I

107TH CONGRESS

1ST SESSION H. R. 1200

To provide for health care for every American and to control the cost and

enhance the quality of the health care system.

IN THE HOUSE OF REPRESENTATIVES

MARCH 22, 2001

Mr. MCDERMOTT (for himself, Mr. CONYERS, Mr. SANDERS, Mr. HINCHEY,

Mr. OLVER, Mr. FARR of California, Ms. BALDWIN, Mr. WAXMAN, Mr.

STARK, Mr. GEORGE MILLER of California, Mr. BONIOR, Mr. FRANK,

Mr. ENGEL, Mrs. CHRISTENSEN, Ms. SCHAKOWSKY, Mr. NADLER, Mr.

WEINER, Mr. KUCINICH, Ms. MCKINNEY, Mr. BRADY of Pennsylvania,

Ms. RIVERS, Mr. RANGEL, Mr. CLAY, and Mr. SERRANO) introduced the

following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, Government Reform, and Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the Committee concerned

A BILL

To provide for health care for every American and to control

the cost and enhance the quality of the health care system.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘American Health Security Act of 2001’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—ESTABLISHMENT OF A STATE-BASED AMERICAN

HEALTH SECURITY PROGRAM; UNIVERSAL ENTITLEMENT; ENROLLMENT

Sec. 101. Establishment of a State-based American Health Security Program.

Sec. 102. Universal entitlement.

Sec. 103. Enrollment.

Sec. 104. Portability of benefits.

Sec. 105. Effective date of benefits.

Sec. 106. Relationship to existing Federal health programs.

TITLE II—COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE

BENEFITS AND BENEFITS FOR LONG TERM CARE

Sec. 201. Comprehensive benefits.

Sec. 202. Definitions relating to services.

Sec. 203. Special rules for home and community-based long-term care services.

Sec. 204. Exclusions and limitations.

Sec. 205. Certification; quality review; plans of care.

TITLE III—PROVIDER PARTICIPATION

Sec. 301. Provider participation and standards.

Sec. 302. Qualifications for providers.

Sec. 303. Qualifications for comprehensive health service organizations.

Sec. 304. Limitation on certain physician referrals.

TITLE IV—ADMINISTRATION

Subtitle A—General Administrative Provisions

Sec. 401. American Health Security Standards Board.

Sec. 402. American Health Security Advisory Council.

Sec. 403. Consultation with private entities.

Sec. 404. State health security programs.

Sec. 405. Complementary conduct of related health programs.

Subtitle B—Control Over Fraud and Abuse

Sec. 411. Application of Federal sanctions to all fraud and abuse under American Health Security Program.

Sec. 412. Requirements for operation of State health care fraud and abuse control units.

TITLE V—QUALITY ASSESSMENT

Sec. 501. American Health Security Quality Council.

Sec. 502. Development of certain methodologies, guidelines, and standards.

Sec. 503. State quality review programs.

Sec. 504. Elimination of existing utilization review programs; transition.
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TITLE VI—NATIONAL HEALTH SECURITY BUDGET; PAYMENTS;

COST CONTAINMENT MEASURES

Subtitle A—Budgeting and Payments to States

Sec. 601. National health security budget.

Sec. 602. Computation of individual and State capitation amounts.

Sec. 603. State health security budgets.

Sec. 604. Federal payments to States.

Sec. 605. Account for health professional education expenditures.

Subtitle B—Payments by States to Providers

Sec. 611. Payments to hospitals and other facility-based services for operating

expenses on the basis of approved global budgets.

Sec. 612. Payments to health care practitioners based on prospective fee

schedule.

Sec. 613. Payments to comprehensive health service organizations.

Sec. 614. Payments for community-based primary health services.

Sec. 615. Payments for prescription drugs.

Sec. 616. Approved devices and equipment.

Sec. 617. Payments for other items and services.

Sec. 618. Payment incentives for medically underserved areas.

Sec. 619. Authority for alternative payment methodologies.

Subtitle C—Mandatory Assignment and Administrative Provisions

Sec. 621. Mandatory assignment.

Sec. 622. Procedures for reimbursement; appeals.

TITLE VII—PROMOTION OF PRIMARY HEALTH CARE; DEVELOPMENT OF HEALTH SERVICE CAPACITY; PROGRAMS TO ASSIST

THE MEDICALLY UNDERSERVED

Subtitle A—Promotion and Expansion of Primary Care Professional Training

Sec. 701. Role of Board; establishment of primary care professional output

goals.

Sec. 702. Establishment of Advisory Committee on Health Professional Education.

Sec. 703. Grants for health professions education, nurse education, and the National Health Service Corps.

Subtitle B—Direct Health Care Delivery

Sec. 711. Setaside for public health block grants.

Sec. 712. Setaside for primary health care delivery.

Sec. 713. Primary care service expansion grants.

Subtitle C—Primary Care and Outcomes Research

Sec. 721. Set-aside for outcomes research.

Sec. 722. Office of Primary Care and Prevention Research.

Subtitle D—School-Related Health Services

Sec. 731. Authorizations of appropriations.

Sec. 732. Eligibility for development and operation grants.

Sec. 733. Preferences.
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Sec. 734. Grants for development of projects.

Sec. 735. Grants for operation of projects.

Sec. 736. Federal administrative costs.

Sec. 737. Definitions.

TITLE VIII—FINANCING PROVISIONS; AMERICAN HEALTH

SECURITY TRUST FUND

Sec. 800. Amendment of 1986 code; section 15 not to apply.

Subtitle A—American Health Security Trust Fund

Sec. 801. American Health Security Trust Fund.

Subtitle B—Taxes Based on Income and Wages

Sec. 811. Payroll tax on employers.

Sec. 812. Health care income tax.

Subtitle C—Increase in Excise Taxes on Tobacco Products

Sec. 821. Increase in excise taxes on tobacco products.

TITLE IX—CONFORMING AMENDMENTS TO THE EMPLOYEE

RETIREMENT INCOME SECURITY ACT OF 1974

Sec. 901. ERISA inapplicable to health coverage arrangements under State

health security programs.

Sec. 902. Exemption of State health security programs from ERISA preemption.

Sec. 903. Prohibition of employee benefits duplicative of benefits under State

health security programs; coordination in case of workers’ compensation.

Sec. 904. Repeal of continuation coverage requirements under ERISA and certain other requirements relating to group health plans.

Sec. 905. Effective date of title.

TITLE X—ADDITIONAL CONFORMING AMENDMENTS

Sec. 1001. Repeal of certain provisions in Internal Revenue Code of 1986.

Sec. 1002. Repeal of certain provisions in the Employee Retirement Income Security Act of 1974.

Sec. 1003. Repeal of certain provisions in the Public Health Service Act.

Sec. 1004. Effective date of title.
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1 TITLE I—ESTABLISHMENT OF A

2 STATE-BASED AMERICAN

3 HEALTH SECURITY PRO4 GRAM; UNIVERSAL ENTITLE5 MENT; ENROLLMENT

6 SEC. 101. ESTABLISHMENT OF A STATE-BASED AMERICAN

7 HEALTH SECURITY PROGRAM.

8 (a) IN GENERAL.—There is hereby established in the

9 United States a State-Based American Health Security

10 Program to be administered by the individual States in

11 accordance with Federal standards specified in, or estab12 lished under, this Act.

13 (b) STATE HEALTH SECURITY PROGRAMS.—In order

14 for a State to be eligible to receive payment under section

15 604, a State must establish a State health security pro16 gram in accordance with this Act.

17 (c) STATE DEFINED.—

18 (1) IN GENERAL.—In this Act, subject to para19 graph (2), the term ‘‘State’’ means each of the fifty

20 States and the District of Columbia.

21 (2) ELECTION.—If the Governor of Puerto

22 Rico, the Virgin Islands, Guam, American Samoa, or

23 the Northern Mariana Islands certifies to the Presi24 dent that the legislature of the Commonwealth or

25 territory has enacted legislation desiring that the
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1 Commonwealth or territory be included as a State

2 under the provisions of this Act, such Common3 wealth or territory shall be included as a ‘‘State’’

4 under this Act beginning January 1 of the first year

5 beginning ninety days after the President receives

6 the notification.

7 SEC. 102. UNIVERSAL ENTITLEMENT.

8 (a) IN GENERAL.—Every individual who is a resident

9 of the United States and is a citizen or national of the

10 United States or lawful resident alien (as defined in sub11 section (d) is entitled to benefits for health care services

12 under this Act under the appropriate State health security

13 program. In this section, the term ‘‘appropriate State

14 health security program’’ means, with respect to an indi15 vidual, the State health security program for the State in

16 which the individual maintains a primary residence.

17 (b) TREATMENT OF CERTAIN NONIMMIGRANTS.—

18 (1) IN GENERAL.—The American Health Secu19 rity Standards Board (in this Act referred to as the

20 ‘‘Board’’) may make eligible for benefits for health

21 care services under the appropriate State health se22 curity program under this Act such classes of aliens

23 admitted to the United States as nonimmigrants as

24 the Board may provide.
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1 (2) CONSIDERATION.—In providing for eligi2 bility under paragraph (1), the Board shall consider

3 reciprocity in health care services offered to United

4 States citizens who are nonimmigrants in other for5 eign states, and such other factors as the Board

6 determines to be appropriate.

7 (c) TREATMENT OF OTHER INDIVIDUALS.—

8 (1) BY BOARD.—The Board also may make eli9 gible for benefits for health care services under the

10 appropriate State health security program under this

11 Act other individuals not described in subsection (a)

12 or (b), and regulate the nature of the eligibility of

13 such individuals, in order—

14 (A) to preserve the public health of

15 communities,

16 (B) to compensate States for the addi17 tional health care financing burdens created by

18 such individuals, and

19 (C) to prevent adverse financial and med20 ical consequences of uncompensated care,

21 while inhibiting travel and immigration to the

22 United States for the sole purpose of obtaining

23 health care services.
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1 (2) BY STATES.—Any State health security pro2 gram may make individuals described in paragraph

3 (1) eligible for benefits at the expense of the State.

4 (d) LAWFUL RESIDENT ALIEN DEFINED.—For pur5 poses of this section, the term ‘‘lawful resident alien’’

6 means an alien lawfully admitted for permanent residence

7 and any other alien lawfully residing permanently in the

8 United States under color of law, including an alien with

9 lawful temporary resident status under section 210, 210A,

10 or 234A of the Immigration and Nationality Act (8 U.S.C.

11 1160, 1161, or 1255a).

12 SEC. 103. ENROLLMENT.

13 (a) IN GENERAL.—Each State health security pro14 gram shall provide a mechanism for the enrollment of indi15 viduals entitled or eligible for benefits under this Act. The

16 mechanism shall—

17 (1) include a process for the automatic enroll18 ment of individuals at the time of birth in the

19 United States and at the time of immigration into

20 the United States or other acquisition of lawful resi21 dent status in the United States,

22 (2) provide for the enrollment, as of January 1,

23 2003, of all individuals who are eligible to be en24 rolled as of such date, and
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1 (3) include a process for the enrollment of indi2 viduals made eligible for health care services under

3 subsections (b) and (c) of section 102.

4 (b) AVAILABILITY OF APPLICATIONS.—Each State

5 health security program shall make applications for enroll6 ment under the program available—

7 (1) at employment and payroll offices of em8 ployers located in the State,

9 (2) at local offices of the Social Security

10 Administration,

11 (3) at social services locations,

12 (4) at out-reach sites (such as provider and

13 practitioner locations), and

14 (5) at other locations (including post offices

15 and schools) accessible to a broad cross-section of

16 individuals eligible to enroll.

17 (c) ISSUANCE OF HEALTH SECURITY CARDS.—In

18 conjunction with an individual’s enrollment for benefits

19 under this Act, the State health security program shall

20 provide for the issuance of a health security card which

21 shall be used for purposes of identification and processing

22 of claims for benefits under the program. The State health

23 security program may provide for issuance of such cards

24 by employers for purposes of carrying out enrollment pur25 suant to subsection (a)(2).
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1 SEC. 104. PORTABILITY OF BENEFITS.

2 (a) IN GENERAL.—To ensure continuous access to

3 benefits for health care services covered under this Act,

4 each State health security program—

5 (1) shall not impose any minimum period of

6 residence in the State, or waiting period, in excess

7 of three months before residents of the State are

8 entitled to, or eligible for, such benefits under the

9 program;

10 (2) shall provide continuation of payment for

11 covered health care services to individuals who have

12 terminated their residence in the State and estab13 lished their residence in another State, for the dura14 tion of any waiting period imposed in the State of

15 new residency for establishing entitlement to, or

16 eligibility for, such services; and

17 (3) shall provide for the payment for health

18 care services covered under this Act provided to indi19 viduals while temporarily absent from the State

20 based on the following principles:

21 (A) Payment for such health care services

22 is at the rate that is approved by the State

23 health security program in the State in which

24 the services are provided, unless the States con25 cerned agree to apportion the cost between

26 them in a different manner.
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1 (B) Payment for such health care services

2 provided outside the United States is made on

3 the basis of the amount that would have been

4 paid by the State health security program for

5 similar services rendered in the State, with due

6 regard, in the case of hospital services, to the

7 size of the hospital, standards of service, and

8 other relevant factors.

9 (b) CROSS-BORDER ARRANGEMENTS.—A State

10 health security program for a State may negotiate with

11 such a program in an adjacent State a reciprocal arrange12 ment for the coverage under such other program of health

13 care services to enrollees residing in the border region.

14 SEC. 105. EFFECTIVE DATE OF BENEFITS.

15 Benefits shall first be available under this Act for

16 items and services furnished on or after January 1, 2003.

17 SEC. 106. RELATIONSHIP TO EXISTING FEDERAL HEALTH

18 PROGRAMS.

19 (a) MEDICARE AND MEDICAID.—

20 (1) IN GENERAL.—Notwithstanding any other

21 provision of law, subject to paragraph (2)—

22 (A) no benefits shall be available under

23 title XVIII of the Social Security Act for any

24 item or service furnished after December 31,

25 2002,
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1 (B) no individual is entitled to medical as2 sistance under a State plan approved under

3 title XIX of such Act for any item or service

4 furnished after such date, and

5 (C) no payment shall be made to a State

6 under section 1903(a) of such Act with respect

7 to medical assistance for any item or service

8 furnished after such date.

9 (2) TRANSITION.—In the case of inpatient hos10 pital services and extended care services during a

11 continuous period of stay which began before Janu12 ary 1, 2003, and which had not ended as of such

13 date, for which benefits are provided under title

14 XVIII, or under a State plan under title XIX, of the

15 Social Security Act, the Secretary of Health and

16 Human Services and each State plan, respectively,

17 shall provide for continuation of benefits under such

18 title or plan until the end of the period of stay.

19 (b) FEDERAL EMPLOYEES HEALTH BENEFITS PRO20 GRAM.—No benefits shall be made available under chapter

21 89 of title 5, United States Code, for any part of a cov22 erage period occurring after December 31, 2002.

23 (c) CHAMPUS.—No benefits shall be made available

24 under sections 1079 and 1086 of title 10, United States
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1 Code, for items or services furnished after December 31,

2 2002.

3 (d) TREATMENT OF BENEFITS FOR VETERANS AND

4 NATIVE AMERICANS.—Nothing in this Act shall affect the

5 eligibility of veterans for the medical benefits and services

6 provided under title 38, United States Code, or of Indians

7 for the medical benefits and services provided by or

8 through the Indian Health Service.

9 TITLE II—COMPREHENSIVE BEN10 EFITS, INCLUDING PREVEN11 TIVE BENEFITS AND BENE12 FITS FOR LONG-TERM CARE

13 SEC. 201. COMPREHENSIVE BENEFITS.

14 (a) IN GENERAL.—Subject to the succeeding provi15 sions of this title, individuals enrolled for benefits under

16 this Act are entitled to have payment made under a State

17 health security program for the following items and serv18 ices if medically necessary or appropriate for the mainte19 nance of health or for the diagnosis, treatment, or rehabili20 tation of a health condition:

21 (1) HOSPITAL SERVICES.—Inpatient and out22 patient hospital care, including 24-hour-a-day emer23 gency services.

24 (2) PROFESSIONAL SERVICES.—Professional

25 services of health care practitioners authorized to
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1 provide health care services under State law, includ2 ing patient education and training in self-manage3 ment techniques.

4 (3) COMMUNITY-BASED PRIMARY HEALTH

5 SERVICES.—Community-based primary health serv6 ices (as defined in section 202(a)).

7 (4) PREVENTIVE SERVICES.—Preventive serv8 ices (as defined in section 202(b)).

9 (5) LONG-TERM, ACUTE, AND CHRONIC CARE

10 SERVICES.—

11 (A) Nursing facility services.

12 (B) Home health services.

13 (C) Home and community-based long-term

14 care services (as defined in section 202(c)) for

15 individuals described in section 203(a).

16 (D) Hospice care.

17 (E) Services in intermediate care facilities

18 for individuals with mental retardation.

19 (6) PRESCRIPTION DRUGS, BIOLOGICALS, INSU20 LIN, MEDICAL FOODS.—

21 (A) Outpatient prescription drugs and

22 biologicals, as specified by the Board consistent

23 with section 515.

24 (B) Insulin.
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1 (C) Medical foods (as defined in section

2 202(e)).

3 (7) DENTAL SERVICES.—Dental services (as de4 fined in section 202(h)).

5 (8) MENTAL HEALTH AND SUBSTANCE ABUSE

6 TREATMENT SERVICES.—Mental health and sub7 stance abuse treatment services (as defined in sec8 tion 202(f)).

9 (9) DIAGNOSTIC TESTS.—Diagnostic tests.

10 (10) OTHER ITEMS AND SERVICES.—

11 (A) OUTPATIENT THERAPY.—Outpatient

12 physical therapy services, outpatient speech pa13 thology services, and outpatient occupational

14 therapy services in all settings.

15 (B) DURABLE MEDICAL EQUIPMENT.—Du16 rable medical equipment.

17 (C) HOME DIALYSIS.—Home dialysis sup18 plies and equipment.

19 (D) AMBULANCE.—Emergency ambulance

20 service.

21 (E) PROSTHETIC DEVICES.—Prosthetic de22 vices, including replacements of such devices.

23 (F) ADDITIONAL ITEMS AND SERVICES.—

24 Such other medical or health care items or

25 services as the Board may specify.
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1 (b) COST-SHARING.—

2 (1) IN GENERAL.—Except as provided in this

3 subsection, there are no deductibles, coinsurance, or

4 copayments applicable to acute care and preventive

5 benefits provided under this title.

6 (2) COST-SHARING FOR LONG-TERM CARE

7 SERVICES.—

8 (A) IN GENERAL.—

9 (i) payments for home and commu10 nity-based long-term care services are sub11 ject to coinsurance of 20 percent, and

12 (ii) payments for nursing facility serv13 ices are subject to coinsurance of 35 per14 cent.

15 (B) EXCEPTION.—With respect to the co16 insurance established under subparagraph

17 (A)—

18 (i) such coinsurance shall not apply to

19 an individual with income (as defined by

20 the Secretary) of not more than 100 per21 cent of the income official poverty line ap22 plicable to a family of the size involved;

23 and

24 (ii) in the case of an individual with

25 such income that exceeds 100 percent, but
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1 is less than 200 percent, of such applicable

2 poverty line, the coinsurance shall be re3 duced in the same proportion as the pro4 portion of such income is less than 200

5 percent of such applicable poverty line.

6 (c) PROHIBITION OF BALANCE BILLING.—As pro7 vided in section 531, no person may impose a charge for

8 covered services for which benefits are provided under this

9 Act.

10 (d) NO DUPLICATE HEALTH INSURANCE.—Each

11 State health security program shall prohibit the sale of

12 health insurance in the State if payment under the insur13 ance duplicates payment for any items or services for

14 which payment may be made under such a program.

15 (e) STATE PROGRAM MAY PROVIDE ADDITIONAL

16 BENEFITS.—Nothing in this Act shall be construed as

17 limiting the benefits that may be made available under a

18 State health security program to residents of the State

19 at the expense of the State.

20 (f) EMPLOYERS MAY PROVIDE ADDITIONAL BENE21 FITS.—Nothing in this Act shall be construed as limiting

22 the additional benefits that an employer may provide to

23 employees or their dependents, or to former employees or

24 their dependents.
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1 SEC. 202. DEFINITIONS RELATING TO SERVICES.

2 (a) COMMUNITY-BASED PRIMARY HEALTH SERV3 ICES.—In this title, the term ‘‘community-based primary

4 health services’’ means ambulatory health services

5 furnished—

6 (1) by a rural health clinic;

7 (2) by a Federally qualified health center (as

8 defined in section 1905(l)(2)(B) of the Social Secu9 rity Act), and which, for purposes of this Act, in10 clude services furnished by State and local health

11 agencies;

12 (3) in a school-based setting;

13 (4) by public educational agencies and other

14 providers of services to children entitled to assist15 ance under the Individuals with Disabilities Edu16 cation Act for services furnished pursuant to a

17 written Individualized Family Services Plan or

18 Individual Education Plan under such Act; and

19 (5) public and private nonprofit entities receiv20 ing Federal assistance under the Public Health

21 Service Act.

22 (b) PREVENTIVE SERVICES.—

23 (1) IN GENERAL.—In this title, the term ‘‘pre24 ventive services’’ means items and services—

25 (A) which—

26 (i) are specified in paragraph (2), or
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1 (ii) the Board determines to be effec2 tive in the maintenance and promotion of

3 health or minimizing the effect of illness,

4 disease, or medical condition; and

5 (B) which are provided consistent with the

6 periodicity schedule established under para7 graph (3).

8 (2) SPECIFIED PREVENTIVE SERVICES.—The

9 services specified in this paragraph are as follows:

10 (A) Basic immunizations.

11 (B) Prenatal and well-baby care (for in12 fants under one year of age).

13 (C) Well-child care (including periodic

14 physical examinations, hearing and vision

15 screening, and developmental screening and ex16 aminations) for individuals under 18 years of

17 age.

18 (D) Periodic screening mammography, Pap

19 smears, and colorectal examinations and exami20 nations for prostate cancer.

21 (E) Physical examinations.

22 (F) Family planning services.

23 (G) Routine eye examinations, eyeglasses,

24 and contact lenses.
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1 (H) Hearing aids, but only upon a deter2 mination of a certified audiologist or physician

3 that a hearing problem exists and is caused by

4 a condition that can be corrected by use of a

5 hearing aid.

6 (3) SCHEDULE.—The Board shall establish, in

7 consultation with experts in preventive medicine and

8 public health and taking into consideration those

9 preventive services recommended by the Preventive

10 Services Task Force and published as the Guide to

11 Clinical Preventive Services, a periodicity schedule

12 for the coverage of preventive services under para13 graph (1). Such schedule shall take into consider14 ation the cost-effectiveness of appropriate preventive

15 care and shall be revised not less frequently than

16 once every 5 years, in consultation with experts in

17 preventive medicine and public health.

18 (c) HOME AND COMMUNITY-BASED LONG-TERM

19 CARE SERVICES.—In this title, the term ‘‘home and com20 munity-based long-term care services’’ means the following

21 services provided to an individual to enable the individual

22 to remain in such individual’s place of residence within

23 the community:

24 (1) Home health aide services.
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1 (2) Adult day health care, social day care or

2 psychiatric day care.

3 (3) Medical social work services.

4 (4) Care coordination services, as defined in

5 subsection (g)(1).

6 (5) Respite care, including training for informal

7 caregivers.

8 (6) Personal assistance services, and home9 maker services (including meals) incidental to the

10 provision of personal assistance services.

11 (d) HOME HEALTH SERVICES.—

12 (1) IN GENERAL.—The term ‘‘home health

13 services’’ means items and services described in sec14 tion 1861(m) of the Social Security Act and includes

15 home infusion services.

16 (2) HOME INFUSION SERVICES.—The term

17 ‘‘home infusion services’’ includes the nursing, phar18 macy, and related services that are necessary to con19 duct the home infusion of a drug regimen safely and

20 effectively under a plan established and periodically

21 reviewed by a physician and that are provided in

22 compliance with quality assurance requirements es23 tablished by the Secretary.

24 (e) MEDICAL FOODS.—In this title, the term ‘‘med25 ical foods’’ means foods which are formulated to be con-
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1 sumed or administered enterally under the supervision of

2 a physician and which are intended for the specific dietary

3 management of a disease or condition for which distinctive

4 nutritional requirements, based on recognized scientific

5 principles, are established by medical evaluation.

6 (f) MENTAL HEALTH AND SUBSTANCE ABUSE

7 TREATMENT SERVICES.—

8 (1) SERVICES DESCRIBED.—In this title, the

9 term ‘‘mental health and substance abuse treatment

10 services’’ means the following services related to the

11 prevention, diagnosis, treatment, and rehabilitation

12 of mental illness and promotion of mental health:

13 (A) INPATIENT HOSPITAL SERVICES.—In14 patient hospital services furnished primarily for

15 the diagnosis or treatment of mental illness or

16 substance abuse for up to 60 days during a

17 year, reduced by a number of days determined

18 by the Secretary so that the actuarial value of

19 providing such number of days of services

20 under this paragraph to the individual is equal

21 to the actuarial value of the days of inpatient

22 residential services furnished to the individual

23 under subparagraph (B) during the year after

24 such services have been furnished to the indi25 vidual for 120 days during the year (rounded to
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1 the nearest day), but only if (with respect to

2 services furnished to an individual described in

3 section 204(b)(1)) such services are furnished

4 in conformity with the plan of an organized sys5 tem of care for mental health and substance

6 abuse services in accordance with section

7 204(b)(2).

8 (B) INTENSIVE RESIDENTIAL SERVICES.—

9 Intensive residential services (as defined in

10 paragraph (2)) furnished to an individual for

11 up to 120 days during any calendar year, ex12 cept that—

13 (i) such services may be furnished to

14 the individual for additional days during

15 the year if necessary for the individual to

16 complete a course of treatment to the ex17 tent that the number of days of inpatient

18 hospital services described in subparagraph

19 (A) that may be furnished to the individual

20 during the year (as reduced under such

21 subparagraph) is not less than 15; and

22 (ii) reduced by a number of days de23 termined by the Secretary so that the actu24 arial value of providing such number of

25 days of services under this paragraph to
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1 the individual is equal to the actuarial

2 value of the days of intensive community3 based services furnished to the individual

4 under subparagraph (D) during the year

5 after such services have been furnished to

6 the individual for 90 days (or, in the case

7 of services described in subparagraph

8 (D)(ii), for 180 days) during the year

9 (rounded to the nearest day).

10 (C) OUTPATIENT SERVICES.—Outpatient

11 treatment services of mental illness or sub12 stance abuse (other than intensive community13 based services under subparagraph (D)) for an

14 unlimited number of days during any calendar

15 year furnished in accordance with standards es16 tablished by the Secretary for the management

17 of such services, and, in the case of services fur18 nished to an individual described in section

19 204(b)(1) who is not an inpatient of a hospital,

20 in conformity with the plan of an organized sys21 tem of care for mental health and substance

22 abuse services in accordance with section

23 204(b)(2).
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1 (D) INTENSIVE COMMUNITY-BASED SERV2 ICES.—Intensive community-based services (as

3 described in paragraph (3))—

4 (i) for an unlimited number of days

5 during any calendar year, in the case of

6 services described in section 1861(ff)(2)(E)

7 that are furnished to an individual who is

8 a seriously mentally ill adult, a seriously

9 emotionally disturbed child, or an adult or

10 child with serious substance abuse disorder

11 (as determined in accordance with criteria

12 established by the Secretary);

13 (ii) in the case of services described in

14 section 1861(ff)(2)(C), for up to 180 days

15 during any calendar year, except that such

16 services may be furnished to the individual

17 for a number of additional days during the

18 year equal to the difference between the

19 total number of days of intensive residen20 tial services which the individual may re21 ceive during the year under part A (as de22 termined under subparagraph (B)) and the

23 number of days of such services which the

24 individual has received during the year, or
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1 (iii) in the case of any other such

2 services, for up to 90 days during any cal3 endar year, except that such services may

4 be furnished to the individual for the num5 ber of additional days during the year de6 scribed in clause (ii).

7 (2) INTENSIVE RESIDENTIAL SERVICES DE8 FINED.—

9 (A) IN GENERAL.—Subject to subpara10 graphs (B) and (C), the term ‘‘intensive resi11 dential services’’ means inpatient services pro12 vided in any of the following facilities:

13 (i) Residential detoxification centers.

14 (ii) Crisis residential programs or

15 mental illness residential treatment pro16 grams.

17 (iii) Therapeutic family or group

18 treatment homes.

19 (iv) Residential centers for substance

20 abuse treatment.

21 (B) REQUIREMENTS FOR FACILITIES.—No

22 service may be treated as an intensive residen23 tial service under subparagraph (A) unless the

24 facility at which the service is provided—
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1 (i) is legally authorized to provide

2 such service under the law of the State (or

3 under a State regulatory mechanism pro4 vided by State law) in which the facility is

5 located or is certified to provide such serv6 ice by an appropriate accreditation entity

7 approved by the State in consultation with

8 the Secretary; and

9 (ii) meets such other requirements as

10 the Secretary may impose to assure the

11 quality of the intensive residential services

12 provided.

13 (C) SERVICES FURNISHED TO AT-RISK

14 CHILDREN.—In the case of services furnished

15 to an individual described in section 204(b)(1),

16 no service may be treated as an intensive resi17 dential service under this subsection unless the

18 service is furnished in conformity with the plan

19 of an organized system of care for mental

20 health and substance abuse services in accord21 ance with section 204(b)(2).

22 (D) MANAGEMENT STANDARDS.—No serv23 ice may be treated as an intensive residential

24 service under subparagraph (A) unless the serv25 ice is furnished in accordance with standards
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1 established by the Secretary for the manage2 ment of such services.

3 (3) INTENSIVE COMMUNITY-BASED SERVICES

4 DEFINED.—

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

6 community-based services’’ means the items

7 and services described in subparagraph (B) pre8 scribed by a physician (or, in the case of serv9 ices furnished to an individual described in sec10 tion 204(b)(1), by an organized system of care

11 for mental health and substance abuse services

12 in accordance with such section) and provided

13 under a program described in subparagraph

14 (D) under the supervision of a physician (or, to

15 the extent permitted under the law of the State

16 in which the services are furnished, a non-phy17 sician mental health professional) pursuant to

18 an individualized, written plan of treatment es19 tablished and periodically reviewed by a physi20 cian (in consultation with appropriate staff par21 ticipating in such program) which sets forth the

22 physician’s diagnosis, the type, amount, fre23 quency, and duration of the items and services

24 provided under the plan, and the goals for

25 treatment under the plan, but does not include
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1 any item or service that is not furnished in ac2 cordance with standards established by the Sec3 retary for the management of such services.

4 (B) ITEMS AND SERVICES DESCRIBED.—

5 The items and services described in this sub6 paragraph are—

7 (i) partial hospitalization services con8 sisting of the items and services described

9 in subparagraph (C);

10 (ii) psychiatric rehabilitation services;

11 (iii) day treatment services for indi12 viduals under 19 years of age;

13 (iv) in-home services;

14 (v) case management services, includ15 ing collateral services designated as such

16 case management services by the Sec17 retary;

18 (vi) ambulatory detoxification services;

19 (vii) such other items and services as

20 the Secretary may provide (but in no event

21 to include meals and transportation),

22 that are reasonable and necessary for the diag23 nosis or active treatment of the individual’s

24 condition, reasonably expected to improve or

25 maintain the individual’s condition and func-
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1 tional level and to prevent relapse or hos2 pitalization, and furnished pursuant to such

3 guidelines relating to frequency and duration of

4 services as the Secretary shall by regulation es5 tablish (taking into account accepted norms of

6 medical practice and the reasonable expectation

7 of patient improvement).

8 (C) ITEMS AND SERVICES INCLUDED AS

9 PARTIAL HOSPITALIZATION SERVICES.—For

10 purposes of subparagraph (B)(i), partial hos11 pitalization services consist of the following:

12 (i) Individual and group therapy with

13 physicians or psychologists (or other men14 tal health professionals to the extent au15 thorized under State law).

16 (ii) Occupational therapy requiring

17 the skills of a qualified occupational thera18 pist.

19 (iii) Services of social workers, trained

20 psychiatric nurses, behavioral aides, and

21 other staff trained to work with psychiatric

22 patients (to the extent authorized under

23 State law).

24 (iv) Drugs and biologicals furnished

25 for therapeutic purposes (which cannot, as
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1 determined in accordance with regulations,

2 be self-administered).

3 (v) Individualized activity therapies

4 that are not primarily recreational or di5 versionary.

6 (vi) Family counseling (the primary

7 purpose of which is treatment of the indi8 vidual’s condition).

9 (vii) Patient training and education

10 (to the extent that training and edu11 cational activities are closely and clearly

12 related to the individual’s care and treat13 ment).

14 (viii) Diagnostic services.

15 (D) PROGRAMS DESCRIBED.—A program

16 described in this subparagraph is a program

17 (whether facility-based or freestanding) which is

18 furnished by an entity—

19 (i) legally authorized to furnish such a

20 program under State law (or the State reg21 ulatory mechanism provided by State law)

22 or certified to furnish such a program by

23 an appropriate accreditation entity ap24 proved by the State in consultation with

25 the Secretary; and
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1 (ii) meeting such other requirements

2 as the Secretary may impose to assure the

3 quality of the intensive community-based

4 services provided.

5 (g) CARE COORDINATION SERVICES.—

6 (1) IN GENERAL.—In this title, the term ‘‘care

7 coordination services’’ means services provided by

8 care coordinators (as defined in paragraph (2)) to

9 individuals described in paragraph (3) for the co10 ordination and monitoring of home and community11 based long term care services to ensure appropriate,

12 cost-effective utilization of such services in a com13 prehensive and continuous manner, and includes—

14 (A) transition management between inpa15 tient facilities and community-based services,

16 including assisting patients in identifying and

17 gaining access to appropriate ancillary services;

18 and

19 (B) evaluating and recommending appro20 priate treatment services, in cooperation with

21 patients and other providers and in conjunction

22 with any quality review program or plan of care

23 under section 205.

24 (2) CARE COORDINATOR.—
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1 (A) IN GENERAL.—In this title, the term

2 ‘‘care coordinator’’ means an individual or non3 profit or public agency or organization which

4 the State health security program determines—

5 (i) is capable of performing directly,

6 efficiently, and effectively the duties of a

7 care coordinator described in paragraph

8 (1), and

9 (ii) demonstrates capability in estab10 lishing and periodically reviewing and re11 vising plans of care, and in arranging for

12 and monitoring the provision and quality

13 of services under any plan.

14 (B) INDEPENDENCE.—State health secu15 rity programs shall establish safeguards to as16 sure that care coordinators have no financial in17 terest in treatment decisions or placements.

18 Care coordination may not be provided through

19 any structure or mechanism through which

20 quality review is performed.

21 (3) ELIGIBLE INDIVIDUALS.—An individual de22 scribed in this paragraph is an individual described

23 in section 203 (relating to individuals qualifying for

24 long term and chronic care services).

25 (h) DENTAL SERVICES.—
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1 (1) IN GENERAL.—In this title, subject to sub2 section (b), the term ‘‘dental services’’ means the

3 following:

4 (A) Emergency dental treatment, including

5 extractions, for bleeding, pain, acute infections,

6 and injuries to the maxillofacial region.

7 (B) Prevention and diagnosis of dental dis8 ease, including examinations of the hard and

9 soft tissues of the oral cavity and related struc10 tures, radiographs, dental sealants, fluorides,

11 and dental prophylaxis.

12 (C) Treatment of dental disease, including

13 non-cast fillings, periodontal maintenance serv14 ices, and endodontic services.

15 (D) Space maintenance procedures to pre16 vent orthodontic complications.

17 (E) Orthodontic treatment to prevent se18 vere malocclusions.

19 (F) Full dentures.

20 (G) Medically necessary oral health care.

21 (H) Any items and services for special

22 needs patients that are not described in sub23 paragraphs (A) through (G) and that—
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1 (i) are required to provide such pa2 tients the items and services described in

3 subparagraphs (A) through (G);

4 (ii) are required to establish oral func5 tion (including general anesthesia for indi6 viduals with physical or emotional limita7 tions that prevent the provision of dental

8 care without such anesthesia);

9 (iii) consist of orthodontic care for se10 vere dentofacial abnormalities; or

11 (iv) consist of prosthetic dental de12 vices for genetic or birth defects or fitting

13 for such devices.

14 (I) Any dental care for individuals with a

15 seizure disorder that is not described in sub16 paragraphs (A) through (H) and that is re17 quired because of an illness, injury, disorder, or

18 other health condition that results from such

19 seizure disorder.

20 (2) LIMITATIONS.—Dental services are subject

21 to the following limitations:

22 (A) PREVENTION AND DIAGNOSIS.—

23 (i) EXAMINATIONS AND PROPHY24 LAXIS.—The examinations and prophylaxis

25 described in paragraph (1)(B) are covered
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1 only consistent with a periodicity schedule

2 established by the Board, which schedule

3 may provide for special treatment of indi4 viduals less than 18 years of age and of

5 special needs patients.

6 (ii) DENTAL SEALANTS.—The dental

7 sealants described in such paragraph are

8 not covered for individuals 18 years of age

9 or older. Such sealants are covered for in10 dividuals less than 10 years of age for pro11 tection of the 1st permanent molars. Such

12 sealants are covered for individuals 10

13 years of age or older for protection of the

14 2d permanent molars.

15 (B) TREATMENT OF DENTAL DISEASE.—

16 Prior to January 1, 2008, the items and serv17 ices described in paragraph (1)(C) are covered

18 only for individuals less than 18 years of age

19 and special needs patients. On or after such

20 date, such items and services are covered for all

21 individuals enrolled for benefits under this Act,

22 except that endodontic services are not covered

23 for individuals 18 years of age or older.

24 (C) SPACE MAINTENANCE.—The items and

25 services described in paragraph (1)(D) are cov-
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1 ered only for individuals at least 3 years of age,

2 but less than 13 years of age and—

3 (i) are limited to posterior teeth;

4 (ii) involve maintenance of a space or

5 spaces for permanent posterior teeth that

6 would otherwise be prevented from normal

7 eruption if the space were not maintained;

8 and

9 (iii) do not include a space maintainer

10 that is placed within 6 months of the ex11 pected eruption of the permanent posterior

12 tooth concerned.

13 (D) ORTHODONTIC TREATMENT.—Prior to

14 January 1, 2008, the items and services de15 scribed in paragraph (1)(E) are covered only

16 for individuals at least 6 years of age, but less

17 than 12 years of age, who have severe

18 dentofacial abnormalities. On or after such

19 date, such items and services are covered only

20 for individuals at least 6 years of age, but less

21 than 12 years of age.

22 (E) DENTURES.—Prior to January 1,

23 2008, the dentures described in paragraph

24 (1)(F) are not covered, except for special needs

25 patients. On or after such date, dentures are
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1 covered for an individual consistent with a peri2 odicity schedule established by the Board, ex3 cept that the limitation of periodicity provided

4 in such schedule shall not apply to a special

5 needs patient.

6 (3) DEFINITIONS.—For purposes of this title:

7 (A) MEDICALLY NECESSARY ORAL HEALTH

8 CARE.—The term ‘‘medically necessary oral

9 health care’’ means oral health care that is re10 quired as a direct result of, or would have a

11 direct impact on, an underlying medical condi12 tion. Such term includes oral health care di13 rected toward control or elimination of pain, in14 fection, or reestablishment of oral function.

15 (B) SPECIAL NEEDS PATIENT.—The term

16 ‘‘special needs patient’’ includes an individual

17 with a genetic or birth defect, a developmental

18 disability, or an acquired medical disability.

19 (i) NURSING FACILITY; NURSING FACILITY SERV20 ICES.—Except as may be provided by the Board, the

21 terms ‘‘nursing facility’’ and ‘‘nursing facility services’’

22 have the meanings given such terms in sections 1919(a)

23 and 1905(f), respectively, of the Social Security Act.
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1 (j) SERVICES IN INTERMEDIATE CARE FACILITIES

2 FOR INDIVIDUALS WITH MENTAL RETARDATION.—Ex3 cept as may be provided by the Board—

4 (1) the term ‘‘intermediate care facility for indi5 viduals with mental retardation’’ has the meaning

6 specified in section 1905(d) of the Social Security

7 Act (as in effect before the enactment of this Act);

8 and

9 (2) the term ‘‘services in intermediate care fa10 cilities for individuals with mental retardation’’

11 means services described in section 1905(a)(15) of

12 such Act (as so in effect) in an intermediate care fa13 cility for individuals with mental retardation to an

14 individual determined to require such services in ac15 cordance with standards specified by the Board and

16 comparable to the standards described in section

17 1902(a)(31)(A) of such Act (as so in effect).

18 (k) OTHER TERMS.—Except as may be provided by

19 the Board, the definitions contained in section 1861 of the

20 Social Security Act shall apply.

21 SEC. 203. SPECIAL RULES FOR HOME AND COMMUNITY22 BASED LONG-TERM CARE SERVICES.

23 (a) QUALIFYING INDIVIDUALS.—For purposes of sec24 tion 201(a)(5)(C), individuals described in this subsection

25 are the following individuals:
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1 (1) ADULTS.—Individuals 18 years of age or

2 older determined (in a manner specified by the

3 Board)—

4 (A) to be unable to perform, without the

5 assistance of an individual, at least 2 of the fol6 lowing 5 activities of daily living (or who has a

7 similar level of disability due to cognitive

8 impairment)—

9 (i) bathing;

10 (ii) eating;

11 (iii) dressing;

12 (iv) toileting; and

13 (v) transferring in and out of a bed or

14 in and out of a chair;

15 (B) due to cognitive or mental impair16 ments, to require supervision because the indi17 vidual behaves in a manner that poses health or

18 safety hazards to himself or herself or others;

19 or

20 (C) due to cognitive or mental impair21 ments, to require queuing to perform activities

22 of daily living.

23 (2) CHILDREN.—Individuals under 18 years of

24 age determined (in a manner specified by the Board)

25 to meet such alternative standard of disability for
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1 children as the Board develops. Such alternative

2 standard shall be comparable to the standard for

3 adults and appropriate for children.

4 (b) LIMIT ON SERVICES.—

5 (1) IN GENERAL.—The aggregate expenditures

6 by a State health security program with respect to

7 home and community-based long-term care services

8 in a period (specified by the Board) may not exceed

9 65 percent (or such alternative ratio as the Board

10 establishes under paragraph (2)) of the average of

11 the amount of payment that would have been made

12 under the program during the period if all the home13 based long-term care beneficiaries had been resi14 dents of nursing facilities in the same area in which

15 the services were provided.

16 (2) ALTERNATIVE RATIO.—The Board may es17 tablish for purposes of paragraph (1) an alternative

18 ratio (of payments for home and community-based

19 long term care services to payments for nursing fa20 cility services) as the Board determines to be more

21 consistent with the goal of providing cost-effective

22 long-term care in the most appropriate and least

23 restrictive setting.
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1 SEC. 204. EXCLUSIONS AND LIMITATIONS.

2 (a) IN GENERAL.—Subject to section 201(e), benefits

3 for service are not available under this Act unless the

4 services meet the standards specified in section 201(a).

5 (b) SPECIAL DELIVERY REQUIREMENTS FOR MEN6 TAL HEALTH AND SUBSTANCE ABUSE TREATMENT SERV7 ICES PROVIDED TO AT-RISK CHILDREN.—

8 (1) REQUIRING SERVICES TO BE PROVIDED

9 THROUGH ORGANIZED SYSTEMS OF CARE.—A State

10 health security program shall ensure that mental

11 health services and substance abuse treatment serv12 ices are furnished through an organized system of

13 care, as described in paragraph (2), if—

14 (A) the services are provided to an indi15 vidual less than 22 years of age;

16 (B) the individual has a serious emotional

17 disturbance or a substance abuse disorder; and

18 (C) the individual is, or is at imminent risk

19 of being, subject to the authority of, or in need

20 of the services of, at least 1 public agency that

21 serves the needs of children, including an agen22 cy involved with child welfare, special education,

23 juvenile justice, or criminal justice.

24 (2) REQUIREMENTS FOR SYSTEM OF CARE.—In

25 this subsection, an ‘‘organized system of care’’ is a

26 community-based service delivery network, which
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1 may consist of public and private providers, that

2 meets the following requirements:

3 (A) The system has established linkages

4 with existing mental health services and sub5 stance abuse treatment service delivery pro6 grams in the plan service area (or is in the

7 process of developing or operating a system

8 with appropriate public agencies in the area to

9 coordinate the delivery of such services to indi10 viduals in the area).

11 (B) The system provides for the participa12 tion and coordination of multiple agencies and

13 providers that serve the needs of children in the

14 area, including agencies and providers involved

15 with child welfare, education, juvenile justice,

16 criminal justice, health care, mental health, and

17 substance abuse prevention and treatment.

18 (C) The system provides for the involve19 ment of the families of children to whom mental

20 health services and substance abuse treatment

21 services are provided in the planning of treat22 ment and the delivery of services.

23 (D) The system provides for the develop24 ment and implementation of individualized

25 treatment plans by multidisciplinary and multi-
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1 agency teams, which are recognized and fol2 lowed by the applicable agencies and providers

3 in the area.

4 (E) The system ensures the delivery and

5 coordination of the range of mental health serv6 ices and substance abuse treatment services re7 quired by individuals under 22 years of age who

8 have a serious emotional disturbance or a sub9 stance abuse disorder.

10 (F) The system provides for the manage11 ment of the individualized treatment plans de12 scribed in subparagraph (D) and for a flexible

13 response to changes in treatment needs over

14 time.

15 (c) TREATMENT OF EXPERIMENTAL SERVICES.—In

16 applying subsection (a), the Board shall make national

17 coverage determinations with respect to those services that

18 are experimental in nature. Such determinations shall be

19 made consistent with a process that provides for input

20 from representatives of health care professionals and pa21 tients and public comment.

22 (d) APPLICATION OF PRACTICE GUIDELINES.—In

23 the case of services for which the American Health Secu24 rity Quality Council (established under section 501) has

25 recognized a national practice guideline, the services are
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1 considered to meet the standards specified in section

2 201(a) if they have been provided in accordance with such

3 guideline or in accordance with such guidelines as are pro4 vided by the State health security program consistent with

5 title V. For purposes of this subsection, a service shall

6 be considered to have been provided in accordance with

7 a practice guideline if the health care provider providing

8 the service exercised appropriate professional discretion to

9 deviate from the guideline in a manner authorized or an10 ticipated by the guideline.

11 (e) SPECIFIC LIMITATIONS.—

12 (1) LIMITATIONS ON EYEGLASSES, CONTACT

13 LENSES, HEARING AIDS, AND DURABLE MEDICAL

14 EQUIPMENT.—Subject to section 201(e), the Board

15 may impose such limits relating to the costs and fre16 quency of replacement of eyeglasses, contact lenses,

17 hearing aids, and durable medical equipment to

18 which individuals enrolled for benefits under this Act

19 are entitled to have payment made under a State

20 health security program as the Board deems appro21 priate.

22 (2) OVERLAP WITH PREVENTIVE SERVICES.—

23 The coverage of services described in section 201(a)

24 (other than paragraph (3)) which also are preventive

25 services are required to be covered only to the extent
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1 that they are required to be covered as preventive

2 services.

3 (3) MISCELLANEOUS EXCLUSIONS FROM COV4 ERED SERVICES.—Covered services under this Act

5 do not include the following:

6 (A) Surgery and other procedures (such as

7 orthodontia) performed solely for cosmetic pur8 poses (as defined in regulations) and hospital or

9 other services incident thereto, unless—

10 (i) required to correct a congenital

11 anomaly;

12 (ii) required to restore or correct a

13 part of the body which has been altered as

14 a result of accidental injury, disease, or

15 surgery; or

16 (iii) otherwise determined to be medi17 cally necessary and appropriate under sec18 tion 201(a).

19 (B) Personal comfort items or private

20 rooms in inpatient facilities, unless determined

21 to be medically necessary and appropriate

22 under section 201(a).

23 (C) The services of a professional practi24 tioner if they are furnished in a hospital or
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1 other facility which is not a participating pro2 vider.

3 (f) NURSING FACILITY SERVICES AND HOME

4 HEALTH SERVICES.—Nursing facility services and home

5 health services (other than post-hospital services, as de6 fined by the Board) furnished to an individual who is not

7 described in section 203(a) are not covered services unless

8 the services are determined to meet the standards speci9 fied in section 201(a) and, with respect to nursing facility

10 services, to be provided in the least restrictive and most

11 appropriate setting.

12 SEC. 205. CERTIFICATION; QUALITY REVIEW; PLANS OF

13 CARE.

14 (a) CERTIFICATIONS.—State health security pro15 grams may require, as a condition of payment for institu16 tional health care services and other services of the type

17 described in such sections 1814(a) and 1835(a) of the So18 cial Security Act, periodic professional certifications of the

19 kind described in such sections.

20 (b) QUALITY REVIEW.—For requirement that each

21 State health security program establish a quality review

22 program that meets the requirements for such a program

23 under title V, see section 404(b)(1)(H).

24 (c) PLAN OF CARE REQUIREMENTS.—A State health

25 security program may require, consistent with standards
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1 established by the Board, that payment for services ex2 ceeding specified levels or duration be provided only as

3 consistent with a plan of care or treatment formulated by

4 one or more providers of the services or other qualified

5 professionals. Such a plan may include, consistent with

6 subsection (b), case management at specified intervals as

7 a further condition of payment for services.

8 TITLE III—PROVIDER

9 PARTICIPATION

10 SEC. 301. PROVIDER PARTICIPATION AND STANDARDS.

11 (a) IN GENERAL.—An individual or other entity fur12 nishing any covered service under a State health security

13 program under this Act is not a qualified provider unless

14 the individual or entity—

15 (1) is a qualified provider of the services under

16 section 302;

17 (2) has filed with the State health security pro18 gram a participation agreement described in sub19 section (b); and

20 (3) meets such other qualifications and condi21 tions as are established by the Board or the State

22 health security program under this Act.

23 (b) REQUIREMENTS IN PARTICIPATION AGREE24 MENT.—
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1 (1) IN GENERAL.—A participation agreement

2 described in this subsection between a State health

3 security program and a provider shall provide at

4 least for the following:

5 (A) Services to eligible persons will be fur6 nished by the provider without discrimination

7 on the ground of race, national origin, income,

8 religion, age, sex or sexual orientation, dis9 ability, handicapping condition, or (subject to

10 the professional qualifications of the provider)

11 illness. Nothing in this subparagraph shall be

12 construed as requiring the provision of a type

13 or class of services which services are outside

14 the scope of the provider’s normal practice.

15 (B) No charge will be made for any cov16 ered services other than for payment authorized

17 by this Act.

18 (C) The provider agrees to furnish such in19 formation as may be reasonably required by the

20 Board or a State health security program, in

21 accordance with uniform reporting standards

22 established under section 401(g)(1), for—

23 (i) quality review by designated enti24 ties;
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1 (ii) the making of payments under

2 this Act (including the examination of

3 records as may be necessary for the

4 verification of information on which pay5 ments are based);

6 (iii) statistical or other studies re7 quired for the implementation of this Act;

8 and

9 (iv) such other purposes as the Board

10 or State may specify.

11 (D) The provider agrees not to bill the pro12 gram for any services for which benefits are not

13 available because of section 204(d).

14 (E) In the case of a provider that is not

15 an individual, the provider agrees not to employ

16 or use for the provision of health services any

17 individual or other provider who or which has

18 had a participation agreement under this sub19 section terminated for cause.

20 (F) In the case of a provider paid under a

21 fee-for-service basis under section 612, the pro22 vider agrees to submit bills and any required

23 supporting documentation relating to the provi24 sion of covered services within 30 days (or such

25 shorter period as a State health security pro-
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1 gram may require) after the date of providing

2 such services.

3 (2) TERMINATION OF PARTICIPATION AGREE4 MENTS.—

5 (A) IN GENERAL.—Participation agree6 ments may be terminated, with appropriate

7 notice—

8 (i) by the Board or a State health se9 curity program for failure to meet the

10 requirements of this title, or

11 (ii) by a provider.

12 (B) TERMINATION PROCESS.—Providers

13 shall be provided notice and a reasonable oppor14 tunity to correct deficiencies before the Board

15 or a State health security program terminates

16 an agreement unless a more immediate termi17 nation is required for public safety or similar

18 reasons.

19 SEC. 302. QUALIFICATIONS FOR PROVIDERS.

20 (a) IN GENERAL.—A health care provider is consid21 ered to be qualified to provide covered services if the pro22 vider is licensed or certified and meets—

23 (1) all the requirements of State law to provide

24 such services,
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1 (2) applicable requirements of Federal law to

2 provide such services, and

3 (3) any applicable standards established under

4 subsection (b).

5 (b) MINIMUM PROVIDER STANDARDS.—

6 (1) IN GENERAL.—The Board shall establish,

7 evaluate, and update national minimum standards to

8 assure the quality of services provided under this

9 Act and to monitor efforts by State health security

10 programs to assure the quality of such services. A

11 State health security program may also establish ad12 ditional minimum standards which providers must

13 meet.

14 (2) NATIONAL MINIMUM STANDARDS.—The na15 tional minimum standards under paragraph (1) shall

16 be established for institutional providers of services,

17 individual health care practitioners, and comprehen18 sive health service organizations. Except as the

19 Board may specify in order to carry out this title,

20 a hospital, nursing facility, or other institutional

21 provider of services shall meet standards for such a

22 facility under the medicare program under title

23 XVIII of the Social Security Act. Such standards

24 also may include, where appropriate, elements relat25 ing to—
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1 (A) adequacy and quality of facilities;

2 (B) training and competence of personnel

3 (including continuing education requirements);

4 (C) comprehensiveness of service;

5 (D) continuity of service;

6 (E) patient satisfaction (including waiting

7 time and access to services); and

8 (F) performance standards (including or9 ganization, facilities, structure of services, effi10 ciency of operation, and outcome in palliation,

11 improvement of health, stabilization, cure, or

12 rehabilitation).

13 (3) TRANSITION IN APPLICATION.—If the

14 Board provides for additional requirements for pro15 viders under this subsection, any such additional re16 quirement shall be implemented in a manner that

17 provides for a reasonable period during which a pre18 viously qualified provider is permitted to meet such

19 an additional requirement.

20 (4) EXCHANGE OF INFORMATION.—The Board

21 shall provide for an exchange, at least annually,

22 among State health security programs of informa23 tion with respect to quality assurance and cost

24 containment.
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1 SEC. 303. QUALIFICATIONS FOR COMPREHENSIVE HEALTH

2 SERVICE ORGANIZATIONS.

3 (a) IN GENERAL.—For purposes of this Act, a com4 prehensive health service organization (in this section re5 ferred to as a ‘‘CHSO’’) is a public or private organization

6 which, in return for a capitated payment amount, under7 takes to furnish, arrange for the provision of, or provide

8 payment with respect to—

9 (1) a full range of health services (as identified

10 by the Board), including at least hospital services

11 and physicians services, and

12 (2) out-of-area coverage in the case of urgently

13 needed services,

14 to an identified population which is living in or near a

15 specified service area and which enrolls voluntarily in the

16 organization.

17 (b) ENROLLMENT.—

18 (1) IN GENERAL.—All eligible persons living in

19 or near the specified service area of a CHSO are eli20 gible to enroll in the organization; except that the

21 number of enrollees may be limited to avoid over22 taxing the resources of the organization.

23 (2) MINIMUM ENROLLMENT PERIOD.—Subject

24 to paragraph (3), the minimum period of enrollment

25 with a CHSO shall be twelve months, unless the en-
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1 rolled individual becomes ineligible to enroll with the

2 organization.

3 (3) WITHDRAWAL FOR CAUSE.—Each CHSO

4 shall permit an enrolled individual to disenroll from

5 the organization for cause at any time.

6 (c) REQUIREMENTS FOR CHSOS.—

7 (1) ACCESSIBLE SERVICES.—Each CHSO, to

8 the maximum extent feasible, shall make all services

9 readily and promptly accessible to enrollees who live

10 in the specified service area.

11 (2) CONTINUITY OF CARE.—Each CHSO shall

12 furnish services in such manner as to provide con13 tinuity of care and (when services are furnished by

14 different providers) shall provide ready referral of

15 patients to such services and at such times as may

16 be medically appropriate.

17 (3) BOARD OF DIRECTORS.—In the case of a

18 CHSO that is a private organization—

19 (A) CONSUMER REPRESENTATION.—At

20 least one-third of the members of the CHSO’s

21 board of directors must be consumer members

22 with no direct or indirect, personal or family

23 financial relationship to the organization.

24 (B) PROVIDER REPRESENTATION.—The

25 CHSO’s board of directors must include at
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1 least one member who represents health care

2 providers.

3 (4) PATIENT GRIEVANCE PROGRAM.—Each

4 CHSO must have in effect a patient grievance pro5 gram and must conduct regularly surveys of the sat6 isfaction of members with services provided by or

7 through the organization.

8 (5) MEDICAL STANDARDS.—Each CHSO must

9 provide that a committee or committees of health

10 care practitioners associated with the organization

11 will promulgate medical standards, oversee the pro12 fessional aspects of the delivery of care, perform the

13 functions of a pharmacy and drug therapeutics com14 mittee, and monitor and review the quality of all

15 health services (including drugs, education, and pre16 ventive services).

17 (6) PREMIUMS.—Premiums or other charges by

18 a CHSO for any services not paid for under this Act

19 must be reasonable.

20 (7) UTILIZATION AND BONUS INFORMATION.—

21 Each CHSO must—

22 (A) comply with the requirements of sec23 tion 1876(i)(8) of the Social Security Act (re24 lating to prohibiting physician incentive plans
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1 that provide specific inducements to reduce or

2 limit medically necessary services), and

3 (B) make available to its membership utili4 zation information and data regarding financial

5 performance, including bonus or incentive pay6 ment arrangements to practitioners.

7 (8) PROVISION OF SERVICES TO ENROLLEES AT

8 INSTITUTIONS OPERATING UNDER GLOBAL BUDG9 ETS.—The organization shall arrange to reimburse

10 for hospital services and other facility-based services

11 (as identified by the Board) for services provided to

12 members of the organization in accordance with the

13 global operating budget of the hospital or facility ap14 proved under section 611.

15 (9) BROAD MARKETING.—Each CHSO must

16 provide for the marketing of its services (including

17 dissemination of marketing materials) to potential

18 enrollees in a manner that is designed to enroll indi19 viduals representative of the different population

20 groups and geographic areas included within its

21 service area and meets such requirements as the

22 Board or a State health security program may

23 specify.

24 (10) ADDITIONAL REQUIREMENTS.—Each

25 CHSO must meet—
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1 (A) such requirements relating to min2 imum enrollment,

3 (B) such requirements relating to financial

4 solvency,

5 (C) such requirements relating to quality

6 and availability of care, and

7 (D) such other requirements,

8 as the Board or a State health security program

9 may specify.

10 (d) PROVISION OF EMERGENCY SERVICES TO NON11 ENROLLEES.—A CHSO may furnish emergency services

12 to persons who are not enrolled in the organization. Pay13 ment for such services, if they are covered services to eligi14 ble persons, shall be made to the organization unless the

15 organization requests that it be made to the individual

16 provider who furnished the services.

17 SEC. 304. LIMITATION ON CERTAIN PHYSICIAN REFERRALS.

18 (a) APPLICATION TO AMERICAN HEALTH SECURITY

19 PROGRAM.—Section 1877 of the Social Security Act, as

20 amended by subsections (b) and (c), shall apply under this

21 Act in the same manner as it applies under title XVIII

22 of the Social Security Act; except that in applying such

23 section under this Act any references in such section to

24 the Secretary or title XVIII of the Social Security Act are
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1 deemed references to the Board and the American Health

2 Security Program under this Act, respectively.

3 (b) EXPANSION OF PROHIBITION TO CERTAIN ADDI4 TIONAL DESIGNATED SERVICES.—Section 1877(h)(6) of

5 the Social Security Act (42 U.S.C. 1395nn(h)(6)) is

6 amended by adding at the end the following:

7 ‘‘(L) Ambulance services.

8 ‘‘(M) Home infusion therapy services.’’.

9 (c) CONFORMING AMENDMENTS.—Section 1877 of

10 such Act is further amended—

11 (1) in subsection (a)(1)(A), by striking ‘‘for

12 which payment otherwise may be made under this

13 title’’ and by inserting ‘‘for which a charge is

14 imposed’’;

15 (2) in subsection (a)(1)(B), by striking ‘‘under

16 this title’’;

17 (3) by amending paragraph (1) of subsection

18 (g) to read as follows:

19 ‘‘(1) DENIAL OF PAYMENT.—No payment may

20 be made under a State health security program for

21 a designated health service for which a claim is pre22 sented in violation of subsection (a)(1)(B). No indi23 vidual, third party payor, or other entity is liable for

24 payment for designated health services for which a
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1 claim is presented in violation of such subsection.’’;

2 and

3 (4) in subsection (g)(3), by striking ‘‘for which

4 payment may not be made under paragraph (1)’’

5 and by inserting ‘‘for which such a claim may not

6 be presented under subsection (a)(1)’’.

7 TITLE IV—ADMINISTRATION

8 Subtitle A—General Administrative

9 Provisions

10 SEC. 401. AMERICAN HEALTH SECURITY STANDARDS

11 BOARD.

12 (a) ESTABLISHMENT.—There is hereby established

13 an American Health Security Standards Board.

14 (b) APPOINTMENT AND TERMS OF MEMBERS.—

15 (1) IN GENERAL.—The Board shall be com16 posed of—

17 (A) the Secretary of Health and Human

18 Services, and

19 (B) 6 other individuals (described in para20 graph (2)) appointed by the President with the

21 advice and consent of the Senate.

22 The President shall first nominate individuals under

23 subparagraph (B) on a timely basis so as to provide

24 for the operation of the Board by not later than

25 January 1, 2002.
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1 (2) SELECTION OF APPOINTED MEMBERS.—

2 With respect to the individuals appointed under

3 paragraph (1)(B):

4 (A) They shall be chosen on the basis of

5 backgrounds in health policy, health economics,

6 the healing professions, and the administration

7 of health care institutions.

8 (B) They shall provide a balanced point of

9 view with respect to the various health care in10 terests and at least two of them shall represent

11 the interests of individual consumers.

12 (C) Not more than three of them shall be

13 from the same political party.

14 (D) To the greatest extent feasible, they

15 shall represent the various geographic regions

16 of the United States and shall reflect the racial,

17 ethnic, and gender composition of the popu18 lation of the United States.

19 (3) TERMS OF APPOINTED MEMBERS.—Individ20 uals appointed under paragraph (1)(B) shall serve

21 for a term of 6 years, except that the terms of 5 of

22 the individuals initially appointed shall be, as des23 ignated by the President at the time of their ap24 pointment, for 1, 2, 3, 4, and 5 years. During a

25 term of membership on the Board, no member shall
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1 engage in any other business, vocation or employ2 ment.

3 (c) VACANCIES.—

4 (1) IN GENERAL.—The President shall fill any

5 vacancy in the membership of the Board in the same

6 manner as the original appointment. The vacancy

7 shall not affect the power of the remaining members

8 to execute the duties of the Board.

9 (2) VACANCY APPOINTMENTS.—Any member

10 appointed to fill a vacancy shall serve for the re11 mainder of the term for which the predecessor of the

12 member was appointed.

13 (3) REAPPOINTMENT.—The President may re14 appoint an appointed member of the Board for a

15 second term in the same manner as the original ap16 pointment. A member who has served for two con17 secutive 6-year terms shall not be eligible for re18 appointment until two years after the member has

19 ceased to serve.

20 (4) REMOVAL FOR CAUSE.—Upon confirmation,

21 members of the Board may not be removed except

22 by the President for cause.

23 (d) CHAIR.—The President shall designate one of the

24 members of the Board, other than the Secretary, to serve

25 at the will of the President as Chair of the Board.
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1 (e) COMPENSATION.—Members of the Board (other

2 than the Secretary) shall be entitled to compensation at

3 a level equivalent to level II of the Executive Schedule,

4 in accordance with section 5313 of title 5, United States

5 Code.

6 (f) GENERAL DUTIES OF THE BOARD.—

7 (1) IN GENERAL.—The Board shall develop

8 policies, procedures, guidelines, and requirements to

9 carry out this Act, including those related to—

10 (A) eligibility;

11 (B) enrollment;

12 (C) benefits;

13 (D) provider participation standards and

14 qualifications, as defined in title III;

15 (E) national and State funding levels;

16 (F) methods for determining amounts of

17 payments to providers of covered services, con18 sistent with subtitle B of title VI;

19 (G) the determination of medical necessity

20 and appropriateness with respect to coverage of

21 certain services;

22 (H) assisting State health security pro23 grams with planning for capital expenditures

24 and service delivery;
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1 (I) planning for health professional edu2 cation funding (as specified in title VI);

3 (J) allocating funds provided under title

4 VII; and

5 (K) encouraging States to develop regional

6 planning mechanisms (described in section

7 404(a)(3)).

8 (2) REGULATIONS.—Regulations authorized by

9 this Act shall be issued by the Board in accordance

10 with the provisions of section 553 of title 5, United

11 States Code.

12 (g) UNIFORM REPORTING STANDARDS; ANNUAL RE13 PORT; STUDIES.—

14 (1) UNIFORM REPORTING STANDARDS.—

15 (A) IN GENERAL.—The Board shall estab16 lish uniform reporting requirements and stand17 ards to ensure an adequate national data base

18 regarding health services practitioners, services

19 and finances of State health security programs,

20 approved plans, providers, and the costs of fa21 cilities and practitioners providing services.

22 Such standards shall include, to the maximum

23 extent feasible, health outcome measures.

24 (B) REPORTS.—The Board shall analyze

25 regularly information reported to it, and to
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1 State health security programs pursuant to

2 such requirements and standards.

3 (2) ANNUAL REPORT.—Beginning January 1,

4 of the second year beginning after the date of the

5 enactment of this Act, the Board shall annually

6 report to Congress on the following:

7 (A) The status of implementation of the

8 Act.

9 (B) Enrollment under this Act.

10 (C) Benefits under this Act.

11 (D) Expenditures and financing under this

12 Act.

13 (E) Cost-containment measures and

14 achievements under this Act.

15 (F) Quality assurance.

16 (G) Health care utilization patterns, in17 cluding any changes attributable to the pro18 gram.

19 (H) Long-range plans and goals for the de20 livery of health services.

21 (I) Differences in the health status of the

22 populations of the different States, including in23 come and racial characteristics.

24 (J) Necessary changes in the education of

25 health personnel.
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1 (K) Plans for improving service to medi2 cally underserved populations.

3 (L) Transition problems as a result of im4 plementation of this Act.

5 (M) Opportunities for improvements under

6 this Act.

7 (3) STATISTICAL ANALYSES AND OTHER STUD8 IES.—The Board may, either directly or by

9 contract—

10 (A) make statistical and other studies, on

11 a nationwide, regional, state, or local basis, of

12 any aspect of the operation of this Act, includ13 ing studies of the effect of the Act upon the

14 health of the people of the United States and

15 the effect of comprehensive health services upon

16 the health of persons receiving such services;

17 (B) develop and test methods of providing

18 through payment for services or otherwise, ad19 ditional incentives for adherence by providers to

20 standards of adequacy, access, and quality;

21 methods of consumer and peer review and peer

22 control of the utilization of drugs, of laboratory

23 services, and of other services; and methods of

24 consumer and peer review of the quality of serv25 ices;
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1 (C) develop and test, for use by the Board,

2 records and information retrieval systems and

3 budget systems for health services administra4 tion, and develop and test model systems for

5 use by providers of services;

6 (D) develop and test, for use by providers

7 of services, records and information retrieval

8 systems useful in the furnishing of preventive

9 or diagnostic services;

10 (E) develop, in collaboration with the phar11 maceutical profession, and test, improved ad12 ministrative practices or improved methods for

13 the reimbursement of independent pharmacies

14 for the cost of furnishing drugs as a covered

15 service; and

16 (F) make such other studies as it may con17 sider necessary or promising for the evaluation,

18 or for the improvement, of the operation of this

19 Act.

20 (4) REPORT ON USE OF EXISTING FEDERAL

21 HEALTH CARE FACILITIES.—Not later than one year

22 after the date of the enactment of this Act, the

23 Board shall recommend to the Congress one or more

24 proposals for the treatment of health care facilities

25 of the Federal Government.
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1 (h) EXECUTIVE DIRECTOR.—

2 (1) APPOINTMENT.—There is hereby estab3 lished the position of Executive Director of the

4 Board. The Director shall be appointed by the

5 Board and shall serve as secretary to the Board and

6 perform such duties in the administration of this

7 title as the Board may assign.

8 (2) DELEGATION.—The Board is authorized to

9 delegate to the Director or to any other officer or

10 employee of the Board or, with the approval of the

11 Secretary of Health and Human Services (and sub12 ject to reimbursement of identifiable costs), to any

13 other officer or employee of the Department of

14 Health and Human Services, any of its functions or

15 duties under this Act other than—

16 (A) the issuance of regulations; or

17 (B) the determination of the availability of

18 funds and their allocation to implement this

19 Act.

20 (3) COMPENSATION.—The Executive Director

21 of the Board shall be entitled to compensation at a

22 level equivalent to level III of the Executive Sched23 ule, in accordance with section 5314 of title 5,

24 United States Code.
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1 (i) INSPECTOR GENERAL.—The Inspector General

2 Act of 1978 (5 U.S.C. App.) is amended—

3 (1) in section 11(1) by inserting after ‘‘Cor4 poration;’’ the following: ‘‘the Chair of the American

5 Health Security Standards Board;’’;

6 (2) in section 11(2) by inserting after ‘‘Infor7 mation Agency,’’ the following: ‘‘the American

8 Health Security Standards Board,’’; and

9 (3) by inserting after the second section 8I the

10 following:

11 ‘‘§ 8J. Special provisions concerning American Health

12 Security Standards Board

13 ‘‘The Inspector General of the American Health Se14 curity Standards Board, in addition to the other authori15 ties vested by this Act, shall have the same authority, with

16 respect to the Board and the American Health Security

17 Program under this Act, as the Inspector General for the

18 Department of Health and Human Services has with re19 spect to the Secretary of Health and Human Services and

20 the medicare and medicaid programs, respectively.’’.

21 (j) STAFF.—The Board shall employ such staff as the

22 Board may deem necessary.

23 (k) ACCESS TO INFORMATION.—The Secretary of

24 Health and Human Services shall make available to the

25 Board all information available from sources within the
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1 Department or from other sources, pertaining to the

2 duties of the Board.

3 SEC. 402. AMERICAN HEALTH SECURITY ADVISORY COUN4 CIL.

5 (a) IN GENERAL.—The Board shall provide for an

6 American Health Security Advisory Council (in this sec7 tion referred to as the ‘‘Council’’) to advise the Board on

8 its activities.

9 (b) MEMBERSHIP.—The Council shall be composed

10 of—

11 (1) the Chair of the Board, who shall serve as

12 Chair of the Council, and

13 (2) twenty members, not otherwise in the em14 ploy of the United States, appointed by the Board

15 without regard to the provisions of title 5, United

16 States Code, governing appointments in the competi17 tive service.

18 The appointed members shall include, in accordance with

19 subsection (e), individuals who are representative of State

20 health security programs, public health professionals, pro21 viders of health services, and of individuals (who shall con22 stitute a majority of the Council) who are representative

23 of consumers of such services, including a balanced rep24 resentation of employers, unions, consumer organizations,

25 and population groups with special health care needs. To
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1 the greatest extent feasible, the membership of the Council

2 shall represent the various geographic regions of the

3 United States and shall reflect the racial, ethnic, and gen4 der composition of the population of the United States.

5 (c) TERMS OF MEMBERS.—Each appointed member

6 shall hold office for a term of four years, except that—

7 (1) any member appointed to fill a vacancy oc8 curring during the term for which the member’s

9 predecessor was appointed shall be appointed for the

10 remainder of that term; and

11 (2) the terms of the members first taking office

12 shall expire, as designated by the Board at the time

13 of appointment, five at the end of the first year, five

14 at the end of the second year, five at the end of the

15 third year, and five at the end of the fourth year

16 after the date of enactment of this Act.

17 (d) VACANCIES.—

18 (1) IN GENERAL.—The Board shall fill any va19 cancy in the membership of the Council in the same

20 manner as the original appointment. The vacancy

21 shall not affect the power of the remaining members

22 to execute the duties of the Council.

23 (2) VACANCY APPOINTMENTS.—Any member

24 appointed to fill a vacancy shall serve for the re-
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1 mainder of the term for which the predecessor of the

2 member was appointed.

3 (3) REAPPOINTMENT.—The Board may re4 appoint an appointed member of the Council for a

5 second term in the same manner as the original

6 appointment.

7 (e) QUALIFICATIONS.—

8 (1) PUBLIC HEALTH REPRESENTATIVES.—

9 Members of the Council who are representative of

10 State health security programs and public health

11 professionals shall be individuals who have extensive

12 experience in the financing and delivery of care

13 under public health programs.

14 (2) PROVIDERS.—Members of the Council who

15 are representative of providers of health care shall

16 be individuals who are outstanding in fields related

17 to medical, hospital, or other health activities, or

18 who are representative of organizations or associa19 tions of professional health practitioners.

20 (3) CONSUMERS.—Members who are represent21 ative of consumers of such care shall be individuals,

22 not engaged in and having no financial interest in

23 the furnishing of health services, who are familiar

24 with the needs of various segments of the population

25 for personal health services and are experienced in
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1 dealing with problems associated with the consump2 tion of such services.

3 (f) DUTIES.—

4 (1) IN GENERAL.—It shall be the duty of the

5 Council—

6 (A) to advise the Board on matters of gen7 eral policy in the administration of this Act, in

8 the formulation of regulations, and in the per9 formance of the Board’s duties under section

10 401; and

11 (B) to study the operation of this Act and

12 the utilization of health services under it, with

13 a view to recommending any changes in the ad14 ministration of the Act or in its provisions

15 which may appear desirable.

16 (2) REPORT.—The Council shall make an an17 nual report to the Board on the performance of its

18 functions, including any recommendations it may

19 have with respect thereto, and the Board shall

20 promptly transmit the report to the Congress, to21 gether with a report by the Board on any rec22 ommendations of the Council that have not been

23 followed.

24 (g) STAFF.—The Council, its members, and any com25 mittees of the Council shall be provided with such secre-
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1 tarial, clerical, or other assistance as may be authorized

2 by the Board for carrying out their respective functions.

3 (h) MEETINGS.—The Council shall meet as fre4 quently as the Board deems necessary, but not less than

5 four times each year. Upon request by seven or more mem6 bers it shall be the duty of the Chair to call a meeting

7 of the Council.

8 (i) COMPENSATION.—Members of the Council shall

9 be reimbursed by the Board for travel and per diem in

10 lieu of subsistence expenses during the performance of du11 ties of the Board in accordance with subchapter I of chap12 ter 57 of title 5, United States Code.

13 (j) FACA NOT APPLICABLE.—The provisions of the

14 Federal Advisory Committee Act shall not apply to the

15 Council.

16 SEC. 403. CONSULTATION WITH PRIVATE ENTITIES.

17 The Secretary and the Board shall consult with pri18 vate entities, such as professional societies, national asso19 ciations, nationally recognized associations of experts,

20 medical schools and academic health centers, consumer

21 groups, and labor and business organizations in the for22 mulation of guidelines, regulations, policy initiatives, and

23 information gathering to assure the broadest and most in24 formed input in the administration of this Act. Nothing

25 in this Act shall prevent the Secretary from adopting
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1 guidelines developed by such a private entity if, in the Sec2 retary’s and Board’s judgment, such guidelines are gen3 erally accepted as reasonable and prudent and consistent

4 with this Act.

5 SEC. 404. STATE HEALTH SECURITY PROGRAMS.

6 (a) SUBMISSION OF PLANS.—

7 (1) IN GENERAL.—Each State shall submit to

8 the Board a plan for a State health security pro9 gram for providing for health care services to the

10 residents of the State in accordance with this Act.

11 (2) REGIONAL PROGRAMS.—A State may join

12 with one or more neighboring States to submit to

13 the Board a plan for a regional health security pro14 gram instead of separate State health security

15 programs.

16 (3) REGIONAL PLANNING MECHANISMS.—The

17 Board shall provide incentives for States to develop

18 regional planning mechanisms to promote the ration19 al distribution of, adequate access to, and efficient

20 use of, tertiary care facilities, equipment, and

21 services.

22 (b) REVIEW AND APPROVAL OF PLANS.—

23 (1) IN GENERAL.—The Board shall review

24 plans submitted under subsection (a) and determine

25 whether such plans meet the requirements for ap-
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1 proval. The Board shall not approve such a plan un2 less it finds that the plan (or State law) provides,

3 consistent with the provisions of this Act, for the

4 following:

5 (A) Payment for required health services

6 for eligible individuals in the State in accord7 ance with this Act.

8 (B) Adequate administration, including the

9 designation of a single State agency responsible

10 for the administration (or supervision of the

11 administration) of the program.

12 (C) The establishment of a State health

13 security budget.

14 (D) Establishment of payment methodolo15 gies (consistent with subtitle B of title VII).

16 (E) Assurances that individuals have the

17 freedom to choose practitioners and other

18 health care providers for services covered under

19 this Act.

20 (F) A procedure for carrying out long-term

21 regional management and planning functions

22 with respect to the delivery and distribution of

23 health care services that—
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1 (i) ensures participation of consumers

2 of health services and providers of health

3 services, and

4 (ii) gives priority to the most acute

5 shortages and maldistributions of health

6 personnel and facilities and the most seri7 ous deficiencies in the delivery of covered

8 services and to the means for the speedy

9 alleviation of these shortcomings.

10 (G) The licensure and regulation of all

11 health providers and facilities to ensure compli12 ance with Federal and State laws and to

13 promote quality of care.

14 (H) Establishment of a quality review sys15 tem in accordance with section 503.

16 (I) Establishment of an independent om17 budsman for consumers to register complaints

18 about the organization and administration of

19 the State health security program and to help

20 resolve complaints and disputes between con21 sumers and providers.

22 (J) Publication of an annual report on the

23 operation of the State health security program,

24 which report shall include information on cost,

25 progress towards achieving full enrollment, pub-
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1 lic access to health services, quality review,

2 health outcomes, health professional training,

3 and the needs of medically underserved

4 populations.

5 (K) Provision of a fraud and abuse preven6 tion and control unit that the Inspector General

7 determines meets the requirements of section

8 412(a).

9 (L) Prohibit payment in cases of prohib10 ited physician referrals under section 304.

11 (2) CONSEQUENCES OF FAILURE TO COMPLY.—

12 If the Board finds that a State plan submitted

13 under paragraph (1) does not meet the requirements

14 for approval under this section or that a State

15 health security program or specific portion of such

16 program, the plan for which was previously ap17 proved, no longer meets such requirements, the

18 Board shall provide notice to the State of such fail19 ure and that unless corrective action is taken within

20 a period specified by the Board, the Board shall

21 place the State health security program (or specific

22 portions of such program) in receivership under the

23 jurisdiction of the Board.

24 (c) STATE HEALTH SECURITY ADVISORY COUN25 CILS.—
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1 (1) IN GENERAL.—For each State, the Gov2 ernor shall provide for appointment of a State

3 Health Security Advisory Council to advise and

4 make recommendations to the Governor and State

5 with respect to the implementation of the State

6 health security program in the State.

7 (2) MEMBERSHIP.—Each State Health Security

8 Advisory Council shall be composed of at least 11 in9 dividuals. The appointed members shall include indi10 viduals who are representative of the State health

11 security program, public health professionals, pro12 viders of health services, and of individuals (who

13 shall constitute a majority) who are representative

14 of consumers of such services, including a balanced

15 representation of employers, unions and consumer

16 organizations. To the greatest extent feasible, the

17 membership of each State Health Security Advisory

18 Council shall represent the various geographic re19 gions of the State and shall reflect the racial, ethnic,

20 and gender composition of the population of the

21 State.

22 (3) DUTIES.—

23 (A) IN GENERAL.—Each State Health Se24 curity Advisory Council shall review, and sub25 mit comments to the Governor concerning the
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1 implementation of the State health security pro2 gram in the State.

3 (B) ASSISTANCE.—Each State Health Se4 curity Advisory Council shall provide assistance

5 and technical support to community organiza6 tions and public and private non-profit agencies

7 submitting applications for funding under ap8 propriate State and Federal public health pro9 grams, with particular emphasis placed on as10 sisting those applicants with broad consumer

11 representation.

12 (d) STATE USE OF FISCAL AGENTS.—

13 (1) IN GENERAL.—Each State health security

14 program, using competitive bidding procedures, may

15 enter into such contracts with qualified entities, such

16 as voluntary associations, as the State determines to

17 be appropriate to process claims and to perform

18 other related functions of fiscal agents under the

19 State health security program.

20 (2) RESTRICTION.—Except as the Board may

21 provide for good cause shown, in no case may more

22 than one contract described in paragraph (1) be

23 entered into under a State health security program.
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1 SEC. 405. COMPLEMENTARY CONDUCT OF RELATED

2 HEALTH PROGRAMS.

3 In performing functions with respect to health per4 sonnel education and training, health research, environ5 mental health, disability insurance, vocational rehabilita6 tion, the regulation of food and drugs, and all other mat7 ters pertaining to health, the Secretary of Health and

8 Human Services shall direct all activities of the Depart9 ment of Health and Human Services toward contributions

10 to the health of the people complementary to this Act.

11 Subtitle B—Control Over Fraud

12 and Abuse

13 SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL

14 FRAUD AND ABUSE UNDER AMERICAN

15 HEALTH SECURITY PROGRAM.

16 The following sections of the Social Security Act shall

17 apply to State health security programs in the same man18 ner as they apply to State medical assistance plans under

19 title XIX of such Act (except that in applying such provi20 sions any reference to the Secretary is deemed a reference

21 to the Board):

22 (1) Section 1128 (relating to exclusion of indi23 viduals and entities).

24 (2) Section 1128A (civil monetary penalties).

25 (3) Section 1128B (criminal penalties).
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1 (4) Section 1124 (relating to disclosure of own2 ership and related information).

3 (5) Section 1126 (relating to disclosure of cer4 tain owners).

5 SEC. 412. REQUIREMENTS FOR OPERATION OF STATE

6 HEALTH CARE FRAUD AND ABUSE CONTROL

7 UNITS.

8 (a) REQUIREMENT.—In order to meet the require9 ment of section 404(b)(1)(K), each State health security

10 program must establish and maintain a health care fraud

11 and abuse control unit (in this section referred to as a

12 ‘‘fraud unit’’) that meets requirements of this section and

13 other requirements of the Board. Such a unit may be a

14 State medicaid fraud control unit (described in section

15 1903(q) of the Social Security Act).

16 (b) STRUCTURE OF UNIT.—The fraud unit must—

17 (1) be a single identifiable entity of the State

18 government;

19 (2) be separate and distinct from the State

20 agency with principal responsibility for the adminis21 tration of the State health security program; and

22 (3) meet 1 of the following requirements:

23 (A) It must be a unit of the office of the

24 State Attorney General or of another depart25 ment of State government which possesses
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1 statewide authority to prosecute individuals for

2 criminal violations.

3 (B) If it is in a State the constitution of

4 which does not provide for the criminal prosecu5 tion of individuals by a statewide authority and

6 has formal procedures, approved by the Board,

7 that (i) assure its referral of suspected criminal

8 violations relating to the State health insurance

9 plan to the appropriate authority or authorities

10 in the States for prosecution, and (ii) assure its

11 assistance of, and coordination with, such au12 thority or authorities in such prosecutions.

13 (C) It must have a formal working rela14 tionship with the office of the State Attorney

15 General and have formal procedures (including

16 procedures for its referral of suspected criminal

17 violations to such office) which are approved by

18 the Board and which provide effective coordina19 tion of activities between the fraud unit and

20 such office with respect to the detection, inves21 tigation, and prosecution of suspected criminal

22 violations relating to the State health insurance

23 plan.

24 (c) FUNCTIONS.—The fraud unit must—
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1 (1) have the function of conducting a statewide

2 program for the investigation and prosecution of vio3 lations of all applicable State laws regarding any

4 and all aspects of fraud in connection with any as5 pect of the provision of health care services and ac6 tivities of providers of such services under the State

7 health security program;

8 (2) have procedures for reviewing complaints of

9 the abuse and neglect of patients of providers and

10 facilities that receive payments under the State

11 health security program, and, where appropriate, for

12 acting upon such complaints under the criminal laws

13 of the State or for referring them to other State

14 agencies for action; and

15 (3) provide for the collection, or referral for col16 lection to a single State agency, of overpayments

17 that are made under the State health security pro18 gram to providers and that are discovered by the

19 fraud unit in carrying out its activities.

20 (d) RESOURCES.—The fraud unit must—

21 (1) employ such auditors, attorneys, investiga22 tors, and other necessary personnel,

23 (2) be organized in such a manner, and
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1 (3) provide sufficient resources (as specified by

2 the Board), as is necessary to promote the effective

3 and efficient conduct of the unit’s activities.

4 (e) COOPERATIVE AGREEMENTS.—The fraud unit

5 must have cooperative agreements (as specified by the

6 Board) with—

7 (1) similar fraud units in other States,

8 (2) the Inspector General, and

9 (3) the Attorney General of the United States.

10 (f) REPORTS.—The fraud unit must submit to the

11 Inspector General an application and annual reports con12 taining such information as the Inspector General deter13 mines to be necessary to determine whether the unit meets

14 the previous requirements of this section.

15 TITLE V—QUALITY ASSESSMENT

16 SEC. 501. AMERICAN HEALTH SECURITY QUALITY COUNCIL.

17 (a) ESTABLISHMENT.—There is hereby established

18 an American Health Security Quality Council (in this title

19 referred to as the ‘‘Council’’).

20 (b) DUTIES OF THE COUNCIL.—The Council shall

21 perform the following duties:

22 (1) PRACTICE GUIDELINES.—The Council shall

23 review and evaluate each practice guideline devel24 oped under part B of title IX of the Public Health

25 Service Act. The Council shall determine whether
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1 the guideline should be recognized as a national

2 practice guideline to be used under section 204(d)

3 for purposes of determining payments under a State

4 health security program.

5 (2) STANDARDS OF QUALITY, PERFORMANCE

6 MEASURES, AND MEDICAL REVIEW CRITERIA.—The

7 Council shall review and evaluate each standard of

8 quality, performance measure, and medical review

9 criterion developed under part B of title IX of the

10 Public Health Service Act. The Council shall deter11 mine whether the standard, measure, or criterion is

12 appropriate for use in assessing or reviewing the

13 quality of services provided by State health security

14 programs, health care institutions, or health care

15 professionals.

16 (3) CRITERIA FOR ENTITIES CONDUCTING

17 QUALITY REVIEWS.—The Council shall develop min18 imum criteria for competence for entities that can

19 qualify to conduct ongoing and continuous external

20 quality review for State quality review programs

21 under section 503. Such criteria shall require such

22 an entity to be administratively independent of the

23 individual or board that administers the State health

24 security program and shall ensure that such entities

25 do not provide financial incentives to reviewers to
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1 favor one pattern of practice over another. The

2 Council shall ensure coordination and reporting by

3 such entities to assure national consistency in qual4 ity standards.

5 (4) REPORTING.—The Council shall report to

6 the Board annually on the conduct of activities

7 under such title and shall report to the Board annu8 ally specifically on findings from outcomes research

9 and development of practice guidelines that may af10 fect the Board’s determination of coverage of serv11 ices under section 401(f)(1)(G).

12 (5) OTHER FUNCTIONS.—The Council shall

13 perform the functions of the Council described in

14 section 502.

15 (c) APPOINTMENT AND TERMS OF MEMBERS.—

16 (1) IN GENERAL.—The Council shall be com17 posed of 10 members appointed by the President.

18 The President shall first appoint individuals on a

19 timely basis so as to provide for the operation of the

20 Council by not later than January 1, 2002.

21 (2) SELECTION OF MEMBERS.—Each member

22 of the Council shall be a member of a health profes23 sion. Five members of the Council shall be physi24 cians. Individuals shall be appointed to the Council

25 on the basis of national reputations for clinical and
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1 academic excellence. To the greatest extent feasible,

2 the membership of the Council shall represent the

3 various geographic regions of the United States and

4 shall reflect the racial, ethnic, and gender composi5 tion of the population of the United States.

6 (3) TERMS OF MEMBERS.—Individuals ap7 pointed to the Council shall serve for a term of 5

8 years, except that the terms of 4 of the individuals

9 initially appointed shall be, as designated by the

10 President at the time of their appointment, for 1, 2,

11 3, and 4 years.

12 (d) VACANCIES.—

13 (1) IN GENERAL.—The President shall fill any

14 vacancy in the membership of the Council in the

15 same manner as the original appointment. The va16 cancy shall not affect the power of the remaining

17 members to execute the duties of the Council.

18 (2) VACANCY APPOINTMENTS.—Any member

19 appointed to fill a vacancy shall serve for the re20 mainder of the term for which the predecessor of the

21 member was appointed.

22 (3) REAPPOINTMENT.—The President may re23 appoint a member of the Council for a second term

24 in the same manner as the original appointment. A

25 member who has served for two consecutive 5-year
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1 terms shall not be eligible for reappointment until

2 two years after the member has ceased to serve.

3 (e) CHAIR.—The President shall designate one of the

4 members of the Council to serve at the will of the Presi5 dent as Chair of the Council.

6 (f) COMPENSATION.—Members of the Council who

7 are not employees of the Federal Government shall be en8 titled to compensation at a level equivalent to level II of

9 the Executive Schedule, in accordance with section 5313

10 of title 5, United States Code.

11 SEC. 502. DEVELOPMENT OF CERTAIN METHODOLOGIES,

12 GUIDELINES, AND STANDARDS.

13 (a) PROFILING OF PATTERNS OF PRACTICE; IDENTI14 FICATION OF OUTLIERS.—The Council shall adopt meth15 odologies for profiling the patterns of practice of health

16 care professionals and for identifying outliers (as defined

17 in subsection (e)).

18 (b) CENTERS OF EXCELLENCE.—The Council shall

19 develop guidelines for certain medical procedures des20 ignated by the Board to be performed only at tertiary care

21 centers which can meet standards for frequency of proce22 dure performance and intensity of support mechanisms

23 that are consistent with the high probability of desired pa24 tient outcome. Reimbursement under this Act for such a

25 designated procedure may only be provided if the proce-
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1 dure was performed at a center that meets such stand2 ards.

3 (c) REMEDIAL ACTIONS.—The Council shall develop

4 standards for education and sanctions with respect to

5 outliers so as to assure the quality of health care services

6 provided under this Act. The Council shall develop criteria

7 for referral of providers to the State licensing board if edu8 cation proves ineffective in correcting provider practice be9 havior.

10 (d) DISSEMINATION.—The Council shall disseminate

11 to the State—

12 (1) the methodologies adopted under subsection

13 (a),

14 (2) the guidelines developed under subsection

15 (b), and

16 (3) the standards developed under subsection

17 (c),

18 for use by the States under section 503.

19 (e) OUTLIER DEFINED.—In this title, the term

20 ‘‘outlier’’ means a health care provider whose pattern of

21 practice, relative to applicable practice guidelines, suggests

22 deficiencies in the quality of health care services being pro23 vided.
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1 SEC. 503. STATE QUALITY REVIEW PROGRAMS.

2 (a) REQUIREMENT.—In order to meet the require3 ment of section 404(b)(1)(H), each State health security

4 program shall establish one or more qualified entities to

5 conduct quality reviews of persons providing covered serv6 ices under the program, in accordance with standards es7 tablished under subsection (b)(1) (except as provided in

8 subsection (b)(2)) and subsection (d).

9 (b) FEDERAL STANDARDS.—

10 (1) IN GENERAL.—The Council shall establish

11 standards with respect to—

12 (A) the adoption of practice guidelines

13 (whether developed by the Federal Government

14 or other entities),

15 (B) the identification of outliers (con16 sistent with methodologies adopted under sec17 tion 502(a)),

18 (C) the development of remedial programs

19 and monitoring for outliers, and

20 (D) the application of sanctions (consistent

21 with the standards developed under section

22 502(c)).

23 (2) STATE DISCRETION.—A State may apply

24 under subsection (a) standards other than those es25 tablished under paragraph (1) so long as the State

26 demonstrates to the satisfaction of the Council on an
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1 annual basis that the standards applied have been as

2 efficacious in promoting and achieving improved

3 quality of care as the application of the standards

4 established under paragraph (1). Positive improve5 ments in quality shall be documented by reductions

6 in the variations of clinical care process and im7 provement in patient outcomes.

8 (c) QUALIFICATIONS.—An entity is not qualified to

9 conduct quality reviews under subsection (a) unless the

10 entity satisfies the criteria for competence for such entities

11 developed by the Council under section 501(b)(3).

12 (d) INTERNAL QUALITY REVIEW.—Nothing in this

13 section shall preclude an institutional provider from estab14 lishing its own internal quality review and enhancement

15 programs.

16 SEC. 504. ELIMINATION OF UTILIZATION REVIEW PRO17 GRAMS; TRANSITION.

18 (a) INTENT.—It is the intention of this title to re19 place by January 1, 2005, random utilization controls with

20 a systematic review of patterns of practice that com21 promise the quality of care.

22 (b) SUPERSEDING CASE REVIEWS.—

23 (1) IN GENERAL.—Subject to the succeeding

24 provisions of this subsection, the program of quality

25 review provided under the previous sections of this
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1 title supersede all existing Federal requirements for

2 utilization review programs, including requirements

3 for random case-by-case reviews and programs re4 quiring pre-certification of medical procedures on a

5 case-by-case basis.

6 (2) TRANSITION.—Before January 1, 2005, the

7 Board and the States may employ existing utiliza8 tion review standards and mechanisms as may be

9 necessary to effect the transition to pattern of prac10 tice-based reviews.

11 (3) CONSTRUCTION.—Nothing in this sub12 section shall be construed—

13 (A) as precluding the case-by-case review

14 of the provision of care—

15 (i) in individual incidents where the

16 quality of care has significantly deviated

17 from acceptable standards of practice, and

18 (ii) with respect to a provider who has

19 been determined to be an outlier; or

20 (B) as precluding the case management of

21 catastrophic, mental health, or substance abuse

22 cases or long-term care where such manage23 ment is necessary to achieve appropriate, cost24 effective, and beneficial comprehensive medical

25 care, as provided for in section 204.
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1 TITLE VI—HEALTH SECURITY

2 BUDGET; PAYMENTS; COST

3 CONTAINMENT MEASURES

4 Subtitle A—Budgeting and

5 Payments to States

6 SEC. 601. NATIONAL HEALTH SECURITY BUDGET.

7 (a) NATIONAL HEALTH SECURITY BUDGET.—

8 (1) IN GENERAL.—By not later than September

9 1 before the beginning of each year (beginning with

10 2002), the Board shall establish a national health

11 security budget, which—

12 (A) specifies the total expenditures (includ13 ing expenditures for administrative costs) to be

14 made by the Federal Government and the

15 States for covered health care services under

16 this Act, and

17 (B) allocates those expenditures among the

18 States consistent with section 604.

19 Pursuant to subsection (b), such budget for a year

20 shall not exceed the budget for the preceding year

21 increased by the percentage increase in gross domes22 tic product.

23 (2) DIVISION OF BUDGET INTO COMPONENTS.—

24 The national health security budget shall consist of

25 at least 4 components:
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1 (A) A component for quality assessment

2 activities (described in title V).

3 (B) A component for health professional

4 education expenditures.

5 (C) A component for administrative costs.

6 (D) A component (in this title referred to

7 as the ‘‘operating component’’) for operating

8 and other expenditures not described in sub9 paragraphs (A) through (C), consisting of

10 amounts not included in the other components.

11 A State may provide for the allocation of this

12 component between capital expenditures and

13 other expenditures.

14 (3) ALLOCATION AMONG COMPONENTS.—Tak15 ing into account the State health security budgets

16 established and submitted under section 603, the

17 Board shall allocate the national health security

18 budget among the components in a manner that—

19 (A) assures a fair allocation for quality as20 sessment activities (consistent with the national

21 health security spending growth limit); and

22 (B) assures that the health professional

23 education expenditure component is sufficient

24 to provide for the amount of health professional

25 education expenditures sufficient to meet the
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1 need for covered health care services (consistent

2 with the national health security spending

3 growth limit under subsection (b)(2)).

4 (b) BASIS FOR TOTAL EXPENDITURES.—

5 (1) IN GENERAL.—The total expenditures speci6 fied in such budget shall be the sum of the capita7 tion amounts computed under section 602(a) and

8 the amount of Federal administrative expenditures

9 needed to carry out this Act.

10 (2) NATIONAL HEALTH SECURITY SPENDING

11 GROWTH LIMIT.—For purposes of this subtitle, the

12 national health security spending growth limit de13 scribed in this paragraph for a year is (A) zero, or,

14 if greater, (B) the average annual percentage in15 crease in the gross domestic product (in current dol16 lars) during the 3-year period beginning with the

17 first quarter of the fourth previous year to the first

18 quarter of the previous year minus the percentage

19 increase (if any) in the number of eligible individuals

20 residing in any State the United States from the

21 first quarter of the second previous year to the first

22 quarter of the previous year.

23 (c) DEFINITIONS.—In this title:

24 (1) CAPITAL EXPENDITURES.—The term ‘‘cap25 ital expenditures’’ means expenses for the purchase,
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1 lease, construction, or renovation of capital facilities

2 and for equipment and includes return on equity

3 capital.

4 (2) HEALTH PROFESSIONAL EDUCATION EX5 PENDITURES.—The term ‘‘health professional edu6 cation expenditures’’ means expenditures in hospitals

7 and other health care facilities to cover costs associ8 ated with teaching and related research activities.

9 SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI10 TATION AMOUNTS.

11 (a) CAPITATION AMOUNTS.—

12 (1) INDIVIDUAL CAPITATION AMOUNTS.—In es13 tablishing the national health security budget under

14 section 601(a) and in computing the national aver15 age per capita cost under subsection (b) for each

16 year, the Board shall establish a method for com17 puting the capitation amount for each eligible indi18 vidual residing in each State. The capitation amount

19 for an eligible individual in a State classified within

20 a risk group (established under subsection (d)(2)) is

21 the product of—

22 (A) a national average per capita cost for

23 all covered health care services (computed

24 under subsection (b)),
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1 (B) the State adjustment factor (estab2 lished under subsection (c)) for the State, and

3 (C) the risk adjustment factor (established

4 under subsection (d)) for the risk group.

5 (2) STATE CAPITATION AMOUNT.—

6 (A) IN GENERAL.—For purposes of this

7 title, the term ‘‘State capitation amount’’

8 means, for a State for a year, the sum of the

9 capitation amounts computed under paragraph

10 (1) for all the residents of the State in the year,

11 as estimated by the Board before the beginning

12 of the year involved.

13 (B) USE OF STATISTICAL MODEL.—The

14 Board may provide for the computation of

15 State capitation amounts based on statistical

16 models that fairly reflect the elements that com17 prise the State capitation amount described in

18 subparagraph (A).

19 (C) POPULATION INFORMATION.—The Bu20 reau of the Census shall assist the Board in de21 termining the number, place of residence, and

22 risk group classification of eligible individuals.

23 (b) COMPUTATION OF NATIONAL AVERAGE PER CAP24 ITA COST.—
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1 (1) FOR 2002.—For 2002, the national average

2 per capita cost under this paragraph is equal to—

3 (A) the average per capita health care ex4 penditures in the United States in 2000 (as

5 estimated by the Board),

6 (B) increased to 2001 by the Board’s esti7 mate of the actual amount of such per capita

8 expenditures during 2001, and

9 (C) updated to 2002 by the national health

10 security spending growth limit specified in sec11 tion 601(b)(2) for 2002.

12 (2) FOR SUCCEEDING YEARS.—For each suc13 ceeding year, the national average per capita cost

14 under this subsection is equal to the national aver15 age per capita cost computed under this subsection

16 for the previous year increased by the national

17 health security spending growth limit (specified in

18 section 601(b)(2)) for the year involved.

19 (c) STATE ADJUSTMENT FACTORS.—

20 (1) IN GENERAL.—Subject to the succeeding

21 paragraphs of this subsection, the Board shall de22 velop for each State a factor to adjust the national

23 average per capita costs to reflect differences

24 between the State and the United States in—
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1 (A) average labor and nonlabor costs that

2 are necessary to provide covered health services;

3 (B) any social, environmental, or geo4 graphic condition affecting health status or the

5 need for health care services, to the extent such

6 a condition is not taken into account in the es7 tablishment of risk groups under subsection (d);

8 (C) the geographic distribution of the

9 State’s population, particularly the proportion

10 of the population residing in medically under11 served areas, to the extent such a condition is

12 not taken into account in the establishment of

13 risk groups under subsection (d); and

14 (D) any other factor relating to operating

15 costs required to assure equitable distribution

16 of funds among the States.

17 (2) MODIFICATION OF HEALTH PROFESSIONAL

18 EDUCATION COMPONENT.—With respect to the por19 tion of the national health security budget allocated

20 to expenditures for health professional education, the

21 Board shall modify the State adjustment factors so

22 as to take into account—

23 (A) differences among States in health

24 professional education programs in operation as

25 of the date of the enactment of this Act, and
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1 (B) differences among States in their rel2 ative need for expenditures for health profes3 sional education, taking into account the health

4 professional education expenditures proposed in

5 State health security budgets under section

6 603(a).

7 (3) BUDGET NEUTRALITY.—The State adjust8 ment factors, as modified under paragraph (2), shall

9 be applied under this subsection in a manner that

10 results in neither an increase nor a decrease in the

11 total amount of the Federal contributions to all

12 State health security programs under subsection (b)

13 as a result of the application of such factors.

14 (4) PHASE-IN.—In applying State adjustment

15 factors under this subsection during the five-year pe16 riod beginning with 2002, the Board shall phase-in,

17 over such period, the use of factors described in

18 paragraph (1) in a manner so that the adjustment

19 factor for a State is based on a blend of such factors

20 and a factor that reflects the relative actual average

21 per capita costs of health services of the different

22 States as of the time of enactment of this Act.

23 (5) PERIODIC ADJUSTMENT.—In establishing

24 the national health security budget before the begin25 ning of each year, the Board shall provide for appro-
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1 priate adjustments in the State adjustment factors

2 under this subsection.

3 (d) ADJUSTMENTS FOR RISK GROUP CLASSIFICA4 TION.—

5 (1) IN GENERAL.—The Board shall develop an

6 adjustment factor to the national average per capita

7 costs computed under subsection (b) for individuals

8 classified in each risk group (as designated under

9 paragraph (2)) to reflect the difference between the

10 average national average per capita costs and the

11 national average per capita cost for individuals clas12 sified in the risk group.

13 (2) RISK GROUPS.—The Board shall designate

14 a series of risk groups, determined by age, health in15 dicators, and other factors that represent distinct

16 patterns of health care services utilization and costs.

17 (3) PERIODIC ADJUSTMENT.—In establishing

18 the national health security budget before the begin19 ning of each year, the Board shall provide for appro20 priate adjustments in the risk adjustment factors

21 under this subsection.

22 SEC. 603. STATE HEALTH SECURITY BUDGETS.

23 (a) ESTABLISHMENT AND SUBMISSION OF BUDG24 ETS.—
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1 (1) IN GENERAL.—Each State health security

2 program shall establish and submit to the Board for

3 each year a proposed and a final State health secu4 rity budget, which specifies the following:

5 (A) The total expenditures (including ex6 penditures for administrative costs) to be made

7 under the program in the State for covered

8 health care services under this Act, consistent

9 with subsection (b), broken down as follows:

10 (i) By the 4 components (described in

11 section 601(a)(2)), consistent with sub12 section (b).

13 (ii) Within the operating component—

14 (I) expenditures for operating

15 costs of hospitals and other facility16 based services in the State,

17 (II) expenditures for payment to

18 comprehensive health service organiza19 tions,

20 (III) expenditures for payment of

21 services provided by health care prac22 titioners, and

23 (IV) expenditures for other cov24 ered items and services.
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1 Amounts included in the operating compo2 nent include amounts that may be used by

3 providers for capital expenditures.

4 (B) The total revenues required to meet

5 the State health security expenditures.

6 (2) PROPOSED BUDGET DEADLINE.—The pro7 posed budget for a year shall be submitted under

8 paragraph (1) not later than June 1 before the year.

9 (3) FINAL BUDGET.—The final budget for a

10 year shall—

11 (A) be established and submitted under

12 paragraph (1) not later than October 1 before

13 the year, and

14 (B) take into account the amounts estab15 lished under the national health security budget

16 under section 601 for the year.

17 (4) ADJUSTMENT IN ALLOCATIONS PER18 MITTED.—

19 (A) IN GENERAL.—Subject to subpara20 graphs (B) and (C), in the case of a final

21 budget, a State may change the allocation of

22 amounts among components.

23 (B) NOTICE.—No such change may be

24 made unless the State has provided prior notice

25 of the change to the Board.
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1 (C) DENIAL.—Such a change may not be

2 made if the Board, within such time period as

3 the Board specifies, disapproves such change.

4 (b) EXPENDITURE LIMITS.—

5 (1) IN GENERAL.—The total expenditures speci6 fied in each State health security budget under sub7 section (a)(1) shall take into account Federal

8 contributions made under section 604.

9 (2) LIMIT ON CLAIMS PROCESSING AND BILL10 ING EXPENDITURES.—Each State health security

11 budget shall provide that State administrative ex12 penditures, including expenditures for claims proc13 essing and billing, shall not exceed 3 percent of the

14 total expenditures under the State health security

15 program, unless the Board determines, on a case-by16 case basis, that additional administrative expendi17 tures would improve health care quality and cost

18 effectiveness.

19 (3) WORKER ASSISTANCE.—A State health se20 curity program may provide that, for budgets for

21 years before 2007, up to 1 percent of the budget

22 may be used for purposes of programs providing as23 sistance to workers who are currently performing

24 functions in the administration of the health insur25 ance system and who may experience economic dis-
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1 location as a result of the implementation of the

2 program.

3 (c) APPROVAL PROCESS FOR CAPITAL EXPENDI4 TURES PERMITTED.—Nothing in this title shall be con5 strued as preventing a State health security program from

6 providing for a process for the approval of capital expendi7 tures based on information derived from regional planning

8 agencies.

9 SEC. 604. FEDERAL PAYMENTS TO STATES.

10 (a) IN GENERAL.—Each State with an approved

11 State health security program is entitled to receive, from

12 amounts in the American Health Security Trust Fund, on

13 a monthly basis each year, of an amount equal to one14 twelfth of the product of—

15 (1) the State capitation amount (computed

16 under section 602(a)(2)) for the State for the year,

17 and

18 (2) the Federal contribution percentage (estab19 lished under subsection (b)).

20 (b) FEDERAL CONTRIBUTION PERCENTAGE.—The

21 Board shall establish a formula for the establishment of

22 a Federal contribution percentage for each State. Such

23 formula shall take into consideration a State’s per capita

24 income and revenue capacity and such other relevant eco25 nomic indicators as the Board determines to be appro-
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1 priate. In addition, during the 5-year period beginning

2 with 2002, the Board may provide for a transition adjust3 ment to the formula in order to take into account current

4 expenditures by the State (and local governments thereof)

5 for health services covered under the State health security

6 program. The weighted-average Federal contribution per7 centage for all States shall equal 86 percent and in no

8 event shall such percentage be less than 81 percent nor

9 more than 91 percent.

10 (c) USE OF PAYMENTS.—All payments made under

11 this section may only be used to carry out the State health

12 security program.

13 (d) EFFECT OF SPENDING EXCESS OR SURPLUS.—

14 (1) SPENDING EXCESS.—If a State exceeds it’s

15 budget in a given year, the State shall continue to

16 fund covered health services from its own revenues.

17 (2) SURPLUS.—If a State provides all covered

18 health services for less than the budgeted amount

19 for a year, it may retain its Federal payment for

20 that year for uses consistent with this Act.

21 SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU22 CATION EXPENDITURES.

23 (a) SEPARATE ACCOUNT.—Each State health secu24 rity program shall—
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1 (1) include a separate account for health pro2 fessional education expenditures, and

3 (2) specify the general manner, consistent with

4 subsection (b), in which such expenditures are to be

5 distributed among different types of institutions and

6 the different areas of the State.

7 (b) DISTRIBUTION RULES.—The distribution of

8 funds to hospitals and other health care facilities from the

9 account must conform to the following principles:

10 (1) The disbursement of funds must be con11 sistent with achievement of the national and pro12 gram goals (specified in section 701(b)) within the

13 State health security program and the distribution

14 of funds from the account must be conditioned upon

15 the receipt of such reports as the Board may require

16 in order to monitor compliance with such goals.

17 (2) The distribution of funds from the account

18 must take into account the potentially higher costs

19 of placing health professional students in clinical

20 education programs in health professional shortage

21 areas.
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1 Subtitle B—Payments by States to

2 Providers

3 SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY4 BASED SERVICES FOR OPERATING EXPENSES

5 ON THE BASIS OF APPROVED GLOBAL

6 BUDGETS.

7 (a) DIRECT PAYMENT UNDER GLOBAL BUDGET.—

8 Payment for operating expenses for institutional and facil9 ity-based care, including hospital services and nursing fa10 cility services, under State health security programs shall

11 be made directly to each institution or facility by each

12 State health security program under an annual prospec13 tive global budget approved under the program. Such a

14 budget shall include payment for outpatient care and non15 facility-based care that is furnished by or through the fa16 cility. In the case of a hospital that is wholly owned (or

17 controlled) by a comprehensive health service organization

18 that is paid under section 614 on the basis of a global

19 budget, the global budget of the organization shall include

20 the budget for the hospital.

21 (b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.—

22 (1) IN GENERAL.—The prospective global budg23 et for an institution or facility shall—

24 (A) be developed through annual negotia25 tions between (i) a panel of individuals who are
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1 appointed by the Governor of the State and who

2 represent consumers, labor, business, and the

3 State government, and (ii) the institution or fa4 cility, and

5 (B) be based on a nationally uniform sys6 tem of cost accounting established under stand7 ards of the Board.

8 (2) CONSIDERATIONS.—In developing a budget

9 through negotiations, there shall be taken into

10 account at least the following:

11 (A) With respect to inpatient hospital serv12 ices, the number, and classification by diag13 nosis-related group, of discharges.

14 (B) An institution’s or facility’s past ex15 penditures.

16 (C) The extent to which debt service for

17 capital expenditures has been included in the

18 proposed operating budget.

19 (D) The extent to which capital expendi20 tures are financed directly or indirectly through

21 reductions in direct care to patients, including

22 (but not limited to) reductions in registered

23 nursing staffing patterns or changes in emer24 gency room or primary care services or avail25 ability.
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1 (E) Change in the consumer price index

2 and other price indices.

3 (F) The cost of reasonable compensation

4 to health care practitioners.

5 (G) The compensation level of the institu6 tion’s or facility’s work force.

7 (H) The extent to which the institution or

8 facility is providing health care services to meet

9 the needs of residents in the area served by the

10 institution or facility, including the institution’s

11 or facility’s occupancy level.

12 (I) The institution’s or facility’s previous

13 financial and clinical performance, based on uti14 lization and outcomes data provided under this

15 Act.

16 (J) The type of institution or facility, in17 cluding whether the institution or facility is

18 part of a clinical education program or serves

19 a health professional education, research or

20 other training purpose.

21 (K) Technological advances or changes.

22 (L) Costs of the institution or facility asso23 ciated with meeting Federal and State regula24 tions.
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1 (M) The costs associated with necessary

2 public outreach activities.

3 (N) In the case of a for-profit facility, a

4 reasonable rate of return on equity capital,

5 independent of those operating expenses nec6 essary to fulfill the objectives of this Act.

7 (O) Incentives to facilities that maintain

8 costs below previous reasonable budgeted levels

9 without reducing the care provided.

10 (P) With respect to facilities that provide

11 mental health services and substance abuse

12 treatment services, any additional costs involved

13 in the treatment of dually diagnosed individ14 uals.

15 The portion of such a budget that relates to expendi16 tures for health professional education shall be con17 sistent with the State health security budget for

18 such expenditures.

19 (3) PROVISION OF REQUIRED INFORMATION; DI20 AGNOSIS-RELATED GROUP.—No budget for an insti21 tution or facility for a year may be approved unless

22 the institution or facility has submitted on a timely

23 basis to the State health security program such in24 formation as the program or the Board shall specify,
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1 including in the case of hospitals information on dis2 charges classified by diagnosis-related group.

3 (c) ADJUSTMENTS IN APPROVED BUDGETS.—

4 (1) ADJUSTMENTS TO GLOBAL BUDGETS THAT

5 CONTRACT WITH COMPREHENSIVE HEALTH SERVICE

6 ORGANIZATIONS.—Each State health security pro7 gram shall develop an administrative mechanism for

8 reducing operating funds to institutions or facilities

9 in proportion to payments made to such institutions

10 or facilities for services contracted for by a com11 prehensive health service organization.

12 (2) AMENDMENTS.—In accordance with stand13 ards established by the Board, an operating and

14 capital budget approved under this section for a year

15 may be amended before, during, or after the year if

16 there is a substantial change in any of the factors

17 relevant to budget approval.

18 (d) DONATIONS PERMISSIBLE.—The States health

19 security programs may permit institutions and facilities

20 to raise funds from private sources to pay for newly con21 structed facilities, major renovations, and equipment. The

22 expenditure of such funds, whether for operating or cap23 ital expenditures, does not obligate the State health secu24 rity program to provide for continued support for such ex25 penditures unless included in an approved global budget.
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1 SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS

2 BASED ON PROSPECTIVE FEE SCHEDULE.

3 (a) FEE FOR SERVICE.—

4 (1) IN GENERAL.—Every independent health

5 care practitioner is entitled to be paid, for the provi6 sion of covered health services under the State

7 health security program, a fee for each billable cov8 ered service.

9 (2) GLOBAL FEE PAYMENT METHODOLOGIES.—

10 The Board shall establish models and encourage

11 State health security programs to implement alter12 native payment methodologies that incorporate glob13 al fees for related services (such as all outpatient

14 procedures for treatment of a condition) or for a

15 basic group of services (such as primary care serv16 ices) furnished to an individual over a period of

17 time, in order to encourage continuity and efficiency

18 in the provision of services. Such methodologies shall

19 be designed to ensure a high quality of care.

20 (3) BILLING DEADLINES; ELECTRONIC BILL21 ING.—A State health security program may deny

22 payment for any service of an independent health

23 care practitioner for which it did not receive a bill

24 and appropriate supporting documentation (which

25 had been previously specified) within 30 days after

26 the date the service was provided. Such a program
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1 may require that bills for services for which payment

2 may be made under this section, or for any class of

3 such services, be submitted electronically.

4 (b) PAYMENT RATES BASED ON NEGOTIATED PRO5 SPECTIVE FEE SCHEDULES.—With respect to any pay6 ment method for a class of services of practitioners, the

7 State health security program shall establish, on a pro8 spective basis, a payment schedule. The State health secu9 rity program may establish such a schedule after negotia10 tions with organizations representing the practitioners in11 volved. Such fee schedules shall be designed to provide in12 centives for practitioners to choose primary care medicine,

13 including general internal medicine and pediatrics, over

14 medical specialization. Nothing in this section shall be con15 strued as preventing a State from adjusting the payment

16 schedule amounts on a quarterly or other periodic basis

17 depending on whether expenditures under the schedule will

18 exceed the budgeted amount with respect to such expendi19 tures.

20 (c) BILLABLE COVERED SERVICE DEFINED.—In this

21 section, the term ‘‘billable covered service’’ means a service

22 covered under section 201 for which a practitioner is enti23 tled to compensation by payment of a fee determined

24 under this section.
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1 SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERV2 ICE ORGANIZATIONS.

3 (a) IN GENERAL.—Payment under a State health se4 curity program to a comprehensive health service organi5 zation to its enrollees shall be determined by the State—

6 (1) based on a global budget described in sec7 tion 611, or

8 (2) based on the basic capitation amount de9 scribed in subsection (b) for each of its enrollees.

10 (b) BASIC CAPITATION AMOUNT.—

11 (1) IN GENERAL.—The basic capitation amount

12 described in this subsection for an enrollee shall be

13 determined by the State health security program on

14 the basis of the average amount of expenditures that

15 is estimated would be made under the State health

16 security program for covered health care services for

17 an enrollee, based on actuarial characteristics (as de18 fined by the State health security program).

19 (2) ADJUSTMENT FOR SPECIAL HEALTH

20 NEEDS.—The State health security program shall

21 adjust such average amounts to take into account

22 the special health needs, including a disproportionate

23 number of medically underserved individuals, of pop24 ulations served by the organization.

25 (3) ADJUSTMENT FOR SERVICES NOT PRO26 VIDED.—The State health security program shall ad-
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1 just such average amounts to take into account the

2 cost of covered health care services that are not pro3 vided by the comprehensive health service organiza4 tion under section 303(a).

5 SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY

6 HEALTH SERVICES.

7 (a) IN GENERAL.—In the case of community-based

8 primary health services, subject to subsection (b), pay9 ments under a State health security program shall—

10 (1) be based on a global budget described in

11 section 611,

12 (2) be based on the basic primary care capita13 tion amount described in subsection (c) for each in14 dividual enrolled with the provider of such services,

15 or

16 (3) be made on a fee-for-service basis under

17 section 612.

18 (b) PAYMENT ADJUSTMENT.—Payments under sub19 section (a) may include, consistent with the budgets devel20 oped under this title—

21 (1) an additional amount, as set by the State

22 health security program, to cover the costs incurred

23 by a provider which serves persons not covered by

24 this Act whose health care is essential to overall

25 community health and the control of communicable
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1 disease, and for whom the cost of such care is other2 wise uncompensated,

3 (2) an additional amount, as set by the State

4 health security program, to cover the reasonable

5 costs incurred by a provider that furnishes case

6 management services (as defined in section

7 1915(g)(2) of the Social Security Act), transpor8 tation services, and translation services, and

9 (3) an additional amount, as set by the State

10 health security program, to cover the costs incurred

11 by a provider in conducting health professional edu12 cation programs in connection with the provision of

13 such services.

14 (c) BASIC PRIMARY CARE CAPITATION AMOUNT.—

15 (1) IN GENERAL.—The basic primary care capi16 tation amount described in this subsection for an en17 rollee with a provider of community-based primary

18 health services shall be determined by the State

19 health security program on the basis of the average

20 amount of expenditures that is estimated would be

21 made under the State health security program for

22 such an enrollee, based on actuarial characteristics

23 (as defined by the State health security program).

24 (2) ADJUSTMENT FOR SPECIAL HEALTH

25 NEEDS.—The State health security program shall
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1 adjust such average amounts to take into account

2 the special health needs, including a disproportionate

3 number of medically underserved individuals, of pop4 ulations served by the provider.

5 (3) ADJUSTMENT FOR SERVICES NOT PRO6 VIDED.—The State health security program shall ad7 just such average amounts to take into account the

8 cost of community-based primary health services

9 that are not provided by the provider.

10 (d) COMMUNITY-BASED PRIMARY HEALTH SERVICES

11 DEFINED.—In this section, the term ‘‘community-based

12 primary health services’’ has the meaning given such term

13 in section 202(a).

14 SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS.

15 (a) ESTABLISHMENT OF LIST.—

16 (1) IN GENERAL.—The Board shall establish a

17 list of approved prescription drugs and biologicals

18 that the Board determines are necessary for the

19 maintenance or restoration of health or of employ20 ability or self-management and eligible for coverage

21 under this Act.

22 (2) EXCLUSIONS.—The Board may exclude re23 imbursement under this Act for ineffective, unsafe,

24 or over-priced products where better alternatives are

25 determined to be available.
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1 (b) PRICES.—For each such listed prescription drug

2 or biological covered under this Act, for insulin, and for

3 medical foods, the Board shall from time to time deter4 mine a product price or prices which shall constitute the

5 maximum to be recognized under this Act as the cost of

6 a drug to a provider thereof. The Board may conduct ne7 gotiations, on behalf of State health security programs,

8 with product manufacturers and distributors in deter9 mining the applicable product price or prices.

10 (c) CHARGES BY INDEPENDENT PHARMACIES.—

11 Each State health security program shall provide for pay12 ment for a prescription drug or biological or insulin fur13 nished by an independent pharmacy based on the drug’s

14 cost to the pharmacy (not in excess of the applicable prod15 uct price established under subsection (b)) plus a dis16 pensing fee. In accordance with standards established by

17 the Board, each State health security program, after con18 sultation with representatives of the pharmaceutical pro19 fession, shall establish schedules of dispensing fees, de20 signed to afford reasonable compensation to independent

21 pharmacies after taking into account variations in their

22 cost of operation resulting from regional differences, dif23 ferences in the volume of prescription drugs dispensed, dif24 ferences in services provided, the need to maintain expend-
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1 itures within the budgets established under this title,

2 and other relevant factors.

3 SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIP4 MENT.

5 (a) ESTABLISHMENT OF LIST.—The Board shall es6 tablish a list of approved durable medical equipment and

7 therapeutic devices and equipment (including eyeglasses,

8 hearing aids, and prosthetic appliances), that the Board

9 determines are necessary for the maintenance or restora10 tion of health or of employability or self-management and

11 eligible for coverage under this Act.

12 (b) CONSIDERATIONS AND CONDITIONS.—In estab13 lishing the list under subsection (a), the Board shall take

14 into consideration the efficacy, safety, and cost of each

15 item contained on such list, and shall attach to any item

16 such conditions as the Board determines appropriate with

17 respect to the circumstances under which, or the frequency

18 with which, the item may be prescribed.

19 (c) PRICES.—For each such listed item covered under

20 this Act, the Board shall from time to time determine a

21 product price or prices which shall constitute the max22 imum to be recognized under this Act as the cost of the

23 item to a provider thereof. The Board may conduct nego24 tiations, on behalf of State health security programs, with
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1 equipment and device manufacturers and distributors in

2 determining the applicable product price or prices.

3 (d) EXCLUSIONS.—The Board may exclude from cov4 erage under this Act ineffective, unsafe, or overpriced

5 products where better alternatives are determined to be

6 available.

7 SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES.

8 In the case of payment for other covered health serv9 ices, the amount of payment under a State health security

10 program shall be established by the program—

11 (1) in accordance with payment methodologies

12 which are specified by the Board, after consultation

13 with the American Health Security Advisory Coun14 cil, or methodologies established by the State under

15 section 620, and

16 (2) consistent with the State health security

17 budget.

18 SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDER19 SERVED AREAS.

20 (a) MODEL PAYMENT METHODOLOGIES.—In addi21 tion to the payment amounts otherwise provided in this

22 title, the Board shall establish model payment methodolo23 gies and other incentives that promote the provision of

24 covered health care services in medically underserved
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1 areas, particularly in rural and inner-city underserved

2 areas.

3 (b) CONSTRUCTION.—Nothing in this title shall be

4 construed as limiting the authority of State health security

5 programs to increase payment amounts or otherwise pro6 vide additional incentives, consistent with the State health

7 security budget, to encourage the provision of medically

8 necessary and appropriate services in underserved areas.

9 SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METH10 ODOLOGIES.

11 A State health security program, as part of its plan

12 under section 404(a), may use a payment methodology

13 other than a methodology required under this subtitle so

14 long as—

15 (1) such payment methodology does not affect

16 the entitlement of individuals to coverage, the

17 weighting of fee schedules to encourage an increase

18 in the number of primary care providers, the ability

19 of individuals to choose among qualified providers,

20 the benefits covered under the program, or the com21 pliance of the program with the State health security

22 budget under subtitle A, and

23 (2) the program submits periodic reports to the

24 Board showing the operation and effectiveness of the

25 alternative methodology, in order for the Board to
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1 evaluate the appropriateness of applying the alter2 native methodology to other States.

3 Subtitle C—Mandatory Assignment

4 and Administrative Provisions

5 SEC. 631. MANDATORY ASSIGNMENT.

6 (a) NO BALANCE BILLING.—Payments for benefits

7 under this Act shall constitute payment in full for such

8 benefits and the entity furnishing an item or service for

9 which payment is made under this Act shall accept such

10 payment as payment in full for the item or service and

11 may not accept any payment or impose any charge for

12 any such item or service other than accepting payment

13 from the State health security program in accordance with

14 this Act.

15 (b) ENFORCEMENT.—If an entity knowingly and will16 fully bills for an item or service or accepts payment in

17 violation of subsection (a), the Board may apply sanctions

18 against the entity in the same manner as sanctions could

19 have been imposed under section 1842(j)(2) of the Social

20 Security Act for a violation of section 1842(j)(1) of such

21 Act. Such sanctions are in addition to any sanctions that

22 a State may impose under its State health security

23 program.
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1 SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS.

2 (a) PROCEDURES FOR REIMBURSEMENT.—In accord3 ance with standards issued by the Board, a State health

4 security program shall establish a timely and administra5 tively simple procedure to assure payment within 60 days

6 of the date of submission of clean claims by providers

7 under this Act.

8 (b) APPEALS PROCESS.—Each State health security

9 program shall establish an appeals process to handle all

10 grievances pertaining to payment to providers under this

11 title.

12 TITLE VII—PROMOTION OF PRI13 MARY HEALTH CARE; DEVEL14 OPMENT OF HEALTH SERV15 ICE CAPACITY; PROGRAMS TO

16 ASSIST THE MEDICALLY UN17 DERSERVED

18 Subtitle A—Promotion and Expan19 sion of Primary Care Profes20 sional Training

21 SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY

22 CARE PROFESSIONAL OUTPUT GOALS.

23 (a) IN GENERAL.—The Board is responsible for—

24 (1) coordinating health professional education

25 policies and goals, in consultation with the Secretary

26 of Health and Human Services (in this title referred
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1 to as the ‘‘Secretary’’), to achieve the national goals

2 specified in subsection (b);

3 (2) overseeing the health professional education

4 expenditures of the State health security programs

5 from the account established under section 602(c);

6 (3) developing and maintaining, in cooperation

7 with the Secretary, a system to monitor the number

8 and specialties of individuals through their health

9 professional education, any postgraduate training,

10 and professional practice; and

11 (4) developing, coordinating, and promoting

12 other policies that expand the number of primary

13 care practitioners.

14 (b) NATIONAL GOALS.—The national goals specified

15 in this subsection are as follows:

16 (1) GRADUATE MEDICAL EDUCATION.—By not

17 later than 5 years after the date of the enactment

18 of this Act, at least 50 percent of the residents in

19 medical residency education programs (as defined in

20 subsection (e)(1)) are primary care residents (as

21 defined in subsection (e)(3)).

22 (2) MIDLEVEL PRIMARY CARE PRACTI23 TIONERS.—To assure an adequate supply of primary

24 care practitioners, there shall be a number, specified

25 by the Board, of midlevel primary care practitioners
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1 (as defined in subsection (e)(2)) employed in the

2 health care system as of January 1, 2007.

3 (c) METHOD FOR ATTAINMENT OF NATIONAL GOAL

4 FOR GRADUATE MEDICAL EDUCATION; PROGRAM

5 GOALS.—

6 (1) IN GENERAL.—The Board shall establish a

7 method of applying the national goal in subsection

8 (b)(1) to program goals for each medical residency

9 education program or to medical residency education

10 consortia.

11 (2) CONSIDERATION.—The program goals

12 under paragraph (1) shall be based on the distribu13 tion of medical schools and other teaching facilities

14 within each State health security program, and the

15 number of positions for graduate medical education.

16 (3) MEDICAL RESIDENCY EDUCATION CONSOR17 TIUM.—In this subsection, the term ‘‘medical resi18 dency education consortium’’ means a consortium of

19 medical residency education programs in a contig20 uous geographic area (which may be an interstate

21 area) if the consortium—

22 (A) includes at least one medical school

23 with a teaching hospital and related teaching

24 settings, and
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1 (B) has an affiliation with qualified com2 munity-based primary health service providers

3 described in section 202(a) and with at least

4 one comprehensive health service organization

5 established under section 303.

6 (4) ENFORCEMENT THROUGH STATE HEALTH

7 SECURITY BUDGETS.—The Board shall develop a

8 formula for reducing payments to State health secu9 rity programs (that provide for payments to a med10 ical residency education program) that failed to meet

11 the goal for the program established under this sub12 section.

13 (d) METHOD FOR ATTAINMENT OF NATIONAL GOAL

14 FOR MIDLEVEL PRIMARY CARE PRACTITIONERS.—To as15 sist in attaining the national goal identified in subsection

16 (b)(2), the Board shall—

17 (1) advise the Public Health Service on alloca18 tions of funding under titles VII and VIII of the

19 Public Health Service Act, the National Health

20 Service Corps, and other programs in order to in21 crease the supply of midlevel primary care practi22 tioners, and

23 (2) commission a study of the potential benefits

24 and disadvantages of expanding the scope of practice
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1 authorized under State laws for any class of midlevel

2 primary care practitioners.

3 (e) DEFINITIONS.—In this title:

4 (1) MEDICAL RESIDENCY EDUCATION PRO5 GRAM.—The term ‘‘medical residency education pro6 gram’’ means a program that provides education

7 and training to graduates of medical schools in order

8 to meet requirements for licensing and certification

9 as a physician, and includes the medical school su10 pervising the program and includes the hospital or

11 other facility in which the program is operated.

12 (2) MIDLEVEL PRIMARY CARE PRACTI13 TIONER.—The term ‘‘midlevel primary care practi14 tioner’’ means a clinical nurse practitioner, certified

15 nurse midwife, physician assistance, or other non16 physician practitioner, specified by the Board, as

17 authorized to practice under State law.

18 (3) PRIMARY CARE RESIDENT.—The term ‘‘pri19 mary care resident’’ means (in accordance with cri20 teria established by the Board) a resident being

21 trained in a distinct program of family practice med22 icine, general practice, general internal medicine, or

23 general pediatrics.
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1 SEC. 702. ESTABLISHMENT OF ADVISORY COMMITTEE ON

2 HEALTH PROFESSIONAL EDUCATION.

3 (a) IN GENERAL.—The Board shall provide for an

4 Advisory Committee on Health Professional Education (in

5 this section referred to as the ‘‘Committee’’) to advise the

6 Board on its activities under section 701.

7 (b) MEMBERSHIP.—The Committee shall be com8 posed of—

9 (1) the Chair of the Board, who shall serve as

10 Chair of the Committee, and

11 (2) 12 members, not otherwise in the employ of

12 the United States, appointed by the Board without

13 regard to the provisions of title 5, United States

14 Code, governing appointments in the competitive

15 service.

16 The appointed members shall provide a balanced point of

17 view with respect to health professional education, primary

18 care disciplines, and health care policy and shall include

19 individuals who are representative of medical schools,

20 other health professional schools, residency programs, pri21 mary care practitioners, teaching hospitals, professional

22 associations, public health organizations, State health

23 security programs, and consumers.

24 (c) TERMS OF MEMBERS.—Each appointed member

25 shall hold office for a term of five years, except that—
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1 (1) any member appointed to fill a vacancy oc2 curring during the term for which the member’s

3 predecessor was appointed shall be appointed for the

4 remainder of that term; and

5 (2) the terms of the members first taking office

6 shall expire, as designated by the Board at the time

7 of appointment, two at the end of the second year,

8 two at the end of the third year, two at the end of

9 the fourth year, and three at the end of the fifth

10 year after the date of enactment of this Act.

11 (d) VACANCIES.—

12 (1) IN GENERAL.—The Board shall fill any va13 cancy in the membership of the Committee in the

14 same manner as the original appointment. The va15 cancy shall not affect the power of the remaining

16 members to execute the duties of the Committee.

17 (2) VACANCY APPOINTMENTS.—Any member

18 appointed to fill a vacancy shall serve for the re19 mainder of the term for which the predecessor of the

20 member was appointed.

21 (3) REAPPOINTMENT.—The Board may re22 appoint an appointed member of the Committee for

23 a second term in the same manner as the original

24 appointment.
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1 (e) DUTIES.—It shall be the duty of the Committee

2 to advise the Board concerning graduate medical edu3 cation policies under this title.

4 (f) STAFF.—The Committee, its members, and any

5 committees of the Committee shall be provided with such

6 secretarial, clerical, or other assistance as may be author7 ized by the Board for carrying out their respective

8 functions.

9 (g) MEETINGS.—The Committee shall meet as fre10 quently as the Board deems necessary, but not less than

11 4 times each year. Upon request by four or more members

12 it shall be the duty of the Chair to call a meeting of the

13 Committee.

14 (h) COMPENSATION.—Members of the Committee

15 shall be reimbursed by the Board for travel and per diem

16 in lieu of subsistence expenses during the performance of

17 duties of the Board in accordance with subchapter I of

18 chapter 57 of title 5, United States Code.

19 (i) FACA NOT APPLICABLE.—The provisions of the

20 Federal Advisory Committee Act shall not apply to the

21 Committee.
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1 SEC. 703. GRANTS FOR HEALTH PROFESSIONS EDUCATION,

2 NURSE EDUCATION, AND THE NATIONAL

3 HEALTH SERVICE CORPS.

4 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

5 From the amounts provided under subsection (c), the

6 Board shall make transfers from the American Health Se7 curity Trust Fund to the Public Health Service under sub8 part II of part D of title III, title VII, and title VIII of

9 the Public Health Service Act for the support of the Na10 tional Health Service Corps, health professions education,

11 and nursing education, including education of clinical

12 nurse practitioners, certified registered nurse anesthetists,

13 certified nurse midwives, and physician assistants. Of the

14 amounts so transferred in each year, not less than 50 per15 cent shall be expended for the support of the National

16 Health Service Corps.

17 (b) RANGE OF FUNDS.—The amount of transfers

18 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 4 19 ⁄100 percent and not to exceed 6 20 ⁄100 percent of the amounts the

21 Board estimates will be expended from the Trust Fund

22 in the fiscal year.

23 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

24 funds provided under this section with respect to provision

25 of services are in addition to, and not in replacement of,

26 funds made available under the provisions referred to in
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1 subsection (a) and shall be administered in accordance

2 with the terms of such provisions. The Board shall make

3 no transfer of funds under this section for any fiscal year

4 for which the total appropriations for the programs au5 thorized by such provisions are less than the total amount

6 appropriated for such programs in fiscal year 2000.

7 Subtitle B—Direct Health Care

8 Delivery

9 SEC. 711. SETASIDE FOR PUBLIC HEALTH.

10 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

11 From the amounts provided under subsection (c), the

12 Board shall make transfers from the American Health Se13 curity Trust Fund to the Public Health Service for the

14 following purposes (other than payment for services cov15 ered under title II):

16 (1) For payments to States under the maternal

17 and child health block grants under title V of the

18 Social Security Act.

19 (2) For prevention and treatment of tuber20 culosis under section 317 of the Public Health Serv21 ice Act.

22 (3) For the prevention and treatment of sexu23 ally transmitted diseases under section 318 of the

24 Public Health Service Act.
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1 (4) Preventive health block grants under part A

2 of title XIX of the Public Health Service Act.

3 (5) Grants to States for community mental

4 health services under subpart I of part B of title

5 XIX of the Public Health Service Act.

6 (6) Grants to States for prevention and treat7 ment of substance abuse under subpart II of part B

8 of title XIX of the Public Health Service Act.

9 (7) Grants for HIV health care services under

10 parts A, B, and C of title XXVI of the Public

11 Health Service Act.

12 (8) Public health formula grants described in

13 subsection (d).

14 (b) RANGE OF FUNDS.—The amount of transfers

15 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 16 ⁄10 percent and not to exceed 14 17 ⁄100 percent of the amounts the

18 Board estimates will be expended from the Trust Fund

19 in the fiscal year.

20 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

21 funds provided under this section with respect to provision

22 of services are in addition to, and not in replacement of,

23 funds made available under the programs referred to in

24 subsection (a) and shall be administered in accordance

25 with the terms of such programs.
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1 (d) REQUIRED REPORTS ON HEALTH STATUS.—The

2 Secretary shall require each State receiving funds under

3 this section to submit annual reports to the Secretary on

4 the health status of the population and measurable objec5 tives for improving the health of the public in the State.

6 Such reports shall include the following:

7 (1) A comparison of the measures of the State

8 and local public health system compared to relevant

9 objectives set forth in ‘‘Health People 2000’’ or sub10 sequent national objectives set by the Secretary.

11 (2) A description of health status measures to

12 be improved within the State (at the State and local

13 levels) through expanded public health functions and

14 health promotion and disease prevention programs.

15 (3) Measurable outcomes and process objectives

16 for improving health status, and a report on out17 comes from the previous year.

18 (4) Information regarding how Federal funding

19 has improved population-based prevention activities

20 and programs.

21 (5) A description of the core public health func22 tions to be carried out at the local level.

23 (6) A description of the relationship between

24 the State’s public health system, community-based
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1 health promotion and disease prevention providers,

2 and the State health security program.

3 (e) LIMITATION ON FUND TRANSFERS.—The Board

4 shall make no transfer of funds under this section for any

5 fiscal year for which the total appropriations for such pro6 grams are less than the total amount appropriated for

7 such programs in fiscal year 2000.

8 (f) PUBLIC HEALTH FORMULA GRANTS.—The Sec9 retary shall provide stable funds to States through for10 mula grants for the purpose of carrying out core public

11 health functions to monitor and protect the health of com12 munities from communicable diseases and exposure to

13 toxic environmental pollutants, occupational hazards,

14 harmful products, and poor health outcomes. Such func15 tions include the following:

16 (1) Data collection, analysis, and assessment of

17 public health data, vital statistics, and personal

18 health data to assess community health status and

19 outcomes reporting. This function includes the ac20 quisition and installation of hardware and software,

21 and personnel training and technical assistance to

22 operate and support automated and integrated infor23 mation systems.
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1 (2) Activities to protect the environment and to

2 assure the safety of housing, workplaces, food, and

3 water.

4 (3) Investigation and control of adverse health

5 conditions, and threats to the health status of indi6 viduals and the community. This function includes

7 the identification and control of outbreaks of infec8 tious disease, patterns of chronic disease and injury,

9 and cooperative activities to reduce the levels of vio10 lence.

11 (4) Health promotion and disease prevention

12 activities for which there is a significant need and a

13 high priority of the Public Health Service.

14 (5) The provision of public health laboratory

15 services to complement private clinical laboratory

16 services, including—

17 (A) screening tests for metabolic diseases

18 in newborns,

19 (B) toxicology assessments of blood lead

20 levels and other environmental toxins,

21 (C) tuberculosis and other diseases requir22 ing partner notification, and

23 (D) testing for infectious and food-borne

24 diseases.
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1 (6) Training and education for the public

2 health professions.

3 (7) Research on effective and cost-effective pub4 lic health practices. This function includes the devel5 opment, testing, evaluation, and publication of re6 sults of new prevention and public health control

7 interventions.

8 (8) Integration and coordination of the preven9 tion programs and services of community-based pro10 viders, local and State health departments, and

11 other sectors of State and local government that af12 fect health.

13 SEC. 712. SETASIDE FOR PRIMARY HEALTH CARE DELIV14 ERY.

15 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

16 From the amounts provided under subsection (c), the

17 Board shall make transfers from the American Health Se18 curity Trust Fund to the Public Health Service for the

19 program of primary care service expansion grants under

20 subpart V of part D of title III of the Public Health

21 Service Act (as added by section 713 of this Act).

22 (b) RANGE OF FUNDS.—The amount of transfers

23 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 6 24 ⁄100 percent and not to exceed 1 25 ⁄10 percent of the amounts the
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1 Board estimates will be expended from the Trust Fund

2 in the fiscal year.

3 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

4 funds provided under this section with respect to provision

5 of services are in addition to, and not in replacement of,

6 funds made available under the sections 329, 330, 340,

7 340A, 1001, and 2655 of the Public Health Service Act.

8 The Board shall make no transfer of funds under this sec9 tion for any fiscal year for which the total appropriations

10 for such sections are less than the total amount appro11 priated under such sections in fiscal year 2000.

12 SEC. 713. PRIMARY CARE SERVICE EXPANSION GRANTS.

13 Part D of title III of the Public Health Service Act

14 (42 U.S.C. 254b et seq.) is amended by adding at the end

15 thereof the following new subpart:

16 ‘‘Subpart X—Primary Care Expansion

17 ‘‘SEC. 340F. EXPANDING PRIMARY CARE DELIVERY CAPAC18 ITY IN URBAN AND RURAL AREAS.

19 ‘‘(a) GRANTS FOR PRIMARY CARE CENTERS.—From

20 the amounts described in subsection (c), the American

21 Health Security Standards Board shall make grants to

22 public and nonprofit private entities for projects to plan

23 and develop primary care centers which will serve medi24 cally underserved populations (as defined in section

25 330(b)(3)) in urban and rural areas and to deliver primary
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1 care services to such populations in such areas. The funds

2 provided under such a grant may be used for the same

3 purposes for which a grant may be made under subsection

4 (c), (e), (f), (g), (h), or (i) of section 330.

5 ‘‘(b) PROCESS OF AWARDING GRANTS.—The provi6 sions of subsection (j)(1) of section 330 shall apply to a

7 grant under this section in the same manner as they apply

8 to a grant under the corresponding subsection of such sec9 tion. The provisions of subsection (l)(2)(A) of such section

10 shall apply to grants for projects to plan and develop pri11 mary care centers under this section in the same manner

12 as they apply to grants under such section.

13 ‘‘(c) FUNDING AS SET-ASIDE FROM TRUST FUND.—

14 Funding to carry out this section is provided from the

15 American Health Security Trust Fund in accordance with

16 section 912 of the American Health Security Act.

17 ‘‘(d) PRIMARY CARE CENTER DEFINED.—In this sec18 tion, the term ‘primary care center’ means—

19 ‘‘(1) a health center (as defined in section

20 330(1)),

21 ‘‘(2) an entity qualified to receive a grant under

22 section 330, 1001 or 2655, or

23 ‘‘(3) a Federally-qualified health center (as de24 fined in section 1905(l)(2)(B) of the Social Security

25 Act).’’.
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1 Subtitle C—Primary Care and

2 Outcomes Research

3 SEC. 721. SET-ASIDE FOR OUTCOMES RESEARCH.

4 (a) GRANTS FOR OUTCOMES RESEARCH.—The

5 Board shall make transfers from the American Health Se6 curity Trust Fund to the Agency for Health Care Policy

7 and Research under title IX of the Public Health Service

8 Act for the purpose of carrying out activities under such

9 title. The Secretary shall assure that there is a special em10 phasis placed on pediatric outcomes research.

11 (b) RANGE OF FUNDS.—The amount of transfers

12 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 13 ⁄100 percent and not to exceed 2 14 ⁄100 percent of the amounts the

15 Board estimates will be expended from the Trust Fund

16 in the fiscal year.

17 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

18 funds provided under this section with respect to provision

19 of services are in addition to, and not in replacement of,

20 funds made available to the Agency for Health Care Policy

21 and Research under section 926 of the Public Health

22 Service Act. The Board shall make no transfer of funds

23 under this section for any fiscal year for which the total

24 appropriations under such section are less than the total
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1 amount appropriated under such section and title in fiscal

2 year 2000.

3 (d) CONFORMING AMENDMENT.—Section 927(b) of

4 the Public Health Service Act (42 U.S.C. 299c–6(b)) is

5 amended by striking ‘‘of the fiscal years 2001 through

6 2005’’ and inserting ‘‘subsequent fiscal year’’.

7 SEC. 722. OFFICE OF PRIMARY CARE AND PREVENTION RE8 SEARCH.

9 (a) IN GENERAL.—Title IV of the Public Health

10 Service Act is amended—

11 (1) by redesignating parts G through I as parts

12 H through J, respectively; and

13 (2) by inserting after part F the following new

14 part:

15 ‘‘PART G—RESEARCH ON PRIMARY CARE AND

16 PREVENTION

17 ‘‘SEC. 486E. OFFICE OF PRIMARY CARE AND PREVENTION

18 RESEARCH.

19 ‘‘(a) ESTABLISHMENT.—There is established within

20 the Office of the Director of NIH an office to be known

21 as the Office of Primary Care and Prevention Research

22 (in this part referred to as the ‘Office’). The Office shall

23 be headed by a director, who shall be appointed by the

24 Director of NIH.

25 ‘‘(b) PURPOSE.—The Director of the Office shall—
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1 ‘‘(1) identify projects of research on primary

2 care and prevention, for children as well as adults,

3 that should be conducted or supported by the na4 tional research institutes, with particular emphasis

5 on—

6 ‘‘(A) clinical patient care, with special em7 phasis on pediatric clinical care and diagnosis,

8 ‘‘(B) diagnostic effectiveness,

9 ‘‘(C) primary care education,

10 ‘‘(D) health and family planning services,

11 ‘‘(E) medical effectiveness outcomes of pri12 mary care procedures and interventions,

13 ‘‘(F) the use of multidisciplinary teams of

14 health care practitioners.

15 ‘‘(2) identify multidisciplinary research related

16 to primary care and prevention that should be so

17 conducted;

18 ‘‘(3) promote coordination and collaboration

19 among entities conducting research identified under

20 any of paragraphs (1) and (2);

21 ‘‘(4) encourage the conduct of such research by

22 entities receiving funds from the national research

23 institutes;

24 ‘‘(5) recommend an agenda for conducting and

25 supporting such research;
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1 ‘‘(6) promote the sufficient allocation of the re2 sources of the national research institutes for con3 ducting and supporting such research; and

4 ‘‘(7) prepare the report required in section

5 486G.

6 ‘‘(c) PRIMARY CARE AND PREVENTION RESEARCH

7 DEFINED.—For purposes of this part, the term ‘primary

8 care and prevention research’ means research on improve9 ment of the practice of family medicine, general internal

10 medicine, and general pediatrics, and includes research

11 relating to—

12 ‘‘(1) obstetrics and gynecology, dentistry, or

13 mental health or substance abuse treatment when

14 provided by a primary care physician or other

15 primary care practitioner, and

16 ‘‘(2) primary care provided by multidisciplinary

17 teams.

18 ‘‘SEC. 486F. NATIONAL DATA SYSTEM AND CLEARINGHOUSE

19 ON PRIMARY CARE AND PREVENTION RE20 SEARCH.

21 ‘‘(a) DATA SYSTEM.—The Director of NIH, in con22 sultation with the Director of the Office, shall establish

23 a data system for the collection, storage, analysis, re24 trieval, and dissemination of information regarding pri25 mary care and prevention research that is conducted or
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1 supported by the national research institutes. Information

2 from the data system shall be available through informa3 tion systems available to health care professionals and pro4 viders, researchers, and members of the public.

5 ‘‘(b) CLEARINGHOUSE.—The Director of NIH, in

6 consultation with the Director of the Office and with the

7 National Library of Medicine, shall establish, maintain,

8 and operate a program to provide, and encourage the use

9 of, information on research and prevention activities of the

10 national research institutes that relate to primary care

11 and prevention research.

12 ‘‘SEC. 486G. BIENNIAL REPORT.

13 ‘‘(a) IN GENERAL.—With respect to primary care

14 and prevention research, the Director of the Office shall,

15 not later than one year after the date of the enactment

16 of this part, and biennially thereafter, prepare a report—

17 ‘‘(1) describing and evaluating the progress

18 made during the preceding two fiscal years in re19 search and treatment conducted or supported by the

20 National Institutes of Health;

21 ‘‘(2) summarizing and analyzing expenditures

22 made by the agencies of such Institutes (and by

23 such Office) during the preceding two fiscal years;

24 and
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1 ‘‘(3) making such recommendations for legisla2 tive and administrative initiatives as the Director of

3 the Office determines to be appropriate.

4 ‘‘(b) INCLUSION IN BIENNIAL REPORT OF DIRECTOR

5 OF NIH.—The Director of the Office shall submit each

6 report prepared under subsection (a) to the Director of

7 NIH for inclusion in the report submitted to the President

8 and the Congress under section 403.

9 ‘‘SEC. 486H. AUTHORIZATION OF APPROPRIATIONS.

10 ‘‘For the Office of Primary Care and Prevention Re11 search, there are authorized to be appropriated

12 $150,000,000 for fiscal year 2002, $180,000,000 for fis13 cal year 2003, and $216,000,000 for fiscal year 2004.’’.

14 (b) REQUIREMENT OF SUFFICIENT ALLOCATION OF

15 RESOURCES OF INSTITUTES.—Section 402(b) of the Pub16 lic Health Service Act (42 U.S.C. 282(b)) is amended—

17 (1) in paragraph (13), by striking ‘‘and’’ after

18 the semicolon at the end;

19 (2) in paragraph (14), by striking the period at

20 the end and inserting ‘‘; and’’; and

21 (3) by inserting after paragraph (14) the fol22 lowing new paragraph:

23 ‘‘(15) after consultation with the Director of

24 the Office of Primary Care and Prevention Re25 search, shall ensure that resources of the National
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1 Institutes of Health are sufficiently allocated for

2 projects on primary care and prevention research

3 that are identified under section 486E(b).’’.

4 Subtitle D—School-Related Health

5 Services

6 SEC. 731. AUTHORIZATIONS OF APPROPRIATIONS.

7 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV8 ICES.—For the purpose of carrying out this subtitle, there

9 are authorized to be appropriated $100,000,000 for fiscal

10 year 2004, $275,000,000 for fiscal year 2005,

11 $350,000,000 for fiscal year 2006, and $400,000,000 for

12 each of the fiscal years 2007 and 2008.

13 (b) RELATION TO OTHER FUNDS.—The authoriza14 tions of appropriations established in subsection (a) are

15 in addition to any other authorizations of appropriations

16 that are available for the purpose described in such sub17 section.

18 SEC. 732. ELIGIBILITY FOR DEVELOPMENT AND OPER19 ATION GRANTS.

20 (a) IN GENERAL.—Entities eligible to apply for and

21 receive grants under section 734 or 735 are the following:

22 (1) State health agencies that apply on behalf

23 of local community partnerships and other commu24 nities in need of health services for school-aged chil25 dren within the State.
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1 (2) Local community partnerships in States in

2 which health agencies have not applied.

3 (b) LOCAL COMMUNITY PARTNERSHIPS.—

4 (1) IN GENERAL.—A local community partner5 ship under subsection (a)(2) is an entity that, at a

6 minimum, includes—

7 (A) a local health care provider with expe8 rience in delivering services to school-aged chil9 dren;

10 (B) one or more local public schools; and

11 (C) at least one community based organi12 zation located in the community to be served

13 that has a history of providing services to

14 school-aged children in the community who are

15 at-risk.

16 (2) PARTICIPATION.—A partnership described

17 in paragraph (1) shall, to the maximum extent fea18 sible, involve broad based community participation

19 from parents and adolescent children to be served,

20 health and social service providers, teachers and

21 other public school and school board personnel, de22 velopment and service organizations for adolescent

23 children, and interested business leaders. Such par24 ticipation may be evidenced through an expanded
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1 partnership, or an advisory board to such partner2 ship.

3 (c) DEFINITIONS REGARDING CHILDREN.—For pur4 poses of this subtitle:

5 (1) The term ‘‘adolescent children’’ means

6 school-aged children who are adolescents.

7 (2) The term ‘‘school-aged children’’ means in8 dividuals who are between the ages of 4 and 19 (in9 clusive).

10 SEC. 733. PREFERENCES.

11 (a) IN GENERAL.—In making grants under sections

12 734 and 735, the Secretary shall give preference to appli13 cants whose communities to be served show the most sub14 stantial level of need for such services among school-aged

15 children, as measured by indicators of community health

16 including the following:

17 (1) High levels of poverty.

18 (2) The presence of a medically underserved

19 population.

20 (3) The presence of a health professional short21 age area.

22 (4) High rates of indicators of health risk

23 among school-aged children, including a high propor24 tion of such children receiving services through the

25 Individuals with Disabilities Education Act, adoles-
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1 cent pregnancy, sexually transmitted disease (includ2 ing infection with the human immunodeficiency

3 virus), preventable disease, communicable disease,

4 intentional and unintentional injuries, community

5 and gang violence, unemployment among adolescent

6 children, juvenile justice involvement, and high rates

7 of drug and alcohol exposure.

8 (b) LINKAGE TO COMMUNITY HEALTH CENTERS.—

9 In making grants under sections 734 and 735, the Sec10 retary shall give preference to applicants that demonstrate

11 a linkage to community health centers.

12 SEC. 734. GRANTS FOR DEVELOPMENT OF PROJECTS.

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

14 to State health agencies or to local community partner15 ships to develop school health service sites.

16 (b) USE OF FUNDS.—A project for which a grant

17 may be made under subsection (a) may include but not

18 be limited to the cost of the following:

19 (1) Planning for the provision of school health

20 services.

21 (2) Recruitment, compensation, and training of

22 health and administrative staff.

23 (3) The development of agreements, and the ac24 quisition and development of equipment and infor25 mation services, necessary to support information
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1 exchange between school health service sites and

2 health plans, health providers, and other entities au3 thorized to collect information under this Act.

4 (4) Other activities necessary to assume oper5 ational status.

6 (c) APPLICATION FOR GRANT.—

7 (1) IN GENERAL.—Applicants shall submit ap8 plications in a form and manner prescribed by the

9 Secretary.

10 (2) APPLICATIONS BY STATE HEALTH AGEN11 CIES.—

12 (A) In the case of applicants that are State

13 health agencies, the application shall contain

14 assurances that the State health agency is ap15 plying for funds—

16 (i) on behalf of at least one local com17 munity partnership; and

18 (ii) on behalf of at least one other

19 community identified by the State as in

20 need of the services funded under this sub21 title but without a local community part22 nership.

23 (B) In the case of the communities identi24 fied in applications submitted by State health

25 agencies that do not yet have local community
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1 partnerships (including the community identi2 fied under subparagraph (A)(ii)), the State

3 shall describe the steps that will be taken to aid

4 the communities in developing a local commu5 nity partnership.

6 (C) A State applying on behalf of local

7 community partnerships and other communities

8 may retain not more than 10 percent of grants

9 awarded under this subtitle for administrative

10 costs.

11 (d) CONTENTS OF APPLICATION.—In order to receive

12 a grant under this section, an applicant must include in

13 the application the following information:

14 (1) An assessment of the need for school health

15 services in the communities to be served, using the

16 latest available health data and health goals and ob17 jectives established by the Secretary.

18 (2) A description of how the applicant will de19 sign the proposed school health services to reach the

20 maximum number of school-aged children who are at

21 risk.

22 (3) An explanation of how the applicant will in23 tegrate its services with those of other health and

24 social service programs within the community.
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1 (4) A description of a quality assurance pro2 gram which complies with standards that the Sec3 retary may prescribe.

4 (e) NUMBER OF GRANTS.—Not more than one plan5 ning grant may be made to a single applicant. A planning

6 grant may not exceed two years in duration.

7 SEC. 735. GRANTS FOR OPERATION OF PROJECTS.

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

9 to State health agencies or to local community partner10 ships for the cost of operating school health service sites.

11 (b) USE OF GRANT.—The costs for which a grant

12 may be made under this section include but are not limited

13 to the following:

14 (1) The cost of furnishing health services that

15 are not otherwise covered under this Act or by any

16 other public or private insurer.

17 (2) The cost of furnishing services whose pur18 pose is to increase the capacity of individuals to uti19 lize available health services, including transpor20 tation, community and patient outreach, patient

21 education, translation services, and such other serv22 ices as the Secretary determines to be appropriate in

23 carrying out such purpose.

24 (3) Training, recruitment and compensation of

25 health professionals and other staff.
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1 (4) Outreach services to school-aged children

2 who are at risk and to the parents of such children.

3 (5) Linkage of individuals to health plans, com4 munity health services and social services.

5 (6) Other activities deemed necessary by the

6 Secretary.

7 (c) APPLICATION FOR GRANT.—Applicants shall sub8 mit applications in a form and manner prescribed by the

9 Secretary. In order to receive a grant under this section,

10 an applicant must include in the application the following

11 information:

12 (1) A description of the services to be furnished

13 by the applicant.

14 (2) The amounts and sources of funding that

15 the applicant will expend, including estimates of the

16 amount of payments the applicant will receive from

17 sources other than the grant.

18 (3) Such other information as the Secretary de19 termines to be appropriate.

20 (d) ADDITIONAL CONTENTS OF APPLICATION.—In

21 order to receive a grant under this section, an applicant

22 must meet the following conditions:

23 (1) The applicant furnishes the following serv24 ices:
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1 (A) Diagnosis and treatment of simple ill2 nesses and minor injuries.

3 (B) Preventive health services, including

4 health screenings.

5 (C) Services provided for the purpose de6 scribed in subsection (b)(2).

7 (D) Referrals and followups in situations

8 involving illness or injury.

9 (E) Health and social services, counseling

10 services, and necessary referrals, including re11 ferrals regarding mental health and substance

12 abuse.

13 (F) Such other services as the Secretary

14 determines to be appropriate.

15 (2) The applicant is a participating provider in

16 the State’s program for medical assistance under

17 title XIX of the Social Security Act.

18 (3) The applicant does not impose charges on

19 students or their families for services (including col20 lection of any cost-sharing for services under the

21 comprehensive benefit package that otherwise would

22 be required).

23 (4) The applicant has reviewed and will periodi24 cally review the needs of the population served by

25 the applicant in order to ensure that its services are
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1 accessible to the maximum number of school-aged

2 children in the area, and that, to the maximum ex3 tent possible, barriers to access to services of the ap4 plicant are removed (including barriers resulting

5 from the area’s physical characteristics, its eco6 nomic, social and cultural grouping, the health care

7 utilization patterns of such children, and available

8 transportation).

9 (5) In the case of an applicant which serves a

10 population that includes a substantial proportion of

11 individuals of limited English speaking ability, the

12 applicant has developed a plan to meet the needs of

13 such population to the extent practicable in the lan14 guage and cultural context most appropriate to such

15 individuals.

16 (6) The applicant will provide non-Federal con17 tributions toward the cost of the project in an

18 amount determined by the Secretary.

19 (7) The applicant will operate a quality assur20 ance program consistent with section 734(d).

21 (e) DURATION OF GRANT.—A grant under this sec22 tion shall be for a period determined by the Secretary.

23 (f) REPORTS.—A recipient of funding under this sec24 tion shall provide such reports and information as are re25 quired in regulations of the Secretary.
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1 SEC. 736. FEDERAL ADMINISTRATIVE COSTS.

2 Of the amounts made available under section 731, the

3 Secretary may reserve not more than 5 percent for admin4 istrative expenses regarding this subtitle.

5 SEC. 737. DEFINITIONS.

6 For purposes of this subtitle:

7 (1) The term ‘‘adolescent children’’ has the

8 meaning given such term in section 732(c).

9 (2) The term ‘‘at risk’’ means at-risk with re10 spect to health.

11 (3) The term ‘‘community health center’’ has

12 the meaning given such term in section 330 of the

13 Public Health Service Act.

14 (4) The term ‘‘health professional shortage

15 area’’ means a health professional shortage area des16 ignated under section 332 of the Public Health Serv17 ice Act.

18 (5) The term ‘‘medically underserved popu19 lation’’ has the meaning given such term in section

20 330 of the Public Health Service Act.

21 (6) The term ‘‘school-aged children’’ has the

22 meaning given such term in section 732(c).
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1 TITLE VIII—FINANCING PROVI2 SIONS; AMERICAN HEALTH

3 SECURITY TRUST FUND

4 SEC. 800. AMENDMENT OF 1986 CODE; SECTION 15 NOT TO

5 APPLY.

6 (a) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this title an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986.

12 (b) SECTION 15 NOT TO APPLY.—The amendments

13 made by subtitle B shall not be treated as a change in

14 a rate of tax for purposes of section 15 of the Internal

15 Revenue Code of 1986.

16 Subtitle A—American Health

17 Security Trust Fund

18 SEC. 801. AMERICAN HEALTH SECURITY TRUST FUND.

19 (a) IN GENERAL.—There is hereby created on the

20 books of the Treasury of the United States a trust fund

21 to be known as the American Health Security Trust Fund

22 (in this section referred to as the ‘‘Trust Fund’’). The

23 Trust Fund shall consist of such gifts and bequests as

24 may be made and such amounts as may be deposited in,
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1 or appropriated to, such Trust Fund as provided in this

2 Act.

3 (b) APPROPRIATIONS INTO TRUST FUND.—

4 (1) TAXES.—There are hereby appropriated to

5 the Trust Fund for each fiscal year (beginning with

6 fiscal year 2002), out of any moneys in the Treasury

7 not otherwise appropriated, amounts equivalent to

8 100 percent of the aggregate increase in tax liabil9 ities under the Internal Revenue Code of 1986 which

10 is attributable to the application of the amendments

11 made by this title. The amounts appropriated by the

12 preceding sentence shall be transferred from time to

13 time (but not less frequently than monthly) from the

14 general fund in the Treasury to the Trust Fund,

15 such amounts to be determined on the basis of esti16 mates by the Secretary of the Treasury of the taxes

17 paid to or deposited into the Treasury; and proper

18 adjustments shall be made in amounts subsequently

19 transferred to the extent prior estimates were in ex20 cess of or were less than the amounts that should

21 have been so transferred.

22 (2) CURRENT PROGRAM RECEIPTS.—Notwith23 standing any other provision of law, there are hereby

24 appropriated to the Trust Fund for each fiscal year

25 (beginning with fiscal year 2002) the amounts that
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1 would otherwise have been appropriated to carry out

2 the following programs:

3 (A) The medicare program, under parts A

4 and B of title XVIII of the Social Security Act

5 (other than amounts attributable to any pre6 miums under such parts).

7 (B) The medicaid program, under State

8 plans approved under title XIX of such Act.

9 (C) The Federal employees health benefit

10 program, under chapter 89 of title 5, United

11 States Code.

12 (D) The CHAMPUS program, under chap13 ter 55 of title 10, United States Code.

14 (E) The maternal and child health pro15 gram (under title V of the Social Security Act),

16 vocational rehabilitation programs, programs

17 for drug abuse and mental health services

18 under the Public Health Service Act, programs

19 providing general hospital or medical assistance,

20 and any other Federal program identified by

21 the Board, in consultation with the Secretary of

22 the Treasury, to the extent the programs pro23 vide for payment for health services the pay24 ment of which may be made under this Act.
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1 (c) INCORPORATION OF PROVISIONS.—The provisions

2 of subsections (b) through (i) of section 1817 of the Social

3 Security Act shall apply to the Trust Fund under this Act

4 in the same manner as they applied to the Federal Hos5 pital Insurance Trust Fund under part A of title XVIII

6 of such Act, except that the American Health Security

7 Standards Board shall constitute the Board of Trustees

8 of the Trust Fund.

9 (d) TRANSFER OF FUNDS.—Any amounts remaining

10 in the Federal Hospital Insurance Trust Fund or the Fed11 eral Supplementary Medical Insurance Trust Fund after

12 the settlement of claims for payments under title XVIII

13 have been completed, shall be transferred into the Amer14 ican Health Security Trust Fund.

15 Subtitle B—Taxes Based on Income

16 and Wages

17 SEC. 811. PAYROLL TAX ON EMPLOYERS.

18 (a) IN GENERAL.—Section 3111 (relating to tax on

19 employers) is amended by redesignating subsection (c) as

20 subsection (d) and by inserting after subsection (b) the

21 following new subsection:

22 ‘‘(c) HEALTH CARE.—In addition to other taxes,

23 there is hereby imposed on every employer an excise tax,

24 with respect to having individuals in his employ, equal to

25 8.7 percent of the wages (as defined in section 3121(a))
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1 paid by him with respect to employment (as defined in

2 section 3121(b)).’’

3 (b) SELF-EMPLOYMENT INCOME.—Section 1401 (re4 lating to rate of tax on self-employment income) is amend5 ed by redesignating subsection (c) as subsection (d) and

6 by inserting after subsection (b) the following new sub7 section:

8 ‘‘(c) HEALTH CARE.—In addition to other taxes,

9 there shall be imposed for each taxable year, on the self10 employment income of every individual, a tax equal to 8.7

11 percent of the amount of the self-employment income for

12 such taxable year.’’

13 (c) COMPARABLE TAXES FOR RAILROAD SERV14 ICES.—

15 (1) TAX ON EMPLOYERS.—Section 3221 is

16 amended by redesignating subsections (c), (d), and

17 (e) as subsections (d), (e), and (f), respectively, and

18 by inserting after subsection (b) the following new

19 subsection:

20 ‘‘(c) HEALTH CARE.—In addition to other taxes,

21 there is hereby imposed on every employer an excise tax,

22 with respect to having individuals in his employ, equal to

23 8.7 percent of the compensation paid by such employer

24 for services rendered to such employer.’’
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1 (2) TAX ON EMPLOYEE REPRESENTATIVES.—

2 Subsection (a) of section 3211 (relating to tax on

3 employee representatives) is amended by redesig4 nating paragraph (3) as paragraph (4) and by in5 serting after paragraph (2) the following new para6 graph:

7 ‘‘(3) HEALTH CARE.—In addition to other

8 taxes, there is hereby imposed on the income of each

9 employee representative a tax equal to 8.7 percent of

10 the compensation received during the calendar year

11 by such employee representative for services ren12 dered by such employee representative.

13 (3) NO APPLICABLE BASE.—Subparagraph (A)

14 of section 3231(e)(2) is amended by adding at the

15 end thereof the following new clause:

16 ‘‘(iv) HEALTH CARE TAXES.—Clause

17 (i) shall not apply to the taxes imposed by

18 sections 3221(c) and 3211(a)(3).’’

19 (4) TECHNICAL AMENDMENTS.—

20 (A) Paragraph (4) of section 3211(a), as

21 redesignated by paragraph (2), is amended by

22 striking ‘‘and (2)’’ and inserting ‘‘, (2), and

23 (3)’’.

24 (B) Subsection (f) of section 3221, as re25 designated by paragraph (1), is amended by
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1 striking ‘‘and (b)’’ and inserting ‘‘, (b), and

2 (c)’’.

3 (d) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to remuneration paid after Decem5 ber 31, 2002.

6 SEC. 812. HEALTH CARE INCOME TAX.

7 (a) GENERAL RULE.—Subchapter A of chapter 1 (re8 lating to determination of tax liability) is amended by add9 ing at the end thereof the following new part:

10 ‘‘PART VIII—HEALTH CARE INCOME TAX ON

11 INDIVIDUALS

‘‘Sec. 59B. Health care income tax.

12 ‘‘SEC. 59B. HEALTH CARE INCOME TAX.

13 ‘‘(a) IMPOSITION OF TAX.—In the case of an indi14 vidual, there is hereby imposed a tax (in addition to any

15 other tax imposed by this subtitle) equal to 2.2 percent

16 of the taxable income of the taxpayer for the taxable year.

17 ‘‘(b) NO CREDITS AGAINST TAX; NO EFFECT ON

18 MINIMUM TAX.—The tax imposed by this section shall not

19 be treated as a tax imposed by this chapter for purposes

20 of determining—

21 ‘‘(1) the amount of any credit allowable under

22 this chapter, or

23 ‘‘(2) the amount of the minimum tax imposed

24 by section 55.
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1 ‘‘(c) SPECIAL RULES.—

2 ‘‘(1) TAX TO BE WITHHELD, ETC.—For pur3 poses of this title, the tax imposed by this section

4 shall be treated as imposed by section 1.

5 ‘‘(2) REIMBURSEMENT OF TAX BY EMPLOYER

6 NOT INCLUDIBLE IN GROSS INCOME.—The gross in7 come of an employee shall not include any payment

8 by his employer to reimburse the employee for the

9 tax paid by the employee under this section.

10 ‘‘(3) OTHER RULES.—The rules of section

11 59A(d) shall apply to the tax imposed by this sec12 tion.’’

13 (b) CLERICAL AMENDMENT.—The table of parts for

14 subchapter A of chapter 1 is amended by adding at the

15 end the following new item:

‘‘Part VIII. Health care income tax on individuals.’’

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

17 this section shall apply to taxable years beginning after

18 December 31, 2002.

19 Subtitle C—Increase in Excise

20 Taxes on Tobacco Products

21 SEC. 821. INCREASE IN EXCISE TAXES ON TOBACCO PROD22 UCTS.

23 (a) CIGARETTES.—Subsection (b) of section 5701 is

24 amended—
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1 (1) by striking ‘‘$19.50 per thousand ($17 per

2 thousand on cigarettes removed during 2000 or

3 2001)’’ in paragraph (1) and inserting ‘‘$22.50 per

4 thousand’’, and

5 (2) by striking ‘‘$40.95 per thousand ($35.70

6 per thousand on cigarettes removed during 2000 or

7 2001)’’ in paragraph (2) and inserting ‘‘$47.25 per

8 thousand’’.

9 (b) CIGARS.—Subsection (a) of section 5701 is

10 amended—

11 (1) by striking ‘‘$1.828 cents per thousand

12 ($1.594 cents per thousand on cigars removed dur13 ing 2000 or 2001)’’ in paragraph (1) and inserting

14 ‘‘$2.11 per thousand’’, and

15 (2) by striking ‘‘equal to’’ and all that follows

16 in paragraph (2) and inserting ‘‘equal to 23.91 per17 cent of the price for which sold but not more than

18 $56.25 per thousand.’’

19 (c) CIGARETTE PAPERS.—Subsection (c) of section

20 5701 is amended by striking ‘‘1.22 cents (1.06 cents on

21 cigarette papers removed during 2000 or 2001)’’ and in22 serting ‘‘1.41 cents’’.

23 (d) CIGARETTE TUBES.—Subsection (d) of section

24 5701 is amended by striking ‘‘2.44 cents (2.13 cents on
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1 cigarette tubes removed during 2000 or 2001)’’ and in2 serting ‘‘2.81 cents’’.

3 (e) SMOKELESS TOBACCO.—Subsection (e) of section

4 5701 is amended—

5 (1) by striking ‘‘58.5 cents (51 cents on snuff

6 removed during 2000 or 2001)’’ in paragraph (1)

7 and inserting ‘‘67.5 cents’’, and

8 (2) by striking ‘‘19.5 cents (17 cents on chew9 ing tobacco removed during 2000 or 2001)’’ in para10 graph (2) and inserting ‘‘22.5 cents’’.

11 (f) PIPE TOBACCO.—Subsection (f) of section 5701

12 is amended by striking ‘‘$1.0969 cents (95.67 cents on

13 pipe tobacco removed during 2000 or 2001)’’ and insert14 ing ‘‘$1.27’’.

15 (g) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to articles removed (as defined in

17 section 5702(k) of the Internal Revenue Code of 1986)

18 after December 31, 2002.

19 (h) FLOOR STOCKS TAXES.—

20 (1) IMPOSITION OF TAX.—On tobacco products

21 and cigarette papers and tubes manufactured in or

22 imported into the United States which are removed

23 before January 1, 2003, and held on such date for

24 sale by any person, there is hereby imposed a tax in

25 an amount equal to the excess of—
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1 (A) the tax which would be imposed under

2 section 5701 of the Internal Revenue Code of

3 1986 on the article if the article had been re4 moved on such date, over

5 (B) the prior tax (if any) imposed under

6 section 5701 or 7652 of such Code on such ar7 ticle.

8 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

9 IN VENDING MACHINES.—To the extent provided in

10 regulations prescribed by the Secretary, no tax shall

11 be imposed by paragraph (1) on cigarettes held for

12 retail sale on January 1, 2003, by any person in any

13 vending machine. If the Secretary provides such a

14 benefit with respect to any person, the Secretary

15 may reduce the $500 amount in paragraph (3) with

16 respect to such person.

17 (3) CREDIT AGAINST TAX.—Each person shall

18 be allowed as a credit against the taxes imposed by

19 paragraph (1) an amount equal to $500. Such credit

20 shall not exceed the amount of taxes imposed by

21 paragraph (1) for which such person is liable.

22 (4) LIABILITY FOR TAX AND METHOD OF PAY23 MENT.—

24 (A) LIABILITY FOR TAX.—A person hold25 ing any article on January 1, 2003, to which
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1 any tax imposed by paragraph (1) applies shall

2 be liable for such tax.

3 (B) METHOD OF PAYMENT.—The tax im4 posed by paragraph (1) shall be paid in such

5 manner as the Secretary shall prescribe by reg6 ulations.

7 (C) TIME FOR PAYMENT.—The tax im8 posed by paragraph (1) shall be paid on or be9 fore July 31, 2003.

10 (5) ARTICLES IN FOREIGN TRADE ZONES.—

11 Notwithstanding the Act of June 18, 1934 (48 Stat.

12 998, 19 U.S.C. 81a) and any other provision of law,

13 any article which is located in a foreign trade zone

14 on January 1, 2003, shall be subject to the tax im15 posed by paragraph (1) if—

16 (A) internal revenue taxes have been deter17 mined, or customs duties liquidated, with re18 spect to such article before such date pursuant

19 to a request made under the 1st proviso of sec20 tion 3(a) of such Act, or

21 (B) such article is held on such date under

22 the supervision of a customs officer pursuant to

23 the 2d proviso of such section 3(a).

24 (6) DEFINITIONS.—For purposes of this

25 subsection—
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1 (A) IN GENERAL.—Terms used in this sub2 section which are also used in section 5702 of

3 the Internal Revenue Code of 1986 shall have

4 the respective meanings such terms have in

5 such section.

6 (B) SECRETARY.—The term ‘‘Secretary’’

7 means the Secretary of the Treasury or his del8 egate.

9 (7) CONTROLLED GROUPS.—Rules similar to

10 the rules of section 5061(e)(3) of such Code shall

11 apply for purposes of this subsection.

12 (8) OTHER LAWS APPLICABLE.—All provisions

13 of law, including penalties, applicable with respect to

14 the taxes imposed by section 5701 of such Code

15 shall, insofar as applicable and not inconsistent with

16 the provisions of this subsection, apply to the floor

17 stocks taxes imposed by paragraph (1), to the same

18 extent as if such taxes were imposed by such section

19 5701. The Secretary may treat any person who bore

20 the ultimate burden of the tax imposed by para21 graph (1) as the person to whom a credit or refund

22 under such provisions may be allowed or made.
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1 TITLE IX—CONFORMING AMEND2 MENTS TO THE EMPLOYEE

3 RETIREMENT INCOME SECU4 RITY ACT OF 1974

5 SEC. 901. ERISA INAPPLICABLE TO HEALTH COVERAGE AR6 RANGEMENTS UNDER STATE HEALTH SECU7 RITY PROGRAMS.

8 Section 4 of the Employee Retirement Income Secu9 rity Act of 1974 (29 U.S.C. 1003) is amended—

10 (1) in subsection (a), by striking ‘‘subsection

11 (b)’’ and inserting ‘‘subsections (b) and (c)’’; and

12 (2) by adding at the end the following new sub13 section:

14 ‘‘(c) The provisions of this title shall not apply to any

15 arrangement forming a part of a State health security pro16 gram established pursuant to section 101(b) of the Amer17 ican Health Security Act of 2001.’’.

18 SEC. 902. EXEMPTION OF STATE HEALTH SECURITY PRO19 GRAMS FROM ERISA PREEMPTION.

20 Section 514(b) of the Employee Retirement Income

21 Security Act of 1974 (29 U.S.C. 1144(b)) is amended by

22 adding at the end the following new paragraph:

23 ‘‘(10) Subsection (a) of this section shall not apply

24 to State health security programs established pursuant to
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1 section 101(b) of the American Health Security Act of

2 2001.’’.

3 SEC. 903. PROHIBITION OF EMPLOYEE BENEFITS DUPLICA4 TIVE OF BENEFITS UNDER STATE HEALTH

5 SECURITY PROGRAMS; COORDINATION IN

6 CASE OF WORKERS’ COMPENSATION.

7 (a) IN GENERAL.—Part 5 of subtitle B of title I of

8 the Employee Retirement Income Security Act of 1974 is

9 amended by adding at the end the following new section:

10 ‘‘PROHIBITION OF EMPLOYEE BENEFITS DUPLICATIVE OF

11 STATE HEALTH SECURITY PROGRAM BENEFITS; CO12 ORDINATION IN CASE OF WORKERS’ COMPENSATION

13 ‘‘SEC. 518. (a) Subject to subsection (b), no employee

14 benefit plan may provide benefits which duplicate payment

15 for any items or services for which payment may be made

16 under a State health security program established pursu17 ant to section 101(b) of the American Health Security Act

18 of 2001.

19 ‘‘(b)(1) Each workers compensation carrier that is

20 liable (or would be liable but for the enactment of the

21 American Health Security Act) for payment for workers

22 compensation services furnished in a State shall reimburse

23 the State health security plan for the State in which the

24 services are furnished for the cost of such services.

25 ‘‘(2) In this subsection:
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1 ‘‘(A) The term ‘workers compensation carrier’

2 means an insurance company that underwrites work3 ers compensation medical benefits with respect to

4 one or more employers and includes an employer or

5 fund that is financially at risk for the provision of

6 workers compensation medical benefits.

7 ‘‘(B) The term ‘workers compensation medical

8 benefits’ means, with respect to an enrollee who is

9 an employee subject to the workers compensation

10 laws of a State, the comprehensive medical benefits

11 for work-related injuries and illnesses provided for

12 under such laws with respect to such an employee.

13 ‘‘(C) The term ‘workers compensation services’

14 means items and services included in workers com15 pensation medical benefits and includes items and

16 services (including rehabilitation services and long17 term-care services) commonly used for treatment of

18 work-related injuries and illnesses.’’.

19 (b) CLERICAL AMENDMENT.—The table of contents

20 in section 1 of such Act is amended by inserting after the

21 item relating to section 517 the following new items:

‘‘Sec. 518. Prohibition of employee benefits duplicative of state health security

program benefits; coordination in case of workers’ compensation.’’.
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1 SEC. 904. REPEAL OF CONTINUATION COVERAGE REQUIRE2 MENTS UNDER ERISA AND CERTAIN OTHER

3 REQUIREMENTS RELATING TO GROUP

4 HEALTH PLANS.

5 (a) IN GENERAL.—Part 6 of subtitle B of title I of

6 the Employee Retirement Income Security Act of 1974

7 (29 U.S.C. 1161 et seq.) is repealed.

8 (b) CONFORMING AMENDMENTS.—

9 (1) Section 502(a) of such Act (29 U.S.C.

10 1132(a)) is amended—

11 (A) by striking paragraph (7); and

12 (B) by redesignating paragraph (8) as

13 paragraph (7).

14 (2) Section 502(c)(1) of such Act (29 U.S.C.

15 1132(c)(1)) is amended by striking ‘‘paragraph (1)

16 or (4) of section 606 or’’.

17 (3) Section 4301(c)(4) of the Omnibus Budget

18 Reconciliation Act of 1993 (Public Law 103–66; 107

19 Stat. 377) and the amendments made thereby are

20 repealed.

21 (4) The table of contents in section 1 of the

22 Employee Retirement Income Security Act of 1974

23 is amended by striking the items relating to part 6

24 of subtitle B of title I of such Act.
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1 SEC. 905. EFFECTIVE DATE OF TITLE.

2 The amendments made by this title shall take effect

3 January 1, 2003.

4 TITLE X—ADDITIONAL

5 CONFORMING AMENDMENTS

6 SEC. 1001. REPEAL OF CERTAIN PROVISIONS IN INTERNAL

7 REVENUE CODE OF 1986.

8 The provisions of titles III and IV of the Health In9 surance Portability and Accountability Act, other than

10 subtitles D and H and section 342, are repealed and the

11 provisions of law that were amended or repealed by such

12 provisions are hereby restored as if such provisions had

13 not been enacted.

14 (c) RELATED AMENDMENTS.—Strike subsections (l)

15 and (m) of section 401 of the Health Insurance Portability

16 and Accountability Act of 1996.

17 SEC. 1002. REPEAL OF CERTAIN PROVISIONS IN THE EM18 PLOYEE RETIREMENT INCOME SECURITY

19 ACT OF 1974.

20 (a) IN GENERAL.—Part 7 of subtitle B of title I of

21 the Employee Retirement Income Security Act of 1974 is

22 repealed and the items relating to such part in the table

23 of contents in section 1 of such Act are repealed.

24 (b) ADDITIONAL AMENDMENTS.—Section 514(b) of

25 such Act (29 U.S.C. 1144(b)) is amended by striking

26 paragraph (9).
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1 SEC. 1003. REPEAL OF CERTAIN PROVISIONS IN THE PUB2 LIC HEALTH SERVICE ACT AND RELATED

3 PROVISIONS.

4 (a) IN GENERAL.—Titles XXII and XXVII of the

5 Public Health Service Act are repealed.

6 (b) ADDITIONAL AMENDMENTS.—(1) Section

7 1301(b) of such Act (42 U.S.C. 300e(b)) is amended by

8 striking paragraph (6).

9 (2) Sections 104 and 191 of the Health Insurance

10 Portability and Accountability Act of 1996 are repealed.

11 SEC. 1004. EFFECTIVE DATE OF TITLE.

12 The amendments made by this title shall take effect

13 January 1, 2003.

Æ