‘‘(B) For purposes of this subsection, the
term ‘underserved rural area’ means a rural
area with a shortage of personal health services,
except that such term does not include any
health professional shortage area.
‘‘(C) The Secretary shall issue criteria for
determining whether an area is an underserved
rural area.
‘‘(2) CERTAIN REQUIREMENTS.—The Secretary
may make a loan under paragraph (1) to an individ-
ual only if the following conditions are met:
‘‘(A) The individual is enrolled (or accept-
ed for enrollment) as a full-time student in a
course of study or program leading to a degree
in medicine, osteopathic medicine, dentistry, or
other health profession, and such course or pro-
gram is offered by an accredited educational in-
stitution (as determined by the Secretary) and
is approved by the Secretary.
‘‘(B) The individual is eligible for, or
holds, an appointment as a commissioned offi-
cer in the Regular or Reserve Corps of the
Service or is eligible for selection for civilian
service in the Corps.
‘‘(C) The individual and the Secretary
enter into the contract described in paragraph
(3).
‘‘(3) LOAN CONTRACT.—For purposes of para-
graph (2)(C), the contract described in this para-
graph is a written contract containing provisions as
follows:
‘‘(A) The Secretary agrees to provide the
individual involved with loans under paragraph
(1) for a number of academic years (not to ex-
ceed 4 academic years) determined by the indi-
vidual, during which period the individual is
pursuing a course of study or program de-
scribed in paragraph (2)(A).
‘‘(B) The Secretary agrees to accept the
individual into the Corps (or for equivalent
service as otherwise provided in this subpart),
subject to the availability of funds for carrying
out sections 331 through 335.
‘‘(C) The individual agrees as follows:
‘‘(i) To accept the loan.
‘‘(ii) To maintain enrollment in the
course or program involved until the indi-
vidual completes the course or program.
‘‘(iii) While enrolled in the course or
program, to maintain an acceptable level of
academic standing (as determined under
regulations of the Secretary by the edu-
cational institution offering the course or
program).
‘‘(iv) To provide obligated service for
purposes of paragraph (5).
‘‘(v) To other provisions of this sub-
section that are applicable to the individ-
ual, including paragraph (8) (relating to
the breach of the obligations of the individ-
ual under this subsection).
‘‘(D) A provision specifying the purposes
for which the loan will be expended, subject to
paragraph (6)(A), and the amount to be ex-
pended for each of the purposes.
‘‘(E) A provision that any financial obliga-
tion of the United States arising out of the con-
tract, and any obligation of the individual under
the contract, is contingent upon funds being
available under subsection (b) for loans under
paragraph (1) and upon funds being available
to carry out the purposes of sections 331
through 335.
‘‘(4) AMOUNT OF LOAN; INTEREST RATE.—The
amount of a loan under paragraph (1) for an aca-
demic year may not exceed $35,000. The rate of in-
terest on the unpaid principal balance of such a loan
may not exceed 4 percent annually, and may not be
less than 2 percent annually.
‘‘(5) PERIOD
OF
OBLIGATED
SERVICE.—For
purposes of paragraph (3)(C)(iv), the obligated serv-
ice of an individual is as follows:
‘‘(A) The service to be provided is the pro-
vision of primary health services.
‘‘(B) The service is to be provided in an
underserved rural area to which the individual
is assigned pursuant to paragraph (10).
‘‘(C) The period of service is the greater of
the following periods:
‘‘(i) 1 year.
‘‘(ii) 1 year for each 2 academic years
for which loans under paragraph (1) are
provided to the individual.
‘‘(iii) 1 year for each $35,000 pro-
vided in such loans to the individual.
‘‘(6) EXPENDITURE OF LOAN.—
‘‘(A) A loan under paragraph (1) to an in-
dividual may be expended only for the following
purposes:
‘‘(i) The tuition of the individual for
the course or program involved for the aca-
demic year involved.
‘‘(ii) Any other reasonable educational
expense, including fees, books, and labora-
tory expenses, incurred by the individual in
the academic year.
‘‘(iii) Reasonable living expenses in-
curred in attending the educational institu-
tion involved, not to exceed the amount in
effect under section 338A(g)(1)(B) for sti-
pends.
‘‘(B) In the case of an educational institu-
tion offering a course or program for which a
loan under paragraph (1) is made, the Sec-
retary may contract with the institution to
make payments to the institution of the
amounts provided for the purposes specified in
clauses (i) and (ii) of subparagraph (A). The
payments may be made to the institution with-
out regard to section 3648 of the Revised Stat-
utes (31 U.S.C. 529).
‘‘(7) REPAYMENT
OF
LOAN; DEFERMENTS.—
The provisions of subparagraphs (B) and (C) of sec-
tion 705(a)(2) apply to loans under paragraph (1) to
the same extent and in the same manner as such
provisions apply to loans under subpart I of part A
of title VII.
‘‘(8) BREACH OF LOAN CONTRACT.—With re-
spect to an individual who has entered into a written
contract under paragraph (3) and who breaches the
contract, an agreement under paragraph (3)(C)(v) is
as follows:
‘‘(A) If, for any reason other than a reason
specified in subparagraph (B), the individual
fails to provide obligated service under para-
graph (5)—
‘‘(i) the balance due on the loan in-
volved will be immediately recomputed
from the date of issuance at an interest
rate of 12 percent per year, compounded
annually; and
‘‘(ii) the recomputed balance will be
paid not later than the expiration of the 3-
year period beginning on the date on which
the individual breaches the contract.
‘‘(B) The individual is liable to the United
States for the amount which has been paid to
or on behalf of the individual under paragraph
(1) if the individual—
‘‘(i) fails to maintain an acceptable
level of academic standing for purposes of
paragraph (3)(C)(iii);
‘‘(ii) is dismissed from the educational
institution involved for disciplinary rea-
sons;
‘‘(iii) voluntarily terminates the course
or program involved before the completion
of the course or program; or
‘‘(iv) fails to accept payment under
the loan under paragraph (1), or instructs
the educational institution not to accept
payment, in whole or in part, of payments
under the loan.
‘‘(9) WAIVER OF OBLIGATIONS; LIMITATION RE-
GARDING BANKRUPTCY.—
‘‘(A) With respect to the obligation of an
individual under a contract under paragraph
(3), the Secretary shall provide for the partial
or total waiver or suspension of the obligation
whenever compliance by the individual is impos-
sible, or would involve extreme hardship to the
individual, and if enforcement of the obligation
with respect to the individual would be uncon-
scionable.
‘‘(B) An obligation of an individual under
the contract under paragraph (3) to make pay-
ments may be released by a discharge in bank-
ruptcy under title 11, United States Code, only
if such discharge is granted after the expiration
of the 5-year period beginning on the first date
that such payment is required (exclusive of any
period in which in which the obligation to make
payments is suspended), and only if the bank-
ruptcy court finds that nondischarge of the obli-
gation would be unconscionable.
‘‘(10) ASSIGNMENT OF CORPS PERSONNEL PUR-
SUANT TO OBLIGATED SERVICE.—The provisions of
section 333 apply to the obligated service of individ-
uals under paragraph (5) with respect to under-
served rural areas to the same extent and in the
same manner as such provisions apply to the obli-
gated service of individuals under section 338A with
respect to health professional shortage areas.
‘‘(11) PRIORITIES IN MAKING LOANS.—
‘‘(A) In making loans under paragraph
(1), the Secretary shall give priority to any in-
dividual (if otherwise a qualified applicant) who
has resided in a rural area for a significant
number of years and who has characteristics in-
dicating the individual will, after the period of
obligated service under paragraph (5), continue
to serve in an underserved rural area.
‘‘(B) Factors considered by the Secretary
in determining priorities for purposes of sub-
paragraph (A) shall include consideration of
whether the health professions school attended
(or to be attended) by the individual involved is
a school whose graduates include a significant
number of health professionals who serve in
rural areas.
‘‘(12) MISCELLANEOUS
PROVISIONS.—Individ-
uals who have entered into written contracts with
the Secretary under this subsection, while under-
going academic training, shall not be counted
against any employment ceiling affecting the De-
partment of Health and Human Services.
‘‘(d) AVAILABILITY OF REPAYMENTS.—Payments of
principal and interest by (or on behalf of) recipients of
loans under subsection (c)(1) are hereby appropriated to
the Fund.
‘‘(e) INVESTMENT.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall invest such amounts of the Fund as
such Secretary determines are not required to meet
current withdrawals from the Fund. Such invest-
ments may be made only in interest-bearing obliga-
tions of the United States. For such purpose, such
obligations may be acquired on original issue at the
issue price, or by purchase of outstanding obliga-
tions at the market price.
‘‘(2) SALE
OF
OBLIGATIONS.—Any obligation
acquired by the Fund may be sold by the Secretary
of the Treasury at the market price.
‘‘(3) AVAILABILITY OF INCOME.—Any interest
derived from obligations acquired by the Fund, and
proceeds from any sale or redemption of such obliga-
tions, are hereby appropriated to the Fund.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of providing amounts for the Fund, there are au-
thorized to be appropriated $20,000,000 for fiscal year
1996, and such sums as may be necessary for each of the
fiscal years 1997 and 1998.’’.
Subtitle B—Other Programs
Regarding Rural Health Care
SEC. 231. STATE OFFICES OF RURAL HEALTH.
(a) REQUIREMENT REGARDING RECRUITMENT
OF
PHYSICIANS.—Section 338J(c) of the Public Health Serv-
ice Act (42 U.S.C. 254r(c)) is amended—
(1) in paragraph (2), by striking ‘‘and’’ after
the semicolon at the end;
(2) in paragraph (3), by striking the period and
inserting ‘‘; and’’; and
(3) by adding at the end the following para-
graph:
‘‘(4) activities to recruit and retain physicians
to serve in rural areas of the State.’’.
(b) AUTHORIZATIONS OF APPROPRIATIONS.—
(1) IN
GENERAL.—Section 338J(j)(1) of the
Public Health Service Act (42 U.S.C. 254r(j)(1)) is
amended—
(A) by striking ‘‘and’’ after ‘‘1992,’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and $1,500,000 for each of the fiscal
years 1996 through 1999’’.
(2) 
CONFORMING
AMENDMENT.—Section
338J(k) of the Public Health Service Act (42 U.S.C.
254r(k)) is amended by striking ‘‘$10,000,000’’ and
inserting ‘‘$16,000,000’’.
SEC. 232. AREA HEALTH EDUCATION CENTER PROGRAMS;
AUTHORIZATION OF APPROPRIATIONS.
Section 746(i)(1)(A) of the Public Health Service Act
(42 U.S.C. 293j(i)(1)(A)) is amended—
(1) by striking ‘‘is authorized’’ and inserting
‘‘are authorized’’; and
(2) by inserting before the period the following:
‘‘, and $50,000,000 for each of the fiscal years 1996
through 1998’’.
TITLE III—PROVISIONS RELAT-
ING TO THE MEDICARE PRO-
GRAM
SEC. 301. ELIMINATION OF APPLICATION OF GEOGRAPHIC
ADJUSTMENT INDICES IN DETERMINING PAY-
MENTS FOR PHYSICIANS’ SERVICES.
(a) ELIMINATION OF ADJUSTMENT BEGINNING IN
2000.—Section 1848 of the Social Security Act (42
U.S.C. 1395w–4) is amended—
(1) in subsection (b)(1)(C), by striking ‘‘the ge-
ographic’’ and inserting ‘‘with respect to services
furnished before 2000, the geographic’’;
(2) in subsection (e)(1)(A), by striking ‘‘the
Secretary’’ and inserting ‘‘with respect to services
furnished before 2000, the Secretary’’; and
(3) in subsection (e)(2), by inserting ‘‘furnished
in years before 2000’’ after ‘‘physicians’ services’’.
(b) INCREASE
IN PAYMENTS
FOR SERVICES
IN
RURAL AREAS DURING TRANSITION PERIOD.—Section
1848(e) of such Act (42 U.S.C. 1395w–4(e)) is amended
by adding at the end the following new paragraph:
‘‘(6) INCREASE IN VALUES FOR SERVICES IN
RURAL AREAS.—
‘‘(A) IN
GENERAL.—During each transi-
tion year (as described in subparagraph (B)),
the Secretary shall—
‘‘(i) increase the geographic index val-
ues otherwise established under this sub-
section for physicians’ services furnished
during the year in any fee schedule area
that is located in a rural area (as defined
in section 1886(d)(2)(D)) by such equiva-
lent percentage as the Secretary deter-
mines necessary to assure that, effective
with the first year that follows the final
transition year, the index values estab-
lished under this subsection shall be the
same for all fee schedule areas; and
‘‘(ii) decrease the geographic index
values otherwise established under this
subsection for physicians’ services fur-
nished during the year in any other fee
schedule area by such percentage as the
Secretary determines necessary to assure
that the aggregate amount of payments
made for physicians’ services under this
section during the year does not exceed the
amount that would have been made if this
paragraph had not been in effect.
‘‘(B) TRANSITION YEARS DESCRIBED.—In
this paragraph, the ‘transition years’ are 1996,
1997, 1998, and 1999.’’.
SEC. 302. EXEMPTION FROM ANTI-KICKBACK PENALTIES
FOR CERTAIN FINANCIAL INCENTIVES PRO-
VIDED TO PHYSICIANS BY RURAL HOSPITALS.
(a) IN GENERAL.—Section 1128B(b)(3) of the Social
Security Act (42 U.S.C. 1320a–7b(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D);
(2) by striking the period at the end of sub-
paragraph (E) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) any payment made by a hospital located
in a rural area (as defined in section 1886(d)(2)(D))
to or on behalf of a physician as repayment of the
physician’s medical education loans or as a subsidy
to enable the physician to start a medical practice,
but only if the payment is contingent upon the phy-
sician—
‘‘(i) joining the hospital’s medical staff,
‘‘(ii) relocating to the area, or
‘‘(iii) providing physicians’ services to resi-
dents of the area.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payments made on or after
January 1, 1996.
SEC. 303. EXTENSION OF BONUS PAYMENT FOR PHYSICIAN
SERVICES PROVIDED IN HEALTH PROFES-
SIONAL 
SHORTAGE 
AREAS 
TO 
CERTAIN
NONPHYSICIAN 
PROVIDERS 
AND 
OTHER
MEDICARE-DEPENDENT PROVIDERS.
(a) BONUS PAYMENT FOR SERVICES PROVIDED IN
HEALTH
PROFESSIONAL
SHORTAGE
AREAS.—Section
1833(m) of the Social Security Act (42 U.S.C. 1395l(m))
is amended—
(1) by striking ‘‘(m)’’ and inserting ‘‘(m)(1)’’;
(2) by inserting ‘‘described in paragraph (2)’’
after ‘‘physicians’ services’’;
(3) by striking ‘‘in an area’’ and all that follows
through ‘‘shortage area,’’;
(4) by striking ‘‘the physician’’ and inserting
‘‘the provider of the service’’; and
(5) by adding at the end the following new
paragraph:
‘‘(2) In paragraph (1), physicians’ services described
in this paragraph are services—
‘‘(A) furnished in an area designated (under
section 332(a)(1)(A) of the Public Health Service
Act) as a health professional shortage area; or
‘‘(B) furnished during a year by a provider with
respect to whom not less than 75 percent of the pa-
tients for whom the provider furnishes such services
during the year are individuals—
‘‘(i) who are entitled to benefits under this
title;
‘‘(ii) who are eligible for medical assistance
under a State plan approved under title XIX;
or
‘‘(iii) with respect to whom the provider
did not receive any payment for the service.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to services furnished on or after
January 1, 1996.
TITLE IV—TREATMENT OF STU-
DENT LOANS FOR HEALTH
PROFESSIONALS
SEC. 401. LOANS UNDER HIGHER EDUCATION ACT OF 1965;
DEFERMENTS REGARDING POSTGRADUATE
PRIMARY-CARE 
PROGRAMS 
IN 
UNDER-
SERVED RURAL AREAS.
(a) STAFFORD LOANS.—
(1) GSL LOANS.—Section 428(b)(1)(M) of the
Higher 
Education 
Act 
of 
1965 
(20 
U.S.C.
1078(b)(1)(M)) is amended—
(A) in clause (ii), by striking ‘‘or’’ at the
end;
(B) in clause (iii), by adding ‘‘or’’ after the
semicolon at the end; and
(C) by adding at the end the following
clause:
‘‘(iv) during which the borrower is
serving in an internship or residency pro-
gram, in a health facility in a rural area,
in preparation for practice in an area of
primary care (including internal medicine,