

13 based allotment less 25 percent of such allot14 ment’’.

15 (4) EFFECTIVE DATE.—The amendments made

16 by this section shall be effective for calendar quar17 ters beginning on or after January 1, 1997.

18 SEC. 882. RECOMMENDATIONS BY THE SECRETARY ON A

19 PHASED-IN ELIMINATION OF MEDICAID HOS20 PITAL DISPROPORTIONATE SHARE ADJUST21 MENT PAYMENTS.

22 Not later than January 1, 2000, the Secretary shall

23 submit recommendations to Congress on a phased-in

24 elimination of the hospital disproportionate share adjust-
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•S 2374 IS

1 ment payments under section 1923 of the Social Security

2 Act.

3 SEC. 883. REVISION OF FEDERAL MEDICAL ASSISTANCE

4 PERCENTAGE FOR CERTAIN STATES.

5 (a) IN GENERAL.—Section 1905(b) (42 U.S.C.

6 1396d(b)) is amended—

7 (1) by redesignating clauses (1) and (2) as

8 clauses (2) and (3) and by inserting after ‘‘except

9 that’’ the following: ‘‘(1) for Alaska, the State per10 centage shall be that percentage which bears the

11 same ratio to 45 per centum as the square of the

12 adjusted per capita income of such State bears to

13 the square of the per capita income of the United

14 States;’’; and

15 (2) by inserting after the first sentence the fol16 lowing: ‘‘The ‘adjusted per capita income’ for Alaska

17 shall be determined by dividing the State 3-year av18 erage per capita income by 1.25.’’.

19 (b) EFFECTIVE DATE.—The amendments made by

20 this section shall become effective on October 1, 1995.

21 SEC. 884. CRITERIA FOR DETERMINING THE AMOUNT OF

22 DISALLOWANCES.

23 (a) IN GENERAL.—
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•S 2374 IS

1 (1) CRITERIA FOR INITIAL DETERMINATIONS.—

2 Section 1903 (42 U.S.C. 1396b) is amended by add3 ing at the end the following new subsection:

4 ‘‘(x) If the Secretary determines that a disallowance

5 of Federal financial participation should be made under

6 this title with respect to any item or class of items, the

7 Secretary shall, in making a determination with respect

8 to the amount of such disallowance, take into account (to

9 the extent the State makes a showing) factors which shall

10 include—

11 ‘‘(1) whether the amount of the disallowance is

12 reasonably related to the act or omission by the

13 State which is the basis for the disallowance; and

14 ‘‘(2) whether the act or omission by the State

15 which is the basis for the disallowance was based on

16 a reasonable interpretation of Federal statutes, Fed17 eral regulations, or any written guidance provided by

18 the Secretary.’’.

19 (2) CRITERIA FOR REDETERMINATIONS.—Sec20 tion 1116(d) (42 U.S.C. 1316(d)) is amended—

21 (A) by striking ‘‘(d)’’ and inserting

22 ‘‘(d)(1)’’; and

23 (B) by adding at the end the following new

24 paragraph:
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•S 2374 IS

1 ‘‘(2) In conducting any reconsideration of a disallow2 ance of Federal financial participation by the Secretary

3 under title XIX, the Departmental Appeals Board of the

4 Department of Health and Human Services (or another

5 entity designated by the Secretary), shall, if such Board

6 or entity upholds the basis for the disallowance, determine

7 whether the amount of the disallowance properly takes

8 into account the factors listed in section 1903(x). If the

9 amount of the disallowance does not properly take into

10 account such factors, the Board shall adjust such amount

11 in accordance with such factors.’’.

12 (b) EFFECTIVE DATE.—The amendment made by

13 subsection (a) shall apply to disallowances made after the

14 date of the enactment of this Act and shall take effect

15 without regard to the promulgation of implementing regu16 lations.

17 SEC. 885. TECHNICAL CORRECTIONS RELATING TO SEC18 TION 4752 OF OBRA–1990 (PHYSICIANS’ SERV19 ICES).

20 (a) Paragraph (59) of section 1902(a) (42 U.S.C.

21 1396a(a)), as added by section 4752(c)(1)(C) of the Om22 nibus Budget Reconciliation Act of 1990 and as redesig23 nated by section 13623(a)(6) of the Omnibus Budget Rec24 onciliation Act of 1993, is amended by striking ‘‘sub25 section (v)’’ and inserting ‘‘subsection (x)’’.
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•S 2374 IS

1 (b) Section 1903(i)(12) (42 U.S.C. 1396b(i)(12)), as

2 inserted by section 4752(e) of the Omnibus Budget Rec3 onciliation Act of 1990 and as redesignated by section

4 13631(c)(3) of the Omnibus Budget Reconciliation Act of

5 1993, is amended—

6 (1) by amending clause (i) of subparagraph (A)

7 to read as follows:

8 ‘‘(i) is certified in family practice or

9 pediatrics by the medical specialty board

10 recognized by the American Board of Med11 ical Specialties for family practice or pedi12 atrics or is certified in general practice or

13 pediatrics by the medical specialty board

14 recognized by the American Osteopathic

15 Association,’’;

16 (2) by amending clause (i) of subparagraph (B)

17 to read as follows:

18 ‘‘(i) is certified in family practice or

19 obstetrics by the medical specialty board

20 recognized by the American Board of Med21 ical Specialties for family practice or ob22 stetrics or is certified in general practice or

23 obstetrics by the Medical Specialty Board

24 recognized by the American Osteopathic

25 Association,’’; and
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•S 2374 IS

1 (3) in subparagraphs (A) and (B)—

2 (A) by striking ‘‘or’’ at the end of clause

3 (v);

4 (B) by redesignating clause (vi) as clause

5 (vii); and

6 (C) by inserting after clause (v) the follow7 ing new clause:

8 ‘‘(vi) delivers such services in the

9 emergency department of a hospital par10 ticipating in the State plan approved under

11 this title, or’’.

12 TITLE IX—DEPARTMENT OF

13 VETERANS AFFAIRS

14 SEC. 901. SHORT TITLE.

15 This title may be cited as the ‘‘Veterans Health Care

16 Administrative Flexibility Act of 1994’’.

17 SEC. 902. PURPOSE.

18 The purpose of this title is to facilitate the provision

19 of health care services by the Department of Veterans Af20 fairs by—

21 (1) granting the Department sufficient flexibil22 ity to respond rapidly and effectively to local mar23 keting and regulatory conditions (including health

24 care reform legislation that might be enacted by the

25 States); and
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•S 2374 IS

1 (2) granting the Department the authority and

2 resources to facilitate the timely acquisition of nec3 essary facilities and services at a local level.

4 SEC. 903. HEALTH CARE REFORM BY THE STATES.

5 (a) INTENT OF CONGRESS.—It is the intent of Con6 gress that the Department of Veterans Affairs health care

7 facilities shall participate as health care providers recog8 nized under health care reform legislation enacted by the

9 several States. To the extent practicable, the Secretary of

10 Veterans Affairs shall provide health care services in a

11 State enacting such reform legislation as if such facilities

12 were providers under such legislation of that State.

13 (b) PROHIBITION.—Notwithstanding any other provi14 sion of law, a State that enacts health care reform legisla15 tion may not prohibit the participation of the Department

16 as a health care provider under such legislation unless the

17 chief executive officer of the State certifies to the Sec18 retary that—

19 (1) the benefits to be provided by the Depart20 ment do not meet the requirements for quality of

21 benefits established by the reform legislation; or

22 (2) the location of Department facilities (includ23 ing facilities providing services by contract or agree24 ment with the Secretary) in the State is such that

25 the proximity of eligible persons to such facilities
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•S 2374 IS

1 does not meet the requirements so established for

2 such proximity.

3 SEC. 904. AUTHORITY TO EXEMPT DEPARTMENT OF VETER4 ANS AFFAIRS HEALTH CARE FACILITIES

5 FROM CERTAIN PROVISIONS OF LAW.

6 (a) IN GENERAL.—Chapter 73 of title 38, United

7 States Code, is amended—

8 (1) by redesignating subchapter IV as sub9 chapter V; and

10 (2) by inserting after subchapter III the follow11 ing new subchapter IV:

12 ‘‘SUBCHAPTER IV—EXEMPTIONS

13 ‘‘§ 7341. Designation of exempt facilities

14 ‘‘In order to facilitate the provision of health care

15 services by the Department in a manner that is responsive

16 to local market and regulatory conditions, the Secretary

17 may designate health care facilities of the Department

18 which shall be exempt from provisions of law as specified

19 in this subchapter.

20 ‘‘§ 7342. Contracts and agreements

21 ‘‘(a) If designated by the Secretary under section

22 7341 of this title to be exempt from provisions of law as

23 specified in this subchapter, a health care facility of the

24 Department may enter into contracts and agreements for

25 the provision of health care services and contracts and
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•S 2374 IS

1 agreements for other services (including procurement of

2 equipment, maintenance and repair services, and other

3 services related to the provision of health care services)

4 as specified in this section.

5 ‘‘(b) Contracts and agreements (including leases)

6 under subsection (a) shall not be subject to the following

7 provisions of law:

8 ‘‘(1) Section 8110(c) of this title, relating to

9 contracting of services at Department health care fa10 cilities.

11 ‘‘(2) Section 8122(a)(1) of this title, relating to

12 the lease of Department property.

13 ‘‘(3) Section 8125 of this title, relating to local

14 contracts for the procurement of health care items.

15 ‘‘(4) Section 702 of title 5, relating to the right

16 of review of agency wrongs by the courts of the

17 United States.

18 ‘‘(5) Sections 1346(a)(2) and 1491 of title 28,

19 relating to the jurisdiction of the district courts of

20 the United States and the United States Court of

21 Federal Claims, respectively, for the actions enumer22 ated in such sections.

23 ‘‘(6) Subchapter V of chapter 35 of title 31, re24 lating to the adjudication of protests of violations of

25 procurement statutes and regulations.
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•S 2374 IS

1 ‘‘(7) Sections 3526 and 3702 of such title, re2 lating to the settlement of accounts and claims, re3 spectively, of the United States.

4 ‘‘(8) Subsection (b)(7), (e), (f), (g), and (h) of

5 section 8 of the Small Business Act (15 U.S.C.

6 637(b)(7), (e), (f), (g), and (h)), relating to require7 ments with respect to small businesses for contracts

8 for property and services.

9 ‘‘(9) The provisions of law assembled for pur10 poses of codification of the United States Code as

11 section 471 through 544 of title 40 that relate to the

12 authority of the Administrator of General Services

13 over the lease and disposal of Federal Government

14 property.

15 ‘‘(10) The provisions of the Office of Federal

16 Procurement Policy Act (41 U.S.C. 401 et seq.), re17 lating to the procurement of property and services

18 by the Federal Government.

19 ‘‘(11) Chapter 3 of the Federal Property and

20 Administrative Services Act of 1949 (41 U.S.C. 251

21 et seq.), relating to the procurement of property and

22 services by the Federal Government.

23 ‘‘(12) Office of Management and Budget Cir24 cular A–76.
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1 ‘‘(c)(1) Notwithstanding any other provision of law,

2 contracts and agreements for the provision of health care

3 services under this section may include contracts and

4 agreements with insurers, health care providers, or other

5 individuals or entities that provide health care services.

6 ‘‘(2) Contracts and agreements under this subsection

7 may be entered into without prior review by the Central

8 Office of the Department.

9 ‘‘(d)(1) A contract or agreement under this section

10 for services other than the services referred to in sub11 section (c) (including a contract or agreement for procure12 ment of equipment, maintenance and repair services, and

13 other services related to the provision of health care serv14 ices) shall not be subject to prior review by the Central

15 Office of the Department if the amount of the contract

16 or agreement is less than $250,000.

17 ‘‘(2) The Central Office may conduct a prior review

18 of a contract or agreement referred to in paragraph (1)

19 if the amount of the contract or agreement is $250,000

20 or greater.

21 ‘‘§ 7343. Department personnel

22 ‘‘Notwithstanding any other provision of law, with re23 spect to facilities designated by the Secretary under sec24 tion 7341 of this title to be exempt from provisions of law

25 as specified in this subchapter, the Secretary may—
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1 ‘‘(1) appoint health care personnel to positions

2 in that facility in accordance with such qualifications

3 for such positions as the Secretary may establish;

4 and

5 ‘‘(2) promote and advance personnel serving in

6 such positions in accordance with such qualifications

7 as the Secretary may establish.

8 ‘‘§ 7344. Funding

9 ‘‘(a) To the extent authorized by current law, the Sec10 retary may continue to collect funds from third party pay11 ers to defray the costs of providing health care services

12 to veterans.

13 ‘‘(b) As a repository for funds referred to in sub14 section (a), there is established in the Treasury a fund

15 to be known as the Department of Veterans Affairs Health

16 Care Reform Fund (hereafter referred to in this section

17 as the ‘Fund’).

18 ‘‘(c)(1) Notwithstanding any other provision of law,

19 amounts shall be deposited in the Fund as follows:

20 ‘‘(A) Amounts collected as referred to in sub21 section (a).

22 ‘‘(B) Amounts made available based on a deter23 mination under subsection (d).

24 ‘‘(C) Amounts transferred to the Fund under

25 subsection (e).
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1 ‘‘(D) Such other amounts as the Secretary de2 termines to be necessary.

3 ‘‘(E) Such other amounts as may be appro4 priated to the Fund.

5 ‘‘(2) The Secretary shall make available amounts

6 under subparagraphs (B) and (D) of paragraph (1) from

7 amounts appropriated to the Department of Veterans Af8 fairs for the provision of health care services.

9 ‘‘(3) The Secretary shall establish and maintain a

10 separate account under the Fund for each health care fa11 cility designated under section 7341 of this title as exempt

12 from the provisions of law as specified in this subchapter.

13 Any deposits and expenditures with respect to a des14 ignated facility shall be made to or from the account es15 tablished and maintained with respect to that facility.

16 ‘‘(d)(1) For each year of the operation of a des17 ignated facility, the Secretary shall deposit in the account

18 of the Fund for the facility an amount (as determined by

19 the Secretary) equal to the amount that would otherwise

20 be made available to the facility for the payment of the

21 cost of health care services by the facility in that year.

22 The Secretary shall deposit such amount at the beginning

23 of such year.
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1 ‘‘(2) The costs referred to in paragraph (1) shall not

2 include costs relating to the provision by the Secretary of

3 the following services:

4 ‘‘(A) Services relating to post-traumatic stress

5 disorder.

6 ‘‘(B) Services relating to spinal-cord injuries.

7 ‘‘(C) Services relating to substance abuse.

8 ‘‘(D) Services relating to the rehabilitation of

9 blind veterans.

10 ‘‘(e) Funds deposited in the Medical-Care Cost Re11 covery Fund established under section 1729(g) of this title

12 during any fiscal year in an amount in excess of the Con13 gressional Budget Office baseline (as of the date of the

14 enactment of the Veterans Health Care Administrative

15 Flexibility Act of 1994) for deposits in that fund for that

16 fiscal year shall not be subject to paragraph (4) of section

17 1710(f), 1712(f), or 1729(g) of this title, as the case may

18 be, but shall be transferred to the Fund. Such transfer

19 for any fiscal year shall be made at any time that the total

20 of amounts so received less amounts estimated to cover

21 the expenses, payments, and costs described in paragraph

22 (3) of section 1729(g) of this title is in excess of the appli23 cable Congressional Budget Office baseline.

24 ‘‘(f) Notwithstanding any other provision of law, the

25 facility director for each facility designated under section
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1 7341 of this title as exempt from the provisions of law

2 as specified in this subchapter shall determine the costs

3 for which amounts in the Fund may be expended in pro4 viding health care services at that facility.

5 ‘‘§ 7345. Expenditure authority

6 ‘‘(a)(1) Except as provided in paragraph (2), if des7 ignated by the Secretary under section 7341 of this title

8 to be exempt from provisions of law as specified in this

9 subchapter, a health care facility of the Department may

10 expend funds under this section in order to cover the fol11 lowing costs:

12 ‘‘(A) Costs of marketing and advertising health

13 care services.

14 ‘‘(B) Costs of legal services provided to the fa15 cility by the General Counsel of the Department re16 lating to this subchapter.

17 ‘‘(C) Costs relating to acquisition (including ac18 quisition of land), construction, repair, or renovation

19 of facilities.

20 ‘‘(2) Costs under this section shall not include costs

21 relating to a major medical facility project or a major

22 medical facility lease as such terms are defined in sub23 paragraphs (A) and (B) of section 8104(a)(3) of this title,

24 respectively.’’.
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 at the beginning of chapter 73 is amended by striking out

3 the item relating to the heading for subchapter IV and

4 inserting in lieu thereof the following:

‘‘SUBCHAPTER IV—EXEMPTIONS

‘‘7341. Designation of exempt facilities.

‘‘7342. Contracts and agreements.

‘‘7343. Department personnel.

‘‘7344. Funding.

‘‘7345. Expenditure authority.

‘‘SUBCHAPTER V—RESEARCH CORPORATIONS’’.

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