414
Title II, Subtitle B
or for a purpose authorized by rule 6(e) of the Fed-
eral Rules of Criminal Procedure or a comparable
State rule;
(3) shall be destroyed or returned to the trustee
if not used for one of the purposes specified in para-
graph (2); and
(4) shall not be maintained, or a description of
the contents of such information shall not be main-
tained, by any government authority other than in
the sealed records of the grand jury, unless such in-
formation has been used in the prosecution of a
crime for which the grand jury issued an indictment
or presentment or for a purpose authorized by rule
6(e) of the Federal Rules of Criminal Procedure or
a comparable State rule.
(e) USE IN ACTION AGAINST INDIVIDUAL.—A person
who receives protected health information about a pro-
tected individual through a disclosure under this section
may not use or disclose the information in any administra-
tive, civil, or criminal action or investigation directed
against the individual, except an action or investigation
arising out of and directly related to the inquiry for which
the information was obtained;
(f) CONSTRUCTION.—Nothing in this section shall be
construed as authority for a health information trustee to
415
Title II, Subtitle B
refuse to comply with a valid administrative subpoena or
warrant or a valid judicial subpoena or search warrant
that meets the requirements of this part.
(g) APPLICABILITY.—A health information trustee
referred to in subsection (a) is any trustee other than the
following:
(1) A health information service organization.
(2) A public health authority.
(3) A health researcher.
SEC. 2161. HEALTH INFORMATION SERVICE ORGANIZA-
TIONS.
A health information trustee may disclose protected
health information to a health information service organi-
zation for the purpose of permitting the organization to
perform a function for which the Secretary has authorized
(by means of a designation or certification) the organiza-
tion to receive access to health care data in electronic or
magnetic form that are regulated by this Act.
Subpart C—Access Procedures and Challenge Rights
SEC. 2171. ACCESS PROCEDURES FOR LAW ENFORCEMENT
SUBPOENAS, WARRANTS, AND SEARCH WAR-
RANTS.
(a) PROBABLE CAUSE REQUIREMENT.—A govern-
ment authority may not obtain protected health informa-
tion about a protected individual from a health informa-
416
Title II, Subtitle B
tion trustee under paragraph (1) or (2) of section 2160(a)
for use in a law enforcement inquiry unless there is prob-
able cause to believe that the information is relevant to
a legitimate law enforcement inquiry being conducted by
the government authority.
(b) WARRANTS AND SEARCH WARRANTS.—A govern-
ment authority that obtains protected health information
about a protected individual from a health information
trustee under circumstances described in subsection (a)
and pursuant to a warrant or search warrant shall, not
later than 30 days after the date the warrant was served
on the trustee, serve the individual with, or mail to the
last known address of the individual, a copy of the
warrant.
(c) SUBPOENAS.—Except as provided in subsection
(d), a government authority may not obtain protected
health information about a protected individual from a
health information trustee under circumstances described
in subsection (a) and pursuant to a subpoena unless a
copy of the subpoena has been served by hand delivery
upon the individual, or mailed to the last known address
of the individual, on or before the date on which the sub-
poena was served on the trustee, together with a notice
(published by the Secretary under section 2175(1)) of the
417
Title II, Subtitle B
individual’s right to challenge the subpoena in accordance
with section 2172, and—
(1) 30 days have passed from the date of serv-
ice, or 30 days have passed from the date of mailing,
and within such time period the individual has not
initiated a challenge in accordance with section
2172; or
(2) disclosure is ordered by a court under sec-
tion 2172.
(d) APPLICATION FOR DELAY.—
(1) IN GENERAL.—A government authority may
apply to an appropriate court to delay (for an initial
period of not longer than 90 days) serving a copy of
a subpoena and a notice otherwise required under
subsection (c) with respect to a law enforcement in-
quiry. The government authority may apply to the
court for extensions of the delay.
(2) REASONS FOR DELAY.—An application for
a delay, or extension of a delay, under this sub-
section shall state, with reasonable specificity, the
reasons why the delay or extension is being sought.
(3) EX PARTE ORDER.—The court shall enter
an ex parte order delaying, or extending the delay
of, the notice and an order prohibiting the trustee
from revealing the request for, or the disclosure of,
418
Title II, Subtitle B
the protected health information being sought if the
court finds that—
(A) the inquiry being conducted is within
the lawful jurisdiction of the government au-
thority seeking the protected health informa-
tion;
(B) there is probable cause to believe that
the protected health information being sought is
relevant to a legitimate law enforcement inquiry
being conducted by the government authority;
(C) the government authority’s need for
the information outweighs the privacy interest
of the protected individual who is the subject of
the information; and
(D) there are reasonable grounds to believe
that receipt of a notice by the individual will re-
sult in—
(i) endangering the life or physical
safety of any individual;
(ii) flight from prosecution;
(iii) destruction of or tampering with
evidence or the information being sought;
or
(iv) intimidation of potential wit-
nesses.
419
Title II, Subtitle B
(4) SERVICE
OF
APPLICATION
ON
INDIVID-
UAL.—Upon the expiration of a period of delay of
notice under this subsection, the government author-
ity shall serve upon the individual, with the service
of the subpoena and the notice, a copy of any appli-
cations filed and approved under this subsection.
SEC. 2172. CHALLENGE PROCEDURES FOR LAW ENFORCE-
MENT SUBPOENAS.
(a) MOTION TO QUASH SUBPOENA.—Within 30 days
of the date of service, or 30 days of the date of mailing,
of a subpoena of a government authority seeking protected
health information about a protected individual from a
health information trustee under paragraph (1) or (2) of
section 2160(a) (except a subpoena to which section 2173
applies), the individual may file (without filing fee) a mo-
tion to quash the subpoena—
(1) in the case of a State judicial subpoena, in
the court which issued the subpoena;
(2) in the case of a subpoena issued under the
authority of a State that is not a State judicial sub-
poena, in a court of competent jurisdiction;
(3) in the case of a subpoena issued under the
authority of a Federal court, in any court of the
United States of competent jurisdiction; or
420
Title II, Subtitle B
(4) in the case of any other subpoena issued
under the authority of the United States, in—
(A) the United States district court for the
district in which the individual resides or in
which the subpoena was issued; or
(B) another United States district court of
competent jurisdiction.
(b) COPY.—A copy of the motion shall be served by
the individual upon the government authority by delivery
of registered or certified mail.
(c) AFFIDAVITS AND SWORN DOCUMENTS.—The gov-
ernment authority may file with the court such affidavits
and other sworn documents as sustain the validity of the
subpoena. The individual may file with the court, within
5 days of the date of the authority’s filing, affidavits and
sworn documents in response to the authority’s filing. The
court, upon the request of the individual, the government
authority, or both, may proceed in camera.
(d) PROCEEDINGS AND DECISION ON MOTION.—The
court may conduct such proceedings as it deems appro-
priate to rule on the motion. All such proceedings shall
be completed, and the motion ruled on, within 10 calendar
days of the date of the government authority’s filing.
(e) EXTENSION
OF
TIME
LIMITS
FOR
GOOD
CAUSE.—The court, for good cause shown, may at any
421
Title II, Subtitle B
time in its discretion enlarge the time limits established
by subsections (c) and (d).
(f) STANDARD FOR DECISION.—A court may deny a
motion under subsection (a) if it finds that there is prob-
able cause to believe that the protected health information
being sought is relevant to a legitimate law enforcement
inquiry being conducted by the government authority, un-
less the court finds that the individual’s privacy interest
outweighs the government authority’s need for the infor-
mation. The individual shall have the burden of dem-
onstrating that the individual’s privacy interest outweighs
the need established by the government authority for the
information.
(g) SPECIFIC CONSIDERATIONS WITH RESPECT TO
PRIVACY INTEREST.—In determining under subsection (f)
whether an individual’s privacy interest outweighs the gov-
ernment authority’s need for the information, the court
shall consider—
(1) the particular purpose for which the infor-
mation was collected by the trustee;
(2) the degree to which disclosure of the infor-
mation will embarrass, injure, or invade the privacy
of the individual;
(3) the effect of the disclosure on the individ-
ual’s future health care;
422
Title II, Subtitle B
(4) the importance of the inquiry being con-
ducted by the government authority, and the impor-
tance of the information to that inquiry; and
(5) any other factor deemed relevant by the
court.
(h) ATTORNEY’S FEES.—In the case of any motion
brought under subsection (a) in which the individual has
substantially prevailed, the court, in its discretion, may as-
sess against a government authority a reasonable attor-
ney’s fee and other litigation costs (including expert fees)
reasonably incurred.
(i) NO INTERLOCUTORY APPEAL.—A court ruling de-
nying a motion to quash under this section shall not be
deemed a final order and no interlocutory appeal may be
taken therefrom by the individual. An appeal of such a
ruling may be taken by the individual within such period
of time as is provided by law as part of any appeal from
a final order in any legal proceeding initiated against the
individual arising out of or based upon the protected
health information disclosed.
SEC. 2173. ACCESS AND CHALLENGE PROCEDURES FOR
OTHER SUBPOENAS.
(a) IN GENERAL.—A person (other than a govern-
ment authority seeking protected health information under
circumstances described in section 2171(a)) may not ob-
423
Title II, Subtitle B
tain protected health information about a protected indi-
vidual from a health information trustee pursuant to a
subpoena under section 2160(a)(2) unless—
(1) a copy of the subpoena has been served
upon the individual or mailed to the last known ad-
dress of the individual on or before the date on
which the subpoena was served on the trustee, to-
gether with a notice (published by the Secretary
under section 2175(2)) of the individual’s right to
challenge the subpoena, in accordance with sub-
section (b); and
(2) either—
(A) 30 days have passed from the date of
service or 30 days have passed from the date of
the mailing and within such time period the in-
dividual has not initiated a challenge in accord-
ance with subsection (b); or
(B) disclosure is ordered by a court under
such subsection.
(b) MOTION TO QUASH.—Within 30 days of the date
of service or 30 days of the date of mailing of a subpoena
seeking protected health information about a protected in-
dividual from a health information trustee under sub-
section (a), the individual may file (without filing fee) in
any court of competent jurisdiction, a motion to quash the
424
Title II, Subtitle B
subpoena, with a copy served on the person seeking the
information. The individual may oppose, or seek to limit,
the subpoena on any grounds that would otherwise be
available if the individual were in possession of the infor-
mation.
(c) STANDARD
FOR DECISION.—The court shall
grant an individual’s motion under subsection (b) if the
person seeking the information has not sustained the bur-
den of demonstrating that—
(1) there are reasonable grounds to believe that
the information will be relevant to a lawsuit or other
judicial or administrative proceeding; and
(2) the need of the person for the information
outweighs the privacy interest of the individual.
(d) SPECIFIC CONSIDERATIONS WITH RESPECT TO
PRIVACY INTEREST.—In determining under subsection (c)
whether the need of the person for the information out-
weighs the privacy interest of the individual, the court
shall consider—
(1) the particular purpose for which the infor-
mation was collected by the trustee;
(2) the degree to which disclosure of the infor-
mation will embarrass, injure, or invade the privacy
of the individual;
425
Title II, Subtitle B
(3) the effect of the disclosure on the individ-
ual’s future health care;
(4) the importance of the information to the
lawsuit or proceeding; and
(5) any other factor deemed relevant by the
court.
(e) ATTORNEY’S FEES.—In the case of any motion
brought under subsection (b) by an individual against a
person in which the individual has substantially prevailed,
the court, in its discretion, may assess against the person
a reasonable attorney’s fee and other litigation costs (in-
cluding expert fees) reasonably incurred.
SEC. 2174. CONSTRUCTION OF SUBPART; SUSPENSION OF
STATUTE OF LIMITATIONS.
(a) IN GENERAL.—Nothing in this subpart shall af-
fect the right of a health information trustee to challenge
a request for protected health information. Nothing in this
subpart shall entitle a protected individual to assert the
rights of a health information trustee.
(b) EFFECT OF MOTION ON STATUTE OF LIMITA-
TIONS.—If an individual who is the subject of protected
health information files a motion under this subpart which
has the effect of delaying the access of a government au-
thority to such information, the period beginning on the
date such motion was filed and ending on the date on
426
Title II, Subtitle B
which the motion is decided shall be excluded in computing
any period of limitations within which the government au-
thority may commence any civil or criminal action in con-
nection with which the access is sought.
SEC. 2175. RESPONSIBILITIES OF SECRETARY.
Not later than July 1, 1996, the Secretary, after no-
tice and opportunity for public comment, shall develop and
disseminate brief, clear, and easily understood model
notices—
(1) for use under subsection (c) of section
2171, detailing the rights of a protected individual
who wishes to challenge, under section 2172, the dis-
closure of protected health information about the in-
dividual under such subsection; and
(2) for use under subsection (a) of section
2173, detailing the rights of a protected individual
who wishes to challenge, under subsection (b) of
such section, the disclosure of protected health infor-
mation about the individual under such section.
Subpart D—Miscellaneous Provisions
SEC. 2181. PAYMENT CARD AND ELECTRONIC PAYMENT
TRANSACTIONS.
(a) PAYMENT FOR HEALTH CARE THROUGH CARD
OR ELECTRONIC MEANS.—If a protected individual pays
a health information trustee for health care by presenting
427
Title II, Subtitle B
a debit, credit, or other payment card or account number,
or by any other electronic payment means, the trustee may
disclose to a person described in subsection (b) only such
protected health information about the individual as is
necessary for the processing of the payment transaction
or the billing or collection of amounts charged to, debited
from, or otherwise paid by, the individual using the card,
number, or other electronic payment means.
(b) TRANSACTION PROCESSING.—A person who is a
debit, credit, or other payment card issuer, is otherwise
directly involved in the processing of payment transactions
involving such cards or other electronic payment trans-
actions, or is otherwise directly involved in the billing or
collection of amounts paid through such means, may only
use or disclose protected health information about a pro-
tected individual that has been disclosed in accordance
with subsection (a) when necessary for—
(1) the authorization, settlement, billing or col-
lection of amounts charged to, debited from, or oth-
erwise paid by, the individual using a debit, credit,
or other payment card or account number, or by
other electronic payment means;
(2) the transfer of receivables, accounts, or in-
terest therein;
428
Title II, Subtitle B
(3) the audit of the credit, debit, or other pay-
ment card account information;
(4) compliance with Federal, State, or local law;
or
(5) a properly authorized civil, criminal, or reg-
ulatory investigation by Federal, State, or local
authorities.
SEC. 2182. ACCESS TO PROTECTED HEALTH INFORMATION
OUTSIDE OF THE UNITED STATES.
(a) IN GENERAL.—Notwithstanding the provisions of
subpart B, and except as provided in subsection (b), a
health information trustee may not permit any person who
is not in a State to have access to protected health infor-
mation about a protected individual unless one or more
of the following conditions exist:
(1) SPECIFIC AUTHORIZATION.—The individual
has specifically consented to the provision of such
access outside of the United States in an authoriza-
tion that meets the requirements of section 2152.
(2) EQUIVALENT PROTECTION.—The provision
of such access is authorized under this part and the
Secretary has determined that there are fair infor-
mation practices for protected health information in
the jurisdiction where the access will be provided
that provide protections for individuals and pro-
429
Title II, Subtitle B
tected health information that are equivalent to the
protections provided for by this part.
(3) ACCESS REQUIRED BY LAW.—The provision
of such access is required under—
(A) a Federal statute; or
(B) a treaty or other international agree-
ment applicable to the United States.
(b) EXCEPTIONS.—Subsection (a) does not apply
where the provision of access to protected health informa-
tion—
(1) is to a foreign public health authority;
(2) is authorized under section 2154 (relating
to next of kin and directory information), 2156 (re-
lating to health research), or 2157 (relating to emer-
gency circumstances); or
(3) is necessary for the purpose of providing for
payment for health care that has been provided to
an individual.
SEC. 2183. STANDARDS FOR ELECTRONIC DOCUMENTS AND
COMMUNICATIONS.
(a) STANDARDS.—Not later than July 1, 1996, the
Secretary, after notice and opportunity for public com-
ment and in consultation with appropriate private stand-
ard-setting organizations and other interested parties,
shall establish standards with respect to the creation,
430
Title II, Subtitle B
transmission, receipt, and maintenance, in electronic and
magnetic form, of each type of written document specifi-
cally required or authorized under this part. Where a sig-
nature is required under any other provision of this part,
such standards shall provide for an electronic or magnetic
substitute that serves the functional equivalent of a signa-
ture.
(b) TREATMENT OF COMPLYING DOCUMENTS AND
COMMUNICATIONS.—An electronic or magnetic document
or communication that satisfies the standards established
under subsection (a) with respect to such document or
communication shall be treated as satisfying the require-
ments of this part that apply to an equivalent written
document.
SEC. 2184. DUTIES AND AUTHORITIES OF AFFILIATED
PERSONS.
(a) REQUIREMENTS ON TRUSTEES.—
(1) PROVISION OF INFORMATION.—A health in-
formation trustee may provide protected health in-
formation to a person who, with respect to the trust-
ee, is an affiliated person and may permit the affili-
ated person to use such information, only for the
purpose of conducting, supporting, or facilitating an
activity that the trustee is authorized to undertake.
431
Title II, Subtitle B
(2) NOTICE TO AFFILIATED PERSON.—A health
information trustee shall notify a person who, with
respect to the trustee, is an affiliated person of any
duties under this part that the affiliated person is
required to fulfill and of any authorities under this
part that the affiliated person is authorized to
exercise.
(b) DUTIES OF AFFILIATED PERSONS.—
(1) IN
GENERAL.—An affiliated person shall
fulfill any duty under this part that—
(A) the health information trustee with
whom the person has an agreement or relation-
ship described in section 2140(c)(1)(C) is re-
quired to fulfill; and
(B) the person has undertaken to fulfill
pursuant to such agreement or relationship.
(2) CONSTRUCTION
OF
OTHER
SUBPARTS.—
With respect to a duty described in paragraph (1)
that an affiliated person is required to fulfill, the
person shall be considered a health information
trustee for purposes of this part. The person shall
be subject to subpart E (relating to enforcement)
with respect to any such duty that the person fails
to fulfill.
432
Title II, Subtitle B
(3) EFFECT ON TRUSTEE.—An agreement or
relationship with an affiliated person does not relieve
a health information trustee of any duty or liability
under this part.
(b) AUTHORITIES OF AFFILIATED PERSONS.—
(1) IN
GENERAL.—An affiliated person may
only exercise an authority under this part that the
health information trustee with whom the person is
affiliated may exercise and that the person has been
given by the trustee pursuant to an agreement or re-
lationship described in section 2140(c)(1)(C). With
respect to any such authority, the person shall be
considered a health information trustee for purposes
of this part. The person shall be subject to subpart
E (relating to enforcement) with respect to any act
that exceeds such authority.
(2) EFFECT ON TRUSTEE.—An agreement or
relationship with an affiliated person does not affect
the authority of a health information trustee under
this part.
SEC. 2185. AGENTS AND ATTORNEYS.
(a) IN GENERAL.—Except as provided in subsections
(b) and (c), a person who is authorized by law (on grounds
other than an individual’s minority), or by an instrument
recognized under law, to act as an agent, attorney, proxy,
433
Title II, Subtitle B
or other legal representative for a protected individual or
the estate of a protected individual, or otherwise to exer-
cise the rights of the individual or estate, may, to the ex-
tent authorized, exercise and discharge the rights of the
individual or estate under this part.
(b) HEALTH CARE POWER OF ATTORNEY.—A person
who is authorized by law (on grounds other than an indi-
vidual’s minority), or by an instrument recognized under
law, to make decisions about the provision of health care
to an individual who is incapacitated may exercise and dis-
charge the rights of the individual under this part to the
extent necessary to effectuate the terms or purposes of
the grant of authority.
(c) NO COURT DECLARATION.—If a health care pro-
vider determines that an individual, who has not been de-
clared to be legally incompetent, suffers from a medical
condition that prevents the individual from acting know-
ingly or effectively on the individual’s own behalf, the right
of the individual to authorize disclosure under section
2152 may be exercised and discharged in the best interest
of the individual by—
(1) a person described in subsection (b) with re-
spect to the individual;
(2) a person described in subsection (a) with re-
spect to the individual, but only if a person de-
434
Title II, Subtitle B
scribed in paragraph (1) cannot be contacted after
a reasonable effort;
(3) the next of kin of the individual, but only
if a person described in paragraph (1) or (2) cannot
be contacted after a reasonable effort; or
(4) the health care provider, but only if a per-
son described in paragraph (1), (2), or (3) cannot be
contacted after a reasonable effort.
SEC. 2186. MINORS.
(a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA-
BLE.—In the case of an individual—
(1) who is 18 years of age or older, all rights
of the individual shall be exercised by the individual,
except as provided in section 2185; or
(2) who, acting alone, has the legal capacity to
apply for and obtain health care and has sought
such care, the individual shall exercise all rights of
an individual under this part with respect to pro-
tected health information relating to such care.
(b) INDIVIDUALS UNDER 18.—Except as provided in
subsection (a)(2), in the case of an individual who is—
(1) under 14 years of age, all the individual’s
rights under this part shall be exercised through the
parent or legal guardian of the individual; or
435
Title II, Subtitle B
(2) 14, 15, 16, or 17 years of age, the right of
inspection (under section 2141), the right of amend-
ment (under section 2142), and the right to author-
ize disclosure of protected health information (under
section 2152) of the individual may be exercised
either by the individual or by the parent or legal
guardian of the individual.
SEC. 
2187. 
MAINTENANCE 
OF 
CERTAIN 
PROTECTED
HEALTH INFORMATION.
(a) IN GENERAL.—A State shall establish a process
under which the protected health information described in
subsection (b) that is maintained by a person described
in subsection (c) is delivered to, and maintained by, the
State or an individual or entity designated by the State.
(b) 
INFORMATION
DESCRIBED.—The 
protected
health information referred to in subsection (a) is pro-
tected health information that—
(1) is recorded in any form or medium;
(2) is created by—
(A) a health care provider; or
(B) a health benefit plan sponsor that pro-
vides benefits in the form of items and services
to enrollees and not in the form of reimburse-
ment for items and services; and
436
Title II, Subtitle B
(3) relates in any way to the past, present, or
future physical or mental health or condition or
functional status of a protected individual or the
provision of health care to a protected individual.
(c) PERSONS DESCRIBED.—A person referred to in
subsection (a) is any of the following:
(A) A health care facility previously located
in the State that has closed.
(B) A professional practice previously op-
erated by a health care provider in the State
that has closed.
(C) A health benefit plan sponsor that—
(i) previously provided benefits in the
form of items and services to enrollees in
the State; and
(ii) has ceased to do business.
Subpart E—Enforcement
SEC. 2191. CIVIL ACTIONS.
(a) IN GENERAL.—Any individual whose right under
this part has been knowingly or negligently violated—
(1) by a health information trustee, or any
other person, who is not described in paragraph (2),
(3), (4), or (5) may maintain a civil action for actual
damages and for equitable relief against the health
information trustee or other person;
437
Title II, Subtitle B
(2) by an officer or employee of the United
States while the officer or employee was acting with-
in the scope of the office or employment may main-
tain a civil action for actual damages and for equi-
table relief against the United States;
(3) by an officer or employee of any government
authority of a State that has waived its sovereign
immunity to a claim for damages resulting from a
violation of this part while the officer or employee
was acting within the scope of the office or employ-
ment may maintain a civil action for actual damages
and for equitable relief against the State govern-
ment;
(4) by an officer or employee of a government
of a State that is not described in paragraph (3)
may maintain a civil action for actual damages and
for equitable relief against the officer or employee;
or
(5) by an officer or employee of a government
authority while the officer or employee was not act-
ing within the scope of the office or employment
may maintain a civil action for actual damages and
for equitable relief against the officer or employee.
(b) KNOWING VIOLATIONS.—Any individual entitled
to recover actual damages under this section because of
438
Title II, Subtitle B
a knowing violation of a provision of this part (other than
subsection (c) or (d) of section 2151) shall be entitled to
recover the amount of the actual damages demonstrated
or $5000, whichever is greater.
(c) ACTUAL DAMAGES.—For purposes of this section,
the term ‘‘actual damages’’ includes damages paid to com-
pensate an individual for nonpecuniary losses such as
physical and mental injury as well as damages paid to
compensate for pecuniary losses.
(d) PUNITIVE DAMAGES; ATTORNEY’S FEES.—In
any action brought under this section in which the com-
plainant has prevailed because of a knowing violation of
a provision of this part (other than subsection (c) or (d)
of section 2151), the court may, in addition to any relief
awarded under subsections (a) and (b), award such puni-
tive damages as may be warranted. In such an action, the
court, in its discretion, may allow the prevailing party a
reasonable attorney’s fee (including expert fees) as part
of the costs, and the United States shall be liable for costs
the same as a private person.
(e) LIMITATION.—A civil action under this section
may not be commenced more than 2 years after the date
on which the aggrieved individual discovered the violation
or the date on which the aggrieved individual had a rea-
439
Title II, Subtitle B
sonable opportunity to discover the violation, whichever oc-
curs first.
(f) INSPECTION AND AMENDMENT.—If a health in-
formation trustee has established a formal internal proce-
dure that allows an individual who has been denied inspec-
tion or amendment of protected health information to ap-
peal the denial, the individual may not maintain a civil
action in connection with the denial until the earlier of—
(1) the date the appeal procedure has been ex-
hausted; or
(2) the date that is 4 months after the date on
which the appeal procedure was initiated.
(g) NO
LIABILITY
FOR
PERMISSIBLE
DISCLO-
SURES.—A health information trustee who makes a disclo-
sure of protected health information about a protected in-
dividual that is permitted by this part and not otherwise
prohibited by State or Federal statute shall not be liable
to the individual for the disclosure under common law.
(h) NO LIABILITY
FOR INSTITUTIONAL REVIEW
BOARD DETERMINATIONS.—If the members of a certified
institutional review board have in good faith determined
that an approved health research project is of sufficient
importance so as to outweigh the intrusion into the privacy
of an individual pursuant to section 2156(a)(1), the mem-
bers, the board, and the parent institution of the board
440
Title II, Subtitle B
shall not be liable to the individual as a result of such
determination.
(i) GOOD FAITH RELIANCE ON CERTIFICATION.—A
health information trustee who relies in good faith on a
certification by a government authority or other person
and discloses protected health information about an indi-
vidual in accordance with this part shall not be liable to
the individual for such disclosure.
SEC. 2192. CIVIL MONEY PENALTIES.
(a) VIOLATION.—Any health information trustee who
the Secretary determines has demonstrated a pattern or
practice of failure to comply with the provisions of this
part shall be subject, in addition to any other penalties
that may be prescribed by law, to a civil money penalty
of not more than $10,000 for each such failure. In deter-
mining the amount of any penalty to be assessed under
the procedures established under subsection (b), the Sec-
retary shall take into account the previous record of com-
pliance of the person being assessed with the applicable
requirements of this part and the gravity of the violation.
(b) PROCEDURES FOR IMPOSITION OF PENALTIES.—
The provisions of section 1128A of the Social Security Act
(other than subsections (a) and (b)) shall apply to the im-
position of a civil monetary penalty under this section in
the same manner as such provisions apply with respect
441
Title II, Subtitle B
to the imposition of a penalty under section 1128A of such
Act.
SEC. 2193. ALTERNATIVE DISPUTE RESOLUTION.
(a) IN GENERAL.—Not later than July 1, 1996, the
Secretary shall, by regulation, develop alternative dispute
resolution methods for use by individuals, health informa-
tion trustees, and other persons in resolving claims under
section 2191.
(b) EFFECT ON INITIATION OF CIVIL ACTIONS.—
(1) IN GENERAL.—Subject to paragraph (2),
the regulations established under subsection (a) may
provide that an individual alleging that a right of
the individual under this part has been violated shall
pursue at least one alternative dispute resolution
method developed under such subsection as a condi-
tion precedent to commencing a civil action under
section 2191.
(2) LIMITATION.—Such regulations may not re-
quire an individual to refrain from commencing a
civil action to pursue one or more alternative dispute
resolution method for a period that is greater than
6 months.
(3) SUSPENSION
OF
STATUTE
OF
LIMITA-
TIONS.—The regulations established by the Sec-
retary under subsection (a) may provide that a pe-
442
Title II, Subtitle B
riod in which an individual described in paragraph
(1) pursues (as defined by the Secretary) an alter-
native dispute resolution method under this section
shall be excluded in computing the period of limita-
tions under section 2191(e).
(c) METHODS.—The methods under subsection (a)
shall include at least the following:
(1) ARBITRATION.—The use of arbitration.
(2) MEDIATION.—The use of mediation.
(3) EARLY OFFERS OF SETTLEMENT.—The use
of a process under which parties make early offers
of settlement.
(d) STANDARDS FOR ESTABLISHING METHODS.—In
developing alternative dispute resolution methods under
subsection (a), the Secretary shall ensure that the meth-
ods promote the resolution of claims in a manner that—
(1) is affordable for the parties involved;
(2) provides for timely and fair resolution of
claims; and
(3) provides for reasonably convenient access to
dispute resolution for individuals.
SEC. 2194. AMENDMENTS TO CRIMINAL LAW.
(a) IN GENERAL.—Title 18, United States Code, is
amended by inserting after chapter 89 the following:
443
Title II, Subtitle B
‘‘CHAPTER 90—PROTECTED HEALTH
INFORMATION
‘‘Sec.
‘‘1831. Definitions.
‘‘1832. Obtaining protected health information under false pretenses.
‘‘1833. Monetary gain from obtaining protected health information under false
pretenses.
‘‘1834. Knowing and unlawful obtaining of protected health information.
‘‘1835. Monetary gain from knowing and unlawful obtaining of protected health
information.
‘‘1836. Knowing and unlawful use or disclosure of protected health information.
‘‘1837. Monetary gain from knowing and unlawful sale, transfer, or use of pro-
tected health information.
‘‘§ 1831. Definitions
‘‘As used in this chapter—
‘‘(1) the term ‘health information trustee’ has
the meaning given such term in section 2140(b)(6)
of the Affordable Health Care Now Act of 1994;
‘‘(2) the term ‘protected health information’ has
the meaning given such term in section 2140(a)(3)
of such Act; and
‘‘(3) the term ‘protected individual’ has the
meaning given such term in section 2140(a)(4) of
such Act.
‘‘§ 1832. 
Obtaining 
protected 
health 
information
under false pretenses
‘‘Whoever under false pretenses—
‘‘(1) requests or obtains protected health infor-
mation from a health information trustee; or
‘‘(2) obtains from a protected individual an au-
thorization for the disclosure of protected health in-
444
Title II, Subtitle B
formation about the individual maintained by a
health information trustee;
shall be fined under this title or imprisoned not more than
5 years, or both.
‘‘§ 1833. Monetary gain from obtaining protected
health information under false pretenses
‘‘Whoever under false pretenses—
‘‘(1) requests or obtains protected health infor-
mation from a health information trustee with the
intent to sell, transfer, or use such information for
profit or monetary gain; or
‘‘(2) obtains from a protected individual an au-
thorization for the disclosure of protected health in-
formation about the individual maintained by a
health information trustee with the intent to sell,
transfer, or use such authorization for profit or
monetary gain;
and knowingly sells, transfers, or uses such information
or authorization for profit or monetary gain shall be fined
under this title or imprisoned not more than 10 years, or
both.
‘‘§ 1834. Knowing and unlawful obtaining of pro-
tected health information
‘‘Whoever knowingly obtains protected health infor-
mation from a health information trustee in violation of
445
Title II, Subtitle B
part 2 of subtitle B of title II of the Affordable Health
Care Now Act of 1994, knowing that such obtaining is
unlawful, shall be fined under this title or imprisoned not
more than 5 years, or both.
‘‘§ 1835. Monetary gain from knowing and unlawful
obtaining of protected health information
‘‘Whoever knowingly—
‘‘(1) obtains protected health information from
a health information trustee in violation of part 2 of
subtitle B of title II of the Affordable Health Care
Now Act of 1994, knowing that such obtaining is
unlawful and with the intent to sell, transfer, or use
such information for profit or monetary gain; and
‘‘(2) knowingly sells, transfers, or uses such in-
formation for profit or monetary gain;
shall be fined under this title or imprisoned not more than
10 years, or both.
‘‘§ 1836. Knowing and unlawful use or disclosure of
protected health information
‘‘Whoever knowingly uses or discloses protected
health information in violation of part 2 of subtitle B of
title II of the Affordable Health Care Now Act of 1994,
knowing that such use or disclosure is unlawful, shall be
fined under this title or imprisoned not more than 5 years,
or both.
446
Title II, Subtitle B
‘‘§ 1837. Monetary gain from knowing and unlawful
sale, transfer, or use of protected health
information
‘‘Whoever knowingly sells, transfers, or uses pro-
tected health information in violation of part 2 of subtitle
B of title II of the Affordable Health Care Now Act of
1994, knowing that such sale, transfer, or use is unlawful,
shall be fined under this title or imprisoned not more than
10 years, or both.’’.
(b) CLERICAL AMENDMENT.—The table of chapters
for part I of title 18, United States Code, is amended by
inserting after the item relating to chapter 89 the
following:
‘‘90. Protected health information .............................................. 1831’’.
Subpart F—Amendments to Title 5, United States
Code
SEC. 2195. AMENDMENTS TO TITLE 5, UNITED STATES
CODE.
(a) NEW SUBSECTION.—Section 552a of title 5,
United States Code, is amended by adding at the end the
following:
‘‘(w) MEDICAL EXEMPTIONS.—The head of an agen-
cy that is a health information trustee (as defined in sec-
tion 2140(b)(6) of the Affordable Health Care Now Act
of 1994) shall promulgate rules, in accordance with the
requirements (including general notice) of subsections
447
Title II, Subtitle B
(b)(1), (b)(2), (b)(3), (c), and (e) of section 553 of this
title, to exempt a system of records within the agency, to
the extent that the system of records contains protected
health information (as defined in section 2140(a)(3) of
such Act), from all provisions of this section except sub-
sections (e)(1), (e)(2), subparagraphs (A) through (C) and
(E) through (I) of subsection (e)(4), and subsections
(e)(5), (e)(6), (e)(9), (e)(12), (l), (n), (o), (p), (q), (r), and
(u).’’.
(b) REPEAL.—Section 552a(f)(3) of title 5, United
States Code, is amended by striking ‘‘pertaining to him,’’
and all that follows through the semicolon and inserting
‘‘pertaining to the individual;’’.
Subpart G—Regulations, Research, and Education;
Effective Dates; Applicability; and Relationship
to Other Laws
SEC. 2196. REGULATIONS; RESEARCH AND EDUCATION.
(a) REGULATIONS.—Not later than July 1, 1996, the
Secretary shall prescribe regulations to carry out this part.
(b) RESEARCH
AND TECHNICAL SUPPORT.—The
Secretary may sponsor—
(1) research relating to the privacy and security
of protected health information;
(2) the development of consent forms governing
disclosure of such information; and
448
Title II, Subtitle B
(3) the development of technology to implement
standards regarding such information.
(c) EDUCATION.—The Secretary shall establish edu-
cation and awareness programs—
(1) to foster adequate security practices by
health information trustees;
(2) to train personnel of health information
trustees respecting the duties of such personnel with
respect to protected health information; and
(3) to inform individuals and employers who
purchase health care respecting their rights with re-
spect to such information.
SEC. 2197. EFFECTIVE DATES.
(a) IN GENERAL.—Except as provided in subsection
(b), this part, and the amendments made by this part,
shall take effect on January 1, 1997.
(b) PROVISIONS EFFECTIVE IMMEDIATELY.—A pro-
vision of this part shall take effect on the date of the en-
actment of this Act if the provision—
(1) imposes a duty on the Secretary to develop,
establish, or promulgate regulations, guidelines, no-
tices, statements, or education and awareness pro-
grams; or
(2) authorizes the Secretary to sponsor research
or the development of forms or technology.
449
Title II, Subtitle B
SEC. 2198. APPLICABILITY.
(a) PROTECTED HEALTH INFORMATION.—Except as
provided in subsections (b) and (c), the provisions of this
part shall apply to any protected health information that
is received, created, used, maintained, or disclosed by a
health information trustee in a State on or after January
1, 1997, regardless of whether the information existed or
was disclosed prior to such date.
(b) EXCEPTION.—
(1) IN GENERAL.—The provisions of this part
shall not apply to a trustee described in paragraph
(2), except with respect to protected health informa-
tion that is received by the trustee on or after Janu-
ary 1, 1997.
(2) APPLICABILITY.—A trustee referred to in
paragraph (1) is—
(A) a health researcher; or
(B) a person who, with respect to specific
protected health information, received the infor-
mation—
(i) pursuant to—
(I) section 2157 (relating to
emergency circumstances);
(II) section 2158 (relating to ju-
dicial and administrative purposes);
450
Title II, Subtitle B
(III) section 2159 (relating to
law enforcement); or
(IV) section 2160 (relating to
subpoenas, warrants, and search war-
rants); or
(ii) while acting in whole or in part in
the capacity of an officer or employee of a
person described in clause (i).
(c) AUTHORIZATIONS FOR DISCLOSURES.—An au-
thorization for the disclosure of protected health informa-
tion about a protected individual that is executed by the
individual before January 1, 1997, and is recognized and
valid under State law on December 31, 1996, shall remain
valid and shall not be subject to the requirements of sec-
tion 2152 until January 1, 1998, or the occurrence of the
date or event (if any) specified in the authorization upon
which the authorization expires, whichever occurs earlier.
SEC. 2199. RELATIONSHIP TO OTHER LAWS.
(a) STATE LAW.—Except as otherwise provided in
subsections (b), (c), (d), and (f), a State may not estab-
lish, continue in effect, or enforce any State law to the
extent that the law is inconsistent with, or imposes addi-
tional requirements with respect to, any of the following:
(1) A duty of a health information trustee
under this part.
451
Title II, Subtitle B
(2) An authority of a health information trustee
under this part to disclose protected health informa-
tion.
(3) A provision of subpart C (relating to access
procedures and challenge rights), subpart D (mis-
cellaneous provisions), or subpart (E) (relating to
enforcement).
(b) LAWS RELATING TO PUBLIC HEALTH AND MEN-
TAL HEALTH.—This part does not preempt, supersede, or
modify the operation of any State law regarding public
health or mental health to the extent that the law prohibits
or regulates a disclosure of protected health information
that is permitted under this part.
(c) CRIMINAL PENALTIES.—A State may establish
and enforce criminal penalties with respect to a failure to
comply with a provision of this part.
(d) PRIVILEGES.—A privilege that a person has
under law in a court of a State or the United States or
under the rules of any agency of a State or the United
States may not be diminished, waived, or otherwise af-
fected by—
(1) the execution by a protected individual of an
authorization for disclosure of protected health in-
formation under this part, if the authorization is ex-
452
Title II, Subtitle B
ecuted for the purpose of receiving health care or
providing for the payment for health care; or
(2) any provision of this part that authorizes
the disclosure of protected health information for the
purpose of receiving health care or providing for the
payment for health care.
(e) DEPARTMENT OF VETERANS AFFAIRS.—The lim-
itations on use and disclosure of protected health informa-
tion under this part shall not be construed to prevent any
exchange of such information within and among compo-
nents of the Department of Veterans Affairs that deter-
mine eligibility for or entitlement to, or that provide, bene-
fits under laws administered by the Secretary of Veterans
Affairs.
(f) CERTAIN DUTIES UNDER STATE OR FEDERAL
LAW.—This part shall not be construed to preempt, super-
sede, or modify the operation of any of the following:
(1) Any law that provides for the reporting of
vital statistics such as birth or death information.
(2) Any law requiring the reporting of abuse or
neglect information about any individual.
(3) Subpart II of part E of title XXVI of the
Public Health Service Act (relating to notifications
of emergency response employees of possible expo-
sure to infectious diseases).
453
Title II, Subtitle B
(4) The Americans with Disabilities Act of
1990.
(5) Any Federal or State statute that estab-
lishes a privilege for records used in health profes-
sional peer review activities.
(g) SECRETARIAL AUTHORITY.—
(1) SECRETARY OF HEALTH AND HUMAN SERV-
ICES.—A provision of this part does not preempt,
supersede, or modify the operation of section 543 of
the Public Health Service Act, except to the extent
that the Secretary of Health and Human Services
determines through regulations promulgated by such
Secretary that the provision provides greater protec-
tion for protected health information, and the rights
of protected individuals, than is provided under such
section 543.
(2) SECRETARY
OF
VETERANS
AFFAIRS.—A
provision of this part does not preempt, supersede,
or modify the operation of section 7332 of title 38,
United States Code, except to the extent that the
Secretary of Veterans Affairs determines through
regulations promulgated by such Secretary that the
provision provides greater protection for protected
health information, and the rights of protected indi-
viduals, than is provided under such section 7332.
454
Title II, Subtitle C
Subtitle C—Deduction for Cost of
Catastrophic Health Plan; Medi-
cal Savings Accounts
SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM
GROSS INCOME FOR COST OF CATASTROPHIC
HEALTH PLAN.
(a) IN GENERAL.—Subsection (a) of section 62 of the
Internal Revenue Code of 1986, as amended by title I,
is amended by inserting after paragraph (16) the following
new paragraph:
‘‘(17) MEDICAL EXPENSES ATTRIBUTABLE TO
CATASTROPHIC HEALTH PLAN COVERAGE.—
‘‘(A) IN GENERAL.—The deduction allowed
by section 213 to the extent attributable to cov-
erage under a catastrophic health plan (as de-
fined in section 220(c)(2)).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to coverage of an individual who
has 
coverage 
described 
in 
section
220(c)(1)(B)(i).’’.
(b) COORDINATION WITH DEDUCTION FOR OTHER
MEDICAL EXPENSES.—Subsection (a) of section 213 of
such Code is amended to read as follows:
‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be
allowed as a deduction the expenses paid during the tax-
455
Title II, Subtitle C
able year, not compensated by insurance or otherwise, for
medical care of the taxpayer, his spouse, or a dependent
(as defined in section 152) in an amount equal to the sum
of—
‘‘(1) the portion of such expenses attributable
to coverage under a catastrophic health plan (as de-
fined in section 220(c)(2)), and
‘‘(2) the excess of such expenses (other than ex-
penses described in paragraph (1)) over 7.5 percent
of the adjusted gross income of the taxpayer.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 2202. MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 220 as section 221 and by insert-
ing after section 219 the following new section:
‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—
‘‘(1) IN GENERAL.—In the case of an eligible
individual, there shall be allowed as a deduction the
applicable percentage of the amounts paid in cash
during the taxable year by or on behalf of such indi-
456
Title II, Subtitle C
vidual to a medical savings account for the benefit
of such individual and (if any) such individual’s
spouse and dependents if such spouse and depend-
ents are eligible individuals.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the term ‘applicable percentage’
means—
‘‘(A) 25 percent for taxable years begin-
ning in 1994 or 1995,
‘‘(B) 50 percent for taxable years begin-
ning in 1996 or 1997, and
‘‘(C) 100 percent for taxable years begin-
ning after 1997.
‘‘(b) LIMITATIONS.—
‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as
provided in regulations prescribed by the Secretary,
no deduction shall be allowed under subsection (a)
for amounts paid to any medical savings account for
the benefit of an individual, such individual’s spouse,
or any dependent of such individual or spouse if
such individual, spouse, or dependent is a beneficiary
of any other medical savings account.
‘‘(2) DOLLAR LIMITATION.—The amount allow-
able as a deduction under subsection (a) for the tax-
457
Title II, Subtitle C
able year shall not exceed whichever of the following
is the least:
‘‘(A) The lowest deductible under any cata-
strophic health plan providing coverage to any
beneficiary of the medical savings account.
‘‘(B) $2,500 ($5,000 if the catastrophic
health plan covering the taxpayer provides cov-
erage for more than 1 individual).
‘‘(C) The excess of—
‘‘(i) the applicable target actuarial
value for standard coverage established
under section 1102(c)(2) of the Affordable
Health Care Now Act of 1994, over
‘‘(ii) the deduction allowed by section
213 for the taxable year to the extent at-
tributable to coverage under a catastrophic
health plan.
Under rules of the Secretary, the target actuar-
ial value under subparagraph (C)(i) shall be
made applicable to individual and family cov-
erage. A beneficiary of such account who has
attained age 65 before the close of the taxable
year shall not be taken into account in deter-
mining the limitation under the preceding sen-
tence.
458
Title II, Subtitle C
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means any individual who is covered
under a catastrophic health plan throughout the
calendar year in which or with which the tax-
able year ends.
‘‘(B) LIMITATIONS.—Such term does not
include—
‘‘(i) an individual who is 65 years of
age or older, unless the individual is cov-
ered under a catastrophic health plan that
is a primary plan (within the meaning of
section 1862(b)(2)(A) of the Social Secu-
rity Act); and
‘‘(ii) an individual who has coverage
under a group health plan or health insur-
ance plan (other than a plan described in
1131(4)(B) of the Affordable Health Care
Now Act of 1994) that has either a de-
ductible that is less than the minimum de-
ductible required under a catastrophic
health plan (as defined in paragraph (2))
or has an actuarial value that is greater
than the value for MedAccess catastrophic
459
Title II, Subtitle C
coverage (as provided in section 1102(d) of
such Act).
‘‘(C) DEDUCTION NOT ALLOWED BEFORE
1999
TO
INDIVIDUALS
ELIGIBLE
FOR
EM-
PLOYER-SUBSIDIZED
COVERAGE.—In the case
of any taxable year beginning before January 1,
1999, such term does not include an individ-
ual—
‘‘(i) who is eligible to participate in
any subsidized health plan maintained by
an employer of such individual or the
spouse of such individual, or
‘‘(ii) who is (or whose spouse is) a
member of a subsidized class of employees
of an employer.
The rules of subparagraphs (B) and (C) of sec-
tion 213(f)(3) shall apply for purposes of this
preceding sentence.
‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur-
poses of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘cata-
strophic health plan’ means a health plan cover-
ing specified expenses incurred by an individual
for medical care for such individual and the
spouse and dependents (as defined in section
460
Title II, Subtitle C
152) of such individual only to the extent such
expenses covered by the plan for any calendar
year exceed $1,800 ($3,600 if the catastrophic
health plan covering the taxpayer provides cov-
erage for more than 1 individual) or such high-
er amounts as may be specified by the plan.
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—In
the case of any calendar year after 1994, each
dollar amount in subparagraph (A) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year.
If any increase under the preceding sentence is
not a multiple of $50, such increase shall be
rounded to the nearest multiple of $50.
‘‘(d) MEDICAL SAVINGS ACCOUNTS.—For purposes
of this section—
‘‘(1) MEDICAL SAVINGS ACCOUNT.—
‘‘(A) IN
GENERAL.—The term ‘medical
savings account’ means a trust created or orga-
nized in the United States exclusively for the
purpose of paying the medical expenses of the
beneficiaries of such trust, but only if the writ-
461
Title II, Subtitle C
ten governing instrument creating the trust
meets the following requirements:
‘‘(i) Except in the case of a rollover
contribution described in subsection (e)(4),
no contribution will be accepted unless it is
in cash, and contributions will not be ac-
cepted in excess of the amount allowed as
a deduction under this section for the tax-
able year (or would be allowed as such a
deduction but for subsection (c)(1)(C)).
‘‘(ii) The trustee is a bank (as defined
in section 408(n)) or another person who
demonstrates to the satisfaction of the Sec-
retary that the manner in which such per-
son will administer the trust will be con-
sistent with the requirements of this sec-
tion.
‘‘(iii) No part of the trust assets will
be invested in life insurance contracts.
‘‘(iv) The assets of the trust will not
be commingled with other property except
in a common trust fund or common invest-
ment fund.
462
Title II, Subtitle C
‘‘(v) The interest of an individual in
the balance in his account is nonforfeit-
able.
‘‘(vi) Under regulations prescribed by
the Secretary, rules similar to the rules of
section 401(a)(9) shall apply to the dis-
tribution of the entire interest of bene-
ficiaries of such trust.
‘‘(B) TREATMENT
OF
COMPARABLE
AC-
COUNTS
HELD
BY
INSURANCE
COMPANIES.—
For purposes of this section, an account held by
an insurance company in the United States
shall be treated as a medical savings account
(and such company shall be treated as a bank)
if—
‘‘(i) such account is part of a health
insurance plan that includes a catastrophic
health plan (as defined in subsection
(c)(2)),
‘‘(ii) such account is exclusively for
the purpose of paying the medical expenses
of the beneficiaries of such account who
are covered under such catastrophic health
plan, and
463
Title II, Subtitle C
‘‘(iii) the written instrument govern-
ing the account meets the requirements of
clauses (i), (v), and (vi) of subparagraph
(A).
‘‘(2) MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘medical ex-
penses’ means, with respect to an individual,
amounts paid or incurred by such individual
for—
‘‘(i) medical care (as defined in sec-
tion 213), or
‘‘(ii) long-term care (as defined in
paragraph (3)),
for such individual, the spouse of such individ-
ual, and any dependent (as defined in section
152) of such individual, but only to the extent
such amounts are not compensated for by in-
surance or otherwise.
‘‘(B) HEALTH PLAN COVERAGE MAY NOT
BE PURCHASED FROM ACCOUNT.—
‘‘(i) IN
GENERAL.—Such term shall
not include any amount paid for coverage
under a health plan.
‘‘(ii) EXCEPTION.—Clause (i) shall
not apply—
464
Title II, Subtitle C
‘‘(I) in the case of coverage of an
individual under 65 years of age
under a catastrophic health plan or
under a long-term care insurance
plan, or
‘‘(II) in the case of coverage of
an individual 65 years of age or older
under a medicare supplemental policy
or under a long-term care insurance
plan or for payment of premiums
under part A or part B of title XVIII
of the Social Security Act.
‘‘(3) LONG-TERM CARE.—
‘‘(A) IN GENERAL.—The term ‘long-term
care’ means diagnostic, preventive, therapeutic,
rehabilitative, maintenance, or personal care
services which are required by, and provided to,
a chronically ill individual, which have as their
primary purpose the direct provision of needed
assistance with 1 or more activities of daily liv-
ing (or the alleviation of the conditions neces-
sitating such assistance) that the individual is
certified under subparagraph (B) as being un-
able to perform, and which are provided in a
setting other than an acute care unit of a hos-
465
Title II, Subtitle C
pital pursuant to a continuing plan of care pre-
scribed by a physician or registered professional
nurse. Such term does not include food or lodg-
ing provided in an institutional or other setting,
or basic living services associated with the
maintenance of a household or participation in
community life, such as case management,
transportation or legal services, or the perform-
ance of home maintenance or household chores.
‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The
term ‘chronically ill individual’ means an indi-
vidual who is certified by a physician or reg-
istered professional nurse as being unable to
perform at least 3 activities of daily living with-
out substantial assistance from another individ-
ual. For purposes of this paragraph, the term
‘activities of daily living’ means bathing, dress-
ing, eating, toileting, transferring, and walking.
‘‘(4) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A contribution shall be deemed to be made
on the last day of the preceding taxable year if the
contribution is made on account of such taxable year
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
466
Title II, Subtitle C
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any amount paid or dis-
tributed out of a medical savings account shall be in-
cluded in the gross income of the individual for
whose benefit such account was established unless
such amount is used exclusively to pay the medical
expenses of such individual.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution of any contribution paid
during a taxable year to a medical savings account
to the extent that such contribution exceeds the
amount allowable as a deduction under subsection
(a) if—
‘‘(A) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for filing
such individual’s return for such taxable year,
and
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which it is received.
467
Title II, Subtitle C
‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED
FOR MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is a payment or distribution from a medical
savings account which is not used to pay the
medical expenses of the individual for whose
benefit the account was established shall be in-
creased by 10 percent of the amount of such
payment or distribution which is includible in
gross income under paragraph (1).
‘‘(B) ACCOUNT
BALANCE
LIMITATION.—
If—
‘‘(i) the tax imposed by this chapter is
required to be increased under subpara-
graph (A) by reason of a distribution, and
‘‘(ii) after such distribution, the ag-
gregate balance of all medical savings ac-
counts established for the benefit of the in-
dividual, is less than the amount of the de-
ductible under the catastrophic health plan
covering such individual,
subparagraph (A) shall be applied by substitut-
ing ‘50 percent’ for ‘10 percent’.
468
Title II, Subtitle C
‘‘(4) ROLLOVERS.—Paragraph (1) shall not
apply to any amount paid or distributed out of a
medical savings account to the individual for whose
benefit the account is maintained if the entire
amount received (including money and any other
property) is paid into another medical savings ac-
count for the benefit of such individual not later
than the 60th day after the day on which he received
the payment or distribution.
‘‘(5) PENALTY
FOR
MANDATORY
DISTRIBU-
TIONS NOT MADE FROM ACCOUNT.—
‘‘(A) IN GENERAL.—If during any taxable
year—
‘‘(i) there is a payment of a manda-
tory distribution expense incurred by a
beneficiary of a medical savings account,
and
‘‘(ii) the person making such payment
is not reimbursed for such payment with a
distribution from such account before the
60th day after such payment,
the taxpayer’s tax imposed by this chapter for
such taxable year shall be increased by 100 per-
cent of the excess of the amount of such pay-
469
Title II, Subtitle C
ment over the amount of reimbursement made
before such 60th day.
‘‘(B) 
MANDATORY
DISTRIBUTION
EX-
PENSE.—For purposes of subparagraph (A),
the term ‘mandatory distribution expense’
means—
‘‘(i) any expense incurred which may
be counted towards a deductible, or for a
copayment or coinsurance, under the cata-
strophic health plan covering such bene-
ficiary, and
‘‘(ii) in the case of a beneficiary who
has attained age 65, any expense for cov-
erage 
described 
in 
subsection
(d)(2)(B)(ii)(II) and any expense incurred
which may be counted toward a deductible,
or for a copayment or coinsurance, under
title XVIII of the Social Security Act.
‘‘(f) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—Any medical sav-
ings account is exempt from taxation under this sub-
title unless such account has ceased to be a medical
savings account by reason of paragraph (2) or (3).
Notwithstanding the preceding sentence, any such
account shall be subject to the taxes imposed by sec-
470
Title II, Subtitle C
tion 511 (relating to imposition of tax on unrelated
business income of charitable, etc. organizations).
‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN-
GAGES IN PROHIBITED TRANSACTION.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the individual for whose benefit the
medical savings account was established, such
individual engages in any transaction prohibited
by section 4975 with respect to the account, the
account ceases to be a medical savings account
as of the first day of that taxable year.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a medical savings account by
reason of subparagraph (A) on the first day of
any taxable year, paragraph (1) of subsection
(e) shall be applied as if there were a distribu-
tion on such first day in an amount equal to
the fair market value (on such first day) of all
assets in the account (on such first day) and no
portion of such distribution were used to pay
medical expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a medical savings account was estab-
471
Title II, Subtitle C
lished uses the account or any portion thereof as se-
curity for a loan, the portion so used is treated as
distributed to that individual and not used to pay
medical expenses.
‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if—
‘‘(1) the assets of such account are held by a
bank (as defined in section 408(n)) or another per-
son who demonstrates to the satisfaction of the Sec-
retary that the manner in which he will administer
the account will be consistent with the requirements
of this section, and
‘‘(2) the custodial account would, except for the
fact that it is not a trust, constitute a medical sav-
ings account described in subsection (d).
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(h) REPORTS.—The trustee of a medical savings ac-
count shall make such reports regarding such account to
the Secretary and to the individual for whose benefit the
account is maintained with respect to contributions, dis-
tributions, and such other matters as the Secretary may
require under regulations. The reports required by this
472
Title II, Subtitle C
subsection shall be filed at such time and in such manner
and furnished to such individuals at such time and in such
manner as may be required by those regulations.’’
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by inserting after
paragraph (17) the following new paragraph:
‘‘(18) MEDICAL SAVINGS ACCOUNTS.—The de-
duction allowed by section 220.’’
(c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC-
COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC-
TION.—Section 213 of such Code is amended by adding
at the end thereof the following new subsection:
‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC-
COUNTS.—The amount otherwise taken into account
under subsection (a) as expenses paid for medical care
shall be reduced by the amount (if any) of the distribu-
tions from any medical savings account of the taxpayer
during the taxable year which is not includible in gross
income by reason of being used for medical care.’’
(d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO
MEDICAL
SAVINGS
ACCOUNTS
FROM
EMPLOYMENT
TAXES.—
(1) SOCIAL SECURITY TAXES.—
473
Title II, Subtitle C
(A) Subsection (a) of section 3121 of such
Code is amended by striking ‘‘or’’ at the end of
paragraph (20), by striking the period at the
end of paragraph (21) and inserting ‘‘; or’’, and
by inserting after paragraph (21) the following
new paragraph:
‘‘(22) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220.’’
(B) Subsection (a) of section 209 of the
Social Security Act is amended by striking ‘‘or’’
at the end of paragraph (17), by striking the
period at the end of paragraph (18) and insert-
ing ‘‘; or’’, and by inserting after paragraph
(18) the following new paragraph:
‘‘(19) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220 of the Internal Revenue Code of
1986.’’
474
Title II, Subtitle C
(2) RAILROAD RETIREMENT TAX.—Subsection
(e) of section 3231 of such Code is amended by add-
ing at the end thereof the following new paragraph:
‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL
SAVINGS ACCOUNTS.—The term ‘compensation’ shall
not include any payment made to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220.’’
(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 of such Code is amended by striking
‘‘or’’ at the end of paragraph (15), by striking the
period at the end of paragraph (16) and inserting ‘‘;
or’’, and by inserting after paragraph (16) the fol-
lowing new paragraph:
‘‘(17) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220.’’
(4) WITHHOLDING TAX.—Subsection (a) of sec-
tion 3401 of such Code is amended by striking ‘‘or’’
at the end of paragraph (19), by striking the period
at the end of paragraph (20) and inserting ‘‘; or’’,
475
Title II, Subtitle C
and by inserting after paragraph (20) the following
new paragraph:
‘‘(21) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220.’’
(e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of such Code (relating to tax on excess contributions to
individual retirement accounts, certain section 403(b) con-
tracts, and certain individual retirement annuities) is
amended—
(1) by inserting ‘‘MEDICAL
SAVINGS
AC-
COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of
such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a medical savings account (within the
meaning of section 220(d)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
476
Title II, Subtitle C
‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS
ACCOUNTS.—For purposes of this section, in the case of
a medical savings account (within the meaning of section
220(d)), the term ‘excess contributions’ means the amount
by which the amount contributed for the taxable year to
the account exceeds the amount excludable from gross in-
come under section 220 for such taxable year. For pur-
poses of this subsection, any contribution which is distrib-
uted out of the medical savings account in a distribution
to which section 220(e)(2) applies shall be treated as an
amount not contributed.’’
(f) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC-
COUNTS.—An individual for whose benefit a medical
savings account (within the meaning of section
220(d)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a medi-
477
Title II, Subtitle C
cal savings account by reason of the application of
section 220(e)(2)(A) to such account.’’, and
(2) by inserting ‘‘or a medical savings account
described in section 220(d)’’ in subsection (e)(1)
after ‘‘described in section 408(a)’’.
(g) FAILURE TO PROVIDE REPORTS ON MEDICAL
SAVINGS ACCOUNTS.—Section 6693 of such Code (relat-
ing to failure to provide reports on individual retirement
account or annuities) is amended—
(1) by inserting ‘‘OR ON MEDICAL SAVINGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 220(h) to
file a report regarding a medical savings account at
the time and in the manner required by such section
shall pay a penalty of $50 for each failure unless it
is shown that such failure is due to reasonable
cause.’’
(h) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following:
‘‘Sec. 220. Medical savings accounts.
‘‘Sec. 221. Cross reference.’’
478
Title II, Subtitle D
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, certain 403(b)
contracts, and certain individual retirement annu-
ities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on medical savings accounts’’ after ‘‘annuities’’ in
the item relating to section 6693.
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
Subtitle D—Anti-Fraud
PART 
1—ESTABLISHMENT 
OF 
ALL-PAYER
HEALTH CARE FRAUD AND ABUSE CONTROL
PROGRAM
SEC. 2301. ALL-PAYER HEALTH CARE FRAUD AND ABUSE
CONTROL PROGRAM.
(a) IN GENERAL.—Not later than January 1, 1996,
the Attorney General shall establish a program—
(1) to coordinate Federal, State, and local law
enforcement programs to control fraud and abuse
with respect to the delivery of and payment for
health care in the United States,
479
Title II, Subtitle D
(2) to conduct investigations, audits, evalua-
tions, and inspections relating to the delivery of and
payment for health care in the United States, and
(3) in consultation with the Inspector General
of the Department of Health and Human Services,
to facilitate the enforcement of the provisions of sec-
tions 1128, 1128A, and 1128B of the Social Secu-
rity Act and other statutes applicable to health care
fraud and abuse.
(b) COORDINATION
WITH
LAW
ENFORCEMENT
AGENCIES.—In carrying out the program under sub-
section (a), the Attorney General shall consult with, and
arrange for the sharing of data and resources with Fed-
eral, State and local law enforcement agencies, State Med-
icaid Fraud Control Units, and State agencies responsible
for the licensing and certification of health care providers.
(c) COORDINATION WITH THIRD PARTY INSUR-
ERS.—In carrying out the program established under sub-
section (a), the Attorney General shall consult with, and
arrange for the sharing of data with representatives of pri-
vate sponsors of health benefit plans and other providers
of health insurance.
(d) REGULATIONS.—
480
Title II, Subtitle D
(1) IN GENERAL.—The Attorney General shall
by regulation establish standards to carry out the
program under subsection (a).
(2) INFORMATION STANDARDS.—
(A) IN
GENERAL.—Such standards shall
include standards relating to the furnishing of
information by health insurers (including self-
insured health benefit plans), providers, and
others to enable the Attorney General to carry
out the program (including coordination with
law enforcement agencies under subsection (b)
and third party insurers under subsection (c)).
(B) CONFIDENTIALITY.—Such standards
shall include procedures to assure that such in-
formation is provided and utilized in a manner
that protects the confidentiality of the informa-
tion and the privacy of individuals receiving
health care services.
(C) QUALIFIED IMMUNITY FOR PROVIDING
INFORMATION.—The 
provisions 
of 
section
1157(a) of the Social Security Act (relating to
limitation on liability) shall apply to a person
providing information to the Attorney General
under the program under this section, with re-
spect to the Attorney General’s performance of
481
Title II, Subtitle D
duties under the program, in the same manner
as such section applies to information provided
to organizations with a contract under part B
of title XI of such Act, with respect to the per-
formance of such a contract.
SEC. 2302. AUTHORIZATION OF ADDITIONAL APPROPRIA-
TIONS FOR INVESTIGATORS AND OTHER PER-
SONNEL.
In addition to any other amounts authorized to be
appropriated to the Attorney General for health care anti-
fraud and abuse activities for a fiscal year, there are au-
thorized to be appropriated such sums as may be nec-
essary to enable the Attorney General to conduct inves-
tigations of allegations of health care fraud and otherwise
carry out the program established under section 2301 in
a fiscal year.
SEC. 2303. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE
TRUST FUND.
(a) ESTABLISHMENT.—There is hereby created on
the books of the Treasury of the United States a trust
fund to be known as the ‘‘Anti-Fraud and Abuse Trust
Fund’’ (in this section referred to as the ‘‘Trust Fund’’).
The Trust Fund shall consist of such amounts as may be
deposited in, or appropriated to, such Trust Fund as pro-
482
Title II, Subtitle D
vided in this part and section 1128A(f)(3) of the Social
Security Act.
(b) MANAGEMENT.—
(1) IN GENERAL.—The Trust Fund shall be
managed by the Attorney General through a Manag-
ing Trustee designated by the Attorney General.
(2) INVESTMENT OF FUNDS.—It shall be the
duty of the Managing Trustee to invest such portion
of the Trust Fund as is not, in the trustee’s judg-
ment, required to meet current withdrawals. Such
investments may be made only in interest-bearing
obligations of the United States or in obligations
guaranteed as to both principal and interest by the
United States. For such purpose such obligations
may be acquired on original issue at the issue price,
or by purchase of outstanding obligations at market
price. The purposes for which obligations of the
United States may be issued under chapter 31 of
title 31, United States Code, are hereby extended to
authorize the issuance at par of public-debt obliga-
tions for purchase by the Trust Fund. Such obliga-
tions issued for purchase by the Trust Fund shall
have maturities fixed with due regard for the needs
of the Trust Fund and shall bear interest at a rate
equal to the average market yield (computed by the
483
Title II, Subtitle D
Managing Trustee on the basis of market quotations
as of the end of the calendar month next preceding
the date of such issue) on all marketable interest-
bearing obligations of the United States then form-
ing a part of the public debt which are not due or
callable until after the expiration of 4 years from the
end of such calendar month, except that where such
average is not a multiple of 1⁄8 of 1 percent, the rate
of interest on such obligations shall be the multiple
of 1⁄8 of 1 percent nearest such market yield. The
Managing Trustee may purchase other interest-bear-
ing obligations of the United States or obligations
guaranteed as to both principal and interest by the
United States, on original issue or at the market
price, only where the Trustee determines that the
purchase of such other obligations is in the public
interest.
(3) Any obligations acquired by the Trust Fund
(except public-debt obligations issued exclusively to
the Trust Fund) may be sold by the Managing
Trustee at the market price, and such public-debt
obligations may be redeemed at par plus accrued in-
terest.
(4) The interest on, and the proceeds from the
sale or redemption of, any obligations held in the
484
Title II, Subtitle D
Trust Fund shall be credited to and form a part of
the Trust Fund.
(5) The receipts and disbursements of the At-
torney General in the discharge of the functions of
the Attorney General shall not be included in the to-
tals of the budget of the United States Government.
For purposes of part C of the Balanced Budget and
Emergency Deficit Control Act of 1985, the Attor-
ney General and the Trust Fund shall be treated in
the same manner as the Federal Retirement Thrift
Investment Board and the Thrift Savings Fund, re-
spectively. The United States is not liable for any
obligation or liability incurred by the Trust Fund.
(c) USE OF FUNDS.—Of the amounts in the Trust
Fund—
(1) not less than 60 percent shall be used to
support educational activities to prevent the occur-
rence of violations of anti-fraud and abuse laws, in-
cluding the issuance of advisory opinions under sec-
tion 1129 and 1877(i) of the Social Security Act (as
added by part 4) and fraud alerts, seminars for pro-
viders, and program updates; and
(2) any amounts remaining after use for activi-
ties under paragraph (1) shall be used to assist the
Attorney General in carrying out the all-payor fraud
485
Title II, Subtitle D
and abuse control program established under section
2301(a) in the fiscal year involved.
(d) DEPOSIT
OF FEDERAL HEALTH ANTI-FRAUD
AND ABUSE PENALTIES INTO TRUST FUND.—Section
1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–
7a(f)(3)) is amended by striking ‘‘as miscellaneous re-
ceipts of the Treasury of the United States’’ and inserting
‘‘in the Anti-Fraud and Abuse Trust Fund established
under section 2303(a) of the Affordable Health Care Now
Act of 1994’’.
(e) USE OF FEDERAL HEALTH ANTI-FRAUD AND
ABUSE PENALTIES TO REPAY BENEFICIARIES FOR COST-
SHARING.—Section 1128A(f) of the Social Security Act
(42 U.S.C. 1320a–7a(f)) is amended in the matter preced-
ing paragraph (1) by striking ‘‘Secretary and disposed of
as follows:’’ and inserting the following: ‘‘Secretary. If the
person against whom such a penalty or assessment was
assessed collected a payment from an individual for pro-
viding to the individual the service that is the subject of
the penalty or assessment, the Secretary shall pay a por-
tion of the amount recovered to the individual in the na-
ture of restitution in an amount equal to the payment so
collected. The Secretary shall dispose of any remaining
amounts recovered under this section as follows:’’.
486
Title II, Subtitle D
PART 2—REVISIONS TO CURRENT SANCTIONS
FOR FRAUD AND ABUSE
SEC. 2311. MANDATORY EXCLUSION FROM PARTICIPATION
IN MEDICARE AND STATE HEALTH CARE PRO-
GRAMS.
(a) INDIVIDUAL CONVICTED OF FELONY RELATING
TO FRAUD.—
(1) IN GENERAL.—Section 1128(a) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)) is amend-
ed by adding at the end the following new para-
graph:
‘‘(3) 
FELONY
CONVICTION
RELATING
TO
FRAUD.—Any individual or entity that has been con-
victed, under Federal or State law, in connection
with the delivery of a health care item or service on
or after the date of the enactment of this paragraph,
or with respect to any act or omission on or after
such date in a program (other than those specifically
described in paragraph (1)) operated by or financed
in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting
of a felony relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct.’’.
487
Title II, Subtitle D
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))
is amended—
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
(b) INDIVIDUAL CONVICTED OF FELONY RELATING
TO CONTROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)), as amend-
ed by subsection (a), is amended by adding at the
end the following new paragraph:
‘‘(4) FELONY CONVICTION RELATING TO CON-
TROLLED
SUBSTANCE.—Any individual or entity
that has been convicted, under Federal or State law,
of a criminal offense consisting of a felony relating
to the unlawful manufacture, distribution, prescrip-
tion, or dispensing of a controlled substance.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))
is amended—
488
Title II, Subtitle D
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
SEC. 2312. ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND
ENTITIES SUBJECT TO PERMISSIVE EXCLU-
SION FROM MEDICARE AND STATE HEALTH
CARE PROGRAMS.
Section 1128(c)(3) of the Social Security Act (42
U.S.C. 1320a–7(c)(3)) is amended by adding at the end
the following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraph (1), (2), or (3) of subsection (b),
the period of the exclusion shall be 3 years, unless the
Secretary determines in accordance with published regula-
tions that a shorter period is appropriate because of miti-
gating circumstances or that a longer period is appro-
priate because of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or
entity under subsection (b)(4) or (b)(5), the period of the
exclusion shall not be less than the period during which
the individual’s or entity’s license to provide health care
489
Title II, Subtitle D
is revoked, suspended, or surrendered, or the individual
or the entity is excluded or suspended from a Federal or
State health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
SEC. 2313. REVISIONS TO CRIMINAL PENALTIES.
(a) CLARIFICATION OF DISCOUNT EXCEPTION TO
ANTI-KICKBACK PROVISIONS.—Section 1128B(b)(3)(A)
of the Social Security Act (42 U.S.C. 1320a–7b(b)(3)(A))
is amended—
(1) by inserting ‘‘(regardless of its timing or
availability)’’ after ‘‘in price’’; and
(2) by striking ‘‘program;’’ and inserting ‘‘pro-
gram and is not paid in the form of currency or
coin;’’.
(b) EXEMPTION FROM ANTI-KICKBACK PENALTIES
FOR CERTAIN MANAGED CARE ARRANGEMENTS.—Section
1128B(b)(3) of such 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
490
Title II, Subtitle D
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) any reduction in cost sharing or increased
benefits given to an individual, any amounts paid to
a provider for an item or service furnished to an in-
dividual, or any discount or reduction in price given
by the provider for such an item or service, if—
‘‘(i) the item or service is provided through
an organization described in section 1877(b)(3),
or
‘‘(ii) the item or service is provided
through such an organization on behalf of an-
other entity (including but not limited to a self-
insured employer or indemnity plan) that as-
sumes financial risk for the provision of the
item or service.’’.
(c) EXEMPTION FROM ANTI-KICKBACK PENALTIES
FOR CERTAIN PROTECTED FINANCIAL RELATIONSHIPS.—
Section 1128B(b)(3) of such Act (42 U.S.C. 1320a–
7b(b)(3)), as amended by subsection (b), is further amend-
ed—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’; and
491
Title II, Subtitle D
(3) by adding at the end the following new sub-
paragraph:
‘‘(G) any amount in a financial relationship of
a physician (or an immediate family member of such
physician) with an entity specified in section
1877(a)(2), if section 1877(a)(1) does not apply to
that amount or financial relationship.’’.
SEC. 2314. REVISIONS TO LIMITATIONS ON PHYSICIAN
SELF-REFERRAL.
(a) CLARIFICATION OF COVERAGE OF RADIOLOGY OR
DIAGNOSTIC SERVICES.—Section 1877(h)(6) of the Social
Security Act (42 U.S.C. 1395nn(h)(6)) is amended by
striking subparagraph (D).
(b) NEW EXCEPTION FOR SHARED FACILITY SERV-
ICES.—Section 
1877(b) 
of 
such 
Act 
(42 
U.S.C.
1395nn(b)) is amended—
(1) by redesignating paragraph (4) as para-
graph (5); and
(2) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) SHARED FACILITY SERVICES.—
‘‘(A) IN
GENERAL.—In the case of a
shared facility service of a shared facility—
‘‘(i) that is furnished—
492
Title II, Subtitle D
‘‘(I) personally by the referring
physician who is a shared facility phy-
sician or personally by an individual
directly employed by such a physician,
‘‘(II) by a shared facility in a
building in which the referring physi-
cian furnishes substantially all of the
services of the physician that are un-
related to the furnishing of shared fa-
cility services, and
‘‘(III) to a patient of a shared fa-
cility physician; and
‘‘(ii) that is billed by the referring
physician.
‘‘(B) SHARED FACILITY RELATED DEFINI-
TIONS.—
‘‘(i) SHARED
FACILITY
SERVICE.—
The term ‘shared facility service’ means,
with respect to a shared facility, a des-
ignated health service furnished by the fa-
cility to patients of shared facility physi-
cians.
‘‘(ii) SHARED
FACILITY.—The term
‘shared facility’ means an entity that fur-
493
Title II, Subtitle D
nishes shared facility services under a
shared facility arrangement.
‘‘(iii) SHARED FACILITY PHYSICIAN.—
The term ‘shared facility physician’ means,
with respect to a shared facility, a physi-
cian who has a financial relationship under
a shared facility arrangement with the fa-
cility.
‘‘(iv) SHARED
FACILITY
ARRANGE-
MENT.—The term ‘shared facility arrange-
ment’ means, with respect to the provision
of shared facility services in a building, a
financial arrangement—
‘‘(I) which is only between physi-
cians who are providing services (un-
related to shared facility services) in
the same building,
‘‘(II) in which the overhead ex-
penses of the facility are shared, in
accordance with methods previously
determined by the physicians in the
arrangement, among the physicians in
the arrangement, and
494
Title II, Subtitle D
‘‘(III) which, in the case of a cor-
poration, is wholly owned and con-
trolled by shared facility physicians.’’.
(c) REVISION TO RURAL PROVIDER EXCEPTION.—
Section 1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2))
is amended by striking ‘‘substantially all’’ and inserting
‘‘not less than 75 percent (as determined in accordance
with regulations of the Secretary)’’.
(d) 
CLARIFICATION
OF
REFERRALS
BY
NEPHROLOGISTS.—Section 1877(h)(5)(C) of such Act (42
U.S.C. 1395nn(H)(5)(C)) is amended—
(1) by striking ‘‘and a request’’ and inserting
‘‘a request’’;
(2) by inserting after ‘‘radiation therapy,’’ the
following: ‘‘and a request by a nephrologist for items
or services related to renal dialysis,’’; and
(3) by striking ‘‘or radiation oncologist’’ and in-
serting ‘‘radiation oncologist, or nephrologist’’.
(e) REVISION OF REPORTING REQUIREMENTS.—Sec-
tion 1877(f) of such Act (42 U.S.C. 1395nn(f)) is
amended—
(1) by striking ‘‘Each entity’’ and all that fol-
lows through paragraph (2) and inserting the follow-
ing: ‘‘The Secretary may require each entity (other
than a physician or physician group practice) provid-
495
Title II, Subtitle D
ing designated health services to provide the Sec-
retary with the following information concerning the
entity’s ownership, investment, and compensation ar-
rangements:
‘‘(1) the designated health services provided by
the entity; and
‘‘(2) the names and unique physician identifier
numbers of all physicians with an ownership or in-
vestment interest (as described in subsection
(a)(2)(A)) or with a compensation interest (as de-
scribed in subsection (a)(2)(B)) in the entity, or
whose immediate relatives have such an ownership,
investment, or compensation interest in the entity.’’;
and
(2) by striking the fifth sentence.
(f) EXCEPTION FOR CERTAIN MANAGED CARE AR-
RANGEMENTS.—Section 1877(b)(3) of such Act (42
U.S.C. 1395nn(b)(3)) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(C);
(2) by striking the period at the end of sub-
paragraph (D) and inserting a comma; and
(3) by adding at the end the following new sub-
paragraphs:
496
Title II, Subtitle D
‘‘(E) with a contract with a State to pro-
vide services under the State plan under title
XIX (in accordance with section 1903(m)); or
‘‘(F) which meets State regulatory require-
ments applicable to health maintenance organi-
zations and which—
‘‘(i) provides designated health serv-
ices directly or through contractual ar-
rangements with providers;
‘‘(ii) assumes financial risk for the
provision of services or provides services on
behalf of another individual or entity (in-
cluding but not limited to a self-insured
employer, indemnity plan, physician, or
physician group) that assumes financial
risk for the provision of the item or serv-
ice; and
‘‘(iii) subjects the services to a pro-
gram of utilization review offered by an or-
ganization described in a preceding sub-
paragraph, an organization meeting State
regulatory requirements applicable to utili-
zation review, or an organization accred-
ited to perform utilization review consid-
ered appropriate by the Secretary.’’.
497
Title II, Subtitle D
(g) PREEMPTION OF STATE LAW.—Section 1877(g)
of such Act (42 U.S.C. 1395nn(g)) is amended by adding
at the end the following new paragraph:
‘‘(6) PREEMPTION OF STATE LAW.—The provi-
sions of this section shall supersede any State law to
the extent State law prohibits a physician from mak-
ing a referral, or an entity from presenting a bill, for
the furnishing of a service which is not subject to
the restrictions applicable under paragraph (1).’’.
(h) REVISION OF EFFECTIVE DATE EXCEPTION PRO-
VISION.—Section 13562(b)(2) of the Omnibus Budget
Reconciliation Act of 1993 is amended by striking sub-
paragraphs (A) and (B) and inserting the following:
‘‘(A) the second sentence of subsection
(a)(2), and subsections (b)(2)(B) and (d)(2), of
section 1877 of the Social Security Act (as in
effect on the day before the date of the enact-
ment of this Act) shall apply instead of the cor-
responding provisions in section 1877 (as
amended by this Act);
‘‘(B) section 1877(b)(4) of the Social Se-
curity Act (as in effect on the day before the
date of the enactment of this Act) shall apply;
‘‘(C) 
the 
requirements 
of 
section
1877(c)(2) of the Social Security Act (as
498
Title II, Subtitle D
amended by this Act) shall not apply to any se-
curities of a corporation that meets the require-
ments of section 1877(c)(2) of the Social Secu-
rity Act (as in effect on the day before the date
of the enactment of this Act);
‘‘(D) section 1877(e)(3) of the Social Secu-
rity Act (as amended by this Act) shall apply,
except that it shall not apply to any arrange-
ment that meets the requirements of subsection
(e)(2) or subsection (e)(3) of section 1877 of
the Social Security Act (as in effect on the day
before the date of the enactment of this Act);
‘‘(E) the requirements of clauses (iv) and
(v) of section 1877(h)(4)(A), and of clause (i)
of section 1877(h)(4)(B), of the Social Security
Act (as amended by this Act) shall not apply;
and
‘‘(F) section 1877(h)(4)(B) of the Social
Security Act (as in effect on the day before the
date of the enactment of this Act) shall apply
instead of section 1877(h)(4)(A)(ii) of such Act
(as amended by this Act).’’.
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to referrals made on or after Janu-
ary 1, 1995, except that the amendments made by sub-
499
Title II, Subtitle D
section (h) shall apply as if included in the enactment of
the Omnibus Budget Reconciliation Act of 1993.
SEC. 2315. MEDICARE HEALTH MAINTENANCE ORGANIZA-
TIONS.
(a) STUDY ON COSTS OF PEER REVIEW CONTRACTS
FOR MEDICARE HMOS.—The Comptroller General shall
conduct a study of the costs incurred by eligible organiza-
tions with risk-sharing contracts under section 1876(b) of
the Social Security Act of complying with the requirement
of entering into a written agreement with an entity provid-
ing peer review services with respect to services provided
by the organization, together with an analysis of how in-
formation generated by such entities is used by the Sec-
retary of Health and Human Services to assess the quality
of services provided by such eligible organizations.
(b) REPORT TO CONGRESS.—Not later than July 1,
1997, the Comptroller General shall submit a report to
the Committee on Ways and Means and the Committee
on Energy and Commerce of the House of Representatives
and the Committee on Finance and the Special Committee
on Aging of the Senate on the study conducted under sub-
section (a).
SEC. 2316. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this part shall take effect January 1, 1996.
500
Title II, Subtitle D
PART 3—AMENDMENTS TO CRIMINAL LAW
SEC. 2321. PENALTIES FOR HEALTH CARE FRAUD.
(a) IN GENERAL.—
(1) FINES AND IMPRISONMENT FOR HEALTH
CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,
United States Code, is amended by adding at the
end the following:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever knowingly executes, or attempts to exe-
cute, a scheme or artifice—
‘‘(1) to defraud any health care plan or other
person, in connection with the delivery of or pay-
ment for health care benefits, items, or services; or
‘‘(2) to obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the
money or property owned by, or under the custody
or control of, any health care plan, or person in con-
nection with the delivery of or payment for health
care benefits, items, or services;
shall be guilty of a felony, and fined under this title or
imprisoned not more than 5 years, or both.
‘‘(b) In determining the amount or scope of any pen-
alty or assessment, the court shall take into account—
‘‘(1) the nature of the false or fraudulent
claims and the circumstances under which they are
presented;
501
Title II, Subtitle D
‘‘(2) the degree of culpability and history of
prior offenses by the convicted health care provider;
‘‘(3) the extent to which restitution is paid; and
‘‘(4) such other matters as justice may require.
‘‘(c) A principal is liable for penalties and assess-
ments under this section for the acts of the principal’s
agents acting within the scope of the agency.
‘‘(d) For purposes of this section, the term ‘health
care plan’ means a Federally-funded public program or
private program for the delivery of or payment for health
care items or services.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of chapter 63 of title 18,
United States Code, is amended by adding at the
end the following:
‘‘1347. Health care fraud.’’.
SEC. 2322. REWARDS FOR INFORMATION LEADING TO
PROSECUTION AND CONVICTION.
Section 3059 of title 18, United States Code, is
amended by adding at the end the following new sub-
section:
‘‘(c)(1) In special circumstances and in the Attorney
General’s sole discretion, the Attorney General may make
a payment of up to $10,000 to a person who furnishes
information unknown to the Government relating to a pos-
sible prosecution under section 1347.
502
Title II, Subtitle D
‘‘(2) A person is not eligible for a payment under
paragraph (1) if—
‘‘(A) the person is a current or former officer
or employee of a Federal or State government agen-
cy or instrumentality who furnishes information dis-
covered or gathered in the course of government em-
ployment.
‘‘(B) the person knowingly participated in the
offense;
‘‘(C) the information furnished by the person
consists of allegations or transactions that have been
disclosed to the public—
‘‘(i) in a criminal, civil, or administrative
proceeding;
‘‘(ii) in a congressional, administrative or
General Accounting Office report, hearing,
audit or investigation; or
‘‘(iii) by the news media, unless the person
is the original source of the information; or
‘‘(D) when, in the judgment of the Attorney
General, it appears that a person whose illegal ac-
tivities are being prosecuted or investigated could
benefit from the award.
‘‘(3) For the purposes of paragraph (2)(C)(iii), the
term ‘original source’ means a person who has direct and
503
Title II, Subtitle D
independent knowledge of the information that is fur-
nished and has voluntarily provided the information to the
Government prior to disclosure by the news media.
‘‘(4) Neither the failure of the Attorney General to
authorize a payment under paragraph (1) nor the amount
authorized shall be subject to judicial review.’’.
SEC. 2323. BROADENING APPLICATION OF MAIL FRAUD
STATUTE.
Section 1341 of title 18, United States Code, is
amended—
(1) by inserting ‘‘or deposits or causes to be de-
posited any matter or thing whatever to be sent or
delivered by any private or commercial interstate
carrier,’’ after ‘‘Postal Service,’’; and
(2) by inserting ‘‘or such carrier’’ after ‘‘causes
to be delivered by mail’’.
PART 4—ADVISORY OPINIONS
SEC. 2331. AUTHORIZING THE SECRETARY OF HEALTH AND
HUMAN SERVICES TO ISSUE ADVISORY OPIN-
IONS UNDER TITLE XI.
Title XI of the Social Security Act (42 U.S.C. 1301
et seq.) is amended by inserting after section 1128B the
following new section:
504
Title II, Subtitle D
‘‘ADVISORY OPINIONS
‘‘SEC. 1129. (a) ISSUANCE
OF ADVISORY OPIN-
IONS.—The Secretary shall issue advisory opinions as pro-
vided in this section.
‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—
The Secretary shall issue advisory opinions as to the fol-
lowing matters:
‘‘(1) What constitutes prohibited remuneration
within the meaning of section 1128B(b).
‘‘(2) Whether an arrangement or proposed ar-
rangement satisfies the criteria set forth in section
1128B(b)(3) for activities which do not result in
prohibited remuneration.
‘‘(3) Whether an arrangement or proposed ar-
rangement satisfies the criteria which the Secretary
has established, or shall establish by regulation for
activities which do not result in prohibited remu-
neration.
‘‘(4) What constitutes an inducement to reduce
or limit services to individuals entitled to benefits
under title XVIII or title XIX within the meaning
of section 1128B(b).
‘‘(5) Whether an arrangement, activity or pro-
posed arrangement or proposed activity violates any
other provision of this Act.
505
Title II, Subtitle D
‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN-
IONS.—Such advisory opinions shall not address the fol-
lowing matters:
‘‘(1) Whether the fair market value shall be, or
was paid or received for any goods, services or prop-
erty.
‘‘(2) Whether an individual is a bona fide em-
ployee within the requirements of section 3121(d)(2)
of the Internal Revenue Code of 1986.
‘‘(d) EFFECT OF ADVISORY OPINIONS.—
‘‘(1) Each advisory opinion issued by the Sec-
retary shall be binding as to the Secretary and the
party or parties requesting the opinion.
‘‘(2) The failure of a party to seek an advisory
opinion may not be introduced into evidence to prove
that the party intended to violate the provisions of
sections 1128, 1128A, or 1128B.
‘‘(e) REGULATIONS.—The Secretary within 180 days
of the date of enactment, shall issue regulations establish-
ing a system for the issuance of advisory opinions. Such
regulations shall provide for—
‘‘(1) the procedure to be followed by a party ap-
plying for an advisory opinion;
506
Title II, Subtitle D
‘‘(2) the procedure to be followed by the Sec-
retary in responding to a request for an advisory
opinion;
‘‘(3) the interval in which the Secretary shall
respond;
‘‘(4) the reasonable fee to be charged to the
party requesting an advisory opinion; and
‘‘(5) the manner in which advisory opinions will
be made available to the public.
‘‘(f) INTERVAL FOR ISSUANCE OF ADVISORY OPIN-
IONS.—Under no circumstances shall the interval in which
the Secretary shall respond to a party requesting an advi-
sory opinion exceed 30 days.’’.
SEC. 2332. AUTHORIZING THE SECRETARY OF HEALTH AND
HUMAN SERVICES TO ISSUE ADVISORY OPIN-
IONS RELATING TO PHYSICIAN OWNERSHIP
AND REFERRAL.
Section 1877 of the Social Security Act (42 U.S.C.
1395nn) is amended by the addition of the following new
subsection:
‘‘(i) ADVISORY OPINIONS.—
‘‘(1) IN GENERAL.—The Secretary shall issue
advisory opinions on whether an arrangement or
proposed arrangement will result in a prohibited re-
ferral within the meaning of this section.
507
Title II, Subtitle D
‘‘(2) EFFECT OF ADVISORY OPINIONS.—
‘‘(A) Each advisory opinion issued by the
Secretary shall be binding as to the Secretary
and the party or parties requesting the opinion.
‘‘(B) The failure of a party to seek an ad-
visory opinion may not be introduced into evi-
dence to prove that the party intended to vio-
late the provisions of this section.
‘‘(3) REGULATIONS.—The Secretary within one
hundred and eighty days of the date of enactment,
shall issue regulations establishing a system for the
issuance of advisory opinions. Such regulations shall
provide for—
‘‘(A) the procedure to be followed by a
party applying for an advisory opinion;
‘‘(B) the procedure to be followed by the
Secretary in responding to a request for an ad-
visory opinion;
‘‘(C) the interval in which the Secretary
shall respond;
‘‘(D) the reasonable fee to be charged to
the party requesting an advisory opinion; and
‘‘(E) the manner in which advisory opin-
ions will be made available to the public.
508
Title II, Subtitle E
‘‘(4) INTERVAL
FOR
ISSUANCE
OF
ADVISORY
OPINIONS.—Under no circumstances shall the inter-
val in which the Secretary shall respond to a party
requesting an advisory opinion exceed thirty days.’’.
SEC. 2333. EFFECTIVE DATE.
Unless otherwise specified, the amendments made by
this part shall be effective upon the enactment of this Act.
Subtitle 
E—Increased 
Medicare
Beneficiary Choice; Additional
Medicare Reforms
PART 1—INCREASED MEDICARE BENEFICIARY
CHOICE
SEC. 2401. REQUIREMENTS FOR HEALTH MAINTENANCE
ORGANIZATIONS UNDER MEDICARE.
(a) USE OF METROPOLITAN STATISTICAL AREAS TO
DETERMINE ADJUSTED AVERAGE PER CAPITA COST.—
Section 
1876(a)(4) 
of 
such 
Act 
(42 
U.S.C.
1395mm(a)(4)) is amended by striking ‘‘in a geographic
area served by an eligible organization or in a similar
area’’ and inserting ‘‘in the metropolitan statistical area
(as defined by the Office of Management and Budget) in
which the individual resides, or in the entire portion of
the State in which the individual resides which is not lo-
cated in a metropolitan statistical area in the case of an
509
Title II, Subtitle E
individual who does not reside in a metropolitan statistical
area’’.
(b) 
DETERMINATION
OF
MODEL
ADDITIONAL
HEALTH BENEFIT PACKAGES.—Section 1876(g) of such
Act (42 U.S.C. 1395mm(g)) is amended by inserting after
paragraph (3) the following new paragraph:
‘‘(4) The Secretary shall develop the following model
packages of additional health benefits (referred to in para-
graph (3)(B)) which an eligible organization may provide
(at its option) under paragraph (2):
‘‘(A) Coverage for catastrophic illness (subject
to a limit on out-of-pocket expenditures).
‘‘(B) Coverage for prescription drugs.
‘‘(C) Coverage for preventive services.’’.
(c) REVISION OF MEMBERSHIP LIMITATION.—Sec-
tion 1876(f) of the Social Security Act (42 U.S.C.
1395mm(f)) is amended—
(1) in paragraph (1), by striking ‘‘one-half’’
and inserting ‘‘25 percent’’; and
(2) in paragraph (2)(A), by striking ‘‘50 per-
cent’’ and inserting ‘‘75 percent’’.
(d) ENROLLMENT PERIODS FOR MEDICARE HEALTH
MAINTENANCE ORGANIZATIONS.—
(1) UNIFORM
OPEN
ENROLLMENT
PERIOD.—
Section 1876(c)(3)(A)(i) of such Act (42 U.S.C.
510
Title II, Subtitle E
1395mm(c)(3)(A)(i)) is amended by striking ‘‘must
have’’ and all that follows through ‘‘and including’’
and inserting the following: ‘‘shall have open enroll-
ment during an annual uniform open enrollment pe-
riod established by the Secretary for all eligible orga-
nizations, together with’’.
(2) 
OPEN
ENROLLMENT
FOR
CERTAIN
DISENROLLED
INDIVIDUALS.—Section
1876(c)(3)(A)(ii)(I) 
of 
such 
Act 
(42 
U.S.C.
1395mm(c)(3)(A)(ii)(I)) is amended by adding at
the end the following: ‘‘Each eligible organization
with a risk-sharing contract under this section shall
have an open enrollment period for individuals resid-
ing in the organization’s service area who disenroll
from another eligible organization with a risk-shar-
ing contract under this section on the grounds that
the individual’s primary care physician is no longer
a member of the organization’s provider network or
for cause (in accordance with such standards, and as
demonstrated through an appeals process that meets
such requirements, as the Secretary may establish).
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to contracts entered into on or
after the date of the enactment of this Act.
511
Title II, Subtitle E
SEC. 2402. EXPANSION AND REVISION OF MEDICARE SE-
LECT POLICIES.
(a) PERMITTING MEDICARE SELECT POLICIES IN
ALL STATES.—
(1) IN
GENERAL.—Subsection (c) of section
4358 of the Omnibus Budget Reconciliation Act of
1990 (hereafter referred to as ‘‘OBRA–1990’’) is
hereby repealed.
(2) CONFORMING AMENDMENT.—Section 4358
of OBRA–1990 is amended by redesignating sub-
section (d) as subsection (c).
(b) REQUIREMENTS OF MEDICARE SELECT POLI-
CIES.—Section 1882(t)(1) of the Social Security Act (42
U.S.C. 1395ss(t)(1)) is amended to read as follows:
‘‘(1)(A) If a medicare supplemental policy meets the
1991 NAIC Model Regulation or 1991 Federal Regulation
and otherwise complies with the requirements of this sec-
tion except that—
‘‘(i) the benefits under such policy are re-
stricted to items and services furnished by certain
entities (or reduced benefits are provided when items
or services are furnished by other entities), and
‘‘(ii) in the case of a policy described in sub-
paragraph (C)(i)—
512
Title II, Subtitle E
‘‘(I) the benefits under such policy are not
one of the groups or packages of benefits de-
scribed in subsection (p)(2)(A),
‘‘(II) except for nominal copayments im-
posed for services covered under part B of this
title, such benefits include at least the core
group of basic benefits described in subsection
(p)(2)(B), and
‘‘(III) an enrollee’s liability under such pol-
icy for physician’s services covered under part
B of this title is limited to the nominal
copayments described in subclause (II),
the policy shall nevertheless be treated as meeting those
standards if the policy meets the requirements of subpara-
graph (B).
‘‘(B) A policy meets the requirements of this sub-
paragraph if—
‘‘(i) full benefits are provided for items and
services furnished through a network of entities
which have entered into contracts or agreements
with the issuer of the policy,
‘‘(ii) full benefits are provided for items and
services furnished by other entities if the services are
medically necessary and immediately required be-
cause of an unforeseen illness, injury, or condition
513
Title II, Subtitle E
and it is not reasonable given the circumstances to
obtain the services through the network,
‘‘(iii) the network offers sufficient access,
‘‘(iv) the issuer of the policy has arrangements
for an ongoing quality assurance program for items
and services furnished through the network,
‘‘(v)(I) the issuer of the policy provides to each
enrollee at the time of enrollment an explanation
of—
‘‘(aa) the restrictions on payment under
the policy for services furnished other than by
or through the network,
‘‘(bb) out of area coverage under the pol-
icy,
‘‘(cc) the policy’s coverage of emergency
services and urgently needed care, and
‘‘(dd) the availability of a policy through
the entity that meets the 1991 Model NAIC
Regulation or 1991 Federal Regulation without
regard to this subsection and the premium
charged for such policy, and
‘‘(II) each enrollee prior to enrollment acknowl-
edges receipt of the explanation provided under
subclause (I), and
514
Title II, Subtitle E
‘‘(vi) the issuer of the policy makes available to
individuals, in addition to the policy described in this
subsection, any policy (otherwise offered by the is-
suer to individuals in the State) that meets the 1991
Model NAIC Regulation or 1991 Federal Regulation
and other requirements of this section without re-
gard to this subsection.
‘‘(C)(i) A policy described in this subparagraph—
‘‘(I) is offered by an eligible organization (as
defined in section 1876(b)),
‘‘(II) is not a policy or plan providing benefits
pursuant to a contract under section 1876 or an ap-
proved demonstration project described in section
603(c) of the Social Security Amendments of 1983,
section 2355 of the Deficit Reduction Act of 1984,
or section 9412(b) of the Omnibus Budget Reconcili-
ation Act of 1986, and
‘‘(III) provides benefits which, when combined
with benefits which are available under this title, are
substantially similar to benefits under policies of-
fered to individuals who are not entitled to benefits
under this title.
‘‘(ii) In making a determination under subclause (III)
of clause (i) as to whether certain benefits are substan-
tially similar, there shall not be taken into account, except
515
Title II, Subtitle E
in the case of preventive services, benefits provided under
policies offered to individuals who are not entitled to bene-
fits under this title which are in addition to the benefits
covered by this title and which are benefits an entity must
provide in order to meet the definition of an eligible orga-
nization under section 1876(b)(1).’’.
(c) RENEWABILITY
OF MEDICARE SELECT POLI-
CIES.—Section 1882(q)(1) of the Social Security Act (42
U.S.C. 1395ss(q)(1)) is amended—
(1) by striking ‘‘(1) Each’’ and inserting
‘‘(1)(A) Except as provided in subparagraph (B),
each’’;
(2) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B)(i) Except as provided in clause (ii), in the
case of a policy that meets the requirements of sub-
section (t), an issuer may cancel or nonrenew such
policy with respect to an individual who leaves the
service area of such policy.
‘‘(ii) If an individual described in clause (i)
moves to a geographic area where an issuer de-
scribed in clause (i), or where an affiliate of such is-
suer, is issuing medicare supplemental policies, such
516
Title II, Subtitle E
individual must be permitted to enroll in any medi-
care supplemental policy offered by such issuer or
affiliate that provides benefits comparable to or less
than the benefits provided in the policy being can-
celed or nonrenewed. An individual whose coverage
is canceled or nonrenewed under this subparagraph
shall, as part of the notice of termination or
nonrenewal, be notified of the right to enroll in other
medicare supplemental policies offered by the issuer
or its affiliates.
‘‘(iii) For purposes of this subparagraph, the
term ‘affiliate’ shall have the meaning given such
term by the 1991 NAIC Model Regulation.’’.
(d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of
the Social Security Act (42 U.S.C. 1395ss(t)(2)) is
amended—
(1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;
(2) by redesignating subparagraphs (A), (B),
(C), and (D) as clauses (i), (ii), (iii), and (iv), re-
spectively;
(3) in clause (iv), as so redesignated—
(A) by striking ‘‘paragraph (1)(E)(i)’’ and
inserting ‘‘paragraph (1)(B)(v)(I), and
(B) by striking ‘‘paragraph (1)(E)(ii)’’ and
inserting ‘‘paragraph (1)(B)(v)(II)’’;
517
Title II, Subtitle E
(4) by striking ‘‘the previous sentence’’ and in-
serting ‘‘this subparagraph’’; and
(5) by adding at the end the following new sub-
paragraph:
‘‘(B) If the Secretary determines that an issuer of
a policy approved under paragraph (1) has made a mis-
representation to the Secretary or has provided the Sec-
retary with false information regarding such policy, the
issuer is subject to a civil money penalty in an amount
not to exceed $100,000 for each such determination. The
provisions of section 1128A (other than the first sentence
of subsection (a) and other than subsection (b)) shall
apply to a civil money penalty under this subparagraph
in the same manner as such provisions apply to a penalty
or proceeding under section 1128A(a).’’.
(e) EFFECTIVE DATES.—
(1) NAIC STANDARDS.—If, within 6 months
after the date of the enactment of this Act, the Na-
tional Association of Insurance Commissioners
(hereafter in this subsection referred to as the
‘‘NAIC’’) makes changes in the 1991 NAIC Model
Regulation (as defined in section 1882(p)(1)(A) of
the Social Security Act) to incorporate the additional
requirements imposed by the amendments made by
this section, section 1882(g)(2)(A) of such Act shall
518
Title II, Subtitle E
be applied in each State, effective for policies issued
to policyholders on and after the date specified in
paragraph (3), as if the reference to the Model Reg-
ulation adopted on June 6, 1979, were a reference
to the 1991 NAIC Model Regulation (as so defined)
as changed under this paragraph (such changed
Regulation referred to in this subsection as the
‘‘1994 NAIC Model Regulation’’).
(2) SECRETARY
STANDARDS.—If the NAIC
does not make changes in the 1991 NAIC Model
Regulation (as so defined) within the 6-month period
specified in paragraph (1), the Secretary of Health
and Human Services (in this subsection as the ‘‘Sec-
retary’’) shall promulgate a regulation and section
1882(g)(2)(A) of the Social Security Act shall be ap-
plied in each State, effective for policies issued to
policyholders on and after the date specified in para-
graph (3), as if the reference to the Model Regula-
tion adopted in June 6, 1979, were a reference to
the 1991 NAIC Model Regulation (as so defined) as
changed by the Secretary under this paragraph
(such changed Regulation referred to in this sub-
section as the ‘‘1994 Federal Regulation’’).
(3) DATE SPECIFIED.—
519
Title II, Subtitle E
(A) IN
GENERAL.—Subject to subpara-
graph (B), the date specified in this paragraph
for a State is the earlier of—
(i) the date the State adopts the 1994
NAIC Model Regulation or the 1994 Fed-
eral Regulation; or
(ii) 1 year after the date the NAIC or
the Secretary first adopts such regulations.
(B) ADDITIONAL LEGISLATIVE ACTION RE-
QUIRED.—In the case of a State which the Sec-
retary identifies, in consultation with the NAIC,
as—
(i) requiring State legislation (other
than legislation appropriating funds) in
order for medicare supplemental policies to
meet the 1994 NAIC Model Regulation or
the 1994 Federal Regulation, but
(ii) having a legislature which is not
scheduled to meet in 1995 in a legislative
session in which such legislation may be
considered,
the date specified in this paragraph is the first
day of the first calendar quarter beginning after
the close of the first legislative session of the
State legislature that begins on or after Janu-
520
Title II, Subtitle E
ary 1, 1995. For purposes of the previous sen-
tence, in the case of a State that has a 2-year
legislative session, each year of such session
shall be deemed to be a separate regular session
of the State legislature.
SEC. 2403. INCLUDING NOTICE OF AVAILABLE HEALTH
MAINTENANCE ORGANIZATIONS IN ANNUAL
NOTICE TO BENEFICIARIES.
Section 1804 of the Social Security Act (42 U.S.C.
1395b–2) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘, and’’; and
(3) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) with respect to the area in which the indi-
vidual receiving the notice resides, a description of
the eligible organizations under section 1833(a)(1)
or section 1876 and the carriers offering a medicare
supplemental policy described in section 1882(t)(1)
which serve the area in which the individual receiv-
ing the notice resides.’’.
521
Title II, Subtitle E
SEC. 2404. LEGISLATIVE PROPOSAL ON ENROLLING MEDI-
CARE BENEFICIARIES IN QUALIFIED HEALTH
PLANS.
(a) IN GENERAL.—
(1) LEGISLATIVE PROPOSAL.—Not later than 1
year after the date of the enactment of this Act, the
Secretary shall develop and submit to Congress a
proposal for legislation which provides for the enroll-
ment of medicare beneficiaries in private health in-
surance plans (including medisave coverage de-
scribed in section 1102(e)).
(2) MEDICARE BENEFICIARY.—For purposes of
this section, the term ‘‘medicare beneficiary’’ means
an individual who is eligible for benefits under part
A of title XVIII of the Social Security Act and is en-
rolled under part B of such title.
(b) CONTENTS OF THE PROPOSAL.—A proposal for
legislation submitted under subsection (a) shall—
(1) provide for an appropriate methodology by
which the Secretary shall make payment to private
health insurance plans for the enrollment of medi-
care beneficiaries;
(2) provide individuals the opportunity to re-
main enrolled in such a plan without an interruption
in coverage upon becoming medicare beneficiaries;
and
522
Title II, Subtitle E
(3) provide medicare beneficiaries with the op-
portunity to enroll in a private health insurance
plan.
SEC. 2405. OPTIONAL INTERIM ENROLLMENT OF MEDICARE
BENEFICIARIES IN PRIVATE HEALTH PLANS.
(a) INTERIM ENROLLMENT
OF MEDICARE BENE-
FICIARIES IN QUALIFIED HEALTH PLANS.—
(1) IN GENERAL.—Notwithstanding title XVIII
of the Social Security Act, the Secretary shall pro-
vide for a monthly payment as provided under sub-
section (b)(1) to a private health insurance plan on
behalf of enrolled medicare beneficiaries who choose
to enroll in such a plan.
(2) MEDICARE BENEFICIARY.—For purposes of
this section, the term ‘‘medicare beneficiary’’ means
an individual who is eligible for benefits under part
A of title XVIII of the Social Security Act and is en-
rolled under part B of such title.
(b) PAYMENT SPECIFIED.—
(1) FEDERAL PAYMENT.—
(A) IN
GENERAL.—The amount of pay-
ment specified in this paragraph for an individ-
ual who is enrolled in a private health insurance
plan is the lesser of—
523
Title II, Subtitle E
(i) the applicable rate specified in sec-
tion 1876(a)(1)(C) of the Social Security
Act; or
(ii) the monthly premium charged the
individual for coverage under the private
health insurance plan.
(B) SOURCE OF PAYMENT.—The payment
to a private health insurance plan under this
paragraph for individuals entitled to benefits
under part A and enrolled under part B of title
XVIII of the Social Security Act shall be made
from the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical
Insurance Trust Fund, with the allocation to be
determined by the Secretary.
(2) INDIVIDUAL’S SHARE.—If the monthly pre-
mium for the private plan in which the individual is
enrolled is greater than the amount specified under
paragraph (1)(A)(i), the individual shall be respon-
sible for paying to the plan the difference between
the monthly premium charged the individual for cov-
erage under the plan and the amount specified in
paragraph (1)(A)(i).
(3) BUDGET-NEUTRALITY.—The total amount
of payments made by the Secretary under this sec-
524
Title II, Subtitle E
tion with respect to a beneficiary for a year may not
exceed the amount of payment that would have been
made under title XVIII of the Social Security Act
during the year if the beneficiary did not choose to
enroll in a private health insurance plan during the
year.
(c) PAYMENTS UNDER THIS SECTION AS SOLE MEDI-
CARE BENEFITS.—Payments made under this section
shall be instead of the amounts that would otherwise be
payable, pursuant to sections 1814(b) and 1833(a) of the
Social Security Act, for services furnished to medicare
beneficiaries.
(d) INCLUSION
IN ANNUAL NOTICE
TO BENE-
FICIARIES.—Section 1804 of the Social Security Act (42
U.S.C. (42 U.S.C. 1395b–2), as amended by section 2403,
is amended
(1) by striking ‘‘and’’ at the end of paragraph
(3);
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘, and’’; and
(3) by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) a description of the option provided pursu-
ant to section 2405 of the Affordable Health Care
Now Act of 1994 for payment to be made by the
525
Title II, Subtitle E
Secretary on the individual’s behalf for enrollment in
a private health insurance plan.’’.
PART 2—MEDICARE PART B PREMIUM; OTHER
MEDICARE PAYMENT CHANGES
SEC. 2411. EXTENSION OF CURRENT RULES FOR COMPUT-
ING MEDICARE PART B PREMIUM.
Section 1839(e) of the Social Security Act (42 U.S.C.
1395r(e)) is amended—
(1) in paragraph (1)(A), by striking ‘‘January
1999’’ and inserting ‘‘January 2005’’; and
(2) in paragraph (2), by striking ‘‘January
1998’’ and inserting ‘‘January 2004’’.
SEC. 2412. INCREASE IN MEDICARE PART B PREMIUM FOR
INDIVIDUALS WITH HIGH INCOME.
(a) IN GENERAL.—Subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding at
the end thereof the following new part:
‘‘PART VIII—MEDICARE PART B PREMIUMS FOR
HIGH-INCOME INDIVIDUALS
‘‘Sec. 59B. Medicare part B premium tax.
‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.
‘‘(a) IMPOSITION OF TAX.—In the case of an individ-
ual to whom this section applies for the taxable year, there
is hereby imposed (in addition to any other tax imposed
by this subtitle) a tax for such taxable year equal to the
526
Title II, Subtitle E
aggregate of the Medicare part B premium taxes for each
of the months during such year that such individual is
covered by Medicare part B.
‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—
This section shall apply to any individual for any taxable
year if—
‘‘(1) such individual is covered under Medicare
part B for any month during such year, and
‘‘(2) the modified adjusted gross income of the
taxpayer for such taxable year exceeds the threshold
amount.
‘‘(c) MEDICARE
PART
B PREMIUM
TAX
FOR
MONTH.—
‘‘(1) IN GENERAL.—The Medicare part B pre-
mium tax for any month is 2⁄3 the amount equal to
the excess of—
‘‘(A) 150 percent of the monthly actuarial
rate for enrollees age 65 and over determined
for that calendar year under section 1839(b) of
the Social Security Act, over
‘‘(B) the total monthly premium under sec-
tion 1839 of the Social Security Act (deter-
mined without regard to subsections (b) and (f)
of section 1839 of such Act).
527
Title II, Subtitle E
‘‘(2) PHASEIN
OF
TAX.—If the modified ad-
justed gross income of the taxpayer for any taxable
years exceeds the threshold amount by less than
$50,000, the Medicare part B premium tax for any
month during such taxable year shall be an amount
which bears the same ratio to the amount deter-
mined under paragraph (1) (without regard to this
paragraph) as such excess bears to $50,000. The
preceding sentence shall not apply to any individual
whose threshold amount is zero.
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh-
old amount’ means—
‘‘(A) except as otherwise provided in this
paragraph, $100,000,
‘‘(B) $125,000 in the case of a joint re-
turn, and
‘‘(C) zero in the case of a taxpayer who—
‘‘(i) is married at the close of the tax-
able year but does not file a joint return
for such year, and
‘‘(ii) does not live apart from his
spouse at all times during the taxable year.
528
Title II, Subtitle E
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.—
The term ‘modified adjusted gross income’ means
adjusted gross income—
‘‘(A) determined without regard to sections
135, 911, 931, and 933, and
‘‘(B) increased by the amount of interest
received or accrued by the taxpayer during the
taxable year which is exempt from tax.
‘‘(3) MEDICARE PART B COVERAGE.—An indi-
vidual shall be treated as covered under Medicare
part B for any month if a premium is paid under
part B of title XVIII of the Social Security Act for
the coverage of the individual under such part for
the month.
‘‘(4) MARRIED
INDIVIDUAL.—The determina-
tion of whether an individual is married shall be
made in accordance with section 7703.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 of such Code is amended by
adding at the end thereof the following new item:
‘‘Part VIII. Medicare Part B Premiums For High-Income Individ-
uals.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to months after December 1994
in taxable years ending after December 31, 1994.
529
Title II, Subtitle E
SEC. 2413. IMPROVED EFFICIENCY THROUGH CONSOLIDA-
TION OF ADMINISTRATION OF PARTS A AND
B.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall take such steps as may be necessary
to consolidate the administration (including processing
systems) of parts A and B of the medicare program (under
title XVIII of the Social Security Act) including over a
5-year period.
(b) COMBINATION OF INTERMEDIARY AND CARRIER
FUNCTIONS.—In taking such steps, the Secretary shall
contract with a single entity that combines the fiscal
intermediary and carrier functions in each area except
where the Secretary finds that special regional or national
contracts are appropriate.
(c) SUPERSEDING CONFLICTING REQUIREMENTS.—
The provisions of sections 1816 and 1842 of the Social
Security Act (including provider nominating provisions in
such section 1816) are superseded to the extent required
to carry out this section.
SEC. 2414. EXTENSION OF MEDICARE SECONDARY PAY-
MENT PROVISIONS.
(a) EXTENSION OF DATA MATCH.—
(1) Section 1862(b)(5)(C)(iii) of the Social Se-
curity Act (42 U.S.C. 1395y(b)(5)(C)(iii)) is amend-
ed by striking ‘‘1998’’ and inserting ‘‘2004’’.
530
Title II, Subtitle F
(2) Section 6103(l)(12)(F) of the Internal Rev-
enue Code of 1986 is amended—
(A) in clause (i), by striking ‘‘1998’’ and
inserting ‘‘2004’’,
(B) in clause (ii)(I), by striking ‘‘1997’’
and inserting ‘‘2003’’, and
(C) in clause (ii)(II), by striking ‘‘1998’’
and inserting ‘‘2004’’.
(b) EXTENSION OF MEDICARE SECONDARY PAYER
TO
DISABLED
BENEFICIARIES.—Section
1862(b)(1)(B)(iii) 
of 
such 
Act 
(42 
U.S.C.
1395y(b)(1)(B)(iii)) is amended by striking ‘‘1998’’ and
inserting ‘‘2004’’.
(c) EXTENSION OF PERIOD FOR END STAGE RENAL
DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) of such
Act (42 U.S.C. 1395y(b)(1)(C)) is amended in the second
sentence by striking ‘‘1998’’ and inserting ‘‘2004’’.
Subtitle F—Health Care Antitrust
Improvements
SEC. 2501. PROTECTION FROM ANTITRUST LAWS FOR CER-
TAIN COMPETITIVE AND COLLABORATIVE
ACTIVITIES.
(a) PROTECTIONS DESCRIBED.—An activity relating
to the provision of health care services shall receive the
following protection from the antitrust laws:
531
Title II, Subtitle F
(1) If the activity is within a safe harbor des-
ignated by the Attorney General under section 2502,
the safe harbor shall be a defense to all antitrust
claims, except for claims for injunctive relief as-
serted by the Attorney General or the Chair of the
Federal Trade Commission in extraordinary cir-
cumstances.
(2) If the activity is specified in and in compli-
ance with the terms of a certificate of review issued
by the Attorney General under section 2503 and the
activity occurs while the certificate is in effect, the
certificate shall be a defense to antitrust claims,
other than claims for injunctive relief.
(b) AWARD OF ATTORNEY’S FEES AND COSTS OF
SUIT.—
(1) IN GENERAL.—If any person brings an ac-
tion alleging a claim under the antitrust laws and
the activity on which the claim is based is found by
the court to be protected from such laws under sub-
section (a), the court shall, at the conclusion of the
action—
(A) award to a substantially prevailing
claimant the cost of suit attributable to such
claim, including a reasonable attorney’s fee, or
532
Title II, Subtitle F
(B) award to a substantially prevailing
party defending against such claim the cost of
such suit attributable to such claim, including
reasonable attorney’s fee, if the claim, or the
claimant’s conduct during litigation of the
claim, was frivolous, unreasonable, without
foundation, or in bad faith.
(2) OFFSET
IN
CASES
OF
BAD
FAITH.—The
court may reduce an award made pursuant to para-
graph (1) in whole or in part by an award in favor
of another party for any part of the cost of suit (in-
cluding a reasonable attorney’s fee) attributable to
conduct during the litigation by any prevailing party
that the court finds to be frivolous, unreasonable,
without foundation, or in bad faith.
SEC. 2502. DESIGNATION OF SAFE HARBORS.
(a) IN GENERAL.—
(1) DESIGNATION BY ATTORNEY GENERAL.—
The Attorney General, in consultation with the Sec-
retary of Health and Human Services and the Chair,
shall develop and designate pursuant to paragraph
(C) safe harbors for purposes of section 2501(a)(1)
relating to—
(A) each category of activities referred to
in paragraph (2); and
533
Title II, Subtitle F
(B) such other categories of activities as
the Attorney General may designate in accord-
ance with the process described in this section.
(2) REQUIRED CATEGORIES OF ACTIVITIES SUB-
JECT TO SAFE HARBORS.—The categories of activi-
ties referred to in this paragraph are as follows:
(A) JOINT PURCHASING OF HEALTH CARE
SERVICES.—Providing the terms under which
consumers of health care services (patients or
others acting on their behalf) may jointly nego-
tiate and purchase health care services.
(B) SMALL HOSPITAL MERGERS.—Provid-
ing for small hospitals lawfully to merge under
the antitrust laws without undue delay or re-
view, taking into account the special needs and
circumstances of rural health care markets.
(C) NETWORK
FORMATION
AND
OPER-
ATION.—Permitting activities related to the
startup and operation of collaborations between
State-licensed providers through partial or full
integration, including multi-provider networks,
hospital networks, physician-hospital organiza-
tions, and other efforts to provide health care
services more efficiently.
534
Title II, Subtitle F
(D) ACTIVITIES OF MEDICAL SELF-REGU-
LATORY
ENTITIES.—Permitting standard set-
ting and enforcement activities by medical self-
regulatory entities (such as hospital boards and
medical societies) to promote health care qual-
ity, except that a safe harbor under this para-
graph may not provide protection for any activ-
ity undertaken for financial gain or for anti-
competitive reasons.
(E) PROVISION OF INFORMATION TO BUY-
ERS AND CONSUMERS.—Permitting health care
providers collectively to supply non-price medi-
cal information to buyers and consumers relat-
ing to the type, quality and efficiency of treat-
ment, including joint views on procedures that
should be covered by purchasers and medical
protocols, except that a safe harbor under this
subparagraph may not provide protection for
any collective refusals to deal or collective at-
tempts at coercion.
(F) PARTICIPATION IN SURVEYS.—Provid-
ing the terms under which health care providers
may lawfully participate in written surveys of
prices of services, reimbursements received, em-
ployee compensation, and other relevant areas.
535
Title II, Subtitle F
(G) HIGH-TECHNOLOGY
AND
TERTIARY
CARE JOINT VENTURES.—Permitting activities
of health care joint ventures to purchase or use
new or existing high technology or costly equip-
ment, or to provide advanced tertiary care
services.
(H) MARKET POWER SCREENS.—Providing
market power screens at appropriate levels
below which combinations of health care provid-
ers are too small to pose a realistic antitrust
threat. There may be different levels for dif-
ferent activities and markets, taking into ac-
count the special needs of rural health care
markets.
(I) JOINT PURCHASING ARRANGEMENTS.—
Providing the terms under which health care
providers may make joint purchases of products
and services.
(J) GOOD FAITH NEGOTIATIONS.—Provid-
ing the terms under which health care providers
may engage in discussions relating to legitimate
collaborative activities contemplated by the safe
harbors.
(b) PROCESS
FOR DESIGNATION
OF ADDITIONAL
CATEGORIES OF ACTIVITIES.—
536
Title II, Subtitle F
(1) SOLICITATION OF PROPOSALS.—Not later
than 30 days after the date of the enactment of this
Act, the Attorney General shall publish a notice in
the Federal Register soliciting proposals for safe
harbors.
(2) REVIEW OF PROPOSED SAFE HARBORS.—
Not later than 180 days after the date of the enact-
ment of this Act, the Attorney General (in consulta-
tion with the Secretary and the Chair) shall review
the proposed safe harbors submitted under para-
graph (1) and include a description of the safe har-
bors in the report under subsection (d).
(3) ADDITIONAL
SAFE
HARBORS.—After sub-
mitting the report under subsection (d), the Attor-
ney General (in consultation with the Secretary and
the Chair) may from time to time add additional
safe harbors in accordance with the procedures de-
scribed in this subsection.
(c) EFFECTIVE DATE OF SAFE HARBORS.—
(1) PUBLICATION.—Not later than 180 days
after the date of the enactment of this Act, the At-
torney General shall publish in the Federal Register
for public comment the safe harbors proposed for
designation under this section. Not later than 180
days after publishing such proposed safe harbors in
537
Title II, Subtitle F
the Federal Register, the Attorney General shall
issue final rules establishing such safe harbors.
(2) EFFECTIVE DATE.—The safe harbors estab-
lished under the final rules issued under paragraph
(1) shall take effect 90 days after issuance, unless
disapproved by the Congress.
(d) REPORT ON PROPOSED SAFE HARBORS.—Not
later than 180 days after the date of the enactment of
this Act, the Attorney General (in consultation with the
Secretary and the Chair) shall submit a report to Congress
describing the proposals from subsections (a) and (b)(1)
to be included in the publication of safe harbors described
in subsection (c)(1) and the proposals from subsection
(b)(1) that are not to be so included, together with expla-
nations therefor.
(e) MODIFICATION
OR REMOVAL
OF SAFE HAR-
BORS.—The Attorney General (in consultation with the
Secretary and the Chair) may modify or remove a safe
harbor following notice and comment upon a determina-
tion that the safe harbor does not meet the criteria of sub-
section (f).
(f) CRITERIA FOR SAFE HARBORS.—In establishing
safe harbors under this section, the Attorney General shall
take into account the following:
538
Title II, Subtitle F
(1) The extent to which a competitive or col-
laborative activity will accomplish any of the follow-
ing:
(A) An increase in access to health care
services.
(B) The enhancement of the quality of
health care services.
(C) The establishment of cost efficiencies
that will be passed on to consumers, including
economies of scale and reduced transaction and
administrative costs.
(D) An increase in the ability of health
care facilities to provide services in medically
underserved areas or to medically underserved
populations.
(E) An improvement in the utilization of
health care resources or the reduction in the in-
efficient duplication of the use of such re-
sources.
(2) Whether the designation of an activity as a
safe harbor will result in the following outcomes:
(A) Health plans and other health care in-
surers, consumers of health care services, and
health care providers will be better able to ne-
539
Title II, Subtitle F
gotiate payment and service arrangements
which will reduce costs to consumers.
(B) Taking into consideration the charac-
teristics of the particular purchasers and pro-
viders involved, competition will not be unduly
restricted.
(C) Equally efficient and less restrictive al-
ternatives do not exist to meet the criteria de-
scribed in paragraph (1).
(D) The activity will not unreasonably
foreclose competition by denying competitors a
necessary element of competition.
SEC. 2503. CERTIFICATES OF REVIEW.
(a) ESTABLISHMENT OF PROGRAM.—In consultation
with the Secretary, the Attorney General shall (not later
than 180 days after the date of the enactment of this Act)
issue certificates of review in accordance with this section
for providers of health care services and advise and assist
any person with respect to applying for such a certificate
of review.
(b) PROCEDURES FOR APPLICATION FOR CERTIFI-
CATE.—
(1) SUBMISSION OF APPLICATION.—
540
Title II, Subtitle F
(A) FORM; CONTENT.—To apply for a cer-
tificate of review, a person shall submit to the
Attorney General a written application which—
(i) specifies the activities relating to
the provision of health care services which
satisfy the criteria described in section
2502(e) and which will be included in the
certificate; and
(ii) is in a form and contains any in-
formation, including information pertain-
ing to the overall market in which the ap-
plicant operates, required by rule or regu-
lation promulgated under section 2506.
(B) FILING FEE.—The Attorney General
may require a filing fee to be submitted with
the application to cover the cost of publication
and the cost of review required by this section.
The amount of the filing fee shall be deter-
mined on a sliding scale established by the At-
torney General (based on the monetary size of
the transaction involved), except that such fee
may not exceed $5,000.
(2) PUBLICATION OF NOTICE IN FEDERAL REG-
ISTER.—Within 10 days after an application submit-
ted under paragraph (1) is received by the Attorney
541
Title II, Subtitle F
General, the Attorney General shall publish in the
Federal Register a notice that announces that an
application for a certificate of review has been sub-
mitted, identifies each person submitting the appli-
cation, and describes the conduct for which the ap-
plication is submitted.
(3) ESTABLISHMENT OF PROCEDURES FOR IS-
SUANCE OF CERTIFICATE.—In consultation with the
Chair and the Secretary, the Attorney General shall
establish procedures to be used in applying for and
in determining whether to approve an application for
a certificate of review under this title. Under such
procedures the Attorney General, in consultation
with the Secretary, shall approve an application if
the Attorney General determines that the activities
to be covered under the certificate will satisfy the
criteria described in section 2502(f) for safe harbors
designated under such section and that the benefits
of the issuance of the certificate will outweigh any
disadvantages that may result from reduced com-
petition. If the Attorney General, with the concur-
rence of the Secretary, determines that the require-
ments for a certificate are met, the Attorney General
shall issue to the applicant a certificate of review.
The certificate of review shall specify—
542
Title II, Subtitle F
(i) the health care market activities to
which the certificate applies,
(ii) the person to whom the certificate
of review is issued, and
(iii) any terms and conditions the At-
torney General or the Secretary deems nec-
essary to assure compliance with the appli-
cable procedures described in paragraph
(3).
(4) TIMING FOR DECISION ON APPLICATION.—
Within 90 days after the Attorney General receives
an application for a certificate of review, the Attor-
ney General shall determine whether to grant or
deny the certificate.
(5) NOTIFICATION OF DECISION.—The Attor-
ney General shall notify the applicant of the Attor-
ney General’s determination and if the application is
denied, the reasons for the denial.
(6) FRAUDULENT
PROCUREMENT.—A certifi-
cate of review shall be void ab initio with respect to
any health care market activities for which the cer-
tificate was procured by fraud.
(c) AMENDMENT
AND REVOCATION
OF CERTIFI-
CATES.—
543
Title II, Subtitle F
(1) NOTIFICATION
OF
CHANGES.—Any appli-
cant who receives a certificate of review—
(A) shall promptly report to the Attorney
General any change relevant to the matters
specified in the certificate; and
(B) may submit to the Attorney General
an application to amend the certificate to re-
flect the effect of the change on the conduct
specified in the certificate.
(2) AMENDMENT TO CERTIFICATE.—An appli-
cation for an amendment to a certificate of review
shall be treated as an application for the issuance of
a certificate. The effective date of an amendment
shall be the date on which the application for the
amendment is received by the Attorney General.
(3) REVOCATION.—
(A) GROUNDS FOR REVOCATION.—In ac-
cordance with this paragraph, the Attorney
General, in consultation with the Secretary,
may revoke in whole or in part a certificate of
review issued under this section. There shall be
considered as grounds for the revocation of a
certificate the fact that—
(i) after the expiration of the 2-year
period beginning on the date a person’s
544
Title II, Subtitle F
certificate is issued, the activities of the
person have not substantially accomplished
the purposes for the issuance of the certifi-
cate;
(ii) the person has failed to comply
with any of the terms or conditions im-
posed under the certificate by the Attorney
General or the Secretary under subsection
(b)(4); or
(iii) the activities covered under the
certificate no longer satisfy the criteria set
forth in section 2502(f).
(B) REQUEST FOR COMPLIANCE INFORMA-
TION.—If the Attorney General or the Sec-
retary has reason to believe that any of the
grounds for revocation of a certificate of review
described in subparagraph (A) may apply to a
person holding the certificate, the Attorney
General shall request such information from
such person as the Attorney General or the Sec-
retary deems necessary to resolve the matter of
compliance. Failure to comply with such request
shall be grounds for revocation of the certificate
under this paragraph.
545
Title II, Subtitle F
(C) PROCEDURES
FOR
REVOCATION.—If
the Attorney General or the Secretary deter-
mines that any of the grounds for revocation of
a certificate of review described in subpara-
graph (A) apply to a person holding the certifi-
cate, or that such person has failed to comply
with a request made under subparagraph (B),
the Attorney General shall give written notice of
the determination to such person. The notice
shall include a statement of the circumstances
underlying, and the reasons in support of, the
determination. In the 60-day period beginning
30 days after the notice is given, the Attorney
General shall revoke the certificate or modify it
as the Attorney General or the Secretary deems
necessary to cause the certificate to apply only
to activities that meet the criteria set forth in
section 2502(f).
(D) 
INVESTIGATION
AUTHORITY.—For
purposes of carrying out this paragraph, the
Attorney General may conduct investigations in
the same manner as the Attorney General con-
ducts investigations under section 3 of the Anti-
trust Civil Process Act, except that no civil in-
vestigative demand may be issued to a person
546
Title II, Subtitle F
to whom a certificate of review is issued if such
person is the target of such investigation.
(d) REVIEW OF DETERMINATIONS.—
(1) AVAILABILITY OF REVIEW FOR CERTAIN AC-
TIONS.—If the Attorney General denies, in whole or
in part, an application for a certificate of review or
for an amendment to a certificate, or revokes or
modifies a certificate pursuant to paragraph (3), the
applicant or certificate holder (as the case may be)
may, within 30 days of the denial or revocation,
bring an action in the United States District Court
for the District of Columbia to set aside the deter-
mination on the ground that such determination is
clearly erroneous.
(2) NO
OTHER
REVIEW
PERMITTED.—Except
as provided in paragraph (1), no action by the At-
torney General, the Chair, or the Secretary pursuant
to this subtitle shall be subject to judicial review.
(3) EFFECT
OF
REJECTED
APPLICATION.—If
the Attorney General denies, in whole or in part, an
application for a certificate of review or for an
amendment to a certificate, or revokes or amends a
certificate, neither the negative determination nor
the statement of reasons therefore shall be admissi-
ble in evidence, in any administrative or judicial pro-
547
Title II, Subtitle F
ceeding, concerning any claim under the antitrust
laws.
(e) PUBLICATION
OF DECISIONS.—The Attorney
General shall publish a notice in the Federal Register on
a timely basis of each decision made with respect to an
application for a certificate of review under this section
or the amendment or revocation of such a certificate, in
a manner that protects the confidentiality of any propri-
etary information relating to the application.
(f) ANNUAL REPORTS.—Every person to whom a cer-
tificate of review is issued shall submit to the Attorney
General an annual report, in such form and at such time
as the Attorney General may require, that contains any
necessary updates to the information required under sub-
section (b) and a description of the activities of the holder
under the certificate during the preceding year.
(g) RESTRICTIONS ON DISCLOSURE OF INFORMA-
TION.—
(1) WAIVER
OF
DISCLOSURE
REQUIREMENTS
UNDER
ADMINISTRATIVE
PROCEDURE
ACT.—Infor-
mation submitted by any person in connection with
the issuance, amendment, or revocation of a certifi-
cate of review shall be exempt from disclosure under
section 552 of title 5, United States Code.
548
Title II, Subtitle F
(2) RESTRICTIONS
ON
DISCLOSURE
OF
COM-
MERCIAL OR FINANCIAL INFORMATION.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), no officer or employee of the
United States shall disclose commercial or fi-
nancial information submitted in connection
with the issuance, amendment, or revocation of
a certificate of review if the information is priv-
ileged or confidential or if disclosure of the in-
formation would cause harm to the person who
submitted the information.
(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply with respect to information dis-
closed—
(i) upon a request made by the Con-
gress or any committee of the Congress,
(ii) in a judicial or administrative pro-
ceeding, subject to appropriate protective
orders,
(iii) with the consent of the person
who submitted the information,
(iv) in the course of making a deter-
mination with respect to the issuance,
amendment, or revocation of a certificate
of review, if the Attorney General deems
549
Title II, Subtitle F
disclosure of the information to be nec-
essary in connection with making the de-
termination,
(v) in accordance with any require-
ment imposed by a statute of the United
States, or
(vi) in accordance with any rule or
regulation promulgated under subsection
(i) permitting the disclosure of the infor-
mation to an agency of the United States
or of a State on the condition that the
agency will disclose the information only
under 
the 
circumstances 
specified 
in
clauses (i) through (v).
(3) PROHIBITION AGAINST USE OF INFORMA-
TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI-
TRUST LAWS.—Any information disclosed in an ap-
plication for a certificate of review under this section
shall only be admissible into evidence in a judicial or
administrative proceeding for the sole purpose of es-
tablishing whether a person is entitled to the protec-
tions provided by such a certificate.
550
Title II, Subtitle F
SEC. 2504. NOTIFICATIONS PROVIDING REDUCTION IN CER-
TAIN PENALTIES UNDER ANTITRUST LAW
FOR HEALTH CARE JOINT VENTURES.
(a) NOTIFICATIONS DESCRIBED.—
(1) SUBMISSION
OF
NOTIFICATION
BY
VEN-
TURE.—Any party to a health care joint venture,
acting on such venture’s behalf, may, not later than
90 days after entering into a written agreement to
form such venture or not later than 90 days after
the date of the enactment of this Act, whichever is
later, file with the Attorney General a written notifi-
cation disclosing—
(A) the identities of the parties to such
venture,
(B) the nature and objectives of such ven-
ture, and
(C) such additional information as the At-
torney General may require by regulation.
(2) FILING FEE.—The Attorney General may
require a filing fee to be submitted with the notifica-
tion to cover the cost of publication and the cost of
administering this section, except that the amount of
such fee shall not exceed $250.
(3) SUBMISSION
OF
ADDITIONAL
INFORMA-
TION.—
551
Title II, Subtitle F
(A) REQUEST OF ATTORNEY GENERAL.—
At any time after receiving a notification filed
under paragraph (1), the Attorney General may
require the submission of additional information
or documentary material relevant to the pro-
posed health care joint venture.
(B) PARTIES TO VENTURE.—Any party to
a health care joint venture may submit such ad-
ditional information on the venture’s behalf as
may be appropriate to ensure that the venture
will receive the protections provided under sub-
section (b).
(C) REQUIRED SUBMISSION OF INFORMA-
TION
ON
CHANGES
TO
VENTURE.—A health
care joint venture for which a notification is in
effect under this section shall submit informa-
tion on any change in the membership of the
venture not later than 90 days after such
change occurs.
(4) PUBLICATION OF NOTIFICATION.—
(A) INFORMATION MADE PUBLICLY AVAIL-
ABLE.—Not later than 30 days after receiving
a notification with respect to a venture under
paragraph (1), the Attorney General shall pub-
lish in the Federal Register a notice with re-
552
Title II, Subtitle F
spect to the venture that identifies the parties
to the venture and generally describes the pur-
pose and planned activity of the venture. Prior
to its publication, the contents of the notice
shall be made available to the parties to the
venture.
(B) RESTRICTION
ON
DISCLOSURE
OF
OTHER
INFORMATION.—All information and
documentary material submitted pursuant to
this section and all information obtained by the
Attorney General in the course of any investiga-
tion or case with respect to a potential violation
of the antitrust laws by the health care joint
venture (other than information and material
described in subparagraph (A)) shall be exempt
from disclosure under section 552 of title 5,
United States Code, and shall not be made pub-
licly available by any agency of the United
States to which such section applies except in
a judicial proceeding in which such information
and material is subject to any protective order.
(5) WITHDRAWAL OF NOTIFICATION.—Any per-
son who files a notification pursuant to this section
may withdraw such notification before a publication
by the Attorney General pursuant to paragraph (4).
553
Title II, Subtitle F
(6) NO
JUDICIAL
REVIEW
PERMITTED.—Any
action taken or not taken by the Attorney General
with respect to notifications filed pursuant to this
subsection shall not be subject to judicial review.
(b) PROTECTIONS
FOR VENTURES SUBJECT
TO
NOTIFICATION.—
(1) IN GENERAL.—
(A) PROTECTIONS DESCRIBED.—Except as
provided in subsection (c), the provisions of
paragraphs (2), (3), (4), and (5) shall apply
with respect to any action under the antitrust
laws challenging conduct within the scope of a
notification which is in effect pursuant to sub-
section (a)(1).
(B) TIMING OF PROTECTIONS.—The pro-
tections described in this subsection shall apply
to the venture that is the subject of a notifica-
tion under subsection (a)(1) as of the earlier
of—
(i) the date of the publication in the
Federal Register of the notice published
with respect to the notification; or
(ii) if such notice is not published dur-
ing the period required under subsection
(a)(4), the expiration of the 30-day period
554
Title II, Subtitle F
that begins on the date the Attorney Gen-
eral receives any necessary information re-
quired to be submitted under subsection
(a)(1) or any additional information re-
quired by the Attorney General under sub-
section (a)(3)(A).
(2) APPLICABILITY
OF
RULE
OF
REASON
STANDARD.—In any action under the antitrust laws,
the conduct of any person which is within the scope
of a notification filed under subsection (a) shall not
be deemed illegal per se, but shall be judged on the
basis of its reasonableness, taking into account all
relevant factors affecting competition, including, but
not limited to, effects on competition in relevant
markets.
(3) LIMITATION
ON
RECOVERY
TO
ACTUAL
DAMAGES AND INTEREST.—Notwithstanding section
4 of the Clayton Act, any person who is entitled to
recovery under the antitrust laws for conduct that is
within the scope of a notification filed under sub-
section (a) shall recover the actual damages sus-
tained by such person and interest calculated at the
rate specified in section 1961 of title 28, United
States Code, for the period beginning on the earliest
date for which injury can be established and ending
555
Title II, Subtitle F
on the date of judgment, unless the court finds that
the award of all or part of such interest is unjust
under the circumstances.
(4) AWARD OF ATTORNEY’S FEES AND COSTS
OF SUIT.—
(A) IN GENERAL.—In any action under the
antitrust laws brought against a health care
joint venture for conduct that is within the
scope of a notification filed under subsection
(a), the court shall, at the conclusion of the ac-
tion—
(i) award to a substantially prevailing
claimant the cost of suit attributable to
such claim, including a reasonable attor-
ney’s fee, or
(ii) award to a substantially prevailing
party defending against such claim the
cost of such suit attributable to such claim,
including a reasonable attorney’s fee, if the
claim, or the claimant’s conduct during
litigation of the claim, was frivolous, un-
reasonable, without foundation, or in bad
faith.
(B) OFFSET IN CASES OF BAD FAITH.—
The court may reduce an award made pursuant
556
Title II, Subtitle F
to subparagraph (A) in whole or in part by an
award in favor of another party for any part of
the cost of suit (including a reasonable attor-
ney’s fee) attributable to conduct during the
litigation by any prevailing party that the court
finds to be frivolous, unreasonable, without
foundation, or in bad faith.
(5) RESTRICTIONS
ON
ADMISSIBILITY
OF
IN-
FORMATION.—
(A) IN
GENERAL.—Any information dis-
closed in a notification submitted under sub-
section (a)(1) and the fact of the publication of
a notification by the Attorney General under
subsection (a)(4) shall only be admissible into
evidence in a judicial or administrative proceed-
ing for the sole purpose of establishing whether
a party to a health care joint venture is entitled
to the protections described in this subsection.
(B) ACTIONS OF ATTORNEY GENERAL.—
No action taken by the Attorney General pursu-
ant to this section shall be admissible into evi-
dence in any judicial or administrative proceed-
ing for the purpose of supporting or answering
any claim under the antitrust laws.
(c) EXCEPTION FOR CERTAIN ACTIVITIES.—
557
Title II, Subtitle F
(1) ACTIVITIES
DESCRIBED.—The protections
described in subsection (b) shall not apply to con-
duct which constitutes price-fixing, bid-rigging, or
market allocation, unless such conduct is related to
procompetitive aspects of a health care joint venture
(as determined in accordance with the process de-
scribed in paragraph (2)).
(2) PROCESS.—If conduct of a health care joint
venture which is subject to a notification under sub-
section (a)(1) is challenged for price-fixing, bid-rig-
ging, or market allocation, any party to the joint
venture shall be entitled to show the procompetitive
aspects of such conduct. The protections described
in subsection (b) shall not apply to the conduct if
the party is unable to show that the conduct is not
mere price-fixing, bid-rigging, or market allocation.
SEC. 2505. REVIEW AND REPORTS ON SAFE HARBORS, CER-
TIFICATES OF REVIEW, AND NOTIFICATIONS.
(a) IN GENERAL.—The Attorney General, in con-
sultation with the Secretary and the Chair, shall periodi-
cally review the safe harbors designated under section
2502, the certificates of review issued under section 2503,
and notification received under section 2504, and—
(1) with respect to the safe harbors, issue modi-
fications to such safe harbors in such manner as the
558
Title II, Subtitle F
Attorney General considers appropriate in accord-
ance with the requirements of section 2502, which
modifications shall take effect 90 days after issu-
ance, unless disapproved by the Congress; and
(2) with respect to the certificates of review and
notifications, submit a report to Congress on the is-
suance of such certificates and receipt of notifica-
tions, including a description of the effect of such
certificates and notifications on increasing access to
high quality health care services at reduced costs.
(b) RECOMMENDATIONS
FOR LEGISLATION.—The
Attorney General shall include in the reports submitted
under subsection (a)(2) any recommendations of the At-
torney General for legislation to improve the programs for
the issuance of certificates of review and receipt of notifi-
cations established under this subtitle.
SEC. 2506. RULES, REGULATIONS, AND GUIDELINES.
(a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA-
TIONS.—The Attorney General, in consultation with the
Secretary and the Chair, shall promulgate such rules, reg-
ulations, and guidelines as are necessary to carry out sec-
tions 2502, 2503, and 2504.
(b) GUIDANCE FOR PROVIDERS.—
(1) IN
GENERAL.—To promote greater cer-
tainty regarding the application of the antitrust laws
559
Title II, Subtitle F
to activities in the health care market, the Attorney
General, in consultation with the Secretary and the
Chair, shall (not later than 1 year after the date of
the enactment of this Act), taking into account the
criteria used to designate safe harbors under section
2502 and grant certificates of review under section
2503, publish guidelines—
(A) to define or provide assistance in de-
termining relevant geographic and product mar-
kets for health care services and providers of
health care services;
(B) to further collaborative activities which
may be helpful to enhance services in under-
served and geographically disadvantaged areas
such as rural markets and inner cities;
(C) to assist collaboration between provid-
ers (such as hospital networks, physician-hos-
pital organizations, and other groups of provid-
ers) which will help provide health care services
more efficiently;
(D) to further activities by which public
health clinics (including community health cen-
ters and migrant health centers under title III
of the Public Health Service Act) may partici-
pate in networks and other collaborative activi-
560
Title II, Subtitle F
ties in order to enhance services in underserved
areas;
(E) to assist providers of health care serv-
ices in analyzing whether the activities of such
providers may be subject to a safe harbor under
section 2502;
(F) to provide clarification for activities in
the general subject matter areas described in
the safe harbors in section 2502, but which fall
outside the safe harbors; and
(G) to describe specific types of activities
which would meet the requirements for issuance
of a certificate of review under section 2503,
and summarizing the factual and legal bases on
which the activities would meet the require-
ments.
(2) PERIODIC UPDATE.—The Attorney General
shall periodically update the guidelines published
under paragraph (1) as the Attorney General consid-
ers appropriate.
(3) WAIVER OF ADMINISTRATIVE PROCEDURE
ACT.—Section 553 of title 5, United States Code,
shall not apply to the issuance of guidelines under
paragraph (1).
561
Title II, Subtitle F
SEC. 2507. ESTABLISHMENT OF HHS OFFICE OF HEALTH
CARE COMPETITION POLICY.
(a) IN GENERAL.—There is established within the
Department of Health and Human Services an Office to
be known as the Office of Health Care Competition Policy
(hereafter in this section referred to as the ‘‘Office’’). The
Office shall be headed by a director, who shall be ap-
pointed by the Secretary.
(b) DUTIES.—The Office shall coordinate the respon-
sibilities of the Secretary under this subtitle and otherwise
assist the Secretary in developing policies relating to the
competitive and collaborative activities of providers of
health care services.
SEC. 2508. DEFINITIONS.
In this subtitle:
(1) The term ‘‘antitrust laws’’—
(A) has the meaning given it in subsection
(a) of the first section of the Clayton Act (15
U.S.C. 12(a)), except that such term includes
section 5 of the Federal Trade Commission Act
(15 U.S.C. 45) to the extent such section ap-
plies to unfair methods of competition; and
(B) includes any State law similar to the
laws referred to in subparagraph (A).
(2) The term ‘‘Chair’’ means the Chair of the
Federal Trade Commission.
562
Title II, Subtitle F
(3) The term ‘‘health benefit plan’’ means any
hospital or medical expense incurred policy or certifi-
cate, hospital or medical service plan contract, or
health maintenance subscriber contract, or a mul-
tiple employer welfare arrangement or employee ben-
efit plan (as defined under the Employee Retirement
Income Security Act of 1974) which provides bene-
fits with respect to health care services.
(4) The term ‘‘health care joint venture’’ means
a joint venture of 2 or more persons formed for the
purpose of providing health care services, including
attempts to enter into or perform a contract or
agreement to provide such services.
(5) The term ‘‘health care services’’ means any
services for which payment may be made under a
health benefit plan, including services related to the
delivery or administration of such services.
(6) The term ‘‘medical self-regulatory entity’’
means a medical society or association, a specialty
board, a recognized accrediting agency, or a hospital
medical staff, and includes the members, officers,
employees, consultants, and volunteers or commit-
tees of such an entity.
(7) The term ‘‘person’’ includes a State or unit
of local government.
563
Title II, Subtitle F
(8) The term ‘‘provider of health care services’’
means any individual or entity that is engaged in the
delivery of health care services in a State and that
is required by State law or regulation to be licensed
or certified by the State to engage in the delivery of
such services in the State.
(9) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(10) The term ‘‘specialty group’’ means a medi-
cal specialty or subspecialty in which a provider of
health care services may be licensed to practice by
a State (as determined by the Secretary in consulta-
tion with the certification boards for such specialties
and subspecialties).
(11) The term ‘‘standard setting and enforce-
ment activities’’ means—
(A) accreditation of health care practition-
ers, health care providers, medical education in-
stitutions, or medical education programs,
(B) technology assessment and risk man-
agement activities,
(C) the development and implementation of
practice guidelines or practice parameters, or
(D) official peer review proceedings under-
taken by a hospital medical staff (or committee
564
Title II, Subtitle G
thereof) or a medical society or association for
purposes of evaluating the professional conduct
or quality of health care provided by a medical
professional.
Subtitle G—Encouraging Enforce-
ment Activities of Medical Self-
Regulatory Entities
PART 1—APPLICATION OF THE CLAYTON ACT TO
MEDICAL SELF-REGULATORY ENTITIES
SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF-
REGULATORY ENTITIES.
(a) IN GENERAL.—(1) Except as provided in para-
graph (2), no damages, interest on damages, cost of suit,
or attorney’s fee may be recovered under section 4, 4A,
or 4C of the Clayton Act (15 U.S.C. 15, 15a, 15c), or
under any State law similar to such section, from any
medical self-regulatory entity (including its members, offi-
cers, employees, consultants, and volunteers or committees
thereof) as a result of engaging in standard setting or en-
forcement activities that are—
(A) designed to promote the quality of health
care provided to patients, and
(B) not conducted for purposes of financial
gain.
565
Title II, Subtitle G
(2) Paragraph (1) shall not prohibit the recovery of
actual damages, interest on damages, the cost of suit, or
a reasonable attorney’s fee under section 4 or 4A of the
Clayton Act (15 U.S.C. 15, 15a), or under any State law
similar to such section, by a State or the United States
from a medical self-regulatory entity (including its mem-
bers, officers, employees, consultants, and volunteers or
committees thereof) for injury sustained as a result of en-
gaging in the conduct described in such paragraph.
(b) FEES.—In any action under section 4, 4C, or 16
of the Clayton Act (15 U.S.C. 15, 15c, 26), or under a
similar State law, brought against any medical self-regu-
latory entity (including its members, officers, employees,
consultants, and volunteers or committees thereof) as a
result of engaging in conduct described in subsection
(a)(1), the court shall award the cost of suit, including
a reasonable attorney’s fee, to a substantially prevailing
defendant.
SEC. 2602. DEFINITIONS.
For purposes of this subtitle:
(1) The term ‘‘medical self-regulatory entity’’
means a medical society or association, a specialty
board, a recognized accrediting agency, or a hospital
medical staff.
566
Title II, Subtitle G
(2) The term ‘‘standard setting and enforce-
ment activities’’ means—
(A) accreditation of health care practition-
ers, health care providers, medical education in-
stitutions, or medical education programs,
(B) technology assessment and risk man-
agement activities,
(C) the development and implementation of
practice guidelines or practice parameters, or
(D) official peer review proceedings under-
taken by a hospital medical staff (or committee
thereof) or a medical society or association for
purposes of evaluating the quality of health care
provided by a medical professional.
PART 2—CONSULTATION BY FEDERAL AGENCIES
SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGU-
LATORY 
ENTITIES 
RESPECTING 
MEDICAL
PROFESSIONAL 
GUIDELINES 
AND 
STAND-
ARDS.
Any Federal agency engaged in the establishment of
medical professional standards shall consult with appro-
priate medical societies or associations, specialty boards,
or recognized accrediting agencies, if available, in carrying
out medical professional standard setting and guidelines
or standards relating to the practice of medicine.
567
Title II, Subtitle H
Subtitle H—Reform of Clinical Lab-
oratory Requirements for Sim-
ple Tests
SEC. 2701. ELIMINATING CLIA REQUIREMENT FOR CERTIFI-
CATE OF WAIVER FOR SIMPLE LABORATORY
EXAMINATIONS AND PROCEDURES.
(a) IN GENERAL.—Section 353 of the Public Health
Service Act (42 U.S.C. 263a) is amended—
(1) in subsection (b), by inserting before the pe-
riod at the end the following: ‘‘or unless the labora-
tory is exempt from the certificate requirement
under subsection (d)(2)’’;
(2) by amending paragraph (2) of subsection
(d) to read as follows:
‘‘(2) EXEMPTION FROM CERTIFICATE REQUIRE-
MENT FOR LABORATORIES PERFORMING ONLY SIM-
PLE EXAMINATIONS AND PROCEDURES.—A labora-
tory which performs only laboratory examinations
and procedures described in paragraph (3) is not re-
quired to have in effect a certificate under this sec-
tion.’’;
(3) by striking paragraph (4) of subsection (d);
and
568
Title II, Subtitle H
(4) in subsection (m)(1), by striking ‘‘, except
that the Secretary’’ and all that follows and insert-
ing a period.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the first day of the first
month beginning after the date of the enactment of this
Act.
SEC. 2702. AMENDMENT RELATED TO SIMPLE LABORATORY
EXAMINATIONS.
Section 353(d) of the Public Health Service Act (42
U.S.C. 263) is amended by striking paragraph (3) and
inserting the following:
‘‘(3) EXAMINATIONS
AND
PROCEDURES.—The
examinations and procedures identified in paragraph
(2) are simple laboratory examinations and proce-
dures which have an insignificant risk of an erro-
neous result and include those which—
‘‘(A) have been approved by the Food and
Drug Administration for home use,
‘‘(B) employ methodologies that are so
simple and accurate as to render the likelihood
of erroneous results negligible,
‘‘(C) the Secretary has determined pose no
reasonable risk of serious harm to the patient
if performed incorrectly, or
569
Title II, Subtitle H
‘‘(D)(i) are performed by or under the di-
rection or supervision of or in collaboration with
a doctor of medicine or osteopathy licensed to
practice medicine or osteopathy in the State in
which the laboratory is located, or by an indi-
vidual qualified to direct, supervise, or perform
examinations and procedures under State laws
or such standards as the Secretary may estab-
lish; and
‘‘(ii) the patient is available for clinical ob-
servation; and
‘‘(iii) prompt results are needed to evalu-
ate, diagnose, and treat the patient or to avoid
additional burdens on the patient that could re-
sult from not performing the test.
‘‘(4) DEFINITION.—As used in this section, the
term ‘simple laboratory examinations and proce-
dures’ includes dipstick tests for total and allergen-
specific IgE; microscopic examination of nasal
smears (for cells and bacteria); mono spot tests;
testing for theophylline using the Accu-Level meth-
od; microscopic urinalysis; vaginal wet mount; KOH
prep, 
scabies 
prep; 
rapid 
strep 
antigen;
nonautomated qualitative and quantitative semen
analysis; pin worm; prostate smears; synovial fluid
570
Title II, Subtitle H
analysis for inflammation and infection; post coital
test; fern test; occult blood; Gram stain; qualitative
drug screen; pulse oximetry; hemoglobin (by hand-
held hemoglobinometer); ASO, CRP, RF, and mono
screen; sickle cell screen; white blood cell count by
manual chamber count; peripheral blood smears;
sputum eosinophil; urine culture colony; urine sen-
sitivities; microscopic examination of hair morphol-
ogy; molluscum smear; fungal cultures, including
dermatophyte test medium; Tzank smear; Darkfield
examination; agglutination pregnancy test; urethral
gram stains, and centrifigal hematology, including
white blood cell count, hematocrit, differential, and
platelet count.’’.
SEC. 2703. AMENDMENT RELATED TO STUDY.
(a) STUDY.—The Secretary of Health and Human
Services, acting through the Centers for Disease Control
and Prevention, shall use existing appropriations to con-
duct the study required by section 4 of the Clinical Lab-
oratory Improvement Amendments of 1988 (42 U.S.C.
263a note). The Secretary shall report the results of such
study to the Committee on Ways and Means and the Com-
mittee on Energy and Commerce of the House of Rep-
resentatives and the Committee on Finance and the Com-
571
Title II, Subtitle H
mittee on Labor and Human Resources of the Senate not
later than May 1, 1996.
(b) SUNSET.—If the results of the study described
in subsection (a) are not reported to the committees of
Congress by May 1, 1996, section 353 of the Public
Health Service Act shall not be in effect after May 1,
1996.
SEC. 2704. AMENDMENTS RELATED TO THE CLINICAL LAB-
ORATORY IMPROVEMENT ADVISORY COM-
MITTEE.
The Secretary of Health and Human Services shall
revise the membership of the Clinical Laboratory Improve-
ment Advisory Committee established by the Secretary in
regulations to implement section 353 of the Public Health
Service Act (subpart T of part 493 of title 42 Code of
Federal Regulations) to contain, in the membership which
does not include ex-officio members or officers or employ-
ees of the Federal Government, a number of practicing
physicians which is proportionate to the number of physi-
cian laboratories regulated under such section 353. For
purposes of this section, the term ‘‘practicing physician’’
means a licensed doctor of medicine or osteopathy who
spends at least 80 percent of the physician’s professional
time in direct patient care and who directs an in-office
clinical laboratory for the physician’s patients.
572
Title II, Subtitle I
Subtitle I—Miscellaneous
Provisions
SEC. 
2801. 
REQUIREMENT 
THAT 
CERTAIN 
AGENCIES
PREFUND GOVERNMENT HEALTH BENEFITS
CONTRIBUTIONS FOR THEIR ANNUITANTS.
(a) DEFINITIONS.—For the purpose of this section—
(1) the term ‘‘agency’’ means any agency or
other instrumentality within the executive branch of
the Government, the receipts and disbursements of
which are not generally included in the totals of the
budget of the United States Government submitted
by the President;
(2) the term ‘‘health benefits plan’’ means, with
respect to an agency, a health benefits plan, estab-
lished by or under Federal law, in which employees
or annuitants of such agency may participate;
(3) the term ‘‘health-benefits coverage’’ means
coverage under a health benefits plan;
(4) an individual shall be considered to be an
‘‘annuitant of an agency’’ if such individual is enti-
tled to an annuity, under a retirement system estab-
lished by or under Federal law, by virtue of—
(A) such individual’s service with, and sep-
aration from, such agency; or
573
Title II, Subtitle I
(B) being the survivor of an annuitant
under subparagraph (A) or of an individual who
died while employed by such agency; and
(5) the term ‘‘Office’’ means the Office of Per-
sonnel Management.
(b) PREFUNDING REQUIREMENT.—
(1) IN GENERAL.—Effective as of October 1,
1994, each agency (or February 1, 1995, in the case
of the agency with the greatest number of employ-
ees, as determined by the Office) shall be required
to prepay the Government contributions which are
or will be required in connection with providing
health-benefits coverage for annuitants of such agen-
cy.
(2) REGULATIONS.—The Office shall prescribe
such regulations as may be necessary to carry out
this section. The regulations shall be designed to en-
sure at least the following:
(A) Amounts paid by each agency shall be
sufficient to cover the amounts which would
otherwise be payable by such agency (on a
‘‘pay-as-you-go’’ basis), on or after the applica-
ble effective date under paragraph (1), on be-
half of—
574
Title II, Subtitle I
(i) individuals who are annuitants of
the agency as of such effective date; and
(ii) individuals who are employed by
the agency as of such effective date, or
who become employed by the agency after
such effective date, after such individuals
have become annuitants of the agency (in-
cluding their survivors).
(B)(i) For purposes of determining any
amounts payable by an agency—
(I) this section shall be treated as if
it had taken effect at the beginning of the
20-year period which ends on the effective
date applicable under paragraph (1) with
respect to such agency; and
(II) in addition to any amounts pay-
able under subparagraph (A), each agency
shall also be responsible for paying any
amounts for which it would have been re-
sponsible, with respect to the 20-year pe-
riod described in subclause (I), in connec-
tion with any individuals who are annu-
itants or employees of the agency as of the
applicable effective date under paragraph
(1).
575
Title II, Subtitle I
(ii) Any amounts payable under this sub-
paragraph for periods preceding the applicable
effective date under paragraph (1) shall be pay-
able in equal installments over the 20-year pe-
riod beginning on such effective date.
(c) FASB STANDARDS.—Regulations under sub-
section (b) shall be in conformance with the provisions of
standard 106 of the Financial Accounting Standards
Board, issued in December 1990.
(d) CLARIFICATION.—Nothing in this section shall be
considered to permit or require duplicative payments on
behalf of any individuals.
(e) DRAFT LEGISLATION.—The Office shall prepare
and submit to Congress any draft legislation which may
be necessary in order to carry out this section.
SEC. 2802. INELIGIBILITY OF ALIENS FOR SSI AND MEDIC-
AID.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law and except as provided in subsections (b) and
(c), no alien shall be eligible for any program referred to
in subsection (d).
(b) EXCEPTIONS.—
(1) REFUGEE
EXCEPTION.—Subsection (a)
shall not apply to an alien admitted to the United
States as a refugee under section 207 of the Immi-
576
Title II, Subtitle I
gration and Nationality Act until 6 years after the
date of such alien’s arrival into the United States.
(2) AGED
EXCEPTION.—Subsection (a) shall
not apply to an alien who—
(A) has been lawfully admitted to the
United States for permanent residence;
(B) is over 75 years of age; and
(C) has resided in the United States for at
least 5 years.
(3) CURRENT
RESIDENT
EXCEPTION.—Sub-
section (a) shall not apply to the eligibility of an
alien for a program referred to in subsection (d)
until 1 year after the date of the enactment of this
Act if, on such date of enactment, the alien is resid-
ing in the United States and is eligible for the pro-
gram.
(c) PROGRAMS FOR WHICH ALIENS MAY BE ELIGI-
BLE.—The limitation under subsection (a) shall not apply
to medical assistance with respect to emergency services
(as defined for purposes of section 1916(a)(2)(D) of the
Social Security Act).
(d) PROGRAMS FOR WHICH ALIENS ARE INELI-
GIBLE.—The programs referred to in this subsection are
the following:
577
Title II, Subtitle I
(1) The program of medical assistance under
title XIX of the Social Security Act, except emer-
gency services as provided in subsection (c).
(2) The supplemental security income program
under title XVI of the Social Security Act.
(e) NOTIFICATION OF ALIENS.—Any Federal agency
that administers a program referred to in subsection (d)
shall, directly or through the States, notify each alien re-
ceiving benefits under the program whose eligibility for the
program is or will be terminated by reason of this section.
SEC. 2803. LIMITATION ON SSI BENEFITS FOR DRUG AND
ALCOHOL ADDICTS.
(a) IN GENERAL.—
(1) LIMITATION DESCRIBED.—Section 1614(a)
of the Social Security Act (42 U.S.C. 1382c(a)) is
amended by adding at the end the following:
‘‘(5)(A) The Secretary shall identify all recipients of
benefits under this title by reason of disability whose dis-
ability is a result of addiction to illegal drugs.
‘‘(B) The Secretary shall periodically, on a random
basis, test each recipient identified under subparagraph
(A) to determine whether the recipient is using illegal
drugs.
‘‘(C)(i) Notwithstanding any other provision of this
title, any individual who is determined under subpara-
578
Title II, Subtitle I
graph (B) to be using illegal drugs, or who refuses to sub-
mit to testing as provided for under subparagraph (B),
shall not be eligible for benefits under this title for a pe-
riod of at least 1 year.
‘‘(ii) The period of ineligibility under clause (i) shall
terminate (after the last day of such 1-year period) if the
individual has 2 tests (at least 2 months apart and not
paid for through Federal funds) which establish that the
recipient is not using illegal drugs.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to quarters beginning
after the expiration of the 6-month period that be-
gins on the date of the enactment of this Act.
(b) REPRESENTATIVE PAYEE REFORMS.—
(1) AUTHORITY OF GOVERNMENT AGENCIES TO
BECOME
PAID
REPRESENTATIVE
PAYEES.—Section
1631(a)(2)(D)(ii) 
of 
such 
Act 
(42 
U.S.C.
1383(a)(2)(D)(ii)) is amended by adding at the end
the following: ‘‘The term ‘qualified organization’ also
includes any government agency that meets the re-
quirements of items (aa) and (bb) of subclause
(II).’’.
(2) MAXIMUM FEE PAYABLE TO REPRESENTA-
TIVE PAYEES.—Section 1631(a)(2)(D)(i) of such Act
(42 U.S.C. 1383(a)(2)(D)(i)) is amended by striking
579
Title III
‘‘the lesser of—’’ and all that follows and inserting
‘‘10 percent of the monthly benefit involved.’’.
TITLE III—LONG-TERM CARE
TABLE OF CONTENTS OF TITLE
Subtitle A—Tax Treatment of Long-term Care Insurance
Sec. 3001. Treatment of long-term care insurance or plans.
Sec. 3002. Exclusion for benefits provided under long-term care insurance; in-
clusion of employer-provided coverage.
Sec. 3003. Qualified long-term services treated as medical care.
Sec. 3004. Effective date.
Subtitle B—Establishment of Federal Standards for Long-term
Care Insurance
Sec. 3101. Establishment of Federal standards for long-term care insurance.
‘‘TITLE XXVII—LONG-TERM CARE INSURANCE STANDARDS
‘‘PART A—PROMULGATION OF STANDARDS AND MODEL BENEFITS
‘‘Sec. 2701. Standards.
‘‘PART B—ESTABLISHMENT AND IMPLEMENTATION OF LONG-TERM CARE
INSURANCE POLICY STANDARDS
‘‘Sec. 2711. Implementation of policy standards.
‘‘Sec. 2712. Regulation of sales practices.
‘‘Sec. 2713. Additional responsibilities for carriers.
‘‘Sec. 2714. Renewability standards for issuance, and basis for cancellation
of policies.
‘‘Sec. 2715. Benefit standards.
‘‘Sec. 2716. Nonforfeiture.
‘‘Sec. 2717. Limit of period of contestability and right to return.
‘‘Sec. 2718. Civil money penalty.
‘‘PART C—LONG-TERM CARE INSURANCE POLICIES, DEFINITION AND
ENDORSEMENTS
‘‘Sec. 2721. Long-term care insurance policy defined.
‘‘Sec. 2722. Code of conduct with respect to endorsements.
‘‘PART D—MISCELLANEOUS PROVISIONS
‘‘Sec. 2731. Funding for long-term care insurance information, counseling,
and assistance.
‘‘Sec. 2732. Definitions.
Subtitle C—Protection of Assets Under Medicaid Through Use
of Qualified Long-term Care Insurance
Sec. 3201. Protection of assets through use of qualified long-term care insur-
ance.
580
Title III, Subtitle A
Subtitle D—Studies
Sec. 3301. Feasibility of encouraging health care providers to donate services
to homebound patients.
Sec. 3302. Feasibility of tax credit for heads of households who care for elderly
family members in their homes.
Sec. 3303. Case management of current long-term care benefits.
Subtitle E—Volunteer Service Credit Demonstration Projects
Sec. 3401. Amendment to the Older Americans Act of 1965.
Subtitle A—Tax Treatment of Long-
term Care Insurance
SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE
OR PLANS.
(a) GENERAL RULE.—Subpart E of part I of sub-
chapter L of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after section 818 the follow-
ing new section:
‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE
OR PLANS.
‘‘(a) GENERAL RULE.—For purposes of this part, a
long-term care insurance contract shall be treated as an
accident or health insurance contract.
‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘long-term care insurance contract’ means
any insurance contract issued if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
581
Title III, Subtitle A
fied long-term care services and benefits inci-
dental to such coverage,
‘‘(B) the maximum benefit under the pol-
icy for expenses incurred for any day does not
exceed $200,
‘‘(C) such contract does not cover expenses
incurred for services or items to the extent that
such expenses are reimbursable under title
XVIII of the Social Security Act or would be so
reimbursable but for the application of a de-
ductible or coinsurance amount,
‘‘(D) such contract is guaranteed renew-
able,
‘‘(E) such contract does not have any cash
surrender value, and
‘‘(F) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be treated
as described in paragraph (1)(A) by reason of
payments being made on a per diem or other
582
Title III, Subtitle A
periodic basis without regard to the expenses
incurred during the period to which the pay-
ments relate.
‘‘(B) CONTRACT
MAY
COVER
MEDICARE
REIMBURSABLE
EXPENSES
WHERE
MEDICARE
IS SECONDARY PAYOR.—Paragraph (1)(C) shall
not apply to expenses which are reimbursable
under title XVIII of the Social Security Act
only as a secondary payor.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(F) shall not apply to any refund of pre-
miums on surrender or cancellation of the con-
tract.
‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, and rehabilitative services, and
maintenance or personal care services, which—
‘‘(A) are required by a chronically ill indi-
vidual in a qualified facility, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
583
Title III, Subtitle A
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i)(I) being unable to perform (with-
out substantial assistance from another in-
dividual) at least 2 activities of daily living
(as defined in subparagraph (B)) for a pe-
riod of at least 90 days due to a loss of
functional capacity, or
‘‘(II) having a level of disability simi-
lar (as determined by the Secretary in con-
sultation with the Secretary of Health and
Human Services) to the level of disability
described in subclause (I), or
‘‘(ii) having a similar level of disabil-
ity due to cognitive impairment.
‘‘(B) ACTIVITIES OF DAILY LIVING.—For
purposes of subparagraph (A), each of the fol-
lowing is an activity of daily living:
‘‘(i) MOBILITY.—The process of walk-
ing or wheeling on a level surface which
may include the use of an assistive device
such as a cane, walker, wheelchair, or
brace.
584
Title III, Subtitle A
‘‘(ii) DRESSING.—The overall complex
behavior of getting clothes from closets
and drawers and then getting dressed.
‘‘(iii) TOILETING.—The act of going
to the toilet room for bowel and bladder
function, transferring on and off the toilet,
cleaning after elimination, and arranging
clothes or the ability to voluntarily control
bowel and bladder function, or in the event
of incontinence, the ability to maintain a
reasonable level of personal hygiene.
‘‘(iv) TRANSFER.—The process of get-
ting in and out of bed or in and out of a
chair or wheelchair.
‘‘(v) EATING.—The process of getting
food from a plate or its equivalent into the
mouth.
‘‘(3) QUALIFIED FACILITY.—The term ‘quali-
fied facility’ means—
‘‘(A) a nursing, rehabilitative, hospice, or
adult day care facility (including a hospital, re-
tirement home, nursing home, skilled nursing
facility, intermediate care facility, or similar in-
stitution)—
585
Title III, Subtitle A
‘‘(i) which is licensed under State law,
or
‘‘(ii) which is a certified facility for
purposes of title XVIII or XIX of the So-
cial Security Act, or
‘‘(B) an individual’s home if a licensed
health care practitioner certifies that without
home care the individual would have to be cared
for in a facility described in subparagraph (A).
‘‘(4) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is to provide needed assistance with any of the ac-
tivities of daily living described in paragraph (2)(B).
‘‘(5) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT
TO APPLY.—This section shall not apply in determining
whether section 4980B (relating to failure to satisfy con-
586
Title III, Subtitle A
tinuation coverage requirements of group health plans) ap-
plies.
‘‘(e) INFLATION ADJUSTMENT
OF $200 BENEFIT
LIMIT.—
‘‘(1) IN GENERAL.—In the case of a calendar
year after 1994, the $200 amount contained in sub-
section (b)(1)(B) shall be increased for such cal-
endar year by the medical care cost adjustment for
such calendar year. If any increase determined
under the preceding sentence is not a multiple of
$10, such increase shall be rounded to the nearest
multiple of $10.
‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For
purposes of paragraph (1), the medical care cost ad-
justment for any calendar year is the percentage (if
any) by which—
‘‘(A) the medical care component of the
Consumer Price Index (as defined in section
1(f)(5)) for August of the preceding calendar
year, exceeds
‘‘(B) such component for August of 1993.’’
(b) RESERVES.—Clause (iii) of section 807(d)(3)(A)
is amended by inserting ‘‘(other than a long-term care in-
surance contract within the meaning of section 818A)’’
after ‘‘contract’’.
587
Title III, Subtitle A
(c) CLERICAL AMENDMENT.—The table of sections
for such subpart E is amended by inserting after the item
relating to section 818 the following new item:
‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’
SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER
LONG-TERM CARE INSURANCE; INCLUSION
OF EMPLOYER-PROVIDED COVERAGE.
(a) IN GENERAL.—Subsection (a) of section 104 of
the Internal Revenue Code of 1986 (relating to compensa-
tion for injuries or sickness) is amended by striking ‘‘and’’
at the end of paragraph (4), by striking the period at the
end of paragraph (5) and inserting ‘‘, and’’, and by insert-
ing after paragraph (4) the following new paragraph:
‘‘(6) benefits under a long-term care insurance
contract (as defined in section 818A(b)).’’
(b) INCLUSION
OF
EMPLOYER-PROVIDED
COV-
ERAGE.—Section 106 of such Code (relating to contribu-
tions by employer to accident and health plans) is amend-
ed by adding at the end thereof the following sentence:
‘‘The preceding sentence shall not apply to any plan pro-
viding coverage for long-term care services.’’
SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS
MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) of the Internal Revenue Code of 1986 (defining
medical care) is amended by striking ‘‘or’’ at the end of
589
Title III, Subtitle A
‘‘In the case of a long-term care insurance contract
(as defined in section 818A), only eligible long-term
care premiums (as defined in paragraph (10)) shall
be taken into account under subparagraph (D).’’
(B) Subsection (d) of section 213 is amended
by adding at the end the following new paragraph:
‘‘(10) ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any long-term care insurance con-
tract (as defined in section 818A) covering an
individual, to the extent such amount does not
exceed the limitation determined under the fol-
lowing table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................................
$200
More than 40 but not more than 50 .........................
375
More than 50 but not more than 60 .........................
750
More than 60 but not more than 70 .........................
1,600
More than 70 .............................................................
2,000.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1993, each dollar amount contained
in paragraph (1) shall be increased by the