I

103D CONGRESS

1ST SESSION H. R. 1976

To guarantee access to affordable health care coverage, to provide for equality

with respect to the provision of service in rural areas, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 5, 1993

Mr. THOMAS of Wyoming introduced the following bill; which was referred

jointly to the Committees on Ways and Means, Energy and Commerce,

the Judiciary, and Education and Labor

A BILL

To guarantee access to affordable health care coverage, to

provide for equality with respect to the provision of service in rural areas, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Comprehensive Health and Rural Equality Act of 1993’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—GUARANTEED ACCESS TO AFFORDABLE HEALTH CARE

COVERAGE
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Sec. 101. Requirement of health insurance coverage.

Sec. 102. Registration of eligible uninsured individuals.

Sec. 103. Eligibility for credit certificates.

Sec. 104. Requirement for offering of MedEquality plans.

Sec. 105. Definitions.

TITLE II—SMALL EMPLOYER INSURANCE REFORM

Sec. 201. Establishment and enforcement of standards for small employer

health insurance plans.

Sec. 202. Preemption of State benefits mandates for plans that meet consumer

protection standards.

Sec. 203. Requirement for offering of basic, low cost plan (MedEquality plan).

Sec. 204. Requirements relating to initial writing of policies.

Sec. 205. Requirements relating to renewal.

Sec. 206. Establishment of reinsurance mechanisms for high risk individuals.

Sec. 207. Registration of all health benefit plans required.

Sec. 208. Definitions.

Sec. 209. Preemption from insurance mandates for qualified small employer

purchasing groups.

Sec. 210. Equalization of tax benefits for self-employed persons.

Sec. 211. Managed care rights.

TITLE III—HEALTH CARE COST CONTAINMENT

Subtitle A—Denial of Certain Tax Deductions and Exclusion for Excess

Benefits

Sec. 301. Denial of employer tax deduction for providing health care coverage

in excess of minimum benefits; denial of employee exclusion for

such excess coverage.

Subtitle B—Medical Malpractice Reform

PART 1—GENERAL PROVISIONS

Sec. 311. Federal reform of medical malpractice liability actions.

Sec. 312. Definitions.

Sec. 313. Effective date.

PART 2—UNIFORM STANDARDS FOR MEDICAL MALPRACTICE LIABILITY

Sec. 321. Statute of limitations.

Sec. 322. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 323. Relation to alternative dispute resolution of Federal agencies.

Sec. 324. Mandatory pretrial settlement conference.

Sec. 325. Calculation and payment of damages.

Sec. 326. Treatment of attorney’s fees and other costs.

Sec. 327. Joint and several liability.

Sec. 328. Uniform standard for determining negligence.

Sec. 329. Application of medical practice guidelines in malpractice liability actions.

Sec. 330. Special provision for certain obstetric services.

Sec. 331. Preemption.
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PART 3—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION

SYSTEMS

Sec. 341. Basic requirements for ADR.

Sec. 342. Certification of State systems.

Sec. 343. Reports on implementation and effectiveness of alternative dispute

resolution systems.

PART 4—OTHER REQUIREMENTS AND PROGRAMS

Sec. 351. Permitting State professional societies to participate in disciplinary

activities.

Subtitle C—Administrative Cost Savings

PART 1—STANDARDIZED CLAIMS PROCESSING

Sec. 361. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 362. Application of standards.

Sec. 363. Periodic review and revision of standards.

Sec. 364. Health benefit plan defined.

PART 2—ELECTRONIC MEDICAL DATA STANDARDS

Sec. 371. Medical data standards for hospitals and other providers.

Sec. 372. Application of electronic data standards to certain hospitals.

Sec. 373. Electronic transmission to Federal agencies.

Sec. 374. Limitation on data requirements where standards are in effect.

Sec. 375. Advisory commission.

PART 3—ADDITIONAL STANDARDS AND REQUIREMENTS

Sec. 381. Standards relating to use of medicare and medicaid magnetized

health benefit cards; secondary payor data bank.

Sec. 382. Preemption of State quill pen laws.

Sec. 383. Use of standard identification numbers.

Sec. 384. Coordination of benefit standards.

Subtitle C—Estimates of Expenses Prior to Treatment

Sec. 391. Requirement.

Subtitle D—Antitrust Exemptions

Sec. 395. Permitting cooperative arrangements between hospitals.

TITLE IV—LONG-TERM CARE

Subtitle A—Treatment of Long-Term Care Insurance Plans

Sec. 401. Qualified long-term care insurance treated as accident and health insurance for purposes of taxation of life insurance companies.

Sec. 402. Qualified long-term care insurance treated as accident and health insurance for purposes of exclusion for benefits received under

such insurance and for employer contributions for such insurance.
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Sec. 403. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for qualified long-term care

insurance.

Sec. 404. Exchange of life insurance policy for qualified long-term care policy

not taxable.

Subtitle B—Treatment of Accelerated Death Benefits

Sec. 411. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 412. Tax treatment of companies issuing qualified accelerated death benefit riders.

TITLE V—INCENTIVES FOR PROVISION OF SERVICES IN RURAL

AREAS

Sec. 501. Deduction for medical school education loan interest incurred by doctors serving in medically underserved rural areas.

Sec. 502. Requiring development of comprehensive plans for medically underserved rural populations.

Sec. 503. Inclusion of transportation costs for physicians in underserved rural

areas in the practice index under the medicare physician payment schedule.

1 TITLE I—GUARANTEED ACCESS

2 TO AFFORDABLE HEALTH

3 CARE COVERAGE

4 SEC. 101. REQUIREMENT OF HEALTH INSURANCE COV5 ERAGE.

6 (a) IN GENERAL.—Each eligible individual who does

7 not establish (in a manner specified by the Secretary) cov8 erage under a health insurance program (as defined in sec9 tion 105(2)) shall—

10 (1) register with the Secretary under section

11 102, and

12 (2) be enrolled under a MedEquality plan in ac13 cordance with this title.

14 (b) ENFORCEMENT THROUGH INFORMATION CON15 CERNING HEALTH COVERAGE SHOWN ON TAX RE-
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1 TURN.—Section 6012 of the Internal Revenue Code of

2 1986 is amended by redesignating subsection (e) as sub3 section (f) and by inserting after subsection (d) the follow4 ing new subsection:

5 ‘‘(e) HEALTH CARE COVERAGE.—Every person re6 quired to file a return under this section for the taxable

7 year shall include on such return a statement declaring

8 whether or not the taxpayer and dependents of the tax9 payer are covered under an accident or health plan as of

10 the time such return is filed.’’

11 SEC. 102. REGISTRATION OF ELIGIBLE UNINSURED INDI12 VIDUALS.

13 (a) BY MAIL.—Each eligible individual who is not in14 sured under a MedEquality plan or other health care plan

15 shall register under this title, either as an individual or

16 as a member of a family, by mailing a registration form

17 to the Secretary.

18 (b) AVAILABILITY OF FORMS.—The Secretary shall

19 make registration forms readily available at post offices

20 and other suitable locations.

21 SEC. 103. CREDIT CERTIFICATES.

22 (a) CREDIT CERTIFICATES.—

23 (1) IN GENERAL.—Each individual, in a State

24 with an agreement described in subsection (d)(2),

25 determined to be a credit eligible individual (as de-
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1 fined in subsection (b)) shall receive a credit certifi2 cate the value of which may be applied towards pur3 chase of a MedEquality plan through an employer or

4 an insurer.

5 (2) VALUE OF CERTIFICATE.—

6 (A) SCALED TO INCOME.—The value of a

7 credit certificate for an individual shall be

8 scaled according to the income of the individual,

9 in a manner specified by the Secretary so

10 that—

11 (i) for individuals and families with

12 income below the poverty level, the value

13 equals the maximum value, and

14 (ii) for individuals and families with

15 income more than 150 percent of the pov16 erty level, there is no value to the credit

17 certificate.

18 (B) LIMIT TO LOWEST PREMIUM

19 CHARGED.—The value of the credit certificate

20 under this section shall not exceed the cost of

21 coverage under the least expensive MedEquality

22 plan available for the type of coverage under

23 which the individual is enrolled.

24 (3) APPLICATION OF CREDIT CERTIFICATE.—In

25 accordance with regulations of the Secretary, upon
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1 presentation of a credit certificate of an individual to

2 a MedEquality plan, the plan shall reduce the value

3 of the premium otherwise imposed and shall trans4 mit to the State electronically such information as

5 may be required in order for the State to provide for

6 payment to the plan (in accordance with subsection

7 (c)(1)(C)).

8 (b) CREDIT ELIGIBLE INDIVIDUAL DEFINED.—In

9 this title, the term ‘‘credit eligible individual’’ means a eli10 gible individual—

11 (1) whose income (as determined under section

12 1612 of the Social Security Act for purposes of the

13 supplemental security income program) does not ex14 ceed 150 percent of the poverty level; and

15 (2) whose resources (as determined under sec16 tion 1613 of such Act for purposes of the supple17 mental security income program) do not exceed the

18 maximum amount of resources that an individual

19 may have and obtain benefits under that program.

20 (c) ELIGIBILITY DETERMINATION.—

21 (1) STATE RESPONSIBILITY.—States are re22 sponsible—

23 (A) for determining if individuals are cred24 it eligible individuals;
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1 (B) in the case of credit eligible individ2 uals, for determining the value of the credit cer3 tificate and for the issues of certificates to such

4 individuals; and

5 (C) for making payment to MedEquality

6 plans for the value of certificates presented to

7 them.

8 (2) APPLICATION.—

9 (A) IN GENERAL.—States shall provide

10 that individuals seeking a determination that

11 they are credit eligible individuals may apply

12 for, and obtain, such a determination (and if

13 found eligible, for a credit certificate under sub14 section (a)) in conjunction with—

15 (i) applying for public welfare assist16 ance (including assistance under title IV,

17 or supplemental security income benefits

18 under title XVI, of the Social Security

19 Act), and

20 (ii) receiving medical services at a

21 hospital emergency room.

22 (B) PERIODIC REAPPLICATIONS.—Individ23 uals who are determined to be credit eligible in24 dividuals are required to reapply for such deter25 mination (and the determination of the amount
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1 of the credit certificate) not less often than

2 once every 6 months.

3 (3) USE OF SOCIAL SECURITY ADMINISTRA4 TION.—At the request of a State, the Secretary may

5 enter into an agreement with a State under which

6 eligibility determinations under this section are con7 ducted by the Social Security Administration on be8 half of the State.

9 (d) PAYMENT TO STATES.—

10 (1) IN GENERAL.—From the amounts in the

11 Treasury not otherwise appropriated, the Secretary

12 shall provide for payments to States with an agree13 ment in effect under paragraph (2) (on a quarterly

14 basis in the same manner as payments are made to

15 States under section 1903(d) of the Social Security

16 Act) of amounts equal to the sum of—

17 (A) the Federal medical assistance percent18 age (as defined in section 1905(a)(2) of such

19 Act) amounts paid by the States for credit cer20 tificates issued under subsection (c), and

21 (B) 60 percent of the reasonable adminis22 trative expenses of the State in administering

23 the certificate program under this title.
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1 (2) AGREEMENTS.—An agreement under this

2 paragraph is an agreement between the Secretary

3 and a State which provides—

4 (A) for the State—

5 (i) to carry out this title in the State

6 (including implementing section 104(b)),

7 and

8 (ii) to comply with the applicable re9 quirements of section 502 (relating to com10 prehensive plans for medically underserved

11 rural populations); and

12 (B) for the Secretary to make payments to

13 the State under paragraph (1).

14 (3) RELATION TO MEDICAID PROGRAM.—

15 (A) DUPLICATION.—Notwithstanding any

16 other provision of law, such a State plan is not

17 required to provide for benefits for services

18 under such State plan to the extent the individ19 ual is entitled to benefits for such services

20 under a MedEquality plan.

21 (B) MEDICAID AS SECONDARY PAYOR.—

22 State plans for medical assistance under title

23 XIX of the Social Security Act shall, under sec24 tion 1902(a)(25) of such Act, not make pay25 ment for services to the extent that payment
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1 may be made for such services under a

2 MedEquality plan.

3 (e) NOTICE.—Whenever a credit certificate is issued

4 under this section, the issuer shall notify the Commis5 sioner of Internal Revenue concerning such issuance.

6 SEC. 104. REQUIREMENT FOR OFFERING OF MEDEQUALITY

7 PLANS.

8 (a) IN GENERAL.—Each licensed insurance carrier in

9 a State shall make available a MedEquality plan to all

10 individuals residing in the State.

11 (b) ENFORCEMENT.—If a carrier in a State fails to

12 comply with development of a MedEquality plan, the In13 surance Commissioner of the State shall revoke the car14 rier’s license to offer health insurance in the State.

15 SEC. 105. DEFINITIONS.

16 In this title:

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

18 individual’’ means an individual who (A) is a citizen

19 or national of the United States, an alien lawfully

20 admitted for permanent residence, or an alien other21 wise permanently residing in the United States

22 under color of law and (B) is residing in the United

23 States.

24 (2) HEALTH INSURANCE PROGRAM.—The term

25 ‘‘health insurance program’’ means any private or
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1 public program, other than a MedEquality plan, that

2 provides for benefits (through insurance or other3 wise) that are not less than the benefits provided

4 under a MedEquality plan, and includes the medi5 care and medicaid programs (under titles XVIII and

6 XIX of the Social Security Act), the Federal employ7 ees health insurance program (under chapter 89 of

8 title 5, United States Code), the program for the

9 provision of medical and dental benefits under chap10 ter 55 of title 10, United States Code, and the pro11 gram for the provision of hospital care and medical

12 services by the Department of Veterans Affairs

13 under chapter 17 of title 38, United States Code.

14 (3) MEDEQUALITY PLAN.—The term

15 ‘‘MedEquality plan’’ has the meaning given such

16 term in section 203(b).

17 (4) POVERTY LEVEL.—The term ‘‘poverty

18 level’’ means the official poverty line (as defined by

19 the Office of Management and Budget, and revised

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

21 Omnibus Budget Reconciliation Act of 1981) appli22 cable to a family of the size involved.

23 (5) SECRETARY.—The term ‘‘Secretary’’ means

24 the Secretary of Health and Human Services.
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1 (6) STATE.—The term ‘‘State’’ includes the

2 District of Columbia, Puerto Rico, the Virgin Is3 lands, Guam, and American Samoa.

4 TITLE II—SMALL EMPLOYER

5 INSURANCE REFORM

6 SEC. 201. ESTABLISHMENT AND ENFORCEMENT OF STAND7 ARDS FOR SMALL EMPLOYER HEALTH INSUR8 ANCE PLANS.

9 (a) ESTABLISHMENT OF GENERAL STANDARDS.—

10 (1) ROLE OF NAIC.—The Secretary of Health

11 and Human Services shall request the National As12 sociation of Insurance Commissioners to develop,

13 within 1 year after the date of the enactment of this

14 Act, model regulations that specify standards with

15 respect to each of the following:

16 (A) The requirement, under section

17 203(a), that small employer carriers offer

18 MedEquality plans.

19 (B) The basic benefits to be included in

20 MedEquality plans under section 203(b).

21 (C) The requirements of guaranteed issue

22 of MedEquality plans under section 203(c).

23 (D) The requirements of sections 204 and

24 205(b).
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1 (E) The requirements of subsections (a)

2 and (c) of section 205.

3 If the NAIC develops such regulations specifying

4 such standards within such period, the Secretary

5 shall review such standards to determine if they

6 meet such requirements. Such review shall be com7 pleted within 6 months after the date the regulations

8 are developed. Unless the Secretary determines with9 in such period that the standards do not meet the

10 requirements, such standards shall serve as the

11 standards under this section.

12 (2) CONTINGENCY.—If the NAIC does not de13 velop such model regulations within such period or

14 the Secretary determines that such regulations do

15 not meet the requirements described in paragraph

16 (1), the Secretary shall inform the NAIC of the spe17 cific deficiencies and request the NAIC to develop

18 such model regulations in conformity with paragraph

19 (1).

20 (3) EFFECTIVE DATE.—The standards provided

21 under this subsection—

22 (A) shall apply to small employer health

23 benefit plans offered in a State on or after the

24 date the standards are implemented in the

25 State under subsection (b)(1), and
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1 (B) with respect to the requirements re2 ferred to in paragraph (1)(D), shall apply to

3 small employer health benefit plans renewed on

4 or after 3 years after the date such standards

5 are implemented in the State under subsection

6 (b)(1).

7 (b) APPLICATION OF STANDARDS THROUGH

8 STATES.—

9 (1) APPLICATION OF ALL STANDARDS TO NEW

10 PLANS.—

11 (A) IN GENERAL.—Each State shall sub12 mit to the Secretary, by the deadline specified

13 in subparagraph (B), a report on the implemen14 tation and enforcement of the standards estab15 lished under subsection (a) with respect to

16 small employer health benefit plans offered not

17 later than such deadline.

18 (B) DEADLINE FOR REPORT.—

19 (i) 1 YEAR AFTER STANDARDS ESTAB20 LISHED.—Subject to clause (ii), the dead21 line under this subparagraph is 1 year

22 after the date standards are established

23 under subsection (a).

24 (ii) EXCEPTION FOR LEGISLATION.—

25 In the case of a State which the Secretary
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1 identifies, in consultation with the NAIC,

2 as—

3 (I) requiring State legislation

4 (other than legislation appropriating

5 funds) in order for carriers and health

6 benefit plans offered to small employ7 ers to meet the standards established

8 under subsection (a), but

9 (II) having a legislature which is

10 not scheduled to meet in 1994 in a

11 legislative session in which such legis12 lation may be considered,

13 the date specified in this subparagraph is

14 the first day of the first calendar quarter

15 beginning after the close of the first legis16 lative session of the State legislature that

17 begins on or after January 1, 1994. For

18 purposes of the previous sentence, in the

19 case of a State that has a 2-year legislative

20 session, each year of such session shall be

21 deemed to be a separate regular session of

22 the State legislature.

23 (2) APPLICATION OF CONSUMER PROTECTION

24 TO ALL PLANS.—Each State shall submit to the Sec25 retary, by not later than 4 years after the date
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1 standards are established under subsection (a), a re2 port on the implementation and enforcement of the

3 standards established under subparagraphs (D) and

4 (E) subsection (a)(1) with respect to small employer

5 health benefit plans renewed not later than 4 years

6 after the date such standards were established.

7 (3) MORE STRINGENT STATE STANDARDS PER8 MITTED.—A State may implement standards that

9 are more stringent than the standards established

10 under subsection (a).

11 (4) ENFORCEMENT.—If the Secretary deter12 mines that a State has failed to submit a report by

13 the deadline under paragraph (1) or (2) or finds

14 that the State no longer is carrying out its respon15 sibility under the respective paragraph, the Sec16 retary shall notify the State and provide the State

17 a period of 30 days in which to submit such report

18 or to carry out its responsibilities under the respec19 tive paragraph. If, after such 30-day period, the Sec20 retary finds that such a failure has not been cor21 rected, the Secretary shall provide for such mecha22 nism for the implementation and enforcement of the

23 standards established under subsection (a) in the

24 State as the Secretary determines to be appropriate.

25 Such standards shall apply to health benefit plans
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1 offered or renewed on or after 3 months after the

2 applicable deadlines established under subpara3 graphs (A) through (C) of subsection (a)(3).

4 SEC. 202. PREEMPTION OF STATE BENEFITS MANDATES

5 FOR PLANS THAT MEET CONSUMER PROTEC6 TION STANDARDS.

7 (a) FINDING.—Congress finds that health benefit

8 plans offered with respect to small employers affect inter9 state commerce.

10 (b) PREEMPTION.—In the case of a small employer

11 health benefit plan that meets the standards with respect

12 to the requirements referred to in subparagraphs (D) and

13 (E) of section 201(a)(1), no provision of State law shall

14 apply that requires the offering, as part of the health ben15 efit plan with respect to such an employer, of any services,

16 category of care, or services of any class or type of pro17 vider.

18 SEC. 203. REQUIREMENT FOR OFFERING OF BASIC, LOW

19 COST PLAN (MEDEQUALITY PLAN).

20 (a) IN GENERAL.—Each small employer carrier

21 which makes available in a State any small employer

22 health benefit plan shall make available to each small em23 ployer in the State a MedEquality plan (as defined in sub24 section (b)).

25 (b) MEDEQUALITY PLAN DEFINED.—
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1 (1) IN GENERAL.—In this title, except as pro2 vided in paragraph (2), the term ‘‘MedEquality

3 plan’’ means a health benefits plan that—

4 (A) is designed to provide only basic hos5 pital, medical, surgical, preventive, and diag6 nostic benefits, specified under standards under

7 section 201(a)(1)(B), so as to make it afford8 able to small employers;

9 (B) includes cost-sharing that provides an

10 appropriate incentive to avoid unnecessary care

11 while avoiding excessive cost-sharing by individ12 uals with catastrophic illnesses;

13 (C) is guaranteed issue (as described in

14 subsection (c));

15 (D) meets the standards established under

16 subparagraphs (D) and (E) of section

17 201(a)(1) (relating to the requirements of sec18 tions 204 and 205); and

19 (E) provides for cost-containment in ac20 cordance with the model made applicable under

21 subsection (d) in the State in which the plan is

22 issued.

23 (2) SPECIAL RULES FOR HEALTH MAINTE24 NANCE ORGANIZATIONS.—With respect to a carrier

25 that is a Federally-qualified health maintenance or-
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1 ganization (as defined in section 1301(a) of the Pub2 lic Health Service Act), the term ‘‘MedEquality

3 plan’’ means a plan of the type described in para4 graph (1) but with benefits that are consistent with

5 the requirements for the plans of such an organiza6 tion under title XIII of such Act. With respect to a

7 carrier that is not such a Federally-qualified health

8 maintenance organization but which is recognized

9 under State law as a health maintenance organiza10 tion, the term ‘‘MedEquality plan’’ means a plan of

11 the type described in paragraph (1) but with bene12 fits that are consistent with the requirements of

13 State law for the plans of such an organization.

14 (3) REVIEW OF MINIMUM BENEFIT STAND15 ARDS.—The NAIC is requested to periodically review

16 the standards for minimum benefits described in

17 paragraph (1)(A). The NAIC is requested to submit

18 to the Secretary and the Congress its recommenda19 tions on changes that should be made in such stand20 ards.

21 (c) GUARANTEED ISSUE FOR MEDEQUALITY

22 PLANS.—

23 (1) IN GENERAL.—Each MedEquality plan in a

24 State—
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1 (A) subject to paragraph (2), must accept

2 every small employer in the State that applies

3 for coverage under the plan;

4 (B) subject to paragraphs (2) and (3),

5 must accept for enrollment every individual who

6 is a full-time employee (or, in the case of family

7 enrollment with respect to such an employee,

8 the employee’s spouse and the employee’s de9 pendents who are under 19 years of age or who

10 are full-time students and under 21 years of

11 age) who applies for enrollment on a timely

12 basis; and

13 (C) subject to paragraphs (2) and (3), may

14 not place any restriction on the eligibility of an

15 individual to enroll, so long as such an individ16 ual is a full-time employee or the employee’s

17 spouse or dependent described in subparagraph

18 (B).

19 (2) SPECIAL RULES FOR HEALTH MAINTE20 NANCE ORGANIZATIONS.—In the case of a

21 MedEquality plan offered by a health maintenance

22 organization, the plan shall—

23 (A) limit the employers that may apply for

24 coverage to those with eligible individuals resid25 ing in the service area of the plan,
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1 (B) limit the individuals who may be en2 rolled under the plan to those who reside in the

3 service area of the plan, and

4 (C) within the service area of the plan,

5 deny coverage to such employers if the plan

6 demonstrates that—

7 (i) it will not have the capacity to de8 liver services adequately to enrollees of any

9 additional groups because of its obligations

10 to existing group contract holders and en11 rollees, and

12 (ii) it is applying this subparagraph

13 uniformly to all employers without regard

14 to the health status, claims experience, or

15 duration of coverage of those employers

16 and their employees.

17 (3) EXCEPTION FOR CERTAIN LATE ENROLL18 EES.—

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

20 this paragraph, paragraph (1)(B) shall not

21 apply to an eligible employee or dependent who

22 fails to enroll in a health benefit plan during an

23 initial enrollment period, if such period is at

24 least 30 days long.
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1 (B) EXCEPTION FOR THOSE WITH PRE2 VIOUS EMPLOYER COVERAGE.—Subparagraph

3 (A) shall not apply to an individual who—

4 (i) was covered under another em5 ployer health benefit plan at the time of

6 the individual’s initial enrollment period,

7 (ii) stated at the time of initial enroll8 ment period that coverage under another

9 employer health benefit plan was the rea10 son for declining enrollment,

11 (iii) lost coverage under another em12 ployer health benefit plan as a result of

13 termination of employment, the termi14 nation of the other plan’s coverage, death

15 of a spouse, or divorce, and

16 (iv) requests enrollment within 30

17 days after termination of coverage under

18 another employer health benefit plan.

19 (C) EXCEPTION FOR OPEN ENROLL20 MENT.—Subparagraph (A) shall not apply to

21 an individual who—

22 (i) is employed by an employer which

23 offers multiple health benefit plans, and

24 (ii) elects a different plan during an

25 open enrollment period.
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1 (D) EXCEPTION FOR COURT ORDERS.—

2 Subparagraph (A) shall not apply to a spouse

3 or minor child if a court has ordered coverage

4 be provided for the spouse or child under a cov5 ered employee’s health benefit plan and request

6 for such coverage is made within 30 days after

7 issuance of such court order.

8 (d) COST CONTAINMENT STANDARDS.—

9 (1) DEVELOPMENT OF MODELS.—

10 (A) ROLE OF NAIC.—The Secretary shall

11 request the NAIC to develop, within 1 year

12 after the date of the enactment of this Act,

13 models for cost-containment features in

14 MedEquality plans. Such models shall include a

15 managed care plan (described in paragraph (3))

16 and any combination of such models the NAIC

17 finds appropriate. If the NAIC develops such

18 models within such period, the Secretary shall

19 review such models to determine if they provide

20 for effective cost-containment. Such review shall

21 be completed within 6 months after the date the

22 models are developed. Unless the Secretary de23 termines within such period that such a model

24 does not provide effective cost-containment,
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1 such remaining models shall serve as the mod2 els under this subsection.

3 (B) CONTINGENCY.—If the NAIC does not

4 develop such models within such period or the

5 Secretary determines that all such models do

6 not provide for effective cost-containment, the

7 Secretary shall inform the NAIC of the specific

8 deficiencies and request the NAIC to develop

9 such models in conformity with paragraph (1).

10 (2) SELECTION OF COST-CONTAINMENT MODEL

11 BY STATE.—By not later than 2 years after the date

12 of the enactment of this Act, each State shall specify

13 the cost-containment model (developed under para14 graph (1)) that will be applied under subsection (a)

15 to MedEquality plans issued in the State.

16 (3) MANAGED CARE PLAN DEFINED.—For pur17 poses of paragraph (1), the term ‘‘managed care

18 plan’’ includes (but is not limited to) any plan

19 that—

20 (A) arranges with selected providers for

21 the furnishing of health care services,

22 (B) provides explicit standards for the se23 lection of such providers,

24 (C) has formal programs for ongoing qual25 ity assurance and utilization review, and
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1 (D) provides significant financial incentives

2 for beneficiaries to use providers and proce3 dures associated with the plan.

4 (d) ROLE OF STATE INSURANCE COMMISSIONER.—

5 The commissioner or superintendent of insurance of each

6 State shall be responsible for determining that the pre7 mium charged for each MedEquality plan is reasonable

8 and not excessive in relation to the benefits.

9 SEC. 204. REQUIREMENTS RELATING TO INITIAL WRITING

10 OF POLICIES.

11 (a) LIMITATIONS ON TREATMENT OF PRE-EXISTING

12 CONDITIONS.—

13 (1) IN GENERAL.—A carrier may not impose

14 (or require an employer to impose through a waiting

15 period for coverage under a health benefit policy or

16 similar requirement) a limitation or exclusion of ben17 efits under a small employer health benefit plan re18 lating to treatment of a condition based on the fact

19 that the condition preexisted the effectiveness of the

20 policy if—

21 (A) the condition relates to a condition

22 that did not exist within 6 months before the

23 date of coverage under the plan, or
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1 (B) the limitation or exclusion extends over

2 more than 12 months after the date of coverage

3 under the plan.

4 (2) PREVIOUS SATISFACTION OF PREEXISTING

5 CONDITION REQUIREMENT.—

6 (A) IN GENERAL.—In addition, each car7 rier shall waive any period applicable to a pre8 existing condition for similar benefits with re9 spect to an individual to the extent that the in10 dividual was covered for the condition under a

11 small employer health benefit plan that was in

12 effect before the date of the enrollment under

13 the carrier’s plan.

14 (B) CONTINUOUS COVERAGE REQUIRED.—

15 Subparagraph (A) shall no longer apply if there

16 is a continuous period of more than 60 days on

17 which the individual was not covered under an

18 employer health benefit plan.

19 (b) LIMITS ON PREMIUMS.—

20 (1) LIMIT ON VARIATION OF INDEX RATES BE21 TWEEN BLOCKS OF BUSINESS.—

22 (A) IN GENERAL.—As a standard under

23 section 202, the index rate for a rating period

24 for any block of business of a small employer

25 carrier may not exceed the index rate for any
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1 other block of business by more than 20 per2 cent.

3 (B) EXCEPTIONS.—Subparagraph (A)

4 shall not apply to a block of business if—

5 (i) the block is one for which the car6 rier does not reject, and never has rejected,

7 small employers included within the defini8 tion of employers eligible for the block of

9 business or otherwise eligible employees

10 and dependents who enroll on a timely

11 basis, based upon their claim experience or

12 health status,

13 (ii) the carrier does not involuntarily

14 transfer, and never has involuntarily trans15 ferred, a health benefit plan into or out of

16 the block of business, and

17 (iii) the block of business is currently

18 available for purchase.

19 (2) LIMIT ON VARIATION OF PREMIUM RATES

20 WITHIN A BLOCK OF BUSINESS.—For a block of

21 business of a small employer carrier, as a standard

22 under section 202 the premium rates charged during

23 a rating period to small employers with similar de24 mographic or other relevant characteristics (not re25 lating to claims experience, health status, or dura-
29

•HR 1976 IH

1 tion of coverage) for the same or similar coverage,

2 or the rates which could be charged to such employ3 ers under the rating system for that block of busi4 ness, shall not vary from the index rate by more

5 than 25 percent of the index rate.

6 (3) LIMIT ON PERMISSIBLE RATE VARI7 ATIONS.—Subject to paragraphs (1) and (2), as a

8 standard under section 202, a carrier may establish

9 rate variations based on factors such as geography,

10 demography, and industry and plan design.

11 (4) LIMIT ON TRANSFER OF EMPLOYERS

12 AMONG BLOCKS OF BUSINESS.—As a standard under

13 section 202, a small employer carrier may not invol14 untarily transfer a small employer into or out of a

15 block of business. A small employer carrier may not

16 offer to transfer a small employer into or out of a

17 block of business unless such offer is made to trans18 fer all small employers in the block of business with19 out regard to demographic characteristics, claim ex20 perience, health status, or duration since issue.

21 (5) DEFINITIONS.—In this subsection:

22 (A) BASE PREMIUM RATE.—The term

23 ‘‘base premium rate’’ means, for each block of

24 business for each rating period, the lowest pre25 mium rate charged or which could have been
30

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1 charged under a rating system for that block of

2 business by the small employer carrier to small

3 employers with similar demographic or other

4 relevant characteristics (not relating to claims

5 experience, health status, or duration of cov6 erage) for health benefit plans with the same or

7 similar coverage.

8 (B) BLOCK OF BUSINESS.—The term

9 ‘‘block of business’’ means, with respect to a

10 carrier, all (or a distinct group of) small em11 ployers as shown on the records of the carrier.

12 (C) RULES FOR ESTABLISHING BLOCKS OF

13 BUSINESS.—For purposes of subparagraph

14 (B)—

15 (i) a carrier may establish, subject to

16 clause (ii), a distinct group of small em17 ployers on the basis that the applicable

18 health benefit plans either—

19 (I) are marketed and sold

20 through individuals and organizations

21 which are not participating in the

22 marketing or sale of other distinct

23 groups of small employers for the car24 rier,
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•HR 1976 IH

1 (II) have been acquired from an2 other carrier as a distinct group, or

3 (III) are provided through an as4 sociation with membership of not less

5 than 100 small employers which has

6 been formed for purposes other than

7 obtaining insurance;

8 (ii) a carrier may not establish more

9 than 2 groupings under each block of busi10 ness because the carrier uses managed-care

11 techniques which are expected to produce

12 substantial variation in health care costs;

13 and

14 (iii) notwithstanding clauses (i) and

15 (ii), a Commissioner of Insurance of a

16 State may, upon application, approve addi17 tional distinct groups upon a finding that

18 such approval would enhance the efficiency

19 and fairness of the small employer market20 place.

21 (D) INDEX RATE.—The term ‘‘index rate’’

22 means, with respect to a block of business, the

23 arithmetic average of the applicable base pre24 mium rate and the corresponding highest pre25 mium rate for the block.
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1 (c) FULL DISCLOSURE OF RATING PRACTICES.—At

2 the time a carrier offers a health benefit plan to a small

3 employer, the carrier shall fully disclose to the employer

4 rating practices for small employer health benefit plans,

5 including rating practices for different industries, popu6 lations, and benefit designs.

7 (d) ACTUARIAL CERTIFICATION.—Each carrier shall

8 file annually with the State commissioner of insurance a

9 written statement by a member of the American Academy

10 of Actuaries (or other individual acceptable to the commis11 sioner) that, based upon an examination by the individual

12 which includes a review of the appropriate records and of

13 the actuarial assumptions of the carrier and methods used

14 by the carrier in establishing premium rates for applicable

15 small employer health benefit plans—

16 (1) the carrier is in compliance with the appli17 cable provisions of this section, and

18 (2) the rating methods are actuarially sound.

19 Each carrier shall retain a copy of such statement for ex20 amination at its principal place of business.

21 (e) REGISTRATION AND REPORTING.—Each carrier

22 that issues any small employer health benefit plan in a

23 State shall be registered or licensed with the State com24 missioner of insurance and shall comply with any report-
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•HR 1976 IH

1 ing requirements of the commissioner relating to such a

2 plan.

3 (f) USE OF MINIMUM PARTICIPATION REQUIRE4 MENT.—A carrier may condition issuance, or renewal, of

5 a health benefit plan to a small employer on the enroll6 ment of a minimum number (or percentage) of its full7 time employees, in accordance with standards established

8 to carry out this section. Such standards shall require that

9 any such conditions be imposed uniformly on employers

10 of the same size.

11 SEC. 205. REQUIREMENTS RELATING TO RENEWAL.

12 (a) RENEWABILITY.—A carrier may not cancel a

13 small employer health benefit plan or deny renewal of cov14 erage under such a plan other than—

15 (1) for nonpayment of premiums,

16 (2) for fraud or other misrepresentation by the

17 insured,

18 (3) for noncompliance with plan provisions,

19 (4) for failure to maintain (in accordance with

20 standards established under section 204(f)) the

21 number of enrollees under the plan at the number

22 (or percentage) required under the plan,

23 (5) for misuse of a provider network provision,

24 or
34

•HR 1976 IH

1 (6) because the carrier is ceasing to provide any

2 small employer health benefit plan in a State, or, in

3 the case of a health maintenance organization, in a

4 geographic area.

5 (b) LIMITATION ON PREMIUM INCREASES.—A carrier

6 may not provide for an increase in the premium charged

7 a small employer for a small employer health benefit plan

8 in a percentage greater than such percentage as shall be

9 specified in standards referred to in section 201(a)(1)(E).

10 Such standards shall take into account increases in pre11 miums charged for new coverage of small employers under

12 the plan.

13 (c) LIMITATION ON MARKET REENTRY.—If a carrier

14 terminates the offering of health benefit plans to small

15 employers in an area, the carrier may not offer such a

16 health benefit plan to any small employer in the area until

17 5 years have elapsed since the date of the termination.

18 SEC. 206. ESTABLISHMENT OF REINSURANCE MECHANISMS

19 FOR HIGH RISK INDIVIDUALS.

20 (a) ESTABLISHMENT OF STANDARDS.—

21 (1) ROLE OF NAIC.—The Secretary shall re22 quest the NAIC to develop, within 1 year after the

23 date of the enactment of this Act, models for rein24 surance mechanisms (each in this section referred to

25 as the ‘‘reinsurance mechanism’’) for individuals and
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•HR 1976 IH

1 small employers who are enrolled under a small em2 ployer health benefit plan that meets the standards

3 with respect to the requirements referred to in sub4 paragraphs (D) and (E) of section 201(a)(1) and for

5 whom a carrier is at risk of incurring high costs

6 under the plan. Such models shall include models

7 based on each of the following:

8 (A) A voluntary prospective reinsurance

9 option.

10 (B) A retrospective reinsurance option.

11 (C) An allocation option.

12 (D) A pooled employee option.

13 (E) A designated carrier option.

14 (F) A mandatory reinsurance option.

15 If the NAIC develops such models within such pe16 riod, the Secretary shall review such models to deter17 mine if they provide for an effective reinsurance

18 mechanism. Such review shall be completed within 6

19 months after the date the models are developed. Un20 less the Secretary determines within such period

21 that such a model is not an effective reinsurance

22 mechanism, such remaining models shall serve as

23 the models under this section.

24 (2) CONTINGENCY.—If the NAIC does not de25 velop such models within such period or the Sec-
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•HR 1976 IH

1 retary determines that all such models do not pro2 vide for an effective reinsurance mechanism, the

3 Secretary shall inform the NAIC of the specific defi4 ciencies and request the NAIC to develop such mod5 els in conformity with paragraph (1).

6 (b) REQUIREMENT OF IMPLEMENTATION OF REIN7 SURANCE MECHANISMS.—

8 (1) IN GENERAL.—By not later than 2 years

9 after the date of the enactment of this Act, each

10 State shall establish one or more reinsurance mecha11 nisms by not later than the deadline specified in sec12 tion 201(b)(1)(B) of this Act.

13 (2) DEFAULT.—If the Secretary determines

14 that a State has failed to establish any reinsurance

15 mechanism under paragraph (1), the Secretary shall

16 establish one or more such mechanisms with respect

17 to that State. The authority provided under the pre18 vious sentence shall expire upon the Secretary’s de19 termination that the State has provided, by law, for

20 establishment of a reinsurance mechanism that

21 meets the requirement of paragraph (1).

22 (c) CONSTRUCTION.—Nothing in this section shall be

23 construed as to prohibit reinsurance arrangements, wheth24 er on a State or regional basis, not required under this

25 section.
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1 SEC. 207. REGISTRATION OF ALL HEALTH BENEFIT PLANS

2 REQUIRED.

3 Notwithstanding any other provision of law, each

4 State commissioner or superintendent of insurance may,

5 under State law, require each employer health benefit plan

6 (including a self-insured plan) to be registered with such

7 official, if the plan is not otherwise required to be reg8 istered or licensed with the official under section 204(e),

9 and to provide the official with such information on the

10 plan as may be necessary to carry out section 206.

11 SEC. 208. DEFINITIONS.

12 In this subtitle:

13 (1)(A) The term ‘‘carrier’’ means any entity

14 which provides health insurance or health benefits in

15 a State, and includes a licensed insurance company,

16 a prepaid hospital or medical service plan, a health

17 maintenance organization, a multiple employer wel18 fare arrangement or employee benefits plan (as de19 fined under the Employee Retirement Income Secu20 rity Act of 1974), or any other entity providing a

21 plan of health insurance subject to State insurance

22 regulation.

23 (B) The term ‘‘small employer carrier’’ means

24 a carrier with respect to the issuance of a small em25 ployer health benefit plan.
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•HR 1976 IH

1 (2) The term ‘‘health benefit plan’’ means any

2 hospital or medical expense incurred policy or certifi3 cate, hospital or medical service plan contract, or

4 health maintenance subscriber contract, but does not

5 include—

6 (A) accident-only, credit, dental, or disabil7 ity income insurance,

8 (B) coverage issued as a supplement to li9 ability insurance,

10 (C) worker’s compensation or similar in11 surance, or

12 (D) automobile medical-payment insur13 ance.

14 (3) The term ‘‘NAIC’’ means the National As15 sociation of Insurance Commissioners.

16 (4) The term ‘‘Secretary’’ means the Secretary

17 of Health and Human Services.

18 (5)(A) The term ‘‘small employer’’ means an

19 entity actively engaged in business which, on at least

20 50 percent of its working days during the preceding

21 year, employed at least 3, but fewer than 50, full22 time employees. For purposes of determining if an

23 employer is a small employer, rules similar to the

24 rules of subsections (b) and (c) of section 414 of the

25 Internal Revenue Code of 1986 shall apply.
39

•HR 1976 IH

1 (B) The term ‘‘full-time employee’’ means, with

2 respect to an employer, an individual who normally

3 is employed for at least 30 hours per week by the

4 employer.

5 (6) The term ‘‘small employer health benefit

6 plan’’ means a health benefit plan which provides

7 coverage to one or more full-time employees of a

8 small employer.

9 (7) The term ‘‘State’’ means the 50 States, the

10 District of Columbia, and Puerto Rico.

11 (8) The term ‘‘State commissioner of insur12 ance’’ includes a State superintendent of insurance.

13 SEC. 209. PREEMPTION FROM INSURANCE MANDATES FOR

14 QUALIFIED SMALL EMPLOYER PURCHASING

15 GROUPS.

16 (a) QUALIFIED SMALL EMPLOYER PURCHASING

17 GROUP DEFINED.—For purposes of this section, an asso18 ciation is a qualified small employer purchasing group if—

19 (1) the association submits an application to

20 the Secretary of Health and Human Services at such

21 time and in such form as the Secretary may require;

22 and

23 (2) on the basis of information contained in the

24 application and any other information the Secretary

25 may require, the Secretary determines that—
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•HR 1976 IH

1 (A) the association is administered solely

2 under the authority and control of its mem3 ber employers,

4 (B) the association’s membership consists

5 solely of employers with not more than 100 em6 ployees (except that an employer member of the

7 group may retain its membership in the group

8 if, after the Secretary determines that the asso9 ciation meets the requirements of this para10 graph, the number of employees of the employer

11 member increases to more than 100),

12 (C) with respect to each State in which its

13 members are located, the association consists of

14 not fewer than 100 employers, and

15 (D) at the time the association submits its

16 application, the health benefit plans with re17 spect to the employer members of the associa18 tion are in compliance with applicable State

19 laws relating to health benefit plans.

20 (b) PREEMPTION FROM INSURANCE MANDATES.—

21 (1) FINDING.—Congress finds that employer

22 purchasing groups organized for the purpose of ob23 taining health insurance for employer members af24 fect interstate commerce.
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1 (2) PREEMPTION OF STATE MANDATES.—In the

2 case of a qualified small employer purchasing group

3 described in subsection (a), no provision of State law

4 shall apply that requires the offering, as part of the

5 health benefit plan with respect to an employer

6 member of such a group, of any services, category

7 of care, or services of any class or type of provider.

8 (3) PREEMPTION OF TAXES ON PREMIUMS.—In

9 the case of a qualified small employer purchasing

10 group described in subsection (a), no provision of

11 State or local law shall apply that requires a pro12 vider of insurance to pay a tax on premiums received

13 from employer members of the group under a health

14 benefit plan obtained by the group from the insurer

15 for its employer members.

16 (4) PREEMPTION OF PROVISIONS RELATING TO

17 MANAGED CARE.—In the case of a qualified small

18 employer purchasing group described in subsection

19 (a), the following provisions of State law are pre20 empted and may not be enforced against the health

21 benefit plan with respect to an employer member of

22 such a group:

23 (A) RESTRICTIONS ON REIMBURSEMENT

24 RATES OR SELECTIVE CONTRACTING.—Any law

25 that restricts the ability of a carrier to nego-
42

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1 tiate reimbursement rates with providers or to

2 contract selectively with one provider or a lim3 ited number of providers.

4 (B) RESTRICTIONS ON DIFFERENTIAL FI5 NANCIAL INCENTIVES.—Any law that limits the

6 financial incentives that a health benefit plan

7 may require a beneficiary to pay when a

8 nonplan provider is used on a nonemergency

9 basis.

10 (C) RESTRICTIONS ON UTILIZATION RE11 VIEW METHODS.—(i) Any law that—

12 (I) prohibits utilization review of any

13 or all treatments and conditions;

14 (II) requires that such review be made

15 by a resident of the State in which the

16 treatment is to be offered or by an individ17 ual licensed in such State, or by a physi18 cian in any particular specialty or with any

19 board certified specialty of the same medi20 cal specialty as the provider whose services

21 are being rendered;

22 (III) requires the use of specified

23 standards of health care practice in such

24 reviews or requires the disclosure of the

25 specific criteria used in such reviews;
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•HR 1976 IH

1 (IV) requires payments to providers

2 for the expenses of responding to utiliza3 tion review requests; or

4 (V) imposes liability for delays in per5 forming such review.

6 (ii) Nothing in clause (i)(II) shall be con7 strued as prohibiting a State from requiring

8 that utilization review be conducted by a li9 censed health care professional, or requiring

10 that any appeal from such a review be made by

11 a licensed physician or by a licensed physi12 cian in any particular specialty or with any

13 board certified specialty of the same medical

14 specialty as the provider whose services are

15 being rendered.

16 (c) EFFECTIVE DATE.—This section shall take effect

17 60 days after the date of the enactment of this Act.

18 SEC. 210. EQUALIZATION OF TAX BENEFITS FOR SELF-EM19 PLOYED PERSONS.

20 (a) INCREASE IN DEDUCTION.—Paragraph (1) of

21 section 162(l) of the Internal Revenue Code of 1986 (re22 lating to special rules for health insurance costs of self23 employed individuals) is amended—
44

•HR 1976 IH

1 (1) by striking ‘‘25 percent’’ and inserting ‘‘the

2 applicable percentage (determined in accordance

3 with the following table)’’,

4 (2) by striking the period at the end and insert5 ing a colon, and

6 (3) by adding at the end thereof the following

7 table:

‘‘In the case of taxable The applicable

years beginning in: percentage is:

1994 .......................................................................... 25

1995 or 1996 ............................................................. 50

1997 or thereafter ..................................................... 100.’’

8 (b) DEDUCTION MADE PERMANENT.—Subsection (l)

9 of section 162 of such Code is amended by striking para10 graph (6).

11 (c) DEDUCTION LIMITED TO MEDEQUALITY PLANS

12 OR EQUIVALENT PLANS.—Subsection (l) of section 162

13 of such Code is amended by adding at the end thereof

14 the following new paragraph:

15 ‘‘(6) DEDUCTION LIMITED TO MEDEQUALITY

16 PLANS OR EQUIVALENT PLANS.—No deduction shall

17 be allowed under paragraph (1) for insurance which

18 is not a MedEquality plan (within the meaning of

19 section 203(b) of the Comprehensive Health and

20 Rural Equality Act of 1993 or an equivalent plan

21 (as defined by the Secretary).’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1993.

4 SEC. 211. MANAGED CARE RIGHTS.

5 (a) PREEMPTION OF STATE LAW PROVISIONS.—The

6 following provisions of State law are preempted and may

7 not be enforced:

8 (1) RESTRICTIONS ON REIMBURSEMENT RATES

9 OR SELECTIVE CONTRACTING.—Any law that re10 stricts the ability of a carrier to negotiate reimburse11 ment rates with providers or to contract selectively

12 with one provider or a limited number of providers.

13 (2) RESTRICTIONS ON DIFFERENTIAL FINAN14 CIAL INCENTIVES.—Any law that limits the financial

15 incentives that a health benefit plan may require a

16 beneficiary to pay when a non-plan provider is used

17 on a non-emergency basis.

18 (3) RESTRICTIONS ON UTILIZATION REVIEW

19 METHODS.—Any law that—

20 (A) prohibits utilization review of any or

21 all treatments and conditions,

22 (B) requires that such review be made (i)

23 by a resident of the State in which the treat24 ment is to be offered or by an individual li25 censed in such State, or (ii) by a physician in
46

•HR 1976 IH

1 any particular specialty or with any board cer2 tified specialty of the same medical specialty as

3 the provider whose services are being rendered,

4 (C) requires the use of specified standards

5 of health care practice in such reviews or re6 quires the disclosure of the specific criteria used

7 in such reviews,

8 (D) requires payments to providers for the

9 expenses of responding to utilization review re10 quests, or

11 (E) imposes liability for delays in perform12 ing such review.

13 Nothing in subparagraph (B) shall be construed as

14 prohibiting a State from (i) requiring that utilization

15 review be conducted by a licensed health care profes16 sional or (ii) requiring that any appeal from such a

17 review be made by a licensed physician or by a li18 censed physician in any particular specialty or with

19 any board certified specialty of the same medical

20 specialty as the provider whose services are being

21 rendered.

22 (b) GAO STUDY.—

23 (1) IN GENERAL.—The Comptroller General

24 shall conduct a study of the benefits and cost effec-
47

•HR 1976 IH

1 tiveness of the use of managed care in the delivery

2 of health services.

3 (2) REPORT.—By not later than 4 years after

4 the date of the enactment of this Act, the Comptrol5 ler General shall submit a report to Congress on the

6 study conducted under paragraph (1) and shall in7 clude in the report such recommendations as may be

8 appropriate.

9 TITLE III—HEALTH CARE COST

10 CONTAINMENT

11 Subtitle A—Denial of Certain Tax

12 Deductions and Exclusion for

13 Excess Benefits

14 SEC. 301. DENIAL OF EMPLOYER TAX DEDUCTION FOR PRO15 VIDING HEALTH CARE COVERAGE IN EXCESS

16 OF MINIMUM BENEFITS; DENIAL OF EM17 PLOYEE EXCLUSION FOR SUCH EXCESS COV18 ERAGE.

19 (a) DENIAL OF DEDUCTION.—Section 162 of the In20 ternal Revenue Code of 1986 (relating to trade or business

21 expenses) is amended by redesignating subsection (m) as

22 subsection (n) and by inserting after subsection (l) the fol23 lowing new subsection:

24 ‘‘(m) EXPENSES FOR PROVIDING HEALTH CARE IN

25 EXCESS OF MINIMUM BENEFITS.—No deduction shall be
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•HR 1976 IH

1 allowed under this chapter for expenses incurred to pro2 vide health care for any employee of the taxpayer (or any

3 beneficiary of such employee) to the extent such expenses

4 are attributable to benefits that are not within the basic

5 benefits included in MedEquality plans under section

6 203(b) of the Comprehensive Health and Rural Equality

7 Act of 1993.’’

8 (b) DENIAL OF EXCLUSION.—The text of section 106

9 of such Code is amended to read as follows:

10 ‘‘(a) IN GENERAL.—Gross income of an employee

11 does not include employer-provided coverage under an ac12 cident or health plan.

13 ‘‘(b) NO EXCLUSION FOR HEALTH CARE COVERAGE

14 IN EXCESS OF MINIMUM BENEFITS.—Subsection (a) shall

15 not apply to the extent coverage is provided for benefits

16 that are not within the basic benefits included in

17 MedEquality plans under section 203(b) of the Com18 prehensive Health and Rural Equality Act of 1993.’’

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

20 this section shall apply to taxable years beginning on or

21 after the first day of the second calendar year beginning

22 after the date of the enactment of this Act, but shall not

23 apply to taxable years beginning before the date the basic

24 benefits, to be included in MedEquality plans under sec-
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•HR 1976 IH

1 tion 203(b) of this Act, have become effective under sec2 tion 203(a)(3) of this Act.

3 Subtitle B—Medical Malpractice

4 Reform

5 PART 1—GENERAL PROVISIONS

6 SEC. 311. FEDERAL REFORM OF MEDICAL MALPRACTICE

7 LIABILITY ACTIONS.

8 (a) CONGRESSIONAL FINDINGS.—

9 (1) EFFECT ON INTERSTATE COMMERCE.—

10 Congress finds that the health care and insurance

11 industries are industries affecting interstate com12 merce and the medical malpractice litigation systems

13 existing throughout the United States affect inter14 state commerce by contributing to the high cost of

15 health care and premiums for malpractice insurance

16 purchased by health care providers.

17 (2) EFFECT ON FEDERAL SPENDING.—Con18 gress finds that the medical malpractice litigation

19 systems existing throughout the United States have

20 a significant effect on the amount, distribution, and

21 use of Federal funds because of—

22 (A) the large number of individuals who

23 receive health care benefits under programs op24 erated or financed by the Federal Government;
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•HR 1976 IH

1 (B) the large number of individuals who

2 benefit because of the exclusion from Federal

3 taxes of the amounts spent by their employers

4 to provide them with health insurance benefits;

5 (C) the large number of health care provid6 ers and health care professionals who provide

7 items or services for which the Federal Govern8 ment makes payments; and

9 (D) the large number of such providers

10 and professionals who have received direct or

11 indirect financial assistance from the Federal

12 Government because of their status as such

13 professionals or providers.

14 (b) APPLICABILITY.—This subtitle shall apply with

15 respect to any medical malpractice liability claim and to

16 any medical malpractice liability action brought in any

17 State or Federal court, except that this subtitle shall not

18 apply to—

19 (1) a claim or action for damages arising from

20 a vaccine-related injury or death to the extent that

21 title XXI of the Public Health Service Act applies to

22 the action; or

23 (2) a claim or action in which the plaintiff’s

24 sole allegation is an allegation of an injury arising

25 from the use of a medical product.
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•HR 1976 IH

1 (c) PREEMPTION OF STATE LAW.—Subject to section

2 331, this subtitle supersedes State law only to the extent

3 that State law differs from any provision of law estab4 lished by or under this subtitle. Any issue that is not gov5 erned by any provision of law established by or under this

6 subtitle shall be governed by otherwise applicable State or

7 Federal law.

8 (d) FEDERAL COURT JURISDICTION NOT ESTAB9 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

10 this subtitle shall be construed to establish any jurisdiction

11 in the district courts of the United States over medical

12 malpractice liability actions on the basis of sections 1331

13 or 1337 of title 28, United States Code.

14 SEC. 312. DEFINITIONS.

15 As used in this subtitle:

16 (1) ALTERNATIVE DISPUTE RESOLUTION SYS17 TEM; ADR.—The term ‘‘alternative dispute resolution

18 system’’ or ‘‘ADR’’ means a system established by

19 a State that provides for the resolution of medical

20 malpractice liability claims in a manner other than

21 through medical malpractice liability actions.

22 (2) CLAIMANT.—The term ‘‘claimant’’ means

23 any person who alleges a medical malpractice liabil24 ity claim, or, in the case of an individual who is de-
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1 ceased, incompetent, or a minor, the person on

2 whose behalf such a claim is alleged.

3 (3) ECONOMIC DAMAGES.—The term ‘‘economic

4 damages’’ means damages paid to compensate an in5 dividual for losses for hospital and other medical ex6 penses, lost wages, lost employment, and other pecu7 niary losses.

8 (4) HEALTH CARE PROFESSIONAL.—The term

9 ‘‘health care professional’’ means any individual who

10 provides health care services in a State and who is

11 required by State law or regulation to be licensed or

12 certified by the State to provide such services in the

13 State.

14 (5) HEALTH CARE PROVIDER.—The term

15 ‘‘health care provider’’ means any organization or

16 institution that is engaged in the delivery of health

17 care services in a State and that is required by State

18 law or regulation to be licensed or certified by the

19 State to engage in the delivery of such services in

20 the State.

21 (6) INJURY.—The term ‘‘injury’’ means any ill22 ness, disease, or other harm that is the subject of

23 a medical malpractice liability action or claim.

24 (7) MEDICAL MALPRACTICE LIABILITY AC25 TION.—The term ‘‘medical malpractice liability ac-
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1 tion’’ means a civil action (other than an action in

2 which the plaintiff’s sole allegation is an allegation

3 of an intentional tort) brought in a State or Federal

4 court against a health care provider or health care

5 professional (regardless of the theory of liability on

6 which the action is based) in which the plaintiff al7 leges a medical malpractice liability claim.

8 (8) MEDICAL MALPRACTICE LIABILITY

9 CLAIM.—The term ‘‘medical malpractice liability

10 claim’’ means a claim in which the claimant alleges

11 that injury was caused by the provision of (or the

12 failure to provide) health care services.

13 (9) MEDICAL PRODUCT.—The term ‘‘medical

14 product’’ means a device (as defined in section

15 201(h) of the Federal Food, Drug, and Cosmetic

16 Act) or a drug (as defined in section 201(g)(1) of

17 the Federal Food, Drug, and Cosmetic Act).

18 (10) NONECONOMIC DAMAGES.—The term

19 ‘‘noneconomic damages’’ means damages paid to

20 compensate an individual for losses for physical and

21 emotional pain, suffering, inconvenience, physical

22 impairment, mental anguish, disfigurement, loss of

23 enjoyment of life, loss of consortium, and other

24 nonpecuniary losses, but does not include punitive

25 damages.
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1 (11) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of Health and Human Services.

3 (12) STATE.—The term ‘‘State’’ means each of

4 the several States, the District of Columbia, the

5 Commonwealth of Puerto Rico, the Virgin Islands,

6 Guam, and American Samoa.

7 SEC. 313. EFFECTIVE DATE.

8 (a) IN GENERAL.—Except as provided in subsection

9 (b) and sections 330 and 351, this subtitle shall apply with

10 respect to claims accruing or actions brought on or after

11 the expiration of the 3-year period that begins on the date

12 of the enactment of this Act.

13 (b) EXCEPTION FOR STATES REQUESTING EARLIER

14 IMPLEMENTATION OF REFORMS.—

15 (1) APPLICATION.—A State may submit an ap16 plication to the Secretary requesting the early imple17 mentation of this subtitle with respect to claims or

18 actions brought in the State.

19 (2) DECISION BY SECRETARY.—The Secretary

20 shall issue a response to a State’s application under

21 paragraph (1) not later than 90 days after receiving

22 the application. If the Secretary determines that the

23 State meets the requirements of this subtitle at the

24 time of submitting its application, the Secretary

25 shall approve the State’s application, and this sub-
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1 title shall apply with respect to actions brought in

2 the State on or after the expiration of the 90-day

3 period that begins on the date the Secretary issues

4 the response. If the Secretary denies the State’s ap5 plication, the Secretary shall provide the State with

6 a written explanation of the grounds for the deci7 sion.

8 PART 2—UNIFORM STANDARDS FOR MEDICAL

9 MALPRACTICE LIABILITY

10 SEC. 321. STATUTE OF LIMITATIONS.

11 (a) IN GENERAL.—No medical malpractice liability

12 claim may be brought after the expiration of the 2-year

13 period that begins on the date the alleged injury that is

14 the subject of the action should reasonably have been dis15 covered, but in no event after the expiration of the 4-year

16 period that begins on the date the alleged injury occurred.

17 (b) EXCEPTION FOR MINORS.—In the case of an al18 leged injury suffered by a minor who has not attained 6

19 years of age, no medical malpractice liability claim may

20 be brought after the expiration of the 2-year period that

21 begins on the date the alleged injury that is the subject

22 of the action should reasonably have been discovered, but

23 in no event after the date on which the minor attains 10

24 years of age.
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1 SEC. 322. REQUIREMENT FOR INITIAL RESOLUTION OF AC2 TION THROUGH ALTERNATIVE DISPUTE RES3 OLUTION.

4 (a) IN GENERAL.—No medical malpractice liability

5 action may be brought in any State court unless the medi6 cal malpractice liability claim that is the subject of the

7 action has been initially resolved under an alternative dis8 pute resolution system certified by the Secretary under

9 section 341(b).

10 (b) INITIAL RESOLUTION OF CLAIMS UNDER

11 ADR.—For purposes of subsection (a), an action is ‘‘ini12 tially resolved’’ under an alternative dispute resolution

13 system if—

14 (1) the ADR reaches a decision on whether the

15 defendant is liable to the plaintiff for damages; and

16 (2) if the ADR determines that the defendant

17 is liable, the ADR determines the amount of dam18 ages assessed against the defendant.

19 (c) PROCEDURES FOR FILING ACTIONS.—

20 (1) DEADLINE.—No medical malpractice liabil21 ity action may be brought unless the action is filed

22 in a court of competent jurisdiction not later than

23 90 days after an opinion resolving the medical mal24 practice liability claim that is the subject of the ac25 tion is issued under the applicable alternative dis26 pute resolution system.
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1 (2) COURT OF COMPETENT JURISDICTION.—

2 For purposes of paragraph (1), the term ‘‘court of

3 competent jurisdiction’’ means—

4 (A) with respect to actions filed in a State

5 court, the appropriate State trial court; and

6 (B) with respect to actions filed in a Fed7 eral court, the appropriate United States dis8 trict court.

9 (d) STATUS OF ADR DECISION.—The decision

10 reached under an alternative dispute resolution system

11 shall, for purposes of enforcement by a court of competent

12 jurisdiction, have the same status in the court as the ver13 dict of a medical malpractice liability action adjudicated

14 in a State or Federal trial court.

15 (e) TREATMENT OF ADR DECISION.—

16 (1) REQUIREMENTS FOR GOING FORWARD WITH

17 ACTION.—In order to bring a medical malpractice li18 ability action to contest the decision made under the

19 previous alternative dispute resolution system with

20 respect to a medical malpractice liability claim, the

21 party contesting the decision must—

22 (A) show that—

23 (i) the decision was procured by cor24 ruption, fraud, or undue means,
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1 (ii) there was partiality or corruption

2 under the system,

3 (iii) there was other misconduct under

4 the system that materially prejudiced the

5 party’s rights, or

6 (iv) the decision was based on an

7 error of law; or

8 (B) present new evidence before the trier

9 of fact that was not available for presentation

10 under the ADR system.

11 (2) BURDEN OF PROOF.—In any medical mal12 practice liability action, the trier of fact shall uphold

13 the decision made under the previous alternative dis14 pute resolution system with respect to the claim that

15 is the subject of the action unless the party contest16 ing the decision proves by a preponderance of the

17 evidence that the decision was incorrect.

18 SEC. 323. RELATION TO ALTERNATIVE DISPUTE RESOLU19 TION OF FEDERAL AGENCIES.

20 (a) MANDATORY APPLICATION OF FEDERAL ADR IN

21 MALPRACTICE CLAIMS AGAINST UNITED STATES.—Sec22 tion 2672 of title 28, United States Code, is amended by

23 striking the period at the end of the first paragraph and

24 inserting the following: ‘‘, except that each Federal agency

25 shall use arbitration or such alternative means of dispute
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1 resolution to settle any tort claim against the United

2 States consisting of a medical malpractice liability claim

3 (as defined in section 312(8) of the Comprehensive Health

4 and Rural Equality Act of 1993).’’.

5 (b) TRANSMITTAL OF INFORMATION OF MAL6 PRACTICE CLAIMS RESOLVED UNDER FEDERAL ADR.—

7 Section 584 of title 5, United States Code, as added by

8 section 4(b) of the Administrative Dispute Resolution Act

9 (Public Law 101–552), is amended by adding at the end

10 the following new subsection:

11 ‘‘(k) Each agency shall transmit on a regular basis

12 to the Administrator for Health Care Policy and Research

13 information on issues in controversy consisting of medical

14 malpractice liability claims (as defined in section 312(8)

15 of the Comprehensive Health and Rural Equality Act of

16 1993) that are resolved under the agency’s dispute resolu17 tion proceeding under this subchapter, in a manner that

18 assures that the identity of the parties to such proceedings

19 shall not be revealed.’’.

20 SEC. 324. MANDATORY PRETRIAL SETTLEMENT CON21 FERENCE.

22 (a) IN GENERAL.—Before the beginning of the trial

23 phase of any medical malpractice liability action, the par24 ties shall attend a conference called by the court for pur-
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1 poses of determining whether grounds exist upon which

2 the parties may negotiate a settlement for the action.

3 (b) REQUIRING PARTIES TO SUBMIT SETTLEMENT

4 OFFERS.—At the conference called pursuant to subsection

5 (a), each party to a medical malpractice liability action

6 shall present an offer of settlement for the action.

7 SEC. 325. CALCULATION AND PAYMENT OF DAMAGES.

8 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

9 total amount of noneconomic damages that may be award10 ed to a plaintiff and the members of the plaintiff’s family

11 for losses resulting from the injury which is the subject

12 of a medical malpractice liability action may not exceed

13 $250,000, regardless of the number of parties against

14 whom the action is brought or the number of actions

15 brought with respect to the injury.

16 (b) TREATMENT OF PUNITIVE DAMAGES.—

17 (1) LIMITATION ON AMOUNT.—The total

18 amount of punitive damages that may be imposed

19 under a medical malpractice liability action may not

20 exceed twice the total of the damages awarded to the

21 plaintiff and the members of the plaintiff’s family.

22 (2) PAYMENTS TO STATE FOR MEDICAL QUAL23 ITY ASSURANCE ACTIVITIES.—

24 (A) IN GENERAL.—Any punitive damages

25 imposed under a medical malpractice liability
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1 action shall be paid to the State in which the

2 action is brought.

3 (B) ACTIVITIES DESCRIBED.—A State

4 shall use amount paid pursuant to subpara5 graph (A) to carry out activities to assure the

6 safety and quality of health care services pro7 vided in the State, including (but not limited

8 to)—

9 (i) licensing or certifying health care

10 professionals and health care providers in

11 the State;

12 (ii) operating alternative dispute reso13 lution systems;

14 (iii) carrying out public education pro15 grams relating to medical malpractice and

16 the availability of alternative dispute reso17 lution systems in the State; and

18 (iv) carrying out programs to reduce

19 malpractice-related costs for retired provid20 ers or other providers volunteering to pro21 vide services in medically underserved

22 areas.

23 (C) MAINTENANCE OF EFFORT.—A State

24 shall use any amounts paid pursuant to sub25 paragraph (A) to supplement and not to replace
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1 amounts spent by the State for the activities

2 described in subparagraph (B).

3 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—If

4 more than $100,000 in damages for expenses to be in5 curred in the future is awarded to the plaintiff in a medi6 cal malpractice liability action, the defendant shall provide

7 for payment for such damages on a periodic basis deter8 mined appropriate by the court (based upon projections

9 of when such expenses are likely to be incurred), unless

10 the court determines that it is not in the plaintiff’s best

11 interests to receive payments for such damages on such

12 a periodic basis.

13 (d) MANDATORY OFFSETS FOR DAMAGES PAID BY

14 A COLLATERAL SOURCE.—

15 (1) IN GENERAL.—The total amount of dam16 ages received by a plaintiff in a medical malpractice

17 liability action shall be reduced (in accordance with

18 paragraph (2)) by any other payment that has been

19 or will be made to the individual to compensate the

20 plaintiff for the injury that was the subject of the

21 action, including payment under—

22 (A) Federal or State disability or sickness

23 programs;

24 (B) Federal, State, or private health insur25 ance programs;
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1 (C) private disability insurance programs;

2 (D) employer wage continuation programs;

3 and

4 (E) any other source of payment intended

5 to compensate the plaintiff for such injury.

6 (2) AMOUNT OF REDUCTION.—The amount by

7 which an award of damages to a plaintiff shall be re8 duced under paragraph (1) shall be—

9 (A) the total amount of any payments

10 (other than such award) that have been made

11 or that will be made to the plaintiff to com12 pensate the plaintiff for the injury that was the

13 subject of the action; minus

14 (B) the amount paid by the plaintiff (or by

15 the spouse, parent, or legal guardian of the

16 plaintiff) to secure the payments described in

17 subparagraph (A).

18 SEC. 326. TREATMENT OF ATTORNEY’S FEES AND OTHER

19 COSTS.

20 (a) LIMITATION ON ATTORNEY’S FEES.—If the

21 plaintiff in a medical malpractice liability action has en22 tered into an agreement with the plaintiff’s attorney to

23 pay the attorney’s fees on a contingency basis, the attor24 ney’s fees for the action may not exceed—
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1 (1) 25 percent of the first $150,000 of any

2 award or settlement paid to the plaintiff; or

3 (2) 15 percent of any additional amounts paid

4 to the plaintiff.

5 (b) AWARDING ATTORNEY’S FEES AND OTHER

6 COSTS TO WINNING PARTY.—

7 (1) IN GENERAL.—If the court in a medical

8 malpractice liability action upholds a ruling of the

9 alternative dispute resolution system with respect to

10 whether or not a health care professional or health

11 care provider committed malpractice or with respect

12 to the amount of damages awarded, the court shall

13 require the party that contested the ruling to pay to

14 the opposing party the costs incurred by the oppos15 ing party under the action, including attorney’s fees,

16 fees paid to expert witnesses, and other litigation ex17 penses (but not including court costs, filing fees, or

18 other expenses paid directly by the party to the

19 court, or any fees or costs associated with the reso20 lution of the claim that is the subject of the action

21 under the alternative dispute resolution system).

22 (2) PERMITTING COURT TO WAIVE OR MODIFY

23 IMPOSITION OF COSTS.—A court may issue a written

24 order waiving or modifying the application of para25 graph (1) to a party if the court finds that the appli-
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1 cation of such paragraph to the party would con2 stitute an undue hardship, or if the medical mal3 practice liability action raised a novel issue of law.

4 The order shall specify the grounds for the court’s

5 decision to waive or modify the application of such

6 paragraph.

7 SEC. 327. JOINT AND SEVERAL LIABILITY.

8 The liability of each defendant in a medical mal9 practice liability action shall be several only and shall not

10 be joint, and each defendant shall be liable only for the

11 amount of damages allocated to the defendant in direct

12 proportion to the defendant’s percentage of responsibility

13 (as determined by the trier of fact).

14 SEC. 328. UNIFORM STANDARD FOR DETERMINING NEG15 LIGENCE.

16 A defendant in a medical malpractice liability action

17 may not be found to have acted negligently unless the de18 fendant’s conduct at the time of providing the health care

19 services that are the subject of the action was not reason20 able.

21 SEC. 329. APPLICATION OF MEDICAL PRACTICE GUIDE22 LINES IN MALPRACTICE LIABILITY ACTIONS.

23 (a) USE OF GUIDELINES AS AFFIRMATIVE DE24 FENSE.—In any medical malpractice liability action, it

25 shall be a complete defense to any allegation that the de-
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1 fendant was negligent that, in the provision of (or the fail2 ure to provide) the services that are the subject of the

3 action, the defendant followed the appropriate practice

4 guideline.

5 (b) RESTRICTION ON GUIDELINES CONSIDERED AP6 PROPRIATE.—

7 (1) GUIDELINES SANCTIONED BY SEC8 RETARY.—For purposes of subsection (a), a practice

9 guideline may not be considered appropriate with re10 spect to actions brought during a year unless the

11 Secretary has sanctioned the use of the guideline for

12 purposes of an affirmative defense to medical mal13 practice liability actions brought during the year in

14 accordance with paragraph (2) or (3).

15 (2) ANNUAL PROCESS FOR SANCTIONING

16 GUIDELINES.—By not later than October 1 of each

17 year (beginning with 1994), the Secretary shall re18 view the practice guidelines and standards developed

19 by the Administrator for Health Care Policy and Re20 search pursuant to section 1142 of the Social Secu21 rity Act, and shall sanction those guidelines which

22 the Secretary considers appropriate for purposes of

23 an affirmative defense to medical malpractice liabil24 ity actions brought during the next year as appro-
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1 priate practice guidelines for purposes of subsection

2 (a).

3 (3) USE OF STATE GUIDELINES.—Upon the ap4 plication of a State, the Secretary may sanction

5 practice guidelines selected by the State for purposes

6 of an affirmative defense to medical malpractice li7 ability actions brought in the State as appropriate

8 practice guidelines for purposes of subsection (a) if

9 the guidelines meet such requirements as the Sec10 retary may impose.

11 (c) PROHIBITING APPLICATION OF FAILURE TO FOL12 LOW GUIDELINES AS PRIMA FACIE EVIDENCE OF NEG13 LIGENCE.—No plaintiff in a medical malpractice liability

14 action may be deemed to have presented prima facie evi15 dence that a defendant was negligent solely by showing

16 that the defendant failed to follow the appropriate practice

17 guideline.

18 (d) PROMOTION OF MEDICAL PRACTICE GUIDE19 LINES.—

20 (1) CONSIDERATION OF MALPRACTICE LIABIL21 ITY DATA IN DEVELOPING AND UPDATING GUIDE22 LINES.—Section 1142(c)(5) of the Social Security

23 Act (42 U.S.C. 1320b–12(c)(5)) is amended by

24 striking ‘‘claims data’’ and all that follows through

25 ‘‘patients’’ and inserting the following: ‘‘claims data,
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1 data on clinical and functional status of patients,

2 and data on medical malpractice liability actions’’.

3 (2) DEVELOPMENT OF REPORTING FORMS FOR

4 STATE ADR SYSTEMS.—The Secretary, in consulta5 tion with the Administrator for the Health Care Pol6 icy and Research, shall develop a standard reporting

7 form to be used by State alternative dispute resolu8 tion systems in transmitting information to the Ad9 ministrator pursuant to section 341(a)(7) of this Act

10 on disputes resolved under such systems.

11 (e) FUNDING ESTABLISHMENT OF PRACTICE GUIDE12 LINES.—

13 (1) IN GENERAL.—Each insurer or other entity

14 that provides individual or group health coverage (as

15 defined by the Secretary), including health insurance

16 and coverage under an employer group health plan,

17 shall pay to the Secretary, at a time and in a manner specified by the Secretary, 1 18 ⁄4 of 1 percent of the

19 gross premiums or other amounts paid for the provi20 sion of such coverage.

21 (2) PLACEMENT IN A SEPARATE ACCOUNT.—

22 Amounts paid to the Secretary under paragraph (1)

23 shall be placed in a separate account in the Treas24 ury.
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1 (3) USE OF FUNDS FOR PRACTICE GUIDE2 LINES.—Amounts in such account shall only be

3 available, pursuant to appropriations Act, for pur4 poses of establishing and sanctioning practice guide5 lines to carry out this section.

6 (4) SUPPLEMENTATION.—The funds in such

7 account are intended to supplement, and not to dis8 place, amounts otherwise appropriated for the estab9 lishment of such practice guidelines.

10 SEC. 330. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

11 SERVICES.

12 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

13 (1) IN GENERAL.—In the case of a medical

14 malpractice liability action relating to services pro15 vided during labor or the delivery of a baby, if the

16 defendant health care professional did not previously

17 treat the plaintiff for the pregnancy, the trier of fact

18 may not find that the defendant committed mal19 practice and may not assess damages against the de20 fendant unless the malpractice is proven by clear

21 and convincing evidence.

22 (2) APPLICABILITY TO GROUP PRACTICES OR

23 AGREEMENTS AMONG PROVIDERS.—For purposes of

24 paragraph (1), a health care professional shall be

25 considered to have previously treated an individual
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1 for a pregnancy if the professional is a member of

2 a group practice whose members previously treated

3 the individual for the pregnancy or is providing serv4 ices to the individual during labor or the delivery of

5 a baby pursuant to an agreement with another pro6 fessional.

7 (b) CLEAR AND CONVINCING EVIDENCE DEFINED.—

8 In subsection (a), the term ‘‘clear and convincing evi9 dence’’ is that measure or degree of proof that will

10 produce in the mind of the trier of fact a firm belief or

11 conviction as to the truth of the allegations sought to be

12 established, except that such measure or degree of proof

13 is more than that required under preponderance of the evi14 dence, but less than that required for proof beyond a rea15 sonable doubt.

16 (c) EFFECTIVE DATE.—This section shall apply to

17 claims accruing or actions brought on or after the expira18 tion of the 2-year period that begins on the date of the

19 enactment of this Act.

20 SEC. 331. PREEMPTION.

21 (a) IN GENERAL.—This part supersedes any State

22 law only to the extent that State law—

23 (1) permits the recovery of a greater amount of

24 damages by a plaintiff;
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1 (2) permits the collection of a greater amount

2 of attorneys’ fees by a plaintiff’s attorney;

3 (3) establishes a longer period during which a

4 medical malpractice liability claim may be initiated;

5 or

6 (4) establishes a stricter standard for determin7 ing whether a defendant was negligent or for deter8 mining the liability of defendants described in sec9 tion 330(a) in actions described in such section.

10 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

11 OF LAW OR VENUE.—Nothing in subsection (a) shall be

12 construed to—

13 (1) waive or affect any defense of sovereign im14 munity asserted by any State under any provision of

15 law;

16 (2) waive or affect any defense of sovereign im17 munity asserted by the United States;

18 (3) affect the applicability of any provision of

19 the Foreign Sovereign Immunities Act of 1976;

20 (4) preempt State choice-of-law rules with re21 spect to claims brought by a foreign nation or a citi22 zen of a foreign nation; or

23 (5) affect the right of any court to transfer

24 venue or to apply the law of a foreign nation or to

25 dismiss a claim of a foreign nation or of a citizen
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1 of a foreign nation on the ground of inconvenient

2 forum.

3 PART 3—REQUIREMENTS FOR STATE

4 ALTERNATIVE DISPUTE RESOLUTION SYSTEMS

5 SEC. 341. BASIC REQUIREMENTS FOR ADR.

6 (a) IN GENERAL.—A State’s alternative dispute reso7 lution system meets the requirements of this section if the

8 system—

9 (1) applies to all medical malpractice liability

10 claims under the jurisdiction of the State courts;

11 (2) requires that a written opinion resolving the

12 dispute be issued that contains findings of fact relat13 ing to the dispute;

14 (3) requires individuals who hear and resolve

15 claims under the system to meet such qualifications

16 as the State may require (in accordance with regula17 tions of the Secretary);

18 (4) is approved by the State or by local govern19 ments in the State;

20 (5) with respect to a State system that consists

21 of multiple dispute resolution procedures—

22 (A) permits the parties to a dispute to se23 lect the procedure to be used for the resolution

24 of the dispute under the system, and
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1 (B) if the parties do not agree on the pro2 cedure to be used for the resolution of the dis3 pute, assigns a particular procedure to the par4 ties;

5 (6) provides for the transmittal to the State

6 agency responsible for monitoring or disciplining

7 health care professionals and health care providers

8 of any findings made under the system that such a

9 professional or provider committed malpractice, un10 less, during the 90-day period beginning on the date

11 the system resolves the claim against the profes12 sional or provider, the professional or provider

13 brings a medical malpractice liability action contest14 ing the decision made under the system; and

15 (7) provides for the regular transmittal to the

16 Administrator for Health Care Policy and Research

17 of information on disputes resolved under the sys18 tem, in a manner that assures that the identity of

19 the parties to a dispute shall not be revealed.

20 (b) APPLICATION OF MALPRACTICE LIABILITY

21 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

22 The provisions of part 2 shall apply with respect to claims

23 brought under a State’s alternative dispute resolution sys24 tem in the same manner as such provisions apply with
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1 respect to medical malpractice liability actions brought in

2 the State.

3 SEC. 342. CERTIFICATION OF STATE SYSTEMS.

4 (a) IN GENERAL.—Not later than October 1 of each

5 year (beginning with 1994), the Secretary, in consultation

6 with the Attorney General, shall determine whether a

7 State’s alternative dispute resolution system meets the re8 quirements of this part for the following calendar year.

9 (b) BASIS FOR CERTIFICATION.—The Secretary shall

10 certify a State’s alternative dispute resolution system

11 under this subsection if the Secretary determines under

12 subsection (a) that the system meets the requirements of

13 section 341.

14 SEC. 343. REPORTS ON IMPLEMENTATION AND EFFECTIVE15 NESS OF ALTERNATIVE DISPUTE RESOLU16 TION SYSTEMS.

17 (a) IN GENERAL.—Not later than 5 years after the

18 date of the enactment of this Act, the Secretary shall pre19 pare and submit to Congress a report describing and eval20 uating State alternative dispute resolution systems oper21 ated pursuant to this part.

22 (b) CONTENTS OF REPORT.—The Secretary shall in23 clude in the report prepared and submitted under sub24 section (a)—

25 (1) information on—
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1 (A) the effect of such systems on the cost

2 of health care within the State,

3 (B) the impact of such systems on the ac4 cess of individuals to health care within the

5 State, and

6 (C) the effect of such systems on the qual7 ity of health care provided within such State;

8 and

9 (2) to the extent that such report does not pro10 vide information on no-fault systems operated by

11 States as alternative dispute resolution systems pur12 suant to this part, an analysis of the feasibility and

13 desirability of establishing a system under which

14 medical malpractice liability claims shall be resolved

15 on a no-fault basis.

16 PART 4—OTHER REQUIREMENTS AND

17 PROGRAMS

18 SEC. 351. PERMITTING STATE PROFESSIONAL SOCIETIES

19 TO PARTICIPATE IN DISCIPLINARY ACTIVI20 TIES.

21 (a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith22 standing any other provision of State or Federal law, a

23 State agency responsible for the conduct of disciplinary

24 actions for a type of health care practitioner may enter

25 into agreements with State or county professional societies
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1 of such type of health care practitioner to permit such so2 cieties to participate in the licensing of such health care

3 practitioner, and to review any health care malpractice ac4 tion, health care malpractice claim or allegation, or other

5 information concerning the practice patterns of any such

6 health care practitioner. Any such agreement shall comply

7 with subsection (b).

8 (b) REQUIREMENTS OF AGREEMENTS.—Any agree9 ment entered into under subsection (a) for licensing activi10 ties or the review of any health care malpractice action,

11 health care malpractice claim or allegation, or other infor12 mation concerning the practice patterns of a health care

13 practitioner shall provide that—

14 (1) the health care professional society conducts

15 such activities or review as expeditiously as possible;

16 (2) after the completion of such review, such so17 ciety shall report its findings to the State agency

18 with which it entered into such agreement;

19 (3) the conduct of such activities or review and

20 the reporting of such findings be conducted in a

21 manner which assures the preservation of confiden22 tiality of health care information and of the review

23 process; and

24 (4) no individual affiliated with such society is

25 liable for any damages or injury directly caused by
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1 the individual’s actions in conducting such activities

2 or review.

3 (c) AGREEMENTS NOT MANDATORY.—Nothing in

4 this section may be construed to require a State to enter

5 into agreements with societies described in subsection (a)

6 to conduct the activities described in such subsection.

7 (d) EFFECTIVE DATE.—This section shall take effect

8 2 years after the date of the enactment of this Act.

9 Subtitle C—Administrative Cost

10 Savings

11 PART 1—STANDARDIZED CLAIMS PROCESSING

12 SEC. 361. ADOPTION OF DATA ELEMENTS, UNIFORM

13 CLAIMS, AND UNIFORM ELECTRONIC TRANS14 MISSION STANDARDS.

15 (a) IN GENERAL.—The Secretary of Health and

16 Human Services (in this subtitle referred to as the ‘‘Sec17 retary’’) shall adopt standards relating to each of the fol18 lowing:

19 (1) Data elements for use in paper and elec20 tronic claims processing under health benefit plans,

21 as well as for use in utilization review and manage22 ment of care (including data fields, formats, and

23 medical nomenclature, and including plan benefit

24 and insurance information).
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1 (2) Uniform claims forms (including uniform

2 procedure and billing codes for uses with such forms

3 and including information on other health benefit

4 plans that may be liable for benefits).

5 (3) Uniform electronic transmission of the data

6 elements (for purposes of billing and utilization re7 view).

8 Standards under paragraph (3) relating to electronic

9 transmission of data elements for claims for services shall

10 supersede (to the extent specified in such standards) the

11 standards adopted under paragraph (2) relating to the

12 submission of paper claims for such services. Standards

13 under paragraph (3) shall include protections to assure

14 the confidentiality of patient-specific information and to

15 protect against the unauthorized use and disclosure of in16 formation.

17 (b) USE OF TASK FORCES.—In adopting standards

18 under this section—

19 (1) the Secretary shall take into account the

20 recommendations of current task forces, including at

21 least the Workgroup on Electronic Data Inter22 change, National Uniform Billing Committee, the

23 Uniform Claim Task Force, and the Computer-based

24 Patient Record Institute;
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1 (2) the Secretary shall consult with the Na2 tional Association of Insurance Commissioners (and,

3 with respect to standards under subsection (a)(3),

4 the American National Standards Institute); and

5 (3) the Secretary shall, to the maximum extent

6 practicable, seek to make the standards consistent

7 with any uniform clinical data sets which have been

8 adopted and are widely recognized.

9 (c) DEADLINES FOR PROMULGATION.—The Sec10 retary shall promulgate the standards under—

11 (1) subsection (a)(1) relating to claims process12 ing data, by not later than 12 months after the date

13 of the enactment of this Act;

14 (2) subsection (a)(2) (relating to uniform

15 claims forms) by not later than 12 months after the

16 date of the enactment of this Act; and

17 (3)(A) subsection (a)(3) relating to trans18 mission of information concerning hospital and phy19 sicians services, by not later than 24 months after

20 the date of the enactment of this Act, and

21 (B) subsection (a)(3) relating to transmission

22 of information on other services, by such later date

23 as the Secretary may determine it to be feasible.

24 (d) REPORT TO CONGRESS.—Not later than 3 years

25 after the date of the enactment of this Act, the Secretary
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1 shall report to Congress recommendations regarding re2 structuring the medicare peer review quality assurance

3 program given the availability of hospital data in elec4 tronic form.

5 SEC. 362. APPLICATION OF STANDARDS.

6 (a) IN GENERAL.—If the Secretary determines, at

7 the end of the 2-year period beginning on the date that

8 standards are adopted under section 361 with respect to

9 classes of services, that a significant number of claims for

10 benefits for such services under health benefit plans are

11 not being submitted in accordance with such standards,

12 the Secretary may require, after notice in the Federal

13 Register of not less than 6 months, that all providers of

14 such services must submit claims to health benefit plans

15 in accordance with such standards. The Secretary may

16 waive the application of such a requirement in such cases

17 as the Secretary finds that the imposition of the require18 ment would not be economically practicable.

19 (b) SIGNIFICANT NUMBER.—The Secretary shall

20 make an affirmative determination described in subsection

21 (a) for a class of services only if the Secretary finds that

22 there would be a significant, measurable additional gain

23 in efficiencies in the health care system that would be ob24 tained by imposing the requirement described in such

25 paragraph with respect to such services.
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1 (c) APPLICATION OF REQUIREMENT.—

2 (1) IN GENERAL.—If the Secretary imposes the

3 requirement under subsection (a)—

4 (A) in the case of a requirement that im5 poses the standards relating to electronic trans6 mission of claims for a class of services, each

7 health care provider that furnishes such services

8 for which benefits are payable under a health

9 benefit plan shall transmit electronically and di10 rectly to the plan on behalf of the beneficiary

11 involved a claim for such services in accordance

12 with such standards;

13 (B) any health benefit plan may reject any

14 claim subject to the standards adopted under

15 section 361 but which is not submitted in ac16 cordance with such standards;

17 (C) it is unlawful for a health benefit plan

18 (i) to reject any such claim on the basis of the

19 form in which it is submitted if it is submitted

20 in accordance with such standards or (ii) to re21 quire, for the purpose of utilization review or as

22 a condition of providing benefits under the plan,

23 a provider to transmit medical data elements

24 that are inconsistent with the standards estab25 lished under section 361(a)(1); and
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1 (D) the Secretary may impose a civil

2 money penalty on any provider that knowingly

3 and repeatedly submits claims in violation of

4 such standards or on any health benefit plan

5 (other than a health benefit plan described in

6 paragraph (2)) that knowingly and repeatedly

7 rejects claims in violation of subparagraph (B),

8 in an amount not to exceed $100 for each such

9 claim.

10 The provisions of section 1128A of the Social Secu11 rity Act (other than the first sentence of subsection

12 (a) and other than subsection (b)) shall apply to a

13 civil money penalty under subparagraph (D) in the

14 same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a) of such Act.

16 (2) PLANS SUBJECT TO EFFECTIVE STATE REG17 ULATION.—A plan described in this paragraph is a

18 health benefit plan—

19 (A) that is subject to regulation by a

20 State, and

21 (B) with respect to which the Secretary

22 finds that—

23 (i) the State provides for application

24 of the standards established under section

25 361, and
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1 (ii) the State regulatory program pro2 vides for the appropriate and effective en3 forcement of such standards.

4 (d) TREATMENT OF REJECTIONS.—If a plan rejects

5 a claim pursuant to subsection (c)(1), the plan shall per6 mit the person submitting the claim a reasonable oppor7 tunity to resubmit the claim on a form or in an electronic

8 manner that meets the requirements for acceptance of the

9 claim under such subsection.

10 SEC. 363. PERIODIC REVIEW AND REVISION OF

11 STANDARDS.

12 (a) IN GENERAL.—The Secretary shall—

13 (1) provide for the ongoing receipt and review

14 of comments and suggestions for changes in the

15 standards adopted and promulgated under section

16 361;

17 (2) establish a schedule for the periodic review

18 of such standards; and

19 (3) based upon such comments, suggestions,

20 and review, revise such standards and promulgate

21 such revisions.

22 (b) APPLICATION OF REVISED STANDARDS.—If the

23 Secretary under subsection (a) revises the standards de24 scribed in 501, then, in the case of any claim for benefits

25 submitted under a health benefit plan more than the mini-
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1 mum period (of not less than 6 months specified by the

2 Secretary) after the date the revision is promulgated

3 under subsection (a)(3), such standards shall apply under

4 section 362 instead of the standards previously promul5 gated.

6 SEC. 364. HEALTH BENEFIT PLAN DEFINED.

7 In this subtitle, the term ‘‘health benefit plan’’ has

8 the meaning given such term in section 208(2) and in9 cludes—

10 (1) the medicare program (under title XVIII of

11 the Social Security Act) and medicare supplemental

12 health insurance, and

13 (2) a State medicaid plan (approved under title

14 XIX of such Act).

15 PART 2—ELECTRONIC MEDICAL DATA

16 STANDARDS

17 SEC. 371. MEDICAL DATA STANDARDS FOR HOSPITALS AND

18 OTHER PROVIDERS.

19 (a) PROMULGATION OF HOSPITAL DATA STAND20 ARDS.—

21 (1) IN GENERAL.—Between July 1, 1995, and

22 January 1, 1996, the Secretary shall promulgate

23 standards described in subsection (b) for hospitals

24 concerning electronic medical data.
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1 (2) REVISION.—The Secretary may from time

2 to time revise the standards promulgated under this

3 subsection.

4 (b) CONTENTS OF DATA STANDARDS.—The stand5 ards promulgated under subsection (a) shall include at

6 least the following:

7 (1) A definition of a standard set of data ele8 ments for use by utilization and quality control peer

9 review organizations.

10 (2) A definition of the set of comprehensive

11 data elements, which set shall include for hospitals

12 the standard set of data elements defined under

13 paragraph (1).

14 (3) Standards for an electronic patient care in15 formation system with data obtained at the point of

16 care, including standards to protect against the un17 authorized use and disclosure of information.

18 (4) A specification of, and manner of presen19 tation of, the individual data elements of the sets

20 and system under this subsection.

21 (5) Standards concerning the transmission of

22 electronic medical data.

23 (6) Standards relating to confidentiality of pa24 tient-specific information.
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1 The standards under this section shall be consistent with

2 standards for data elements established under section 361.

3 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO4 VIDERS.—

5 (1) IN GENERAL.—The Secretary may promul6 gate standards described in paragraph (2) concern7 ing electronic medical data for providers that are not

8 hospitals. The Secretary may from time to time re9 vise the standards promulgated under this sub10 section.

11 (2) CONTENTS OF DATA STANDARDS.—The

12 standards promulgated under paragraph (1) for non13 hospital providers may include standards comparable

14 to the standards described in paragraphs (2), (4),

15 and (5) of subsection (b) for hospitals.

16 (d) CONSULTATION.—In promulgating and revising

17 standards under this section, the Secretary shall—

18 (1) consult with the American National Stand19 ards Institute, hospitals, with the advisory commis20 sion established under section 375, and with other

21 affected providers, health benefit plans, and other

22 interested parties, and

23 (2) take into consideration, in developing stand24 ards under subsection (b)(1), the data set used by

25 the utilization and quality control peer review pro-
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1 gram under part B of title XI of the Social Security

2 Act.

3 SEC. 372. APPLICATION OF ELECTRONIC DATA STANDARDS

4 TO CERTAIN HOSPITALS.

5 (a) MEDICARE REQUIREMENT FOR SHARING OF

6 HOSPITAL INFORMATION.—As of January 1, 1997, sub7 ject to paragraph (2), each hospital, as a requirement of

8 each participation agreement under section 1866 of the

9 Social Security Act, shall—

10 (1) maintain clinical data included in the set of

11 comprehensive data elements under section

12 371(b)(2) in electronic form on all inpatients,

13 (2) upon request of the Secretary or of a utili14 zation and quality control peer review organization

15 (with which the Secretary has entered into a con16 tract under part B of title XI of such Act), transmit

17 electronically the data set, and

18 (3) upon request of the Secretary, or of a fiscal

19 intermediary or carrier, transmit electronically any

20 data (with respect to a claim) from such data set,

21 in accordance with the standards promulgated under sec22 tion 371(a).

23 (b) WAIVER AUTHORITY.—Until January 1, 2000:

24 (1) The Secretary may waive the application of

25 the requirements of subsection (a) for a hospital
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1 that is a small rural hospital, for such period as the

2 hospital demonstrates compliance with such require3 ments would constitute an undue financial hardship.

4 (2) The Secretary may waive the application of

5 the requirements of subsection (a) for a hospital

6 that is in the process of developing a system to pro7 vide the required data set and executes agreements

8 with its fiscal intermediary and its utilization and

9 quality control peer review organization that the hos10 pital will meet the requirements of subsection (a) by

11 a specified date (not later than January 1, 2000).

12 (3) The Secretary may waive the application of

13 the requirement of subsection (a)(1) for a hospital

14 that agrees to obtain from its records the data ele15 ments that are needed to meet the requirements of

16 paragraphs (2) and (3) of subsection (a) and agrees

17 to subject its data transfer process to a quality as18 surance program specified by the Secretary.

19 (c) APPLICATION TO HOSPITALS OF THE DEPART20 MENT OF VETERANS AFFAIRS.—

21 (1) IN GENERAL.—The Secretary of Veterans

22 Affairs shall provide that each hospital of the De23 partment of Veterans Affairs shall comply with the

24 requirements of subsection (a) in the same manner
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1 as such requirements would apply to the hospital if

2 it were participating in the medicare program.

3 (2) WAIVER.—Such Secretary may waive the

4 application of such requirements to a hospital in the

5 same manner as the Secretary of Health and

6 Human Services may waive under subsection (b) the

7 application of the requirements of subsection (a).

8 SEC. 373. ELECTRONIC TRANSMISSION TO FEDERAL AGEN9 CIES.

10 (a) IN GENERAL.—Effective January 1, 2000, if a

11 provider is required under a Federal program to transmit

12 a data element that is subject to a presentation or trans13 mission standard (as defined in subsection (b)), the head

14 of the Federal agency responsible for such program (if not

15 otherwise authorized) is authorized to require the provider

16 to present and transmit the data element electronically in

17 accordance with such a standard.

18 (b) PRESENTATION OR TRANSMISSION STANDARD

19 DEFINED.—In subsection (a), the term ‘‘presentation or

20 transmission standard’’ means a standard, promulgated

21 under subsection (b) or (c) of section 371, described in

22 paragraph (4) or (5) of section 371(b).
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1 SEC. 374. LIMITATION ON DATA REQUIREMENTS WHERE

2 STANDARDS ARE IN EFFECT.

3 (a) IN GENERAL.—If standards with respect to data

4 elements are promulgated under section 371 with respect

5 to a class of provider, a health benefit plan may not re6 quire, for the purpose of utilization review or as a condi7 tion of providing benefits under the plan, that a provider

8 in the class—

9 (1) provide any data element not in the set of

10 comprehensive data elements specified under such

11 standards, or

12 (2) transmit or present any such data element

13 in a manner inconsistent with the applicable stand14 ards for such transmission or presentation.

15 (b) COMPLIANCE.—

16 (1) IN GENERAL.—The Secretary may impose a

17 civil money penalty on any health benefit plan (other

18 than a health benefit plan described in paragraph

19 (2)) that fails to comply with subsection (a) in an

20 amount not to exceed $100 for each such failure.

21 The provisions of section 1128A of the Social Secu22 rity Act (other than the first sentence of subsection

23 (a) and other than subsection (b)) shall apply to a

24 civil money penalty under this paragraph in the

25 same manner as such provisions apply to a penalty

26 or proceeding under section 1128A(a) of such Act.
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1 (2) PLANS SUBJECT TO EFFECTIVE STATE REG2 ULATION.—A plan described in this paragraph is a

3 health benefit plan that is subject to regulation by

4 a State, if the Secretary finds that—

5 (A) the State provides for application of

6 the requirement of subsection (a), and

7 (B) the State regulatory program provides

8 for the appropriate and effective enforcement of

9 such requirement with respect to such plans.

10 SEC. 375. ADVISORY COMMISSION.

11 (a) IN GENERAL.—The Secretary shall establish an

12 advisory commission including hospital executives, hospital

13 data base managers, physicians, health services research14 ers, and technical experts in collection and use of data

15 and operation of data systems. Such commission shall in16 clude, as ex officio members, a representative of the Direc17 tor of the National Institutes of Health, the Administrator

18 for Health Care Policy and Research, the Secretary of

19 Veterans Affairs, and the Director of the Centers for Dis20 ease Control.

21 (b) FUNCTIONS.—The advisory commission shall

22 monitor and advise the Secretary concerning—

23 (1) the standards established under this part,

24 and
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1 (2) operational concerns about the implementa2 tion of such standards under this part.

3 (c) STAFF.—From the amounts appropriated under

4 subsection (d), the Secretary shall provide sufficient staff

5 to assist the advisory commission in its activities under

6 this section.

7 (d) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated such sums as are nec9 essary to carry out this section.

10 PART 3—ADDITIONAL STANDARDS AND

11 REQUIREMENTS

12 SEC. 381. STANDARDS RELATING TO USE OF MEDICARE

13 AND MEDICAID MAGNETIZED HEALTH BENE14 FIT CARDS; SECONDARY PAYOR DATA BANK.

15 (a) MAGNETIZED IDENTIFICATION CARDS UNDER

16 MEDICARE PROGRAM.—The Secretary shall adopt stand17 ards relating to the design and use of magnetized medi18 care identification cards in order to assist health care pro19 viders providing medicare covered services to individuals—

20 (1) in determining whether individuals are eligi21 ble for benefits under the medicare program, and

22 (2) in billing the medicare program for such

23 services provided to eligible individuals.

24 Such cards shall be designed to be compatible with ma25 chines currently employed to transmit information on
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1 credit cards. Such cards also shall be designed to be able

2 to be used with respect to the provision of benefits under

3 medicare supplemental policies.

4 (b) ADOPTION UNDER MEDICAID PLANS.—

5 (1) IN GENERAL.—The Secretary shall take

6 such steps as may be necessary to encourage and as7 sist States to design and use magnetized medicaid

8 identification cards that meet such standards, for

9 use under their medicaid plans.

10 (2) LIMITATION ON MMIS FUNDS.—In applying

11 section 1903(a)(3) of the Social Security Act, the

12 Secretary may determine that Federal financial par13 ticipation is not available under that section to a

14 State which has provided for a magnetized card sys15 tem that is inconsistent with the standards adopted

16 under subsection (a).

17 (c) MEDICARE AND MEDICAID SECONDARY PAYOR

18 DATA BANK.—The Secretary shall establish a medicare

19 and medicaid information system which is designed to pro20 vide information on those group health plans and other

21 health benefit plans that are primary payors to the medi22 care program and medicaid program under section

23 1862(b) or section 1905(a)(25) of the Social Security Act.

24 (d) AUTHORIZATION OF APPROPRIATIONS.—There

25 are authorized to be appropriated, in equal proportions
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1 from the Federal Hospital Insurance Trust Fund and

2 from the Federal Supplementary Medical Insurance Trust

3 Fund, a total of $25,000,000 to carry out subsections (a)

4 and (c), including the issuance of magnetized cards to

5 medicare beneficiaries.

6 SEC. 382. PREEMPTION OF STATE QUILL PEN LAWS.

7 (a) IN GENERAL.—Effective January 1, 1995, no ef8 fect shall be given to any provision of State law that re9 quires medical or health insurance records (including bill10 ing information) to be maintained in written, rather than

11 electronic, form.

12 (b) SECRETARIAL AUTHORITY.—The Secretary of

13 Health and Human Services may issue regulations to

14 carry out subsection (a). Such regulations may provide for

15 such exceptions to subsection (a) as the Secretary deter16 mines to be necessary to prevent fraud and abuse, with

17 respect to controlled substances, and in such other cases

18 as the Secretary deems appropriate.

19 SEC. 383. USE OF STANDARD IDENTIFICATION NUMBERS.

20 (a) IN GENERAL.—Effective January 1, 1995, each

21 health benefit plan shall—

22 (1) for each of its beneficiaries that has a social

23 security account number, use that number as the

24 personal identifier for claims processing and related

25 purposes, and
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1 (2) for each provider that has a unique identi2 fier for purposes of title XVIII of the Social Security

3 Act and that furnishes health care items or services

4 to a beneficiary under the plan, use that identifier

5 as the identifier of that provider for claims process6 ing and related purposes.

7 (b) COMPLIANCE.—

8 (1) IN GENERAL.—The Secretary may impose a

9 civil money penalty on any health benefit plan (other

10 than a health benefit plan described in paragraph

11 (2)) that fails to comply with standards established

12 under subsection (a) in an amount not to exceed

13 $100 for each such failure. The provisions of section

14 1128A of the Social Security Act (other than the

15 first sentence of subsection (a) and other than sub16 section (b)) shall apply to a civil money penalty

17 under this paragraph in the same manner as such

18 provisions apply to a penalty or proceeding under

19 section 1128A(a) of such Act.

20 (2) PLANS SUBJECT TO EFFECTIVE STATE REG21 ULATION.—A plan described in this paragraph is a

22 health benefit plan that is subject to regulation by

23 a State, if the Secretary finds that—

24 (A) the State provides for application of

25 the requirement of subsection (a), and
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1 (B) the State regulatory program provides

2 for the appropriate and effective enforcement of

3 such requirement with respect to such plans.

4 SEC. 384. COORDINATION OF BENEFIT STANDARDS.

5 (a) REVIEW OF COORDINATION OF BENEFIT PROB6 LEMS.—Between July 1, 1995, and January 1, 1996, the

7 Secretary shall determine whether problems relating to—

8 (1) the rules for determining the liability of

9 health benefit plans when benefits are payable under

10 two or more such plans, or

11 (2) the availability of information among such

12 health benefit plans when benefits are so payable,

13 cause significant administrative costs.

14 (b) CONTINGENT PROMULGATION OF STANDARDS.—

15 (1) IN GENERAL.—If the Secretary determines

16 that such problems do cause significant administra17 tive costs that could be significantly reduced through

18 the implementation of standards, the Secretary shall

19 promulgate standards concerning—

20 (A) the liability of health benefit plans

21 when benefits are payable under two or more

22 such plans, and

23 (B) the transfer among health benefit

24 plans of appropriate information (which may in25 clude standards for the use of unique identifi-
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1 ers, and for the listing of all individuals covered

2 under a health benefit plan) in determining li3 ability in cases when benefits are payable under

4 two or more such plans.

5 (2) EFFECTIVE DATE.—The standards promul6 gated under paragraph (1) shall become effective on

7 a date specified by the Secretary, which date shall

8 be not earlier than one year after the date of pro9 mulgation of the standards.

10 (c) COMPLIANCE.—

11 (1) IN GENERAL.—The Secretary may impose a

12 civil money penalty on any health benefit plan (other

13 than a health benefit plan described in paragraph

14 (2)) that fails to comply with standards promulgated

15 under subsection (b) in an amount not to exceed

16 $100 for each such failure. The provisions of section

17 1128A of the Social Security Act (other than the

18 first sentence of subsection (a) and other than sub19 section (b)) shall apply to a civil money penalty

20 under this paragraph in the same manner as such

21 provisions apply to a penalty or proceeding under

22 section 1128A(a) of such Act.

23 (2) PLANS SUBJECT TO EFFECTIVE STATE REG24 ULATION.—A plan described in this paragraph is a
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1 health benefit plan that is subject to regulation by

2 a State, if the Secretary finds that—

3 (A) the State provides for application of

4 the standards established under subsection (b),

5 and

6 (B) the State regulatory program provides

7 for the appropriate and effective enforcement of

8 such standards with respect to such plans.

9 (d) REVISION OF STANDARDS.—If the Secretary es10 tablishes standards under subsection (b), the Secretary

11 may revise such standards from time to time and such

12 revised standards shall be applied under subsection (c) on

13 or after such date (not earlier than 6 months after the

14 date the revision is promulgated) as the Secretary shall

15 specify.

16 Subtitle C—Estimates of Expenses

17 Prior to Treatment

18 SEC. 391. REQUIREMENT.

19 (a) IN GENERAL.—If requested, except as provided

20 in subsection (b), each hospital, physician, or other pro21 vider of a health care item or service, before providing any

22 health care item or services to any individual in the United

23 States shall disclose to the individual (in form and manner

24 specified by the Secretary of Health and Human Services)

25 a range of prices to be charged for the item or service.
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1 In the case of provision of items and services for which

2 the particular services to be provided are not readily deter3 minable in advance, the Secretary shall permit the use of

4 such estimates as may be appropriate.

5 (b) EXCEPTION FOR EMERGENCIES.—Subsection (a)

6 shall not apply in the case of emergency treatment and

7 such other extenuating circumstances as the Secretary

8 may provide by regulation.

9 (c) ENFORCEMENT.—No individual shall be liable for

10 payment for a health care item or service for which a dis11 closure is required under subsection (a), if the disclosure

12 has not been substantially made in accordance with such

13 subsection.

14 (d) EFFECTIVE DATE.—This section shall apply to

15 items and services furnished on or after 1 year after the

16 date of the enactment of this Act.

17 Subtitle D—Antitrust Exemptions

18 SEC. 395. PERMITTING COOPERATIVE ARRANGEMENTS BE19 TWEEN HOSPITALS.

20 (a) EXEMPTION.—Upon issuance of a certificate

21 under subsection (c) with respect to an arrangement, the

22 antitrust laws shall not apply with respect to—

23 (1) an arrangement among hospitals providing

24 for (or attempting to provide for) the combination of

25 two or more hospitals, or
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1 (2) a cooperative arrangement entered into sole2 ly by two or more hospitals with respect to sharing

3 expensive capital-intensive medical technology or

4 other highly resource-intensive services.

5 (b) APPLICATION.—In order to obtain the benefits of

6 subsection (a) with respect to an arrangement, one or

7 more licensed hospitals may submit to the Secretary of

8 Health and Human Services an application, containing

9 such information as the Secretary may require with re10 spect to the arrangement, including—

11 (1) a statement that such hospital desires to

12 negotiate and enter into a voluntary cooperative ar13 rangement under which the hospital is operating in

14 one State or region for the sharing of medical tech15 nology or services with another hospital;

16 (2) a description of the nature and scope of the

17 activities contemplated under the arrangement that

18 demonstrates that consumer costs would not in19 crease under the arrangement;

20 (3) a description of the financial arrangement

21 between the hospital and other hospitals that are

22 parties to the arrangement; and

23 (4) any other information determined appro24 priate by the Secretary.
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1 (c) EVALUATIONS OF APPLICATIONS.—Not later

2 than 120 days after the date an application under sub3 section (b) is received, the Secretary, in consultation with

4 the Administrator for the Health Care Financing Admin5 istration, shall issue a certificate approving the arrange6 ment if the Secretary determines that under the arrange7 ment—

8 (1) Federal expenditures will be reduced;

9 (2) hospital services in geographical proximity

10 to the communities traditionally served will be pre11 served; and

12 (3) consumer costs would not increase.

13 (d) ANTITRUST LAWS DEFINED.—For purposes of

14 this section, the term ‘‘antitrust laws’’ has the meaning

15 given such term in subsection (a) of the first section of

16 the Clayton Act (15 U.S.C. 12), except that such term

17 includes section 5 of the Federal Trade Commission Act

18 (15 U.S.C. 45) to the extent that such section 5 applies

19 with respect to unfair methods of competition.
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1 TITLE IV—LONG-TERM CARE

2 Subtitle A—Treatment of Long3 Term Care Insurance Plans

4 SEC. 401. QUALIFIED LONG-TERM CARE INSURANCE TREAT5 ED AS ACCIDENT AND HEALTH INSURANCE

6 FOR PURPOSES OF TAXATION OF LIFE INSUR7 ANCE COMPANIES.

8 (a) IN GENERAL.—Section 818 of the Internal Reve9 nue Code of 1986 (relating to other definitions and special

10 rules) is amended by adding at the end the following new

11 subsection:

12 ‘‘(g) QUALIFIED LONG-TERM CARE INSURANCE

13 TREATED AS ACCIDENT OR HEALTH INSURANCE.—For

14 purposes of this part—

15 ‘‘(1) IN GENERAL.—Any reference to accident

16 or health insurance shall be treated as including a

17 reference to qualified long-term care insurance.

18 ‘‘(2) QUALIFIED LONG-TERM CARE INSUR19 ANCE.—For purposes of this subsection—

20 ‘‘(A) IN GENERAL.—Subject to subpara21 graphs (B) and (C), the term ‘qualified long22 term care insurance’ means insurance under a

23 policy or rider, which is issued by a qualified is24 suer, which meets standards at least as strin25 gent as those set forth in the January 1990
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1 Long-Term Care Insurance Model Regulation

2 of the National Association of Insurance Com3 missioners, and which is certified by the Sec4 retary of Health and Human Services (in ac5 cordance with procedures similar to the proce6 dures prescribed in section 1882 of the Social

7 Security Act (42 U.S.C. 1385ss) used in the

8 certification of medicare supplemental policies

9 (as defined in subsection (g)(1) of such sec10 tion)) to be advertised, marketed, offered, or

11 designed to provide coverage—

12 ‘‘(i) for not less than 12 consecutive

13 months for each covered person who has

14 attained age 50,

15 ‘‘(ii) on an expense incurred, indem16 nity, or prepaid basis,

17 ‘‘(iii) for 1 or more medically nec18 essary, diagnostic services, preventive serv19 ices, therapeutic services, rehabilitation

20 services, maintenance services, or personal

21 care services, and

22 ‘‘(iv) provided in a setting other than

23 an acute care unit of a hospital.
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1 The requirement of clause (iv) shall be met only

2 if at least 1 of the settings in which such cov3 erage is provided is the patient’s home.

4 ‘‘(B) COVERAGE SPECIFICALLY EX5 CLUDED.—Such term does not include any in6 surance under any policy or rider which is of7 fered primarily to provide any combination of

8 the following kinds of coverage:

9 ‘‘(i) Basic Medicare supplement cov10 erage.

11 ‘‘(ii) Basic hospital-based acute care

12 expense coverage.

13 ‘‘(iii) Basic medical-surgical expense

14 coverage.

15 ‘‘(iv) Hospital confinement indemnity

16 coverage.

17 ‘‘(v) Major medical expense coverage.

18 ‘‘(vi) Disability income protection cov19 erage.

20 ‘‘(vii) Accident only coverage.

21 ‘‘(viii) Specified disease coverage.

22 ‘‘(ix) Specified accident coverage.

23 ‘‘(x) Limited benefit health coverage.
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1 ‘‘(C) QUALIFIED ISSUER.—For purposes of

2 subparagraph (A), the term ‘qualified issuer’

3 means any of the following:

4 ‘‘(i) Private insurance company.

5 ‘‘(ii) Fraternal benefit society.

6 ‘‘(iii) Nonprofit health corporation.

7 ‘‘(iv) Nonprofit hospital corporation.

8 ‘‘(v) Nonprofit medical service cor9 poration.

10 ‘‘(vi) Prepaid health plan.’’

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to taxable years beginning after

13 December 31, 1993.

14 SEC. 402. QUALIFIED LONG-TERM CARE INSURANCE TREAT15 ED AS ACCIDENT AND HEALTH INSURANCE

16 FOR PURPOSES OF EXCLUSION FOR BENE17 FITS RECEIVED UNDER SUCH INSURANCE

18 AND FOR EMPLOYER CONTRIBUTIONS FOR

19 SUCH INSURANCE.

20 (a) IN GENERAL.—Section 105 of the Internal Reve21 nue Code of 1986 (relating to amounts received under ac22 cident and health plans) is amended by adding at the end

23 the following new subsection:
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1 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED

2 LONG-TERM CARE INSURANCE.—For purposes of section

3 104, this section, and section 106—

4 ‘‘(1) BENEFITS TREATED AS PAYABLE FOR

5 SICKNESS, ETC.—Any benefit received through quali6 fied long-term care insurance (as defined in section

7 818(g)) shall be treated as received for personal in8 juries or sickness.

9 ‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT

10 PROVIDED UNDER QUALIFIED LONG-TERM CARE IN11 SURANCE TREATED AS INCURRED FOR MEDICAL

12 CARE.—Expenses incurred by a taxpayer for which

13 reimbursement is paid through qualified long-term

14 care insurance (as so defined) shall be treated for

15 purposes of subsection (b) as incurred for medical

16 care (as defined in section 213(d)).

17 ‘‘(3) REFERENCES TO ACCIDENT AND HEALTH

18 PLANS.—Any reference to an accident or health plan

19 shall be treated as including a reference to a plan

20 providing qualified long-term care insurance.’’

21 (b) EFFECTIVE DATE.—The amendment made by

22 subsection (a) shall apply to taxable years beginning after

23 December 31, 1993.
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1 SEC. 403. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

2 WITHDRAWN FROM INDIVIDUAL RETIRE3 MENT PLANS OR 401(k) PLANS FOR QUALI4 FIED LONG-TERM CARE INSURANCE.

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 items specifically excluded from gross income) is amended

8 by redesignating section 136 as section 137 and by insert9 ing after section 135 the following new section:

10 ‘‘SEC. 136. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

11 ACCOUNTS AND SECTION 401(k) PLANS FOR

12 QUALIFIED LONG-TERM CARE INSURANCE.

13 ‘‘(a) GENERAL RULE.—The amount includible in the

14 gross income of an individual for the taxable year by rea15 son of qualified distributions during such taxable year

16 shall not exceed the excess of—

17 ‘‘(1) the amount which would (but for this sec18 tion) be so includible by reason of such distributions,

19 over

20 ‘‘(2) the aggregate premiums paid by such indi21 vidual during such taxable year for any policy of

22 qualified long-term care insurance (as defined in sec23 tion 818(g)) for the benefit of such individual or the

24 spouse of such individual.

25 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

26 this section, the term ‘qualified distribution’ means any
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1 distribution to an individual from an individual retirement

2 account or a section 401(k) plan if such individual has

attained age 591 3 ⁄2 on or before the date of the distribution

4 (and, in the case of a distribution used to pay premiums

5 for the benefit of the spouse of such individual, such

spouse has attained age 591 6 ⁄2 on or before the date of the

7 distribution).

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

10 term ‘individual retirement account’ has the mean11 ing given such term by section 408(a).

12 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

13 401(k) plan’ means any employer plan which meets

14 the requirements of section 401(a) and which in15 cludes a qualified cash or deferred arrangement (as

16 defined in section 401(k)).

17 ‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—

18 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC19 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

20 DEFERRED ARRANGEMENT.—This section shall not

21 apply to any distribution from a section 401(k) plan

22 to the extent the aggregate amount of such distribu23 tions for the use described in subsection (a) exceeds

24 the aggregate employer contributions made pursuant

25 to the employee’s election under section 401(k)(2).
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1 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI2 FICATION.—A plan shall not be treated as failing to

3 satisfy the requirements of section 401, and an ar4 rangement shall not be treated as failing to be a

5 qualified cash or deferred arrangement (as defined

6 in section 401(k)(2)), merely because under the plan

7 or arrangement distributions are permitted which

8 are excludable from gross income by reason of this

9 section.’’.

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 401(k) of such Code is amended by

12 adding at the end the following new paragraph:

13 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

136.’’

14 (2) Section 408(d) of such Code is amended by

15 adding at the end the following new paragraph:

16 ‘‘(8) CROSS REFERENCE.—

For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 136.’’

17 (3) The table of sections for such part III is

18 amended by striking the last item and inserting the

19 following new items:

‘‘Sec. 136. Distributions from individual retirement accounts and

section 401(k) plans for qualified long-term care insurance.

‘‘Sec. 137. Cross references to other Acts.’’
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1 (c) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to taxable years beginning after

3 December 31, 1993.

4 SEC. 404. EXCHANGE OF LIFE INSURANCE POLICY FOR

5 QUALIFIED LONG-TERM CARE POLICY NOT

6 TAXABLE.

7 (a) IN GENERAL.—Subsection (a) of section 1035 of

8 the Internal Revenue Code of 1986 (relating to certain

9 exchanges of insurance policies) is amended by striking

10 the period at the end of paragraph (3) and inserting ‘‘;

11 or’’ and by adding at the end the following new paragraph:

12 ‘‘(4) in the case of an individual who has attained age 591 13 ⁄2, a contract of life insurance or a

14 contract of endowment insurance or an annuity con15 tract for a contract of qualified long-term care insur16 ance (as defined in section 818(g)) for the benefit of

17 such individual or the spouse of such individual if

such spouse has attained age 591 18 ⁄2 on or before the

19 date of the exchange.’’

20 (b) EFFECTIVE DATE.—The amendment made by

21 this section shall apply to taxable years beginning after

22 December 31, 1993.
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1 Subtitle B—Treatment of

2 Accelerated Death Benefits

3 SEC. 411. TAX TREATMENT OF ACCELERATED DEATH BENE4 FITS UNDER LIFE INSURANCE CONTRACTS.

5 (a) GENERAL RULE.—Section 101 of the Internal

6 Revenue Code of 1986 (relating to certain death benefits)

7 is amended by adding at the end thereof the following new

8 subsection:

9 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

10 DEATH BENEFITS.—

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, any amount paid to an individual under a life

13 insurance contract on the life of an insured who is

14 a terminally ill individual or who is permanently con15 fined to a nursing home shall be treated as an

16 amount paid by reason of the death of such insured.

17 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur18 poses of this subsection, the term ‘terminally ill indi19 vidual’ means an individual who has been certified

20 by a physician, licensed under State law, as having

21 an illness or physical condition which can reasonably

22 be expected to result in death in 12 months or less.

23 ‘‘(3) PERMANENTLY CONFINED TO A NURSING

24 HOME.—For purposes of this subsection, an individ25 ual has been permanently confined to a nursing
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1 home if the individual is presently confined to a

2 nursing home and has been certified by a physician,

3 licensed under State law, as having an illness or

4 physical condition which can reasonably be expected

5 to result in the individual remaining in a nursing

6 home for the rest of his life.’’

7 (b) EFFECTIVE DATE.—The amendment made by

8 this section shall apply to taxable years beginning after

9 December 31, 1993.

10 SEC. 412. TAX TREATMENT OF COMPANIES ISSUING QUALI11 FIED ACCELERATED DEATH BENEFIT RID12 ERS.

13 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID14 ERS TREATED AS LIFE INSURANCE.—Section 818 of the

15 Internal Revenue Code of 1986 (relating to other defini16 tions and special rules) is amended by adding at the end

17 thereof the following new subsection:

18 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

19 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

20 this part—

21 ‘‘(1) IN GENERAL.—Any reference to a life in22 surance contract shall be treated as including a ref23 erence to a qualified accelerated death benefit rider

24 on such contract.
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1 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE2 FIT RIDERS.—For purposes of this subsection, the

3 term ‘qualified accelerated death benefit rider’

4 means any rider or addendum on, or other provision

5 of, a life insurance contract which provides for pay6 ments to an individual on the life of an insured upon

7 such insured becoming a terminally ill individual (as

8 defined in section 101(g)(2)) or being permanently

9 confined to a nursing home (as defined in section

10 101(g)(3)).’’

11 (b) DEFINITIONS OF LIFE INSURANCE AND MODI12 FIED ENDOWMENT CONTRACTS.—

13 (1) RIDER TREATED AS QUALIFIED ADDI14 TIONAL BENEFIT.—Paragraph (5)(A) of section

15 7702(f) of such Code is amended by striking ‘‘or’’

16 at the end of clause (iv), by redesignating clause (v)

17 as clause (vi), and by inserting after clause (iv) the

18 following new clause:

19 ‘‘(v) any qualified accelerated death

20 benefit rider (as defined in section

21 818(g)(2)) or any qualified long-term care

22 insurance rider which reduces the death

23 benefit, or’’.

24 (2) TRANSITIONAL RULE.—For purposes of ap25 plying section 7702 or 7702A of the Internal Reve-
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1 nue Code of 1986 to any contract (or determining

2 whether either such section applies to such con3 tract), the issuance of a rider or addendum on, or

4 other provision of, a life insurance contract permit5 ting the acceleration of death benefits (as described

6 in section 101(g) of such Code) or for qualified long7 term care insurance (as defined in section 849(b) of

8 such Code) shall not be treated as a modification or

9 material change of such contract.

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

11 this section shall apply to taxable years beginning before,

12 on, or after December 31, 1993.

13 TITLE V—INCENTIVES FOR PRO14 VISION OF SERVICES IN

15 RURAL AREAS

16 SEC. 501. DEDUCTION FOR MEDICAL SCHOOL EDUCATION

17 LOAN INTEREST INCURRED BY DOCTORS

18 SERVING IN MEDICALLY UNDERSERVED

19 RURAL AREAS.

20 (a) IN GENERAL.—Paragraph (2) of section 163(h)

21 of the Internal Revenue Code of 1986 (relating to dis22 allowance of deduction for personal interest) is amended

23 by striking ‘‘and’’ at the end of subparagraph (D), by re24 designating subparagraph (E) as subparagraph (F), and
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1 by inserting after subparagraph (D) the following new

2 subparagraph:

3 ‘‘(E) any qualified medical education loan

4 interest (within the meaning of paragraph (5)),

5 and’’.

6 (b) QUALIFIED MEDICAL EDUCATION LOAN INTER7 EST DEFINED.—Paragraph (5) of section 163(h) of such

8 Code is amended to read as follows:

9 ‘‘(5) QUALIFIED MEDICAL EDUCATION LOAN IN10 TEREST.—

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

12 medical education loan interest’ means inter13 est—

14 ‘‘(i) which is on a medical education

15 loan of a physician,

16 ‘‘(ii) which is paid or accrued by such

17 physician, and

18 ‘‘(iii) which accrues during the pe19 riod—

20 ‘‘(I) such physician is providing

21 primary care (including internal medi22 cine, pediatrics, obstetrics/gynecology,

23 family medicine, and osteopathy) to

24 residents of a medically underserved

25 rural area, and
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1 ‘‘(II) such physician’s principal

2 place of abode is in such area.

3 ‘‘(B) MEDICAL EDUCATION LOAN.—The

4 term ‘medical education loan’ means indebted5 ness incurred to pay the individual’s—

6 ‘‘(i) qualified tuition and related ex7 penses (as defined in section 117(b)) in8 curred for the medical education of such

9 individual, or

10 ‘‘(ii) reasonable living expenses while

11 away from home in order to attend an edu12 cational institution described in section

13 170(b)(1)(A)(ii) for the medical education

14 of such individual.

15 ‘‘(C) PHYSICIAN.—For purposes of sub16 paragraph (A), the term ‘physician’ has the

17 meaning given such term by section 1861(r)(1)

18 of the Social Security Act.

19 ‘‘(D) MEDICALLY UNDERSERVED RURAL

20 AREA.—The term ‘medically underserved rural

21 area’ means any rural area which is a medically

22 underserved area (as defined in section 330(b)

23 or 1302(7) of the Public Health Service Act).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years ending after the

3 date of the enactment of this Act.

4 SEC. 502. REQUIRING DEVELOPMENT OF COMPREHENSIVE

5 PLANS FOR MEDICALLY UNDERSERVED

6 RURAL POPULATIONS.

7 (a) STATE COMPREHENSIVE PLANS FOR MEDICALLY

8 UNDERSERVED RURAL AREAS.—As a requirement of an

9 agreement between the Secretary of Health and Human

10 Services and a State under section 103(d)(2) in the case

11 of a State that has one or more rural areas that are medi12 cally underserved areas (as defined in section 330(b) or

13 1302(7) of the Public Health Service Act), the State shall

14 develop and submit to the Secretary a comprehensive plan

15 that addresses the health care needs of the populations

16 in all such areas. The comprehensive plan shall utilize, in

17 the most efficient manner possible and to the maximum

18 extent possible, the current resources of Federal, State,

19 and local governments, including public health clinics.

20 (b) RESPONSE TO MANAGED COMPETITION.—

21 (1) IN GENERAL.—If a State is required to es22 tablish a comprehensive plan under subsection (a),

23 the State may not operate a managed competition

24 system (described in paragraph (2)) unless, with re-
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1 spect to each medically underserved rural area in the

2 State, either—

3 (A) the system provides assurances with

4 respect to the timely and cost-effective delivery

5 of appropriate health care in that area, or

6 (B) the application of the system is waived

7 with respect to residents of such area and there

8 is established, in accordance with the plan, an

9 alternative method of assuring the timely and

10 cost-effective delivery of appropriate health care

11 in that area.

12 (2) MANAGED COMPETITION SYSTEM DE13 SCRIBED.—A managed competition system described

14 in this paragraph is a system under which a State

15 assures access to basic health care services for all

16 residents through the enrollment of such residents

17 under a certified health plan offered by a health in18 surance purchasing cooperative or similar entity.

19 SEC. 503. INCLUSION OF TRANSPORTATION COSTS FOR

20 PHYSICIANS IN UNDERSERVED RURAL AREAS

21 IN THE PRACTICE INDEX UNDER THE MEDI22 CARE PHYSICIAN PAYMENT SCHEDULE.

23 (a) IN GENERAL.—Section 1848(e) of the Social Se24 curity Act (42 U.S.C. 1395w–4(e)) is amended—
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1 (1) by adding at the end of paragraph (1) the

2 following new subparagraph:

3 ‘‘(D) INCLUSION OF TRANSPORTATION

4 COSTS.—In establishing the index under sub5 paragraph (A)(i), the Secretary shall take into

6 account transportation costs associated with

7 providing health care services to patients in

8 rural health professional shortage areas (as des9 ignated under section 332 of the Public Health

10 Service Act).’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to services furnished on or after

13 January 1, 1994.

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