I

103D CONGRESS

2D SESSION H. R. 200

To establish the framework for a health care system that will bring about

universal access to affordable, quality health care by containing the

growth in health care costs through a national health budget, managed

competition, and other means, by improving access to and simplifying

the administration of health insurance, by deterring and prosecuting

health care fraud and abuse, by expanding benefits under the medicare

program, by expanding eligibility and increasing payment levels under

the medicaid program, and by making health insurance available to

all children.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. STARK introduced the following bill; which was referred jointly to the

Committees on Ways and Means, Energy and Commerce, and Education

and Labor

JANUARY 26, 1994

Additional sponsors: Mr. BLACKWELL, and Mr. ROMERO-BARCELO ́

A BILL

To establish the framework for a health care system that

will bring about universal access to affordable, quality

health care by containing the growth in health care costs

through a national health budget, managed competition,

and other means, by improving access to and simplifying

the administration of health insurance, by deterring and

prosecuting health care fraud and abuse, by expanding

benefits under the medicare program, by expanding eligibility and increasing payment levels under the medicaid
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program, and by making health insurance available to

all children.

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 ‘‘Health Care Cost Containment and Reform Act of

6 1993’’.

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

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. General definitions.

TITLE I—COST CONTAINMENT

Subtitle A—National Health Budget

Sec. 101. National health expenditure budget.

Sec. 102. Classes of health care services.

Sec. 103. Allocation of health budget by class of service.

Sec. 104. Adjustments for changes in medicare benefits.

Sec. 105. National health expenditures reporting system.

Subtitle B—State Provider Payment Control Systems

Sec. 121. State provider payment rates.

Sec. 122. General conditions for State provider payment control systems.

Sec. 123. Control of aggregate expenditures requirement for State systems.

Sec. 124. Treatment of States failing to control aggregate expenditures.

Sec. 125. Termination of approval of State system.

Subtitle C—Maximum Payment Rates for Services Not Subject to State Provider Payment Control Systems or Provided by Staff or Group Model

Health Maintenance Organizations

Sec. 140. Exemption for services subject to approved State provider payment

control systems or provided by staff or group model health

maintenance organizations.

PART 1—ESTABLISHMENT AND APPLICATION OF MAXIMUM PAYMENT RATES

(OTHER THAN UNDER MEDICARE PROGRAM)

Sec. 141. Process.

Sec. 142. Payment methodology; relation to budget allocation.

Sec. 143. General application and enforcement of maximum payment rates.

Sec. 144. Limitation on payment rates under medicaid.
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PART 2—METHODOLOGIES FOR DETERMINING MAXIMUM RATES (OTHER

THAN UNDER MEDICARE PROGRAM)

Sec. 151. Basis for maximum rates of payment for inpatient hospital services.

Sec. 152. Basis for maximum payment rate for class of physicians’ services and

other professional medical services.

Sec. 153. Basis for other maximum payment rates for services using certain

medicare payment methodologies.

Sec. 154. Other services.

Sec. 155. Development of prospectively-determined payment methodologies.

PART 3—MEDICARE PAYMENT ADJUSTMENTS

Sec. 161. Conforming medicare payment rates to medicare health expenditure

allocations.

Sec. 162. Adjustments to medicare payments for graduate medical education.

TITLE II—MANAGED CARE AND MANAGED COMPETITION

Subtitle A—Managed Care

Sec. 201. Authorization for managed care systems to pay less than maximum

payment rates.

Sec. 202. Staff and group model health maintenance organizations exempt from

maximum payment rates.

Sec. 203. Repeal of sunset of dual choice requirement.

Sec. 204. Multiple choice of health maintenance organizations.

Sec. 205. Federal assistance for establishment and initial operation of staff and

group model HMOs.

Sec. 206. Preemption of ‘‘any willing provider’’ State laws.

Sec. 207. Adjustment in medicare capitation payments to account for regional

variations in application of secondary payor provisions.

Sec. 208. GAO study of expansion of health maintenance organizations.

Subtitle B—Managed Competition

PART 1—ESTABLISHMENT OF NATIONAL HPPC PROGRAM

Sec. 221. Establishment of program; grants to States.

Sec. 222. Establishment of HPPCs; designation of HPPC areas.

Sec. 223. Organization and operation of HPPCs.

Sec. 224. Agreements with employers.

Sec. 225. Agreements with qualified health plans (QHPs).

Sec. 226. Enrolling individuals in qualified health plans through a HPPC.

Sec. 227. Coordination among HPPCs.

Sec. 228. Definitions.

PART 2—REQUIREMENTS FOR QUALIFIED HEALTH PLANS

Sec. 251. Approval process; qualifications.

Sec. 252. Benefit packages.

Subtitle C—National Patient Outcomes and Enrollee Satisfaction Data

Reporting Program

Sec. 271. National patient outcomes program.

Sec. 272. Enrollee health plan satisfaction.

Sec. 273. Research and demonstration.
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Subtitle D—Study of Universal Health Insurance Coverage and Cost

Containment

Sec. 291. Study.

TITLE III—HEALTH SYSTEMS REFORM

Subtitle A—Health Insurance Reform

Sec. 301. Excise tax on premiums received on health insurance policies which

do not meet certain requirements.

Sec. 302. Health benefit plan standards.

‘‘TITLE XXI—HEALTH BENEFIT PLAN STANDARDS

‘‘Sec. 2101. Standards and requirements for health benefit plans.

‘‘Sec. 2102. Establishment of standards.

‘‘Sec. 2103. Requirements applicable to all health benefit plans.

‘‘Sec. 2104. Standards applicable only to insured health benefit plans.

‘‘Sec. 2105. Payment of commissions.

‘‘Sec. 2106. Insurance requirement for multiple employer welfare arrangements.

‘‘Sec. 2107. Nonapplication in Puerto Rico and the territories.

‘‘Sec. 2108. Definitions.

Sec. 303. Assuring continuation of access to college and university health benefit plans by graduating students.

Subtitle B—Administrative Simplification

Sec. 321. Requirement for uniform health claims cards.

Sec. 322. Requirement for entitlement verification system.

Sec. 323. Requirements for uniform claims and electronic claims data set.

Sec. 324. Electronic medical records and reporting.

Sec. 325. Uniform hospital cost reporting.

Sec. 326. Definitions.

Subtitle C—Fraud and Abuse

PART 1—NATIONAL HEALTH CARE FRAUD CONTROL PROGRAM

Sec. 341. All-payer fraud and abuse control program.

Sec. 342. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health benefit plan.

Sec. 343. Prohibition against offering inducements to individuals enrolled under

or employed by programs or plans.

Sec. 344. Intermediate sanctions for medicare health maintenance organizations.

PART 2—BAN ON IMPROPER PHYSICIAN REFERRALS

Sec. 351. Application of medicare ban on self-referrals to all payors.

Sec. 352. Extension of self-referral ban to additional specified services.

Sec. 353. Changes in exceptions and other provisions relating to compensation

arrangements.

Sec. 354. Effective dates.

Subtitle D—Other Provisions

Sec. 361. Malpractice reform.
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TITLE IV—EXPANSIONS OF HEALTH BENEFITS AND OTHER

HEALTH INITIATIVES

Subtitle A—Medicaid Benefit Improvements

Sec. 401. Floor on medicaid payment levels for inpatient hospital services and

physicians’ services.

Sec. 402. Medicaid eligibility expansion.

Sec. 403. Full Federal payment for increased costs.

Subtitle B—Expansion of Medicare Benefits

PART 1—PREVENTIVE BENEFITS

Sec. 411. Annual screening mammography.

Sec. 412. Coverage of colorectal screening.

Sec. 413. Coverage of certain immunizations.

Sec. 414. Coverage of well-child care.

Sec. 415. Demonstration projects for coverage of other preventive services.

PART 2—COVERAGE OF PRESCRIPTION DRUGS

Sec. 421. Coverage of outpatient prescription drugs.

Sec. 422. Establishment of Prescription Drug Payment Review Commission.

Sec. 423. Coverage of prescription drugs for qualified medicare beneficiaries

and qualified disabled and working individuals.

PART 3—QUALIFIED MEDICARE BENEFICIARY ENROLLMENT

Sec. 431. Qualified medicare beneficiary enrollment.

Subtitle C—Health Insurance Deduction for the Self-Employed

Sec. 441. Deduction for health insurance costs of self-employed individuals

made permanent and increased.

Subtitle D—Health Insurance Program for Children

Sec. 451. Health insurance for children.

‘‘TITLE XXII—HEALTH INSURANCE FOR CHILDREN

‘‘Sec. 2200. Establishment of program of health insurance for children.

‘‘PART A—ELIGIBILITY AND ENROLLMENT

‘‘Sec. 2201. Eligibility.

‘‘Sec. 2202. Enrollment periods.

‘‘Sec. 2203. Employment-based enrollment.

‘‘Sec. 2204. Coverage period.

‘‘PART B—BENEFITS; PAYMENTS FOR BENEFITS

‘‘Sec. 2211. Scope of benefits.

‘‘Sec. 2212. Exclusions.

‘‘Sec. 2213. Payments for benefits.

‘‘PART C—PREMIUMS; TRUST FUND

‘‘Sec. 2231. Amount of premiums.
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‘‘Sec. 2232. Payment of premiums.

‘‘Sec. 2233. Children’s Health Insurance Trust Fund.

‘‘PART D—GENERAL PROVISIONS

‘‘Sec. 2251. Incorporation of certain medicare provisions.

‘‘Sec. 2252. Incorporation of peer review provisions and fraud and abuse

provisions.

1 SEC. 2. GENERAL DEFINITIONS.

2 (a) IN GENERAL.—In this Act (except as otherwise

3 provided):

4 (1) APPLICABLE COMMISSION.—The term ‘‘ap5 plicable Commission’’ means—

6 (A) with respect to services included in a

7 class of services furnished by a hospital, other

8 institutional provider, or home health provider,

9 the Prospective Payment Assessment Commis10 sion,

11 (B) with respect to prescription drugs on

12 or after January 1, 1995, the Prescription

13 Drug Payment Review Commission (established

14 under section 1847 of the Social Security Act,

15 as added by section 422 of this Act), and

16 (C) with respect to health care services not

17 described in subparagraphs (A) and (B), the

18 Physician Payment Review Commission.

19 (2) CLASS OF SERVICES.—The term ‘‘class’’

20 means, with respect to health care services, a class

21 established under section 102.
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1 (3) HEALTH CARE SERVICES.—The term

2 ‘‘health care services’’ means the items and services

3 described in section 102(a)(2) or included in health

4 care services under section 102(a)(3), but does not

5 include items and services described in section

6 102(a)(4).

7 (4) MEDICARE PROGRAM; MEDICARE BENE8 FICIARY.—(A) The term ‘‘medicare program’’ means

9 the programs established under parts A and B of

10 title XVIII of the Social Security Act.

11 (B) The term ‘‘medicare beneficiary’’ means an

12 individual entitled to benefits under part A or B, or

13 both, of the medicare program.

14 (5) MEDICAID PROGRAM.—The term ‘‘medicaid

15 program’’ means any State plan approved under title

16 XIX of the Social Security Act and includes a State

17 program operating under a waiver under section

18 1115 of such Act.

19 (6) NATIONAL HEALTH CARE EXPENDITURE

20 BUDGET.—The term ‘‘national health care expendi21 ture budget’’ means such a budget established under

22 section 101.

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

24 the Secretary of Health and Human Services.
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1 (8) STATE.—The term ‘‘State’’ means the 50

2 States and the District of Columbia.

3 (9) UNITED STATES.—The term ‘‘United

4 States’’ means the 50 States and the District of Co5 lumbia.

6 (b) TERM USED IN TITLES I AND II.—In titles I and

7 II:

8 (1) HEALTH MAINTENANCE ORGANIZATION.—

9 The term ‘‘health maintenance organization’’ means

10 an eligible organization with a contract under sec11 tion 1876 of the Social Security Act or a qualified

12 health maintenance organization (as defined in sec13 tion 1310(d) of the Public Health Service Act).

14 (2) STAFF OR GROUP MODEL HEALTH MAINTE15 NANCE ORGANIZATION.—The term ‘‘staff or group

16 model health maintenance organization’’ means a

17 health maintenance organization (as defined in para18 graph (1)) for which 90 percent of the services of

19 physicians are provided through members of the

20 staff of the organization or through a medical group

21 (or groups).

22 TITLE I—COST CONTAINMENT

23 Subtitle A—National Health Budget

24 SEC. 101. NATIONAL HEALTH EXPENDITURE BUDGET.

25 (a) ESTABLISHMENT.—
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1 (1) IN GENERAL.—For each calendar year (be2 ginning with 1995), there is established a national

3 health expenditure budget equal to the sum of—

4 (A) the medicare health expenditure budg5 et (under paragraph (2)), and

6 (B) the nonmedicare health expenditure

7 budget (under such paragraph).

8 (2) AMOUNT.—Subject to section 104—

9 (A) 1995.—The total amount of the medi10 care and nonmedicare health expenditure budg11 ets for 1995 is equal to the respective medicare

12 and nonmedicare budget baselines (determined

13 under paragraphs (1) and (2), respectively, of

14 subsection (b) for 1994) multiplied by the appli15 cable adjustment factor (specified under sub16 section (c)) for 1995.

17 (B) SUBSEQUENT YEARS.—The total

18 amount of each such budget for each year after

19 1995 is equal to the respective budget deter20 mined under this paragraph for the previous

21 year multiplied by the applicable adjustment

22 factor (specified under subsection (c)) for the

23 year involved.

24 (3) PUBLICATION.—The Secretary of Health

25 and Human Services shall publish in the Federal
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1 Register and report to the Congress, by not later

2 than April 1 before each year, the amounts of the

3 national health expenditure budget, of the medicare

4 health expenditure budget, and of the nonmedicare

5 health expenditure budget for the year.

6 (b) BUDGET BASELINES.—

7 (1) MEDICARE BUDGET BASELINE.—The Sec8 retary shall compute a medicare budget baseline

9 under this paragraph for 1994 as follows:

10 (A) 1993 ACTUAL EXPENDITURES.—The

11 Secretary shall determine (on the basis of the

12 best data available) the amount of the aggre13 gate medicare expenditures (as defined in sub14 section (d)(1)) during 1993.

15 (B) PROJECTION FOR 1994.—The Sec16 retary shall increase such amount by the Sec17 retary’s estimate of the percentage increase in

18 the aggregate medicare expenditures between

19 the midpoint of 1993 and the midpoint of 1994.

20 (2) NONMEDICARE BUDGET BASELINE.—The

21 Secretary shall compute a nonmedicare budget base22 line under this paragraph for 1994 as follows:

23 (A) 1993 ACTUAL EXPENDITURES.—The

24 Secretary shall determine (on the basis of the

25 best data available) the amount of the aggre-
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1 gate nonmedicare expenditures (as defined in

2 subsection (d)(2)) for health care services dur3 ing 1993.

4 (B) PROJECTION FOR 1994.—The Sec5 retary shall increase such amount by the Sec6 retary’s estimate of the percentage increase in

7 the aggregate nonmedicare expenditures for

8 such services between the midpoint of 1993 and

9 the midpoint of 1994.

10 (c) APPLICABLE ADJUSTMENT FACTOR.—The appli11 cable adjustment factor under this subsection for each

12 year is 1 plus the sum (expressed as a fraction) of—

13 (1) the average annual percentage increase in

14 the gross domestic product (in current dollars, as

15 published by the Secretary of Commerce) during the

16 5-year period ending with the second previous year;

17 plus

18 (2)(A) for 1995, 3.5 percentage points,

19 (B) for 1996, 2.5 percentage points,

20 (C) for 1997, 1.5 percentage points,

21 (D) for 1998, 0.5 percentage point, and

22 (E) for each year thereafter, 0 percentage

23 points.

24 (d) AGGREGATE MEDICARE AND NONMEDICARE EX25 PENDITURES DEFINED.—
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1 (1) AGGREGATE MEDICARE EXPENDITURES.—

2 In this Act, the term ‘‘aggregate medicare expendi3 tures’’ means, with respect to health care services or

4 a class of services, expenditures made under the

5 medicare program with respect to the provision of

6 such services or class of services, and also includes

7 receipts of providers with respect to amounts pay8 able as deductibles, coinsurance, or other amounts

9 for which the beneficiary is liable with respect to

10 items and services covered under such program pro11 vided to a medicare beneficiary, and including pay12 ments made under a contract under section

13 1833(a)(1) or section 1876 of the Social Security

14 Act (other than the portion of such payments that

15 is attributable to administrative costs).

16 (2) AGGREGATE NONMEDICARE EXPENDI17 TURES.—

18 (A) IN GENERAL.—Subject to the succeed19 ing provisions of this paragraph, in this Act,

20 the term ‘‘aggregate nonmedicare expenditures’’

21 means, with respect to health care services or a

22 class of services, receipts of providers in the

23 United States with respect to the provision of

24 such services or class of services, excluding ag-
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1 gregate medicare expenditures with respect to

2 such services or class of services.

3 (B) INCLUSION OF ALL PAYORS.—Except

4 as provided in paragraph (3), the amount of ag5 gregate nonmedicare expenditures shall be de6 termined without regard to the source of pay7 ment and shall include (as specified by the Sec8 retary) direct patient expenditures as well as

9 payments made by third party payors (includ10 ing Government health programs).

11 (3) EXCLUSIONS.—In computing aggregate

12 nonmedicare expenditures, there shall be excluded,

13 as specified by the Secretary—

14 (A) nonoperating revenues (such as inter15 est);

16 (B) receipts attributable to personal com17 fort and convenience items described in section

18 102(a)(5);

19 (C) direct payments from the Federal Gov20 ernment, from State government, from units of

21 local government for research to the extent un22 related (and not attributable) to the provision

23 of health care services;

24 (D) receipts attributable to the program

25 for the provision of hospital care and medical
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1 services by the Department of Veterans’ Affairs

2 under chapter 17 of title 38, United States

3 Code;

4 (E) payments made to health care facilities

5 and providers of the Department of Defense

6 and of the Indian Health Service; and

7 (F) such other receipts unrelated to the

8 provision of health care services as the Sec9 retary specifies.

10 SEC. 102. CLASSES OF HEALTH CARE SERVICES.

11 (a) ESTABLISHMENT OF CLASSES.—

12 (1) IN GENERAL.—

13 (A) SPECIFIED SERVICES.—

14 (i) IN GENERAL.—Subject to subpara15 graph (B)(ii), in the case of items and

16 services specified in a subparagraph under

17 paragraph (2), all of the items and services

18 described in that subparagraph shall be

19 considered to be a ‘‘separate’’ class of

20 health care services.

21 (ii) OVERLAPPING SERVICES.—Except

22 as the Secretary may provide, items and

23 services specified in a subparagraph of

24 paragraph (2) shall be considered to be ex-
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1 cluded from the subsequent subparagraphs

2 of that paragraph.

3 (B) OTHER ITEMS AND SERVICES.—

4 (i) IN GENERAL.—In the case of items

5 and services included as health care serv6 ices under paragraph (3), the Secretary

7 shall group such items and services into

8 such class or classes of health care services

9 as may be appropriate.

10 (ii) INCLUSION IN CLASSES OF SPECI11 FIED HEALTH CARE SERVICES.—In carry12 ing out clause (i), the Secretary may in13 clude an item or service described in para14 graph (3) within a class of services estab15 lished under subparagraph (A).

16 (2) SPECIFIED HEALTH CARE SERVICES.—Sub17 ject to paragraph (4), the items and services speci18 fied in this paragraph are as follows:

19 (A) Inpatient hospital services, other than

20 mental health services.

21 (B) Outpatient hospital services and ambu22 latory facility services (including renal dialysis

23 facility services), other than mental health serv24 ices.
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1 (C) Diagnostic testing services (including

2 clinical laboratory services and x-ray services).

3 (D) Physicians’ services and other profes4 sional medical services, other than mental

5 health services.

6 (E) Home health services and hospice care.

7 (F) Rehabilitation services, such as phys8 ical therapy, occupational and speech therapy.

9 (G) Durable medical equipment and sup10 plies.

11 (H) Prescription drugs and biologicals and

12 insulin.

13 (I) Nursing facility services, including

14 skilled nursing facility services and intermediate

15 care facility services, other than mental health

16 services.

17 (J) Mental health services.

18 (3) ADDITIONAL ITEMS AND SERVICES.—Sub19 ject to paragraph (4), the Secretary shall specify ad20 ditional items and services (not described in para21 graph (2)) for which payment is generally made

22 under a private or public health plan.

23 (4) EXCLUSIONS.—The following items and

24 services shall not be considered to be health care
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1 services and shall not be included in a class of serv2 ices under paragraph (1):

3 (A) Over-the-counter medications and med4 ical equipment and devices, not provided pursu5 ant to a prescription.

6 (B) Homemaker and home health aide

7 services and personal care services, and other

8 services described in section 1915(c)(4)(B), sec9 tion 1929(a), or section 1930(a) of the Social

10 Security Act.

11 (C) Intermediate care facility and other

12 custodial services for the mentally retarded.

13 (D) Inpatient mental health services of a

14 custodial nature.

15 (5) EXCLUSION OF INSTITUTIONAL CHARGES

16 FOR PERSONAL COMFORT AND CONVENIENCE

17 ITEMS.—Payments received (and amounts charged)

18 by a facility which are attributable to items (such as

19 private rooms, telephones, and television rentals)

20 provided for the personal comfort and convenience of

21 patients shall not be counted as receipts (nor subject

22 to limitations on amounts that may be charged) for

23 purposes of this title.

24 (b) PUBLICATION.—
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1 (1) IN GENERAL.—The Secretary shall pub2 lish—

3 (A) by not later than April 1, 1994, pro4 posed regulations defining the health care serv5 ices and establishing the classes of services

6 under this section, and

7 (B) by not later than June 1, 1994, final

8 regulations defining the health care services and

9 establishing such classes.

10 (2) ITEMS INCLUDED IN REGULATIONS.—In

11 such regulations, the Secretary shall define—

12 (A) the class or classes to be established

13 under subsection (a)(1),

14 (B) the services to be included within each

15 class, and

16 (C) the methods and sources of data for

17 computing, for purposes of this title, aggregate

18 medicare and nonmedicare expenditures for

19 services within the class.

20 (3) CHANGES.—

21 (A) NO CHANGES AUTHORIZED.—After the

22 Secretary has established classes of services

23 under paragraph (1)(B), the Secretary may not

24 change such classes (or the services included in

25 such classes), except in the case of services not
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1 previously classified. Any such services not pre2 viously classified shall be classified within one

3 of the classes previously established.

4 (B) RECOMMENDED CHANGES.—If the

5 Secretary determines that a change in the clas6 sification established under this section may be

7 appropriate, the Secretary shall submit to the

8 Congress a report proposing such change. The

9 Secretary shall include in the report an expla10 nation of—

11 (i) the rationale for such change, and

12 (ii) the impact of such change on the

13 total aggregate medicare and non-medicare

14 expenditures permitted for classes of serv15 ices that would be affected by the change.

16 (4) COMMISSION REPORTS.—

17 (A) INITIAL REPORTS.—With respect to

18 the establishment of classes of services under

19 this section, each applicable Commission (as de20 fined in section 2(a)(1))—

21 (i) by not later than March 1, 1994,

22 shall report its recommendations to the

23 Secretary and Congress concerning such

24 classes, and
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1 (ii) by not later than May 1, 1994,

2 shall report to the Secretary and the Con3 gress its comments concerning the classi4 fication proposed by the Secretary under

5 paragraph (1)(A).

6 (B) PERIODIC REPORTS.—Each applicable

7 Commission shall periodically report to Con8 gress on changes in the system of classification

9 under this section that should be made to pro10 mote the more efficient provision of medically

11 appropriate health care services.

12 SEC. 103. ALLOCATION OF HEALTH BUDGET BY CLASS OF

13 SERVICE.

14 (a) ALLOCATION.—

15 (1) IN GENERAL.—The Secretary shall allocate

16 the medicare and nonmedicare health expenditure

17 budgets under section 101 for a year among classes

18 of services specified under section 102.

19 (2) PROPORTIONAL ALLOCATION BASED ON

20 HISTORICAL PROJECTED EXPENDITURES.—Subject

21 to section 104—

22 (A) MEDICARE HEALTH EXPENDITURE

23 BUDGET.—The percent of the medicare health

24 expenditure budget allocated to each class for a
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1 year shall be equal to the quotient (expressed as

2 a percentage) of—

3 (i) the historical projected medicare

4 expenditures for the class for the year (as

5 determined under subsection (b)(1)), di6 vided by

7 (ii) the sum of such historical pro8 jected medicare expenditures for all the

9 classes for the year.

10 (B) NONMEDICARE HEALTH EXPENDITURE

11 BUDGET.—The percent of the nonmedicare

12 health expenditure budget allocated to each

13 class for a year shall be equal to the quotient

14 (expressed as a percentage) of—

15 (i) the historical projected

16 nonmedicare expenditures for the class for

17 the year (as determined under subsection

18 (b)(2)), divided by

19 (ii) the sum of such historical pro20 jected nonmedicare expenditures for all the

21 classes for the year.

22 (3) PUBLICATION.—

23 (A) IN GENERAL.—The Secretary shall, in

24 conjunction with the publication of budgets

25 under section 101(a)(3) for a year and by not
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1 later than April 1 before the year, publish in

2 the Federal Register and report to the Congress

3 the allocation of the budgets among the classes

4 of services under this subsection.

5 (B) EXCEPTION FOR 1995.—For 1995,

6 the Secretary shall publish and report the allo7 cation of the budgets among the classes of

8 services under this subsection not later than

9 August 1, 1994.

10 (b) HISTORICAL PROJECTED EXPENDITURES.—

11 (1) MEDICARE.—

12 (A) DETERMINATION.—For purposes of

13 subsection (a)—

14 (i) FOR 1994.—The historical pro15 jected medicare expenditures for a class of

16 services for 1994 is equal to the portion of

17 the amount of aggregate medicare expendi18 tures during 1993 (as determined under

19 section 101(b)(1)(A)) which is attributable

20 to the class of services, multiplied by the

21 medicare trend factor (described in sub22 paragraph (B)) for the class for 1994.

23 (ii) SUBSEQUENT YEARS.—The histor24 ical projected medicare expenditures for a

25 class of services for a year after 1994 is
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1 equal to the amount of the allocation for

2 the class under subsection (a)(2)(A) (tak3 ing into account any adjustment under sec4 tion 104) for the preceding year multiplied

5 by the medicare trend factor (described in

6 subparagraph (B)) for the class for the

7 year involved.

8 (B) MEDICARE TREND FACTOR.—In sub9 paragraph (A), subject to section 104(b)(2), the

10 ‘‘medicare trend factor’’, for a class of services,

11 is 1 plus the average annual rate of increase in

12 aggregate medicare expenditures for the class of

13 services during the 5-year period ending with

14 1993.

15 (2) NONMEDICARE.—

16 (A) DETERMINATION.—For purposes of

17 subsection (a)—

18 (i) FOR 1994.—The historical pro19 jected nonmedicare expenditures for a class

20 of services for 1994 is equal to the portion

21 of the amount of aggregate nonmedicare

22 expenditures during 1993 (as determined

23 under section 101(b)(2)(A)) which is at24 tributable to the class of services, multi25 plied by the nonmedicare trend factor (de-
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1 scribed in subparagraph (B)) for the class

2 for 1994.

3 (ii) SUBSEQUENT YEARS.—The histor4 ical projected nonmedicare expenditures for

5 a class of services for a year after 1994 is

6 equal to the amount of the allocation for

7 the class under subsection (a)(2)(B) (tak8 ing into account any adjustment under sec9 tion 104) for the preceding year multiplied

10 by the medicare trend factor (described in

11 subparagraph (B)) for the class for the

12 year involved.

13 (B) NONMEDICARE TREND FACTOR.—In

14 subparagraph (A), subject to section 104(b)(2),

15 the ‘‘nonmedicare trend factor’’, for a class of

16 services, is 1 plus the average annual rate of in17 crease in aggregate nonmedicare expenditures

18 for the class of services during the 5-year pe19 riod ending with 1993.

20 (3) PUBLICATION OF TREND FACTORS.—The

21 Secretary shall publish, by not later than August 1,

22 1994, the medicare and nonmedicare trend factors

23 for the different classes of services.

24 (c) REVIEW AND CHANGES IN ALLOCATION.—

25 (1) IN GENERAL.—
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1 (A) NO ADMINISTRATIVE AUTHORITY TO

2 CHANGE.—Except as specifically provided in

3 section 104 or by law enacted after the enact4 ment of this Act, the Secretary has no authority

5 to change the allocation or trend factors from

6 the allocation and trend factors provided under

7 this section.

8 (B) RECOMMENDED CHANGES.—If the

9 Secretary determines that a change in the allo10 cation of a budget among classes is appropriate,

11 the Secretary shall submit to the Congress a re12 port proposing such change. The Secretary shall

13 include in the report an explanation of—

14 (i) the rationale for such change, and

15 (ii) the impact of such change on the

16 total aggregate medicare and nonmedicare

17 expenditures permitted for classes of serv18 ices that would be affected by the change.

19 (2) COMMISSION REVIEW.—Each applicable

20 Commission shall annually review and report to Con21 gress, in its report submitted under section

22 102(b)(4), on the effect of the trend factors used in

23 the allocation of the budgets among classes of serv24 ices. Such report shall include such recommenda25 tions for appropriate adjustments in the trend fac-
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1 tors as the applicable Commission considers appro2 priate to properly take into account at least—

3 (A) changes in health care technology,

4 (B) changes in the patterns and practices

5 relating to health care delivery found to be ap6 propriate,

7 (C) changes in the distribution of health

8 care services, and

9 (D) the special health care needs of under10 served rural and inner city populations.

11 SEC. 104. ADJUSTMENTS FOR CHANGES IN MEDICARE BEN12 EFITS.

13 (a) IN GENERAL.—With respect to a change in cov14 erage under the medicare program provided in title IV of

15 this Act that is effective in a year and results in an in16 crease in expenditures for a class of services under the

17 medicare program—

18 (1) the Secretary shall—

19 (A) increase the medicare health expendi20 ture budget under section 101 in the year by

21 the amount (estimated by the Secretary) of

22 such increase in expenditures, and

23 (B) decrease the nonmedicare health ex24 penditure budget under section 101 in the year

25 by such amount; and
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1 (2) the Secretary shall—

2 (A) increase the amount allocated under

3 section 103(a) to the class of services under the

4 medicare health expenditure budget for that

5 year by such amount, and

6 (B) decrease the amount allocated under

7 section 103(a) to the class of services under the

8 nonmedicare health expenditure budget for that

9 year by such amount.

10 (b) SUBSEQUENT YEARS.—If the Secretary makes a

11 change in a budget or allocation in a particular year under

12 subsection (a) with respect to a class of services—

13 (1) the budgets and allocations for subsequent

14 years shall be computed based upon the changes

15 made in the budget or allocations for the particular

16 year, and

17 (2) the Secretary may adjust the medicare

18 trend factor (under section 103(b)(1)(B)) and

19 nonmedicare trends factor (under section

20 103(b)(2)(B)) applied to such class of services in

21 subsequent years to the extent appropriate to reflect

22 any difference between the trend factor otherwise

23 applicable for the class and the annual rate of in24 crease in aggregate medicare and nonmedicare ex25 penditures for the services affected by the change.
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1 SEC. 105. NATIONAL HEALTH EXPENDITURES REPORTING

2 SYSTEM.

3 (a) IN GENERAL.—The Secretary shall establish a

4 national health expenditures reporting system (in this sec5 tion referred to as the ‘‘system’’) for purposes of—

6 (1) establishing the national health expendi7 tures budget,

8 (2) allocating the health budgets among classes

9 of services,

10 (3) determining maximum payment rates,

11 (4) monitoring of State provider payment con12 trol systems, and

13 (5) otherwise carrying out this title.

14 (b) INFORMATION REPORTING.—

15 (1) BY PROVIDER.—Under the system, provid16 ers of health care services shall report (beginning

17 not later than January 1, 1995) such information

18 relating to the provision of health care services (in19 cluding the volume and receipts for such services) in

20 such form and manner (including the use of elec21 tronic transmission), by such classification, and at

22 such periodic intervals, as the Secretary shall specify

23 in regulation.

24 (2) USE OF REPORTING MECHANISMS.—To the

25 maximum extent practicable and appropriate, report26 ing under such system shall be done through report-
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1 ing mechanisms (such as uniform hospital reports

2 provided under section 325) and using data bases

3 otherwise in use.

4 (3) USE OF SURVEYS.—The Secretary may,

5 where appropriate, provide for the collection of infor6 mation under the system through surveys of a sam7 ple of health care providers or with respect to a sam8 ple of information with respect to such providers.

9 (4) CONFIDENTIALITY.—Information gathered

10 pursuant to the authority provided under this sec11 tion shall not be disclosed in a manner that identi12 fies individual providers of services.

13 (5) TRANSITION.—Before January 1, 1995, for

14 purposes of this title, the Secretary may use such

15 other data collection and estimation techniques as

16 may be appropriate for purposes described in sub17 section (a).

18 (c) ENFORCEMENT.—If a provider of health services

19 is required, under the system under this section, to report

20 information and refuses, after being requested by the Sec21 retary, to provide the information required, or deliberately

22 provides information that is false, the Secretary may im23 pose a civil money penalty of not to exceed $10,000 for

24 each such refusal or provision of false information. The

25 provisions of section 1128A of the Social Security Act
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1 (other than subsections (a) and (b)) shall apply to civil

2 money penalties under the previous sentence in the same

3 manner as such provisions apply to a penalty or proceed4 ing under section 1128A(a) of such Act.

5 (d) INCLUSION OF HEALTH MAINTENANCE ORGANI6 ZATIONS.—In this section, the term ‘‘provider of health

7 care services’’ includes health maintenance organizations.

8 Subtitle B—State Provider

9 Payment Control Systems

10 SEC. 121. STATE PROVIDER PAYMENT RATES.

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

12 provider payment control system (in this subtitle referred

13 to as a ‘‘State system’’) approved under this section—

14 (1) the payment rates provided under such sys15 tem shall apply to services covered under the system

16 and furnished in the State, and

17 (2) pursuant to section 140(a), maximum pay18 ment rates shall not be established or applied to

19 such services under subtitle C.

20 (b) PROCESS.—

21 (1) APPLICATION.—The Secretary may not ap22 prove a State system under this section unless the

23 State submits to the Secretary an application in

24 such form and manner as the Secretary may require

25 and containing the information and assurance re-
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1 quired under this subtitle, together with any other

2 information and assurance as the Secretary may re3 quire.

4 (2) RESPONSE.—The Secretary shall be deemed

5 to have approved the application of a State under

6 paragraph (1) for a State system unless the Sec7 retary, within 90 days after the date the State sub8 mits the application to the Secretary, either denies

9 such application in writing or informs the State in

10 writing with respect to any additional information or

11 assurances needed to make a final determination

12 with respect to the application. After the date the

13 Secretary receives such additional information and

14 assurances, the application shall be deemed to be ap15 proved unless the Secretary, within 90 days of such

16 date, denies the application.

17 (3) DEEMED APPROVAL OF CERTAIN SYS18 TEMS.—

19 (A) IN GENERAL.—In the case of a hos20 pital reimbursement control system approved

21 under section 1886(c)(4) of the Social Security

22 Act or described in section 1814(b)(3) of such

23 Act and used for payment of hospital services

24 in the State under the medicare program, the

25 system is deemed to be a State system approved
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1 under this section with respect to payment for

2 hospital services.

3 (B) TERMINATION.—Insofar as subpara4 graph (A) applies to a State system, the con5 tinuation of the approval of the system is condi6 tioned upon the system’s compliance with the

7 requirements of section 123(a).

8 (4) EFFECT OF APPROVAL.—The approval of a

9 State system under this section shall be deemed to

10 constitute the approval by the Secretary of a waiver

11 of such requirements relating to the determination

12 of payment amounts under the medicare and medic13 aid programs as may be necessary to implement

14 such system.

15 (c) CONDITIONS FOR APPROVAL.—

16 (1) IN GENERAL.—The Secretary shall approve

17 the application of a State with respect to a State

18 system only if the Secretary determines that the

19 conditions for approval described in sections 122 and

20 123 are met.

21 (2) LIMITATION ON DISAPPROVAL.—The Sec22 retary cannot deny the application of a State for a

23 State system on the ground that the methodology

24 used under the system to control payments for inpa25 tient hospital services is based on a payment meth-
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1 odology other than on the basis of a diagnosis2 related group.

3 (d) TERMINATION OF APPROVAL.—The Secretary

4 shall terminate approval of a State system in accordance

5 with section 125 if—

6 (1) the Secretary determines that the system no

7 longer meets the requirements of section 122(b)(1)

8 (relating to all payors), section 122(b)(3)(B) (relat9 ing to limitation on differentials for medicaid serv10 ices), or section 122(e) (relating to certain require11 ments for hospitals); or

12 (2) the Secretary has reason to believe that the

13 assurances described in any of the following sections

14 are not being (or will not be) met:

15 (A) Section 122(b)(2) (relating to equi16 table treatment of all payors).

17 (B) Section 122(f) (relating to special re18 quirements for hospital admissions and exclu19 sions).

20 (C) Section 123 (relating to limiting aggre21 gate expenditures).

22 SEC. 122. GENERAL CONDITIONS FOR STATE PROVIDER

23 PAYMENT CONTROL SYSTEMS.

24 (a) APPLICATION TO CLASSES OF SERVICES.—
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1 (1) IN GENERAL.—Subject to paragraph (2),

2 the system applies to—

3 (A) inpatient hospital services (including

4 services of exempt hospitals (as defined in sec5 tion 151(f)(2)) statewide;

6 (B) inpatient and outpatient hospital serv7 ices (including services of exempt hospitals (as

8 so defined) statewide;

9 (C) physicians services statewide; or

10 (D) such inpatient and outpatient hospital

11 services and physicians services statewide.

12 (2) ADDITIONAL CLASSES.—The system may

13 apply to services in a class of services in addition to

14 services described in paragraph (1) only if the sys15 tem applies to all services within such class of serv16 ices.

17 (b) APPLICATION TO ALL PAYORS; EQUITABLE

18 TREATMENT.—

19 (1) APPLICATION TO ALL PAYORS.—The system

20 applies to substantially all payors (including the

21 medicare program and the medicaid program in the

22 State) for services to which the system applies.

23 (2) EQUITABLE TREATMENT.—The Secretary

24 has been provided satisfactory assurances as to the

25 equitable treatment of all payors (including the med-
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1 icare and medicaid programs and other Federal and

2 State programs) under the system.

3 (3) PAYMENT RATE DIFFERENTIALS PER4 MITTED.—

5 (A) IN GENERAL.—Subject to subpara6 graph (B), a State may provide for payment

7 rates for services furnished under the medicaid

8 program that are different from the payment

9 rates for services for which payment is made by

10 other payors.

11 (B) LIMITATION ON DIFFERENTIALS FOR

12 SERVICES UNDER MEDICAID.—The ratio of the

13 average rate of payment for services under the

14 medicaid program to such average rate of pay15 ment for the same services by health benefit

16 plans (other than the medicare and medicaid

17 programs) may not be less than the ratio of the

18 average of the rates of payment within the class

19 of services for which payment is provided under

20 the medicaid program to such average rate of

21 payment under other health benefit plans (other

22 than the medicare and medicaid programs) dur23 ing the most recent year before the implementa24 tion of the State system, as determined by the

25 Secretary.
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1 (4) SEPARATE RATE NEGOTIATIONS PERMITTED

2 FOR HEALTH MAINTENANCE ORGANIZATIONS.—A

3 State may provide that a health maintenance organi4 zation (as defined in section 2(b)) may negotiate di5 rectly with providers of services covered under the

6 system with respect to the organization’s rate of

7 payment for such services.

8 (5) MINIMUM PAYMENT RATES.—Under the

9 State system, the State may provide that the

10 amount of payment for any service within a class of

11 services under the system may not be less than a

12 minimum payment rate established by the State for

13 the services.

14 (c) OPERATION.—The system is operated directly by

15 the State or by a State agency or other public authority.

16 (d) REPORTS REQUIRED.—Providers of services cov17 ered under the system must make such reports as the Sec18 retary may require in order to monitor assurances pro19 vided under section 123 and make determinations under

20 section 124.

21 (e) ASSURANCES OF CONTINUED ACCESS.—The

22 State must provide the Secretary with satisfactory assur23 ances that operation of the system will not result in any

24 change in hospital admission practices or the provision of

25 other services which result in—
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1 (1) a significant reduction in the proportion of

2 patients (receiving services covered under the sys3 tem) who have no third-party coverage and who are

4 unable to pay for such services,

5 (2) a significant reduction in the proportion of

6 individuals provided services for which payment is

7 (or is likely to be) less than the anticipated charges

8 or costs of such services, or

9 (3) the refusal to provide services to individuals

10 who would be expected to require unusually costly or

11 prolonged treatment for reasons other than those re12 lated to the appropriateness of the care available

13 from the provider.

14 (f) SPECIAL REQUIREMENTS FOR HOSPITAL ADMIS15 SIONS AND EXCLUSIONS.—If the system applies to pay16 ment for hospital services, the system requires hospitals

17 to which the system applies to meet the requirement of

18 section 1866(a)(1)(G) of the Social Security Act with re19 spect to the medicare program and the system provides

20 for the exclusion of certain costs in accordance with sec21 tion 1862(a)(14) of such Act (except for such waivers

22 thereof as the Secretary provides by regulation).

23 SEC. 123. CONTROL OF AGGREGATE EXPENDITURES RE24 QUIREMENT FOR STATE SYSTEMS.

25 (a) ASSURANCES REQUIRED.—
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1 (1) IN GENERAL.—A State system may not be

2 approved until the Secretary has been provided sat3 isfactory assurances that under the system, during a

4 3-year period (the first such period beginning with

5 the first month in which this section applies to that

6 system in the State)—

7 (A) the sum of the aggregate medicare and

8 nonmedicare expenditures (as defined in section

9 101(d)) for the class (or classes) of services

10 covered under the system will not exceed the

11 applicable total limit specified in paragraph (2);

12 and

13 (B) the aggregate medicare expenditures

14 for such class (or classes) under the system will

15 not exceed the applicable medicare limit speci16 fied in paragraph (3).

17 (2) APPLICABLE TOTAL LIMIT.—The applicable

18 total limit specified in this paragraph is the total of

19 the maximum amount of payments that would be

20 payable in the State for the covered class (or class21 es) of services if the State system were not in effect.

22 (3) APPLICABLE MEDICARE LIMIT.—The appli23 cable medicare limit specified in this paragraph is

24 the total of the maximum amount of payments that

25 would be payable in the State for the covered class
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1 (or classes) of services under the medicare program

2 if the State system were not in effect.

3 (4) SPECIAL RULE FOR EXPENDITURES FOR

4 HMOS.—In determining aggregate expenditures for

5 purposes of subparagraphs (A) and (B) of para6 graph (1), the Secretary shall exclude expenditures

7 for services of staff or group model health mainte8 nance organizations if the State system provides

9 that such organizations may negotiate directly with

10 providers of services covered under the system with

11 respect to the organization’s rate of payment for

12 such services and, in determining the applicable lim13 its under paragraphs (2) and (3), the Secretary shall

14 exclude payments for services of such organizations.

15 (b) ANNUAL DETERMINATION BY SECRETARY.—

16 (1) IN GENERAL.—The Secretary shall annually

17 determine whether a State system met the assur18 ances required under subsection (a) for the most re19 cent 3-year period for which the State system was

20 in effect.

21 (2) AGGREGATION.—The Secretary may not de22 termine under paragraph (1) that—

23 (A) aggregate medicare and nonmedicare

24 expenditures under a State system exceeded the

25 applicable total limit for a 3-year period unless
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1 the Secretary determines that, for all classes of

2 services covered under the system, aggregate

3 medicare and nonmedicare expenditures in the

4 State exceeded such limit for all such classes,

5 and

6 (B) aggregate medicare expenditures under

7 a State system exceeded the applicable medicare

8 limit for a 3-year period unless the Secretary

9 determines that, for all classes of services cov10 ered under the system, aggregate medicare ex11 penditures in the State exceeded the applicable

12 medicare limit for all such classes.

13 (c) USE OF MEDICARE SAVINGS.—

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

15 that a State system under this subtitle has resulted

16 in medicare savings over a period of 3 consecutive

17 years, in the 4th year there shall be paid to the

18 State an amount equal to the medicare savings in

19 the first year of such 3-year period. Such payments

20 shall be made from the Federal Hospital Insurance

21 Trust Fund or the Federal Supplementary Medical

22 Insurance Trust Fund in such amounts as reflects

23 the medicare savings attributable to the respective

24 Trust Fund in such first year.

25 (2) DEFINITIONS.—In this subsection:
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1 (A) The term ‘‘medicare spending’’ means,

2 with respect to a State in a year, aggregate

3 medicare expenditures incurred under the medi4 care program in the State in the year.

5 (B) The term ‘‘baseline medicare spend6 ing’’ means, with respect to a State in a year,

7 the amount of aggregate medicare expenditures

8 that the Secretary estimates would have been

9 incurred under the medicare program in the

10 State in the year if this subtitle did not apply

11 in the State.

12 (C) The term ‘‘medicare savings’’ means,

13 with respect to a State in a year, the amount

14 by which the baseline medicare spending for the

15 State in the year exceeds the medicare spending

16 for the State in the year.

17 SEC. 124. TREATMENT OF STATES FAILING TO CONTROL

18 AGGREGATE EXPENDITURES

19 (a) IN GENERAL.—The Secretary shall terminate the

20 State system (in accordance with section 125) or impose

21 a sanction described in subsection (b) on a State if the

22 Secretary determines that, with respect to a State system

23 under this subtitle for a 3-year period—

24 (1) the aggregate medicare and nonmedicare

25 expenditures (as defined in section 101(d)) for the
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1 class (or classes) of services covered under the sys2 tem exceeded the applicable total limit specified in

3 section 123(a)(2); or

4 (2) the aggregate medicare expenditures for the

5 class (or classes) of services covered under the sys6 tem exceeded the applicable medicare limit specified

7 in section 123(a)(3).

8 (b) SANCTIONS.—The sanctions described in this

9 subsection are as follows:

10 (1) In the case of a determination under sub11 section (a)(1), a reduction in the aggregate

12 nonmedicare expenditures otherwise applicable for

13 the class (or classes) of services covered under the

14 system for the following year (or for the following 3-

15 year period, if the Secretary determines that a re16 duction for such period is appropriate in the case of

17 a State) in an amount equal to—

18 (A) the amount by which the aggregate

19 medicare and nonmedicare expenditures for the

20 class (or classes) for the preceding 3-year pe21 riod exceeded the applicable total limit, less

22 (B) the amount of any reduction under

23 paragraph (2).

24 (2) In the case of a determination under sub25 section (a)(2), a reduction in the aggregate medicare
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1 expenditures otherwise applicable for the class (or

2 classes) of services covered under the system for the

3 following year (or for the following 3-year period, if

4 the Secretary determines that a reduction for such

5 period is appropriate in the case of a State) in an

6 amount equal to the amount by which the aggregate

7 medicare expenditures for the class (or classes) for

8 the preceding 3-year period exceeded the applicable

9 medicare limit.

10 (c) NOTICE.—The Secretary may not impose any

11 sanction against a State under subsection (b) unless the

12 Secretary has provided the State with notice of the Sec13 retary’s determination under subsection (a) and intent to

14 impose the sanction under subsection (b).

15 SEC. 125. TERMINATION OF APPROVAL OF STATE SYSTEM.

16 (a) PROCESS REQUIREMENTS.—

17 (1) NOTICE.—The Secretary may terminate the

18 approval of a State system under this subtitle only

19 after the expiration of a 90-day period beginning on

20 the date the Secretary informs the State of the Sec21 retary’s intention to terminate such approval, unless,

22 during such 90-day period, the State requests a

23 hearing with the Secretary.

24 (2) HEARING.—If the State requests a hearing

25 during the 90-day period described in paragraph (1),
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1 the Secretary shall conduct a hearing during which

2 the State may present evidence showing that the

3 Secretary should not terminate the approval of its

4 system. If the Secretary decides to reject such evi5 dence, the Secretary shall terminate the approval of

6 the State’s system beginning with the first day of

7 the first month that begins after the Secretary’s de8 cision.

9 (3) JUDICIAL REVIEW PROHIBITED.—There

10 shall be no administrative or judicial review of a de11 cision by the Secretary to terminate the approval of

12 a State system under this subsection.

13 (b) EFFECT OF TERMINATION ON PAYMENT RATES

14 APPLICABLE TO SERVICES IN STATE.—

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

16 the approval of a State system under this section,

17 the maximum payment rates applicable to services

18 within the class (or classes) of services covered

19 under the State system shall be the maximum pay20 ment rates otherwise applicable to services within

21 the class (or classes) under subtitle C, subject to the

22 adjustment described in paragraph (2).

23 (2) RECAPTURE OF EXCESS SPENDING.—

24 (A) MEDICARE.—The Secretary shall mod25 ify the percentage payment adjustment applied
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1 under section 161 to services within the class

2 (or classes) of services that were covered under

3 a State system for which approval was termi4 nated under this section by such factor as the

5 Secretary determines necessary to decrease the

6 amount of aggregate medicare expenditures

7 that would otherwise be made for services pro8 vided in the State by the amount by which ag9 gregate medicare expenditures for such class

10 (or classes) of services exceeded the applicable

11 medicare limit specified in section 123(a)(3) for

12 the preceding year.

13 (B) NONMEDICARE.—The Secretary shall

14 reduce the maximum payment rates applicable

15 under part 1 of subtitle C to services within the

16 class (or classes) of services that were covered

17 under a State system for which approval was

18 terminated under this section by such factor as

19 the Secretary determines necessary to decrease

20 the amount of aggregate nonmedicare expendi21 tures that would otherwise be made for services

22 provided in the State by—

23 (i) the amount by which aggregate

24 medicare and nonmedicare expenditures

25 for such class (or classes) of services ex-
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1 ceeded the applicable total limit specified

2 in section 123(a)(2) for the preceding year,

3 less

4 (ii) the amount of any decrease in ag5 gregate medicare expenditures in the State

6 provided under subparagraph (A).

7 Subtitle C—Maximum Payment

8 Rates for Services Not Subject

9 to State Provider Payment Con10 trol Systems or Provided by

11 Staff or Group Model Health

12 Maintenance Organizations

13 SEC. 140. EXEMPTION FOR SERVICES SUBJECT TO AP14 PROVED STATE PROVIDER PAYMENT CON15 TROL SYSTEMS OR PROVIDED BY STAFF OR

16 GROUP MODEL HEALTH MAINTENANCE OR17 GANIZATIONS.

18 (a) APPROVED STATE PROVIDER PAYMENT CON19 TROL SYSTEMS.—In the case of services furnished in a

20 State and to which the State provider payment control

21 system (approved by the Secretary under section 121) ap22 plies—

23 (1) the Secretary shall not propose, establish,

24 or apply maximum payment rates to such services

25 under part 1 of this subtitle, and
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1 (2) the adjustments on payments rates for such

2 services made under the medicare program under

3 section 161 shall not apply.

4 (b) SERVICES PROVIDED BY STAFF OR GROUP

5 MODEL HEALTH MAINTENANCE ORGANIZATIONS.—

6 (1) IN GENERAL.—Subject to paragraph (2),

7 the maximum payment rates established under part

8 1 shall not apply to charges or payments for services

9 furnished to individuals who are enrolled in a staff

10 or group model health maintenance organization (as

11 defined in section 2(b)(2)) with respect to health

12 care services covered under the subscriber agree13 ment.

14 (2) CONTINUED APPLICATION TO OUT-OF-AREA

15 COVERAGE AND EMERGENCY SERVICES.—Paragraph

16 (1) shall not apply to services described in section

17 1876(c)(4)(B) of the Social Security Act.

18 (3) INDIRECT APPLICATION UNDER MEDICARE

19 PROGRAM.—Nothing in this subsection shall be con20 strued as affecting the payment of amounts to

21 health maintenance organizations under the medi22 care program under a risk-sharing contract under

23 section 1876 of the Social Security Act. However,

24 adjustments in payment rates under section 161
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1 may affect the computation of the average adjusted

2 per capita cost under such section.

3 PART 1—ESTABLISHMENT AND APPLICATION OF MAXI4 MUM PAYMENT RATES (OTHER THAN UNDER MEDI5 CARE PROGRAM)

6 SEC. 141. PROCESS.

7 (a) PUBLICATION OF RATES.—Subject to section

8 140, the Secretary shall cause to have published in the

9 Federal Register—

10 (1) not later than April 1 of each year (or not

11 later than September 1, 1994, in the case of rates

12 for 1995), proposed maximum payment rates under

13 this subtitle for the following year for public com14 ment, and

15 (2) during the last 15 days of October of each

16 year (or not later than December 1, 1994, in the

17 case of rates for 1995), after such consideration of

18 public comment on the proposed rates, the maximum

19 payment rates under this subtitle for the following

20 year.

21 (b) ITEMS INCLUDED IN PUBLICATIONS.—The Sec22 retary shall include in the publications referred to in sub23 section (a)—
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1 (1) a description of the payment methodology

2 used in the establishment of maximum payment

3 rates; and

4 (2) in the case of a publication under sub5 section (a)(2), the extent that the rates differ from

6 the applicable Commission’s recommendations under

7 subsection (c), an explanation of the Secretary’s

8 grounds for not following such recommendations.

9 (c) REPORTS OF COMMISSIONS.—With respect to the

10 establishment of maximum payment rates for services

11 under this subtitle, the applicable Commission, not later

12 than June 1 of each year, shall report its recommenda13 tions to the Secretary and Congress concerning such rates

14 for the following year. Each such report may include such

15 other recommendations relating to the operation of this

16 subtitle as the Commission considers appropriate.

17 (d) PAYMENT RATE DEFINED.—In this subtitle, the

18 term ‘‘payment rate’’ means, with respect to health care

19 services for which amounts are payable under a plan or

20 program, the rate of payment provided for under the plan

21 or program and including cost-sharing (including

22 deductibles, coinsurance, and extra billing amounts) appli23 cable under the plan or program with respect to the serv24 ices.
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1 SEC. 142. PAYMENT METHODOLOGY; RELATION TO BUDGET

2 ALLOCATION.

3 (a) PAYMENT METHODOLOGY.—

4 (1) IN GENERAL.—The Secretary shall establish

5 maximum payment rates under this subtitle consist6 ent with the payment rate methodology specified

7 under part 2.

8 (2) TREATMENT OF SERVICES WITHIN A

9 CLASS.—Nothing in this title shall be construed as

10 requiring that maximum payment rates established

11 under this subtitle for different health care services

12 within a class of services be the same or determined

13 under the same methodology.

14 (b) RELATION TO OVERALL LIMIT ON EXPENDI15 TURES FOR CLASSES OF SERVICES.—

16 (1) IN GENERAL.—The maximum payment

17 rates for a year shall be established under this sub18 title in a manner so that, as applied under section

19 143—

20 (A) the aggregate nonmedicare expendi21 tures for all the services within each class sub22 ject to such rates, is equal to

23 (B) the allocation to the class for the year

24 under section 102 with respect to the

25 nonmedicare health expenditure budget (less
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1 the amount of the reduction in the allocation

2 provided under paragraph (2)).

3 (2) REMOVAL OF PORTION OF ALLOCATION AT4 TRIBUTABLE TO STATE PROVIDER PAYMENT CON5 TROL SYSTEMS OR STAFF OR GROUP MODEL

6 HEALTH MAINTENANCE ORGANIZATIONS.—For pur7 poses of paragraph (1)(B), the allocation to a class

8 of services for a year shall be reduced by the product

9 of—

10 (A) such allocation, and

11 (B) the proportion of such allocation that

12 the Secretary estimates is attributable to serv13 ices exempt under section 140 from the estab14 lishment or application of maximum payment

15 rates under this part.

16 SEC. 143. GENERAL APPLICATION AND ENFORCEMENT OF

17 MAXIMUM PAYMENT RATES.

18 (a) LIMITS ON CHARGES.—Subject to section 140—

19 (1) IN GENERAL.—In the case of a provider

20 that provides health care services to an individual

21 for which a maximum payment rate is established

22 under this subtitle—

23 (A) the provider may not charge (i) an

24 amount in excess of such rate or (ii) on a pay-
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1 ment basis other than the payment basis estab2 lished for such services under part 2;

3 (B) the provider may not collect for such

4 services an amount in excess of such rate; and

5 (C) the individual and other entities, in6 cluding a health benefit plan, are not liable col7 lectively for payment of any amount that ex8 ceeds such rate.

9 (2) RELATION TO MEDICARE PROGRAM.—This

10 subsection shall not apply to services furnished to an

11 individual who is entitled to benefits with respect to

12 such services under the medicare program.

13 (b) ENFORCEMENT THROUGH CIVIL MONEY PEN14 ALTIES.—

15 (1) IMPROPER CHARGES.—If a provider im16 poses a charge in violation of subsection (a)(1)(A),

17 the provider is subject to civil money penalty in an

18 amount not to exceed $100 for each such charge.

19 (2) IMPROPER COLLECTION.—If a provider col20 lects excess amounts in violation of subsection

21 (a)(1)(B) and does not refund such excess amounts

22 within 30 days of date on which the provider is noti23 fied that the provider collected excess amount, the

24 provider is subject to a civil money penalty in an

25 amount equal to three times the amount of such ex-
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1 cess which has not been so refunded or, if greater,

2 $500.

3 (3) PROCESS.—The provisions of section 1128A

4 of the Social Security Act (other subsections (a) and

5 (b)) shall apply to a civil money penalty under this

6 subsection in the same manner as such provisions

7 apply to a penalty or proceeding under section

8 1128A(a) of such Act.

9 (4) DEPOSIT OF PENALTIES IN ANTI-FRAUD

10 AND ABUSE TRUST FUND.—Any civil money pen11 alties collected under this subsection shall be paid

12 into the Anti-Fraud and Abuse Trust Fund estab13 lished under section 341(b).

14 SEC. 144. LIMITATION ON PAYMENT RATES UNDER MEDIC15 AID.

16 (a) IN GENERAL.—Subject to subsection (b), not17 withstanding any other provision of law, payment may not

18 be made under section 1903(a)(1) of the Social Security

19 Act to a State for amounts expended as medical assistance

20 for health care services for which maximum payment rates

21 are established under this part, to the extent that the rate

22 of payment for such services exceeds the maximum pay23 ment rate so established.

24 (b) APPLICATION OF MEDICAID PAYMENT

25 FLOORS.—Subsection (a) shall not apply to the extent
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1 payment rates do not exceed the applicable minimum pay2 ment rates required to be provided under section 401 or

3 under section 1902(a)(13)(G) of the Social Security Act.

4 PART 2—METHODOLOGIES FOR DETERMINING MAXI5 MUM RATES (OTHER THAN UNDER MEDICARE PRO6 GRAM)

7 SEC. 151. BASIS FOR MAXIMUM RATES OF PAYMENT FOR

8 INPATIENT HOSPITAL SERVICES.

9 (a) IN GENERAL.—

10 (1) IN GENERAL.—Subject to additions under

11 subsection (d) and to other adjustments under sub12 section (e), the maximum payment rate established

13 under this subtitle for a service within the class of

14 services consisting of inpatient hospital services that

15 is provided by a hospital (as defined in paragraph

16 (2)) during a year shall be equal to the product of—

17 (A) the standardized amount applicable to

18 the hospital, as established in accordance with

19 subsection (b); and

20 (B) the weighting factor assigned to the

21 service (as determined in accordance with sub22 section (c)).

23 (2) HOSPITAL DEFINED.—In this section, the

24 term ‘‘hospital’’ does not include an exempt hospital

25 (as defined in subsection (f)).
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1 (b) ESTABLISHMENT OF STANDARDIZED

2 AMOUNTS.—

3 (1) IN GENERAL.—The Secretary shall establish

4 a standardized amount under subsection (a) for hos5 pitals located in a large urban area and for other

6 hospitals for a year by standardizing the hospital’s

7 average cost per discharge (based on the hospital’s

8 allowed operating receipts, as determined under

9 paragraph (2)) in accordance with paragraph (3).

10 For purposes of the preceding sentence, a hospital is

11 located in a ‘‘large urban area’’ if the hospital is

12 treated as being located in a large urban area under

13 section 1886(d) of the Social Security Act for pur14 poses of the medicare program.

15 (2) ALLOWED OPERATING RECEIPTS DE16 FINED.—

17 (A) IN GENERAL.—For purposes of para18 graph (1) and except as provided in subpara19 graph (B), a hospital’s ‘‘allowed operating re20 ceipts’’ means the total of all receipts of the

21 hospital (without regard to the source) attrib22 utable to routine operating costs, ancillary serv23 ice operating costs, and special care unit oper24 ating costs with respect to inpatient hospital

25 services, as determined on an average per ad-
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1 mission or per discharge basis (as determined

2 by the Secretary), during 1993, increased by

3 the Secretary’s estimate of the percentage in4 crease in such receipts between the midpoint of

5 1993 and the midpoint of 1994.

6 (B) EXCLUSIONS.—In determining a hos7 pital’s allowed operating receipts under sub8 paragraph (A), the Secretary shall exclude the

9 following:

10 (i) Receipts attributable to services

11 for which payment was made to the hos12 pital under the medicare program.

13 (ii) The value of the costs of services

14 which are treated as bad debt or charity

15 care (as defined by the Secretary) for pur16 poses of the hospital’s cost reports.

17 (iii) The value of the costs of services

18 furnished under the medicaid program

19 which are in excess of the payment re20 ceived from such program by the hospital.

21 (C) CERTAIN OUTPATIENT RECEIPTS IN22 CLUDED.—In determining a hospital’s allowed

23 operating receipts under subparagraph (A), the

24 Secretary shall include all receipts attributable

25 to services that are provided by the hospital (or
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1 by an entity wholly owned or operated by the

2 hospital) to a patient during the 3 days imme3 diately preceding the date of the patient’s ad4 mission if such services are diagnostic services

5 (including clinical diagnostic laboratory tests)

6 or are other services related to the admission

7 (as defined by the Secretary).

8 (3) PROCESS FOR STANDARDIZING AMOUNTS.—

9 The Secretary shall standardize the average per dis10 charge amount for each hospital for a year by—

11 (A) adjusting for variations among hos12 pitals by area in the average hospital wage

13 level, using the area wage level applied for hos14 pitals under the medicare program under sec15 tion 1886(d)(3)(E) of the Social Security Act;

16 (B) adjusting for variations in case mix

17 among hospitals;

18 (C) excluding an estimate of the additional

19 payments to be made for outliers, using the

20 amounts paid to hospitals for outliers under the

21 medicare program under section 1886(d)(5)(A)

22 of such Act (except that the Secretary may

23 apply different amounts if the Secretary finds

24 that such different amounts more accurately re-
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1 flect outliers for services furnished to individ2 uals who are not medicare beneficiaries);

3 (D) adjusting for variations among hos4 pitals by area in input prices other than wages

5 and wage-related costs;

6 (E) excluding an estimate of indirect medi7 cal education costs, using the indirect medical

8 education adjustment applied for hospitals

9 under the medicare program under section

10 1886(d)(5)(B) of such Act;

11 (F) excluding an estimate of direct grad12 uate medical education costs; and

13 (G) excluding an estimate of capital-related

14 costs.

15 (c) ESTABLISHMENT OF DIAGNOSIS-RELATED

16 GROUPS AND WEIGHTING FACTORS.—

17 (1) IN GENERAL.—

18 (A) DIAGNOSIS-RELATED GROUPS.—For

19 purposes of this section, the Secretary shall es20 tablish a classification of inpatient hospital dis21 charges by diagnosis-related groups and a

22 methodology for classifying specific hospital dis23 charges within these groups.

24 (B) WEIGHTING FACTORS.—For each di25 agnosis-related group established under sub-
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1 paragraph (A), the Secretary shall assign an

2 appropriate weighting factor which reflects the

3 relative hospital resources used with respect to

4 discharges classified within that group com5 pared to discharges classified within other

6 groups.

7 (C) USE OF MEDICARE GROUPS AND FAC8 TORS.—In establishing diagnosis-related groups

9 and assigning weighting factors for such groups

10 under this paragraph, the Secretary shall use

11 the diagnosis-related groups and weighting fac12 tors used under the medicare program under

13 section 1886(d)(4) of the Social Security Act,

14 except to the extent that the Secretary must es15 tablish diagnosis-related groups in addition to

16 the groups under such program, or adjust such

17 weighting factors, to take into account the ap18 plication of payment rates under this section to

19 inpatient hospital services furnished to individ20 uals who are not medicare beneficiaries.

21 (2) STANDARD BENEFIT PACKAGE.—The diag22 nosis-related groups and the weighting factors as23 signed to such groups shall be based upon a stand24 ard benefit package consisting of the standard inpa25 tient hospital services provided under health benefit
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1 plans (other than the medicare program and the

2 medicaid program), as determined by the Secretary

3 on the basis of a survey of such plans.

4 (3) ADJUSTMENT FOR VARIATIONS FROM

5 STANDARD BENEFIT PACKAGE.—The Secretary shall

6 establish a table of adjustment factors to adjust the

7 weighting factors to reflect the actuarial differences

8 between the value of the coverage under the stand9 ard benefit package described in paragraph (2) and

10 the value of the services provided under health bene11 fit plans that vary from the services provided under

12 the standard benefit package.

13 (d) INCREASES TO MAXIMUM PAYMENT RATES.—

14 (1) COSTS OF DIRECT GRADUATE MEDICAL

15 EDUCATION.—In the case of a hospital that has in16 curred costs for direct graduate medical education

17 during a year, the Secretary shall increase the maxi18 mum payment rate otherwise applicable under this

19 section to inpatient services furnished by the hos20 pital, consistent with the methodology used to make

21 payments to hospitals under the medicare program

22 for such costs under section 1886(h) of the Social

23 Security Act.

24 (2) ADJUSTMENT FOR INDIRECT MEDICAL EDU25 CATION.—The Secretary shall increase the maximum
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1 payment rate otherwise applicable under this section

2 for a hospital for to take into account indirect costs

3 of medical education incurred by a hospital, in ac4 cordance with the methodology used to adjust pay5 ments to hospitals under the medicare program for

6 such costs under section 1886(d)(5)(B) of the Social

7 Security Act.

8 (3) ADJUSTMENT FOR OUTLIERS.—The Sec9 retary shall increase the maximum payment rate

10 otherwise applicable under this section for a hos11 pital—

12 (A) for length of stay outliers for dis13 charges in a diagnosis-related group (as deter14 mined by the Secretary in accordance with the

15 criteria used to adjust payments to hospitals

16 under the medicare program for such outliers

17 under section 1886(d)(5)(A)(i) of the Social Se18 curity Act); and

19 (B) for cost outliers for any discharges in

20 a diagnosis-related group (as determined by the

21 Secretary in accordance with the criteria used

22 to adjust payments to hospitals under the medi23 care program for such outliers under section

24 1886(d)(5)(A)(ii) of the Social Security Act).
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1 (4) UNCOMPENSATED CARE ADJUSTMENT.—

2 The Secretary shall increase the maximum payment

3 rate otherwise applicable under this section for a

4 hospital to take into account the costs incurred by

5 a hospital in providing services described in clause

6 (ii) or (iii) of subsection (b)(2)(B).

7 (e) OTHER ADJUSTMENTS.—

8 (1) NEEDS OF CERTAIN FACILITIES.—The Sec9 retary may adjust the maximum payment rates oth10 erwise determined under this section in such manner

11 and to such extent as the Secretary considers appro12 priate to take into account the needs of—

13 (A) regional and national referral centers

14 described in section 1886(d)(5)(C) of the Social

15 Security Act;

16 (B) sole community hospitals described in

17 section 1886(d)(5)(D) of such Act; and

18 (C) essential access hospitals designated by

19 the Secretary under section 1820(i)(1) of such

20 Act.

21 (2) PAYMENTS FOR TRANSFERRED PA22 TIENTS.—The Secretary shall provide for an adjust23 ment to the maximum payment rates under this sec24 tion to take into account inpatient hospital services

25 provided to patients transferred to (or from) the
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1 hospital, in accordance with the standards used to

2 determine such adjustments under the medicare pro3 gram.

4 (3) PAYMENTS FOR CAPITAL.—Payments to

5 hospitals for capital and capital-related costs shall

6 be determined in the same manner as payments for

7 capital and capital-related costs are made under sec8 tion 1886(g) of the Social Security Act, adjusted to

9 take into account the portion of such costs for which

10 the hospital receives payment from health benefit

11 plans (other than the medicare and medicaid pro12 grams).

13 (f) MAXIMUM PAYMENT RATES FOR EXEMPT HOS14 PITALS.—

15 (1) HOSPITAL-SPECIFIC, PER ADMISSION

16 AMOUNT.—In the case of an exempt hospital (as de17 fined in paragraph (2)), the maximum payment rate

18 for inpatient hospital services provided by the hos19 pital shall be determined on a per admission basis,

20 based on the allowable operating receipts of the hos21 pital (determined in the same manner as such re22 ceipts are determined for other hospitals under sub23 section (b)).

24 (2) EXEMPT HOSPITAL.—The term ‘‘exempt

25 hospital’’ means—
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1 (A) a psychiatric hospital (as defined in

2 section 1861(f) of the Social Security Act), in3 cluding a psychiatric unit of a hospital which is

4 a distinct part of the hospital (as defined by the

5 Secretary);

6 (B) a rehabilitation hospital (as defined by

7 the Secretary), including a rehabilitation unit of

8 a hospital which is a distinct part of the hos9 pital (as defined by the Secretary);

10 (C) a hospital whose inpatients are pre11 dominantly individuals under 18 years of age;

12 (D) a hospital which has an average inpa13 tient length of stay (as determined by the Sec14 retary) of greater than 25 days; or

15 (E) a hospital that the Secretary has clas16 sified, at any time on or before December 31,

17 1992, for purposes of applying exceptions and

18 adjustments to payment amounts under section

19 1886(d) of such Act, as a hospital involved ex20 tensively in treatment for or research on cancer.

21 SEC. 152. BASIS FOR MAXIMUM PAYMENT RATE FOR CLASS

22 OF PHYSICIANS’ SERVICES AND OTHER PRO23 FESSIONAL MEDICAL SERVICES.

24 (a) USE OF RELATIVE VALUE FEE SCHEDULE.—
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1 (1) IN GENERAL.—Subject to subsection (b),

2 the maximum payment rates established under this

3 subtitle for a service within the class of services con4 sisting of physicians’ services and other professional

5 medical services during a year shall be equal to the

6 product of—

7 (A) the relative value for the service ap8 plied under section 1848(b) of the Social Secu9 rity Act;

10 (B) an applicable conversion factor (deter11 mined by the Secretary in an amount consistent

12 with the requirements of section 142(b)); and

13 (C) the geographic adjustment factor ap14 plied under section 1848(b) of the Social Secu15 rity Act.

16 (b) NEW PROCEDURE CODES AND RELATIVE VALUE

17 UNITS.—In applying subsection (a) in the case of services

18 for which relative value units have not been established

19 under section 1848 of the Social Security Act, the Sec20 retary shall establish relative value units in the same man21 ner as if payment for such services were made under the

22 medicare program.

23 (c) PUBLICATION OF DEFINITIONS, RELATIVE

24 VALUE UNITS, AND PAYMENT POLICIES.—The Secretary

25 shall provide for publication of such definitions, relative
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1 value units (established under subsection (b)), and pay2 ment policies as may be necessary for payors to apply the

3 maximum payment rates established under this section.

4 SEC. 153. BASIS FOR OTHER MAXIMUM PAYMENT RATES

5 FOR SERVICES USING CERTAIN MEDICARE

6 PAYMENT METHODOLOGIES.

7 The maximum payment rates established under this

8 subtitle for services for any of the following classes of serv9 ices shall be determined using the applicable payment

10 methodologies under the medicare program as follows:

11 (1) In the case of facility services described in

12 section 1832(a)(2)(F) of the Social Security Act fur13 nished in connection with a surgical procedure speci14 fied pursuant to section 1833(i)(1)(A) of such Act

15 and furnished to an individual in an ambulatory sur16 gical center described in such section, the methodol17 ogy described in section 1833(i)(2) of such Act.

18 (2) For the class of diagnostic testing services

19 described in section 102(a)(2)(C)—

20 (A) in the case of clinical laboratory serv21 ices, the methodology described in sections

22 1833(a)(2)(D) and 1833(h) of such Act, and

23 (B) in the case of other diagnostic services,

24 the applicable methodology under part B of title

25 XVIII of such Act.
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1 (3) In the case of an item of durable medical

2 equipment (described in section 1834(a)(13) of such

3 Act), the methodology described in section

4 1834(a)(1) of such Act.

5 (4) In the case of prosthetic devices and

6 orthotics and prosthetics, the methodology described

7 in section 1834(h)(1)(A) of such Act.

8 (5) In the case of psychologists and clinical so9 cial workers, the methodologies described in section

10 1833(a)(1)(L) and 1833(a)(1)(F), respectively.

11 (6) For prescription drugs, the methodology de12 scribed in section 1834(e) of such Act.

13 (7) For renal dialysis services, home dialysis

14 supplies and equipment (as defined in section

15 1881(b)(8) of such Act), and self-care home dialysis

16 support services (as defined in section 1881(b)(9) of

17 such Act), the methodology described in section

18 1881(b) of such Act.

19 (8) For any other service within a class of serv20 ices for which the amount of payment made under

21 part B of the medicare program is determined on

22 the basis of reasonable or prevailing charge, the

23 methodology used for payment for such service

24 under such part.
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1 SEC. 154. OTHER SERVICES.

2 In the case of services within a class of services for

3 which a methodology for establishing maximum payment

4 rates is not otherwise provided pursuant to the preceding

5 provisions of this subtitle, the Secretary shall establish an

6 appropriate methodology for establishing such rates, tak7 ing into account the payment methodology or methodolo8 gies in use under the medicare program or other health

9 benefit plans.

10 SEC. 155. DEVELOPMENT OF PROSPECTIVELY-DETER11 MINED PAYMENT METHODOLOGIES.

12 (a) DEVELOPMENT OF PROSPECTIVE PAYMENT

13 METHODOLOGIES FOR ALL CLASSES OF SERVICES.—

14 (1) PROPOSAL.—The Secretary shall develop

15 proposals to establish a methodology for each class

16 of services (or services within such a class) for which

17 payment rates are not specified in sections 151

18 through 153 and are not determined on a prospec19 tive basis pursuant to this subtitle under which pay20 ment rates for such services shall be determined on

21 a prospectively-determined basis.

22 (2) REPORT.—Not later than 3 years after the

23 date of the enactment of this Act, the Secretary

24 shall submit the proposals developed under para25 graph (1) to the Committee on Ways and Means and

26 the Committee on Energy and Commerce of the
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1 House of Representatives, the Committee on Fi2 nance of the Senate.

3 (b) ADJUSTMENT TO PROSPECTIVE METHODOLOGY

4 FOR CHILDREN’S HOSPITALS.—If any methodology is im5 plemented to determine the amount of payments for the

6 operating costs of inpatient hospital services under the

7 medicare program on the basis of prospectively-determined

8 rates for hospitals whose inpatients are predominantly in9 dividuals under 18 years of age, the Secretary shall assure

10 that payments under such methodology shall—

11 (1) be made on a hospital-specific basis;

12 (2) be based on the resource requirements of

13 the population receiving services from such hospitals;

14 and

15 (3) be determined by using pediatric-specific in16 patient data.

17 PART 3—MEDICARE PAYMENT ADJUSTMENTS

18 SEC. 161. CONFORMING MEDICARE PAYMENT RATES TO

19 MEDICARE HEALTH EXPENDITURE ALLOCA20 TIONS.

21 (a) IN GENERAL.—Notwithstanding any other provi22 sion of law (including the amendments made by title IV

23 of this Act), but subject to section 140(a)(2), the Sec24 retary shall adjust the payment rate or allowance (or, in

25 the absence of such a rate, payment amount) otherwise
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1 applied under the medicare program (and any maximum

2 charge limits or payment limits imposed under such pro3 gram) for any health care service in a class of services

4 by the percentage payment adjustment specified by the

5 Secretary under subsection (b) for the class for the year

6 involved.

7 (b) PERCENTAGE PAYMENT ADJUSTMENT COM8 PUTED.—Subject to section 125(b)(2)(A), at the same

9 time as the Secretary establishes maximum payment rates

10 under part 1, the Secretary shall compute and publish,

11 for each class of services for each year, such percentage

12 payment adjustment as the Secretary determines to be

13 necessary to assure that—

14 (1) aggregate medicare expenditures for such

15 class of services for the year subject to such adjust16 ment, does not exceed

17 (2) the allocation (under section 103(a)(2)(A))

18 of aggregate medicare expenditures attributable to

19 such class for the year less the product of such allo20 cation and the proportion of such allocation that the

21 Secretary estimates is attributable to services ex22 empt under section 140 from the establishment or

23 application of maximum payment rates under part

24 1.
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1 (c) PUBLICATIONS.—In publishing payment rates

2 under the medicare program, the Secretary shall take into

3 account any percentage payment adjustment applied

4 under this section.

5 SEC. 162. ADJUSTMENTS TO MEDICARE PAYMENTS FOR

6 GRADUATE MEDICAL EDUCATION.

7 (a) DETERMINATION OF FULL-TIME-EQUIVALENT

8 RESIDENTS DURING INITIAL RESIDENCY PERIOD.—

9 (1) EMPHASIS ON PRIMARY CARE.—Paragraph

10 (4)(C)(ii) of section 1886(h) of the Social Security

11 Act (42 U.S.C. 1395ww(h)) is amended by striking

12 ‘‘is 1.00,’’ and inserting the following: ‘‘is—

13 ‘‘(I) 1.1, in the case of a resident

14 who is a primary care resident (as de15 fined in paragraph (5)(H)),

16 ‘‘(II) 1.0, in the case of a resi17 dent who is not a primary care resi18 dent and who specializes in internal

19 medicine or pediatrics,

20 ‘‘(III) .9, in the case of a resi21 dent who is not described in subclause

22 (I) or (II) and who is in the initial 3

23 years of the residency period, or
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1 ‘‘(IV) .8, in the case of a resident

2 not described in subclause (I), (II), or

3 (III),’’.

4 (2) PRIMARY CARE RESIDENT DEFINED.—Para5 graph (5) of such section is amended—

6 (A) by redesignating subparagraph (H) as

7 subparagraph (I), and

8 (B) by inserting after subparagraph (G)

9 the following new subparagraph:

10 ‘‘(H) PRIMARY CARE RESIDENT.—The

11 term ‘primary care resident’ means (in accord12 ance with criteria established by the Secretary)

13 a resident being trained in a distinct program

14 of family practice medicine, general practice,

15 general internal medicine, or general pediat16 rics.’’.

17 (b) EFFECTIVE DATE.—The amendments made by

18 subsection (a) shall apply to cost reporting periods begin19 ning on or after October 1, 1993.
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1 TITLE II—MANAGED CARE AND

2 MANAGED COMPETITION

3 Subtitle A—Managed Care

4 SEC. 201. AUTHORIZATION FOR MANAGED CARE SYSTEMS

5 TO PAY LESS THAN MAXIMUM PAYMENT

6 RATES.

7 Nothing in this Act shall be construed as preventing

8 managed care systems from negotiating with providers

9 payment rates that are less than the maximum payment

10 rates established under title I.

11 SEC. 202. STAFF AND GROUP MODEL HEALTH MAINTE12 NANCE ORGANIZATIONS EXEMPT FROM MAX13 IMUM PAYMENT RATES.

14 Pursuant to section 140(b), the maximum payment

15 rates established under part 1 of subtitle C of title I shall

16 not apply to charges or payments for services furnished

17 to individuals who are enrolled in a staff or group model

18 health maintenance organization (as defined in section

19 2(b)(2)) with respect to health care services covered under

20 the subscriber agreement.

21 SEC. 203. REPEAL OF SUNSET OF DUAL CHOICE REQUIRE22 MENT.

23 Effective upon the enactment of this Act, section 7(b)

24 of the Health Maintenance Organization Amendments of

25 1988 (Public Law 100–517) is repealed and the provisions
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1 of section 1310 of the Public Health Service Act shall be

2 effective as if such section 7(b) had not been enacted.

3 SEC. 204. MULTIPLE CHOICE OF HEALTH MAINTENANCE

4 ORGANIZATIONS.

5 (a) IN GENERAL.—Section 1310(a) of the Public

6 Health Service Act (42 U.S.C. 300e–9(a)) is amended by

7 adding at the end the following new paragraph:

8 ‘‘(3) Nothing in this subsection shall be construed as

9 limiting the option of membership to a limited number of

10 organizations.’’.

11 (b) DISTRIBUTION OF MATERIALS.—Paragraph (1)

12 of such section is amended by adding at the end the follow13 ing new sentence: ‘‘Each such health benefit plan shall

14 make available, to each individual eligible to enroll with

15 a qualified health maintenance organization under such an

16 option, such marketing materials as the organization pro17 vides to the plan.’’.

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

19 this section shall take effect 6 months after the date of

20 the enactment of this Act.
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1 SEC. 205. FEDERAL ASSISTANCE FOR ESTABLISHMENT AND

2 INITIAL OPERATION OF STAFF AND GROUP

3 MODEL HMOS.

4 (a) IN GENERAL.—The Secretary shall provide for

5 grants for the establishment and initial operation of staff

6 or group model health maintenance organizations.

7 (b) PURPOSES.—Funds provided under this section

8 may be used for purposes specified by the Secretary, which

9 shall include—

10 (1) surveys of the prospective market for such

11 organizations to determine the feasibility of operat12 ing such an organization in the service area,

13 (2) activities relating to initial enrollment of in14 dividuals,

15 (3) working capital during the startup period,

16 (4) recruitment of physicians and other health

17 personnel, and

18 (5) acquisition of building and equipment.

19 (c) APPLICATION PROCESS.—No grant may be pro20 vided under this section unless—

21 (1) an application therefore has been submitted

22 (in such form and manner and containing such in23 formation, as the Secretary specifies) to and ap24 proved by the Secretary, and

25 (2) the Secretary determines that sufficient

26 planning for the organization’s establishment has
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1 been conducted by the applicant and the feasibility

2 of establishing and operating the organization has

3 been established by the applicant.

4 (d) PERIOD OF GRANT.—Grants under this section

5 shall be for a period of 1 year but may be renewed for

6 2 additional periods of 1 year each.

7 (e) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated $25,000,000 for each

9 of fiscal years 1994 through 1998 to carry out this

10 section.

11 SEC. 206. PREEMPTION OF STATE LAWS RESTRICTING

12 HEALTH MAINTENANCE ORGANIZATIONS.

13 (a) IN GENERAL.—

14 (1) PREEMPTION.—Except as provided in para15 graph (2), any provision of State law that restricts

16 the ability of a health maintenance organization to

17 negotiate reimbursement rates with providers or to

18 contract selectively with one provider or a limited

19 number of providers is hereby preempted and may

20 not be enforced.

21 (2) EXCEPTION FOR STATES WITH PROVIDER

22 PAYMENT CONTROL SYSTEMS.—Paragraph (1) shall

23 not apply to a provision of State law that restricts

24 the ability of a health maintenance organization to

25 negotiate reimbursement rates with providers if the
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1 State has a State provider payment control system

2 approved under section 121.

3 (b) EFFECTIVE DATE.—Subsection (a) shall take ef4 fect on January 1, 1994.

5 SEC. 207. ADJUSTMENT IN MEDICARE CAPITATION PAY6 MENTS TO ACCOUNT FOR REGIONAL VARI7 ATIONS IN APPLICATION OF SECONDARY

8 PAYOR PROVISIONS.

9 (a) IN GENERAL.—Section 1876(a)(4) of the Social

10 Security Act (42 U.S.C. 1395mm(a)(4)) is amended by

11 adding at the end the following new sentence: ‘‘In estab12 lishing the adjusted average per capita cost for a geo13 graphic area, the Secretary shall take into account the dif14 ferences between the proportion of individuals in the area

15 with respect to whom there is a group health plan that

16 is a primary payor (within the meaning of section

17 1862(b)(2)(A)) compared to the proportion of all such in18 dividuals with respect to whom there is such a group

19 health plan.’’.

20 (b) EFFECTIVE DATE.—The amendment made by

21 subsection (a) shall apply to contracts entered into for

22 years beginning with 1995.
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1 SEC. 208. GAO STUDY OF EXPANSION OF HEALTH MAINTE2 NANCE ORGANIZATIONS.

3 (a) STUDY.—The Comptroller General shall conduct

4 a study of additional measures that may be taken to en5 courage the development and expansion of health mainte6 nance organizations.

7 (b) REPORT.—By not later than 18 months after the

8 date of the enactment of this Act, the Comptroller General

9 shall submit a report to Congress on the study conducted

10 under subsection (a) and shall include in the report such

11 recommendations as may be appropriate.

12 Subtitle B—Managed Competition

13 PART 1—ESTABLISHMENT OF NATIONAL HEALTH PLAN

14 PURCHASING COOPERATIVE PROGRAM

15 SEC. 221. ESTABLISHMENT OF PROGRAM; GRANTS TO

16 STATES.

17 (a) IN GENERAL.—The Secretary shall establish a

18 program for the establishment and operation of health

19 plan purchasing cooperatives (each in this subtitle referred

20 to as a ‘‘HPPC’’) in each State in accordance with this

21 subtitle.

22 (b) GRANT PROGRAM FOR HPPCS.—

23 (1) IN GENERAL.—The Secretary may provide

24 assistance, through grants, contracts, and coopera25 tive agreements, with States and with HPPCs for
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1 the planning, development, and initial operation of

2 HPPCs under this subtitle.

3 (2) TERMS.—Assistance under this subsection

4 shall be provided under such terms and conditions as

5 the Secretary may specify consistent with the follow6 ing:

7 (A) The period of such assistance may not

8 extend for longer than 5 years with respect to

9 any HPPC.

10 (B) The total amount of assistance with

11 respect to any HPPC may not exceed

12 $5,000,000.

13 (3) AUTHORIZATION OF APPROPRIATIONS.—

14 There are authorized to be appropriated, for the pro15 vision of assistance under this subsection, a total of

16 $150,000,000 for the 5-fiscal-year period beginning

17 with fiscal year 1994.

18 SEC. 222. ESTABLISHMENT OF HPPCS; DESIGNATION OF

19 HPPC AREAS.

20 (a) STATE REQUIREMENT.—

21 (1) IN GENERAL.—Each State—

22 (A) shall provide by law for the organiza23 tion and operation, by not later than January

24 1, 1996, of 1 or more health plan purchasing
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1 cooperatives in accordance with section 223,

2 and

3 (B) may provide (in accordance with sub4 sections (b) and (c)) for the designation of more

5 than 1 HPPC areas in the State.

6 (2) COVERAGE OF ALL GEOGRAPHIC AREAS IN

7 A STATE.—In carrying out this subsection, HPPCs

8 shall be established, and HPPC areas designated, in

9 a State so as to provide for the offerring of qualified

10 health plans in every geographic area of the State.

11 (3) SINGLE ORGANIZATION SERVING MULTIPLE

12 HPPC AREAS.—Nothing in this subsection shall be

13 construed as preventing—

14 (A) a single corporation from being the

15 HPPC for more than one HPPC area, or

16 (B) a State from coordinating, through a

17 single entity, the activities of one or more

18 HPPCs in the State.

19 (4) FEDERAL DEFAULT.—If a State fails to

20 provide for the organization and continued operation

21 of 1 or more HPPCs or designation of HPPC areas

22 in accordance with this section, the Secretary shall

23 provide for such organization and operation or des24 ignation, and, in such case with respect to such a

25 HPPC, any subsequent reference to State law or a
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1 Governor in this subtitle shall be deemed a reference

2 to Federal law or the Secretary, respectively.

3 (b) HPPC AREAS.—

4 (1) IN GENERAL.—Except as may be otherwise

5 provided under this subsection and subsection (c),

6 each State shall be considered a separate HPPC

7 area.

8 (2) ALTERNATIVE, INTRASTATE AREAS.—

9 HPPC areas within a State may cover less than the

10 entire State so long as—

11 (A) all portions of each metropolitan sta12 tistical area in the State are within the same

13 HPPC area, and

14 (B) the number of individuals residing

15 within a HPPC area is not less than 1,000,000.

16 (c) INTERSTATE HPPCS.—

17 (1) AUTHORIZATION.—One or more contiguous

18 States may provide—

19 (A) for the designation consistent with

20 paragraph (2) of a HPPC area that includes

21 adjoining portions of the States, and

22 (B) for the organization and operation, in

23 accordance with rules of the Secretary, of a

24 HPPC with respect to such a designated HPPC

25 area.
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1 (2) INTERSTATE HPPC AREAS.—Any HPPC

2 area designated under paragraph (1)(A)—

3 (A) that includes any part of a metropoli4 tan statistical area shall include all of such

5 area, and

6 (B) shall have a population of not less

7 than 1,000,000.

8 SEC. 223. ORGANIZATION AND OPERATION OF HPPCS.

9 (a) IN GENERAL.—Each HPPC shall be organized

10 and operated consistent with the requirements of this sub11 title.

12 (b) ORGANIZATION.—Each HPPC shall be a not-for13 profit public benefit corporation established under State

14 law and governed by a Board of Directors appointed by

15 the Governor or other chief executive officer of the State.

16 (c) GENERAL DUTIES OF HPPCS.—

17 (1) MAKING HEALTH CARE PLANS AVAILABLE

18 TO EMPLOYERS.—

19 (A) IN GENERAL.—Each HPPC shall enter

20 into agreements with qualified health plans

21 under section 225 under which coverage under

22 such a QHP is made available with respect to

23 employers which—

24 (i) have employees who reside in the

25 HPPC area served by the HPPC, and
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1 (ii) have entered into an agreement

2 with the HPPC under section 224.

3 (B) HPPC OUTREACH TO SMALL EMPLOY4 ERS.—Beginning not later than 1 year after the

5 date a HPPC is organized, a HPPC shall in6 ventory and inform all small employers (as de7 fined in section 228(c)(2)) in the HPPC area

8 (including employers in rural areas of the

9 HPPC area) of the health benefits available,

10 through enrollment with qualified health plans,

11 through the HPPC for their employees (and

12 family members) who reside in a HPPC area

13 served by the HPPC.

14 (2) OPTION OF ENROLLMENT FOR ELIGIBLE

15 RESIDENTS.—A HPPC may provide, under such an

16 agreement with a qualified health plan, for coverage

17 under such a plan with respect to individuals who

18 are eligible residents (as defined in section

19 228(a)(4)).

20 (3) CONSTRUCTION.—Nothing in this sub21 section shall be construed as requiring—

22 (A) an employer to enter into an agree23 ment under section 224 with a HPPC, or

24 (B) an employee or other individual to en25 roll in a QHP offered by a HPPC.
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1 (d) SCOPE OF PLANS OFFERED.—To the maximum

2 extent practicable, each HPPC—

3 (1) shall enter into agreements with each QHP

4 which is a qualified health maintenance organization

5 (as defined in section 228(b)(2));

6 (2) shall enter into agreements with at least

7 one qualified health plan that is a service benefit

8 plan and at least one qualified health plan that is an

9 indemnity plan for each HPPC area served by the

10 HPPC; and

11 (3) may enter into agreements with other quali12 fied health plans (such as preferred provider organi13 zations).

14 SEC. 224. AGREEMENTS WITH EMPLOYERS.

15 (a) IN GENERAL.—Each agreement under this sec16 tion, between a HPPC and an employer, shall include (as

17 specified by the Secretary) provisions consistent with the

18 requirements specified in the succeeding subsections of

19 this section.

20 (b) FORWARDING INFORMATION ON ELIGIBLE EM21 PLOYEES.—

22 (1) IN GENERAL.—Under an agreement under

23 this section between an employer and a HPPC, the

24 employer must forward to the appropriate HPPC

25 the name and address (and other identifying infor-
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1 mation required by the HPPC) of each employee (in2 cluding part-time and seasonal employees).

3 (2) INFORMATION ON PLANS.—Under the

4 agreement and consistent with section 226, the

5 HPPC—

6 (A) shall provide to each employee identi7 fied under paragraph (1) information on bene8 fits available through QHPs, and

9 (B) upon the request of such an employee,

10 shall enroll the employee (and, at the option of

11 the employee, eligible family members) in such

12 plans.

13 (3) APPROPRIATE HPPC.—In this subsection,

14 the term ‘‘appropriate HPPC’’ means the HPPC for

15 the principal place of business of the employer or (at

16 the option of an employee) the HPPC serving the

17 place of residence of the employee.

18 (c) PAYROLL DEDUCTION OPTION.—

19 (1) IN GENERAL.—Under an agreement under

20 this section between an employer and a HPPC, if

21 the HPPC indicates to the employer that an eligible

22 employee is enrolled in a QHP through the HPPC—

23 (A) the employer shall pay to the HPPC

24 the amount of any employer contribution to-
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1 wards the premium for enrollment of the em2 ployee under the QHP, and

3 (B) if the employee elects to have any em4 ployee share of premiums deducted from wages

5 or other compensation paid by the employer,

6 the employer shall provide for the deduction,

7 from the employee’s wages or other compensa8 tion, of the employee’s share of the amount of

9 the premium due and the payment of such de10 duction to the HPPC.

11 (2) SPECIAL RULES FOR PAYMENT OF EM12 PLOYEE SHARE.—In the case of an employee who is

13 paid wages or other compensation on a monthly or

14 more frequent basis, an employer shall not be re15 quired to provide for payment of amounts of the em16 ployee’s share to a HPPC other than at the same

17 time at which the amounts are deducted from wages

18 or other compensation. In the case of an employee

19 who is paid wages or other compensation less fre20 quently than monthly, an employer may be required

21 to provide for payment of amounts under paragraph

22 (1)(B) to a HPPC on a monthly basis.

23 (d) LIMITED EMPLOYER OBLIGATIONS.—Nothing in

24 this section shall be construed as—
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1 (1) requiring an employer to provide directly for

2 enrollment of eligible employees under a QHP or

3 other health plan,

4 (2) requiring the employer to make, or prevent5 ing the employer from making, information about

6 such plans available to such employees, or

7 (3) requiring the employer to make, or prevent8 ing the employer from making, an employer con9 tribution for coverage of such individuals under such

10 a plan.

11 (e) REFUSAL TO ENTER INTO AGREEMENT.—A

12 HPPC may refuse to enter into an agreement under this

13 section with a small employer if less than a percentage

14 (specified by the HPPC, consistent with rules of the Sec15 retary) of the otherwise eligible employees of the employer

16 are enrolled with a QHP pursuant to such agreement.

17 SEC. 225. AGREEMENTS WITH QUALIFIED HEALTH PLANS

18 (QHPs).

19 (a) AGREEMENTS.—

20 (1) IN GENERAL.—Each HPPC for a HPPC

21 area shall enter into an agreement under this section

22 with each qualified health plan that serves residents

23 of the area. Each such agreement under this section

24 between a QHP and a HPPC shall include (as speci25 fied by the Secretary) provisions consistent with the
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1 requirements of the succeeding subsections of this

2 section. Except as provided in paragraph (2)(A), a

3 HPPC may not refuse to enter into such an agree4 ment with a QHP.

5 (2) TERMINATION OF AGREEMENT.—In accord6 ance with regulations of the Secretary—

7 (A) the HPPC may terminate an agree8 ment under paragraph (1) if the QHP’s ap9 proval under this subtitle is terminated, and

10 (B) the QHP may terminate such an

11 agreement only upon sufficient notice in order

12 to provide for the orderly enrollment of enroll13 ees under other QHPs.

14 The Secretary shall establish a process for the ter15 mination of agreements under this paragraph.

16 (b) OFFER OF ENROLLMENT UNDER PLAN.—

17 (1) IN GENERAL.—Under an agreement under

18 this section between a QHP and a HPPC, the

19 HPPC—

20 (A) shall offer, on behalf of the QHP, en21 rollment in the QHP to eligible employees, and

22 (B) may offer, on behalf of the QHP, en23 rollment in the QHP to eligible residents.

24 (2) TIMING OF OFFER.—The offer of enroll25 ment shall be available on a continuous, year-round
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1 basis, consistent with section 2104 of the Social Se2 curity Act (as added by section 202 of this Act).

3 (c) RECEIPT OF GROSS PREMIUMS.—

4 (1) IN GENERAL.—Under an agreement under

5 this section between a HPPC and a QHP, payment

6 of premiums shall be made, by individuals or em7 ployers on their behalf, directly to the HPPC for the

8 benefit of the QHP.

9 (2) TIMING OF PAYMENT OF PREMIUMS.—Pre10 miums shall be payable on a monthly basis (or, at

11 the option of an eligible resident, on a quarterly

12 basis). The HPPC may provide for penalties and

13 grace periods for late payment.

14 (3) QHPS RETAIN RISK OF NONPAYMENT.—

15 Nothing in this subsection shall be construed as

16 placing upon a HPPC any risk associated with fail17 ure to make prompt payment of premiums (other

18 than the portion of the premium representing the

19 HPPC overhead amount). Each eligible individual

20 who enrolls with a QHP through the HPPC is liable

21 to the QHP for premiums.

22 (d) COLLECTION AND FORWARDING OF PRE23 MIUMS.—

24 (1) PREMIUM CHARGED.—Under an agreement

25 under this section between a QHP and a HPPC, the
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1 HPPC shall charge, with respect to the enrollment

2 of eligible individuals in the plan through the

3 HPPC, an amount equal to the sum of—

4 (A) the premium rate established by the

5 plan (consistent with section 2104(c) of the So6 cial Security Act) for the type of enrollment,

7 and

8 (B) the HPPC overhead amount (estab9 lished under subsection (e) for enrollment of in10 dividuals through the HPPC).

11 (2) AMOUNT FORWARDED.—Under an agree12 ment under this section between a QHP and a

13 HPPC, the HPPC shall forward to each QHP in

14 which an eligible individual has been enrolled an

15 amount equal to the premium rate established by the

16 plan (consistent with section 2104(c) of the Social

17 Security Act) for the type of enrollment.

18 (3) PAYMENTS.—Payments shall be made by

19 the HPPC under this subsection to a QHP within

20 a period (specified by the Secretary and not to ex21 ceed 7 days) after receipt of the premium from the

22 employer of the eligible individual or the eligible in23 dividual, as the case may be.

24 (4) ADJUSTMENTS FOR DIFFERENCES IN

25 NONPAYMENT RATES.— In accordance with rules es-
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1 tablished by the Secretary, each agreement between

2 a QHP and a HPPC under this section shall provide

3 that, if a HPPC determines that the rates of

4 nonpayment of premiums during grace periods es5 tablished under subsection (c)(2) vary appreciably

6 among QHPs, the HPPC shall provide for such ad7 justments in the payments made under this sub8 section as will place each QHP in the same position

9 as if the rates of nonpayment were the same.

10 (e) HPPC OVERHEAD AMOUNT.—

11 (1) HPPC BUDGET.—Each HPPC shall estab12 lish a budget for each year for each HPPC area in

13 accordance with regulations established by the Sec14 retary.

15 (2) HPPC OVERHEAD AMOUNT.—Based upon

16 the budget, the HPPC shall compute HPPC over17 head amounts so that—

18 (A) the amounts vary by type of enroll19 ment based upon factors (specified by the Sec20 retary) reflecting the relative average premium

21 amounts established for the different types of

22 enrollment,

23 (B) subject to subparagraph (C), the total

24 of such amounts are projected to equal the

25 budget established under paragraph (1), and
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1 (C) the average overhead amount for a

2 type of enrollment does not exceed 5 percent of

3 the average premium amounts imposed for that

4 type of enrollment.

5 SEC. 226. ENROLLING INDIVIDUALS IN QUALIFIED HEALTH

6 PLANS THROUGH A HPPC.

7 (a) IN GENERAL.—Each HPPC shall offer in accord8 ance with this section eligible employees (and, at the op9 tion of the HPPC, eligible residents) the opportunity to

10 enroll in a QHP for the HPPC area in which the individ11 ual resides.

12 (b) ENROLLMENT PROCESS.—Each HPPC shall es13 tablish an enrollment process in accordance with rules es14 tablished by the Secretary.

15 (c) DISTRIBUTION OF COMPARATIVE INFORMA16 TION.—Each HPPC shall distribute, to eligible individuals

17 and participating employers, information, in comparative

18 form, on the prices, outcomes, enrollee satisfaction, and

19 other information pertaining to the quality of the different

20 QHPs for which it is offering enrollment. Each HPPC also

21 shall make such information available to other interested

22 persons.

23 (d) PERIOD OF COVERAGE.—

24 (1) IN GENERAL.—Except as the Secretary may

25 provide, in the case of an eligible individual who en-
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1 rolls with a QHP through a HPPC, coverage under

2 the plan shall begin on such date (not later than the

3 first day of the first month that begins at least 15

4 days after the date of enrollment) as the Secretary

5 shall specify.

6 (2) MINIMUM PERIOD OF ENROLLMENT.—In

7 order to avoid adverse selection, each HPPC may re8 quire, consistent with rules of the Secretary, that en9 rollment with QHPs be for not less than 1 year

10 (with exceptions permitted for such exceptional cir11 cumstances as the Secretary may recognize).

12 SEC. 227. COORDINATION AMONG HPPCS.

13 (a) IN GENERAL.—The Secretary shall establish

14 rules consistent with this section for coordination among

15 HPPCs in cases where participating employers are located

16 in one HPPC area and their employees reside in a dif17 ferent HPPC area (and are eligible for enrollment with

18 QHPs located in the other area).

19 (b) COORDINATION RULES.—Under the rules estab20 lished under subsection (a)—

21 (1) HPPC FOR EMPLOYER.—The HPPC for

22 the principal place of business of an employer shall

23 be responsible—
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1 (A) for providing information to the em2 ployer’s employees on QHPs for areas in which

3 employees reside;

4 (B)(i) for enrolling employees under the

5 QHP selected (even if the QHP selected is not

6 in the same HPPC area as the HPPC) and (ii)

7 if the QHP chosen is not in the same HPPC

8 area as the HPPC, for forwarding the enroll9 ment information to the HPPC for the area in

10 which the QHP selected is located; and

11 (C) in the case of premiums to be paid

12 through payroll deduction, to receive such pre13 miums and forward them to the HPPC for the

14 area in which the QHP selected is located.

15 (2) HPPC FOR EMPLOYEE RESIDENCE.—The

16 HPPC for the HPPC area in which an employee re17 sides shall be responsible for providing other HPPCs

18 with information concerning QHPs being offered in

19 the HPPC’s areas.

20 SEC. 228. DEFINITIONS.

21 (a) ELIGIBILITY.—In this title:

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

23 individual’’ means, with respect to a HPPC area, an

24 individual who—
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1 (A) is an eligible employee (as defined in

2 paragraph (2)),

3 (B) is an eligible resident (as defined in

4 paragraph (4)), or

5 (C) an eligible family member (as defined

6 in paragraph (3)) of an eligible employee or eli7 gible resident.

8 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

9 employee’’ means, with respect to a HPPC area, an

10 individual residing in the area who is the employee

11 of a participating employer.

12 (3) ELIGIBLE FAMILY MEMBER.—The term ‘‘el13 igible family member’’ means, with respect to an eli14 gible employee or other principal enrollee, an individ15 ual who is residing in the United States and—

16 (A) is the spouse of the employee or prin17 cipal enrollee, or

18 (B) is an unmarried dependent child under

19 22 years of age, including—

20 (i) an adopted child or recognized nat21 ural child, and

22 (ii) a stepchild or foster child but only

23 if the child lives with the employee or prin24 cipal enrollee in a regular parent-child re25 lationship,
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1 or such an unmarried dependent child regard2 less of age who is incapable of self-support be3 cause of mental or physical disability which ex4 isted before age 22.

5 (4) ELIGIBLE RESIDENT.—The term ‘‘eligible

6 resident’’ means, with respect to a HPPC area, an

7 individual who—

8 (A) is residing in the area, and

9 (B) is not an eligible employee.

10 (5) PARTICIPATING EMPLOYER.—The term

11 ‘‘participating employer’’ means an employer that

12 has an agreement in effect with a HPPC under sec13 tion 224.

14 (b) ABBREVIATIONS.—In this title:

15 (1) HPPC; HEALTH PLAN PURCHASING COOP16 ERATIVE.—The terms ‘‘health plan purchasing coop17 erative’’ and ‘‘HPPC’’ mean a health plan purchas18 ing cooperative established under this part.

19 (2) QUALIFIED HMO; QUALIFIED HEALTH MAIN20 TENANCE ORGANIZATION.—The terms ‘‘qualified

21 HMO’’ and ‘‘qualified health maintenance organiza22 tion’’ mean a health benefit plan that—

23 (A) is an eligible organization having a

24 contract under section 1876 of the Social Secu25 rity Act, or
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1 (B) is a qualified health maintenance orga2 nization (as defined in section 1310(d) of the

3 Public Health Service Act).

4 (3) QHP; QUALIFIED HEALTH PLAN.—The

5 terms ‘‘qualified health plan’’ and ‘‘QHP’’ mean a

6 health plan approved by the Secretary under section

7 251(a).

8 (c) OTHER TERMS.—In this title:

9 (1) HEALTH BENEFIT PLAN.—The term

10 ‘‘health benefit plan’’ has the meaning given such

11 term in section 2108(3) of the Social Security Act,

12 as added by section 302 of this Act.

13 (2) SMALL EMPLOYER.—The term ‘‘small em14 ployer’’ has the meaning given such term in section

15 2103(d)(2) of the Social Security Act (as added by

16 section 302 of this Act).

17 (4) STATE.—The term ‘‘State’’ includes the

18 District of Columbia.

19 (5) TYPE OF ENROLLMENT.—There are 2

20 ‘‘types of enrollment’’:

21 (A) Coverage only of an individual (re22 ferred to in this subtitle as enrollment ‘‘on an

23 individual basis’’).
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1 (B) Coverage of a family consisting of

2 more than 1 individual (referred to in this sub3 title as enrollment ‘‘on a family basis’’).

4 PART 2—REQUIREMENTS FOR QUALIFIED HEALTH

5 PLANS

6 SEC. 251. APPROVAL PROCESS; QUALIFICATIONS.

7 (a) IN GENERAL.—The Secretary shall provide a

8 process whereby a health benefit plan (as defined in sec9 tion 228(c)(1)) may be approved as a qualified health

10 plan.

11 (b) QUALIFICATIONS.—

12 (1) IN GENERAL.—In order to be approved as

13 a QHP, a plan must—

14 (A) provide, in accordance with section

15 252, for coverage of the core group of benefits;

16 (B) subject to paragraph (2), be a quali17 fied health maintenance organization (as de18 fined in section 228(b)(2));

19 (C) have been certified under section 2101

20 of the Social Security Act as meeting the stand21 ards established under title XXI of such Act

22 (including standards relating to prohibiting dis23 crimination based on health status, to open en24 rollment, use of community-rated premiums,

25 etc.);
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1 (D) meet standards established by the Sec2 retary to protect enrollees with respect to po3 tential insolvency; and

4 (E) provide, in accordance with the na5 tional patient outcomes data reporting program

6 under subtitle C, for the collection and report7 ing to the Secretary of certain information re8 garding its enrollees and provision of services.

9 (2) WAIVER OF QUALIFIED HMO REQUIRE10 MENT.—A HPPC may waive the requirement of

11 paragraph (1)(B) in the case of such plans as it de12 termines will promote access to quality, cost effective

13 health care in the HPPC area. However, any such

14 plan that is not a qualified health maintenance orga15 nization must meet the following additional require16 ments:

17 (A) EFFECTIVE GRIEVANCE PROCE18 DURES.—The plan must provide for effective

19 procedures for hearing and resolving grievances

20 between the plan and individuals enrolled under

21 the plan, which procedures meet standards

22 specified by the Secretary.

23 (B) RESTRICTION ON CERTAIN PHYSICIAN

24 INCENTIVE PLANS.—
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1 (i) IN GENERAL.—If the plan operates

2 a physician incentive plan (as defined in

3 clause (ii)), the incentive plan must meet

4 the requirements specified in clauses (i)

5 through (iii) of section 1876(i)(8)(A) of

6 the Social Security Act (in the same man7 ner as they apply to eligible organizations

8 under section 1876 of such Act).

9 (ii) PHYSICIAN INCENTIVE PLAN DE10 FINED.—In this subparagraph, the term

11 ‘‘physician incentive plan’’ means any com12 pensation or other financial arrangement

13 between a plan and a physician or physi14 cian group that may directly or indirectly

15 have the effect of reducing or limiting serv16 ices provided with respect to individuals

17 enrolled under the plan.

18 (C) WRITTEN POLICIES AND PROCEDURES

19 RESPECTING ADVANCE DIRECTIVES.—The plan

20 must meet the requirements of section 1866(f)

21 of the Social Security Act (relating to maintain22 ing written policies and procedures respecting

23 advance directives), insofar as such require24 ments would apply to the plan if the plan were

25 an eligible organization.
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1 (c) PROTECTION AGAINST PROVIDER CLAIMS.—In

2 the case of a failure of a QHP to make payments with

3 respect to an individual enrolled under the plan through

4 a HPPC, under standards established by the Secretary,

5 the individual is not liable to any health care provider or

6 practitioner with respect to the provision of health services

7 within such package of benefits covered in excess of the

8 amount for which the enrollee would have been liable if

9 the plan had made payments in a timely manner.

10 SEC. 252. BENEFIT PACKAGES.

11 (a) REQUIREMENT OF OFFERING.—The Secretary

12 may not approve a qualified health plan unless, subject

13 to subsection (b), the plan—

14 (1) offers, as a separate and distinct benefit

15 package, the core benefit package specified pursuant

16 to subsection (c);

17 (2) has entered into arrangements with a suffi18 cient number and variety of providers to provide for

19 its enrollees benefits under such core benefit pack20 age without imposing cost-sharing in excess of the

21 cost-sharing permitted under such benefit package

22 and (except for an indemnity plan) does not permit

23 providers participating in the plan to charge for

24 services covered under the core benefit package
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1 amounts in excess of the cost-sharing permitted

2 under such package; and

3 (3) provides, in the case of individuals covered

4 under more than one qualified health plan, for co5 ordination of coverage under such plans in an equi6 table manner specified by the Secretary.

7 (b) TREATMENT OF ADDITIONAL, OPTIONAL BENE8 FITS.—A QHP may also offer benefits in addition to (and

9 not duplicative of) the core benefit package (including re10 ducing cost-sharing below the cost-sharing provided for in

11 such package), if such additional benefits—

12 (1) are offered, and priced, separately from the

13 core benefit package, and

14 (2) are only offered consistent with such stand15 ard, incremental benefit packages as the Secretary

16 specifies under subsection (c).

17 (c) SPECIFICATION OF BENEFIT PACKAGES.—

18 (1) IN GENERAL.—The Secretary shall specify

19 the services and cost-sharing to be included in—

20 (A) the core benefit package under this

21 subtitle, and

22 (B) additional incremental benefit pack23 ages under this subtitle.

24 (2) CORE BENEFIT PACKAGE.—
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1 (A) BASED ON MEDICARE BENEFITS.—Ex2 cept as provided in subparagraph (B), the serv3 ices and cost-sharing in the core benefit pack4 age shall be the same as the services and cost5 sharing provided under the medicare program.

6 (B) ADDITIONAL BENEFITS.—The core

7 benefit package also shall include the following:

8 (i) No limit on days of coverage of in9 patient hospital services based on a spell of

10 illness.

11 (ii) An annual limitation on out-of12 pocket costs for cost-sharing (not including

13 premiums and extra-billing amounts) of

14 $2,500 for individual enrollment and

15 $3,000 for family enrollment.

16 (iii) Instead of the deductible for inpa17 tient hospital services under part A of title

18 XVIII of the Social Security Act and the

19 general deductible applicable under part B

20 of such title (subject to clause (v)), there

21 shall be imposed an annual deductible of

22 $300 for each individual (but not to exceed

23 $600 for all individuals in a family).

24 (iv) Benefits for maternity care, well25 child care, and other preventive services
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1 (identified by the Secretary), without the

2 imposition of deductibles or other cost3 sharing.

4 (v) In the case of qualified health

5 maintenance organizations, cost-sharing

6 for deductibles and copayments shall be

7 nominal, consistent with standards for

8 such cost-sharing permitted of qualified

9 health maintenance organizations under

10 title XIII of the Public Health Service Act.

11 The Secretary may change, on an annual basis,

12 the dollar amounts specified under this sub13 paragraph based on changes in an appropriate

14 index.

15 (4) CHANGES IN CORE BENEFIT PACKAGE.—

16 The Secretary, after appropriate advance notice,

17 shall change the core benefit package in order to re18 flect changes in the benefits under the medicare pro19 gram which are not reflected in paragraph (3).

20 (5) OVERRIDING OF STATE BENEFIT MAN21 DATES.—Any State requirement relating to the pro22 vision or coverage of benefits under health plans

23 shall not apply to the benefits provided by qualified

24 health plans through HPPCs under this subtitle.
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1 Subtitle C—National Patient Out2 comes and Enrollee Satisfaction

3 Data Reporting Program

4 SEC. 271. NATIONAL PATIENT OUTCOMES PROGRAM.

5 (a) IN GENERAL.—The Secretary shall establish a

6 national data base on patient outcomes (in this section re7 ferred to as the ‘‘outcomes data base’’) in accordance with

8 this section.

9 (b) COLLECTION OF UNIFORM DATA BASE.—In

10 order to collect information in the outcomes data base in

11 a uniform format—

12 (1) By not later than January 1, 1995, the Sec13 retary shall define and publish the uniform outcomes

14 data that would be collected.

15 (2) By not later than July 1, 1995, the Sec16 retary shall establish, by regulation, the reporting

17 requirements for the routine collection of the out18 comes data.

19 (3) By not later than January 1, 1996, the Sec20 retary shall require all qualified health maintenance

21 organizations, all other health benefit plans, and all

22 health care providers to begin reporting on an an23 nual basis the outcomes data to the Secretary pursu24 ant to the regulations.
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1 (c) PUBLICATION AND DISTRIBUTION OF NATIONAL

2 OUTCOMES DATA BASE.—The Secretary shall publish and

3 distribute an annual report regarding patient outcomes,

4 including information on individual providers, based on in5 formation from the outcomes data base and appropriate

6 utilization information available from the QHPs.

7 SEC. 272. ENROLLEE HEALTH PLAN SATISFACTION.

8 (a) IN GENERAL.—The Secretary shall establish a

9 national data base on enrollee satisfaction with health ben10 efit plans (including self-insured health benefit plans) (in

11 this section referred to as the ‘‘enrollee data base’’) in ac12 cordance with this section.

13 (b) COLLECTION OF UNIFORM DATA BASE.—In

14 order to collect information in the enrollee data base in

15 a uniform format—

16 (1) By not later than July 1, 1995, the Sec17 retary shall define and publish the enrollee satisfac18 tion survey to be used by health benefit plans in col19 lecting data under this section.

20 (2) By not later than January 1, 1996, the Sec21 retary shall require all health benefit plans to begin

22 reporting on an annual basis the data to the Sec23 retary pursuant to the regulations.

24 (c) PUBLICATION AND DISTRIBUTION OF DATA

25 BASE.—The Secretary shall publish and distribute an an-
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1 nual report regarding enrollee satisfaction with the dif2 ferent health plans based on information from the enrollee

3 data base.

4 SEC. 273. RESEARCH AND DEMONSTRATION.

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

6 research and demonstration projects concerning—

7 (1) new methods for collecting and analyzing

8 outcomes and enrollee satisfaction information under

9 this subtitle, and

10 (2) the use of outcomes information systems by

11 qualified health maintenance organizations, health

12 benefits plans, and providers of health care services.

13 The Secretary may also provide for research and dem14 onstration projects concerning the collection and analysis

15 of indicators of system performance (such as health status

16 of community served, prevention of illness, and capacity

17 of delivery system) with respect to integrated health care

18 delivery systems.

19 (b) AUTHORIZATION OF APPROPRIATIONS.—There

20 are authorized to be appropriated $20,000,000 in each of

21 fiscal years 1994 through 1998 to carry out this section.
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1 Subtitle D—Study of Universal

2 Health Insurance Coverage and

3 Cost Containment

4 SEC. 291. STUDY.

5 (a) IN GENERAL.—The Congressional Budget Office

6 shall conduct a study on the different options for providing

7 universal health insurance coverage in the United States.

8 Such study shall identify the following:

9 (1) OPTIONS.—The cost of the different cov10 erage options.

11 (2) COST CONTAINMENT.—The effectiveness of

12 the different options in cost containment.

13 (3) REVENUES REQUIRED.—The revenue levels

14 required for the different options.

15 (4) FINANCING OPTIONS.—Options for financ16 ing these revenue levels, including—

17 (A) the distributional impact of these reve18 nue options, and

19 (B) with respect to the option of imposing

20 a geographic-area specific limit on the tax-fa21 vored status of employer payment for health

22 care for employees, former employees, and de23 pendents, the revenue, administrative, and dis24 tributive impact of imposing such limits.
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1 (b) ASSISTANCE OF JOINT TAX COMMITTEE.—The

2 Joint Committee on Tax shall provide such assistance to

3 the Congressional Budget Office as may be required to

4 conduct the study under this section.

5 (c) REPORT.—The Director of the Congressional

6 Budget Office shall submit, by not later than January 1,

7 1994, a report on the study conducted under this section

8 to the Committees on Ways and Means and Energy and

9 Commerce of the House of Representatives and the Com10 mittee on Finance of the Senate.

11 TITLE III—HEALTH SYSTEMS

12 REFORM

13 Subtitle A—Health Insurance

14 Reform

15 SEC. 301. EXCISE TAX ON PREMIUMS RECEIVED ON

16 HEALTH INSURANCE POLICIES WHICH DO

17 NOT MEET CERTAIN REQUIREMENTS.

18 (a) IN GENERAL.—Chapter 47 of the Internal Reve19 nue Code of 1986 (relating to taxes on group health plans)

20 is amended by adding at the end thereof the following new

21 section:

22 ‘‘SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS

23 FOR HEALTH INSURANCE.

24 ‘‘(a) IMPOSITION OF TAX.—
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1 ‘‘(1) GENERAL RULE.—There is hereby imposed

2 a tax on any nonqualified health benefit plan.

3 ‘‘(2) NONQUALIFIED HEALTH BENEFIT PLAN

4 DEFINED.—For purposes of this section, the term

5 ‘nonqualified health benefit plan’ means any health

6 benefit plan that—

7 ‘‘(A) is not certified under section 2101 of

8 the Social Security Act, or

9 ‘‘(B) the Secretary of Health and Human

10 Services determines is providing coverage in vio11 lation of section 2101(a) of such Act.

12 ‘‘(b) AMOUNT OF TAX.—

13 ‘‘(1) IN GENERAL.—The amount of tax imposed

14 by subsection (a) shall be equal to—

15 ‘‘(A) in the case of an insured health bene16 fit plan, 50 percent of the gross premiums re17 ceived by the issuer which are attributable to

18 the period during which the plan is a non19 qualified health benefit plan, and

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

21 benefit plan, 50 percent of the expenditures

22 under such plan during the period that the plan

23 is a nonqualified health benefit plan.

24 ‘‘(2) GROSS PREMIUMS.—For purposes of para25 graph (1)(A), gross premiums shall include any con-
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1 sideration received with respect to any insured

2 health benefit plan.

3 ‘‘(3) CONTROLLED GROUPS.—For purposes of

4 paragraph (1)—

5 ‘‘(A) CONTROLLED GROUP OF CORPORA6 TIONS.—All corporations which are members of

7 the same controlled group of corporations shall

8 be treated as 1 person. For purposes of the pre9 ceding sentence, the term ‘controlled group of

10 corporations’ has the meaning given to such

11 term by section 1563(a), except that—

12 ‘‘(i) ‘more than 50 percent’ shall be

13 substituted for ‘at least 80 percent’ each

14 place it appears in section 1563(a)(1), and

15 ‘‘(ii) the determination shall be made

16 without regard to subsections (a)(4) and

17 (e)(3)(C) of section 1563.

18 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

19 ETC., WHICH ARE UNDER COMMON CONTROL.—

20 Under regulations prescribed by the Secretary,

21 all trades or business (whether or not incor22 porated) which are under common control shall

23 be treated as 1 person. The regulations pre24 scribed under this subparagraph shall be based
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1 on principles similar to the principles which

2 apply in the case of subparagraph (A).

3 ‘‘(c) LIABILITY FOR TAX.—

4 ‘‘(1) INSURED PLAN.—In the case of an insured

5 health benefit plan, the issuer of the insurance or

6 subscriber contract under which such plan is pro7 vided shall be liable for the tax imposed by this

8 section.

9 ‘‘(2) SELF-INSURED PLAN.—In the case of a

10 self-insured plan—

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

12 subparagraph (B), the employer maintaining

13 such plan shall be liable for the tax imposed by

14 this section.

15 ‘‘(B) MULTIEMPLOYER PLANS, ETC.—In

16 the case of a multiemployer plan or any other

17 plan not maintained by an employer, the plan

18 shall be liable for the tax imposed by this

19 section.

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

21 ‘‘(1) HEALTH BENEFIT PLAN.—

22 ‘‘(A) IN GENERAL.—The term ‘health ben23 efit plan’ means any plan or contract under

24 which any medical benefit is provided to any

25 individual.
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1 ‘‘(B) CERTAIN PLANS AND CONTRACTS

2 NOT COVERED.—The term ‘health benefit plan’

3 does not include any plan or contract—

4 ‘‘(i) which provides for accident only,

5 dental only, or disability only coverage,

6 ‘‘(ii) which provides coverage as a

7 supplement to liability insurance, and

8 ‘‘(iii) which provides insurance arising

9 out of a workers’ compensation or similar

10 law, or automobile medical-payment insur11 ance.

12 ‘‘(2) INSURED HEALTH BENEFIT PLAN.—The

13 term ‘insured health benefit plan’ means any health

14 benefit plan provided through insurance, and in15 cludes a prepaid hospital or medical service plan, the

16 health benefit plan of a health maintenance organi17 zation, and a multiple employer welfare arrangement

18 (as defined in section 3(40) of the Employee Retire19 ment Income Security Act of 1974).

20 ‘‘(3) MEDICAL BENEFIT.—The term ‘medical

21 benefit’ means any benefit which consists of the pro22 viding (through insurance or otherwise) of medical

23 care (as defined in section 213(d)).

24 ‘‘(4) SELF-INSURED HEALTH BENEFIT PLAN.—

25 The term ‘self-insured health benefit plan’ means
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1 any health benefit plan that is not an insured health

2 benefit plan.’’

3 (b) NONDEDUCTIBILITY OF TAX.—Subsection (a) of

4 section 275 of such Code (relating to nondeductibility of

5 certain taxes) is amended by adding at the end thereof

6 the following new paragraph:

7 ‘‘(7) Taxes imposed by section 5000A (failure

8 to satisfy certain standards for health insurance).’’

9 (c) CLERICAL AMENDMENTS.—

10 (1) So much of chapter 47 of such Code as pre11 cedes subsection (a) of section 5000 is amended to

12 read as follows:

13 ‘‘CHAPTER 47—TAXES RELATING TO

14 HEALTH BENEFIT PLANS

‘‘Sec. 5000. Contributions to nonconforming large group health

plans.

‘‘Sec. 5000A. Failure to satisfy certain standards for health insurance.

15 ‘‘SEC. 5000. CONTRIBUTIONS TO NONCONFORMING LARGE

16 GROUP HEALTH PLANS.’’

17 (2) The table of chapters for subtitle D of such

18 Code is amended by striking the item relating to

19 chapter 47 and inserting the following new item:

‘‘Chapter 47. Taxes relating to health benefit plans.’’

20 SEC. 302. HEALTH BENEFIT PLAN STANDARDS.

21 The Social Security Act is amended by adding at the

22 end the following new title:
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1 ‘‘TITLE XXI—HEALTH BENEFIT PLAN

2 STANDARDS

3 ‘‘SEC. 2101. STANDARDS AND REQUIREMENTS FOR HEALTH

4 BENEFIT PLANS.

5 ‘‘(a) CERTIFICATION REQUIRED.—

6 ‘‘(1) IN GENERAL.—No health benefit plan (as

7 defined in section 2108(3)) may be issued on or

8 after the effective date specified in subsection (d)

9 (and no new contract may be offered under such

10 plan with respect to any individual or group begin11 ning on or after such effective date) unless the plan

12 has been certified—

13 ‘‘(A) by the Secretary (in accordance with

14 such procedures as the Secretary establishes),

15 or

16 ‘‘(B) by a State regulatory program (ap17 proved under subsection (b)),

18 as meeting the standards established under section

19 2102 by such effective date.

20 ‘‘(2) PLAN DISAPPROVED.—If the Secretary

21 (or, in the case of a plan certified by a State regu22 latory program, the State) determines that a health

23 benefit plan does not meet the applicable standards

24 of this title on or after such effective date, no cov25 erage may be provided under the plan to individuals
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1 not enrolled as of the date of the determination and

2 the plan may not be continued for plan years begin3 ning after the date of such determination until the

4 Secretary (or program) determines that such plan is

5 in compliance with such standards.

6 ‘‘(b) STATE APPROVED PROGRAMS.—

7 ‘‘(1) IN GENERAL.—If the Secretary determines

8 that a State has in effect an effective regulatory pro9 gram for the application of the standards established

10 under section 2102 to health benefit plans, the Sec11 retary may approve such program for purposes of

12 certification of health benefit plans under this title.

13 ‘‘(2) ANNUAL REPORTS.—As a condition for the

14 continued approval of such a regulatory program,

15 the State shall report to the Secretary annually such

16 information as the Secretary may require with re17 spect to the performance of the program. Such infor18 mation shall include a list of the health benefit plans

19 certified under the program, the compliance of such

20 plans with the standards established under section

21 2102, and enforcement actions taken to ensure such

22 compliance.

23 ‘‘(3) PERIODIC SECRETARIAL REVIEW OF STATE

24 REGULATORY PROGRAMS.—The Secretary annually

25 shall review State regulatory programs approved
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1 under paragraph (1) to determine if they continue to

2 apply and enforce the standards. If the Secretary

3 initially determines that a State regulatory program

4 no longer is applying and enforcing such standards,

5 the Secretary shall provide the State an opportunity

6 to adopt such a plan of correction that would bring

7 such program into compliance. If the Secretary

8 makes a final determination that the State regu9 latory program, fails to apply and enforce such

10 standards after such an opportunity, the Secretary

11 shall disapprove such program and reassume respon12 sibility for certification of all health benefit plans in

13 that State.

14 ‘‘(4) GAO AUDITS.—The Comptroller General

15 shall conduct periodic reviews on a sample of State

16 regulatory programs approved under paragraph (1)

17 to determine their compliance with the requirements

18 of such paragraph. The Comptroller General shall

19 report to the Secretary and Congress on the findings

20 of such reviews.

21 ‘‘(c) EXCISE TAX SANCTIONS.—For application of

22 excise tax in the case of a nonqualified health benefit plan,

23 see section 5000A of the Internal Revenue Code of 1986.

24 ‘‘(d) EFFECTIVE DATE.—The effective date specified

25 in this subsection is January 1, 1994.
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1 ‘‘SEC. 2102. ESTABLISHMENT OF STANDARDS.

2 ‘‘(a) ESTABLISHMENT OF STANDARDS.—The Sec3 retary shall develop and publish, by not later than October

4 1, 1993, specific standards to implement the requirements

5 of this title and to be applied under section 5000A of the

6 Internal Revenue Code of 1986.

7 ‘‘(b) MORE STRINGENT STATE STANDARDS PER8 MITTED.—In the case of insured health benefit plans, a

9 State may implement standards that are more stringent

10 than the standards established under this section.

11 ‘‘(c) APPLICATION TO ERISA.—The Secretary shall

12 consult with the Secretary of Labor concerning the appli13 cation of the requirements of this title to employee welfare

14 benefit plans under title I of the Employee Retirement In15 come Security Act of 1974.

16 ‘‘SEC. 2103. REQUIREMENTS APPLICABLE TO ALL HEALTH

17 BENEFIT PLANS.

18 ‘‘(a) NO DISCRIMINATION BASED ON HEALTH STA19 TUS.—

20 ‘‘(1) PROVISION OF SERVICES.—Except as pro21 vided under subsections (b) and (c), a health benefit

22 plan may not deny, limit, or condition the coverage

23 under (or benefits of) the plan based on the health

24 status, claims experience, receipt of health care,

25 medical history, or lack of evidence of insurability,

26 of an individual.
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1 ‘‘(2) PREMIUM CHARGES WITHIN SELF-IN2 SURED HEALTH BENEFIT PLANS.—A self-insured

3 health benefit plan may not vary premiums charged

4 based on the health status, claims experience, receipt

5 of health care, medical history, or lack of evidence

6 of insurability, of an individual.

7 ‘‘(b) TREATMENT OF PRE-EXISTING CONDITION EX8 CLUSIONS FOR ALL SERVICES.—

9 ‘‘(1) IN GENERAL.—Subject to the succeeding

10 provisions of this subsection, a health benefit plan

11 may exclude coverage with respect to services related

12 to treatment of a pre-existing condition, but the pe13 riod of such exclusion may not exceed 6 months.

14 ‘‘(2) NONAPPLICATION TO NEWBORNS.—The

15 exclusion of coverage permitted under paragraph (1)

16 shall not apply to services furnished to newborns.

17 ‘‘(3) CREDITING OF PREVIOUS COVERAGE.—

18 ‘‘(A) IN GENERAL.—If an individual is in

19 a period of continuous coverage (as defined in

20 subparagraph (B)(i)) with respect to particular

21 services as of the date of initial coverage under

22 a plan, any period of exclusion of coverage with

23 respect to a pre-existing condition for such serv24 ices or type of services shall be reduced by 1
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1 month for each month in the period of continu2 ous coverage.

3 ‘‘(B) DEFINITIONS.—In this paragraph:

4 ‘‘(i) PERIOD OF CONTINUOUS COV5 ERAGE.—The term ‘period of continuous

6 coverage’ means, with respect to particular

7 services, the period beginning on the date

8 an individual is enrolled under a health

9 benefit plan or program (including the

10 medicare program, a State plan under title

11 XIX, continuation coverage under section

12 4980B of the Internal Revenue Code of

13 1986, or a State general medical assistance

14 program) which provides the same or sub15 stantially similar benefits with respect to

16 such services and ends on the date the in17 dividual is not so enrolled for a continuous

18 period of more than 3 months.

19 ‘‘(ii) PRE-EXISTING CONDITION.—The

20 term ‘pre-existing condition’ means, with

21 respect to coverage under a plan, a condi22 tion which has been diagnosed or treated

23 during the 3-month period ending on the

24 day before the first date of such coverage,

25 except that such term does not include a
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1 condition which was first diagnosed or

2 treated during a period of continuous cov3 erage.

4 ‘‘(C) STANDARDS FOR SIMILAR BENE5 FITS.—The Secretary shall establish such cri6 teria for determining if benefits are substan7 tially similar as may be necessary to carry out

8 this subsection.

9 ‘‘(c) EXCLUSION OF COLLECTIVELY BARGAINED

10 HEALTH BENEFIT PLANS.—In the case of a health bene11 fit plan established or maintained under or pursuant to

12 one or more collective bargaining agreements, the plan

13 may exclude from coverage individuals who are not cov14 ered under the plan or pursuant to one of such collective

15 bargaining agreements.

16 ‘‘(d) SMALL EMPLOYERS CANNOT OFFER SELF-IN17 SURED PLANS.—

18 ‘‘(1) IN GENERAL.—No health benefit plan of a

19 small employer may be certified under this title un20 less such plan is an insured health benefit plan.

21 ‘‘(2) SMALL EMPLOYER DEFINED.—

22 ‘‘(A) IN GENERAL.—In paragraph (1), the

23 term ‘small employer’ means, with respect to a

24 plan year, an employer that normally employs
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1 more than 1 but less than 101 eligible employ2 ees on a typical business day during such year.

3 ‘‘(B) ELIGIBLE EMPLOYEE.—For purposes

4 of subparagraph (A), the term ‘eligible em5 ployee’ means, with respect to an employer, an

6 employee who normally performs on a monthly

basis at least 171 7 ⁄2 hours of service per week for

8 that employer. For the purposes of this para9 graph, the term ‘employee’ includes a self-em10 ployed individual.

11 ‘‘(3) CONTROLLED GROUPS.—For purposes of

12 paragraph (2)—

13 ‘‘(A) CONTROLLED GROUP OF CORPORA14 TIONS.—All corporations which are members of

15 the same controlled group of corporations shall

16 be treated as 1 person. For purposes of the pre17 ceding sentence, the term ‘controlled group of

18 corporations’ has the meaning given to such

19 term by section 1563(a) of the Internal Reve20 nue Code of 1986, except that—

21 ‘‘(i) ‘more than 50 percent’ shall be

22 substituted for ‘at least 80 percent’ each

23 place it appears in section 1563(a)(1) of

24 such Code, and
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1 ‘‘(ii) the determination shall be made

2 without regard to subsections (a)(4) and

3 (e)(3)(C) of section 1563 of such Code.

4 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

5 ETC., WHICH ARE UNDER COMMON CONTROL.—

6 Under regulations prescribed by the Secretary

7 of the Treasury, all trades or business (whether

8 or not incorporated) which are under common

9 control shall be treated as 1 person. The regu10 lations prescribed under this subparagraph shall

11 be based on principles similar to the principles

12 which apply in the case of subparagraph (A).

13 ‘‘(4) EXCEPTION.—Paragraph (1) shall not

14 apply to a health benefit plan that is exempt from

15 treatment as a multiple employer welfare benefit

16 plan because of section 3(40)(A)(ii) of the Employee

17 Retirement Income Security Act of 1974.

18 ‘‘SEC. 2104. STANDARDS APPLICABLE ONLY TO INSURED

19 HEALTH BENEFIT PLANS.

20 ‘‘(a) OPEN ENROLLMENT.—

21 ‘‘(1) IN GENERAL.—Subject to the succeeding

22 provisions of this subsection, a carrier that offers an

23 insured health benefit plan to individuals residing

24 (or to groups located) in a State must offer the

25 same plan to any other resident of (or group located
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1 in) the State. Such requirement shall apply on a

2 continuous, year-round basis.

3 ‘‘(2) RESTRICTIONS OF ENROLLMENT IN THE

4 CASE OF CERTAIN ASSOCIATION COVERAGE.—In the

5 case of an insured health benefit plan offered

6 through an association which is composed exclusively

7 of employers (which may include self-employed indi8 viduals) and which has been formed for purposes

9 other than obtaining health insurance, the carrier is

10 not required to offer the plan to individuals or em11 ployers who are not employees of such employers or

12 self-employed members of the association, or their

13 dependents.

14 ‘‘(3) TREATMENT OF HEALTH MAINTENANCE

15 ORGANIZATIONS.—

16 ‘‘(A) GEOGRAPHIC LIMITATIONS.—A

17 health maintenance organization may deny en18 rollment with respect to an individual if the in19 dividual is residing outside the service area of

20 the organization, but only if such denial is ap21 plied uniformly without regard to health status

22 or insurability.

23 ‘‘(B) SIZE LIMITS.—A health maintenance

24 organization may apply to the Secretary to

25 cease enrolling new employer groups or individ-
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1 uals in its insured health benefit plan (or in a

2 geographic area served by the plan) if—

3 ‘‘(i) it ceases to enroll any new em4 ployer groups or individuals, and

5 ‘‘(ii) it can demonstrate that its finan6 cial or administrative capacity to serve pre7 viously enrolled groups and individuals

8 (and additional individuals who will be ex9 pected to enroll because of affiliation with

10 such previously enrolled groups) will be im11 paired if it is required to enroll new em12 ployer groups or individuals.

13 ‘‘(b) GROUNDS FOR REFUSAL TO ISSUE OR

14 RENEW.—A carrier may refuse to issue or renew or termi15 nate a plan only for—

16 ‘‘(1) nonpayment of premiums, and

17 ‘‘(2) fraud or misrepresentation.

18 ‘‘(c) USE OF COMMUNITY-RATED PREMIUM

19 RATES.—

20 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

21 the premium rate charged for an insured health ben22 efit plan with similar benefits in a community for a

23 type of enrollment (described in paragraph (4)) shall

24 be—
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1 ‘‘(A) the same for all enrollments on a

2 group basis, and

3 ‘‘(B) the same for all other enrollments.

4 ‘‘(2) TRANSITION.—

5 ‘‘(A) IN GENERAL.—In the case of an in6 sured health benefit plan that charged different

7 premium rates for similar benefits in a commu8 nity for a type of enrollment in 1993, notwith9 standing paragraph (1) the percentage range

10 (as defined in subparagraph (B)) of premium

11 rates charged—

12 ‘‘(i) in 1994 may not be greater than

2 13 ⁄3 of the premium range of premium rates

14 charged in 1993, and

15 ‘‘(ii) in 1995 may not be greater than

1 16 ⁄3 of the premium range of premium rates

17 charged in 1993.

18 ‘‘(B) PREMIUM RANGE DEFINED.—In sub19 paragraph (A), the term ‘premium range’

20 means, with respect to premium rates under a

21 plan for similar benefits in a community for a

22 type of enrollment, the quotient (expressed as a

23 percentage) of—

24 ‘‘(i) the difference between the highest

25 premium rate for such coverage and the
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1 lowest premium rate for such coverage, di2 vided by

3 ‘‘(ii) the lowest premium rate for such

4 coverage.

5 ‘‘(3) SPECIFICATION OF COMMUNITY.—For pur6 poses of this subsection, no carrier may use a geo7 graphic area that is smaller than a metropolitan sta8 tistical area as a community.

9 ‘‘(4) TYPES OF ENROLLMENT.—For purposes

10 of this subsection, the types of enrollment in a

11 health benefit plan are individual-only coverage and

12 coverage of a family consisting of more than 1 indi13 vidual.

14 ‘‘(d) MINIMUM PLAN PERIOD.—A carrier may not

15 offer to, or issue with respect to, an individual or employer

16 an insured health benefit plan with a term of less than

17 12 months.

18 ‘‘(e) NOTICES AND RENEWAL PERIODS.—

19 ‘‘(1) NOTICE AND SPECIFICATION OF RATES

20 AND ADMINISTRATIVE CHANGES.—

21 ‘‘(A) NOTICE.—The carrier of an insured

22 health benefit plan shall provide for notice, at

23 least 30 days before the date of expiration of

24 the plan, of the terms for renewal of the plan.

25 Except with respect to rates and administrative
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1 changes, the terms of renewal (including bene2 fits) shall be the same as the terms of issuance.

3 ‘‘(B) RENEWAL RATES SAME AS ISSUANCE

4 RATES.—The carrier may change the terms for

5 such renewal, but the premium rates charged

6 with respect to such renewal shall be the same

7 as that for a new issue.

8 ‘‘(2) PERIOD OF RENEWAL.—The period of re9 newal of each insured health benefit plan shall be for

10 a period of not less than 12 months.

11 ‘‘SEC. 2105. PAYMENT OF COMMISSIONS.

12 ‘‘A carrier may not vary the remuneration paid a

13 broker for the sale or renewal of any health benefit plan

14 based, directly or indirectly, on the anticipated or actual

15 claims experience associated with the group or individuals

16 to which the plan was sold.

17 ‘‘SEC. 2106. INSURANCE REQUIREMENT FOR MULTIPLE EM18 PLOYER WELFARE ARRANGEMENTS.

19 ‘‘Each insured health benefit plan that is a multiple

20 employer welfare arrangement must be offered by an en21 tity licensed under an insurance law of a State.

22 ‘‘SEC. 2107. NONAPPLICATION IN PUERTO RICO AND THE

23 TERRITORIES.

24 ‘‘This title shall not apply outside the 50 States or

25 the District of Columbia.
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1 ‘‘SEC. 2108. DEFINITIONS.

2 ‘‘In this title:

3 ‘‘(1) CARRIER.—The term ‘carrier’ means any

4 person that offers a health benefit plan, whether

5 through insurance or otherwise, including a licensed

6 insurance company, a prepaid hospital or medical

7 service plan, a health maintenance organization, and

8 a multiple employer welfare arrangement.

9 ‘‘(2) GROUP.—The term ‘group’ means 2 or

10 more employees of the same employer who normally

perform on a monthly basis at least 171 11 ⁄2 hours of

12 service per week for that employer.

13 ‘‘(3) HEALTH BENEFIT PLAN.—

14 ‘‘(A) IN GENERAL.—The term ‘health ben15 efit plan’ means any plan or contract under

16 which any medical benefit is provided to any in17 dividual.

18 ‘‘(B) CERTAIN PLANS AND CONTRACTS

19 NOT COVERED.—The term ‘health benefit plan’

20 does not include any plan or contract—

21 ‘‘(i) which provides for accident only,

22 dental only, or disability only coverage,

23 ‘‘(ii) which provides coverage as a

24 supplement to liability insurance, and

25 ‘‘(iii) which provides insurance arising

26 out of a workers’ compensation or similar
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1 law, or automobile medical-payment insur2 ance.

3 ‘‘(4) HEALTH MAINTENANCE ORGANIZATION.—

4 The term ‘health maintenance organization’ has the

5 meaning given the term ‘eligible organization’ in sec6 tion 1876(b).

7 ‘‘(5) INSURED HEALTH BENEFIT PLAN.—The

8 term ‘insured health benefit plan’ means any health

9 benefit plan provided through insurance, and in10 cludes a prepaid hospital or medical service plan, the

11 health benefit plan of a health maintenance organi12 zation, and a multiple employer welfare arrange13 ment.

14 ‘‘(6) MEDICAL BENEFIT.—The term ‘medical

15 benefit’ means any benefit which consists of the pro16 viding (through insurance or otherwise) of medical

17 care (as defined in section 213(d) of the Internal

18 Revenue Code of 1986).

19 ‘‘(7) MULTIPLE EMPLOYER WELFARE AR20 RANGEMENT.—The term ‘multiple employer welfare

21 arrangement’ has the meaning given such term in

22 section 3(40) of the Employee Retirement Income

23 Security Act of 1974.

24 ‘‘(8) SELF-INSURED HEALTH BENEFIT PLAN.—

25 The term ‘self-insured health benefit plan’ means
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1 any health benefit plan not provided through insur2 ance.

3 ‘‘(9) STATE.—The term ‘State’ means the 50

4 States and the District of Columbia.’’.

5 SEC. 303. ASSURING CONTINUATION OF ACCESS TO COL6 LEGE AND UNIVERSITY HEALTH BENEFIT

7 PLANS BY GRADUATING STUDENTS.

8 (a) IN GENERAL.—No State shall establish or enforce

9 any law or regulation that prevents the health benefit plan

10 of a college or university from offering eligible individuals

11 continuation of coverage under the plan.

12 (b) CONSTRUCTION.—Nothing in this section shall be

13 construed—

14 (1) as requiring the health benefit plan of a col15 lege or university to provide for the continuation

16 coverage described in subsection (a),

17 (2) if such continuation coverage is provided, as

18 requiring such continuation coverage to be made

19 available to other individuals or as requiring facili20 ties of the health benefit plan to be made available

21 to any individuals who have not otherwise been asso22 ciated with the college or university, or

23 (3) as preventing such a health benefit plan

24 from imposing premiums for such continuation cov25 erage.
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1 (c) DEFINITIONS.—In this section:

2 (1) The term ‘‘college or university’’ means an

3 institution of higher education (as defined in section

4 1201(a) of the Higher Education Act of 1965).

5 (2) The term ‘‘eligible individual’’ means, with

6 respect to a college or university, an individual

7 who—

8 (A) is enrolled under the health benefit

9 plan of the college or university as a student (or

10 as a dependent of a student), and

11 (B) whose enrollment under the plan would

12 otherwise terminate because of the graduation

13 from the college or university of the individual

14 (or the spouse or parent of the individual).

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

16 on the date of the enactment of this Act.

17 Subtitle B—Administrative

18 Simplification

19 SEC. 321. REQUIREMENT FOR UNIFORM HEALTH CLAIMS

20 CARDS.

21 (a) UNIFORM HEALTH CLAIMS CARDS.—

22 (1) REQUIREMENT.—Each health benefit plan

23 (as defined in section 326(a)) shall issue a health

24 claims card that meets the requirements of sub25 section (c) for each individual who is entitled to ben-
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1 efits under the plan and who is residing in the Unit2 ed States. Such card shall be issued to the individual

3 involved or, in the case of an individual enrolled as

4 a dependent of another individual, to that other indi5 vidual.

6 (2) DEADLINE FOR APPLICATION OF REQUIRE7 MENT.—The deadline specified under this paragraph

8 for the requirement under paragraph (1) is 6

9 months after the date the standards are established

10 under subsection (c).

11 (b) ENFORCEMENT THROUGH CIVIL MONEY PEN12 ALTIES.—

13 (1) IN GENERAL.—In the case of a health bene14 fit plan that fails to issue a health claims card in ac15 cordance with subsection (a)(1), the plan is subject

16 to a civil money penalty of not to exceed $100 for

17 each such violation. The provisions of section 1128A

18 of the Social Security Act (other than subsections

19 (a) and (b)) shall apply to a civil money penalty

20 under this subsection in the same manner as such

21 provisions apply to a penalty or proceeding under

22 section 1128A(a) of such Act.

23 (2) EFFECTIVE DATE.—No penalty may be im24 posed under paragraph (1) for any failure occurring

25 before the deadline specified in subsection (a)(2).
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1 (c) UNIFORM HEALTH CLAIMS CARDS.—

2 (1) IN GENERAL.—The Secretary shall establish

3 standards consistent with this subsection respecting

4 the form and information to be contained on uni5 form health claims cards (for purposes of subsection

6 (a)).

7 (2) ELECTRONIC.—

8 (A) IN GENERAL.—Subject to subpara9 graph (B), the card shall be in a form similar

10 to that of a credit card and shall have, encoded

11 in electronic form—

12 (i) the identity of the individual,

13 (ii) the health benefit plan in which

14 the individual is enrolled, and

15 (iii) the telephone number or numbers

16 to be used for the verification electronically

17 of entitlement to benefits under the plan

18 under section 322 and for the submission

19 electronically of claims under the plan

20 under section 323.

21 (B) USE OF ELECTRONIC READ-AND22 WRITE CARDS.—The Secretary may provide for

23 cards in an electronic form that permits infor24 mation on the card to be readily changed. Such

25 information may include information relating to
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1 the health coverage status of the individual and

2 the medical history of the individual.

3 (C) PERSONAL IDENTIFIER.—For pur4 poses of subparagraph (A) and for purposes of

5 claims processing and related purposes under

6 section 323, the Social Security account number

7 of the individual or, in the case of an infant or

8 other individual to whom such a number has

9 not been issued, such a Social Security account

10 number of a parent or guardian or other num11 ber as the Secretary shall specify, shall be used

12 as the personal identifier for the individual.

13 (3) ADDITIONAL INFORMATION.—The card

14 shall include such additional information, in elec15 tronic or other form, as the Secretary may require

16 to carry out the purposes of this Act. In addition,

17 the health benefit plan issuing the card may include

18 such additional information on the card as the plan

19 desires, subject to such limitations as the Secretary

20 may provide.

21 (4) DEADLINE.—The Secretary shall first es22 tablish the standards for uniform health claims

23 cards under this subsection by not later than 12

24 months after the date of the enactment of this Act.
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1 (d) APPLICATION TO MEDICARE AND MEDICAID PRO2 GRAMS.—

3 (1) MEDICARE PROGRAM.—The Secretary shall

4 provide, in regulations promulgated to carry out the

5 medicare program, that identification cards issued

6 under that program are modified to the extent re7 quired to conform to the standards established under

8 subsection (c), by not later than the deadline speci9 fied in subsection (a)(2).

10 (2) STATE MEDICAID PLANS.—As a condition

11 for the approval of a State plan under the medicaid

12 program, effective for calendar quarters beginning

13 on or after the deadline specified in subsection

14 (a)(2), each such plan shall provide, in accordance

15 with regulations of the Secretary, that identification

16 cards issued under the plan are modified to the ex17 tent required to conform to the requirements of sub18 section (c).

19 SEC. 322. REQUIREMENT FOR ENTITLEMENT VERIFICA20 TION SYSTEM.

21 (a) IN GENERAL.—

22 (1) REQUIREMENT.—Each health benefit plan

23 shall provide for an electronic system, that is cer24 tified by the Secretary as meeting the standards es25 tablished under subsection (c), for the verification of
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1 an individual’s entitlement to benefits under such

2 plan.

3 (2) DEADLINE FOR APPLICATION OF REQUIRE4 MENT.—The deadline specified under this paragraph

5 for the requirement under paragraph (1) is 6

6 months after the date the standards are established

7 under subsection (c).

8 (b) ENFORCEMENT THROUGH CIVIL MONEY PEN9 ALTIES.—

10 (1) IN GENERAL.—In the case of a health bene11 fit plan that fails to provide for an electronic ver12 ification system that is certified by the Secretary as

13 meeting the standards established under subsection

14 (c), the plan is subject to a civil money penalty of

15 not to exceed $100 for each day in which such fail16 ure persists. The provisions of section 1128A of the

17 Social Security Act (other than subsections (a) and

18 (b)) shall apply to a civil money penalty under this

19 subsection in the same manner as such provisions

20 apply to a penalty or proceeding under section

21 1128A(a) of such Act.

22 (2) EFFECTIVE DATE.—No penalty may be im23 posed under paragraph (1) for any failure occurring

24 before the deadline specified in subsection (a)(2).
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1 (c) STANDARDS FOR ENTITLEMENT VERIFICATION

2 SYSTEMS.—

3 (1) IN GENERAL.—The Secretary shall establish

4 standards consistent with this subsection respecting

5 the requirements for certification of entitlement ver6 ification systems.

7 (2) INFORMATION AVAILABLE.—Such standards

8 shall require a system to provide information, with

9 respect to individuals, concerning the following:

10 (A) The specific benefits to which the indi11 vidual is entitled under the plan.

12 (B) Current status of the individual with

13 respect to fulfillment of deductibles,

14 copayments, and out-of-pocket limits on cost15 sharing.

16 (C) Restrictions on providers who may pro17 vide covered services, including utilization con18 trols (such as preadmission certification).

19 (3) COORDINATION OF BENEFIT INFORMA20 TION.—Such standards shall require a system to

21 provide for the transfer among health benefit plans

22 of appropriate information in determining liability in

23 cases in which benefits may be payable under two or

24 more such plans.
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1 (4) FORM OF INQUIRY.—Each verification sys2 tem shall be capable of accepting inquiries under

3 this subsection from health care providers (and, to

4 the extent provided under paragraph (3), from other

5 health benefit plans) in a variety of electronic and

6 other forms, including—

7 (A) through electronic transmission of in8 formation on the uniform health claims card (in

9 a manner similar to that for verification of

10 credit card purchases),

11 (B) through the use of a touch-tone tele12 phone line, and

13 (C) through the use of a computer modem.

14 The system shall also provide, for an additional fee,

15 for the acceptance of inquiries in a nonelectronic

16 form.

17 (5) FORM OF RESPONSE.—Each such system

18 shall be capable of responding to such inquiries

19 under this subsection in a variety of electronic and

20 other forms, including—

21 (A) through modem transmission of infor22 mation,

23 (B) through computer synthesized voice

24 communication, and
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1 (C) through transmission of information to

2 a facsimile (fax) machine.

3 The system shall also provide, for an additional fee,

4 for the response to inquiries in a nonelectronic form.

5 (6) LIMITATION ON FEES.—A health benefit

6 plan may not impose a fee for the acceptance or re7 sponse to an inquiry under this subsection except

8 where the acceptance or response is in a

9 nonelectronic form.

10 (7) PUBLIC DOMAIN SOFTWARE TO PROVID11 ERS.—The Secretary shall provide for the develop12 ment, and shall make available without charge to

13 health service providers and health benefit plans,

14 such computer software as will enable—

15 (A) such providers to make inquiries, and

16 receive responses, electronically respecting the

17 eligibility and benefits of an individual under

18 health benefit plans, and

19 (B) such plans to make inquiries, and re20 ceive responses, electronically respecting liability

21 of other plans for the provision or payment of

22 benefits.

23 (8) DEADLINE.—The Secretary shall first es24 tablish the standards under this subsection (and

25 shall develop and make available the software under
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1 paragraph (7)) by not later than 12 months after

2 the date of the enactment of this Act.

3 (d) APPLICATION TO MEDICARE AND MEDICAID PRO4 GRAMS.—

5 (1) MEDICARE PROGRAM.—The Secretary shall

6 provide, in regulations promulgated to carry out the

7 medicare program, that there is established an enti8 tlement verification system that meets the standards

9 established under subsection (c), by not later than

10 the deadline specified in subsection (a)(2).

11 (2) STATE MEDICAID PLANS.—As a condition

12 for the approval of a State plan under the medicaid

13 program, effective for calendar quarters beginning

14 on or after the deadline specified in subsection

15 (a)(2), each such plan shall provide, in accordance

16 with regulations of the Secretary, that there is es17 tablished an entitlement verification system that

18 meets the standards established under subsection

19 (c).

20 SEC. 323. REQUIREMENTS FOR UNIFORM CLAIMS AND

21 ELECTRONIC CLAIMS DATA SET.

22 (a) REQUIREMENTS.—

23 (1) SUBMISSION OF CLAIMS.—Each health serv24 ice provider that furnishes services in the United

25 States for which payment may be made under a
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1 health benefit plan shall submit any claim for pay2 ment for such services only in a form and manner

3 consistent with standards established under sub4 section (c).

5 (2) ACCEPTANCE OF CLAIMS.—A health benefit

6 plan may not reject a claim for payment under the

7 plan on the basis of the form or manner in which

8 the claim is submitted if the claim is submitted in

9 accordance with the standards established under

10 subsection (c).

11 (3) EFFECTIVE DATE.—This subsection shall

12 apply to claims for services furnished on or after the

13 date that is 6 months after the date standards are

14 established under subsection (c).

15 (b) ENFORCEMENT THROUGH CIVIL MONEY PEN16 ALTIES.—

17 (1) IN GENERAL.—

18 (A) PROVIDERS.—In the case of a health

19 service provider that submits a claim in viola20 tion of subsection (a)(1), the provider is subject

21 to a civil money penalty of not to exceed $100

22 (or, if greater, the amount of the claim) for

23 each such violation.

24 (B) PLANS.—In the case of a health bene25 fit plan that rejects a claim in violation of sub-
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1 section (a)(2), the plan is subject to a civil

2 money penalty of not to exceed $100 (or, if

3 greater, the amount of the claim) for each such

4 violation.

5 (2) PROCESS.—The provisions of section 1128A

6 of the Social Security Act (other than subsections

7 (a) and (b)) shall apply to a civil money penalty

8 under paragraph (1) in the same manner as such

9 provisions apply to a penalty or proceeding under

10 section 1128A(a) of such Act.

11 (3) SUNSET FOR PENALTY.—No civil money

12 penalty may be imposed under this subsection for

13 submission (or rejection) of any claim on or after

14 the date that is 36 months after the effective date

15 specified in subsection (a)(3).

16 (c) STANDARDS RELATING TO UNIFORM CLAIMS AND

17 ELECTRONIC CLAIMS DATA SET.—

18 (1) ESTABLISHMENT OF STANDARDS.—The

19 Secretary shall establish standards that—

20 (A) relate to the form and manner of sub21 mission of claims for benefits under a health

22 benefit plan, and

23 (B) define the data elements to be con24 tained in a uniform electronic claims data set to

25 be used with respect to such claims.
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1 (2) SCOPE OF INFORMATION.—

2 (A) IN GENERAL.—The standards under

3 this subsection are intended to cover substan4 tially most claims that are filed under health

5 benefit plans. Such information need not in6 clude all elements that may potentially be re7 quired to be reported under utilization review

8 provisions of plans.

9 (B) ENSURING ACCOUNTABILITY FOR

10 CLAIMS SUBMITTED ELECTRONICALLY.—In es11 tablishing such standards, the Secretary, in

12 consultation with appropriate agencies, shall in13 clude such methods of ensuring provider re14 sponsibility and accountability for claims sub15 mitted electronically that are designed to con16 trol fraud and abuse in the submission of such

17 claims.

18 (C) COMPONENTS.—In establishing such

19 standards the Secretary shall—

20 (i) with respect to data elements, de21 fine data fields, formats, and medical no22 menclature, and plan benefit and insurance

23 information;
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1 (ii) develop a single, uniform coding

2 system for diagnostic and procedure codes;

3 and

4 (iii) provide for standards for the uni5 form electronic transmission of such ele6 ments.

7 (3) COORDINATION WITH STANDARDS FOR

8 ELECTRONIC MEDICAL RECORDS.—In establishing

9 standards under this subsection, the Secretary shall

10 assure that—

11 (A) the development of such standards is

12 coordinated with the development of the stand13 ards for electronic medical records under sec14 tion 324, and

15 (B) the coding of data elements under the

16 uniform electronic claims data set and the cod17 ing of the same elements in the uniform hos18 pital clinical data set are consistent.

19 (4) USE OF TASK FORCES.—In adopting stand20 ards under this subsection—

21 (A) the Secretary shall take into account

22 the recommendations of current task forces, in23 cluding at least the Workgroup on Electronic

24 Data Interchange, National Uniform Billing

25 Committee, the Uniform Claim Task Force, and
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1 the Computer-based Patient Record Institute,

2 and

3 (B) the Secretary shall provide that the

4 electronic transmission standards are consist5 ent, to the extent practicable, with the applica6 ble standards established by the Accredited

7 Standards Committee X-12 of the American

8 National Standards Institute.

9 (5) UNIFORM, UNIQUE PROVIDER IDENTIFICA10 TION CODES.—In establishing standards under this

11 subsection—

12 (A) the Secretary shall provide for a

13 unique identifier code for each health service

14 provider that furnishes services for which a

15 claim may be submitted under a health benefit

16 plan, and

17 (B) in the case of a provider that has a

18 unique identifier issued for purposes of the

19 medicare program, the code provided under

20 subparagraph (A) shall be the same as such

21 unique identifier.

22 (6) PUBLIC DOMAIN SOFTWARE TO PROVID23 ERS.—The Secretary shall provide for the develop24 ment, and shall make available without charge to

25 health service providers, such computer software as
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1 will enable the providers to submit claims and to re2 ceive verification of claims status electronically.

3 (7) STANDARDS FOR PAPER CLAIMS.—The

4 standards shall provide for a uniform paper claims

5 form which is consistent with data elements required

6 for the submission of claims electronically.

7 (8) STANDARDS FOR CLAIMS FOR CLINICAL

8 LABORATORY TESTS.—The standards shall provide

9 that claims for clinical laboratory tests for which

10 benefits are provided under a health benefit plan

11 shall be submitted directly by the person or entity

12 that performed (or supervised the performance of)

13 the tests to the plan in a manner consistent with

14 (and subject to such exceptions as are provided

15 under) the requirement for direct submission of such

16 claims under the medicare program.

17 (9) DEADLINE.—The Secretary shall first pro18 vide for the standards for the uniform claims under

19 this subsection (and shall develop and make avail20 able the software under paragraph (6)) by not later

21 than 1 year after the date of the enactment of this

22 Act.

23 (d) USE UNDER MEDICARE AND MEDICAID PRO24 GRAMS.—
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1 (1) REQUIREMENT FOR PROVIDERS.—In the

2 case of a health service provider that submits a

3 claim for services furnished under the medicare pro4 gram or medicaid program in violation of subsection

5 (a)(1), no payment shall be made under such pro6 gram for such services.

7 (2) REQUIREMENTS OF INTERMEDIARIES AND

8 CARRIERS UNDER MEDICARE PROGRAM.—The Sec9 retary shall provide, in regulations promulgated to

10 carry out title XVIII of the Social Security Act, that

11 the claims process provided under that title is modi12 fied to the extent required to conform to the stand13 ards established under subsection (c).

14 (3) REQUIREMENTS OF STATE MEDICAID

15 PLANS.—As a condition for the approval of State

16 plans under the medicaid program, effective as of

17 the effective date specified in subsection (a)(3), each

18 such plan shall provide, in accordance with regula19 tions of the Secretary, that the claims process pro20 vided under the plan is modified to the extent re21 quired to conform to the standards established under

22 subsection (c).
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1 SEC. 324. ELECTRONIC MEDICAL RECORDS AND REPORT2 ING.

3 (a) STANDARDS FOR ELECTRONIC MEDICAL

4 RECORDS FOR HOSPITALS.—

5 (1) PROMULGATION OF STANDARDS.—

6 (A) IN GENERAL.—Between July 1, 1994,

7 and January 1, 1995, the Secretary shall pro8 mulgate standards described in paragraph (2)

9 for hospitals concerning electronic medical

10 records.

11 (B) REVISION.—The Secretary may from

12 time to time revise the standards promulgated

13 under this paragraph.

14 (2) CONTENTS OF STANDARDS.—The standards

15 promulgated under paragraph (1) shall include at

16 least the following:

17 (A) A definition of a uniform hospital clini18 cal data set, including a definition of the set of

19 comprehensive data elements, for use by utiliza20 tion and quality control peer review organiza21 tions.

22 (B) Standards for an electronic patient

23 care information system with data obtained at

24 the point of care.
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1 (C) A specification of, and manner of pres2 entation of, the individual data elements of the

3 set and system under this paragraph.

4 (D) Standards concerning the transmission

5 of electronic medical data.

6 (E) Standards relating to confidentiality of

7 patient-specific information, which include the

8 physical security of electronic data and the use

9 of keys, passwords, encryption, and other

10 means to ensure the protection of the confiden11 tiality and privacy of electronic data.

12 (3) COORDINATION WITH STANDARDS FOR UNI13 FORM ELECTRONIC CLAIMS DATA SET.—In establish14 ing standards under this subsection, the Secretary

15 shall assure that—

16 (A) the development of such standards is

17 coordinated with the development of the stand18 ards for the uniform electronic claims data set

19 under section 323, and

20 (B) the coding of data elements under the

21 uniform hospital clinical data set and the cod22 ing of the same elements under the uniform

23 electronic claims data set are consistent.

24 (4) CONSULTATION.—in establishing standards

25 under this subsection, the Secretary shall—
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1 (A) consult with the American National

2 Standards Institute, hospitals, health benefit

3 plans, and other interested parties, and

4 (B) take into consideration, in developing

5 standards under paragraph (2)(A), the data set

6 used by the utilization and quality control peer

7 review program under part B of title XI of the

8 Social Security Act.

9 (b) REQUIREMENT FOR APPLICATION OF ELEC10 TRONIC RECORDS STANDARDS TO HOSPITALS.—

11 (1) AS CONDITION OF MEDICARE PARTICIPA12 TION.—As of January 1, 1996, each hospital, as a

13 requirement of each participation agreement under

14 section 1866 of the Social Security Act, shall, in ac15 cordance with the standards promulgated under sub16 section (a)(1)—

17 (A) maintain clinical data included in the

18 uniform hospital clinical data set under sub19 section (a)(2)(A) in electronic form on all inpa20 tients,

21 (B) upon request of the Secretary or of a

22 utilization and quality control peer review orga23 nization (with which the Secretary has entered

24 into a contract under part B of title XI of such
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1 Act), transmit electronically data requested

2 from such data set, and

3 (C) upon request of the Secretary, or of a

4 fiscal intermediary or carrier, transmit elec5 tronically any data (with respect to a claim)

6 from such data set.

7 (2) APPLICATION OF PRESENTATION AND

8 TRANSMISSION STANDARDS TO ELECTRONIC TRANS9 MISSION TO FEDERAL AGENCIES.—Effective Janu10 ary 1, 1996, if a hospital is required under a Fed11 eral program to transmit a data element that is sub12 ject to a standard, promulgated under subsection

13 (a)(1), described in subparagraph (C) or (D) of sub14 section (a)(2), the head of the Federal agency re15 sponsible for such program (if not otherwise author16 ized) is authorized to require the provider to present

17 and transmit the data element electronically in ac18 cordance with such a standard.

19 (c) LIMITATION ON DATA REQUIREMENTS WHERE

20 STANDARDS IN EFFECT.—

21 (1) IN GENERAL.—On or after January 1,

22 1996, a health benefit plan may not require, for the

23 purpose of utilization review or as a condition of

24 providing benefits or making payments under the

25 plan, that a hospital—
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1 (A) provide any data element not in the

2 uniform hospital clinical data set specified

3 under the standards promulgated under sub4 section (a), or

5 (B) transmit or present any such data ele6 ment in a manner inconsistent with such stand7 ards applicable to such transmission or presen8 tation.

9 (2) COMPLIANCE.—The Secretary may impose

10 a civil money penalty on any health benefit plan that

11 fails to comply with paragraph (1) in an amount not

12 to exceed $100 for each such failure. The provisions

13 of section 1128A of the Social Security Act (other

14 than the first sentence of subsection (a) and other

15 than subsection (b)) shall apply to a civil money

16 penalty under this paragraph in the same manner as

17 such provisions apply to a penalty or proceeding

18 under section 1128A(a) of such Act.

19 (3) APPLICATION TO MEDICARE PROGRAM.—Ef20 fective as of January 1, 1996, neither the Secretary,

21 nor any carrier or fiscal intermediary, nor any utili22 zation and quality control peer review organization

23 may require, for the purpose of utilization review or

24 as a condition of providing benefits or making pay-
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1 ments under the medicare program, that a hos2 pital—

3 (A) provide any data element not in the

4 uniform hospital clinical data set specified

5 under the standards promulgated under sub6 section (a), or

7 (B) transmit or present any such data ele8 ment in a manner inconsistent with such stand9 ards applicable to such transmission or presen10 tation.

11 (4) APPLICATION TO MEDICAID PROGRAM.—As

12 a condition for the approval of State plans under the

13 medicaid program and in accordance with regula14 tions of the Secretary, effective as of January 1,

15 1996, each such plan may not require that a hos16 pital, for the purpose of utilization review or as a

17 condition of providing benefits or making payments

18 under the plan—

19 (A) provide any data element not in the

20 uniform hospital clinical data set specified

21 under the standards promulgated under sub22 section (a), or

23 (B) transmit or present any such data ele24 ment in a manner inconsistent with such stand-
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1 ards applicable to such transmission or presen2 tation.

3 (d) PREEMPTION OF STATE QUILL PEN LAWS.—

4 (1) IN GENERAL.—Any provision of State law

5 that requires medical or health insurance records

6 (including billing information) to be maintained in

7 written, rather than electronic, form shall deemed to

8 be satisfied if the records are maintained in an elec9 tronic form that meets standards established by the

10 Secretary under paragraph (2).

11 (2) SECRETARIAL AUTHORITY.—Not later than

12 1 year after the the date of the enactment of this

13 Act, the Secretary shall issue regulations to carry

14 out paragraph (1). The regulations shall provide for

15 an electronic substitute that is in the form of a

16 unique identifier (assigned to each authorized indi17 vidual) that serves the functional equivalent of a sig18 nature. The regulations may provide for such excep19 tions to paragraph (1) as the Secretary determines

20 to be necessary to prevent fraud and abuse, to pre21 vent the illegal distribution of controlled substances,

22 and in such other cases as the Secretary deems ap23 propriate.

24 (3) EFFECTIVE DATE.—Paragraph (1) shall

25 take effect on the first day of the first month that
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1 begins more than 30 days after the date the Sec2 retary issues the regulations referred to in para3 graph (2).

4 SEC. 325. UNIFORM HOSPITAL COST REPORTING.

5 Each hospital, as a requirement under a participation

6 agreement under section 1866(a) of the Social Security

7 Act for each cost reporting period beginning during or

8 after fiscal year 1993, shall provide for the reporting of

9 information to the Secretary with respect to any hospital

10 care provided in a uniform manner consistent with stand11 ards established by the Secretary to carry out section

12 4007(c) of the Omnibus Budget Reconciliation Act of

13 1987 and in an electronic form consistent with standards

14 established by the Secretary.

15 SEC. 326. DEFINITIONS.

16 (a) HEALTH BENEFIT PLAN.—In this subtitle:

17 (1) IN GENERAL.—The term ‘‘health benefit

18 plan’’ means, except as provided in paragraphs (2)

19 through (4), any public or private entity or program

20 that provides for payments for health care services,

21 including—

22 (A) a group health plan (as defined in sec23 tion 5000(b)(1) of the Internal Revenue Code

24 of 1986), and
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1 (B) any other health insurance arrange2 ment, including any arrangement consisting of

3 a hospital or medical expense incurred policy or

4 certificate, hospital or medical service plan con5 tract, or health maintenance organization sub6 scriber contract.

7 (2) PLANS EXCLUDED.—Such term does not in8 clude—

9 (A) accident-only, credit, or disability in10 come insurance;

11 (B) coverage issued as a supplement to li12 ability insurance;

13 (C) an individual making payment on the

14 individual’s own behalf (or on behalf of a rel15 ative or other individual) for deductibles, coin16 surance, or services not covered under a health

17 benefit plan; and

18 (D) such other plans as the Secretary may

19 determine, because of the limitation of benefits

20 to a single type or kind of health care, such as

21 dental services, or other reasons should not be

22 subject to the requirements of this section.

23 (3) PLANS INCLUDED.—Such term includes—

24 (A) worker’s compensation or similar in25 surance, and
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1 (B) automobile medical-payment insurance.

2 (4) TREATMENT OF DIRECT FEDERAL PROVI3 SION OF SERVICES.—Such term does not include a

4 Federal program that provides directly for the provi5 sion of health services to beneficiaries.

6 (b) HEALTH SERVICE PROVIDER.—In this subtitle,

7 the term ‘‘health service provider’’ includes a provider of

8 services (as defined in section 1861(u) of the Social Secu9 rity Act), physician, supplier, and other person furnishing

10 health care services.

11 Subtitle C—Fraud and Abuse

12 PART 1—NATIONAL HEALTH CARE FRAUD CONTROL

13 PROGRAM

14 SEC. 341. ALL-PAYER FRAUD AND ABUSE CONTROL PRO15 GRAM

16 (a) ESTABLISHMENT OF PROGRAM.—

17 (1) ESTABLISHMENT.—Not later than January

18 1, 1994, the Secretary shall establish in the Office

19 of the Inspector General of the Department of

20 Health and Human Services a program—

21 (A) to coordinate Federal, State, and local

22 law enforcement programs to control fraud and

23 abuse with respect to the delivery of and pay24 ment for health care in the United States,
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1 (B) to conduct investigations, audits, eval2 uations, and inspections relating to the delivery

3 of and payment for health care in the United

4 States, and

5 (C) to facilitate the enforcement of the

6 provisions of sections 1128, 1128A, and 1128B

7 of the Social Security Act and other statutes

8 applicable to health care fraud and abuse.

9 (2) COORDINATION WITH LAW ENFORCEMENT

10 AGENCIES.—In carrying out the program established

11 under paragraph (1), the Secretary shall consult

12 with, and arrange for the sharing of data and re13 sources with, the Attorney General and State law

14 enforcement agencies, State medicaid fraud and

15 abuse units, and State agencies responsible for the

16 licensing and certification of health care providers.

17 (3) REGULATIONS.—

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

19 regulation establish standards to carry out the

20 program under paragraph (1).

21 (B) INFORMATION STANDARDS.—

22 (i) IN GENERAL.—Such standards

23 shall include standards relating to the fur24 nishing of information by health insurers

25 (including self-insured health benefit
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1 plans), providers, and others to enable the

2 Secretary to carry out the program (in3 cluding coordination with law enforcement

4 agencies under paragraph (2)).

5 (ii) CONFIDENTIALITY.—Such stand6 ards shall include procedures to assure

7 that such information is provided and uti8 lized in a manner that protects the con9 fidentiality of the information and the pri10 vacy of individuals receiving health care

11 services.

12 (iii) QUALIFIED IMMUNITY FOR PRO13 VIDING INFORMATION.—The provisions of

14 section 1157(a) of the Social Security Act

15 (relating to limitation on liability) shall

16 apply to a person providing information to

17 the Secretary under the program under

18 this section, with respect to the Secretary’s

19 performance of duties under the program,

20 in the same manner as such section applies

21 to information provided to organizations

22 with a contract under part B of title XI of

23 such Act, with respect to the performance

24 of such a contract.
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1 (C) DISCLOSURE OF OWNERSHIP INFOR2 MATION.—

3 (i) IN GENERAL.—Such standards

4 shall include standards relating to the dis5 closure of ownership information described

6 in clause (ii).

7 (ii) OWNERSHIP INFORMATION DE8 SCRIBED.—The ownership information de9 scribed in this clause includes—

10 (I) covered items and services

11 provided by an entity;

12 (II) the names and unique physi13 cian identification numbers of all phy14 sicians with an ownership or invest15 ment interest in the entity (as de16 scribed in section 1877(a)(2)(A) of

17 the Social Security Act) or whose im18 mediate relatives have such an owner19 ship or investment interest; and

20 (III) the names of all other indi21 viduals with such an ownership or in22 vestment interest in the entity.

23 (D) INTEGRITY OF ISSUANCE OF PRO24 VIDER IDENTIFICATION CODES.—Such stand25 ards shall, insofar as they relate to the issuance
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1 of unique provider codes (described in section

2 323(c)(5))—

3 (i) include standards relating to the

4 information (including ownership informa5 tion described in subparagraph (C)(ii) and

6 other information needed in the adminis7 tration of the program) to be required for

8 the issuance of such codes, and

9 (ii) provide for the issuance of such a

10 code upon the presentation of such infor11 mation as would be sufficient to provide

12 for the issuance of similar codes under the

13 medicare program.

14 (4) AUTHORIZATION OF APPROPRIATIONS FOR

15 INVESTIGATORS AND OTHER PERSONNEL.—

16 (A) IN GENERAL.—In addition to any

17 other amounts authorized to be appropriated to

18 the Secretary for health care anti-fraud and

19 abuse activities for a fiscal year, there are au20 thorized to be appropriated additional amounts

21 described in subparagraph (B) to enable the

22 Secretary to conduct investigations of allega23 tions of health care fraud and otherwise carry

24 out the program established under paragraph

25 (1) in a fiscal year.
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1 (B) AMOUNTS DESCRIBED.—The amounts

2 referred to in subparagraph (A) are as follows:

3 (i) For fiscal year 1995,

4 $300,000,000.

5 (ii) For fiscal year 1996,

6 $350,000,000.

7 (iii) For fiscal year 1997,

8 $400,000,000.

9 (iv) For fiscal year 1998,

10 $450,000,000.

11 (5) ENSURING ACCESS TO DOCUMENTATION.—

12 (A) The Inspector General of the Department of

13 Health and Human Services is authorized to exercise

14 the authority described in paragraphs (4) and (5) of

15 section 6 of the Inspector General Act of 1978 (re16 lating to subpoenas and administration of oaths)

17 with respect to the activities under the all-payor

18 fraud and abuse control program established under

19 this subsection to the same extent as such Inspector

20 General may exercise such authorities to perform the

21 functions assigned to such official by such Act.

22 (B) Section 1128(b) of the Social Security Act

23 (42 U.S.C. 1320a–7(b)) is amended by adding at

24 the end the following new paragraph:
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1 ‘‘(15) FAILURE TO SUPPLY REQUESTED

2 INFORMATION TO THE INSPECTOR GENERAL.—

3 Any individual or entity that fails fully and ac4 curately to provide, upon request of the Inspec5 tor General of the Department of Health and

6 Human Services, records, documents, and other

7 information necessary for the purposes of carry8 ing out activities under the all-payor fraud and

9 abuse control program established under section

10 341 of the Health Care Cost Containment and

11 Reform Act of 1993.’’.

12 (b) ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

13 TRUST FUND.—

14 (1) ESTABLISHMENT.—

15 (A) IN GENERAL.—There is hereby created

16 on the books of the Treasury of the United

17 States a trust fund to be known as the ‘‘Anti18 Fraud and Abuse Trust Fund’’ (in this section

19 referred to as the ‘‘Trust Fund’’). The Trust

20 Fund shall consist of such gifts and bequests as

21 may be made as provided in subparagraph (B)

22 and such amounts as may be deposited in, or

23 appropriated to, such Trust Fund as provided

24 in this subtitle, section 143(b), and title XI of

25 the Social Security Act.
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1 (B) AUTHORIZATION TO ACCEPT GIFTS.—

2 The Managing Trustee of the Trust Fund is

3 authorized to accept on behalf of the United

4 States money gifts and bequests made uncondi5 tionally to the Trust Fund, for the benefit of

6 the Trust Fund, or any activity financed

7 through the Trust Fund.

8 (2) MANAGEMENT.—

9 (A) IN GENERAL.—The Trust Fund shall

10 be managed by the Secretary through a Manag11 ing Trustee designated by the Secretary.

12 (B) INVESTMENT OF FUNDS.—It shall be

13 the duty of the Managing Trustee to invest

14 such portion of the Trust Fund as is not, in the

15 trustee’s judgment, required to meet current

16 withdrawals. Such investments may be made

17 only in interest-bearing obligations of the Unit18 ed States or in obligations guaranteed as to

19 both principal and interest by the United

20 States. For such purpose such obligations may

21 be acquired (i) on original issue at the issue

22 price, or (ii) by purchase of outstanding obliga23 tions at market price. The purposes for which

24 obligations of the United States may be issued

25 under chapter 31 of title 31, United States
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1 Code, are hereby extended to authorize the issu2 ance at par of public-debt obligations for pur3 chase by the Trust Fund. Such obligations is4 sued for purchase by the Trust Fund shall have

5 maturities fixed with due regard for the needs

6 of the Trust Fund and shall bear interest at a

7 rate equal to the average market yield (com8 puted by the Managing Trustee on the basis of

9 market quotations as of the end of the calendar

10 month next preceding the date of such issue) on

11 all marketable interest-bearing obligations of

12 the United States then forming a part of the

13 public debt which are not due or callable until

14 after the expiration of 4 years from the end of

15 such calendar month, except that where such

average is not a multiple of 1 16 ⁄8 of 1 percent, the

17 rate of interest on such obligations shall be the

multiple of 1 18 ⁄8 of 1 percent nearest such market

19 yield. The Managing Trustee may purchase

20 other interest-bearing obligations of the United

21 States or obligations guaranteed as to both

22 principal and interest by the United States, on

23 original issue or at the market price, only where

24 the Trustee determines that the purchase of

25 such other obligations is in the public interest.
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1 (C) Any obligations acquired by the Trust

2 Fund (except public-debt obligations issued ex3 clusively to the Trust Fund) may be sold by the

4 Managing Trustee at the market price, and

5 such public-debt obligations may be redeemed

6 at par plus accrued interest.

7 (D) The interest on, and the proceeds from

8 the sale or redemption of, any obligations held

9 in the Trust Fund shall be credited to and form

10 a part of the Trust Fund.

11 (E) The receipts and disbursements of the

12 Secretary in the discharge of the functions of

13 the Secretary shall not be included in the totals

14 of the budget of the United States Government.

15 For purposes of part C of the Balanced Budget

16 and Emergency Deficit Control Act of 1985,

17 the Secretary and the Trust Fund shall be

18 treated in the same manner as the Federal Re19 tirement Thrift Investment Board and the

20 Thrift Savings Fund, respectively. The United

21 States is not liable for any obligation or liability

22 incurred by the Trust Fund.

23 (3) USE OF FUNDS.—Amounts in the Trust

24 Fund shall be used to assist the Inspector General

25 of the Department of Health and Human Services in
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1 carrying out the all-payor fraud and abuse control

2 program established under subsection (a) in the fis3 cal year involved.

4 SEC. 342. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

5 AND ABUSE SANCTIONS TO ALL FRAUD AND

6 ABUSE AGAINST ANY HEALTH BENEFIT PLAN.

7 (a) CIVIL MONETARY PENALTIES.—Section 1128A

8 of the Social Security Act (42 U.S.C. 1320a–7a) is amend9 ed as follows:

10 (1) In subsection (a)(1), in the matter before

11 subparagraph (A), by inserting ‘‘or of any health

12 benefit plan,’’ after ‘‘subsection (i)(1)),’’.

13 (2) In subsection (b)(1)(A), by inserting ‘‘or

14 under a health benefit plan’’ after ‘‘title XIX’’.

15 (3) In subsection (f), by amending paragraph

16 (2) to read as follows:

17 ‘‘(2) In the case of amounts recovered arising

18 out of claim under a health benefit plan, the portion

19 of amounts recovered as is determined to have been

20 paid out of the Federal Hospital Insurance Trust

21 Fund and the Federal Supplementary Medical In22 surance Trust Fund, and the portion of amounts re23 covered arising out of a claim under title XIX that

24 is not paid to the State agency under paragraph

25 (1)(A), such amounts (and such portions) shall be
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1 paid to the Anti-Fraud and Abuse Trust Fund es2 tablished under section 341(b) of the Health Care

3 Cost Containment and Reform Act of 1993.’’.

4 (4) In subsection (i)—

5 (A) in paragraph (2), by inserting ‘‘or

6 under a health benefit plan’’ before the period

7 at the end, and

8 (B) in paragraph (5), by inserting ‘‘or

9 under a health benefit plan’’ after ‘‘or XX’’.

10 (b) CRIMES.—

11 (1) SOCIAL SECURITY ACT.—Section 1128B of

12 such Act (42 U.S.C. 1320a–7b) is amended as fol13 lows:

14 (A) In the heading, by adding at the end

15 the following: ‘‘OR HEALTH BENEFIT PLANS’’.

16 (B) In subsection (a)(1)—

17 (i) by striking ‘‘title XVIII or’’ and

18 inserting ‘‘title XVIII,’’, and

19 (ii) by adding at the end the follow20 ing: ‘‘or a health benefit plan (as defined

21 in section 1128(i)),’’.

22 (C) In subsection (a)(5), by striking ‘‘title

23 XVIII or a State health care program’’ and in24 serting ‘‘title XVIII, a State health care pro25 gram, or a health benefit plan’’.
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1 (D) In the second sentence of subsection

2 (a)—

3 (i) by inserting after ‘‘title XIX’’ the

4 following: ‘‘or a health benefit plan’’, and

5 (ii) by inserting after ‘‘the State’’ the

6 following: ‘‘or the plan’’.

7 (E) In subsection (b)(1), by striking ‘‘title

8 XVIII or a State health care program’’ each

9 place it appears and inserting ‘‘title XVIII, a

10 State health care program, or a health benefit

11 plan’’.

12 (F) In subsection (b)(2), by striking ‘‘title

13 XVIII or a State health care program’’ each

14 place it appears and inserting ‘‘title XVIII, a

15 State health care program, or a health benefit

16 plan’’.

17 (G) In subsection (b)(3), by striking ‘‘title

18 XVIII or a State health care program’’ each

19 place it appears in subparagraphs (A) and (C)

20 and inserting ‘‘title XVIII, a State health care

21 program, or a health benefit plan’’.

22 (H) In subsection (d)(2)—

23 (i) by striking ‘‘title XIX,’’ and insert24 ing ‘‘title XIX or under a health benefit

25 plan,’’, and
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1 (ii) by striking ‘‘State plan,’’ and in2 serting ‘‘State plan or the health benefit

3 plan,’’.

4 (2) TREBLE DAMAGES FOR CRIMINAL SANC5 TIONS.—Section 1128B of such Act (42 U.S.C.

6 1320a–7b) is amended by adding at the end the fol7 lowing new subsection:

8 ‘‘(f) In addition to the fines that may be imposed

9 under subsection (a), (b), or (c), any individual found to

10 have violated the provisions of any of such subsections

11 may be subject to treble damages.’’.

12 (3) IDENTIFICATION OF COMMUNITY SERVICE

13 OPPORTUNITIES.—Section 1128B of such Act (42

14 U.S.C. 1320a–7b) is further amended by adding at

15 the end the following new subsection:

16 ‘‘(g) The Secretary shall—

17 ‘‘(1) identify opportunities for the satisfaction

18 of community service obligations that a court may

19 impose upon the conviction of an offense under this

20 section, and

21 ‘‘(2) make information concerning such oppor22 tunities available to Federal and State law enforce23 ment officers.’’.

24 (d) HEALTH BENEFIT PLAN DEFINED.—Section

25 1128 of such Act (42 U.S.C. 1320a–7) is amended by re-
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1 designating subsection (i) as subsection (j) and by insert2 ing after subsection (h) the following new subsection:

3 ‘‘(i) HEALTH BENEFIT PLAN DEFINED.—For pur4 poses of sections 1128A and 1128B, the term ‘health ben5 efit plan’ means a health benefit program other than the

6 medicare program, the medicaid program, or a State

7 health care program.’’.

8 (e) CONFORMING AMENDMENT.—Section

9 1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–

10 7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in11 serting ‘‘1128A (other than a penalty arising from a

12 health benefit plan, as defined in subsection (i))’’.

13 SEC. 343. PROHIBITION AGAINST OFFERING INDUCEMENTS

14 TO INDIVIDUALS ENROLLED UNDER OR EM15 PLOYED BY PROGRAMS OR PLANS.

16 (a) INDUCEMENTS TO INDIVIDUALS ENROLLED

17 UNDER MEDICARE.—Section 1128A(a)(1) of the Social

18 Security Act (42 U.S.C. 1320a–7a(a)(1)) is amended—

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

20 (1)(D);

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

22 (2) and inserting a semicolon;

23 (3) by striking the semicolon at the end of

24 paragraph (3) and inserting ‘‘; or’’; and
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1 (4) by inserting after paragraph (3) the follow2 ing new paragraph:

3 ‘‘(4) routinely transfers anything for less than

4 fair market value to (or for the benefit of) an indi5 vidual entitled to benefits under the medicare pro6 gram in order to influence the individual to receive

7 from a particular provider, practitioner, or supplier

8 a covered item or service for which payment may be

9 made under such program;’’.

10 (b) INDUCEMENTS TO EMPLOYEES.—Section

11 1128A(a)(1) of such Act (42 U.S.C. 1320a–7a(a)(1)), as

12 amended by subsection (a), is further amended—

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

14 (3);

15 (2) by striking the semicolon at the end of

16 paragraph (4) and inserting ‘‘; or’’; and

17 (3) by inserting after paragraph (4) the follow18 ing new paragraph:

19 ‘‘(5) pays a bonus, reward, or other incentive to

20 an employee to induce the employee to encourage in21 dividuals to seek or obtain covered items or services

22 for which payment may be made under the medicare

23 program, a State health care program, or a health

24 benefit plan where the amount of the incentive is in

25 proportion to the activities of the employee in en-
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1 couraging individuals to seek or obtain covered items

2 or services;’’.

3 SEC. 344. INTERMEDIATE SANCTIONS FOR MEDICARE

4 HEALTH MAINTENANCE ORGANIZATIONS.

5 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

6 ANY PROGRAM VIOLATIONS.—

7 (1) IN GENERAL.—Section 1876(i)(1) of the

8 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

9 amended by striking ‘‘the Secretary may terminate’’

10 and all that follows and inserting the following: ‘‘in

11 accordance with procedures established under para12 graph (9), the Secretary may at any time terminate

13 any such contract or may impose the intermediate

14 sanctions described in paragraph (6)(B) or (6)(C)

15 (whichever is applicable) on the eligible organization

16 if the Secretary determines that the organization—

17 ‘‘(A) has failed substantially to carry out

18 the contract;

19 ‘‘(B) is carrying out the contract in a man20 ner inconsistent with the efficient and effective

21 administration of this section;

22 ‘‘(C) is operating in a manner that is not

23 in the best interests of the individuals covered

24 under the contract; or
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1 ‘‘(D) no longer substantially meets the ap2 plicable conditions of subsections (b), (c), (e),

3 and (f).’’.

4 (2) OTHER INTERMEDIATE SANCTIONS

5 FOR MISCELLANEOUS PROGRAM VIOLATIONS.—

6 Section 1876(i)(6) of such Act (42 U.S.C.

7 1395mm(i)(6)) is amended by adding at the

8 end the following new subparagraph:

9 ‘‘(C) In the case of an eligible organization for

10 which the Secretary makes a determination under

11 paragraph (1) the basis of which is not described in

12 subparagraph (A), the Secretary may apply the fol13 lowing intermediate sanctions:

14 ‘‘(i) civil money penalties of not more than

15 $25,000 for each determination under para16 graph (1) if the deficiency that is the basis of

17 the determination has directly adversely af18 fected (or has the substantial likelihood of ad19 versely affecting) an individual covered under

20 the organization’s contract;

21 ‘‘(ii) civil money penalties of not more than

22 $10,000 for each week beginning after the initi23 ation of procedures by the Secretary under

24 paragraph (9) during which the deficiency that
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1 is the basis of a determination under paragraph

2 (1) exists; and

3 ‘‘(iii) suspension of enrollment of individ4 uals under this section after the date the Sec5 retary notifies the organization of a determina6 tion under paragraph (1) and until the Sec7 retary is satisfied that the deficiency that is the

8 basis for the determination has been corrected

9 and is not likely to recur.’’.

10 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

11 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

12 is amended by adding at the end the following new

13 paragraph:

14 ‘‘(9) The Secretary may terminate a contract with an

15 eligible organization under this section or may impose the

16 intermediate sanctions described in paragraph (6) on the

17 organization in accordance with formal investigation and

18 compliance procedures established by the Secretary under

19 which—

20 ‘‘(A) the Secretary provides the organization

21 with the opportunity to develop and implement a

22 corrective action plan to correct the deficiencies that

23 were the basis of the Secretary’s determination

24 under paragraph (1);
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1 ‘‘(B) the Secretary shall impose more severe

2 sanctions on organizations that have a history of de3 ficiencies or that have not taken steps to correct de4 ficiencies the Secretary has brought to their atten5 tion;

6 ‘‘(C) there are no unreasonable or unnecessary

7 delays between the finding of a deficiency and the

8 imposition of sanctions; and

9 ‘‘(D) the Secretary provides the organization

10 with reasonable notice and opportunity for hearing

11 (including the right to appeal an initial decision) be12 fore imposing any sanction or terminating the con13 tract.’’.

14 (4) CONFORMING AMENDMENTS.—(A) Section

15 1876(i)(6)(B) of such Act (42 U.S.C.

16 1395mm(i)(6)(B)) is amended by striking the sec17 ond sentence.

18 (B) Section 1876(i)(6) of such Act (42 U.S.C.

19 1395mm(i)(6)) is further amended by adding at the

20 end the following new subparagraph:

21 ‘‘(D) The provisions of section 1128A (other

22 than subsections (a) and (b)) shall apply to a civil

23 money penalty under subparagraph (A) or (B) in the

24 same manner as they apply to a civil money penalty

25 or proceeding under section 1128A(a).’’.
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1 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA2 TIONS.—

3 (1) REQUIREMENT FOR WRITTEN AGREE4 MENT.—Section 1876(i)(7)(A) of the Social Security

5 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by

6 striking ‘‘an agreement’’ and inserting ‘‘a written

7 agreement’’.

8 (2) DEVELOPMENT OF MODEL AGREEMENT.—

9 Not later than July 1, 1993, the Secretary of Health

10 and Human Services shall develop a model of the

11 agreement that an eligible organization with a risk12 sharing contract under section 1876 of the Social

13 Security Act must enter into with an entity provid14 ing peer review services with respect to services pro15 vided by the organization under section

16 1876(i)(7)(A) of such Act.

17 (3) REPORT BY GAO.—

18 (A) STUDY.—The Comptroller General

19 shall conduct a study of the costs incurred by

20 eligible organizations with risk-sharing con21 tracts under section 1876(b) of such Act of

22 complying with the requirement of entering into

23 a written agreement with an entity providing

24 peer review services with respect to services pro25 vided by the organization, together with an
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1 analysis of how information generated by such

2 entities is used by the Secretary of Health and

3 Human Services to assess the quality of serv4 ices provided by such eligible organizations.

5 (B) REPORT TO CONGRESS.—Not later

6 than July 1, 1995, the Comptroller General

7 shall submit a report to the Committee on

8 Ways and Means and the Committee on Energy

9 and Commerce of the House of Representatives

10 and the Committee on Finance of the Senate on

11 the study conducted under subparagraph (A).

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

13 this section shall apply with respect to contract years be14 ginning on or after January 1, 1994.

15 PART 2—BAN ON IMPROPER PHYSICIAN REFERRALS

16 SEC. 351. APPLICATION OF MEDICARE BAN ON SELF-RE17 FERRALS TO ALL PAYORS.

18 Section 1877 of the Social Security Act (42 U.S.C.

19 1395nn) is amended—

20 (1) in subsection (a)—

21 (A) in paragraph (1)(A), by striking ‘‘for

22 which payment otherwise may be made under

23 this title’’ and inserting ‘‘for which a charge is

24 imposed’’, and
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1 (B) in paragraph (1)(B), by striking

2 ‘‘under this title’’;

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

4 (g) to read as follows:

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

6 be made under this title, under another Federal

7 health care program, or under a State health care

8 program (as defined in section 1128(h)) for a des9 ignated health service for which a claim is presented

10 in violation of subsection (a)(1)(B). No individual,

11 third party payor, or other entity is liable for pay12 ment for designated health services for which a

13 claim is presented in violation of such subsection.’’;

14 and

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

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

17 and inserting ‘‘for which such a claim may not be

18 presented under subsection (a)(1)’’.

19 SEC. 352. EXTENSION OF SELF-REFERRAL BAN TO ADDI20 TIONAL SPECIFIED SERVICES.

21 (a) IN GENERAL.—Section 1877 of the Social Secu22 rity Act is further amended—

23 (1) by striking ‘‘clinical laboratory services’’

24 and ‘‘CLINICAL LABORATORY SERVICES’’ and insert25 ing ‘‘designated health services’’ and ‘‘DESIGNATED
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1 HEALTH SERVICES’’, respectively, each place either

2 appears in subsections (a)(1), (b)(2)(A)(ii)(I),

3 (b)(4), (d)(1), (d)(2), and (d)(3), and

4 (2) by adding at the end the following new sub5 section:

6 ‘‘(i) DESIGNATED HEALTH SERVICES DEFINED.—In

7 this section, the term ‘designated health services’ means—

8 ‘‘(1) clinical laboratory services;

9 ‘‘(2) physical therapy services;

10 ‘‘(3) radiology services, including magnetic reso11 nance imaging, computerized axial tomography

12 scans, and ultrasound services;

13 ‘‘(4) radiation therapy services;

14 ‘‘(5) the furnishing of durable medical equip15 ment;

16 ‘‘(6) the furnishing of parenteral and enteral

17 nutrition equipment and supplies;

18 ‘‘(7) the furnishing of outpatient prescription

19 drugs;

20 ‘‘(8) ambulance services;

21 ‘‘(9) home infusion therapy services;

22 ‘‘(10) occupational therapy services; and

23 ‘‘(11) inpatient and outpatient hospital services

24 (including services furnished at a psychiatric or re25 habilitation hospital).’’.
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1 (b) CONFORMING AMENDMENTS.—Section 1877 of

2 such Act is further amended—

3 (1) in subsection (d)(2), by striking ‘‘labora4 tory’’ and inserting ‘‘entity’’,

5 (2) in subsection (g)(1), by striking ‘‘clinical

6 laboratory service’’ and inserting ‘‘designated health

7 service’’, and

8 (3) in subsection (h)(7)(B), by striking ‘‘clinical

9 laboratory service’’ and inserting ‘‘designated health

10 service’’.

11 SEC. 353. CHANGES IN EXCEPTIONS AND OTHER PROVI12 SIONS RELATING TO COMPENSATION AR13 RANGEMENTS.

14 (a) MULTIPLE LOCATIONS FOR GROUP PRAC15 TICES.—Section 1877(b)(2)(A)(ii)(II) of the Social Secu16 rity Act is amended by striking ‘‘centralized provision’’

17 and inserting ‘‘provision of some or all’’.

18 (b) TREATMENT OF COMPENSATION ARRANGE19 MENTS.—

20 (1) RENTAL OF OFFICE SPACE AND EQUIP21 MENT.—Paragraph (1) of section 1877(e) of such

22 Act is amended to read as follows:

23 ‘‘(1) RENTAL OF OFFICE SPACE; RENTAL OF

24 EQUIPMENT.—
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1 ‘‘(A) OFFICE SPACE.—Payments made by

2 a lessee to a lessor for the use of premises if—

3 ‘‘(i) the lease is set out in writing,

4 signed by the parties, and specifies the

5 premises covered by the lease,

6 ‘‘(ii) the aggregate space rented or

7 leased is reasonable and necessary for the

8 legitimate business purposes of the lease or

9 rental,

10 ‘‘(iii) the lease provides for a term of

11 rental or lease for at least one year,

12 ‘‘(iv) in the case of a lease that is in13 tended to provide the lessee with access to

14 the premises for periodic intervals of time,

15 rather than on a full-time basis, the lease

16 specifies exactly the schedule of such inter17 vals, their length, and the rent for such in18 tervals,

19 ‘‘(v) the rental charges over the term

20 of the lease are set in advance, are consist21 ent with fair market value, and are not de22 termined in a manner that takes into ac23 count the volume or value of any referrals

24 or other business generated between the

25 parties,
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1 ‘‘(vi) the lease would be commercially

2 reasonable even if no referrals were made

3 between the parties, and

4 ‘‘(vii) the compensation arrangement

5 meets such other requirements as the Sec6 retary may impose by regulation as needed

7 to protect against program or patient

8 abuse.

9 ‘‘(B) EQUIPMENT.—Payments made by a

10 lessee of equipment to the lessor of the equip11 ment for the use of the equipment if—

12 ‘‘(i) the lease is set out in writing,

13 signed by the parties, and specifies the

14 equipment covered by the lease,

15 ‘‘(ii) the equipment rented or leased is

16 reasonable and necessary for the legitimate

17 business purposes of the lease or rental,

18 ‘‘(iii) the lease provides for a term of

19 rental or lease of at least one year,

20 ‘‘(iv) in the case of a lease that is in21 tended to provide the lessee with use of the

22 equipment for periodic intervals of time,

23 rather than on a full-time basis, the lease

24 specifies exactly the schedule of such inter-
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1 vals, their length, and the rent for such in2 tervals,

3 ‘‘(v) the rental charges over the term

4 of the lease are set in advance, are consist5 ent with fair market value, and are not de6 termined in a manner that takes into ac7 count the volume or value of any referrals

8 or other business generated between the

9 parties,

10 ‘‘(vi) the lease would be commercially

11 reasonable even if no referrals were made

12 between the parties, and

13 ‘‘(vii) the compensation arrangement

14 meets such other requirements as the Sec15 retary may impose by regulation as needed

16 to protect against program or patient

17 abuse.’’.

18 (2) BONA FIDE EMPLOYMENT RELATION19 SHIPS.—Paragraph (2) of such section is amended—

20 (A) by striking ‘‘WITH HOSPITALS’’,

21 (B) by striking ‘‘An arrangement’’ and all

22 that follows through ‘‘if’’ and inserting ‘‘Any

23 amount paid by an employer to an employee

24 who has a bona fide employment relationship

25 with the employer for employment, or paid by
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1 a hospital pursuant to an arrangement with a

2 physician (or immediate family member) for the

3 provision of administrative services, if’’,

4 (C) in subparagraphs (A), (B), and (D), by

5 striking ‘‘arrangement’’ and inserting ‘‘employ6 ment relationship or arrangement’’, and

7 (D) in subparagraph (C), by striking ‘‘to

8 the hospital’’.

9 (3) ADDITIONAL EXCEPTIONS.—Such sub10 section is further amended by adding at the end the

11 following new paragraphs:

12 ‘‘(7) PAYMENTS TO A PHYSICIAN FOR OTHER

13 ITEMS OR SERVICES.—

14 ‘‘(A) IN GENERAL.—Payments made by an

15 entity to a physician (or family member) who is

16 not employed by the entity as compensation for

17 services specified in subparagraph (B), if—

18 ‘‘(i) the compensation agreement is

19 set out in writing and specifies the services

20 to be provided by the parties, the com21 pensation for each unit of service provided

22 under the agreement, and the schedule for

23 the provision of such services,

24 ‘‘(ii) the compensation paid over the

25 term of the agreement is consistent with
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1 fair market value and is not determined in

2 a manner that takes into account the vol3 ume or value of any referrals or other busi4 ness generated between the parties,

5 ‘‘(iii) the compensation is provided

6 pursuant to an agreement which would be

7 commercially reasonable even if no refer8 rals were made to the entity, and

9 ‘‘(iv) the compensation arrangement

10 meets such other requirements as the Sec11 retary may impose by regulation as needed

12 to protect against program or patient

13 abuse.

14 ‘‘(B) SPECIFIED SERVICES.—For purposes

15 of subparagraph (A), the services specified in

16 this subparagraph are any of the following:

17 ‘‘(i) Consultative services that—

18 ‘‘(I) relate to results that have

19 been obtained that are outside estab20 lished parameters, or are specifically

21 requested by the referring physician

22 on a specified patient,

23 ‘‘(II) are furnished by a physi24 cian other than the referring physi25 cian (or by another physician who is
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1 a member of the same group prac2 tice), and

3 ‘‘(III) for which the physician

4 furnishes a written report for that pa5 tient.

6 ‘‘(ii) Interpretation of tissue pathology

7 or Pap smear slides or the provision of

8 other cytology services.

9 ‘‘(iii) Phlebotomy services for pater10 nity or toxicology testing where the serv11 ices are furnished by a physician other

12 than the physician referring the individual

13 for such testing (or by another physician

14 who is a member of the same group prac15 tice).

16 ‘‘(iv) Employment-related health care

17 services, including a payment by a self-in18 sured employer for services rendered to

19 employee applicants, employees, or their

20 families under the terms of a health bene21 fit plan.

22 ‘‘(v) Services as a clinical consultant

23 to the entity as required for certification of

24 the provider under section 353 of the Pub25 lic Health Service Act.
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1 ‘‘(vi) Services required by local, State,

2 or Federal licensure, accreditation, or

3 other health and safety provisions.

4 ‘‘(vii) Services billed in the name of a

5 group practice provided by a physician

6 under contract to the group practice for

7 services not otherwise available directly

8 through a physician who is a member of

9 the group.

10 ‘‘(8) PAYMENTS BY A PHYSICIAN FOR ITEMS

11 AND SERVICES.—Payments made by a physician—

12 ‘‘(A) to a laboratory in exchange for the

13 provision of clinical laboratory services, or

14 ‘‘(B) to an entity as compensation for

15 other items or services if the items or services

16 are furnished at a price that is consistent with

17 fair market value and are generally available to

18 referrors and non-referrors alike on similar

19 terms and conditions.

20 ‘‘(9) PAYMENTS FOR PATHOLOGY SERVICES OF

21 A GROUP PRACTICE.—Payments made to a group

22 practice for pathology services under an agreement

23 if—

24 ‘‘(A) the agreement is set out in writing

25 and specifies the services to be provided by the
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1 parties and the compensation for services pro2 vided under the agreement,

3 ‘‘(B) the compensation paid over the term

4 of the agreement is consistent with fair market

5 value and is not determined in a manner that

6 takes into account the volume or value of any

7 referrals or other business generated between

8 the parties,

9 ‘‘(C) the compensation is provided pursu10 ant to an agreement which would be commer11 cially reasonable even if no referrals were made

12 to the entity; and

13 ‘‘(D) the compensation arrangement be14 tween the parties meets such other require15 ments as the Secretary may impose by regula16 tion as needed to protect against program or

17 patient abuse.’’.

18 (c) TREATMENT OF GROUP PRACTICES.—

19 (1) USE OF BILLING NUMBERS, ETC.—Section

20 1877 of the Social Security Act is amended—

21 (A) in subsection (b)(2)(B), by inserting

22 ‘‘under a billing number assigned to the group

23 practice’’ after ‘‘member’’,
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1 (B) in subsection (h)(4)(B), by inserting

2 ‘‘and under a billing number assigned to the

3 group’’ after ‘‘in the name of the group’’, and

4 (C) in subsection (h)(4)(C), by striking

5 ‘‘by members of the group’’.

6 (2) TREATMENT OF CLINICAL LABORATORY

7 SERVICES FURNISHED UNDER ARRANGEMENTS BE8 TWEEN HOSPITALS AND GROUP PRACTICES.—

9 (A) IN GENERAL.—Section 1877(h)(4) of

10 such Act is amended—

11 (i) in subparagraph (B) (as amended

12 by paragraph (1)(B)), by inserting ‘‘(or

13 are billed in the name of a hospital for

14 which the group provides clinical labora15 tory services pursuant to an arrangement

16 that meets the requirements of subpara17 graph (B))’’ after ‘‘assigned to the group’’;

18 (ii) by redesignating subparagraphs

19 (A) through (D) as clauses (i) through

20 (iv), respectively;

21 (iii) by inserting ‘‘(A)’’ after ‘‘.—’’;

22 and

23 (iv) by adding at the end the following

24 new subparagraph:
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1 ‘‘(B) The requirements of this subparagraph,

2 with respect to an arrangement for clinical labora3 tory services provided by the laboratory of a group

4 and billed in the name of a hospital, are that—

5 ‘‘(i) with respect to services provided to an

6 inpatient of the hospital, the arrangement is

7 pursuant to the provision of inpatient hospital

8 services under section 1861(b)(3);

9 ‘‘(ii) the arrangement began before Decem10 ber 19, 1989, and has continued in effect with11 out interruption since such date;

12 ‘‘(iii) the laboratory provides substantially

13 all of the clinical laboratory services to the hos14 pital’s patients;

15 ‘‘(iv) the arrangement is pursuant to an

16 agreement that is set out in writing and that

17 specifies the services to be provided by the par18 ties and the compensation for services provided

19 under the agreement;

20 ‘‘(v) the compensation paid over the term

21 of the agreement is consistent with fair market

22 value and the compensation per unit of services

23 is fixed in advance and is not determined in a

24 manner that takes into account the volume or
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1 value of any referrals or other business gen2 erated between the parties;

3 ‘‘(vi) the compensation is provided pursu4 ant to an agreement which would be commer5 cially reasonable even if no referrals were made

6 to the entity; and

7 ‘‘(vii) the arrangement between the parties

8 meets such other requirements as the Secretary

9 may impose by regulation as needed to protect

10 against program or patient abuse.’’.

11 (B) CONFORMING AMENDMENT.—Section

12 1877(b)(2)(B) of such Act is amended by in13 serting ‘‘(or by a hospital for which such a

14 group practice provides clinical laboratory serv15 ices pursuant to an arrangement that meets the

16 requirements of subsection (h)(4)(B))’’ after

17 ‘‘by a group practice of which such physician is

18 a member’’.

19 (3) TREATMENT OF CERTAIN FACULTY PRAC20 TICE PLANS.—The last sentence of section

21 1877(h)(4)(A) of such Act, as redesignated by para22 graph (1)(A), is amended by inserting ‘‘, institution

23 of higher education, or medical school’’ after ‘‘hos24 pital’’.
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1 (d) EXPANDING RURAL PROVIDER EXCEPTION TO

2 COVER COMPENSATION ARRANGEMENTS.—

3 (1) IN GENERAL.—Section 1877(b) of such Act

4 is further amended—

5 (A) by redesignating paragraph (5) as

6 paragraph (7), and

7 (B) by inserting after paragraph (4) the

8 following new paragraph:

9 ‘‘(5) RURAL PROVIDERS.—In the case of des10 ignated services if—

11 ‘‘(A) the entity furnishing the services is in

12 a rural area (as defined in section

13 1886(d)(2)(D)), and

14 ‘‘(B) substantially all of the services fur15 nished by the entity to individuals entitled to

16 benefits under this title are furnished to such

17 individuals who reside in such a rural area.’’.

18 (2) CONFORMING AMENDMENTS.—Section

19 1877(d) of such Act is amended—

20 (A) by striking paragraph (2), and

21 (B) by redesignating paragraph (3) as

22 paragraph (2).

23 (e) EXEMPTION OF COMPENSATION ARRANGEMENTS

24 INVOLVING CERTAIN TYPES OF REMUNERATION.—Sec25 tion 1877(h)(1) of such Act is amended—
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1 (1) by striking subparagraph (B);

2 (2) in subparagraph (A), by inserting before the

3 period the following: ‘‘(other than an arrangement

4 involving only remuneration described in subpara5 graph (B))’’; and

6 (3) by adding at the end the following new sub7 paragraph:

8 ‘‘(B) Remuneration described in this subpara9 graph is any remuneration consisting of any of the

10 following:

11 ‘‘(i) The forgiveness of amounts owed for

12 inaccurate tests or procedures, mistakenly per13 formed tests or procedures, or the correction of

14 minor billing errors.

15 ‘‘(ii) The provision of items, devices, or

16 supplies of minor value that are used to—

17 ‘‘(I) collect, transport, process, or

18 store specimens for the entity providing

19 the item, device, or supply, or

20 ‘‘(II) communicate the results of tests

21 or procedures for such entity.

22 ‘‘(iii) The furnishing by an entity of lab23 oratory services to a group practice affiliated

24 with the entity, if the entity provides all or sub-
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1 stantially all of the clinical laboratory services

2 of the group practice.’’.

3 (f) MISCELLANEOUS AND TECHNICAL CORREC4 TIONS.—Section 1877 of such Act is amended—

5 (1) in the fourth sentence of subsection (f)—

6 (A) by striking ‘‘provided’’ and inserting

7 ‘‘furnished’’, and

8 (B) by striking ‘‘provides’’ and inserting

9 ‘‘furnish’’;

10 (2) in the fifth sentence of subsection (f)—

11 (A) by striking ‘‘providing’’ each place it

12 appears and inserting ‘‘furnishing’’,

13 (B) by striking ‘‘with respect to the provid14 ers’’ and inserting ‘‘with respect to the enti15 ties’’, and

16 (C) by striking ‘‘diagnostic imaging serv17 ices of any type’’ and inserting ‘‘magnetic reso18 nance imaging, computerized axial tomography

19 scans, and ultrasound services’’; and

20 (3) in subsection (a)(2)(B), by striking ‘‘sub21 section (h)(1)(A)’’ and inserting ‘‘subsection (h)(1)’’.

22 SEC. 354. EFFECTIVE DATES.

23 (a) EXPANSION OF COVERAGE AND PAYORS.—The

24 amendments made by sections 351 and 352 shall apply

25 with respect to a referral by a physician for designated
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1 health services (as described in section 1877(i) of the So2 cial Security Act) made on or after the first day of the

3 first month beginning 2 years after the date of the enact4 ment of this Act.

5 (b) CHANGES IN EXCEPTIONS, ETC.—The amend6 ments made by section 353 shall apply to referrals made

7 on or after January 1, 1992.

8 Subtitle D—Other Provisions

9 SEC. 361. MALPRACTICE REFORM.

10 (a) STUDY BY PHYSICIAN PAYMENT REVIEW COM11 MISSION.—The Physician Payment Review Commission

12 shall conduct a study of—

13 (1) the need for tort reforms with respect to

14 medical malpractice liability claims, including the

15 need to establish or impose alternative dispute reso16 lution requirements on such claims; and

17 (2) the impact of such reforms on—

18 (A) expenditures for health care services

19 and on access to such services,

20 (B) the quality of health care services, and

21 (C) access of injured patients to the medi22 cal malpractice system.

23 (b) REPORT.—Not later than September 30, 1993,

24 the Commission shall submit a report to Congress on the

25 study conducted under paragraph (1) and shall include in
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1 such study such recommendations as the Commission con2 siders appropriate.

3 TITLE IV—EXPANSIONS OF

4 HEALTH BENEFITS AND

5 OTHER HEALTH INITIATIVES

6 Subtitle A—Medicaid Benefit

7 Improvements

8 SEC. 401. FLOOR ON MEDICAID PAYMENT LEVELS FOR IN9 PATIENT HOSPITAL SERVICES AND PHYSI10 CIANS’ SERVICES.

11 (a) INPATIENT HOSPITAL SERVICES.—

12 (1) IN GENERAL.—(A) A State plan under title

13 XIX of the Social Security Act shall not be consid14 ered to meet the requirement of section

15 1902(a)(13)(A) of such Act (insofar as it requires

16 payments to hospitals for inpatient hospital services

17 that are reasonable and adequate to meet the costs

18 which must be incurred by efficiently and economi19 cally operated facilities), as of October 1, 1996, un20 less the State has submitted to the Secretary of

21 Health and Human Services (in this subsection re22 ferred to as the ‘‘Secretary’’), by not later than such

23 date, an amendment to such plan that assures that,

24 in the aggregate, the amount of payments for inpa25 tient hospital services provided in subsection (d) hos-
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1 pitals (as defined in section 1886(d)(1)(B) of such

2 Act) under the plan is not less than—

3 (i) in the case of services furnished during

4 fiscal year 1997, 80 percent (or, if greater, the

5 percent specified in subparagraph (B)) of the

6 amount of payments for such services that

7 would be made under title XVIII of such Act

8 (without regard to any deductible imposed

9 under section 1813(a) of such Act or any limi10 tation on the coverage of inpatient hospital

11 services under such title) for such services if

12 covered under such title;

13 (ii) in the case of services furnished during

14 fiscal year 1998, 85 percent (or, if greater, the

15 percent specified in subparagraph (B)) of the

16 amount of payments for such services that

17 would be made under title XVIII of such Act

18 (without regard to any deductible imposed

19 under section 1813(a) of such Act or any limi20 tation on the coverage of inpatient hospital

21 services under such title) for such services if

22 covered under such title; and

23 (iii) in the case of services furnished dur24 ing any succeeding fiscal year, 90 percent of the

25 amount of payments for such services that
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1 would be made under title XVIII of such Act

2 (without regard to any deductible imposed

3 under section 1813(a) of such Act or any limi4 tation on the coverage of inpatient hospital

5 services under such title) for such services if

6 covered under such title.

7 (B) The percent specified in this subparagraph

8 is the quotient of—

9 (i) the total payments made under the

10 State plan under title XIX of the Social Secu11 rity Act in fiscal year 1993 with respect to in12 patient hospital services, divided by

13 (ii) the amount of payments for such serv14 ices that would be made under title XVIII of

15 such Act (without regard to any deductible im16 posed under section 1813(a) of such Act or any

17 limitation on the coverage of inpatient hospital

18 services under such title) for such services in

19 such fiscal year if covered under such title,

20 expressed as a percentage, or, if less, 90 percent.

21 (C) In computing amounts under subparagraph

22 (A), the Secretary shall adjust for differences in case

23 mix, volume, the age and disability of the popu24 lations covered by the two programs, and other rel25 evant factors identified by the Secretary.
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1 (2) REVIEW.—The Secretary, by not later than

2 90 days after the date of submission of a plan

3 amendment under paragraph (1), shall—

4 (A) review each such amendment for com5 pliance with the requirement of section

6 1902(a)(13)(A) of the Social Security Act; and

7 (B) approve or disapprove each such

8 amendment.

9 If the Secretary disapproves such an amendment,

10 the State shall immediately submit a revised amend11 ment which meets such requirement.

12 (3) COLLECTION OF DATA.—The Secretary may

13 provide for such collection of data on payment for

14 inpatient hospital services as may be necessary to

15 carry out this subsection.

16 (4) NONWAIVABILITY.—The provisions of this

17 subsection may not be waived by the Secretary.

18 (b) PHYSICIANS’ SERVICES.—

19 (1) IN GENERAL.—Section 1902 of the Social

20 Security Act (42 U.S.C. 1396a) is amended—

21 (A) in subsection (a)(13)—

22 (i) by striking ‘‘and’’ at the end of

23 subparagraph (E);
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1 (ii) by striking the semicolon at the

2 end of subparagraph (F) and inserting ‘‘;

3 and’’; and

4 (iii) by adding at the end the follow5 ing new subparagraph:

6 ‘‘(G) for payment for physicians’ services

7 through a methodology under which the amount

8 of payment for such services furnished during a

9 calendar quarter is not less than the amount

10 specified in subsection (z);’’; and

11 (B) by adding at the end the following new

12 subsection:

13 ‘‘(z)(1) For purposes of subsection (a)(13)(G), the

14 amount specified in this subsection is—

15 ‘‘(A) for physicians’ services furnished during a

16 calendar quarter in fiscal year 1997, 60 percent (or,

17 if greater, the percent specified in paragraph (2)) of

18 the applicable fee schedule amount established under

19 section 1848 for services furnished in such year,

20 ‘‘(B) for physicians’ services furnished during a

21 calendar quarter in fiscal year 1998, 70 percent (or,

22 if greater, the percent specified in subparagraph

23 (B)) of the applicable fee schedule amount estab24 lished under section 1848 for services furnished in

25 such year, and
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1 ‘‘(C) for physicians’ services furnished during a

2 calendar quarter in a succeeding fiscal year, 90 per3 cent (or, if greater, the percent specified in subpara4 graph (B)) of the applicable fee schedule amount es5 tablished under section 1848 for services furnished

6 in such year.

7 ‘‘(2) The percent specified in this paragraph is the

8 quotient of—

9 ‘‘(A) the total payments made under the State

10 plan under title XIX of the Social Security Act in

11 fiscal year 1993 for physicians’ services, divided by

12 ‘‘(B) the amount of payments for such services

13 that would be made under title XVIII of such Act

14 (without regard to any deductible or coinsurance)

15 for such services in such fiscal year if covered under

16 such title,

17 expressed as a percentage, or, if less, 90 percent.’’.

18 (2) TRANSMITTAL OF PAYMENT INFORMATION

19 TO STATES.—Section 1848(i) of such Act (42 U.S.C.

20 1395w–4(i)) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(4) TRANSMITTAL OF PHYSICIAN PAYMENT IN23 FORMATION TO STATES.—Not later than August 1

24 of 1996 (and of each year thereafter), the Secretary

25 shall transmit such information to the States as is
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1 necessary to enable the States to carry out the re2 quirements of section 1902(a)(13)(G) of the Social

3 Security Act (as added by section 401(b)(1) of the

4 Health Care Cost Containment and Reform Act of

5 1993).’’.

6 (3) RELATION TO PAYMENTS FOR OBSTETRICAL

7 AND PEDIATRIC SERVICES.—Section 1926 of such

8 Act (42 U.S.C. 1396r–7) is amended by adding at

9 the end the following new subsection:

10 ‘‘(e) Payment rates established under this section

11 with respect to services shall in no case be less than the

12 minimum payment amounts specified under section

13 1902(z) with respect to such services. The fact that pay14 ment amounts with respect to such services are consistent

15 with the payment rates required under such section shall

16 not be the basis for a determination that the payment

17 amounts comply with the requirements of this section.’’.

18 (4) EFFECTIVE DATE.—The amendments made

19 by this subsection shall apply to payments under

20 title XIX of the Social Security Act for calendar

21 quarters beginning on or after October 1, 1997.

22 SEC. 402. MEDICAID ELIGIBILITY EXPANSION.

23 (a) IN GENERAL.—

24 (1) BENEFITS FOR LOW-INCOME INDIVID25 UALS.—Section 1902(a)(10)(A)(i) of the Social Se-
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1 curity Act (42 U.S.C. 1396a(a)(10)(A)(i)) is amend2 ed—

3 (A) by striking ‘‘or’’ at the end of

4 subclause (VI);

5 (B) by striking the semicolon at the end of

6 subclause (VII) and inserting ‘‘, or’’; and

7 (C) by adding at the end the following new

8 subclause:

9 ‘‘(VIII) who are described in sub10 section (aa)(1);’’.

11 (2) INDIVIDUALS DESCRIBED.—

12 (A) IN GENERAL.—Section 1902 of such

13 Act (42 U.S.C. 1396a), as amended by section

14 401(b), is amended by adding at the end the

15 following new subsection:

16 ‘‘(aa)(1) Individuals described in this paragraph

17 are—

18 ‘‘(A) for quarters beginning on or after October

19 1, 1996, women during pregnancy (and during the

20 60-day period beginning on the last day of the preg21 nancy) or individuals who have not attained 6 years

22 of age;

23 ‘‘(B) for quarters beginning on or after October

24 1, 1997, individuals not described in subparagraph

25 (A) who have not attained 11 years of age;
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1 ‘‘(C) for quarters beginning on or after October

2 1, 1998, individuals not described in subparagraph

3 (A) or (B) who have not attained 19 years of age;

4 and

5 ‘‘(D) for quarters beginning on or after October

6 1, 1999, individuals not described in a preceding

7 subparagraph who have not attained 65 years of

8 age,

9 who are not described in any of subclauses (I) through

10 (VII) of subsection (a)(10)(A)(i) and whose family income

11 does not exceed the income level described in paragraph

12 (2) for a family of the size of the family.

13 ‘‘(2)(A) The income level described in this paragraph

14 is the percent provided under subparagraph (B) of the of15 ficial poverty line (as defined by the Office of Management

16 and Budget, and revised annually in accordance with sec17 tion 673(2) of the Omnibus Budget Reconciliation Act of

18 1981) applicable to a family of the size involved.

19 ‘‘(B) The percentage provided in this subparagraph

20 is—

21 ‘‘(i) for individuals described in subparagraph

22 (A), (B), or (C) of paragraph (1), 200 percent; and

23 ‘‘(ii) with respect to any other individual, for

24 purposes of determining eligibility for medical assist25 ance on or after—
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1 ‘‘(I) October 1, 1999, is 50 percent,

2 ‘‘(II) October 1, 2000, is 100 percent,

3 ‘‘(III) October 1, 2001, is 150 percent,

4 and

5 ‘‘(IV) October 1, 2002, is 200 percent.

6 ‘‘(3) Notwithstanding subsection (a)(17), for individ7 uals who are eligible for medical assistance because of sub8 section (a)(10)(A)(i)(VIII)—

9 ‘‘(A) no resource standard shall be applied;

10 ‘‘(B) the income standard to be applied is the

11 appropriate income standard established under para12 graph (2); and

13 ‘‘(C) family income shall be determined in ac14 cordance with the methodology that is not more re15 strictive than the methodology employed under the

16 State plan under part A or E of title IV (except to

17 the extent such methodology is inconsistent with

18 clause (D) of subsection (a)(17)), and costs incurred

19 for medical care or for any other type of remedial

20 care shall not be taken into account.

21 Any different treatment provided under this paragraph for

22 such individuals shall not, because of subsection (a)(17),

23 require or permit such treatment for other individuals.

24 ‘‘(4)(A) In the case of any State which is providing

25 medical assistance to its residents under a waiver granted
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1 under section 1115, the Secretary shall require the State

2 to provide medical assistance for individuals described in

3 paragraph (1) in the same manner as the State would be

4 required to provide such assistance for such individuals

5 if the State had in effect a plan approved under this title.

6 ‘‘(B) In the case of a State which is not one of the

7 50 States or the District of Columbia, the State need not

8 meet the requirement of subsection (a)(10)(A)(i)(VIII)

9 and, for purposes of paragraph (2)(A), the State may sub10 stitute for the percentages provided under such paragraph

11 any percentages that are less than such percentages.

12 ‘‘(5) The Secretary may not require that an individ13 ual apply for eligibility under subclauses (I) through (VII)

14 of subsection (a)(10)(A)(i) as a condition of being deter15 mined to be eligible for medical assistance under this title

16 as an individual described in paragraph (1).’’.

17 (B) CONFORMING AMENDMENT.—Section

18 1905(a) of such Act (42 U.S.C. 1396d(a)) is

19 amended—

20 (i) by striking ‘‘or’’ at the end of

21 clause (ix),

22 (ii) by adding ‘‘or’’ at the end of

23 clause (x), and

24 (iii) by inserting after clause (x) the

25 following new clause:
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1 ‘‘(xi) individuals described in section

2 1902(aa)(1),’’.

3 (b) RESTRICTIONS ON BENEFITS PROVIDED.—Sec4 tion 1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10))

5 is amended in the matter following subparagraph (F)—

6 (1) by striking ‘‘; and (XI) the making’’ and in7 serting ‘‘, (XI) the making’’;

8 (2) by striking ‘‘and (XI) the medical’’ and in9 serting ‘‘(XII) the medical’’; and

10 (3) by striking the semicolon at the end and in11 serting the following: ‘‘ and (XIII) the medical as12 sistance required to be made available to an individ13 ual described in subsection (aa)(1) shall not include

14 nursing facility services, home and community-based

15 services (as defined in section 1915(d)(5)(C)(i)),

16 services in an intermediate care facility for the men17 tally retarded, and community supported living ar18 rangements services;’’.

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

20 subsections (a) and (b) shall apply to quarters beginning

21 on or after October 1, 1996, without regard to whether

22 or not regulations to carry out such amendments have

23 been promulgated by such date.
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1 SEC. 403. FULL FEDERAL PAYMENT FOR INCREASED

2 COSTS.

3 Section 1903 of the Social Security Act (42 U.S.C.

4 1396b) is amended by adding at the end the following new

5 subsection:

6 ‘‘(w)(1) Notwithstanding subsection (a), with respect

7 to new mandated expenditures (as defined in paragraph

8 (2)) in a quarter, instead of the amounts otherwise paid

9 to a State under subsection (a) for a quarter with respect

10 to such expenditures, there shall be paid to the State an

11 amount equal to 100 percent of the amount of such ex12 penditures.

13 ‘‘(2) In this subsection, the term ‘new mandated ex14 penditures’ means the sum of the following expenditures

15 under the State plan during a quarter:

16 ‘‘(A) The amount by which (i) the minimum

17 amount of expenditures for medical assistance for

18 inpatient hospital services (consistent with section

19 401(a) of the Health Care Cost Containment and

20 Reform Act of 1993), exceeds (ii) the amount of ex21 penditures for such assistance which the Secretary

22 determines would have been payable under the plan

23 (as such plan was in effect as of the date of the en24 actment of this subsection).

25 ‘‘(B) The amount by which (i) the minimum

26 amount of expenditures under the plan for medical
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1 assistance for physicians’ services (consistent with

2 section 1902(a)(13)(G)) for the quarter, exceeds (ii)

3 the amount of expenditures under the plan for such

4 assistance which the Secretary determines would

5 have been payable under the plan (as such plan was

6 in effect as of the date of the enactment of this sub7 section) for the quarter.

8 ‘‘(C) The amount of expenditures for medical

9 assistance attributable to individuals with respect to

10 whom the State plan would not be required to pro11 vide such assistance but for the amendments made

12 by section 402.

13 ‘‘(D) The amount of expenses reasonably attrib14 utable to the expenditures described in subpara15 graphs (A) through (C).’’.

16 Subtitle B—Expansion of Medicare

17 Benefits

18 PART 1—PREVENTIVE BENEFITS

19 SEC. 411. ANNUAL SCREENING MAMMOGRAPHY.

20 (a) ANNUAL SCREENING MAMMOGRAPHY FOR

21 WOMEN OVER AGE 64.—Section 1834(c)(2)(A) of the So22 cial Security Act (42 U.S.C. 1395m(b)(2)(A)) is amend23 ed—

24 (1) in clause (iv), by striking ‘‘but under 65

25 years of age,’’; and
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1 (2) by striking clause (v).

2 (b) EFFECTIVE DATE.—The amendments made by

3 subsection (a) shall apply to screening mammography per4 formed on or after January 1, 1995.

5 SEC. 412. COVERAGE OF COLORECTAL SCREENING.

6 (a) IN GENERAL.—Section 1834 of the Social Secu7 rity Act (42 U.S.C. 1395m) is amended by inserting after

8 subsection (c) the following new subsection:

9 ‘‘(d) FREQUENCY AND PAYMENT LIMITS FOR

10 SCREENING FECAL-OCCULT BLOOD TESTS AND SCREEN11 ING FLEXIBLE SIGMOIDOSCOPIES.—

12 ‘‘(1) SCREENING FECAL-OCCULT BLOOD

13 TESTS.—

14 ‘‘(A) PAYMENT LIMIT.—In establishing fee

15 schedules under section 1833(h) with respect to

16 screening fecal-occult blood tests provided for

17 the purpose of early detection of colon cancer,

18 except as provided by the Secretary under para19 graph (3)(A), the payment amount established

20 for tests performed—

21 ‘‘(i) in 1995 shall not exceed $5; and

22 ‘‘(ii) in a subsequent year, shall not

23 exceed the limit on the payment amount

24 established under this subsection for such

25 tests for the preceding year, adjusted by
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1 the applicable adjustment under section

2 1833(h) for tests performed in such year.

3 ‘‘(B) FREQUENCY LIMIT.—Subject to revi4 sion by the Secretary under paragraph (3)(B),

5 no payment may be made under this part for

6 a screening fecal-occult blood test provided to

7 an individual for the purpose of early detection

8 of colon cancer—

9 ‘‘(i) if the individual is under 50 years

10 of age; or

11 ‘‘(ii) if the test is performed within 11

12 months after a previous screening fecal-oc13 cult blood test.

14 ‘‘(2) SCREENING FLEXIBLE SIGMOID15 OSCOPIES.—

16 ‘‘(A) PAYMENT AMOUNT.—The Secretary

17 shall establish a payment amount under section

18 1848 with respect to screening flexible

19 sigmoidoscopies provided for the purpose of

20 early detection of colon cancer that is consistent

21 with payment amounts under such section for

22 similar or related services, except that such

23 payment amount shall be established without

24 regard to subsection (a)(2)(A) of such section.
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1 ‘‘(B) FREQUENCY LIMIT.—Subject to revi2 sion by the Secretary under paragraph (3)(B),

3 no payment may be made under this part for

4 a screening flexible sigmoidoscopy provided to

5 an individual for the purpose of early detection

6 of colon cancer—

7 ‘‘(i) if the individual is under 50 years

8 of age; or

9 ‘‘(ii) if the procedure is performed

10 within 59 months after a previous screen11 ing flexible sigmoidoscopy.

12 ‘‘(3) REDUCTIONS IN PAYMENT LIMIT AND RE13 VISION OF FREQUENCY.—

14 ‘‘(A) REDUCTIONS IN PAYMENT LIMIT.—

15 The Secretary shall review from time to time

16 the appropriateness of the amount of the pay17 ment limit established for screening fecal-occult

18 blood tests under paragraph (1)(A). The Sec19 retary may, with respect to tests performed in

20 a year after 1997, reduce the amount of such

21 limit as it applies nationally or in any area to

22 the amount that the Secretary estimates is re23 quired to assure that such tests of an appro24 priate quality are readily and conveniently

25 available during the year.
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1 ‘‘(B) REVISION OF FREQUENCY.—

2 ‘‘(i) REVIEW.—The Secretary, in con3 sultation with the Director of the National

4 Cancer Institute, shall review periodically

5 the appropriate frequency for performing

6 screening fecal-occult blood tests and

7 screening flexible sigmoidoscopies based on

8 age and such other factors as the Sec9 retary believes to be pertinent.

10 ‘‘(ii) REVISION OF FREQUENCY.—The

11 Secretary, taking into consideration the re12 view made under clause (i), may revise

13 from time to time the frequency with

14 which such tests and procedures may be

15 paid for under this subsection, but no such

16 revision shall apply to tests or procedures

17 performed before January 1, 1998.

18 ‘‘(4) LIMITING CHARGES OF NONPARTICIPATING

19 PHYSICIANS.—

20 ‘‘(A) IN GENERAL.—In the case of a

21 screening flexible sigmoidoscopy provided to an

22 individual for the purpose of early detection of

23 colon cancer for which payment may be made

24 under this part, if a nonparticipating physician

25 provides the procedure to an individual enrolled
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1 under this part, the physician may not charge

2 the individual more than the limiting charge (as

3 defined in section 1848(g)(2)).

4 ‘‘(B) ENFORCEMENT.—If a physician or

5 supplier knowing and willfully imposes a charge

6 in violation of subparagraph (A), the Secretary

7 may apply sanctions against such physician or

8 supplier in accordance with section

9 1842(j)(2).’’.

10 (b) CONFORMING AMENDMENTS.—(1) Paragraphs

11 (1)(D) and (2)(D) of section 1833(a) of such Act (42

12 U.S.C. 1395l(a)) are each amended by striking ‘‘sub13 section (h)(1),’’ and inserting ‘‘subsection (h)(1) or section

14 1834(d)(1),’’.

15 (2) Section 1833(h)(1)(A) of such Act (42 U.S.C.

16 1395l(h)(1)(A)) is amended by striking ‘‘The Secretary’’

17 and inserting ‘‘Subject to paragraphs (1) and (3)(A) of

18 section 1834(d), the Secretary’’.

19 (3) Clauses (i) and (ii) of section 1848(a)(2)(A) of

20 such Act (42 U.S.C. 1395w–4(a)(2)(A)) are each amended

21 by striking ‘‘a service’’ and inserting ‘‘a service (other

22 than a screening flexible sigmoidoscopy provided to an

23 individual for the purpose of early detection of colon

24 cancer)’’.
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1 (4) Section 1862(a) of such Act (42 U.S.C. 1395y(a))

2 is amended—

3 (A) in paragraph (1)—

4 (i) in subparagraph (E), by striking ‘‘and’’

5 at the end,

6 (ii) in subparagraph (F), by striking the

7 semicolon at the end and inserting ‘‘, and’’, and

8 (iii) by adding at the end the following new

9 subparagraph:

10 ‘‘(G) in the case of screening fecal-occult

11 blood tests and screening flexible sigmoid12 oscopies provided for the purpose of early detec13 tion of colon cancer, which are performed more

14 frequently than is covered under section

15 1834(d);’’; and

16 (B) in paragraph (7), by striking ‘‘paragraph

17 (1)(B) or under paragraph (1)(F)’’ and inserting

18 ‘‘subparagraphs (B), (F), or (G) of paragraph (1)’’.

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

20 this section shall apply to screening fecal-occult blood tests

21 and screening flexible sigmoidoscopies performed on or

22 after January 1, 1995.

23 SEC. 413. COVERAGE OF CERTAIN IMMUNIZATIONS.

24 (a) IN GENERAL.—Section 1861(s)(10) of the Social

25 Security Act (42 U.S.C. 1395x(s)(10)) is amended—
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1 (1) in subparagraph (A)—

2 (A) by striking ‘‘, subject to section

3 4071(b) of the Omnibus Budget Reconciliation

4 Act of 1987,’’, and

5 (B) by striking ‘‘; and’’ and inserting a

6 comma;

7 (2) in subparagraph (B), by striking the semi8 colon at the end and inserting ‘‘, and’’; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(C) tetanus-diphtheria booster and its ad12 ministration;’’.

13 (b) LIMITATION ON FREQUENCY.—Section

14 1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)), as

15 amended by section 412(b)(4)(A), is amended—

16 (1) in subparagraph (F), by striking ‘‘and’’ at

17 the end;

18 (2) in subparagraph (G), by striking the semi19 colon at the end and inserting ‘‘, and’’; and

20 (3) by adding at the end the following new sub21 paragraph:

22 ‘‘(H) in the case of an influenza vaccine,

23 which is administered within the 11 months

24 after a previous influenza vaccine, and, in the

25 case of a tetanus-diphtheria booster, which is
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1 administered within the 119 months after a

2 previous tetanus-diphtheria booster;’’.

3 (c) CONFORMING AMENDMENT.—Section 1862(a)(7)

4 of such Act (42 U.S.C. 1395y(a)(7)), as amended by sec5 tion 412(b)(4)(B), is amended by striking ‘‘or (G)’’ and

6 inserting ‘‘(G), or (H)’’.

7 (d) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to influenza vaccines and tetanus9 diphtheria boosters administered on or after January 1,

10 1995.

11 SEC. 414. COVERAGE OF WELL-CHILD CARE.

12 (a) IN GENERAL.—Section 1861(s)(2) of the Social

13 Security Act (42 U.S.C. 1395x(s)(2)) is amended—

14 (1) by striking ‘‘and’’ at the end of subpara15 graph (O);

16 (2) by striking the semicolon at the end of sub17 paragraph (P) and inserting ‘‘; and’’; and

18 (3) by adding at the end the following new sub19 paragraph:

20 ‘‘(Q) well-child services (as defined in sub21 section (ll)(1)) provided to an individual entitled to

22 benefits under this title who is under 7 years of

23 age;’’.

24 (b) SERVICES DEFINED.—Section 1861 of such Act

25 (42 U.S.C. 1395x) is amended—
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1 (1) by redesignating the subsection (jj) as sub2 section (kk); and

3 (2) by inserting after subsection (kk) (as so re4 designated) the following new subsection:

5 ‘‘Well-Child Services

6 ‘‘(ll)(1) The term ‘well-child services’ means well7 child care, including routine office visits, routine immuni8 zations (including the vaccine itself), routine laboratory

9 tests, and preventive dental care, provided in accordance

10 with the periodicity schedule established with respect to

11 the services under paragraph (2).

12 ‘‘(2) The Secretary, in consultation with the Amer13 ican Academy of Pediatrics, the Advisory Committee on

14 Immunization Practices, and other entities considered ap15 propriate by the Secretary, shall establish a schedule of

16 periodicity which reflects the appropriate frequency with

17 which the services referred to in paragraph (1) should be

18 provided to healthy children.’’.

19 (c) CONFORMING AMENDMENTS.—(1) Section

20 1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)), as

21 amended by sections 412(b)(4)(A) and 413(b), is amend22 ed—

23 (A) in subparagraph (G), by striking ‘‘and’’ at

24 the end;
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1 (B) in subparagraph (H), by striking the semi2 colon at the end and inserting ‘‘, and’’; and

3 (C) by adding at the end the following new sub4 paragraph:

5 ‘‘(I) in the case of well-child services, which are

6 provided more frequently than is provided under the

7 schedule of periodicity established by the Secretary

8 under section 1861(ll)(2) for such services;’’.

9 (2) Section 1862(a)(7) of such Act (42 U.S.C.

10 1395y(a)(7)), as amended by sections 412(b)(4)(B) and

11 413(c), is amended by striking ‘‘or (H)’’ and inserting

12 ‘‘(H), or (I)’’.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to well-child services provided on

15 or after January 1, 1995.

16 SEC. 415. DEMONSTRATION PROJECTS FOR COVERAGE OF

17 OTHER PREVENTIVE SERVICES.

18 (a) ESTABLISHMENT.—The Secretary shall establish

19 and provide for a series of ongoing demonstration projects

20 under which the Secretary shall provide for coverage of

21 the preventive services described in subsection (c) under

22 the medicare program in order to determine—

23 (1) the feasibility and desirability of expanding

24 coverage of medical and other health services under

25 the medicare program to include coverage of such
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1 services for all individuals enrolled under part B of

2 title XVIII of the Social Security Act; and

3 (2) appropriate methods for the delivery of

4 those services to medicare beneficiaries.

5 (b) SITES FOR PROJECT.—The Secretary shall pro6 vide for the conduct of the demonstration projects estab7 lished under subsection (a) at the sites at which the Sec8 retary conducts the demonstration program established

9 under section 9314 of the Consolidated Omnibus Budget

10 Reconciliation Act of 1985 and at such other sites as the

11 Secretary considers appropriate.

12 (c) SERVICES COVERED UNDER PROJECTS.—The

13 Secretary shall cover the following services under the se14 ries of demonstration projects established under sub15 section (a):

16 (1) Glaucoma screening.

17 (2) Cholesterol screening and cholesterol-reduc18 ing drug therapies.

19 (3) Screening and treatment for osteoporosis,

20 including tests for bone-marrow density and hor21 mone replacement therapy.

22 (4) Screening services for pregnant women, in23 cluding ultra-sound and clamydial testing and ma24 ternal serum alfa-protein.
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1 (5) One-time comprehensive assessment for in2 dividuals beginning at age 65 or 75.

3 (6) Prostate-specific antigen (PSA) testing.

4 (7) Other services considered appropriate by the

5 Secretary.

6 (d) REPORTS TO CONGRESS.—Not later than October

7 1, 1996, and every 2 years thereafter, the Secretary shall

8 submit a report to the Committee on Finance of the Sen9 ate and the Committee on Ways and Means and the Com10 mittee on Energy and Commerce of the House of Rep11 resentatives describing findings made under the dem12 onstration projects conducted pursuant to subsection (a)

13 during the preceding 2-year period and the Secretary’s

14 plans for the demonstration projects during the succeeding

15 2-year period.

16 (e) AUTHORIZATION OF APPROPRIATIONS.—There

17 are authorized to be appropriated from the Federal Sup18 plementary Medical Insurance Trust Fund for expenses

19 incurred in carrying out the series of demonstration

20 projects established under subsection (a) the following

21 amounts:

22 (1) $4,000,000 for fiscal year 1995.

23 (2) $4,000,000 for fiscal year 1996.

24 (3) $5,000,000 for fiscal year 1997.

25 (4) $5,000,000 for fiscal year 1998.
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1 (5) $6,000,000 for fiscal year 1999.

2 PART 2—COVERAGE OF PRESCRIPTION DRUGS

3 SEC. 421. COVERAGE OF OUTPATIENT PRESCRIPTION

4 DRUGS.

5 (a) DESCRIPTION OF COVERED OUTPATIENT

6 DRUGS.—Section 1861 of the Social Security Act (42

7 U.S.C. 1395x) is amended—

8 (1) in subsection (s)(2), by amending subpara9 graph (J) to read as follows:

10 ‘‘(J) covered outpatient drugs (as defined in

11 subsection (t)); and’’; and

12 (2) in subsection (t)—

13 (A) by inserting ‘‘and paragraph (2)’’ after

14 ‘‘subsection (m)(5)’’,

15 (B) by striking ‘‘(t)’’ and inserting

16 ‘‘(t)(1)’’, and

17 (C) by adding at the end the following new

18 paragraphs:

19 ‘‘(2) Subject to paragraph (3), the term ‘covered out20 patient drug’ means—

21 ‘‘(A) a drug which may be dispensed only upon

22 prescription and—

23 ‘‘(i) which is approved for safety and effec24 tiveness as a prescription drug under section

25 505 or 507 of the Federal Food, Drug, and
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1 Cosmetic Act or which is approved under sec2 tion 505(j) of such Act;

3 ‘‘(ii)(I) which was commercially used or

4 sold in the United States before the date of the

5 enactment of the Drug Amendments of 1962 or

6 which is identical, similar, or related (within the

7 meaning of section 310.6(b)(1) of title 21 of the

8 Code of Federal Regulations) to such a drug,

9 and (II) which has not been the subject of a

10 final determination by the Secretary that it is

11 a ‘new drug’ (within the meaning of section

12 201(p) of the Federal Food, Drug, and Cos13 metic Act) or an action brought by the Sec14 retary under section 301, 302(a), or 304(a) of

15 such Act to enforce section 502(f) or 505(a) of

16 such Act; or

17 ‘‘(iii)(I) which is described in section

18 107(c)(3) of the Drug Amendments of 1962

19 and for which the Secretary has determined

20 there is a compelling justification for its medi21 cal need, or is identical, similar, or related

22 (within the meaning of section 310.6(b)(1) of

23 title 21 of the Code of Federal Regulations) to

24 such a drug, and (II) for which the Secretary

25 has not issued a notice of an opportunity for a
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1 hearing under section 505(e) of the Federal

2 Food, Drug, and Cosmetic Act on a proposed

3 order of the Secretary to withdraw approval of

4 an application for such drug under such section

5 because the Secretary has determined that the

6 drug is less than effective for all conditions of

7 use prescribed, recommended, or suggested in

8 its labeling;

9 ‘‘(B) a biological product which—

10 ‘‘(i) may only be dispensed upon prescrip11 tion,

12 ‘‘(ii) is licensed under section 351 of the

13 Public Health Service Act, and

14 ‘‘(iii) is produced at an establishment li15 censed under such section to produce such

16 product; and

17 ‘‘(C) insulin certified under section 506 of the

18 Federal Food, Drug, and Cosmetic Act.

19 ‘‘(3)(A) The term ‘covered outpatient drug’ does not

20 include any drug, biological product, or insulin provided

21 as, as part of, or as incident to, any of the following (and

22 for which payment may be included under this title):

23 ‘‘(i) Inpatient hospital services (described in

24 subsection (b)(2)).
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1 ‘‘(ii) Extended care services (described in sub2 section (h)(5)).

3 ‘‘(iii) Physicians’ services under subparagraph

4 (A) or (B) of subsection (s)(2).

5 ‘‘(iv) Dialysis supplies under subsection

6 (s)(2)(F).

7 ‘‘(v) Antigens under subsection (s)(2)(G).

8 ‘‘(vi) Blood clotting factors for hemophiliacs

9 under subsection (s)(2)(I).

10 ‘‘(vii) Services of a physician assistant, nurse

11 practitioner, or clinical nurse specialist under sub12 section (s)(2)(K).

13 ‘‘(viii) Pneumococcal, hepatitis B, or influenza

14 vaccines under subsection (s)(10).

15 ‘‘(ix) Rural health clinic services (under sub16 section (aa)(1)).

17 ‘‘(x) Comprehensive outpatient rehabilitation fa18 cility services (under subsection (cc)(1)).

19 ‘‘(xi) Hospice care (as defined in subsection

20 (dd)(1)).

21 ‘‘(xii) Certified nurse-midwife service (as de22 fined in subsection (gg)(1)).

23 ‘‘(xiii) Inpatient or outpatient rural primary

24 care hospital services (as defined in subsection

25 (mm)).
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1 ‘‘(xiv) A covered surgical procedure in an ambu2 latory surgical center (under section

3 1832(a)(2)(F)(i)).

4 ‘‘(B) The term ‘covered outpatient drug’ does not in5 clude any drug that is intravenously administered in a

6 home setting.’’.

7 (b) DEDUCTIBLE AND PAYMENT AMOUNTS.—(1)

8 Section 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1))

9 is amended—

10 (A) by striking ‘‘1834(h)(1), (M)’’ and inserting

11 ‘‘1834(h)(1), (N)’’;

12 (B) by striking ‘‘(r)(2)) and (N)’’ and inserting

13 ‘‘(r)(2)), (O)’’; and

14 (C) by striking the semicolon at the end and in15 serting the following ‘‘, and (P) with respect to ex16 penses incurred for covered outpatient drugs, the

17 amounts paid shall be the amounts determined

18 under section 1834(d)(2);’’.

19 (2) Section 1833(a)(2) of such Act (42 U.S.C.

20 1395l(a)(2)) is amended by inserting ‘‘(other than covered

21 outpatient drugs)’’ after ‘‘(2) in the case of services’’.

22 (3) Section 1833(b) of such Act (42 U.S.C. 1395l(b))

23 is amended—

24 (A) in clause (1), by inserting ‘‘or for covered

25 outpatient drugs’’ after ‘‘1861(s)(10)(A)’’, and
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1 (B) in clause (2), by inserting ‘‘or with respect

2 to covered outpatient drugs’’ after ‘‘home health

3 services’’.

4 (4) Section 1834 of the Social Security Act (42

5 U.S.C. 1395m), as amended by section 412(a), is amended

6 by inserting after subsection (d) the following new sub7 section:

8 ‘‘(e) PAYMENT FOR COVERED OUTPATIENT

9 DRUGS.—

10 ‘‘(1) DEDUCTIBLE.—

11 ‘‘(A) APPLICATION.—

12 ‘‘(i) IN GENERAL.—Except as pro13 vided in clauses (ii) and (iii), payment

14 shall be made under paragraph (2) only

15 with respect to expenses incurred by an in16 dividual for covered outpatient drugs dur17 ing a calendar year on or after such date

18 in the year as the Secretary determines

19 that the individual has incurred expenses

20 in the year for covered outpatient drugs

21 (during a period in which the individual is

22 entitled to benefits under this part) equal

23 to the amount of the prescription drug de24 ductible specified in subparagraph (C) for

25 that year.
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1 ‘‘(ii) DEDUCTIBLE NOT APPLIED TO

2 1ST YEAR IMMUNOSUPPRESSIVES.—The

3 prescription drug deductible established

4 under this paragraph shall not apply to

5 drugs described in section 1861(t)(2)(A)

6 used in immunosuppressive therapy and

7 furnished, to an individual who receives an

8 organ transplant for which payment is

9 made under this title, within 1 year after

10 the date of the transplant.

11 ‘‘(B) RESPONSE TO APPLICATION.—If the

12 system described in section 1842(o)(4) has not

13 been established and an individual applies to

14 the Secretary to establish that the individual

15 has met the requirement of subparagraph (A),

16 the Secretary shall promptly notify the individ17 ual (and, if the application was submitted by or

18 through a participating pharmacy, the phar19 macy) as to the date (if any) as of which the

20 individual has met such requirement.

21 ‘‘(C) PRESCRIPTION DRUG DEDUCTIBLE

22 AMOUNT.—The prescription drug deductible

23 specified in this subparagraph for—

24 ‘‘(i) 1997 is $850,

25 ‘‘(ii) 1998 is $900,
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1 ‘‘(iii) 1999 is $950, and

2 ‘‘(iv) any succeeding year, is the

3 amount specified for the previous year, in4 creased by the percentage increase in the

5 allocation for the class of services consist6 ing of prescription drugs for such year (at7 tributable to the medicare program) over

8 such allocation for the previous year, as

9 determined in accordance with subtitle A

10 of title I of the Health Care Cost Contain11 ment and Reform Act of 1993.

12 ‘‘(2) PAYMENT AMOUNT.—

13 ‘‘(A) IN GENERAL.—Subject to the pre14 scription drug deductible established under

15 paragraph (1)(A) and except as provided in

16 subparagraph (B), the amounts payable under

17 this part with respect to a covered outpatient

18 drug is equal to 80 percent of the lesser of—

19 ‘‘(i) the actual charge for the drug, or

20 ‘‘(ii) the applicable payment limit es21 tablished under paragraph (3).

22 ‘‘(B) TREATMENT OF CERTAIN COST23 BASED PREPAID ORGANIZATIONS.—In applying

24 subparagraph (A) in the case of an organization

25 under a reasonable cost reimbursement contract
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1 under section 1876 and in the case of an orga2 nization receiving payment under section

3 1833(a)(1)(A) and providing coverage of cov4 ered outpatient drugs, the Secretary shall pro5 vide for an appropriate adjustment in the pay6 ment amounts otherwise made to reflect the ag7 gregate increase in payments that would other8 wise be made with respect to enrollees in such

9 an organization if payments were made other

10 than under such clause or such a contract on

11 an individual-by-individual basis.

12 ‘‘(3) PAYMENT LIMITS.—

13 ‘‘(A) PAYMENT LIMIT FOR NON-MULTIPLE

14 SOURCE DRUGS AND MULTIPLE-SOURCE DRUGS

15 WITH RESTRICTIVE PRESCRIPTIONS.—In the

16 case of a drug that either is not a multiple

17 source drug (as defined in paragraph (9)(A)) or

18 is a multiple source drug and has a restrictive

19 prescription (as defined in paragraph (9)(B)),

20 the payment limit for the drug under this para21 graph for a payment calculation period is equal

22 to the lesser of—

23 ‘‘(i) the 90th percentile of the actual

24 charges (computed on a statewide basis,

25 carrier-wide basis, or other appropriate ge-
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1 ographic area basis, as specified by the

2 Secretary) for the drug for the second pre3 vious payment calculation period, adjusted

4 (as the Secretary determines to be appro5 priate) to reflect the number of tablets (or

6 other dosage units) dispensed; or

7 ‘‘(ii) the amount of the administrative

8 allowance (established under paragraph

9 (4)) plus the product of—

10 ‘‘(I) the number of tablets (or

11 other dosage units) dispensed, and

12 ‘‘(II) the per tablet or unit aver13 age wholesale price for such drug (as

14 determined under subparagraph (C)

15 for the period for purposes of this

16 subparagraph).

17 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

18 SOURCE DRUGS WITHOUT RESTRICTIVE PRE19 SCRIPTIONS.—In the case of a drug that is a

20 multiple source drug but does not have a re21 strictive prescription, the payment limit for the

22 drug under this paragraph for a payment cal23 culation period is equal to the amount of the

24 administrative allowance (established under

25 paragraph (4)) plus the product of—
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1 ‘‘(i) the number of tablets (or other

2 dosage units) dispensed, and

3 ‘‘(ii) the unweighted median of the

4 per tablet or unit average wholesale prices

5 (determined under subparagraph (C) for

6 purposes of this subparagraph) for such

7 drug for the period.

8 ‘‘(C) DETERMINATION OF UNIT PRICE.—

9 ‘‘(i) IN GENERAL.—For purposes of

10 this paragraph, the Secretary shall deter11 mine, with respect to the dispensing of a

12 covered outpatient drug in a payment cal13 culation period (beginning on or after Jan14 uary 1, 1997), the per tablet or unit aver15 age wholesale price for the drug.

16 ‘‘(ii) BASIS FOR DETERMINATIONS.—

17 ‘‘(I) DETERMINATION FOR NON18 MULTIPLE-SOURCE DRUGS.—For pur19 poses of subparagraph (A), such de20 termination shall be based on a bian21 nual survey conducted by the Sec22 retary of a representative sample of

23 direct sellers, wholesalers, or phar24 macies (as appropriate) of wholesale

25 (or comparable direct) prices (exclud-
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1 ing discounts to pharmacies); except

2 that if, because of low volume of sales

3 for the drug or other appropriate rea4 sons or in the case of covered out5 patient drugs during 1997, the Sec6 retary determines that such a survey

7 is not appropriate with respect to a

8 specific drug, such determination shall

9 be based on published average whole10 sale (or comparable direct) prices for

11 the drug.

12 ‘‘(II) DETERMINATION FOR MUL13 TIPLE-SOURCE DRUGS.—For purposes

14 of subparagraph (B), the Secretary

15 may base the determination under

16 this subparagraph on the published

17 average wholesale (or comparable di18 rect) prices for the drug or on a bian19 nual survey conducted by the Sec20 retary of a representative sample of

21 direct sellers, wholesalers, or phar22 macists (as appropriate) of wholesale

23 (or comparable direct) prices (exclud24 ing discounts to pharmacies).
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1 ‘‘(III) COMPLIANCE WITH SUR2 VEY REQUIRED.—If a wholesaler or

3 direct seller of a covered outpatient

4 drug refuses, after being requested by

5 the Secretary, to provide the informa6 tion required in a survey under this

7 clause, or deliberately provides infor8 mation that is false, the Secretary

9 may impose a civil money penalty of

10 not to exceed $10,000 for each such

11 refusal or provision of false informa12 tion. The provisions of section 1128A

13 (other than subsections (a) and (b))

14 shall apply to civil money penalties

15 under the previous sentence in the

16 same manner as such provisions apply

17 to a penalty or proceeding under sec18 tion 1128A(a). Information gathered

19 pursuant to the survey shall not be

20 disclosed except as the Secretary de21 termines to be necessary to carry out

22 the purposes of this part.

23 ‘‘(iii) QUANTITY AND TIMING.—Such

24 determination shall be based on the price

25 or prices for purchases in reasonable quan-
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1 tities and shall be made for a payment cal2 culation period based on prices for the first

3 day of the first month of the previous pay4 ment calculation period.

5 ‘‘(iv) GEOGRAPHIC BASIS.—The Sec6 retary shall make such determination, and

7 calculate the payment limits under this

8 paragraph, on a national basis; except that

9 the Secretary may make such determina10 tion, and calculate such payment limits, on

11 a regional basis to take account of limita12 tions on the availability of drug products

13 and variations among regions in the aver14 age wholesale prices for a drug product.

15 ‘‘(4) ADMINISTRATIVE ALLOWANCE FOR PUR16 POSES OF PAYMENT LIMITS.—

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

18 subparagraph (B), for drugs dispensed in—

19 ‘‘(i) 1997, the administrative allow20 ance under this paragraph is—

21 ‘‘(I) $5.00 for drugs dispensed by

22 a participating pharmacy, or

23 ‘‘(II) $3.00 for drugs dispensed

24 by another pharmacy; or
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1 ‘‘(ii) a subsequent year, the adminis2 trative allowance under this paragraph is

3 the administrative allowance under this

4 paragraph for the preceding year increased

5 by the percentage increase (if any) in the

6 implicit price deflator for gross national

7 product (as published by the Department

8 of Commerce in its ‘Survey of Current

9 Business’) over the 12-month period end10 ing with August of such preceding year.

11 Any allowance determined under the clause (ii)

12 which is not a multiple of 1 cent shall be round13 ed to the nearest multiple of 1 cent.

14 ‘‘(B) ADJUSTMENT IN ALLOWANCE FOR

15 MAIL SERVICE PHARMACIES.—The Secretary

16 may, by regulation and after consultation with

17 pharmacists, elderly groups, and private insur18 ers, reduce the administrative allowances estab19 lished under subparagraph (A) for any drug

20 dispensed by a mail service pharmacy (as de21 fined by the Secretary) based on differences be22 tween such pharmacies and other pharmacies

23 with respect to operating costs and other econo24 mies.
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1 ‘‘(5) ASSURING APPROPRIATE PRESCRIBING

2 AND DISPENSING PRACTICES.—

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

4 establish a program to identify (and to educate

5 physicians and pharmacists concerning)—

6 ‘‘(i) instances or patterns of unneces7 sary or inappropriate prescribing or dis8 pensing practices for covered outpatient

9 drugs;

10 ‘‘(ii) instances or patterns of sub11 standard care with respect to such drugs;

12 and

13 ‘‘(iii) potential adverse reactions.

14 ‘‘(B) STANDARDS.—In carrying out the

15 program under subparagraph (A), the Secretary

16 shall establish for each covered outpatient drug

17 standards for the prescribing of the drug which

18 are based on accepted medical practice. In es19 tablishing such standards, the Secretary shall

20 incorporate standards from such current au21 thoritative compendia as the Secretary may se22 lect; except that the Secretary may modify such

23 a standard by regulation on the basis of sci24 entific and medical information that such
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1 standard is not consistent with the safe and ef2 fective use of the drug.

3 ‘‘(C) PROHIBITION OF FORMULARY.—

4 Nothing in this title (other than section

5 1862(c)) shall be construed as authorizing the

6 Secretary to exclude from coverage or to deny

7 payment—

8 ‘‘(i) for any specific covered out9 patient drug, or specific class of covered

10 outpatient drug; or

11 ‘‘(ii) for any specific use of such a

12 drug for a specific indication unless such

13 exclusion is pursuant to section 1862(a)(1)

14 based on a finding by the Secretary that

15 such use is not safe or is not effective.

16 ‘‘(6) TREATMENT OF CERTAIN PREPAID ORGA17 NIZATIONS.—

18 ‘‘(A) GENERAL RULE COUNTING PREPAID

19 PLAN EXPENSES TOWARDS THE PRESCRIPTION

20 DRUG DEDUCTIBLE.—Except as provided in

21 subparagraph (B), expenses incurred by (or on

22 behalf of) a medicare beneficiary for covered

23 outpatient drugs shall be counted (consistent

24 with subparagraph (C)) toward the prescription

25 drug deductible established under paragraph
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1 (1) whether or not, at the time the expenses

2 were incurred, the beneficiary was enrolled in a

3 plan under section 1833(a)(1)(A) or under sec4 tion 1876.

5 ‘‘(B) TREATMENT OF DRUG BUY-OUT PLAN

6 EXPENSES.—In the case of a medicare bene7 ficiary enrolled in a month in a drug buy-out

8 plan (as defined in subparagraph (D))—

9 ‘‘(i) expenses incurred by the bene10 ficiary for covered outpatient drugs reim11 bursed under the plan shall not be counted

12 towards the prescription drug deductible,

13 but

14 ‘‘(ii) if the individual disenrolls from

15 the plan during the year, the beneficiary is

16 deemed to have incurred, for each month

17 of such enrollment, expenses for covered

18 outpatient drugs in an amount equal to the

19 actuarial value (with respect to such

20 month) of the deductible for covered out21 patient drugs (as computed by the Sec22 retary for purposes of section 1876(e)(1))

23 applicable on the average to individuals in

24 the United States.
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1 ‘‘(C) TREATMENT OF EXPENSES FOR COV2 ERED OUTPATIENT DRUGS INCURRED WHILE

3 ENROLLED IN A PREPAID PLAN OTHER THAN A

4 DRUG BUY-OUT PLAN.—The Secretary may not

5 enter into a contract with an organization

6 under section 1876, or provide for payment

7 under section 1833(a)(1)(A) with respect to an

8 organization which provides reimbursement for

9 covered outpatient drugs, with respect to a plan

10 that is not a drug buy-out plan, unless the or11 ganization provides assurances, satisfactory to

12 the Secretary, that—

13 ‘‘(i) the organization will maintain

14 and make available, for its enrollees and in

15 coordination with the appropriate carriers

16 under this part, an accounting of expenses

17 incurred by (or on behalf of) enrollees

18 under the plan for covered outpatient

19 drugs; and

20 ‘‘(ii) the organization will take into

21 account, in any deductibles established

22 under the plan in a year with respect to

23 covered outpatient drugs under this part,

24 the amounts of expenses for covered out25 patient drugs incurred in the year by (or
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1 on behalf of) the beneficiary and otherwise

2 counted towards the prescription drug de3 ductible in the year.

4 ‘‘(D) DRUG BUY-OUT PLAN DEFINED.—In

5 this paragraph, the term ‘drug buy-out plan’

6 means a plan under section 1833(a)(1)(A) or

7 offered by an organization under section 1876

8 and with respect to which—

9 ‘‘(i) the amount of any deductible

10 under the plan with respect to covered out11 patient drugs under this title,

12 is less than 50 percent of—

13 ‘‘(ii) the prescription drug deductible

14 specified in paragraph (1)(C).

15 ‘‘(E) MEDICARE BENEFICIARY DEFINED.—

16 In this subsection, the term ‘medicare bene17 ficiary’ means, with respect to a month, an in18 dividual covered for benefits under this part for

19 the month.

20 ‘‘(F) TREATMENT OF PLAN CHARGES.—In

21 the case of covered outpatient drugs furnished

22 by an eligible organization under section

23 1876(b) or an organization described in section

24 1833(a)(1)(A) which does not impose charges

25 on covered outpatient drugs dispensed to its
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1 members, for purposes of this subsection the

2 actual charges of the organization shall be the

3 organization’s standard charges to members,

4 and other individuals, not entitled to benefits

5 with respect to such drugs.

6 ‘‘(7) PHYSICIAN GUIDE.—

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

8 develop, and update annually, an information

9 guide for physicians concerning the comparative

10 average wholesale prices of at least 500 of the

11 most commonly prescribed covered outpatient

12 drugs. Such guide shall, to the extent prac13 ticable, group covered outpatient drugs (includ14 ing multiple source drugs) in a manner useful

15 to physicians by therapeutic category or with

16 respect to the conditions for which they are pre17 scribed. Such guide shall specify the average

18 wholesale prices on the basis of the amount of

19 the drug required for a typical daily therapeutic

20 regimen.

21 ‘‘(B) MAILING GUIDE.—The Secretary

22 shall provide for mailing, in January of each

23 year (beginning with 1997), a copy of the guide

24 developed and updated under subparagraph

25 (A)—
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1 ‘‘(i) to each hospital with an agree2 ment in effect under section 1866;

3 ‘‘(ii) to each physician (as defined in

4 section 1861(r)(1)) who routinely provides

5 services under this part; and

6 ‘‘(iii) to Social Security offices, senior

7 citizen centers, and other appropriate

8 places.

9 ‘‘(8) REPORTS ON UTILIZATION AND EFFECTS

10 ON PRICES.—

11 ‘‘(A) COMPILATION OF INFORMATION.—

12 The Secretary shall compile information on—

13 ‘‘(i) manufacturers’ prices for covered

14 outpatient drugs, and on charges of phar15 macists for covered outpatient drugs, and

16 ‘‘(ii) the use of covered outpatient

17 drugs by individuals entitled to benefits

18 under this part.

19 The information compiled under clause (i) shall

20 include a comparison of the increases in prices

21 and charges for covered outpatient drugs dur22 ing each 6-month period (beginning with Janu23 ary 1997) with the semiannual average increase

24 in such prices and charges during the 5 years

25 beginning with 1992.
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1 ‘‘(B) REPORTS.—The Secretary shall sub2 mit to the Committees on Ways and Means and

3 Energy and Commerce of the House of Rep4 resentatives and the Committee on Finance of

5 the Senate a report, in May and November of

6 1998 and 1999 and in May of each succeeding

7 year, providing the information compiled under

8 subparagraph (A). For each such report sub9 mitted after 1999, the report shall include an

10 explanation of the extent to which the increases

11 in outlays for covered outpatient drugs under

12 this part are due to the factors described in

13 subparagraphs (A)(i) and (A)(ii).

14 ‘‘(9) DEFINITIONS.—In this subsection:

15 ‘‘(A) MULTIPLE SOURCE DRUG.—

16 ‘‘(i) IN GENERAL.—The term ‘mul17 tiple source drug’ means, with respect to a

18 payment calculation period, a covered out19 patient drug for which there are 2 or more

20 drug products which—

21 ‘‘(I) are rated as therapeutically

22 equivalent (under the Food and Drug

23 Administration’s most recent publica24 tion of ‘Approved Drug Products with
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1 Therapeutic Equivalence Evalua2 tions’);

3 ‘‘(II) except as provided in clause

4 (ii), are pharmaceutically equivalent

5 and bioequivalent, as defined in clause

6 (iii) and as determined by the Food

7 and Drug Administration; and

8 ‘‘(III) are sold or marketed dur9 ing the period.

10 ‘‘(ii) EXCEPTION.—Subclause (II) of

11 clause (i) shall not apply if the Food and

12 Drug Administration changes by regulation

13 (after an opportunity for public comment

14 of 90 days) the requirement that, for pur15 poses of the publication described in clause

16 (i)(I), in order for drug products to be

17 rated as therapeutically equivalent, they

18 must be pharmaceutically equivalent and

19 bioequivalent, as defined in clause (iii).

20 ‘‘(iii) DEFINITIONS.—For purposes of

21 this subparagraph:

22 ‘‘(I) PHARMACEUTICALLY EQUIV23 ALENT.—Drug products are pharma24 ceutically equivalent if the products

25 contain identical amounts of the same
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1 active drug ingredient in the same

2 dosage form and meet compendial or

3 other applicable standards of strength,

4 quality, purity, and identity.

5 ‘‘(II) BIOEQUIVALENT.—Drugs

6 are bioequivalent if they do not

7 present a known or potential

8 bioequivalence problem or, if they do

9 present such a problem, are shown to

10 meet an appropriate standard of

11 bioequivalence.

12 ‘‘(III) SOLD OR MARKETED.—A

13 drug is considered to be sold or mar14 keted during a period if it is listed in

15 the publications referred to in clause

16 (i)(I), unless the Secretary determines

17 that such sale or marketing is not ac18 tually taking place.

19 ‘‘(B) RESTRICTIVE PRESCRIPTION.—A

20 drug has a ‘restrictive prescription’ only if—

21 ‘‘(i) in the case of a written prescrip22 tion, the prescription for the drug indi23 cates, in the handwriting of the physician

24 or other person prescribing the drug and

25 with an appropriate phrase (such as ‘brand
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1 medically necessary’) recognized by the

2 Secretary, that the particular drug must be

3 dispensed; or

4 ‘‘(ii) in the case of a prescription is5 sued by telephone—

6 ‘‘(I) the physician or other per7 son prescribing the drug (through use

8 of such an appropriate phrase) states

9 that the particular drug must be dis10 pensed, and

11 ‘‘(II) the physician or other per12 son submits to the pharmacy involved,

13 within 30 days after the date of the

14 telephone prescription, a written con15 firmation which is in the handwriting

16 of the physician or other person pre17 scribing the drug and which indicates

18 with such appropriate phrase that the

19 particular drug was required to have

20 been dispensed.

21 ‘‘(C) PAYMENT CALCULATION PERIOD.—

22 The term ‘payment calculation period’ means

23 the 6-month period beginning with January of

24 each year and the 6-month period beginning

25 with July of each year.’’.
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1 (c) PARTICIPATING PHARMACIES; CIVIL MONEY

2 PENALTIES.—

3 (1) PARTICIPATING PHARMACIES.—Section

4 1842 of such Act (42 U.S.C. 1395t) is amended—

5 (A) in subsection (h)(1), by inserting be6 fore the period at the end of the second sen7 tence the following: ‘‘, except that, with respect

8 to a supplier of covered outpatient drugs, the

9 term ‘participating supplier’ means a participat10 ing pharmacy (as defined in subsection

11 (o)(1))’’;

12 (B) in subsection (h)(4), is amended by

13 adding at the end the following: ‘‘In publishing

14 directories under this paragraph, the Secretary

15 shall provide for separate directories (wherever

16 appropriate) for participating pharmacies.’’;

17 and

18 (C) by inserting after subsection (n) the

19 following new subsection:

20 ‘‘(o)(1) For purposes of this section, the term ‘par21 ticipating pharmacy’ means, with respect to covered out22 patient drugs dispensed on or after January 1, 1997, an

23 entity which is authorized under a State law to dispense

24 covered outpatient drugs and which has entered into an
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1 agreement with the Secretary, providing at least the fol2 lowing:

3 ‘‘(A) The entity agrees to accept payment under

4 this part on an assignment-related basis for all cov5 ered outpatient drugs dispensed to an individual en6 titled to benefits under this part (in this subsection

7 referred to as a ‘medicare beneficiary’) during a year

8 after—

9 ‘‘(i) the Secretary has notified the entity,

10 through the electronic system described in para11 graph (4); or

12 ‘‘(ii) in the absence of such a system, the

13 entity is otherwise notified that the Secretary

14 has determined,

15 that the individual has met the prescription drug de16 ductible with respect to such drugs under section

17 1834(e)(1) for the year.

18 ‘‘(B) The entity agrees—

19 ‘‘(i) not to refuse to dispense covered out20 patient drugs stocked by the entity to any medi21 care beneficiary; and

22 ‘‘(ii) not to charge medicare beneficiaries

23 (regardless of whether or not the beneficiaries

24 are enrolled under a prepaid health plan or with

25 eligible organization under section 1876) more
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1 for such drugs than the amount it charges to

2 the general public (as determined by the Sec3 retary in regulations).

4 ‘‘(C) The entity agrees to keep patient records

5 (including records on expenses) for all covered out6 patient drugs dispensed to all medicare beneficiaries.

7 ‘‘(D) The entity agrees to submit information

8 (in a manner specified by the Secretary to be nec9 essary to administer this title) on all purchases of

10 covered outpatient drugs dispensed to medicare

11 beneficiaries.

12 ‘‘(E) The entity agrees—

13 ‘‘(i) to offer to counsel, or to offer to pro14 vide information (consistent with State law re15 specting the provision of such information) to,

16 each medicare beneficiary on the appropriate

17 use of a drug to be dispensed and whether there

18 are potential interactions between the drug and

19 other drugs dispensed to the beneficiary; and

20 ‘‘(ii) to advise the beneficiary on the avail21 ability (consistent with State laws respecting

22 substitution of drugs) of therapeutically equiva23 lent covered outpatient drugs.
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1 ‘‘(F) The entity agrees to provide the informa2 tion requested by the Secretary in surveys under sec3 tion 1834(e)(3)(C)(ii).

4 Nothing in this paragraph shall be construed as requiring

5 a pharmacy operated by an eligible organization (described

6 in section 1876(b)) or an organization described in section

7 1833(a)(1)(A) for the exclusive benefit of its members to

8 dispense covered outpatient drugs to individuals who are

9 not members of the organization.

10 ‘‘(2) The Secretary shall provide to each participating

11 pharmacy—

12 ‘‘(A) a distinctive emblem (suitable for display

13 to the public) indicating that the pharmacy is a par14 ticipating pharmacy; and

15 ‘‘(B) upon request, such electronic equipment

16 and technical assistance (other than the costs of ob17 taining, maintaining, or expanding telephone service)

18 as the Secretary determines may be necessary for

19 the pharmacy to submit claims using the electronic

20 system established under paragraph (4).

21 ‘‘(3) The Secretary shall provide for periodic audits

22 of participating pharmacies to assure—

23 ‘‘(A) compliance with the requirements for par24 ticipation under this title; and
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1 ‘‘(B) the accuracy of information submitted by

2 the pharmacies under this title.

3 ‘‘(4) The Secretary shall establish, by not later than

4 January 1, 1997, a point-of-sale electronic system for use

5 by carriers and participating pharmacies in the submission

6 of information respecting covered outpatient drugs dis7 pensed to medicare beneficiaries under this part.

8 ‘‘(5) Notwithstanding subsection (b)(3)(B), payment

9 for covered outpatient drugs may be made on the basis

10 of an assignment described in clause (ii) of that subsection

11 only to a participating pharmacy.’’.

12 (2) CIVIL MONEY PENALTIES FOR VIOLATION

13 OF PARTICIPATION AGREEMENT, FOR EXCESSIVE

14 CHARGES FOR NONPARTICIPATING PHARMACIES AND

15 FOR FAILURE TO PROVIDE SURVEY INFORMATION.—

16 Section 1128A(a) of such Act (42 U.S.C. 1320a–

17 7a(a)), as amended by subsections (a) and (b) of

18 section 243, is amended—

19 (A) by striking ‘‘or’’ at the end of para20 graph (1);

21 (B) in paragraph (2)(C), by inserting ‘‘or

22 to be a participating pharmacy under section

23 1842(o)’’ after ‘‘1842(h)(1)’’;

24 (C) by striking ‘‘or’’ at the end of para25 graph (4);
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1 (D) by adding ‘‘or’’ at the end of para2 graph (5); and

3 (E) by inserting after paragraph (5) the

4 following new paragraph:

5 ‘‘(6) in the case of a participating or

6 nonparticipating pharmacy (as defined for purposes

7 of part B of title XVIII)—

8 ‘‘(A) presents or causes to be presented to

9 any person a request for payment for covered

10 outpatient drugs dispensed to an individual en11 titled to benefits under part B of title XVIII

12 and for which the amount charged by the phar13 macy is greater than the amount the pharmacy

14 charges the general public (as determined by

15 the Secretary in regulations), or

16 ‘‘(B) fails to provide the information re17 quested by the Secretary in a survey under sec18 tion 1834(e)(3)(C)(ii);’’.

19 (d) LIMITATION ON LENGTH OF PRESCRIPTION.—

20 Section 1862(c) of such Act (42 U.S.C. 1395y(c)) is

21 amended—

22 (1) by redesignating subparagraphs (A) through

23 (D) of paragraph (1) as clauses (i) through (iv);

24 (2) in paragraph (2)(A), by striking ‘‘paragraph

25 (1)’’ and inserting ‘‘subparagraph (A)’’;
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1 (3) by redesignating subparagraphs (A) and

2 (B) of paragraph (2) as clauses (i) and (ii);

3 (4) by redesignating paragraphs (1) and (2) as

4 subparagraphs (A) and (B);

5 (5) by inserting ‘‘(1)’’ after ‘‘(c)’’; and

6 (6) by adding at the end the following new

7 paragraph:

8 ‘‘(2) No payment may be made under part B for any

9 expense incurred for a covered outpatient drug if the drug

10 is dispensed in a quantity exceeding a supply of 30 days

11 or such longer period of time (not to exceed 90 days, ex12 cept in exceptional circumstances) as the Secretary may

13 authorize.’’.

14 (e) USE OF CARRIERS, FISCAL INTERMEDIARIES,

15 AND OTHER ENTITIES IN ADMINISTRATION.—

16 (1) AUTHORIZING USE OF OTHER ENTITIES IN

17 ELECTRONIC CLAIMS SYSTEM.—Section 1842(f) of

18 such Act (42 U.S.C. 1395u(f)) is amended—

19 (A) by striking ‘‘and’’ at the end of para20 graph (1);

21 (B) by striking the period at the end of

22 paragraph (2) and inserting ‘‘; and’’; and

23 (C) by adding at the end the following new

24 paragraph:
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1 ‘‘(3) with respect to implementation and oper2 ation (and related functions) of the electronic system

3 established under subsection (o)(4), a voluntary as4 sociation, corporation, partnership, or other non5 governmental organization, which the Secretary de6 termines to be qualified to conduct such activities.’’.

7 (2) ADDITIONAL FUNCTIONS OF CARRIERS.—

8 Section 1842(b)(3) of such Act (42 U.S.C.

9 1395u(b)(3)) is amended—

10 (A) by striking ‘‘and’’ at the end of sub11 paragraph (H);

12 (B) by adding ‘‘and’’ at the end of sub13 paragraph (L);

14 (C) by redesignating subparagraph (L) as

15 subparagraph (I); and

16 (D) by inserting after subparagraph (I) (as

17 so redesignated) the following new subpara18 graphs:

19 ‘‘(J) if it makes determinations or payments

20 with respect to covered outpatient drugs, will—

21 ‘‘(i) receive information transmitted under

22 the electronic system established under sub23 section (o)(4), and

24 ‘‘(ii) respond to requests by participating

25 pharmacies (and individuals entitled to benefits
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1 under this part) as to whether or not such an

2 individual has met the prescription drug de3 ductible established under section

4 1834(e)(1)(A) for a year; and

5 ‘‘(K) will enter into such contracts with organi6 zations described in subsection (f)(3) as the Sec7 retary determines may be necessary to implement

8 and operate (and for related functions with respect

9 to) the electronic system established under sub10 section (o)(4) for covered outpatient drugs under

11 this part;’’.

12 (3) SPECIAL CONTRACT PROVISIONS FOR ELEC13 TRONIC CLAIMS SYSTEM.—

14 (A) PAYMENT ON OTHER THAN A COST

15 BASIS.—Section 1842(c)(1)(A) of such Act (42

16 U.S.C. 1395u(c)(1)(A)) is amended—

17 (i) by inserting ‘‘(i)’’ after

18 ‘‘(c)(1)(A)’’;

19 (ii) in the first sentence, by inserting

20 ‘‘, except as provided in clause (ii),’’ after

21 ‘‘under this part, and’’; and

22 (iii) by adding at the end the follow23 ing new clause:

24 ‘‘(ii) To the extent that a contract under this section

25 provides for implementation and operation (and related
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1 functions) of the electronic system established under sub2 section (o)(4) for covered outpatient drugs, the Secretary

3 may provide for payment for such activities based on any

4 method of payment determined by the Secretary to be ap5 propriate.’’.

6 (B) APPLICATION OF DIFFERENT PER7 FORMANCE STANDARDS.—The Secretary of

8 Health and Human Services, before entering

9 into contracts under section 1842 of the Social

10 Security Act with respect to the implementation

11 and operation (and related functions) of the

12 electronic system for covered outpatient drugs,

13 shall establish standards with respect to per14 formance with respect to such activities. The

15 provisions of section 1153(e)(2) and paragraphs

16 (1) and (2) of section 1153(h) of such Act shall

17 apply to such activities in the same manner as

18 they apply to contracts with peer review organi19 zations, instead of the requirements of the last

20 2 sentences of section 1842(b)(2) of such Act.

21 (C) USE OF REGIONAL CARRIERS.—Section

22 1842(b)(2)(A) of such Act (42 U.S.C.

23 1395u(b)(2)(A)) is amended by adding at the

24 end the following new sentence: ‘‘With respect

25 to activities relating to implementation and op-
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1 eration (and related functions) of the electronic

2 system established under subsection (o)(4), the

3 Secretary may enter into contracts with carriers

4 under this section to perform such activities on

5 a regional basis.’’.

6 (4) DELAY IN APPLICATION OF COORDINATED

7 BENEFITS WITH MEDIGAP.—The provisions of sub8 paragraph (B) of section 1842(h)(3) of the Social

9 Security Act shall not apply to covered outpatient

10 drugs (other than drugs described in section

11 1861(s)(2)(J) of such Act as of the date of the en12 actment of this Act) dispensed before January 1,

13 1999.

14 (5) BATCH PROMPT PROCESSING OF CLAIMS.—

15 Section 1842(c) (42 U.S.C. 1395u(c)) is amended—

16 (A) in paragraphs (2)(A) and (3)(A), by

17 striking ‘‘Each’’ and inserting ‘‘Except as pro18 vided in paragraph (3), each’’;

19 (B) by adding at the end the following new

20 paragraph:

21 ‘‘(4)(A) Each contract under this section which pro22 vides for the disbursement of funds, as described in sub23 section (a)(1)(B), with respect to claims for payment for

24 covered outpatient drugs shall provide for a payment cycle

25 under which each carrier will, on a monthly basis, make
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1 a payment with respect to all claims which were received

2 and approved for payment in the period since the most

3 recent date on which such a payment was made with re4 spect to the participating pharmacy or individual submit5 ting the claim.

6 ‘‘(B) If payment is not issued, mailed, or otherwise

7 transmitted within 5 days of when such a payment is re8 quired to be made under subparagraph (A), interest shall

9 be paid at the rate used for purposes of section 3902(a)

10 of title 31, United States Code (relating to interest pen11 alties for failure to make prompt payments) for the period

12 beginning on the day after such 5-day period and ending

13 on the date on which payment is made.’’.

14 (f) MODIFICATION OF HMO/CMP CONTRACTS.—

15 (1) SEPARATE ACTUARIAL DETERMINATION

16 FOR COVERED OUTPATIENT DRUG BENEFIT.—Sec17 tion 1876(e)(1) of such Act (42 U.S.C.

18 1395mm(e)(1)) is amended by adding at the end

19 thereof the following new sentence: ‘‘The preceding

20 sentence shall be applied separately with respect to

21 covered outpatient drugs.’’.

22 (2) ADDITIONAL OPTIONAL BENEFITS.—Section

23 1876(g)(3)(A) of such Act (42 U.S.C.

24 1395mm(g)(3)(A)) is amended by striking ‘‘rate’’

25 and inserting ‘‘rates’’.
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1 (g) CONFORMING AMENDMENTS.—

2 (1) The first sentence of section 1866(a)(2)(A)

3 (42 U.S.C. 1395cc(a)(2)(A)) is amended—

4 (A) by inserting ‘‘1834(e),’’ after

5 ‘‘1833(b),’’; and

6 (B) by inserting ‘‘and in the case of cov7 ered outpatient drugs, applicable coinsurance

8 percent (specified in section 1834(e)(2)(C)) of

9 the lesser of the actual charges for the drugs or

10 the payment limit (established under section

11 1834(e)(3))’’ after ‘‘established by the Sec12 retary’’.

13 (2) Section 1903(i)(5) (42 U.S.C. 1396b(i)(5))

14 is amended by striking ‘‘section 1862(c)’’ and insert15 ing ‘‘section 1862(c)(1)’’.

16 (h) EFFECTIVE DATES.—

17 (1) IN GENERAL.—Except as otherwise pro18 vided in this subsection, the amendments made by

19 this section shall apply to items dispensed on or

20 after July 1, 1997.

21 (2) CARRIERS.—The amendments made by sub22 section (e) shall take effect on the date of the enact23 ment of this Act; except that the amendments made

24 by subsection (e)(5) shall take effect on January 1,
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1 1998, but shall not be construed as requiring pay2 ment before February 1, 1998.

3 (3) HMO/CMP ENROLLMENTS.—The amend4 ment made by subsection (f) shall apply to enroll5 ments effected on or after January 1, 1997.

6 SEC. 422. ESTABLISHMENT OF PRESCRIPTION DRUG PAY7 MENT REVIEW COMMISSION.

8 Part B of title XVIII of the Social Security Act is

9 amended by inserting after section 1846 the following new

10 section:

11 ‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION

12 ‘‘SEC. 1847. (a)(1) The Director of the Congressional

13 Office of Technology Assessment (in this section referred

14 to as the ‘Director’ and the ‘Office’, respectively) shall

15 provide for the appointment of a Prescription Drug Pay16 ment Review Commission (in this section referred to as

17 the ‘Commission’), to be composed of individuals with ex18 pertise in the provision and financing of covered out19 patient drugs appointed by the Director (without regard

20 to the provisions of title 5, United States Code, governing

21 appointments in the competitive service).

22 ‘‘(2) The Commission shall consist of 11 individuals.

23 Members of the Commission shall first be appointed by

24 no later than January 1, 1996, for a term of 3 years, ex25 cept that the Director may provide initially for such short-
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1 er terms as will insure that (on a continuing basis) the

2 terms of no more than 4 members expire in any one year.

3 ‘‘(3) The membership of the Commission shall in4 clude recognized experts in the fields of health care eco5 nomics, medicine, pharmacology, pharmacy, and prescrip6 tion drug reimbursement, as well as at least one individual

7 who is a medicare beneficiary.

8 ‘‘(b)(1) The Commission shall submit to Congress an

9 annual report no later than May 1 of each year, beginning

10 with 1997, concerning methods of determining payment

11 for covered outpatient drugs under this part.

12 ‘‘(2) Such report, in 1998 and thereafter, shall in13 clude, with respect to the previous year, information on—

14 ‘‘(A) increases in manufacturers’ prices for cov15 ered outpatient drugs and in charges of pharmacists

16 for covered outpatient drugs,

17 ‘‘(B) the level of utilization of covered out18 patient drugs by medicare beneficiaries, and

19 ‘‘(C) administrative costs relating to covered

20 outpatient drugs.

21 ‘‘(3) The report submitted in 1998 shall include the

22 Commissions’s recommendations regarding the feasibility

23 and desirability of establishing coverage rules for covered

24 outpatient drugs under which the Secretary may exclude

25 from coverage or deny payment—
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1 ‘‘(A) for specific covered outpatient drugs, or a

2 specific class of covered outpatient drug; or

3 ‘‘(B) for the specific use of such a drug for a

4 specific indication (in addition to exclusions pursu5 ant to section 1862(a)(1) based on a finding by the

6 Secretary that such use is not safe or is not effec7 tive).

8 ‘‘(c) Section 1845(c)(1) shall apply to the Commis9 sion in the same manner as it applies to the Physician

10 Payment Review Commission.

11 ‘‘(d) There are authorized to be appropriated such

12 sums as may be necessary to carry out the provisions of

13 this section. Such sums shall be payable from the Federal

14 Supplementary Medical Insurance Trust Fund.’’.

15 SEC. 423. COVERAGE OF PRESCRIPTION DRUGS FOR QUALI16 FIED MEDICARE BENEFICIARIES AND QUALI17 FIED DISABLED AND WORKING INDIVIDUALS.

18 (a) IN GENERAL.—Section 1902(a)(10)(E) of the So19 cial Security Act (42 U.S.C. 1396a(a)(10)(E)) is amend20 ed—

21 (1) by striking the semicolon at the end of

22 clause (i) and inserting a comma;

23 (2) by striking ‘‘; and’’ at the end of clause (ii)

24 and inserting a comma;
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1 (3) by striking the semicolon at the end of

2 clause (iii) and inserting ‘‘, and’’; and

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

4 clause:

5 ‘‘(iv) for making available prescribed drugs

6 for qualified medicare beneficiaries described in

7 section 1905(p)(1), qualified disabled and work8 ing individuals described in section 1905(s),

9 and individuals described in clause (iii);’’.

10 (b) FULL FEDERAL PAYMENT FOR INCREASED

11 COSTS.—Section 1903(w)(2) of such Act, as added by sec12 tion 403, is amended—

13 (1) in subparagraph (D), by striking ‘‘(C)’’ and

14 inserting ‘‘(D)’’;

15 (2) by redesignating subparagraph (D) as sub16 paragraph (E); and

17 (3) by inserting after subparagraph (C) the fol18 lowing new subparagraph:

19 ‘‘(D) The amount of expenditures for medical

20 assistance attributable to individuals with respect to

21 whom the State plan would not be required to pro22 vide such assistance but for the amendments made

23 by section 423(a) of the Health Care Cost Contain24 ment and Reform Act of 1993.’’.
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1 (c) CONFORMING AMENDMENT.—Section

2 1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)) is

3 amended in clause (VIII) of the matter following subpara4 graph (E) by striking ‘‘1905(p)(3),’’ and inserting

5 ‘‘1905(p)(3) and for prescribed drugs,’’.

6 (d) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to calendar quarters beginning on

8 or after January 1, 1996, without regard to whether or

9 not regulations to implement such amendments are pro10 mulgated by such date.

11 PART 3—QUALIFIED MEDICARE BENEFICIARY

12 ENROLLMENT

13 SEC. 431. QUALIFIED MEDICARE BENEFICIARY ENROLL14 MENT.

15 (a) ENROLLMENT.—The Secretary of Health and

16 Human Services shall establish and implement a method

17 for obtaining information from newly eligible medicare

18 beneficiaries that may be used (beginning with fiscal year

19 1997) to determine whether such beneficiaries may be eli20 gible for medical assistance for medicare cost-sharing

21 under State medicaid plans as qualified medicare bene22 ficiaries, and for transmitting such information to the

23 State in which such a beneficiary resides. If, under such

24 method, the Secretary determines that an individual is eli25 gible for medical assistance for such cost-sharing under
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1 the medicaid plan of a State, the Secretary shall enroll

2 the individual in such plan for quarters beginning after

3 the date on which the Secretary makes such determina4 tion.

5 (b) EXPLANATIONS IN ANNUAL NOTICE OF BENE6 FITS.—

7 (1) IN GENERAL.—Section 1804 of the Social

8 Security Act (42 U.S.C. 1395b–2) is amended—

9 (A) by striking ‘‘and’’ at the end of para10 graph (2);

11 (B) by striking the period at the end of

12 paragraph (3) and inserting ‘‘, and’’; and

13 (C) by inserting after paragraph (3) the

14 following new paragraph:

15 ‘‘(4) a general description in clear language of

16 the availability of and the requirements for obtaining

17 medical assistance for medicare cost-sharing under

18 State plans approved under title XIX.’’.

19 (2) EFFECTIVE DATE.—The amendments made

20 by paragraph (1) shall apply to annual notices under

21 section 1804 of the Social Security Act for years be22 ginning with 1996.
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1 Subtitle C—Health Insurance

2 Deduction for the Self-Employed

3 SEC. 441. DEDUCTION FOR HEALTH INSURANCE COSTS OF

4 SELF-EMPLOYED INDIVIDUALS MADE PERMA5 NENT AND INCREASED.

6 (a) DEDUCTION MADE PERMANENT.—

7 (1) IN GENERAL.—Subsection (l) of section 162

8 of the Internal Revenue Code of 1986 (relating to

9 special rules for health insurance costs of self-em10 ployed individuals) is amended by striking paragraph

11 (6).

12 (2) EFFECTIVE DATE.—The amendment made

13 by paragraph (1) shall apply to taxable years begin14 ning after June 30, 1992.

15 (b) INCREASE IN DEDUCTION.—

16 (1) IN GENERAL.—Paragraph (1) of section

17 162(l) of such Code is amended by striking ‘‘25 per18 cent of’’.

19 (2) EFFECTIVE DATE.—The amendment made

20 by paragraph (1) shall apply to taxable years begin21 ning after December 31, 1993.
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1 Subtitle D—Health Insurance

2 Program for Children

3 SEC. 451. HEALTH INSURANCE FOR CHILDREN.

4 (a) IN GENERAL.—The Social Security Act, as

5 amended by section 302, is amended by adding at the end

6 the following new title:

7 ‘‘TITLE XXII—HEALTH INSURANCE FOR

8 CHILDREN

9 ‘‘SEC. 2200. ESTABLISHMENT OF PROGRAM OF HEALTH IN10 SURANCE FOR CHILDREN.

11 ‘‘There is hereby established a program of health in12 surance for children under 19 years of age.

13 ‘‘PART A—ELIGIBILITY AND ENROLLMENT

14 ‘‘SEC. 2201. ELIGIBILITY.

15 ‘‘(a) IN GENERAL.—Every eligible child (as defined

16 in subsection (b)) is eligible to enroll for benefits under

17 this title.

18 ‘‘(b) ELIGIBLE CHILD DEFINED.—In this title, the

19 term ‘eligible child’ means, for a month, an individual

20 who—

21 ‘‘(1) is under 19 years of age as of the last day

22 of the month;

23 ‘‘(2) is a resident of the United States; and

24 ‘‘(3) is a citizen or national of the United

25 States, an alien lawfully admitted for permanent res-
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1 idence, or an alien otherwise permanently residing in

2 the United States under color of law.

3 ‘‘SEC. 2202. ENROLLMENT PERIODS.

4 ‘‘(a) IN GENERAL.—An eligible individual may enroll

5 in the program under this title only in such manner and

6 form as may be prescribed by regulations, and only during

7 an enrollment period prescribed in or under this section.

8 ‘‘(b) GENERAL ENROLLMENT PERIOD.—There shall

9 be a general enrollment period during the month of Sep10 tember of each year (beginning with 1995).

11 ‘‘(c) INITIAL SPECIAL ENROLLMENT PERIODS.—

12 ‘‘(1) BIRTH.—With respect to each eligible indi13 vidual who becomes an eligible individual by reason

14 of birth during a month after the end of first gen15 eral enrollment period, there shall be a special en16 rollment period during the 30-day period beginning

17 on the date of the birth.

18 ‘‘(2) OBTAINING LAWFUL RESIDENT STATUS.—

19 With respect to each eligible individual who does not

20 meet the requirements of paragraphs (2) and (3) of

21 section 2201(a) at the time of birth and who be22 comes an eligible individual during a month after the

23 end of the first general enrollment period, there shall

24 be a special enrollment period during the 30-day pe-
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1 riod beginning on the first date on which the individ2 ual is an eligible individual.

3 ‘‘(d) CONTINUATION SPECIAL ENROLLMENT PERI4 ODS.—In the case of an eligible individual—

5 ‘‘(1) who at the time the individual first be6 comes an eligible individual (or, if later, the first

7 month of the first general enrollment period) is en8 rolled in a group health plan (including continuation

9 coverage under such a plan), and

10 ‘‘(2) whose coverage under such a plan (includ11 ing continuation coverage under such a plan) is ter12 minated due to a qualifying event (within the mean13 ing of section 4980B(f)(3) of the Internal Revenue

14 Code of 1986) or due to expiration of the period of

15 continuation coverage,

16 there shall be a special enrollment period during the 3-

17 month period beginning 1 month before the effective date

18 of termination of coverage under such a plan.

19 ‘‘SEC. 2203. EMPLOYMENT-BASED ENROLLMENT.

20 ‘‘(a) IN GENERAL.—Subject to subsection (d), the

21 Secretary shall permit the sponsor of a group health plan

22 to elect to offer coverage to eligible children under a group

23 health plan through enrollment under this title in accord24 ance with this section. Except as specifically provided in

25 this section, the terms and period of the coverage effected
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1 pursuant to such election shall be the same as the terms

2 and period of coverage that would be provided if the indi3 vidual were enrolled under this title not pursuant to such

4 election.

5 ‘‘(b) CONDITIONS FOR ELECTION.—An election is

6 available under this section with respect to a group health

7 plan only if the sponsor provides assurances, satisfactory

8 to the Secretary, that the following conditions are met:

9 ‘‘(1) OFFER TO ALL ELIGIBLE CHILDREN.—The

10 offer of coverage under the election must be made

11 (at such times, including at the time of initial em12 ployment, and in such manner as the Secretary de13 termines to be consistent with the provisions of this

14 title) to every eligible child for every individual to

15 whom health benefits are made available under the

16 plan.

17 ‘‘(2) PAYMENT TOWARDS PREMIUM.—

18 ‘‘(A) IN GENERAL.—Under the election,

19 the plan shall provide for payment of the pre20 miums imposed under this title and may not

21 collect from any such child or the parent or

22 guardian of such a child more than 20 percent

23 of the amount of such premiums paid by the

24 plan with respect to such a child.
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1 ‘‘(B) TREATMENT OF CONTINUATION COV2 ERAGE.—Subparagraph (A) shall not apply to

3 children of those individuals who are eligible for

4 benefits under the group health plan only on

5 the basis of continuation coverage (such as that

6 described in section 4980B of the Internal Rev7 enue Code of 1986).

8 ‘‘(3) NO MANDATED ENROLLMENT.—The plan

9 may not require an individual, as a condition for the

10 receipt of benefits under the group health plan, to

11 accept the offer of enrollment under the election.

12 ‘‘(c) TERMINATION OF ELECTION.—If the Secretary

13 determines that a group health plan has failed to meet

14 the conditions described in subsection (b), the Secretary,

15 after notice and opportunity for correction, shall terminate

16 the election and shall provide individuals enrolled under

17 the election the opportunity to enroll directly as individ18 uals under this title.

19 ‘‘(d) LIMITATION.—In the case of a sponsor of a

20 group health plan that offers coverage (other than under

21 the election under this section) for some or all classes of

22 eligible children as of any date, the election under this sec23 tion shall not be available during the 2-year period follow24 ing such date.
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1 ‘‘SEC. 2204. COVERAGE PERIOD.

2 ‘‘(a) IN GENERAL.—No payments may be made

3 under this title with respect to the expenses of an eligible

4 child unless such expenses were incurred by such child

5 during a period which, with respect to the individual, is

6 a coverage period provided under this section.

7 ‘‘(b) ENROLLMENT DURING GENERAL ENROLLMENT

8 PERIOD.—In the case of an eligible child who enrolls

9 under this title during a general enrollment period in a

10 year, the period during which the individual is entitled to

11 benefits under the program under this title shall begin on

12 January 1 of the following year.

13 ‘‘(c) ENROLLMENT DURING SPECIAL ENROLLMENT

14 PERIODS.—

15 ‘‘(1) BIRTH.—In the case of an eligible child

16 who enrolls under this title during a special enroll17 ment period described in section 2202(c)(1), the pe18 riod during which the individual is entitled to bene19 fits under the program under this title shall begin

20 as of the date of birth.

21 ‘‘(2) OBTAINING LAWFUL RESIDENT STATUS.—

22 In the case of an eligible child who enrolls under this

23 title during a special enrollment period described in

24 section 2202(c)(2), the period during which the indi25 vidual is entitled to benefits under the program
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1 under this title shall begin as of the first day of the

2 month in which the individual enrolls.

3 ‘‘(3) CONTINUATION OF COVERAGE.—In the

4 case of an eligible child who enrolls under this title

5 during a special enrollment period described in sec6 tion 2202(d), the period during which the individual

7 is entitled to benefits under the program under this

8 title shall begin as of the first day of the month in

9 which the individual enrolls (or, if later, the first day

10 of the month in which coverage under the group

11 health plan, including continuation coverage under

12 such a plan, terminates).

13 ‘‘(d) TERMINATION OF ENROLLMENT.—

14 ‘‘(1) INITIAL MINIMUM 1-YEAR PERIOD.—Ex15 cept as provided in paragraph (5), an individual’s

16 coverage period shall continue until terminated

17 under paragraph (2), (3), or (4), and termination

18 under such paragraph may not occur before the end

19 of the 12-month period beginning with the first

20 month in which the coverage period begins.

21 ‘‘(2) TERMINATION.—

22 ‘‘(A) INDIVIDUAL NOTICE.—With respect

23 to coverage after the minimum coverage period

24 required under paragraph (1), an individual

25 may terminate coverage under this title by the
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1 filing of notice that the individual no longer

2 wishes to participate in the program under this

3 title. The termination of coverage under this

4 subparagraph shall take effect at the close of

5 the month following the month in which the no6 tice is filed.

7 ‘‘(B) FAILURE TO PAY PREMIUMS.—The

8 Secretary shall terminate coverage under this

9 title in the case of an individual for

10 nonpayment of premiums, but such termination

11 shall not be effective for coverage before the

12 end of the minimum coverage required under

13 paragraph (1). The Secretary may provide by

14 regulation for a grace period before coverage is

15 terminated under this subparagraph.

16 ‘‘(3) AGE.—An individual’s coverage period

17 shall in no case continue beyond the end of the

18 month in which the individual attains 19 years of

19 age or in which the individual dies.

20 ‘‘(4) MEDICARE COVERAGE.—An individual’s

21 coverage period shall be terminated in the month in

22 which the individual becomes entitled to benefits

23 under part A of title XVIII.

24 ‘‘(5) COVERAGE UNDER GROUP HEALTH

25 PLAN.—The 12-month minimum enrollment period
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1 under paragraph (1) shall not apply in the case of

2 an eligible child if it is demonstrated (to the satis3 faction of the Secretary) that at the time of termi4 nation of enrollment under this title the child will be

5 covered under a group health plan.

6 ‘‘PART B—BENEFITS; PAYMENTS FOR BENEFITS

7 ‘‘SEC. 2211. SCOPE OF BENEFITS.

8 ‘‘(a) IN GENERAL.—Except as provided in the suc9 ceeding provisions of this section, the benefits provided to

10 an individual by the program established by this title shall

11 consist of the same benefits that are available under title

12 XVIII (including benefits for well-child services under sec13 tion 1861(ll)) to individuals entitled to benefits under part

14 A of that title and enrolled under part B of that title.

15 ‘‘(b) NEWBORN AND WELL-BABY CARE; WAIVER OF

16 COST-SHARING FOR WELL-CHILD SERVICES AND OF DE17 DUCTIBLE FOR COVERED OUTPATIENT SERVICES.—

18 ‘‘(1) IN GENERAL.—In addition to the benefits

19 described in subsection (a), the benefits under this

20 title shall include entitlement to have payment made

21 (in the same manner as for physicians’ services

22 under part B of title XVIII) for newborn and well23 baby care, including normal newborn care and pedia24 trician services for high-risk deliveries, without the

25 application of deductibles, coinsurance, or
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1 copayments, subject to the periodicity schedule es2 tablished with respect to the services under para3 graph (2).

4 ‘‘(2) PERIODICITY SCHEDULE.—The Secretary,

5 in consultation with the American Academy of Pedi6 atrics, shall establish a schedule of periodicity which

7 reflects the general, appropriate frequency with

8 which services described in paragraph (1) should be

9 provided to healthy newborns and babies.

10 ‘‘(c) WAIVER OF COST-SHARING FOR WELL-CHILD

11 SERVICES.—For purposes of this title, payment shall be

12 made under this title for well-child services (as defined in

13 section 1861(ll)) without regard to any deductible or coin14 surance.

15 ‘‘(d) SPECIAL RULE FOR DEDUCTIBLE FOR COV16 ERED OUTPATIENT DRUGS.—For purposes of this title,

17 payment shall be made under this title for covered out18 patient drugs without regard to the deductible specified

19 under section 1834(e)(1).

20 ‘‘SEC. 2212. EXCLUSIONS.

21 ‘‘(a) IN GENERAL.—Except as provided in sub22 sections (b) and (c), section 1862 shall apply to expenses

23 incurred for items and services provided under this title

24 the same manner as such section applies to items and

25 services provided under title XVIII.
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1 ‘‘(b) BENEFITS EXCEPTION.—In applying section

2 1862(a) with respect to services described in section

3 2211(b)(1) (relating to newborn and well-baby care), pay4 ment shall not be denied under paragraph (1), (7), or (12)

5 of such section 1862(a) if the services are provided in ac6 cordance with the periodicity schedule described in section

7 2211(b)(2).

8 ‘‘SEC. 2213. PAYMENTS FOR BENEFITS.

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

10 this section—

11 ‘‘(1) payment of benefits under this title with

12 respect to benefits shall be made in the same

13 amounts and on the same basis as payment may be

14 made with respect to such benefits under title

15 XVIII, and

16 ‘‘(2) the provisions of sections 1814, 1833,

17 1842, 1848, and 1886 shall apply to payment of

18 benefits under this title in the same manner as they

19 apply to benefits under title XVIII.

20 ‘‘(b) NO COST-SHARING FOR CERTAIN SERVICES.—

21 No deductibles, coinsurance, copayments, or other cost22 sharing shall be imposed with respect to newborn and well23 baby care described in section 2211(b)(1) and no deduct24 ible shall be imposed with respect to covered outpatient

25 drugs.
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1 ‘‘(c) ESTABLISHMENT OF NEW DRGS AND

2 WEIGHTS.—In making payment under this title with re3 spect to inpatient hospital services, the Secretary shall

4 make such adjustments in the diagnosis-related groups

5 and weighting factors with respect to discharges within

6 such groups, otherwise established under section

7 1886(d)(4) as may be necessary to reflect the types of dis8 charges occurring under this title which are not occurring

9 under title XVIII.

10 ‘‘(d) CONDITIONS OF AND LIMITATIONS ON PAY11 MENTS.—The provisions of sections 1814 and 1835 shall

12 apply to payment for services under this title in the same

13 manner as they apply to payment for services under parts

14 A and B, respectively, of title XVIII.

15 ‘‘(e) USE OF TRUST FUND.—In carrying out this sec16 tion, any reference in title XVIII to a trust fund shall be

17 treated as a reference to the Children’s Health Insurance

18 Trust Fund established under section 2233.

19 ‘‘PART C—PREMIUMS; TRUST FUND

20 ‘‘SEC. 2231. AMOUNT OF PREMIUMS.

21 ‘‘(a) PREMIUM CLASSES.—There are 2 monthly pre22 mium rate classes under this section as follows:

23 ‘‘(1) SINGLE CHILD MONTHLY PREMIUM

24 RATE.—A premium rate for a single eligible child in

25 a family (in this section referred to as the ‘single
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1 child monthly premium rate’), which shall be the

2 rate paid under section 2232 with respect to a child

3 who has no other eligible children in the same fam4 ily.

5 ‘‘(2) FAMILY MONTHLY PREMIUM RATE.—A

6 premium rate for two or more eligible children in a

7 family (in this section referred to as the ‘family

8 monthly premium rate’), which shall be the rate paid

9 under section 2232 with respect to all eligible chil10 dren in the same family.

11 ‘‘(3) FAMILY.—The Secretary shall specify, in

12 regulations, those children who shall be considered

13 to be in the same family for purposes of this section.

14 ‘‘(b) MONTHLY PREMIUM RATES.—

15 ‘‘(1) 1996 and 1997.—Subject to subsection

16 (c), the single child monthly premium rate and the

17 family monthly premium rate, for months in 1996

18 and 1997, are determined as follows:

For months in

The single child

monthly premium

rate

The family monthly

premium rate

1996 ........................................................ $156 $299

1997 ........................................................ $167 $321

19 ‘‘(2) AFTER 1997.—Subject to subsection (d),

20 for months in years after 1997, the single child

21 monthly premium rate and the family monthly pre22 mium rate are equal to such respective rates estab-
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1 lished under this subsection for the previous year

2 multiplied by the applicable adjustment factor (spec3 ified under section 101(c) of the Health Care Cost

4 Containment and Reform Act of 1993) for the year

5 involved.

6 ‘‘(c) GEOGRAPHIC AREA ADJUSTMENT.—

7 ‘‘(1) FORMULA.—The Secretary shall compute,

8 for each geographic locality, the ratio of the average

9 per capita costs of coverage under this title in local10 ity to the national average per capita costs.

11 ‘‘(2) ADJUSTMENT.—The premium rates other12 wise established under this section and applied to a

13 geographic locality shall be multiplied by such ratio

14 and by such factor as the Secretary determines to be

15 necessary so that, if all eligible children were en16 rolled in the program under this title for all months

17 in the year and paid premiums based on the rates

18 specified in subsection (c) as adjusted under this

19 subsection, the total amount of such premiums

20 would equal the total amount of payments that

21 would be made under this title in the year.

22 ‘‘(3) SELECTION OF GEOGRAPHIC LOCAL23 ITIES.—For purposes of this subsection, the Sec24 retary shall use contiguous geographic localities that

25 are not smaller than metropolitan statistical areas.
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1 ‘‘(d) PUBLICATION OF RATES.—The Secretary shall

2 during July of each year (beginning in 1996) publish the

3 applicable premiums under this section for months in the

4 succeeding year for the different localities used under sub5 section (c).

6 ‘‘SEC. 2232. PAYMENT OF PREMIUMS.

7 ‘‘(a) IN GENERAL.—Subject to subsection (c), pre8 miums under this title shall be paid at the rates specified

9 under section 2231 to the Secretary at such times, and

10 in such manner, as the Secretary shall prescribe by regula11 tions.

12 ‘‘(b) INTEREST FOR LATE PAYMENT.—In the case

13 premiums are not paid on a timely basis, the Secretary

14 may impose a reasonable late charge and interest at a rate

15 (estimated by the Secretary) not to exceed 125 percent

16 of the average market yield described in the third sentence

17 of section 1817(c).

18 ‘‘(c) SUSPENSION OF PREMIUMS.—Payment of pre19 miums under this section shall be suspended for any

20 month for which the eligible individual establishes that the

21 individual—

22 ‘‘(1) is entitled to medical assistance under a

23 State plan approved under title XIX, or

24 ‘‘(2) is entitled to benefits under a group health

25 plan (as defined in section 5000(b)(1) of the Inter-
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1 nal Revenue Code of 1986), including benefits under

2 continuation coverage.

3 ‘‘(d) DEPOSIT INTO TRUST FUND.—Premiums col4 lected under this section shall be deposited in the Chil5 dren’s Health Insurance Trust Fund.

6 ‘‘SEC. 2233. CHILDREN’S HEALTH INSURANCE TRUST FUND.

7 ‘‘(a) ESTABLISHMENT.—(1) There is hereby created

8 on the books of the Treasury of the United States a trust

9 fund to be known as the ‘Children’s Health Insurance

10 Trust Fund’ (in this section referred to as the ‘Trust

11 Fund’). The Trust Fund shall consist of such gifts and

12 bequests as may be made as provided in section 201(i)(1)

13 and amounts appropriated under paragraph (2).

14 ‘‘(2) There are authorized to be appropriated for each

15 fiscal year out of any moneys in the Treasury not other16 wise appropriated to the Trust Fund a Government con17 tribution equal to the amount of expenditures made under

18 this title in the fiscal year, reduced by the amount of the

19 premiums deposited in the Trust Fund under section

20 2232(d).

21 ‘‘(b) INCORPORATION OF PROVISIONS.—

22 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

23 the provisions of subsections (b) through (j) of sec24 tion 1817 shall apply to the Trust Fund in the same
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1 manner as they apply to the Federal Hospital Insur2 ance Trust Fund.

3 ‘‘(2) EXCEPTIONS.—In applying paragraph

4 (1)—

5 ‘‘(A) the Board of Trustees and Managing

6 Trustee of the Trust Fund shall be composed of

7 the members of the Board of Trustees and the

8 Managing Trustee, respectively, of the Federal

9 Hospital Insurance Trust Fund; and

10 ‘‘(B) any reference in section 1817 to the

11 Federal Hospital Insurance Trust Fund or to

12 title XVIII (or part A thereof) is deemed a ref13 erence to the Trust Fund under this section

14 and this title, respectively.

15 ‘‘PART D—GENERAL PROVISIONS

16 ‘‘SEC. 2251. INCORPORATION OF CERTAIN MEDICARE PRO17 VISIONS.

18 ‘‘(a) USE OF CARRIERS AND INTERMEDIARIES.—The

19 Secretary shall provide for the administration of this title

20 through the use of fiscal intermediaries and carriers in

21 the same manner as title XVIII is carried out through

22 the use of such fiscal intermediaries and carriers.

23 ‘‘(b) DEFINITIONS.—Except as otherwise provided in

24 this title, the definitions contained in section 1861 shall
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1 apply for purposes of this title in the same manner as they

2 apply for purposes of title XVIII.

3 ‘‘(c) CERTIFICATION, PROVIDER QUALIFICATION,

4 ETC.—The provisions of sections 1863 through 1875, sec5 tions 1878 through 1880, section 1883, section 1885, and

6 sections 1887 through 1892 shall apply to this title in the

7 same manner as they apply to title XVIII.

8 ‘‘(d) HEALTH MAINTENANCE ORGANIZATIONS AND

9 COMPETITIVE MEDICAL PLANS.—

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

11 subsection, section 1876 shall apply to individuals

12 entitled to benefits under this title in the same man13 ner as such section applies to individuals entitled to

14 benefits under part A, and enrolled under part B, of

15 title XVIII.

16 ‘‘(2) APPLICATION.—In applying section 1876

17 under this subsection—

18 ‘‘(A) the provisions of such section relating

19 only to individuals enrolled under part B of title

20 XVIII shall not apply;

21 ‘‘(B) any reference to a Trust Fund estab22 lished under title XVIII and to benefits under

23 such title is deemed a reference to the Chil24 dren’s Health Insurance Trust Fund and to

25 benefits under this title;
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1 ‘‘(C) the adjusted average per capita cost

2 and the adjusted community rate shall be deter3 mined on the basis of benefits under this title;

4 and

5 ‘‘(D) subsection (f) shall not apply.

6 ‘‘SEC. 2252. INCORPORATION OF PEER REVIEW PROVISIONS

7 AND FRAUD AND ABUSE PROVISIONS.

8 ‘‘The provisions of sections 1121 through 1126, sec9 tions 1128 through 1128B, section 1134, section 1138,

10 and part B of title XI shall apply to this title in the same

11 manner as they apply to title XVIII.’’.

12 (b) CONFORMING AMENDMENTS.—

13 (1) Section 201(g)(1)(A) of the Social Security

14 Act (42 U.S.C. 401(g)(1)(A)) is amended by striking

15 ‘‘and the Federal Supplementary Medical Insurance

16 Trust Fund’’ and inserting ‘‘, Federal Supple17 mentary Medical Insurance Trust Fund, and the

18 Children’s Health Insurance Trust Fund’’.

19 (2) Section 201(i)(1) of such Act (42 U.S.C.

20 401(i)(1)) is amended by striking ‘‘and the Federal

21 Supplementary Medical Insurance Trust Fund’’ and

22 inserting ‘‘, Federal Supplementary Medical Insur23 ance Trust Fund, and the Children’s Health Insur24 ance Trust Fund’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on the date of the enactment

3 of this Act, except that no benefits shall be available under

4 title XXII of the Social Security Act for items or services

5 furnished before January 1, 1996.

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