Title I, Subtitle D
(7) HEALTH INSURANCE COVERAGE.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘‘health insurance
coverage’’ means any hospital or medical service
policy or certificate, hospital or medical service
plan contract, or health maintenance organiza-
tion group contract offered by a carrier.
(B) EXCEPTION.—Such term does not in-
clude any of the following (or any combination
of the following):
(i) Coverage only for accident, dental,
vision, disability income, or long-term care
insurance, or any combination thereof.
(ii) Medicare supplemental health in-
surance.
(iii) Coverage issued as a supplement
to liability insurance.
(iv) Liability insurance, including gen-
eral liability insurance and automobile li-
ability insurance.
(v) Workers’ compensation or similar
insurance.
(vi) Automobile medical-payment in-
surance.
Title I, Subtitle D
(vii) Coverage for a specified disease
or illness.
(viii) A hospital or fixed indemnity
policy.
(ix) Coverage provided exclusively to
individuals who are not eligible individuals.
(8) HEALTH
MAINTENANCE
ORGANIZATION.—
The term ‘‘health maintenance organization’’ in-
cludes, as defined in standards established under
section 1103, an organization that provides health
insurance coverage which meets specified standards
and under which health services are offered to be
provided on a prepaid, at-risk basis primarily
through a defined set of providers.
(9) HEALTH
PLAN
PURCHASING
ORGANIZA-
TION.—The term ‘‘health plan purchasing organiza-
tion’’ means an organization established under sub-
title A of title VI.
(10) INDIVIDUAL/SMALL GROUP MARKET.—The
term ‘‘individual/small group market’’ means the in-
surance market offered—
(A) to individuals seeking health insurance
coverage on behalf of themselves (and their de-
pendents) insofar as no employer is seeking
such coverage on behalf of the individual, and
Title I, Subtitle D
(B) to small employers seeking health in-
surance coverage on behalf of their employees
(and their dependents),
regardless of whether or not such coverage is made
available directly or through a multiple employer
welfare arrangement, association, or otherwise.
(11) MANAGED CARE ARRANGEMENTS.—
(A) MANAGED CARE ARRANGEMENT.—The
term ‘‘managed care arrangement’’ means, with
respect to a group health plan or under health
insurance coverage, an arrangement under such
plan or coverage under which providers agree to
provide items and services covered under the ar-
rangement to individuals covered under the
plan or who have such coverage.
(B) 
PROVIDER
NETWORK.—The 
term
‘‘provider network’’ means, with respect to a
group health plan or health insurance coverage,
providers who have entered into an agreement
described in subparagraph (A).
(12) MULTIPLE
EMPLOYER
WELFARE
AR-
RANGEMENT.—The term ‘‘multiple employer welfare
arrangement’’ shall have the meaning applicable
under section 3(40) of the Employee Retirement In-
come Security Act of 1974.
Title I, Subtitle D
(13) NAIC.—The term ‘‘NAIC’’ means the Na-
tional Association of Insurance Commissioners.
(14) OPTIONS.—Each of the following is a
‘‘type of coverage option’’ in relation to standard
coverage:
(A) FEE-FOR-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘fee-for-
service option’’ if, regardless of whether covered
individuals may receive benefits through a pro-
vider network, benefits with respect to the cov-
ered items and services in the coverage are
made available for such items and services pro-
vided through any lawful provider of such cov-
ered items and services and payment is made to
such a provider whether or not there is a con-
tractual arrangement between the provider and
the carrier or plan.
(B) MANAGED
CARE
OPTION.—Standard
coverage is considered to provide a ‘‘managed
care option’’ if benefits with respect to the cov-
ered items and services in the coverage are
made available exclusively through a provider
network, except in the case of emergency serv-
ices and as otherwise required under law.
Title I, Subtitle D
(C) POINT-OF-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘point-of-
service option’’ if the benefits with respect to
covered items and services in the coverage are
made available principally through a managed
care arrangement, with the choice of the en-
rollee to obtain such benefits for items and
services provided through any lawful provider of
such covered items and services. The coverage
may provide for different cost sharing schedules
based on whether the items and services are
provided through such an arrangement or out-
side such an arrangement.
(15) QUALIFIED
HEALTH
COVERAGE.—The
term ‘‘qualified health coverage’’ has the meaning
given such term in section 1101.
(16) STANDARD COVERAGE.—The term ‘‘stand-
ard coverage’’ means coverage provided consistent
with section 1102(a).
(17) STATE COMMISSIONER OF INSURANCE.—
The term ‘‘State commissioner of insurance’’ in-
cludes a State superintendent of insurance.
Title I, Subtitle D
SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IM-
MIGRATION STATUS.
Except as otherwise provided, for purposes of this
Act:
(1) ALIEN
PERMANENTLY
RESIDING
IN
THE
UNITED STATES UNDER COLOR OF LAW.—The term
‘‘alien permanently residing in the United States
under color of law’’ means an alien lawfully admitted
for permanent residence (within the meaning of sec-
tion 101(a)(20) of the Immigration and Nationality
Act), and includes any of the following (such status
not having changed):
(A) An alien who is admitted as a refugee
under section 207 of the Immigration and Na-
tionality Act.
(B) An alien who is granted asylum under
section 208 of such Act.
(C) An alien whose deportation is withheld
under section 243(h) of such Act.
(D) An alien whose deportation is sus-
pended pursuant to section 244 of such Act.
(E) An alien who is granted conditional
entry pursuant to section 203(a)(7) of such Act
as in effect before April 1, 1980.
Title I, Subtitle D
(F) An alien who is admitted for tem-
porary residence under section 210, 210A, or
245A of such Act.
(G) An alien who is within a class of aliens
lawfully present in the United States pursuant
to any other provision of such Act, if (i) the At-
torney General determines that the continued
presence of such class of aliens serves a human-
itarian or other compelling public interest, and
(ii) the Secretary determines that such interest
would be further served by treating each such
alien within such class as a ‘‘legal permanent
resident’’ for purposes of this Act or who has
been granted extended voluntary departure as a
member of a nationality group.
(H) An alien who is the spouse or unmar-
ried child under 21 years of age of a citizen of
the United States, or the parent of such a citi-
zen if the citizen is over 21 years of age, and
with respect to whom an application for adjust-
ment to lawful permanent residence is pending.
(I) An alien within such other classification
of permanent resident aliens as the Secretary
may establish by regulation.
Title I, Subtitle D
(2) LONG-TERM
NONIMMIGRANT.—The term
‘‘long-term nonimmigrant’’ means a nonimmigrant
described in subparagraph (E), (H), (I), (K), (L),
(N), (O), (Q), or (R) of section 101(a)(15) of the
Immigration and Nationality Act.
(3) 
QUALIFYING
INDIVIDUAL.—The 
term
‘‘qualifying individual’’ means, an individual who is
a resident of the United States, who is not a pris-
oner, and is—
(A) a citizen or national of the United
States;
(B) an alien permanently residing in the
United States under color of law (as defined in
paragraph (1)); or
(C) a long-term nonimmigrant (as defined
in paragraph (2)).
SEC. 1905. EFFECTIVE DATES.
The requirements of this title shall apply with respect
to—
(1) group health plans for plan years beginning
on or after January 1, 1997, and
(2) carriers (with respect to coverage other than
under a group health plan) as of January 1, 1997.
Title II, Subtitle A
TITLE II—REMOVAL OF FINAN-
CIAL BARRIERS TO ACCESS
Subtitle A—Tax Deductibility for
Individuals and Self-Employed
SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED 
INDIVIDUALS 
INCREASED
AND MADE PERMANENT.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
of the Internal Revenue Code of 1986 (relating to special
rules for health insurance costs of self-employed individ-
uals) is amended by striking ‘‘25 percent’’ and inserting
‘‘the applicable percentage’’.
(b) DEDUCTION MADE PERMANENT; APPLICABLE
PERCENTAGE.—Paragraph (6) of section 162(l) of such
Code is amended to read as follows:
‘‘(6) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1)—
‘‘In the case of taxable years begin-
ning in calendar year:
The applicable
percentage is:
1996, 1997, or 1998 ...............................
30 percent
1999 ........................................................
50 percent
2000 or thereafter ...................................
100 percent.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
Title II, Subtitle A
SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF
INDIVIDUALS 
WHO 
ARE 
NOT 
SELF-EM-
PLOYED.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions) is amended by redesignat-
ing section 220 as section 221 and by inserting after sec-
tion 219 the following new section:
‘‘SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS
WHO ARE NOT SELF-EMPLOYED.
‘‘(a) IN GENERAL.—In the case of an individual who
is not a self-employed individual (as defined in section
401(c)(1)), there shall be allowed as a deduction an
amount equal to 25 percent of the amount paid during
the taxable year for insurance which constitutes medical
care for the taxpayer, his spouse, and dependents.
‘‘(b) COORDINATION WITH DEDUCTION FOR SELF-
EMPLOYED INDIVIDUALS.—The amount which would (but
for this paragraph) be allowed as a deduction under sub-
section (a) for the taxable year shall be reduced (but not
below zero) by the amount (if any) allowed as a deduction
under section 162(l) for such taxable year.
‘‘(c) OTHER COVERAGE.—Subsection (a) shall not
apply to any taxpayer for any calendar month for which
the taxpayer is eligible to participate in any subsidized
Title II, Subtitle A
health plan maintained by any employer of the taxpayer
or of the spouse of the taxpayer.
‘‘(d) COORDINATION WITH MEDICAL DEDUCTION,
ETC..—Any amount paid by a taxpayer for insurance to
which subsection (a) applies shall not be taken into ac-
count in computing the amount allowable to the taxpayer
as a deduction under section 213(a).’’
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by adding at the
end the following new paragraph:
‘‘(16) HEALTH INSURANCE COSTS.—The deduc-
tion allowed by section 220.’’
(c) CLERICAL AMENDMENT.—The table of sections
for part VII of subchapter B of chapter 1 of such Code
is amended by striking the last item and inserting the fol-
lowing new items:
‘‘Sec. 220. Health insurance costs of individuals who are not self-
employed.
‘‘Sec. 221. Cross reference.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
Title II, Subtitle A
SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PRO-
VIDED THROUGH CAFETERIA PLANS AND
FLEXIBLE SPENDING ARRANGEMENTS.
(a) FLEXIBLE SPENDING ARRANGEMENTS.—Section
106 of the Internal Revenue Code of 1986 (relating to
contributions by employer to accident and health plans)
is amended to read as follows:
‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT
AND HEALTH PLANS.
‘‘(a) GENERAL RULE.—Except as otherwise provided
in this section, gross income of an employee does not in-
clude employer-provided coverage under an accident or
health plan.
‘‘(b) INCLUSION OF CERTAIN BENEFITS PROVIDED
THROUGH
FLEXIBLE
SPENDING
ARRANGEMENTS.—
Gross income of an employee shall include such employer-
provided coverage which is provided through a flexible
spending or similar arrangement if any amount of deduct-
ible, copayment, coinsurance, or similar cost-sharing may
be paid for or reimbursed under such arrangement.’’
(b) CAFETERIA PLANS.—Subsection (f) of section
125 of such Code (defining qualified benefits) is amended
by adding at the end thereof the following new sentence:
‘‘Such term shall not include any benefits or coverage
under an accident or health plan if any amount of deduct-
ible, copayment, coinsurance, or similar cost-sharing
Title II, Subtitle A
under such a plan, or more than 20 percent of any pre-
mium (or comparable amount in the case of a plan not
provided through insurance) for such a plan, may be paid
for or reimbursed under the cafeteria plan.’’
(c) EMPLOYMENT TAX TREATMENT.—
(1) SOCIAL SECURITY TAX.—
(A) Subsection (a) of section 3121 of such
Code is amended by inserting after paragraph
(21) the following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(B) Subsection (a) of section 209 of the
Social Security Act is amended by inserting
after paragraph (21) the following new sen-
tence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b) of the Internal Revenue
Code of 1986.’’
(2) RAILROAD RETIREMENT TAX.—Paragraph
(1) of section 3231(e) of such Code is amended by
adding at the end thereof the following new sen-
tence: ‘‘Nothing in clause (i) of the second sentence
of this paragraph shall exclude from the term ‘com-
Title II, Subtitle A
pensation’ any amount which is required to be in-
cluded in gross income under section 106(b).’’
(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 of such Code is amended by inserting
after paragraph (16) the following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(4) WAGE
WITHHOLDING.—Subsection (a) of
section 3401 of such Code is amended by adding at
the end thereof the following new sentence:
‘‘Nothing in the preceding provisions of this subsection
shall exclude from the term ‘wages’ any amount which is
required to be included in gross income under section
106(b).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
(e) TRANSFERS FROM FLEXIBLE SPENDING AR-
RANGEMENTS
TO MEDICAL SAVINGS ACCOUNTS PER-
MITTED DURING 1997.—A flexible spending arrangement
for health shall not cease to be treated as such an arrange-
ment, and no amount shall be includible in the gross in-
come of the employee, solely because amounts not paid out
as reimbursements under such arrangement during 1996
are contributed to a medical savings account (as defined
Title II, Subtitle B
in section 7705 of the Internal Revenue Code of 1986)
of such employee if such contributions are made before
April 1, 1997, and such employee is an eligible employee
(as defined in such section) at the time of the contribu-
tions.
Subtitle 
B—Premium 
and 
Cost-
Sharing Subsidy Program and
Supplemental Benefits Program
for Low-Income Individuals
SEC. 2101. STATE PREMIUM AND COST-SHARING SUBSIDY
PROGRAMS AND SUPPLEMENTAL BENEFITS
PROGRAMS.
(a) REQUIREMENTS FOR PROGRAMS.—The Social Se-
curity Act is amended by adding at the end the following
new title:
‘‘TITLE XXI—STATE ACUTE CARE BENEFITS
PROGRAMS FOR LOW-INCOME INDIVIDUALS
‘‘PART A—STATE PREMIUM AND COST-SHARING
SUBSIDY PROGRAMS
‘‘SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.
‘‘(a) IN GENERAL.—As a requirement under section
1902(a)(63), effective January 1, 1998, each State shall
establish and maintain a premium and cost-sharing sub-
sidy program (in this title referred to as a ‘State subsidy
program’) that provides for—
Title II, Subtitle B
‘‘(1) premium assistance described in section
2103 to premium assistance eligible individuals de-
scribed in section 2102(a) in accordance with this
part,
‘‘(2) cost-sharing assistance described in section
2103 to cost-sharing assistance eligible individuals
described in section 2102(b) in accordance with this
part, and
‘‘(3) State maintenance-of-effort payments in
accordance with section 2107.
‘‘(b) AVAILABILITY OF FUNDS.—Each State with a
State subsidy program approved under this part is enti-
tled, for calendar quarters beginning on or after January
1, 1998, to payment under section 2106.
‘‘(c) APPROVAL OF STATE PROGRAMS.—The Sec-
retary may not approve a State subsidy program unless
the State has submitted a detailed description that speci-
fies the form and manner in which it will carry out the
program and the Secretary finds that the program meets
the requirements of this part.
‘‘(d) DESIGNATION OF STATE AGENCY.—A State shall
designate an appropriate State agency to administer the
State subsidy program. Such agency shall be the same
agency as the agency designated to administer the State
supplemental medical benefits program under part B.
Title II, Subtitle B
‘‘SEC. 2102. ELIGIBILITY.
‘‘(a) ASSISTANCE.—
‘‘(1) PREMIUM
ASSISTANCE.—Each premium
assistance eligible individual (as defined in sub-
section (b)) is entitled to premium assistance under
section 2103(a)(1).
‘‘(2) COST-SHARING
ASSISTANCE.—Each cost-
sharing assistance eligible individual (as defined in
subsection (c)) is entitled to cost-sharing assistance
described in section 2103(a)(2).
‘‘(b) PREMIUM ASSISTANCE ELIGIBLE INDIVIDUAL
DEFINED.—
‘‘(1) IN GENERAL.—In this title, subject to the
succeeding provisions of this section, the term ‘pre-
mium assistance eligible individual’ means an indi-
vidual who has been determined under section 2104
to have family modified adjusted income below 100
percent of the applicable poverty line (as defined in
section 2144(2)).
‘‘(2) SPECIAL RULE FOR CHILDREN AND PREG-
NANT WOMEN.—In this title, subject to the succeed-
ing provisions of this section, the term ‘premium as-
sistance eligible individual’ includes an individual
who is a child under 19 years of age or a pregnant
woman and who has been determined under section
Title II, Subtitle B
2104 to have family modified adjusted income below
185 percent of the applicable poverty line.
‘‘(c) COST-SHARING ASSISTANCE ELIGIBLE INDIVID-
UAL DEFINED.—In this title, subject to the succeeding
provisions of this section, the term ‘cost-sharing assistance
eligible individual’ means an individual who has been de-
termined under section 2104 to have family modified ad-
justed income below 100 percent of the applicable poverty
line.
‘‘(d) EXCLUSION OF CERTAIN INDIVIDUALS.—In this
title—
‘‘(1) IN GENERAL.—The terms ‘premium assist-
ance eligible individual’ and ‘cost-sharing assistance
eligible individual’ do not include, with respect to a
month, any of the following individuals:
‘‘(A) MEDICARE BENEFICIARY.—An indi-
vidual who is entitled to benefits under part A
or B of title XVIII for the month.
‘‘(B) INMATES.—An individual who as of
the first day of the month is an inmate of a
public institution (except as a patient of a med-
ical institution).
‘‘(C) CERTAIN ALIENS.—An alien who is
not lawfully admitted for permanent residence
or not otherwise permanently residing in the
Title II, Subtitle B
United States under color of law (as defined in
paragraph (2)).
‘‘(D) NONRESIDENTS.—An individual who
is not residing in any State.
‘‘(2) ALIEN PERMANENTLY RESIDING IN THE
UNITED STATES UNDER COLOR OF LAW.—The term
‘alien permanently residing in the United States
under color of law’ means an alien lawfully admitted
for permanent residence (within the meaning of sec-
tion 101(a)(20) of the Immigration and Nationality
Act), and includes any of the following:
‘‘(A) An alien who is admitted as a refugee
under section 207 of the Immigration and Na-
tionality Act.
‘‘(B) An alien who is granted asylum
under section 208 of such Act.
‘‘(C) An alien whose deportation is with-
held under section 243(h) of such Act.
‘‘(D) An alien whose deportation is sus-
pended under section 244 of such Act.
‘‘(E) An alien who is granted conditional
entry pursuant to section 203(a)(7) of such
Act, as in effect before April 1, 1980.
Title II, Subtitle B
‘‘(F) An alien who is admitted for tem-
porary residence under section 210, 210A, or
245A of such Act.
‘‘(G) An alien who has been paroled into
the United States under section 212(d)(5) of
such Act for an indefinite period or who has
been granted extended voluntary departure as a
member of a nationality group.
‘‘(H) An alien who is the spouse or unmar-
ried child under 21 years of age of a citizen of
the United States, or the parent of such a citi-
zen if the citizen is over 21 years of age, and
with respect to whom an application for adjust-
ment to lawful permanent residence is pending.
‘‘(e) PROTECTION OF CURRENT BENEFICIARIES.—
‘‘(1) IN GENERAL.—In this title, the term ‘pre-
mium assistance eligible individual’ also includes,
with respect to a State as of December 31, 1997, an
individual described in paragraph (2) whose eligi-
bility for premium assistance has not terminated
under paragraph (3).
‘‘(2) CURRENT
BENEFICIARIES
DESCRIBED.—
An individual described in this paragraph is an indi-
vidual who—
‘‘(A) is not excluded under subsection (d),
100
Title II, Subtitle B
‘‘(B) is enrolled to receive medical assist-
ance under the State plan under title XIX (and
for which Federal financial participation was
available) as of December 31, 1997, and
‘‘(C) would remain enrolled to receive such
assistance under the State plan under title XIX
but for amendments made by the Health Care
Improvement Act of 1995.
‘‘(3) LIMITATION.—An individual is a premium
assistance eligible individual pursuant to this sub-
section only until the earlier of—
‘‘(A) June 30, 1998, or
‘‘(B) the first date after December 31,
1997, on which the individual’s eligibility for
medical assistance under the State plan under
title XIX would have been terminated if the
amendments made by the Health Care Improve-
ment Act of 1995 had not been enacted.
‘‘SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.
‘‘(a) IN GENERAL.—
‘‘(1) PREMIUM ASSISTANCE.—
‘‘(A) IN GENERAL.—The premium assist-
ance under a State subsidy program shall be in
the form of a premium assistance certificate
that is in the amount computed under sub-
101
Title II, Subtitle B
section (b) and that may be applied toward
qualifying coverage (as defined in subparagraph
(B)). A carrier or group health plan providing
such coverage that is tendered such a certificate
with respect to an individual shall reduce the
amount of the premium by the amount of the
certificate, except as provided in subsection
(c)(1)(C).
‘‘(B) QUALIFYING COVERAGE DEFINED.—
For purposes of this part—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the term ‘qualifying
coverage’ means standard coverage de-
scribed in section 1102 of the Health Care
Improvement Act of 1995.
‘‘(ii) OPTIONAL
USE
OF
HIGH-DE-
DUCTIBLE COVERAGE.—At the election of
a premium assistance eligible individual,
the term ‘qualifying coverage’ includes
high-deductible coverage described in sec-
tion 1103 of the Health Care Improvement
Act of 1995 with respect to an individual,
but only if the individual—
‘‘(I) is not described in section
2102(a)(2) and has been determined
102
Title II, Subtitle B
under section 2104 to have family
modified adjusted income not less
than 100 percent of the applicable
poverty line, and
‘‘(II) demonstrates to the satis-
faction of the State that the individual
meets the requirements of section
1101(b)(2) of the Health Care Im-
provement Act of 1995 (relating to re-
quirement for available assets).
‘‘(2) COST-SHARING
ASSISTANCE.—The cost-
sharing assistance under a State subsidy program
shall be in the form of a cost-sharing assistance cer-
tificate (or other means) that may be applied with
respect to standard coverage. A carrier providing
health insurance coverage or a group health plan
that is tendered such a certificate with respect to an
individual shall reduce the cost-sharing otherwise
imposed with respect to health coverage to amounts
that are nominal (as specified by the State, consist-
ent with the regulations established to carry out sec-
tion 1916(a)(3)) and shall not impose any cost-shar-
ing in the case of preventive benefits described in
section 1102(b)(4) of the Health Care Improvement
Act of 1995.
103
Title II, Subtitle B
‘‘(3) CONSOLIDATED
AND
ELECTRONIC
CER-
TIFICATES.—Nothing in this section shall be con-
strued as preventing a State from—
‘‘(A) in the case of an individual who is
both a premium assistance eligible individual
and a cost-sharing assistance eligible individual,
from consolidating the premium and cost-shar-
ing certificates of the individual, and
‘‘(B) providing premium and cost-sharing
assistance certificates through electronic or
other means.
‘‘(b) AMOUNT OF PREMIUM ASSISTANCE.—
‘‘(1) AMOUNT OF ASSISTANCE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the amount of premium assistance
under this subsection for a month for an indi-
vidual is the lesser of—
‘‘(i) the premium assistance reference
amount determined under paragraph (2),
or
‘‘(ii) the amount of the monthly pre-
mium for the qualifying coverage provided
to the individual.
‘‘(B) TAKING
INTO
ACCOUNT
EMPLOYER
CONTRIBUTIONS.—If an employer is making a
104
Title II, Subtitle B
contribution for the health coverage of a pre-
mium assistance eligible individual, the amount
of the premium assistance under this subsection
for a month shall not exceed the amount by
which the premium amount described in sub-
paragraph (A)(ii) exceeds the amount of the
employer contribution.
‘‘(2) 
PREMIUM
ASSISTANCE
REFERENCE
AMOUNT DETERMINED.—
‘‘(A) IN GENERAL.—Subject to paragraph
(4), the premium assistance reference amount
determined under this paragraph is an amount
equal to 1⁄12 of the weighted average annual
premium (determined in accordance with sub-
paragraph (B)) for the individual’s family class
of enrollment for qualified standard health cov-
erage offered in the fair rating area (as defined
in section 1903 of the Health Care Improve-
ment Act of 1995) in the individual/small group
market in which the individual resides.
‘‘(B) DETERMINATION OF WEIGHTED AV-
ERAGE
ANNUAL
PREMIUM.—For purposes of
subparagraph (A), the weighted average annual
premium for a family class of enrollment for
qualified standard health coverage shall be
105
Title II, Subtitle B
based on the number of families (or individuals
in the case of the individual class of enrollment)
so covered in the class and area involved.
‘‘(C) FAMILY CLASS OF ENROLLMENT.—In
this paragraph, the term ‘family class of enroll-
ment’ means a class of enrollment described in
section 1021(a)(3) of the Health Care Improve-
ment Act of 1995.
‘‘(c) PAYMENTS OF ASSISTANCE.—
‘‘(1) PREMIUM ASSISTANCE.—
‘‘(A) IN GENERAL.—The State issuing a
premium assistance certificate shall, upon ten-
der to the State of such certificate by the car-
rier or group health plan providing qualifying
coverage, pay the carrier or plan the amount of
the certificate.
‘‘(B) TIMING
OF
PAYMENTS.—Payments
under this paragraph shall commence in the
first month during which the individual obtains
qualifying coverage and is determined under
section 2104 to be a premium assistance eligible
individual.
‘‘(C) TREATMENT
OF
SURPLUSES
AND
DEFICITS.—
106
Title II, Subtitle B
‘‘(i) DEFICIT.—If the premium for
coverage is greater than the amount of the
premium assistance for an individual, the
individual is responsible for payment of
any difference.
‘‘(ii) SURPLUS.—If the premium for
coverage is less than the amount of the
premium assistance for an individual, the
difference shall not be paid to the individ-
ual or the carrier or plan but shall revert
to the Federal Government.
‘‘(2) COST-SHARING ASSISTANCE.
‘‘(A) IN GENERAL.—The State issuing a
cost-sharing assistance certificate shall, upon
presentation to the State of evidence of such
certificate by the carrier or group health plan
providing coverage and evidence of cost-sharing
amounts otherwise incurred for which a reduc-
tion in cost-sharing is available under the cer-
tificate, pay the carrier or plan the amount of
the reduction in cost-sharing in relation to
standard coverage.
‘‘(B) TIMING
OF
PAYMENTS.—Payments
under this paragraph shall be provided at the
time an individual has obtained qualified stand-
107
Title II, Subtitle B
ard health coverage, is determined under sec-
tion 2104 to be a cost-sharing assistance eligi-
ble individual, and has incurred health care ex-
penses of the type for which a cost-sharing re-
duction is available under subparagraph (A).
‘‘(3) ADMINISTRATIVE ERRORS.—A State is fi-
nancially responsible for premium or cost-sharing as-
sistance paid based on an eligibility determination
error to the extent the State’s error rate for eligi-
bility determinations exceeds a maximum permissible
error rate to be specified by the Secretary.
‘‘SEC. 2104. ELIGIBILITY DETERMINATIONS.
‘‘(a) IN GENERAL.—The Secretary shall promulgate
regulations specifying requirements for State subsidy pro-
grams with respect to determining eligibility for premium
and cost-sharing assistance, including requirements with
respect to—
‘‘(1) application procedures;
‘‘(2) information verification procedures;
‘‘(3) timeliness of eligibility determinations;
‘‘(4) procedures for applicants to appeal adverse
decisions; and
‘‘(5) any other matters determined appropriate
by the Secretary.
108
Title II, Subtitle B
‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg-
ulations promulgated by the Secretary under subsection
(a) shall include the following requirements:
‘‘(1) FREQUENCY OF APPLICATIONS.—A State
program shall provide that an individual may file an
application for assistance with an agency designated
by the State at any time, in person.
‘‘(2) APPLICATION
FORM.—A State program
shall provide for the use of an application form de-
veloped by the Secretary under subsection (c)(2).
‘‘(3) 
DISTRIBUTION
OF
APPLICATIONS.—A
State program shall distribute applications for as-
sistance widely, including to employers, health plan
purchasing organizations, brokers for health cov-
erage, and appropriate public agencies.
‘‘(4) CONVENIENT LOCATION TO SUBMIT APPLI-
CATIONS.—A State program shall provide convenient
locations for premium and cost-sharing assistance el-
igible individuals to apply for premium and cost-
sharing assistance.
‘‘(5) REQUIREMENT TO SUBMIT REVISED AP-
PLICATION.—A State program shall, in accordance
with regulations promulgated by the Secretary, re-
quire individuals to submit revised applications dur-
ing a year to reflect changes in estimated family in-
109
Title II, Subtitle B
comes, including changes in employment status of
family members, and changes in eligibility status de-
scribed in section 2002(c) during the year. The
State shall revise the amount of any premium and
cost-sharing assistance based on such a revised ap-
plication.
‘‘(6) AFDC AND
SSI
APPLICANTS.—A State
program shall include a procedure under which indi-
viduals applying for benefits under part A of title IV
or title XVI shall have an opportunity to apply for
assistance under this part in connection with such
application.
‘‘(7) VERIFICATION.—A State program shall
provide for verification of the information supplied
in applications under this part. Such verification
may include examining return information disclosed
to the State for such purpose under section
6103(l)(15) of the Internal Revenue Code of 1986.
‘‘(c) ADMINISTRATION OF STATE PROGRAM.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish standards for States operating programs under
this part which ensure that such programs are oper-
ated in a uniform manner with respect to application
procedures, data standards, and such other adminis-
110
Title II, Subtitle B
trative activities as the Secretary determines to be
necessary.
‘‘(2) APPLICATION
FORMS.—The Secretary
shall develop an application form for assistance
which shall—
‘‘(A) be simple in form and understandable
to the average individual;
‘‘(B) require the provision of information
necessary to make a determination as to wheth-
er an individual is a premium or cost-sharing
assistance eligible individual including a dec-
laration of estimated family income by the indi-
vidual; and
‘‘(C) require attachment of such docu-
mentation as deemed necessary by the Sec-
retary in order to ensure eligibility for assist-
ance.
‘‘(3) OUTREACH ACTIVITIES.—A State operat-
ing a program under this part shall conduct such
outreach activities as the Secretary determines ap-
propriate.
‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM
AND COST-SHARING ASSISTANCE.—A determination by a
State that an individual is a premium or cost-sharing as-
sistance eligible individual shall be effective for the cal-
111
Title II, Subtitle B
endar year for which such determination is made unless
a revised application submitted under subsection (b)(5) in-
dicates that an individual is no longer eligible for premium
or cost-sharing assistance.
‘‘(e) PENALTIES FOR MATERIAL MISREPRESENTA-
TIONS.—
‘‘(1) IN GENERAL.—Any individual who know-
ingly makes a material misrepresentation of infor-
mation in an application for assistance under this
part shall be liable to the Federal Government for
the amount any premium and cost-sharing assist-
ance received by an individual on the basis of a mis-
representation and interest on such amount at a
rate specified by the Secretary, and shall, in addi-
tion, be liable to the Federal Government for $2,000
or, if greater, 3 times the amount any premium and
cost-sharing assistance provided on the basis of a
misrepresentation.
‘‘(2) COLLECTION OF PENALTY AMOUNTS.—A
State which receives an application for assistance
with respect to which a material misrepresentation
has been made shall collect the penalty amount re-
quired under paragraph (1) and submit 50 percent
of such amount to the Secretary in a timely manner.
112
Title II, Subtitle B
‘‘SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM
ASSISTANCE.
‘‘(a) IN GENERAL.—
‘‘(1) REQUIREMENT TO FILE STATEMENT.—An
individual who received premium assistance under
this part from a State for any month in a calendar
year shall file with the State an income reconcili-
ation statement to verify the individual’s family in-
come for the year. Such a statement shall be filed
at such time, and contain such information, as the
State may specify in accordance with regulations
promulgated by the Secretary.
‘‘(2) NOTICE OF REQUIREMENT.—A State shall
provide a written notice of the requirement under
paragraph (1) at the end of the year to an individual
who received assistance under this part from such
State in any month during the year.
‘‘(b) RECONCILIATION
OF PREMIUM ASSISTANCE
BASED ON ACTUAL INCOME.—
‘‘(1) IN GENERAL.—Based on and using the in-
come reported in the reconciliation statement filed
under subsection (a) with respect to an individual,
the State shall compute the amount of premium as-
sistance that should have been provided under this
part with respect to the individual for the year in-
volved.
113
Title II, Subtitle B
‘‘(2) OVERPAYMENT
OF
ASSISTANCE.—If the
total amount of the premium assistance provided
was greater than the amount computed under para-
graph (1), the excess amount shall be treated as an
underpayment of a tax imposed by chapter 1 of the
Internal Revenue Code of 1986.
‘‘(3) UNDERPAYMENT OF ASSISTANCE.—If the
total amount of the premium assistance provided
was less than the amount computed under para-
graph (1), the amount of the difference shall be
treated as an overpayment of tax imposed by such
chapter, or in the event the taxpayer involved is enti-
tled to a refund of such a tax, subject to the provi-
sions of section 6402(d) of such Code.
‘‘(c) VERIFICATION.—Each State may use such infor-
mation as it has available to verify income of individuals
with applications filed under this part, including return
information disclosed to the State for such purpose under
section 6103(l)(15) of the Internal Revenue Code of 1986.
‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the
case of an individual who is required to file a statement
under this section in a year who fails to file such a state-
ment by such date as the Secretary shall specify in regula-
tions, the entire amount of the premium assistance pro-
vided in such year shall be considered an excess amount
114
Title II, Subtitle B
under subsection (b)(2) and such individual shall not be
eligible for premium assistance under this part until such
statement is filed. A State, using rules established by the
Secretary, shall waive the application of this subsection
if the individual establishes, to the satisfaction of the State
under such rules, good cause for the failure to file the
statement on a timely basis.
‘‘(e) PENALTIES FOR FALSE INFORMATION.—Any in-
dividual who provides false information in a statement
filed under subsection (a) is subject to the same penalties
as are provided under section 2104(e) for a misrepresenta-
tion of material fact described in such section.
‘‘(f) NO RECONCILIATION FOR COST-SHARING AS-
SISTANCE.—No reconciliation statement is required under
this section with respect to cost-sharing assistance.
‘‘SEC. 2106. PAYMENTS TO STATES.
‘‘(a) PAYMENTS FOR PREMIUM AND COST-SHARING
ASSISTANCE.—Subject to subsection (b), the Secretary
shall provide for payment to each State operating a State
subsidy program in an amount equal to the sum of—
‘‘(1) the Federal title XXI matching percentage
(specified under section 2107(a)) of the amount ex-
pended by the State under the program during the
quarter for premium assistance on behalf of pre-
mium assistance eligible individuals and for cost-
115
Title II, Subtitle B
sharing assistance on behalf of cost-sharing assist-
ance eligible individuals; plus
‘‘(2) 50 percent of the amounts expended by
the State during the quarter as found necessary by
the Secretary for the proper and efficient adminis-
tration of such program in the State.
‘‘(b) LIMITATION ON PAYMENTS.—
‘‘(1) IN GENERAL.—The total amount of pay-
ments that may be made to a State under subsection
(a)(1) for all quarters in a calendar year may not
exceed the lesser of—
‘‘(A) subject to paragraph (3), the product
of—
‘‘(i) the per capita core benefit Fed-
eral payment limit applicable to the cal-
endar year under subsection (c), and
‘‘(ii) the average monthly number of
premium assistance eligible individuals in
the State in the year; or
‘‘(B) 110 percent of the total amount that
would otherwise have been paid to the State
under title XIX in the year with respect to
medical 
assistance 
described 
in 
section
1903(i)(16).
116
Title II, Subtitle B
‘‘(2) ESTIMATIONS
AND
ADJUSTMENTS.—The
Secretary shall—
‘‘(A) establish a process for estimating the
limit established under this subsection for a
year at the beginning of the year and adjusting
such amount during such year; and
‘‘(B) notifying each State of the esti-
mations and adjustments referred to in sub-
paragraph (A).
‘‘(3) ADJUSTMENT FOR CERTAIN STATES.—In
the case of a State in a year in which the product
described in paragraph (1)(A) (as adjusted under
this paragraph) exceeds the amount described in
paragraph (1)(B), the amount described in para-
graph (1)(A) shall be increased by a proportion
equal to the ratio of—
‘‘(A) the total amount of the reductions in
payment made by the application of paragraph
(1)(B) in the year, to
‘‘(B) the total of the limitations in pay-
ment for all such States in the year under para-
graph (1)(A), determined without regard to any
adjustment under this paragraph.
‘‘(c) PER CAPITA CORE BENEFIT FEDERAL PAY-
MENT LIMIT DEFINED.—
117
Title II, Subtitle B
‘‘(1) IN GENERAL.—For purposes of subsection
(b)(1)(A), the ‘per capita core benefit Federal pay-
ment limit’ for a State for a year is equal to the
base per capita core Federal payments (described in
paragraph (2)) increased by the FEHBP State roll-
ing increase percentage (as defined in subsection
(d)(2)) for each year after 1995 and up to the year
involved.
‘‘(2) BASE PER CAPITA CORE FEDERAL PAY-
MENTS.—For purposes of paragraph (1), the ‘base
per capita core Federal payments’ described in this
paragraph, for a State, is—
‘‘(A) the baseline Federal medicaid core
benefit expenditures (as defined in paragraph
(3)) for the State, divided by
‘‘(B) the number of AFDC recipients, SSI
recipients, and non-cash medicaid beneficiaries
(as described in section 1931(a)(2)) enrolled in
the State plan under title XIX in 1995, as de-
termined under paragraph (4).
‘‘(3) DETERMINATION OF BASELINE FEDERAL
MEDICAID CORE PAYMENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2)(A), the ‘baseline Federal medicaid
core payments’ for a State is the amount of
118
Title II, Subtitle B
Federal 
payments 
made 
under 
section
1903(a)(1) with respect to medical assistance
furnished for core benefits (as defined in sec-
tion 1931(b)(1)) for AFDC recipients, SSI re-
cipients, and non-cash medicaid beneficiaries
for all calendar quarters in 1995.
‘‘(B) DISPROPORTIONATE
SHARE
PAY-
MENTS NOT INCLUDED.—In applying subpara-
graph (A), payments attributable to section
1923 shall not be counted in the amount of
payments.
‘‘(C) TREATMENT OF DISALLOWANCES.—
The amount determined under this paragraph
shall take into account amounts (or an estimate
of amounts) disallowed under title XIX.
‘‘(4) APPLICATION TO PARTICULAR ITEMS AND
SERVICES.—For purposes of this subsection, in de-
termining the per capita core benefit expenditure
limit for a category of items and services (within
core benefits) furnished in a State, there shall be
counted only that proportion of such expenditures
(determined only with respect to medical assistance
furnished to AFDC recipients, SSI recipients, and
non-cash medicaid beneficiaries) that were attrib-
utable to items and services included in the core
119
Title II, Subtitle B
benefits (taking into account any limitation on
amount, duration, or scope of items and services in-
cluded in such benefits).
‘‘(5) DETERMINATION OF NUMBER OF RECIPI-
ENTS AND BENEFICIARIES.—For purposes of para-
graph (2)(B), the number of AFDC recipients, SSI
recipients, and non-cash medicaid beneficiaries for a
State for 1995 shall be determined based on actual
reports submitted by the State to the Secretary. In
the case of individuals who were not recipients or
beneficiaries for the entire fiscal year, the number
shall take into account only the portion of the year
in which they were such recipients. The Secretary
may audit such reports.
‘‘(d) FEHBP NATIONAL AND STATE ROLLING IN-
CREASE PERCENTAGES.—
‘‘(1) NATIONAL INCREASE PERCENTAGE.—For
purposes of this title, the term ‘FEHBP national
rolling increase percentage’ means, for a year, the 5-
year weighted average of the annual national per-
centage increase in the premiums for health plans
offered under the Federal Employees Health Bene-
fits Program (under chapter 89 of title 5, United
States Code) for the 5-year period ending with the
previous year.
120
Title II, Subtitle B
‘‘(2) STATE INCREASE PERCENTAGE.—For pur-
poses of this title, the term ‘FEHBP State rolling
increase percentage’ means, for a year with respect
to a State, the 5-year weighted average of the an-
nual percentage increase in the premiums for health
plans offered in the State under the Federal Em-
ployees Health Benefits Program (under chapter 89
of title 5, United States Code) for the 5-year period
ending with the previous year.
‘‘(3) DETERMINATION.—The increase percent-
ages under paragraphs (1) and (2) shall be deter-
mined by the Secretary, in consultation with the Di-
rector of Office of Personnel Management, based on
the best information available. Such increases shall
be adjusted—
‘‘(A) to take into account the age distribu-
tion in the Federal workforce (not taking into
account individuals 65 years of age or older,
employees of the United States Postal Service,
retirees, and annuitants) relative to the age dis-
tribution in the population of AFDC recipients
and non-cash medicaid beneficiaries, and
‘‘(B) to disregard any changes due to
changes in the benefit package under the Fed-
121
Title II, Subtitle B
eral Employees Health Benefits Program after
1994.
‘‘SEC. 2107. FEDERAL TITLE XXI MATCHING PERCENTAGE.
‘‘(a) COMPUTATION.—
‘‘(1) IN GENERAL.—In this title, except as pro-
vided in subsections (c) and (e), the term ‘Federal
title XXI matching percentage’ means, for each of
the 50 States, 100 percent reduced by the product
of the applicable percentage (as defined in para-
graph (2)) and the ratio of—
‘‘(A) the total taxable resources ratio (as
defined in paragraph (3)) of the State, to—
‘‘(B) the population in poverty ratio (as
defined in paragraph (4)) of the State.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of this section, the term ‘applicable percentage’
means a percentage estimated by the Secretary with
the advice of the General Accounting Office that, if
it were substituted for the Federal medical assist-
ance percentage for purposes of title XIX with re-
spect to core benefits, would have resulted in an
amount of aggregate payments under section
1903(a) for calendar years 1994 through 1998 equal
to the amount of aggregate payments that would
have been made under such section for quarters in
122
Title II, Subtitle B
such years if such percentage had not been so sub-
stituted. The applicable percentage estimated by the
Secretary under the previous sentence shall apply
with respect to quarters beginning on or after Janu-
ary 1, 1998.
‘‘(3) TOTAL
TABLE
RESOURCES
RATIO
DE-
FINED.—For purposes of this section, the term
‘total taxable resources ratio’ means—
‘‘(A) an amount equal to the most recent
3-year average of the total taxable resources of
the State, as determined by the Secretary of the
Treasury, divided by
‘‘(B) an amount equal to the sum of the 3-
year averages determined under subparagraph
(A) for each of the 50 States.
‘‘(4) POPULATION
IN
POVERTY
RATIO
DE-
FINED.—For purposes of this section, the term ‘pop-
ulation in poverty ratio’ means—
‘‘(A) an amount equal to the 3-year-aver-
age of the number of individuals in the State
whose family income is below 100 percent of
the income official poverty line (as defined by
the Office of Management and Budget and re-
vised annually in accordance with section
123
Title II, Subtitle B
673(2) of the Omnibus Budget Reconciliation
Act of 1981), divided by
‘‘(B) an amount equal to the sum of the
averages determined under subparagraph (A)
for the 50 States.
‘‘(b) RULE FOR TERRITORIES AND THE DISTRICT OF
COLUMBIA.—The Federal title XXI matching percent-
age—
‘‘(1) for Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands, and American Samoa
shall be 40 percent, and
‘‘(2) for the District of Columbia shall be 50
percent.
‘‘(c) LIMITATION FOR STATES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2) and subsections (b) and (e), the Federal
title XXI matching percentage shall in no case be
less than 50 percent or greater than 75 percent.
‘‘(2) TREATMENT OF INDIAN FACILITIES.—The
Federal title XXI matching percentage shall be 100
percent with respect to amounts expended for pre-
mium assistance or cost-sharing assistance or for
supplemental acute care benefits with respect to
services which are received through an Indian
Health Service facility whether operated by the In-
124
Title II, Subtitle B
dian Health Service or by an Indian tribe or tribal
organization (as defined in section 4 of the Indian
Health Care Improvement Act).
‘‘(d) 3 PERCENT BONUS FOR PROMOTING PURCHAS-
ING MECHANISMS.—Except in the case described in sub-
section (c) or in subsection (e), in the case of a State that
has established and is operating a system of health plan
purchasing organizations or other mechanism that—
‘‘(1) promotes pooling of risk and competition
among carriers offering qualified health coverage to
residents of the State (including premium subsidy el-
igible individuals), and
‘‘(2) provides information to such consumers
about their health plan options,
the Federal title XXI matching percentage otherwise com-
puted (without regard to this subsection) shall be in-
creased by 3 percentage points.
‘‘PART B—STATE SUPPLEMENTAL ACUTE CARE
BENEFITS PROGRAMS
‘‘SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL
ACUTE CARE BENEFITS PROGRAMS.
‘‘(a) IN GENERAL.—Each State shall establish a
State supplemental acute care benefits program (each in
this part referred to as a ‘State supplemental acute care
125
Title II, Subtitle B
benefits program’) that provides supplemental acute care
benefits for supplemental benefit eligible individuals.
‘‘(b) AVAILABILITY OF FUNDS.—Each State with a
State supplemental acute care benefits program approved
under this part is entitled, for calendar quarters beginning
on or after January 1, 1998, to payment under section
2124.
‘‘(c) APPROVAL OF STATE PROGRAMS; PROGRAM DE-
SCRIPTIONS.—The Secretary may not approve a State
supplemental acute care benefits program unless the State
has submitted a detailed description of the form and man-
ner in which it will carry out the program (consistent with
the applicable requirements of this part) and the Secretary
finds that the program meets such applicable require-
ments.
‘‘SEC. 2122. ELIGIBILITY.
‘‘(a) IN GENERAL.—In this part, the term ‘supple-
mental benefit eligible individual’ means an individual
who, as of the time of provision of supplemental acute care
benefits, is a premium assistance eligible individual (as de-
fined in section 2102(a)).
‘‘(b) CONSTRUCTION.—Nothing in this part shall be
construed to create an entitlement for any specific supple-
mental benefit eligible individual.
126
Title II, Subtitle B
‘‘SEC. 2123. SCOPE AND PROVISION OF BENEFITS; BENE-
FITS ADMINISTRATION.
‘‘(a) IN GENERAL.—The supplemental acute care
benefits that may be made available under a State supple-
mental acute care benefits program may include supple-
mental acute care benefits (as defined in section
1931(a)(2)(F)).
‘‘(b) COVERAGE OF BENEFITS.—Each State supple-
mental acute care benefits program—
‘‘(1) shall establish methods and standards to
select the types, and the amount, duration, and
scope, of supplemental acute care benefits included
in the program and to assure access to, and the
quality of, services included in such benefits;
‘‘(2) in providing benefits for supplemental ben-
efit eligible individuals—
‘‘(A) may vary the supplemental acute care
benefits provided among reasonable classes of
such individuals, and
‘‘(B) may take into account the individual
needs of individuals; and
‘‘(3) shall coordinate the provision of such bene-
fits with other health insurance coverage and health
benefit programs in a manner that avoids duplica-
tion of benefits.
127
Title II, Subtitle B
‘‘(c) PAYMENT METHODS.—Benefits under a pro-
gram may be made available in the form of direct provi-
sion of services, reimbursement of providers, prepayment
to providers or health plans on a capitation basis, reim-
bursement of supplemental benefit eligible individuals for
expenses incurred for supplemental acute care benefits, or
a combination of these methods.
‘‘(d) ADMINISTRATION.—
‘‘(1) STATE AGENCY.—Each State supplemental
acute care benefits program shall designate any ap-
propriate State agency to administer the program.
‘‘(2) COORDINATION.—The State supplemental
acute care benefits program shall specify how the
program—
‘‘(A) will be coordinated with the State
medicaid plan, titles V and XX, part A of this
title, and any other Federal or State programs
that provide services or assistance targeted to
supplemental benefit eligible individuals, and
‘‘(B) will be coordinated with qualified
health coverage.
‘‘(e) REPORTS AND INFORMATION TO SECRETARY;
AUDITS.—Each State supplemental acute care benefits
program shall furnish to the Secretary—
128
Title II, Subtitle B
‘‘(1) such reports, and cooperate with such au-
dits, as the Secretary determines are needed con-
cerning the State’s administration of the program
under this part, including the processing of any
claims under the program, and
‘‘(2) such data and information as the Sec-
retary may require in order to carry out the Sec-
retary’s responsibilities.
‘‘SEC. 2124. PAYMENTS TO STATES.
‘‘(a) IN GENERAL.—Subject to subsection (b), the
Secretary shall provide for payment to each State operat-
ing an approved State supplemental acute care benefits
program for a quarter in an amount equal to the sum of—
‘‘(1) the Federal title XXI matching percentage
(specified under section 2107(a)) of the amount ex-
pended by the State under the program during the
quarter for supplemental acute care benefits for sup-
plemental benefit eligible individuals; and
‘‘(2) 50 percent of the amounts expended by
the State during the quarter as found necessary by
the Secretary for the proper and efficient adminis-
tration of such program in the State.
‘‘(b) LIMITATION
ON
PAYMENTS
FOR
SUPPLE-
MENTAL ACUTE CARE BENEFITS.—
129
Title II, Subtitle B
‘‘(1) IN GENERAL.—The total amount of pay-
ments that may be made to a State under subsection
(a)(1) for all quarters in a calendar year may not
exceed the product of—
‘‘(A) the per capita supplemental acute
care benefit Federal payment limit applicable to
the calendar year under subsection (c), and
‘‘(B) the average monthly number of sup-
plemental benefit eligible individuals in the
State in the year.
‘‘(2) ESTIMATIONS
AND
ADJUSTMENTS.—The
Secretary shall—
‘‘(A) establish a process for estimating the
limit established under this subsection for a
year at the beginning of the year and adjusting
such amount during such year; and
‘‘(B) notifying each State of the esti-
mations and adjustments referred to in sub-
paragraph (A).
‘‘(c) PER CAPITA SUPPLEMENTAL ACUTE CARE
BENEFIT FEDERAL PAYMENT LIMIT DEFINED.—
‘‘(1) IN GENERAL.—For purposes of subsection
(b)(1)(A), the ‘per capita supplemental acute care
benefit Federal payment limit’ for a State for a year
is equal to the base per capita supplemental acute
130
Title II, Subtitle B
care Federal payments (described in paragraph (2))
increased by the FEHBP national rolling increase
percentage (as defined in section 2106(d)(1)) for
each year after 1995 and up to the year involved.
‘‘(2) BASE PER CAPITA SUPPLEMENTAL ACUTE
CARE FEDERAL PAYMENTS.—For purposes of para-
graph (1), the ‘base per capita supplemental acute
care Federal payments’ described in this paragraph,
for a State, is—
‘‘(A) the baseline Federal medicaid supple-
mental acute care benefit expenditures (as de-
fined in paragraph (3)) for the State, divided
by
‘‘(B) the number of AFDC recipients, SSI
recipients, and non-cash medicaid beneficiaries
(as described in section 1931(a)(2)) enrolled in
the State plan under title XIX in 1995, as de-
termined under paragraph (4).
‘‘(3) DETERMINATION OF BASELINE FEDERAL
MEDICAID
SUPPLEMENTAL
ACUTE
CARE
PAY-
MENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2)(A), the ‘baseline Federal medicaid
supplemental acute care payments’ for a State
is the amount of Federal payments made under
131
Title II, Subtitle B
section 1903(a)(1) with respect to medical as-
sistance furnished for supplemental acute care
benefits (as defined in section 1931(b)(2)) for
AFDC recipients, SSI recipients, and non-cash
medicaid beneficiaries for all calendar quarters
in 1995.
‘‘(B) DISPROPORTIONATE
SHARE
PAY-
MENTS NOT INCLUDED.—In applying subpara-
graph (A), payments attributable to section
1923 shall not be counted in the amount of
payments.
‘‘(C) TREATMENT OF DISALLOWANCES.—
The amount determined under this paragraph
shall take into account amounts (or an estimate
of amounts) disallowed under title XIX.
‘‘(4) APPLICATION TO PARTICULAR ITEMS AND
SERVICES.—For purposes of this subsection, in de-
termining the per capita supplemental medical bene-
fit expenditure limit for a category of items and
services (within the supplemental acute care bene-
fits) furnished in a State, there shall be counted only
that proportion of such expenditures (determined
only with respect to medical assistance furnished to
AFDC recipients, SSI recipients, and non-cash med-
icaid beneficiaries) that were attributable to items
132
Title II, Subtitle B
and services included in the supplemental acute care
benefits (taking into account any limitation on
amount, duration, or scope of items and services in-
cluded in such benefits).
‘‘(5) DETERMINATION OF NUMBER OF RECIPI-
ENTS AND BENEFICIARIES.—For purposes of para-
graph (2)(B), the number of AFDC recipients, SSI
recipients, and non-cash medicaid beneficiaries for a
State for 1995 shall be determined based on actual
reports submitted by the State to the Secretary. In
the case of individuals who were not recipients or
beneficiaries for the entire fiscal year, the number
shall take into account only the portion of the year
in which they were such recipients. The Secretary
may audit such reports.
‘‘(d) SUPPLEMENTAL ACUTE CARE BENEFIT IN-
CREASE FACTOR DESCRIBED.—For purposes of sub-
section (b)(1)(C), the ‘supplemental medical benefit in-
crease factor’ for a year for a State is equal to the
FEHBP national rolling increase factor (as defined in sec-
tion 2107(c)(1)) for the year.
‘‘(e) FUNDING.—Payments to States under this sec-
tion shall be made by the Secretary at such time and in
such form as provided in regulations promulgated by the
133
Title II, Subtitle B
Secretary, based on the form and manner in which pay-
ments are made under section 1903.
‘‘PART C—GENERAL PROVISIONS
‘‘SEC. 2141. NATURE OF PAYMENT OBLIGATION.
‘‘Sections 2106 and 2124 constitute budget authority
in advance of appropriations Acts, and represent the obli-
gation of the Federal Government to provide payments to
States under such sections in accordance with the applica-
ble provisions of this title.
‘‘SEC. 2142. AUDITS.
‘‘The Secretary shall conduct regular audits of the
activities under the State programs conducted under this
title.
‘‘SEC. 2143. DEMONSTRATION PROJECT AUTHORITY.
‘‘(a) IN GENERAL.—In the case of any experimental,
pilot, or demonstration project which in the judgment of
the Secretary is likely to assist in promoting the objectives
of this title in a State or States, the Secretary may waive
compliance with any of the requirements of this title to
the extent and for the period the Secretary finds necessary
to enable the Secretary to carry out the project.
‘‘(b) RESTRICTION.—The Secretary may authorize a
waiver under subsection (a) only if the Secretary deter-
mines that under the waiver—
134
Title II, Subtitle B
‘‘(1) all individuals who would be premium as-
sistance eligible individuals remain eligible for pre-
mium assistance,
‘‘(2) benefits under part A are not reduced
below the level of benefits otherwise provided, and
‘‘(3) the amount of payments made by the Fed-
eral Government do not exceed the amount of pay-
ments otherwise provided.
‘‘SEC. 2144. DEFINITIONS AND DETERMINATIONS OF IN-
COME.
‘‘For purposes of this title:
‘‘(1) DETERMINATIONS OF INCOME.—
‘‘(A) FAMILY INCOME.—The term ‘family
income’ means, with respect to an individual
who—
‘‘(i) is not a dependent (as defined in
subparagraph (B)) of another individual,
the sum of the modified adjusted gross in-
comes (as defined in subparagraph (D))
for the individual, the individual’s spouse,
and dependents of the individual; or
‘‘(ii) is a dependent of another indi-
vidual, the sum of the modified adjusted
gross incomes for the other individual, the
135
Title II, Subtitle B
other individual’s spouse, and dependents
of the other individual.
‘‘(B) DEPENDENT.—The term ‘dependent’
shall have the meaning given such term under
paragraphs (1) or (2) of section 152(a) of the
Internal Revenue Code of 1986.
‘‘(C) SPECIAL
RULE
FOR
FOSTER
CHIL-
DREN.—For purposes of subparagraph (A), a
child who is placed in foster care by a State
agency shall not be considered a dependent of
another individual.
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income (as defined
in section 62(a) of the Internal Revenue Code
of 1986)—
‘‘(i) determined without regard to sec-
tions 135, 162(l), 220, 911, 931, and 933
of such Code, and
‘‘(ii) increased by—
‘‘(I) the amount of interest re-
ceived or accrued by the individual
during the taxable year which is ex-
empt from tax,
136
Title II, Subtitle B
‘‘(II) the amount of the social se-
curity benefits (as defined in section
86(d) of such Code) received during
the taxable year to the extent not in-
cluded in gross income under section
86 of such Code,
‘‘(III) the amount of aid to fami-
lies with dependent children received
during the taxable year under part A
of title IV to the extent not included
in gross income under such Code, and
‘‘(IV) the amount of any supple-
mental security income benefits pro-
vided under title XVI.
The determination under the preceding sen-
tence shall be made without regard to any car-
ryover or carryback.
‘‘(E) ELECTION
WITH
RESPECT
TO
IN-
COME DETERMINATION.—As elected by a family
at the time of submission of an application for
a premium or cost-sharing assistance under this
part, family income shall be determined ei-
ther—
‘‘(i) by multiplying by a factor of 4
the individual’s family income for the 3-
137
Title II, Subtitle B
month period immediately preceding the
month in which the application is made, or
‘‘(ii) based upon estimated income for
the entire year in which the application is
submitted.
‘‘(2) APPLICABLE
POVERTY
LINE.—The term
‘applicable poverty line’ means the income official
poverty line (as defined by the Office of Manage-
ment and Budget, and revised annually in accord-
ance with section 673(2) of the Omnibus Budget
Reconciliation Act of 1981) that—
‘‘(A) in the case of a family of less than
five individuals, is applicable to a family of the
size involved; and
‘‘(B) in the case of a family of more than
four individuals, is applicable to a family of
four persons.
‘‘(3) PREGNANT WOMAN.—The term ‘pregnant
woman’ includes a woman during the 60-day period
beginning on the last day of the pregnancy.
‘‘(4) PREMIUM.—Any reference to the term
‘premium’ includes a reference to premium equiva-
lence for self-insured plans.’’.
138
Title II, Subtitle B
SEC. 2102. DIVISION OF MEDICAID BENEFITS INTO CORE
BENEFITS AND SUPPLEMENTAL BENEFITS
FOR 
AFDC, 
SSI, 
AND 
NON-CASH 
BENE-
FICIARIES; LIMITATION ON FEDERAL FINAN-
CIAL PARTICIPATION FOR CORE AND SUP-
PLEMENTAL BENEFITS.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended by redesignating section 1931 as section
1932 and by inserting after section 1930 the following new
section:
‘‘MEDICAID REFORM RULES FOR BENEFITS FOR ACUTE
MEDICAL AND SUPPLEMENTAL SERVICES FOR AFDC
RECIPIENTS, SSI RECIPIENTS, AND NON-CASH MED-
ICAID BENEFICIARIES
‘‘SEC. 1931. (a) APPLICATION OF SECTION.—
‘‘(1) IN GENERAL.—This section applies with
respect to medical assistance for acute medical serv-
ices (as defined in paragraph (2)) under State plans
under this title for calendar quarters beginning on
or after January 1, 1998, provided to AFDC recipi-
ents, SSI recipients, and non-cash medicaid categor-
ical beneficiaries. To the extent this section applies,
it supersedes any contrary provision of this title or
of other applicable law.
‘‘(2) DEFINITIONS.—In this section:
139
Title II, Subtitle B
‘‘(A) ACUTE
MEDICAL
SERVICES.—The
term ‘acute medical services’ means items and
services described in section 1905(a) other than
the following:
‘‘(i) Nursing facility services (as de-
fined in section 1905(f)).
‘‘(ii) Intermediate care facility for the
mentally retarded services (as defined in
section 1905(d)).
‘‘(iii) Personal care services (as de-
scribed in section 1905(a)(24)).
‘‘(iv) Private duty nursing services (as
referred to in section 1905(a)(8)).
‘‘(v) Home or community-based serv-
ices furnished under a waiver granted
under subsection (c), (d), or (e) of section
1915.
‘‘(vi) Home and community care fur-
nished to functionally disabled elderly indi-
viduals under section 1929.
‘‘(vii) Community supported living ar-
rangements services under section 1930.
‘‘(viii) Case-management services (as
described in section 1915(g)(2)).
140
Title II, Subtitle B
‘‘(ix) Home health care services (as
referred to in section 1905(a)(7)), clinic
services, and rehabilitation services that
are furnished to an individual who has a
condition or disability that qualifies the in-
dividual to receive any of the services de-
scribed in a previous clause.
‘‘(x) Hospice care.
‘‘(B) 
AFDC 
RECIPIENT.—The 
term
‘AFDC recipient’ means, for a month, an indi-
vidual who is receiving aid or assistance under
any plan of the State approved under title I, X,
XIV, or XVI, or part A or part E of title IV
for the month.
‘‘(C) CORE
BENEFITS.—The term ‘core
benefits’ means benefits with respect to acute
medical services which the Secretary identifies
under subsection (b)(1) as typically included in
the services covered under benchmark coverage
(as defined in section 1903(1) of the Health
Care Improvement Act of 1995).
‘‘(D) 
NON-CASH
MEDICAID
BENE-
FICIARY.—The term ‘non-cash medicaid bene-
ficiary’ means an individual described in section
141
Title II, Subtitle B
1902(a)(10)(A) who is not an AFDC recipient
or a SSI recipient.
‘‘(E) SSI RECIPIENT.—The term ‘SSI re-
cipient’ means, for a month, an individual—
‘‘(i) with respect to whom supple-
mental security income benefits are being
paid under title XVI for the month,
‘‘(ii) who is receiving a supplementary
payment under section 1616 or under sec-
tion 212 of Public Law 93–66 for the
month,
‘‘(iii) who is receiving monthly bene-
fits under section 1619(a) (whether or not
pursuant to section 1616(c)(3)) for the
month, or
‘‘(iv) who is treated under section
1619(b) as receiving supplemental security
income benefits in a month for purposes of
title XIX.
‘‘(F) SUPPLEMENTAL ACUTE CARE BENE-
FITS.—The term ‘supplemental acute care bene-
fits’ means benefits for acute medical services
which are not—
‘‘(i) core benefits, and
142
Title II, Subtitle B
‘‘(ii) benefits for items or services de-
scribed in clauses (i) through (x) of sub-
paragraph (A).
‘‘(b) DIVISION OF ACUTE MEDICAL SERVICE BENE-
FITS INTO CORE BENEFITS AND SUPPLEMENTAL ACUTE
CARE BENEFITS.—The Secretary shall divide the class of
benefits for acute medical services into the following bene-
fit groups:
‘‘(1) CORE
BENEFITS.—A group of benefits
consisting of core benefits (as defined in subsection
(a)(2)(C)).
‘‘(2) SUPPLEMENTAL
ACUTE
CARE
BENE-
FITS.—A group of benefits consisting of supple-
mental acute care benefits (as defined in subsection
(a)(2)(F)).
‘‘(c) LIMITATION ON AMOUNT OF FEDERAL FINAN-
CIAL PARTICIPATION FOR BENEFITS FOR ACUTE MEDI-
CAL SERVICES FOR AFDC RECIPIENTS, SSI RECIPIENTS,
AND NON-CASH MEDICAID BENEFICIARIES.—With re-
spect to expenditures for medical assistance for acute med-
ical services benefits for AFDC recipients, SSI recipients,
and non-cash medicaid beneficiaries who are not entitled
to benefits under part A of title XVIII in a State for quar-
ters in a calendar year after 1998—
143
Title II, Subtitle B
‘‘(1) no such Federal financial participation
shall be payable under section 1903(a)(1), and
‘‘(2) such a recipient or beneficiary is not enti-
tled to receive any medical assistance for such bene-
fits under the State plan under this title.
‘‘(d) ELIMINATION OF ENTITLEMENT FOR SUPPLE-
MENTAL ACUTE CARE BENEFITS.—With respect to medi-
cal assistance for supplemental acute care benefits for
AFDC recipients and non-cash medicaid beneficiaries who
are not entitled to benefits under part A of title XVIII
in a State for quarters in 1998 or any succeeding year—
‘‘(1) no Federal financial participation shall be
payable under section 1903(a)(1),
‘‘(2) the State may receive payments for such
supplemental acute care benefits under part B of
title XXI, and
‘‘(3) such a recipient or beneficiary is not enti-
tled to receive any medical assistance for such bene-
fits under the State plan under this title.’’.
(b) CONFORMING AMENDMENT.—Section 1903(i) of
the Social Security Act (42 U.S.C. 1396b(i)) is amend-
ed—
(1) by striking ‘‘or’’ at the end of paragraph
(14),
144
Title II, Subtitle B
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the fol-
lowing:
‘‘(16) in accordance with section 1931, with re-
spect to amounts expended for medical assistance
for core benefits for AFDC recipients, SSI recipi-
ents, and non-cash medicaid beneficiaries who are
not entitled to benefits under part A of title XVIII
for calendar quarters beginning on or after January
1, 1998.’’.
SEC. 2103. OPERATION OF PROGRAM AS STATE PLAN RE-
QUIREMENT UNDER MEDICAID.
(a) IN GENERAL.—Section 1902(a) of the Social Se-
curity Act (42 U.S.C. 1396a(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (62) the fol-
lowing new paragraph:
‘‘(63) provide for a State program furnishing
premium subsidies for low-income individuals in ac-
cordance with part A of title XXI.’’.
145
Title II, Subtitle B
(b) EFFECTIVE DATE.—The requirement of section
1902(a)(63) of the Social Security Act (as added by sub-
section (a)) shall apply to Federal financial participation
for calendar quarters beginning on or after January 1,
1998.
SEC. 2104. APPLICATION OF MISCELLANEOUS PROVISIONS.
(a) APPLICATION OF SAVE PROVISIONS.—Section
1137(b) of the Social Security Act (42 U.S.C. 1320b–
7(b)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(4),
(2) by striking the period at the end of para-
graph (5) and inserting ‘‘; and’’, and
(3) by adding at the end the following:
‘‘(6) a State subsidy program under part A of
title XXI.’’.
(b) DISCLOSURE OF CERTAIN INFORMATION.
(1) IN
GENERAL.—Subsection (l) of section
6103 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new
paragraph:
‘‘(15) DISCLOSURE OF RETURN INFORMATION
TO CARRY OUT HEALTH PREMIUM ASSISTANCE CER-
TIFICATE
PROGRAM.—The Secretary shall, upon
written request from a State, disclose to officials of
146
Title II, Subtitle B
the State return information for purposes of deter-
mining or verifying whether any individual is enti-
tled to a premium assistance certificate under part
A of title XXI of the Social Security Act and the
amount thereof. Return information disclosed under
this paragraph may be used by such officers and em-
ployees only for the purposes of, and to the extent
necessary in, making such determination or verifica-
tion.’’.
(2) CONFORMING CHANGE.—Paragraph (4) of
section 6103(p) of such Code is amended by striking
‘‘or (14)’’ each place it appears and inserting ‘‘(14)
or (15)’’.
(c) APPLICATION OF DEFINITION OF STATE.—Sec-
tion 1001(a)(1) of the Social Security Act (42 U.S.C.
1301(a)(1)) is amended by striking ‘‘title XX’’ and insert-
ing ‘‘titles XX and XXI’’.
(d) CONSTRUCTION.—Nothing in this title shall be
construed as preventing the Secretary of Health and
Human Services from continuing in effect waivers (in ef-
fect as of the date of the enactment of this Act) of require-
ments under title XIX of the Social Security Act.
147
Title III, Subtitle A
TITLE III—ACCESS
IMPROVEMENTS
Subtitle A—Improved Access in
Rural Areas
PART 1—GRANTS TO ENCOURAGE COMMUNITY
RURAL HEALTH NETWORKS
SEC. 3001. ASSISTANCE FOR DEVELOPMENT OF ACCESS
PLANS FOR CHRONICALLY UNDERSERVED
AREAS.
(a) AVAILABILITY OF FINANCIAL ASSISTANCE TO IM-
PLEMENT ACTION PLANS TO INCREASE ACCESS.—
(1) IN GENERAL.—The Secretary shall provide
grants (in amounts determined in accordance with
paragraph (3)) over a 3-year period to an eligible
State for the development of plans to increase access
to health care services during such period for resi-
dents of areas in the State that are designated as
chronically underserved areas in accordance with
subsection (b).
(2) ELIGIBILITY REQUIREMENTS.—A State is
eligible to receive grants under this section if the
State submits to the Secretary (at such time and in
such form as the Secretary may require) assurances
that the State has developed (or is in the process of
developing) a plan to increase the access of residents
148
Title III, Subtitle A
of a chronically underserved area to health care serv-
ices that meets the requirements of subsection (c),
together with such other information and assurances
as the Secretary may require.
(3) AMOUNT OF ASSISTANCE.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the amount of assistance provided to
a State under this subsection with respect to
any plan during a 3-year period shall be equal
to—
(i) for the first year of the period, an
amount equal to 100 percent of the
amounts expended by the State during the
year to implement the plan described in
paragraph (1) (as reported to the Sec-
retary in accordance with such require-
ments as the Secretary may impose);
(ii) for the second year of the period,
an amount equal to 50 percent of the
amounts expended by the State during the
year to implement the plan; and
(iii) for the third year of the period,
an amount equal to 33 percent of the
amounts expended by the State during the
year to implement the plan.
149
Title III, Subtitle A
(B) AGGREGATE
PER
PLAN
LIMIT.—The
amount of assistance provided to a State under
this subsection with respect to any plan may
not exceed $100,000 during any year of the 3-
year period for which the State receives assist-
ance.
(b) DESIGNATION OF AREAS.—
(1) DESIGNATION BY GOVERNOR.—In accord-
ance with the guidelines developed under paragraph
(2), the Governor of a State may designate an area
in the State as a chronically underserved area for
purposes of this section upon the request of a local
official of the area or upon the Governor’s initiative.
(2) GUIDELINES FOR DESIGNATION.—
(A) DEVELOPMENT BY SECRETARY.—Not
later than 1 year after the date of the enact-
ment of this Act, the Secretary shall develop
guidelines for the designation of areas as chron-
ically underserved areas under this section.
(B) FACTORS CONSIDERED IN DEVELOP-
MENT
OF
GUIDELINES.—In developing guide-
lines under paragraph (1), the Secretary shall
consider the following factors:
(i) Whether the area (or a significant
portion of the area)—
150
Title III, Subtitle A
(I) is designated as a health pro-
fessional shortage area (under section
332(a) of the Public Health Service
Act), or meets the criteria for des-
ignation as such an area; or
(II) was previously designated as
such an area or previously met such
criteria for an extended period prior
to the designation of the area under
this section (in accordance with cri-
teria established by the Secretary).
(ii) The availability and adequacy of
health care providers and facilities for resi-
dents of the area.
(iii) The extent to which the availabil-
ity of assistance under other Federal and
State programs has failed to alleviate the
lack of access to health care services for
residents of the area.
(iv) The percentage of residents of the
area whose income is at or below the pov-
erty level.
(v) The percentage of residents of the
area who are age 65 or older.
151
Title III, Subtitle A
(vi) The existence of cultural or geo-
graphic barriers to access to health care
services in the area, including weather con-
ditions.
(3) REVIEW BY SECRETARY.—No designation
under paragraph (1) shall take effect under this sec-
tion unless the Secretary—
(A) has been notified of the proposed des-
ignation; and
(B) has not, within 60 days after the date
of receipt of the notice, disapproved the des-
ignation.
(4) PERIOD OF DESIGNATION.—A designation
under this section shall be effective during a period
specified by the Governor of not longer than 3 years.
The Governor may extend the designation for addi-
tional 3-year periods, except that a State may not
receive assistance under subsection (a)(3) for
amounts expended during any such additional peri-
ods.
(c) REQUIREMENTS FOR STATE ACCESS PLANS.—A
State plan to increase the access of residents of chronically
underserved areas to health care services meets the re-
quirements of this section if the Secretary finds that the
plan was developed with the participation of health care
152
Title III, Subtitle A
providers and facilities and residents of the area that is
the subject of the plan, together with such other require-
ments as the Secretary may impose.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated for assistance under this
section $10,000,000 for each of the first 3 fiscal years
beginning after the date on which the Secretary develops
guidelines for the designation of areas as chronically un-
derserved areas under subsection (b)(2).
SEC. 3002. TECHNICAL ASSISTANCE GRANTS FOR NET-
WORKS.
(a) IN GENERAL.—The Secretary shall make funds
available under this section to provide technical assistance
(including information regarding eligibility for other Fed-
eral programs) and advice for entities described in sub-
section (b) seeking to establish or enhance a community
rural health network in an underserved rural area.
(b) ENTITIES ELIGIBLE TO RECEIVE FUNDS.—The
following entities are eligible to receive funds for technical
assistance under this section:
(1) An entity receiving a grant under section
3003.
(2) A State or unit of local government.
153
Title III, Subtitle A
(3) An entity providing health care services (in-
cluding health professional education services) in the
area involved.
(c) USE OF FUNDS.—
(1) IN GENERAL.—Funds made available under
this section may be used—
(A) for planning a community health net-
work and the submission of the plan for the
network to the Secretary under section 3003(c)
(subject to the limitation described in para-
graph (2));
(B) to provide assistance in conducting
community-based needs and prioritization, iden-
tifying existing regional health resources, and
developing networks, utilizing existing local pro-
viders and facilities where appropriate;
(C) to provide advice on obtaining the
proper balance of primary and secondary facili-
ties for the population served by the network;
(D) to provide assistance in coordinating
arrangements for tertiary care;
(E) to provide assistance in recruitment
and retention of health care professionals;
(F) to provide assistance in coordinating
the delivery of emergency services with the pro-
154
Title III, Subtitle A
vision of other health care services in the area
served by the network;
(G) to provide assistance in coordinating
arrangements for mental health and substance
abuse treatment services; and
(H) to provide information regarding the
area or proposed network’s eligibility for Fed-
eral and State assistance for health care-related
activities, together with information on funds
available through private sources.
(2) LIMITATION ON AMOUNT AVAILABLE FOR
DEVELOPMENT OF NETWORK.—The amount of fi-
nancial assistance available for activities described in
paragraph (1) may not exceed $50,000 and may not
be available for a period of time exceeding 1 year.
(d) USE OF RURAL HEALTH OFFICES.—In carrying
out this section with respect to entities in rural areas, the
Secretary shall make funds available through—
(1) not more than 10 regional centers acting as
clearinghouses for the distribution of such funds;
and
(2) State Offices of Rural Health, or any com-
bination of such centers and Offices.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $10,000,000 for each
155
Title III, Subtitle A
of fiscal years 1996 and 1997 and $30,000,000 for each
of fiscal years 1998 through 2000 to carry out this sec-
tion. Amounts appropriated under this section shall be
available until expended.
SEC. 3003. DEVELOPMENT GRANTS FOR NETWORKS.
(a) IN GENERAL.—The Secretary shall provide finan-
cial assistance to eligible entities in order to provide for
the development and implementation of community rural
health networks.
(b) ELIGIBLE ENTITIES.—
(1) IN GENERAL.—An entity is eligible to re-
ceive financial assistance under this section only if
the entity—
(A) is (i) based in a rural area or (ii) is
described in paragraph (2), (3), or (4) of sec-
tion 3002(b),
(B) is undertaking to develop and imple-
ment a community rural health network in an
underserved rural area (or underserved rural
areas) with the active participation of at least
3 health care providers or facilities in the area,
and
(C) has consulted with the local govern-
ments of the area to be served by the network
and with individuals who reside in the area.
157
Title III, Subtitle A
(B) after the Secretary approves the plan
for the network, for activities to implement the
network, including (but not limited to)—
(i) establishing information systems,
including telecommunications,
(ii) recruiting health care providers,
(iii) providing services to enable indi-
viduals to have access to health care serv-
ices, including transportation and language
interpretation services (including interpre-
tation services for the hearing-impaired),
and
(iv) establishing and operating a com-
munity health advisor program described
in paragraph (2).
(2) COMMUNITY HEALTH ADVISOR PROGRAM.—
(A) PROGRAM DESCRIBED.—In paragraph
(1), a ‘‘community health advisor program’’ is
a program under which community health advi-
sors carry out the following activities:
(i) Collaborating efforts with health
care providers and related entities to facili-
tate the provision of health services and
health-related social services.
158
Title III, Subtitle A
(ii) Providing public education on
health promotion and disease prevention
and efforts to facilitate the use of available
health services and health-related social
services.
(iii) Providing health-related counsel-
ing.
(iv) Making referrals for available
health services and health-related social
services.
(v) Improving the ability of individ-
uals to use health services and health-relat-
ed social services under Federal, State,
and local programs through assisting indi-
viduals in establishing eligibility under the
programs.
(vi) Providing outreach services to in-
form the community of the availability of
the services provided under the program.
(B) COMMUNITY
HEALTH
ADVISOR
DE-
FINED.—In subparagraph (A), the term ‘‘com-
munity health advisor’’ means, with respect to
a community health advisor program, an indi-
vidual—
159
Title III, Subtitle A
(i) who has demonstrated the capacity
to carry out one or more of the activities
carried out under the program; and
(ii) who, for not less than one year,
has been a resident of the community in
which the program is to be operated.
(3) LIMITATIONS ON ACTIVITIES FUNDED.—Fi-
nancial assistance made available under this section
may not be used for any of the following:
(A) For a telecommunications system un-
less such system is coordinated with, and does
not duplicate, a system existing in the area.
(B) For construction or remodeling of
health care facilities.
(4) LIMITATION ON AMOUNT AVAILABLE FOR
DEVELOPMENT OF NETWORK.—The amount of fi-
nancial assistance available for activities described in
paragraph (1)(A) may not exceed $50,000 and may
not be made available for a period of time exceeding
1 year.
(d) APPLICATION.—
(1) IN GENERAL.—No financial assistance shall
be provided under this section to an entity unless
the entity has submitted to the Secretary, in a time
160
Title III, Subtitle A
and manner specified by the Secretary, and had ap-
proved by the Secretary an application.
(2) INFORMATION
TO
BE
INCLUDED.—Each
such application shall include—
(A) a description of the community rural
health network, including service area and ca-
pacity, and
(B) a description of how the proposed net-
work will utilize existing health care facilities in
a manner that avoids unnecessary duplication.
(e) AUTHORIZATION OF APPROPRIATIONS.—
(1) IN GENERAL.—There are authorized to be
appropriated $100,000,000 for each of fiscal years
1996 and 1997, $120,000,000 for fiscal year 1998,
$130,000,000 for fiscal year 1999, $140,000,000 for
fiscal year 2000, $150,000,000 for fiscal year 2001,
$160,000,000 for fiscal year 2002, $170,000,000 for
fiscal year 2003, and $180,000,000 for fiscal year
2004, to carry out this section. Amounts appro-
priated under this section shall be available until ex-
pended.
(2) INTEGRATION
OF
OTHER
AUTHORIZA-
TIONS.—In order to provide for the authorization of
appropriations under paragraph (1), notwithstanding
any other provision of law, no funds are authorized
161
Title III, Subtitle A
to be appropriated to carry out the following pro-
grams in fiscal years after fiscal year 1996:
(A) The rural health transition grant pro-
gram (under section 4005(e) of the Omnibus
Budget Reconciliation Act of 1987).
(B) The rural health outreach program
(for which appropriations were annually pro-
vided under the Departments of Labor, Health
and Human Services, and Education, and Re-
lated Agencies Appropriation Acts).
(3) ANNUAL LIMIT ON ASSISTANCE TO GRANT-
EE.—The amount of financial assistance provided to
an entity under this section during a year may not
exceed $250,000.
SEC. 3004. DEFINITIONS.
For purposes of this part:
(1) COMMUNITY RURAL HEALTH NETWORK.—
The term ‘‘community rural health network’’ means
a formal cooperative arrangement between partici-
pating hospitals, physicians, and other health care
providers which—
(A) is located in an underserved rural
area;
(B) furnishes health care services to indi-
viduals residing in the area; and
162
Title III, Subtitle A
(C) is governed by a board of directors se-
lected by participating health care providers
and residents of the area.
(2) RURAL AREA.—The term ‘‘rural area’’ has
the 
meaning 
given 
such 
term 
in 
section
1886(d)(2)(D) of the Social Security Act.
(3) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(4) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, the Northern Mari-
ana Islands, and American Samoa.
(5) UNDERSERVED
RURAL
AREA.—The term
‘‘underserved rural area’’ means a rural area des-
ignated—
(A) as a health professional shortage area
under section 332(a) of the Public Health Serv-
ice Act; or
(B) as a chronically underserved area
under section 3001.
163
Title III, Subtitle A
PART 
2—INCENTIVES 
FOR 
HEALTH 
PROFES-
SIONALS TO PRACTICE IN RURAL AREAS
THROUGH THE NATIONAL HEALTH SERVICE
CORPS PROGRAM
SEC. 3011. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS EXCLUDED FROM GROSS INCOME.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any qualified loan repayment.
‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes
of this section, the term ‘qualified loan repayment’ means
any payment made on behalf of the taxpayer by the Na-
tional Health Service Corps Loan Repayment Program
under section 338B(g) of the Public Health Service Act.’’.
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 338B(g) of the Public Health Service Act is
amended by striking ‘‘Federal, State, or local’’ and insert-
ing ‘‘State or local’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of the Internal
164
Title III, Subtitle A
Revenue Code of 1986 is amended by striking the item
relating to section 137 and inserting the following:
‘‘Sec. 137. National Health Service Corps loan repayments.
‘‘Sec. 138. Cross-references to other Acts.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments made under section
338B(g) of the Public Health Service Act after the date
of the enactment of this Act.
SEC. 3012. MODIFICATION IN CRITERIA FOR DESIGNATION
AS HEALTH PROFESSIONAL SHORTAGE AREA.
(a) RELEVANCE OF TRAVEL TIMES WITHIN FRON-
TIER AREAS.—Section 332(a) of the Public Health Service
Act (42 U.S.C. 245e(a)) is amended by adding at the end
the following new paragraph:
‘‘(4) With respect to meeting the criteria under
paragraph (1)(A) for an area to be designated as a
health professional shortage area, the Secretary
shall, in the case of a frontier area, make the deter-
mination of whether the frontier area is a rational
area for the delivery of health services without re-
gard to—
‘‘(A) the travel time between population
centers in the frontier area; or
‘‘(B) the travel time to contiguous area re-
sources in the frontier area.’’.
165
Title III, Subtitle A
(b) REGULATIONS
DEFINING
HEALTH
PROFES-
SIONAL SHORTAGE AREAS.—Within 1 year after the date
of the enactment of this Act, the Secretary of Health and
Human Services shall promulgate regulations that define
health professional shortage areas for purposes of title III
of the Public Health Service Act.
(c) AGENCY
RECOMMENDATIONS
FOR
IMPROVE-
MENTS.—Not later than July 1, 1996, the Secretary of
Health and Human Services shall submit to the Congress
a report specifying the recommendations of the Secretary
for improving the manner of determining the extent to
which a geographic area has a need for assignments of
members of the National Health Service Corps, and for
equitably allocating such assignments among the geo-
graphic areas with a need for such assignments.
(d) EFFECTIVE DATE.—This section shall take effect
on October 1, 1995, or upon the date of the enactment
of this Act, whichever occurs later.
SEC. 3013. OTHER PROVISIONS REGARDING NATIONAL
HEALTH SERVICE CORPS.
(a) SCHOLARSHIP
AND LOAN REPAYMENT PRO-
GRAMS.—
(1) AUTHORIZATION
OF
APPROPRIATIONS.—
Section 338H(b)(1) of the Public Health Service Act
(42 U.S.C. 254q(b)(1)) is amended—
166
Title III, Subtitle A
(A) by striking ‘‘and’’ after ‘‘1991,’’; and
(B) by striking ‘‘through 2000.’’ and in-
serting ‘‘through 2004.’’.
(2) 
ALLOCATION
FOR
PARTICIPATION
OF
NURSES
IN
SCHOLARSHIP
PROGRAM.—Section
338H(b)(2) of the Public Health Service Act (42
U.S.C. 254q(b)(2)) is amended by adding at the end
the following subparagraph:
‘‘(C) Of the amounts appropriated under
paragraph (1) for fiscal year 1995 and subse-
quent fiscal years, the Secretary shall reserve
such amounts as may be necessary to ensure
that, of the aggregate number of individuals
who are participants in the Scholarship Pro-
gram, the total number who are being educated
as nurses or are serving as nurses, respectively,
is increased to 20 percent.’’.
(b) INCREASE
IN NUMBER
OF MENTAL HEALTH
PROFESSIONALS IN SHORTAGE AREAS.—
(1) IN GENERAL.—Section 338H(b) of the Pub-
lic Health Service Act (42 U.S.C. 254q(b)) is
amended by adding at the end the following para-
graph:
‘‘(3) MENTAL
HEALTH
PROFESSIONALS.—In
providing contracts under this subpart for scholar-
167
Title III, Subtitle A
ships and loan repayments, the Secretary shall en-
sure that an appropriate number of mental health
professionals is assigned under section 333 for
health professional shortage areas.’’.
(2) APPLICABILITY.—With respect to contracts
for scholarships and loan repayments under subpart
III of part D of title III of the Public Health Service
Act, the amendment made by subsection (a) applies
with respect to contracts entered into on or after Oc-
tober 1, 1995.
PART 3—ASSISTANCE FOR INSTITUTIONAL
PROVIDERS
Subpart A—Emergency Medical Systems
SEC. 3021. EMERGENCY MEDICAL SERVICES.
(a) HEADINGS.—Title XII of the Public Health Serv-
ice Act (42 U.S.C. 300d et seq.) is amended—
(1) in the heading for the title, by striking
‘‘TRAUMA CARE’’ and inserting ‘‘EMER-
GENCY MEDICAL AND TRAUMA CARE
SERVICES’’; and
(2) in the heading for part A, by striking ‘‘Gen-
eral’’ and all that follows and inserting ‘‘General Au-
thorities and Duties’’.
(b) STATE OFFICES OF EMERGENCY MEDICAL SERV-
ICES; DEMONSTRATION PROGRAM REGARDING TELE-
168
Title III, Subtitle A
COMMUNICATIONS.—Part A of title XII of the Public
Health Service Act (42 U.S.C. 300d et seq.), as amended
by section 601(b) of Public Law 103-183 (107 Stat.
2238), is amended—
(1) by redesignating sections 1202 and 1203 as
sections 1203 and 1204, respectively;
(2) by inserting after section 1201 the following
section:
‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL
SERVICES.
‘‘(a) PROGRAM
OF GRANTS.—The Secretary may
make grants to States for the purpose of improving the
availability and quality of emergency medical services
through the operation of State offices of emergency medi-
cal services.
‘‘(b) REQUIREMENT OF MATCHING FUNDS.—
‘‘(1) IN
GENERAL.—The Secretary may not
make a grant under subsection (a) unless the State
involved agrees, with respect to the costs to be in-
curred by the State in carrying out the purpose de-
scribed in such subsection, to provide non-Federal
contributions toward such costs in an amount that—
‘‘(A) for the first fiscal year of payments
under the grant, is not less than $1 for each $3
of Federal funds provided in the grant;
170
Title III, Subtitle A
‘‘(ii) for any second fiscal year of such
payments, not more than 50 percent of
such non-Federal contributions will be pro-
vided in the form of in-kind contributions;
and
‘‘(iii) for any third fiscal year of such
payments, such non-Federal contributions
will be provided solely in the form of cash.
‘‘(c) CERTAIN REQUIRED ACTIVITIES.—The Sec-
retary may not make a grant under subsection (a) unless
the State involved agrees that activities carried out by an
office operated pursuant to such subsection will include—
‘‘(1) coordinating the activities carried out in
the State that relate to emergency medical services;
‘‘(2) activities regarding the matters described
in paragraphs (1) through (4) section 1201(a); and
‘‘(3) identifying Federal and State programs re-
garding emergency medical services and providing
technical assistance to public and nonprofit private
entities regarding participation in such programs.
‘‘(d) REQUIREMENT REGARDING ANNUAL BUDGET
FOR OFFICE.—The Secretary may not make a grant
under subsection (a) unless the State involved agrees that,
for any fiscal year for which the State receives such a
grant, the office operated pursuant to subsection (a) will
171
Title III, Subtitle A
be provided with an annual budget of not less than
$50,000.
‘‘(e) CERTAIN USES OF FUNDS.—
‘‘(1) RESTRICTIONS.—The Secretary may not
make a grant under subsection (a) unless the State
involved agrees that—
‘‘(A) if research with respect to emergency
medical services is conducted pursuant to the
grant, not more than 10 percent of the grant
will be expended for such research; and
‘‘(B) the grant will not be expended to pro-
vide emergency medical services (including pro-
viding cash payments regarding such services).
‘‘(2) ESTABLISHMENT
OF
OFFICE.—Activities
for which a State may expend a grant under sub-
section (a) include paying the costs of establishing
an office of emergency medical services for purposes
of such subsection.
‘‘(f) REPORTS.—The Secretary may not make a
grant under subsection (a) unless the State involved
agrees to submit to the Secretary reports containing such
information as the Secretary may require regarding activi-
ties carried out under this section by the State.
‘‘(g) REQUIREMENT
OF APPLICATION.—The Sec-
retary may not make a grant under subsection (a) unless
172
Title III, Subtitle A
an application for the grant is submitted to the Secretary
and the application is in such form, is made in such man-
ner, and contains such agreements, assurances, and infor-
mation as the Secretary determines to be necessary to
carry out this section.’’; and
(3) in section 1204 (as redesignated by para-
graph (1) of this subsection)—
(A) by redesignating subsection (c) as sub-
section (d); and
(B) by inserting after subsection (b) the
following new subsection:
‘‘(c) DEMONSTRATION PROGRAM REGARDING TELE-
COMMUNICATIONS.—
‘‘(1) LINKAGES
FOR
RURAL
FACILITIES.—
Projects under subsection (a)(1) shall include dem-
onstration projects to establish telecommunications
between rural medical facilities and medical facilities
that have expertise or equipment that can be utilized
by the rural facilities through the telecommuni-
cations.
‘‘(2) MODES
OF
COMMUNICATION.—The Sec-
retary shall ensure that the telecommunications
technologies demonstrated under paragraph (1) in-
clude interactive video telecommunications, static
video imaging transmitted through the telephone
173
Title III, Subtitle A
system, and facsimiles transmitted through such sys-
tem.’’.
(c) FUNDING.—Section 1232 of the Public Health
Service Act (42 U.S.C. 300d–32) is amended by striking
subsections (a) and (b) and inserting the following:
‘‘(a) 
EMERGENCY
MEDICAL
SERVICES
GEN-
ERALLY.—For the purpose of carrying out section 1201
other than with respect to trauma care, and for the pur-
pose of carrying out section 1204(c), there are authorized
to be appropriated $2,000,000 for each of the fiscal years
1997, 1998, and 1999.
‘‘(b) STATE OFFICES.—For the purpose of carrying
out section 1202, there are authorized to be appropriated
$3,000,000 for each of the fiscal years 1997, 1998, and
1999.’’.
SEC. 3022. GRANTS TO STATES REGARDING AIRCRAFT FOR
TRANSPORTING RURAL VICTIMS OF MEDICAL
EMERGENCIES.
Part E of title XII of the Public Health Service Act
(42 U.S.C. 300d–51 et seq.) is amended by adding at the
end the following new section:
‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL
VICTIMS OF MEDICAL EMERGENCIES.
‘‘(a) IN GENERAL.—The Secretary shall make grants
to States to assist such States in the creation or enhance-
174
Title III, Subtitle A
ment of air medical transport systems that provide victims
of medical emergencies in rural areas with access to treat-
ments for the injuries or other conditions resulting from
such emergencies.
‘‘(b) APPLICATION AND PLAN.—
‘‘(1) APPLICATION.—To be eligible to receive a
grant under subsection (a), a State shall prepare
and submit to the Secretary an application in such
form, made in such manner, and containing such
agreements, assurances, and information, including
a State plan as required in paragraph (2), as the
Secretary determines to be necessary to carry out
this section.
‘‘(2) STATE PLAN.—An application submitted
under paragraph (1) shall contain a State plan that
shall—
‘‘(A) describe the intended uses of the
grant proceeds and the geographic areas to be
served;
‘‘(B) demonstrate that the geographic
areas to be served, as described under subpara-
graph (A), are rural in nature;
‘‘(C) demonstrate that there is a lack of
facilities available and equipped to deliver ad-
175
Title III, Subtitle A
vanced levels of medical care in the geographic
areas to be served;
‘‘(D) demonstrate that in utilizing the
grant proceeds for the establishment or en-
hancement of air medical services the State
would be making a cost-effective improvement
to existing ground-based or air emergency medi-
cal service systems;
‘‘(E) demonstrate that the State will not
utilize the grant proceeds to duplicate the capa-
bilities of existing air medical systems that are
effectively meeting the emergency medical needs
of the populations they serve;
‘‘(F) demonstrate that in utilizing the
grant proceeds the State is likely to achieve a
reduction in the morbidity and mortality rates
of the areas to be served, as determined by the
Secretary;
‘‘(G) demonstrate that the State, in utiliz-
ing the grant proceeds, will—
‘‘(i) maintain the expenditures of the
State for air and ground medical transport
systems at a level equal to not less than
the level of such expenditures maintained
by the State for the fiscal year preceding
176
Title III, Subtitle A
the fiscal year for which the grant is re-
ceived; and
‘‘(ii) ensure that recipients of direct
financial assistance from the State under
such grant will maintain expenditures of
such recipients for such systems at a level
at least equal to the level of such expendi-
tures maintained by such recipients for the
fiscal year preceding the fiscal year for
which the financial assistance is received;
‘‘(H) demonstrate that persons experienced
in the field of air medical service delivery were
consulted in the preparation of the State plan;
and
‘‘(I) contain such other information as the
Secretary may determine appropriate.
‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In
determining whether to award a grant to a State under
this section, the Secretary shall—
‘‘(1) consider the rural nature of the areas to
be served with the grant proceeds and the services
to be provided with such proceeds, as identified in
the State plan submitted under subsection (b); and
‘‘(2) give preference to States with State plans
that demonstrate an effective integration of the pro-
177
Title III, Subtitle A
posed air medical transport systems into a com-
prehensive network or plan for regional or statewide
emergency medical service delivery.
‘‘(d) 
STATE
ADMINISTRATION
AND
USE
OF
GRANT.—
‘‘(1) IN
GENERAL.—The Secretary may not
make a grant to a State under subsection (a) unless
the State agrees that such grant will be adminis-
tered by the State agency with principal responsibil-
ity for carrying out programs regarding the provi-
sion of medical services to victims of medical emer-
gencies or trauma.
‘‘(2) PERMITTED
USES.—A State may use
amounts received under a grant awarded under this
section to award subgrants to public and private en-
tities operating within the State.
‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—
The Secretary may not make a grant to a State
under subsection (a) unless that State agrees that,
in developing and carrying out the State plan under
subsection (b)(2), the State will provide public notice
with respect to the plan (including any revisions
thereto) and facilitate comments from interested
persons.
178
Title III, Subtitle A
‘‘(e) NUMBER
OF GRANTS.—The Secretary shall
award grants under this section to not less than 7 States.
‘‘(f) REPORTS.—
‘‘(1) REQUIREMENT.—A State that receives a
grant under this section shall annually (during each
year in which the grant proceeds are used) prepare
and submit to the Secretary a report that shall con-
tain—
‘‘(A) a description of the manner in which
the grant proceeds were utilized;
‘‘(B) a description of the effectiveness of
the air medical transport programs assisted
with grant proceeds; and
‘‘(C) such other information as the Sec-
retary may require.
‘‘(2) TERMINATION OF FUNDING.—In reviewing
reports submitted under paragraph (1), if the Sec-
retary determines that a State is not using amounts
provided under a grant awarded under this section
in accordance with the State plan submitted by the
State under subsection (b), the Secretary may termi-
nate the payment of amounts under such grant to
the State until such time as the Secretary deter-
mines that the State comes into compliance with
such plan.
179
Title III, Subtitle A
‘‘(g) DEFINITION.—As used in this section, the term
‘rural areas’ means geographic areas that are located out-
side of standard metropolitan statistical areas, as identi-
fied by the Secretary.
‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to make grants under
this section, such sums as may be necessary for each of
fiscal years 1997 through 2000.’’.
Subpart B—Demonstration Projects to En-
courage Primary Care and Rural-Based
Graduate Medical Education
SEC. 3031. STATE AND CONSORTIUM DEMONSTRATION
PROJECTS.
(a) IN GENERAL.—
(1) PARTICIPATION OF STATES AND CONSOR-
TIA.—The Secretary shall establish and conduct a
demonstration project to increase the number and
percentage of medical students entering primary
care practice relative to those entering nonprimary
care practice under which the Secretary shall make
payments in accordance with subsection (d)—
(A) to not more than 10 States for the
purpose of testing and evaluating mechanisms
to meet the goals described in section 3032;
and
180
Title III, Subtitle A
(B) to not more than 10 health care train-
ing consortia for the purpose of testing and
evaluating mechanisms to meet such goals.
(2) EXCLUSION OF CONSORTIA IN PARTICIPAT-
ING STATES.—A consortia may not receive payments
under the demonstration project under paragraph
(1)(B) if any of its members is located in a State
receiving payments under the project under para-
graph (1)(A).
(b) APPLICATIONS.—
(1) IN GENERAL.—Each State and consortium
desiring to conduct a demonstration project under
this section shall prepare and submit to the Sec-
retary an application, at such time, in such manner,
and containing such information as the Secretary
may require to assure that the State or consortium
will meet the goals described in section 3032. In the
case of an application of a State, the application
shall include—
(A) information demonstrating that the
State has consulted with interested parties with
respect to the project, including State medical
associations, State hospital associations, and
medical schools located in the State;
181
Title III, Subtitle A
(B) an assurance that no hospital conduct-
ing an approved medical residency training pro-
gram in the State will lose more than 10 per-
cent of such hospital’s approved medical resi-
dency positions in any year as a result of the
project; and
(C) an explanation of a plan for evaluating
the impact of the project in the State.
(2) APPROVAL OF APPLICATIONS.—A State or
consortium that submits an application under para-
graph (1) may begin a demonstration project under
this subsection—
(A) upon approval of such application by
the Secretary; or
(B) at the end of the 60-day period begin-
ning on the date such application is submitted,
unless the Secretary denies the application dur-
ing such period.
(3) NOTICE AND COMMENT.—A State or con-
sortium shall issue a public notice on the date it
submits an application under paragraph (1) which
contains a general description of the proposed dem-
onstration project. Any interested party may com-
ment on the proposed demonstration project to the
State or consortium or the Secretary during the 30-
182
Title III, Subtitle A
day period beginning on the date the public notice
is issued.
(c) SPECIFIC REQUIREMENTS FOR PARTICIPANTS.—
(1) REQUIREMENTS FOR STATES.—Each State
participating in the demonstration project under this
subtitle shall use the payments provided under sub-
section (d) to test and evaluate either of the follow-
ing mechanisms to increase the number and percent-
age of medical students entering primary care prac-
tice relative to those entering nonprimary care prac-
tice:
(A) USE
OF
ALTERNATIVE
WEIGHTING
FACTORS.—
(i) IN
GENERAL.—The State may
make payments to hospitals in the State
for direct graduate medical education costs
in amounts determined under the meth-
odology provided under section 1886(h) of
the Social Security Act, except that the
State shall apply weighting factors that are
different than the weighting factors other-
wise set forth in section 1886(h)(4)(C) of
the Social Security Act.
(ii) USE OF PAYMENTS FOR PRIMARY
CARE
RESIDENTS.—In applying different
183
Title III, Subtitle A
weighting factors under clause (i), the
State shall ensure that the amount of pay-
ment made to hospitals for costs attrib-
utable to primary care residents shall be
greater than the amount that would have
been paid to hospitals for costs attributable
to such residents if the State had applied
the weighting factors otherwise set forth in
section 1886(h)(4)(C) of the Social Secu-
rity Act.
(B) PAYMENTS FOR MEDICAL EDUCATION
THROUGH CONSORTIUM.—The State may make
payments for graduate medical education costs
through payments to a health care training con-
sortium (or through any entity identified by
such a consortium as appropriate for receiving
payments on behalf of the consortium) that is
established in the State but that is not other-
wise participating in the demonstration project.
(2) REQUIREMENTS FOR CONSORTIUM.—
(A) IN GENERAL.—In the case of a consor-
tium participating in the demonstration project
under this subtitle, the Secretary shall make
payments for graduate medical education costs
through a health care training consortium
184
Title III, Subtitle A
whose members provide medical residency train-
ing (or through any entity identified by such a
consortium as appropriate for receiving pay-
ments on behalf of the consortium).
(B) USE OF PAYMENTS.—
(i) IN
GENERAL.—Each consortium
receiving payments under subparagraph
(A) shall use such funds to conduct activi-
ties which test and evaluate mechanisms to
increase the number and percentage of
medical students entering primary care
practice 
relative 
to 
those 
entering
nonprimary care practice, and may use
such funds for the operation of the consor-
tium.
(ii) PAYMENTS
TO
PARTICIPATING
PROGRAMS.—The consortium shall ensure
that the majority of the payments received
under subparagraph (A) are directed to
consortium members for primary care resi-
dency programs, and shall designate for
each resident assigned to the consortium a
hospital operating an approved medical
residency training program for purposes of
enabling the Secretary to calculate the con-
185
Title III, Subtitle A
sortium’s payment amount under the
project. Such hospital shall be the hospital
where the resident receives the majority of
the 
resident’s 
hospital-based, 
non-
ambulatory training experience.
(d) ALLOCATION OF PORTION OF MEDICARE GME
PAYMENTS FOR ACTIVITIES UNDER PROJECT.—Notwith-
standing any provision of title XVIII of the Social Security
Act, the following rules apply with respect to each State
and each health care training consortium participating in
the demonstration project established under this section
during a year:
(1) In the case of a State—
(A) the Secretary shall reduce the amount
of each payment made to hospitals in the State
during the year for direct graduate medical
education costs under section 1886(h) of the
Social Security Act by 3 percent; and
(B) the Secretary shall pay the State an
amount equal to the Secretary’s estimate of the
sum of the reductions made during the year
under subparagraph (A) (as adjusted by the
Secretary in subsequent years for over- or
under-estimations in the amount estimated
under this subparagraph in previous years).
186
Title III, Subtitle A
(2) In the case of a consortium—
(A) the Secretary shall reduce the amount
of each payment made to hospitals who are
members of the consortium during the year for
direct graduate medical education costs under
section 1886(h) of the Social Security Act by 3
percent; and
(B) the Secretary shall pay the consortium
an amount equal to the Secretary’s estimate of
the sum of the reductions made during the year
under subparagraph (A) (as adjusted by the
Secretary in subsequent years for over- or
under-estimations in the amount estimated
under this subparagraph in previous years).
(e) ADDITIONAL GRANT FOR PLANNING AND EVAL-
UATION.—
(1) IN GENERAL.—The Secretary may award
grants to States and consortia participating in the
demonstration project under this section for the pur-
pose of developing and evaluating such projects. A
State or consortia may conduct such an evaluation
or contract with a private entity to conduct the eval-
uation. Each State and consortia desiring to receive
a grant under this paragraph shall prepare and sub-
mit to the Secretary an application, at such time, in
187
Title III, Subtitle A
such manner, and containing such information as
the Secretary may require.
(2) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated such sums
as may be necessary for grants under this paragraph
for fiscal years 1997 through 2001.
(f) DURATION.—A demonstration project under this
section shall be conducted for a period not to exceed 5
years. The Secretary may terminate a project if the Sec-
retary determines that the State or consortium conducting
the project is not in substantial compliance with the terms
of the application approved by the Secretary.
(g) EVALUATIONS AND REPORTS.—
(1) EVALUATIONS.—Each State or consortium
participating in the demonstration project shall sub-
mit to the Secretary a final evaluation within 360
days of the termination of the State or consortium’s
participation and such interim evaluations as the
Secretary may require.
(2) REPORTS TO CONGRESS.—Not later than
360 days after the first demonstration project under
this subtitle begins, and annually thereafter for each
year in which such a project is conducted, the Sec-
retary shall submit a report to Congress which eval-
uates the effectiveness of the State and consortium
188
Title III, Subtitle A
activities conducted under such projects and includes
any legislative recommendations determined appro-
priate by the Secretary.
(h) MAINTENANCE OF EFFORT.—Any funds available
for the activities covered by a demonstration project under
this subtitle shall supplement, and shall not supplant,
funds that are expended for similar purposes under any
State, regional, or local program.
SEC. 3032. GOALS FOR PROJECTS.
The goals referred to in this section for a State or
consortium participating in the demonstration project
under this subtitle are as follows:
(1) The training of an equal number of physi-
cian and non-physician primary care providers.
(2) The recruiting of residents for graduate
medical education training programs who received a
portion of undergraduate training in a rural area.
(3) The allocation of not less than 50 percent
of the training spent in a graduate medical residency
training program at sites at which acute care inpa-
tient hospital services are not furnished.
(4) The rotation of residents in approved medi-
cal residency training programs among practices
that serve residents of rural areas.
189
Title III, Subtitle A
(5) The development of a plan under which,
after a 5-year transition period, not less than 50
percent of the residents who begin an initial resi-
dency period in an approved medical residency train-
ing program shall be primary care residents.
SEC. 3033. DEFINITIONS.
In this subpart:
(1) APPROVED MEDICAL RESIDENCY TRAINING
PROGRAM.—The term ‘‘approved medical residency
training program’’ has the meaning given such term
in section 1886(h)(5)(A) of the Social Security Act.
(2) HEALTH
CARE
TRAINING
CONSORTIUM.—
The term ‘‘health care training consortium’’ means
a State, regional, or local entity consisting of at
least one of each of the following:
(A) A hospital operating an approved med-
ical residency training program at which resi-
dents receive training at ambulatory training
sites located in rural areas.
(B) A school of medicine or osteopathic
medicine.
(C) A school of allied health or a program
for the training of physician assistants (as such
terms are defined in section 799 of the Public
Health Service Act).
190
Title III, Subtitle A
(D) A school of nursing (as defined in sec-
tion 853 of the Public Health Service Act).
(3) PRIMARY CARE.—The term ‘‘primary care’’
means family practice, general internal medicine,
general pediatrics, and obstetrics and gynecology.
(4) RESIDENT.—The term ‘‘resident’’ has the
meaning given such term in section 1886(h)(5)(H)
of the Social Security Act.
(5) RURAL AREA.—The term ‘‘rural area’’ has
the 
meaning 
given 
such 
term 
in 
section
1886(d)(2)(D) of the Social Security Act.
Subpart C—Medicare Demonstration
Regarding Consortia of Hospitals
SEC. 3041. MEDICARE DEMONSTRATION REGARDING CON-
SORTIA OF HOSPITALS.
(a) IN GENERAL.—The Secretary shall establish and
conduct not more than 10 demonstration projects to in-
crease the number and percentage of medical students en-
tering primary care practice relative to those entering
nonprimary care practice under which the Secretary shall
make payments in accordance with subsection (c) to par-
ticipating health care training consortia.
(b) APPLICATIONS.—Each consortium desiring to
participate in a demonstration project under this section
shall prepare and submit to the Secretary an application
191
Title III, Subtitle A
at such time and in such manner as the Secretary may
require, and containing—
(1) an explanation of a plan with the goal of
training at least 50 percent of all residents partici-
pating in approved residency training programs con-
ducted by members of the consortium as primary
care residents (as defined in subsection (f)(4)); and
(2) such other information and assurances as
the Secretary may require.
(c) PAYMENTS TO PARTICIPANTS.—
(1) IN GENERAL.—Notwithstanding any provi-
sion of title XVIII of the Social Security Act—
(A) in the case of a consortium participat-
ing in a demonstration project under this sub-
title, the Secretary shall make payments under
such title for the direct and indirect costs of
graduate medical education of members of the
consortium to the consortium (or through any
entity identified by such a consortium as appro-
priate for receiving payments on behalf of the
consortium), except that the amount paid to the
consortium shall be based on the designations
described in paragraph (2); and
(B) the Secretary may not make any pay-
ment under such title to a member of a consor-
192
Title III, Subtitle A
tium for the direct and indirect costs of grad-
uate medical education during the period of the
consortium’s participation in the demonstration
project.
(2) DESIGNATION OF RESIDENTS BY CONSOR-
TIUM.—Each consortium participating in a dem-
onstration project shall designate for each resident
assigned to the consortium a hospital operating an
approved medical residency training program for
purposes of enabling the Secretary to calculate the
amount paid to the consortium under paragraph
(1)(A). Such hospital shall be the hospital where the
resident receives the majority of the resident’s hos-
pital-based, nonambulatory training experience.
(3) LIMIT ON PAYMENT.—The amount paid to
a consortium under paragraph (1)(A) during a year
may not exceed the Secretary’s estimate of the sum
of the payments that would have been made under
title XVIII to each member of the consortium during
the year but for the application of this section, de-
termined as if such payments were based on—
(A) the number of full-time-equivalent resi-
dents in approved medical residency training
programs of the member calculated under sec-
tion 1886(h)(4) of the Social Security Act dur-
193
Title III, Subtitle A
ing the academic year beginning July 1, 1994;
and
(B) the ratio of the member’s full-time
equivalent interns and residents to beds applica-
ble under section 1886(d)(5)(B)(ii) of such Act
for discharges occurring during the 12-month
cost reporting period beginning or after July 1,
1994.
(d) DURATION.—A demonstration project under this
section shall be conducted for a period not to exceed 10
years. The Secretary may terminate a project if the Sec-
retary determines that the consortium participating in the
project is not in substantial compliance with the terms of
the application approved by the Secretary.
(e) EVALUATIONS AND REPORTS.—
(1) EVALUATIONS.—Each consortium partici-
pating in a demonstration project shall submit to the
Secretary a final evaluation within 360 days of the
termination of the consortium’s participation and
such interim evaluations as the Secretary may re-
quire.
(2) REPORTS TO CONGRESS.—Not later than
360 days after the first demonstration project under
this section begins, and annually thereafter for each
year in which such a project is conducted, the Sec-
194
Title III, Subtitle A
retary shall submit a report to Congress which eval-
uates the effectiveness of the consortium activities
conducted under such projects and includes any leg-
islative recommendations determined appropriate by
the Secretary.
(f) DEFINITIONS.—In this section:
(1) APPROVED MEDICAL RESIDENCY TRAINING
PROGRAM.—The term ‘‘approved medical residency
training program’’ has the meaning given such term
in section 1886(h)(5)(A) of the Social Security Act.
(2) HEALTH
CARE
TRAINING
CONSORTIUM.—
The term ‘‘health care training consortium’’ means
a State, regional, or local entity consisting of at
least 2 hospitals operating approved medical resi-
dency training programs.
(3) RESIDENT.—The term ‘‘resident’’ has the
meaning given such term in section 1886(h)(5)(H)
of the Social Security Act.
(4) PRIMARY CARE RESIDENT.—The term ‘‘pri-
mary care resident’’ means a resident enrolled in an
approved medical residency training program in fam-
ily medicine, general internal medicine, general pedi-
atrics, preventive medicine, geriatric medicine, osteo-
pathic general practice, or obstetrics and gynecology.
195
Title III, Subtitle B
Subtitle B—Public Health Grants
SEC. 3101. GRANTS TO STATES FOR PUBLIC HEALTH PRO-
GRAMS.
Part B of title III of the Public Health Service Act
(42 U.S.C. 243 et seq.), as amended by section 703 of
Public Law 103–183 (107 Stat. 2240), is amended by in-
serting after section 317F the following section:
‘‘GRANTS TO STATES FOR PUBLIC HEALTH PROGRAMS
‘‘SEC. 317G. (a) IN GENERAL.—The Secretary may
make grants to States for the following purposes:
‘‘(1) Education and training of public health
professionals.
‘‘(2) Prevention and control of poisoning.
‘‘(3) Prevention and control of infectious dis-
eases.
‘‘(4) Laboratory services regarding public
health.
‘‘(5) Community and school-based health edu-
cation.
‘‘(6) Prevention programs regarding public
health.
‘‘(7) Community and school-based public-health
services.
‘‘(8) Collection and reporting of data regarding
public health.
196
Title III, Subtitle B
‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of carrying out this section, there are authorized
to be appropriated such sums as may be necessary for
each of the fiscal years 1996 through 1998.’’.
SEC. 3102. SCHOLARSHIP AND LOAN REPAYMENT PRO-
GRAMS 
REGARDING 
SERVICE 
IN 
PUBLIC
HEALTH POSITIONS.
Part D of title VII of the Public Health Service Act
(42 U.S.C. 294 et seq.) is amended—
(1) by redesignating subparts II and III as sub-
parts III and IV, respectively; and
(2) by inserting after subpart I the following
subpart:
‘‘Subpart II—Scholarship and Loan Repayment Pro-
grams Regarding Service in Public Health Posi-
tions
‘‘SEC. 765A. SCHOLARSHIP AND LOAN REPAYMENT PRO-
GRAMS.
‘‘(a) SCHOLARSHIP PROGRAM.
‘‘(1) IN
GENERAL.—The Secretary, acting
through the Administrator of the Health Resources
and Services Administration and in consultation
with the Director of the Centers for Disease Control
and Prevention, shall carry out a program under
which the Secretary awards scholarships to individ-
197
Title III, Subtitle B
uals described in paragraph (2) for the purpose of
assisting the individuals with the costs of attending
public and nonprofit private schools of public health
(or other public or nonprofit private institutions pro-
viding graduate or specialized training in public
health).
‘‘(2) ELIGIBLE
INDIVIDUALS.—An individual
referred to in paragraph (1) is any individual meet-
ing the following conditions:
‘‘(A) The individual is enrolled (or accept-
ed for enrollment) at a school or other institu-
tion referred to in paragraph (1) as a full-time
or part-time student in a program providing
training in a health profession in a field of pub-
lic health (including the fields of epidemiology,
biostatistics, environmental health, health ad-
ministration and planning, behavioral sciences,
maternal and child health, occupational safety,
public health nursing, nutrition, and toxi-
cology).
‘‘(B) The individual enters into the con-
tract required pursuant to subsection (c) as a
condition of receiving the scholarship (relating
to an agreement to provide services in approved
198
Title III, Subtitle B
public health positions, as defined in subsection
(c).
‘‘(3) ELIGIBLE SCHOOLS.—For fiscal year 1997
and subsequent fiscal years, the Secretary may make
an award of a scholarship under paragraph (1) only
if the Secretary determines that—
‘‘(A) the school or other institution with
respect to which the award is to be provided
has coordinated the activities of the school or
institution with relevant activities of the Health
Resources and Services Administration and the
Centers for Disease Control and Prevention;
and
‘‘(B) not fewer than 60 percent of the
graduates of the school or institution are in
public health positions determined by the Sec-
retary to be consistent with the needs of the
United States regarding such professionals.
‘‘(4) 
APPLICABILITY
OF
CERTAIN
PROVI-
SIONS.—Except as inconsistent with this subsection
or subsection (c), the provisions of subpart III of
part D of title III (relating to the Scholarship and
Loan Repayment Programs of the National Health
Service Corps) apply to an award of a scholarship
under paragraph (1) to the same extent and in the
199
Title III, Subtitle B
same manner as such provisions apply to an award
of a scholarship under section 338A.
‘‘(b) LOAN REPAYMENT PROGRAM.—
‘‘(1) IN
GENERAL.—The Secretary, acting
through the Administrator of the Health Resources
and Services Administration and in consultation
with the Director of the Centers for Disease Control
and Prevention, shall carry out a program under
which the Federal Government enters into agree-
ments to repay all or part of the educational loans
of individuals meeting the following conditions:
‘‘(A) The individual involved is a graduate
of a school or other institution described in sub-
section (a)(1).
‘‘(B) The individual meets the applicable
legal requirements to provide services as a pub-
lic health professional (including a professional
in any of the fields specified in subsection
(a)(2)(A)).
‘‘(C) The individual enters into the con-
tract required pursuant to subsection (c) as a
condition of the Federal Government repaying
such loans (relating to an agreement to provide
services in approved public health positions, as
defined in subsection (c)).
200
Title III, Subtitle B
‘‘(2) 
APPLICABILITY
OF
CERTAIN
PROVI-
SIONS.—Except as inconsistent with this subsection
or subsection (c), the provisions of subpart III of
part D of title III (relating to the Scholarship and
Loan Repayment Programs of the National Health
Service Corps) apply to an agreement regarding re-
payment under paragraph (1) to the same extent
and in the same manner as such provisions apply to
an agreement regarding repayment under section
338B.
‘‘(3) AMOUNT OF REPAYMENTS.—For each year
for which an individual contracts to serve in an ap-
proved public health position pursuant to paragraph
(2), the Secretary may repay not more than $20,000
of the principal and interest of the educational loans
of the individual.
‘‘(c) APPROVED PUBLIC HEALTH POSITIONS.—
‘‘(1) POSITION REGARDING POPULATIONS WITH
SIGNIFICANT NEED FOR SERVICES.—
‘‘(A) With respect to the programs under
this section, the obligated service of a program
participant pursuant to subsections (a)(4) and
(b)(2) shall be provided through an assignment,
to an entity described in paragraph (2), for a
position in which the participant provides serv-
201
Title III, Subtitle B
ices as a public health professional to a popu-
lation determined by the Secretary to have a
significant unmet need for the services of such
a professional.
‘‘(B) For purposes of subsection (a)(4) and
(b)(2), the period of obligated service is the fol-
lowing, as applicable to the program participant
involved:
‘‘(i) In the case of scholarships under
subsection (a) for full-time students, the
greater of—
‘‘(I) 1 year for each year for
which such a scholarship is provided;
or
‘‘(II) 2 years.
‘‘(ii) In the case of scholarships under
subsection (a) for part-time students, a pe-
riod determined by the Secretary on the
basis of the number of hours of education
or training received under the scholarship,
considering the percentage constituted by
the ratio of such number to the number of
hours for a full-time student in the pro-
gram involved.
202
Title III, Subtitle B
‘‘(iii) In the case of the loan repay-
ments under subsection (b), such period as
the Secretary and the participant may
agree, except that the period may not be
less than 2 years.
‘‘(2) APPROVAL OF ENTITIES FOR ASSIGNMENT
OF PROGRAM PARTICIPANTS.—The entities referred
to in paragraph (1)(A) are public and nonprofit pri-
vate entities approved by the Secretary as meeting
such requirements for the assignment of a program
participant as the Secretary may establish. The enti-
ties that the Secretary may so approve include State
and local departments of health, public hospitals,
community and neighborhood health clinics, migrant
health clinics, community-based health-related orga-
nizations, certified regional poison control centers,
purchasing cooperatives regarding health insurance,
and any other public or nonprofit private entity.
‘‘(3) DEFINITIONS.—For purposes of this sec-
tion:
‘‘(1) The term ‘approved public health position’,
with respect to a program participant, means a posi-
tion to which the participant is assigned pursuant to
paragraph (1).
203
Title III, Subtitle B
‘‘(B) The term ‘program participant’
means an individual who enters into a contract
pursuant to subsection (a)(2)(B) or subsection
(b)(1)(C).
‘‘(d) CERTAIN CONSIDERATIONS.—
‘‘(1) SPECIAL
CONSIDERATION
FOR
CERTAIN
INDIVIDUALS.—In making awards of scholarships
under subsection (a) and making repayments under
subsection (b), the Secretary shall give special con-
sideration to individuals who are in the armed forces
of the United States or who are veterans of the
armed forces.
‘‘(2) 
SCHOOL
HEALTH
EDUCATION
PRO-
GRAMS.—The Secretary shall ensure that the ap-
proved public health positions to which the Secretary
assigns program participants under this part include
positions in programs that provide education on the
promotion of health and the prevention of diseases
and that are carried out on the premises of public
or nonprofit private elementary and secondary
schools.
‘‘(e) FUNDING.—
‘‘(1) AUTHORIZATION
OF
APPROPRIATIONS.—
For the purpose of carrying out this section, there
are authorized to be appropriated such sums as may
204
Title III, Subtitle C
be necessary for each of the fiscal years 1996
through 1998.
‘‘(2) ALLOCATIONS.—Of the amounts appro-
priated under subsection (a) for a fiscal year, the
Secretary shall obligate not less than 30 percent for
the purpose of providing awards for scholarships
under subsection (a) to individuals who have not
previously received such scholarships.’’.
Subtitle C—Academic Health
Centers
SEC. 3201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION
AT SITES OTHER THAN HOSPITALS.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study of the feasibility and desir-
ability of making payments to facilities that are not hos-
pitals for the direct and indirect costs of graduate medical
education attributable to residents trained at such facili-
ties. In conducting the study, the Secretary shall evaluate
new payment methodologies—
(1) under which each entity which incurs costs
of graduate medical education shall receive reim-
bursement for such costs; and
(2) which would encourage the training of pri-
mary care physicians.
205
Title III, Subtitle C
(b) REPORT.—Not later than 2 years after the date
of the enactment of this Act, the Secretary shall submit
a report to Congress a report on the study conducted
under subsection (a), and shall include in the report such
recommendations as the Secretary considers appropriate.
SEC. 3202. STUDY OF FUNDING NEEDS OF HEALTH PROFES-
SIONS SCHOOLS.
(a) IN GENERAL.—The Secretary shall conduct a
study for the purpose of determining the funding needs
of health professions schools, including schools of medicine
and osteopathic medicine, schools of dentistry, and schools
of public health.
(b) CONSIDERATION OF CERTAIN COSTS.—In con-
ducting the study under subsection (a), the Secretary shall
also consider the following costs regarding the funding
needs of health professions schools:
(1) Uncompensated costs incurred in providing
health care.
(2) Costs resulting from reduced productivity
due to teaching responsibilities.
(3) Increased costs of caring for the health
needs of patients with severe medical complications.
(4) Uncompensated costs incurred by faculty,
residents, and students in providing consultations
for hospitalized patients.
206
Title IV, Subtitle A
(5) Uncompensated costs incurred in conduct-
ing clinical research.
(c) 
CONSIDERATIONS
REGARDING
ADDITIONAL
FUNDING.—In conducting the study under subsection (a),
the Secretary shall determine the following:
(1) Whether the health professions schools in-
volved have a significant need for an increase in the
amount of funds available to the schools.
(2) If there is such a need—
(A) 
recommendations 
regarding 
the
sources of funds to provide the increase; and
(B) recommendations for a methodology
for determining the amount that should be pro-
vided to the schools involved.
(d) REPORT
TO CONGRESS.—Not later than 18
months after the date of the enactment of this Act, the
Secretary shall submit to the Congress a report describing
the findings and recommendations made in the study.
TITLE IV—MALPRACTICE
REFORM
Subtitle A—Findings; Purpose;
Definitions
SEC. 4001. FINDINGS; PURPOSE.
(a) FINDINGS.—Congress finds that—
207
Title IV, Subtitle A
(1) the health care and insurance industries are
industries affecting interstate commerce and the
medical malpractice litigation systems existing
throughout the United States affect interstate com-
merce by contributing to the high cost of health care
and premiums for malpractice insurance purchased
by health care providers; and
(2) the Federal Government has a major inter-
est in health care as a direct provider of health care
and as a source of payment for health care, and has
a demonstrated interest in assessing the quality of
care, access to care, and the costs of care through
the evaluative activities of several Federal agencies.
(b) PURPOSE.—It is the purpose of this title to—
(1) provide grants to States to develop alter-
native dispute resolution procedures to attain a more
efficient, expeditious, and equitable resolution of
health care malpractice disputes;
(2) enhance general knowledge concerning the
benefits of different forms of alternative dispute res-
olution mechanisms; and
(3) establish uniformity and curb excesses in
the State-based medical liability systems through
Federally-mandated reforms.
208
Title IV, Subtitle A
SEC. 4002. DEFINITIONS.
As used in this title:
(1) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM.—The term ‘‘alternative dispute resolution sys-
tem’’ means a system that is enacted or adopted by
a State to resolve medical malpractice claims other
than through a medical malpractice liability action.
(2) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and, in the case of an individual who is deceased, in-
competent, or a minor, the person on whose behalf
such an action is brought.
(3) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established,
except that such measure or degree of proof is more
than that required under a preponderance of the evi-
dence, but less than that required for proof beyond
a reasonable doubt.
(4) ECONOMIC DAMAGES.—The term ‘‘economic
damages’’ means damages paid to compensate an in-
dividual for losses for hospital and other medical ex-
penses, lost wages, lost employment, and other pecu-
niary losses.
209
Title IV, Subtitle A
(5) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means any individual who
provides health care services in a State and who is
required by State law or regulation to be licensed or
certified by the State to provide such services in the
State.
(6) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any organization or
institution that is engaged in the delivery of health
care services in a State 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.
(7) INJURY.—The term ‘‘injury’’ means any ill-
ness, disease, or other harm that is the subject of
a medical malpractice claim.
(8) MEDICAL
MALPRACTICE
LIABILITY
AC-
TION.—The term ‘‘medical malpractice liability ac-
tion’’ means any civil action brought pursuant to
State law in which a plaintiff alleges a medical mal-
practice claim against a health care provider or
health care professional, but does not include any
action in which the plaintiff’s sole allegation is an al-
legation of an intentional tort.
210
Title IV, Subtitle A
(9) MEDICAL MALPRACTICE CLAIM.—The term
‘‘medical malpractice claim’’ means any claim relat-
ing to the provision of (or the failure to provide)
health care services or the use of a medical product,
without regard to the theory of liability asserted,
and includes any third-party claim, cross-claim,
counterclaim, or contribution claim in a medical
malpractice liability action.
(10) MEDICAL PRODUCT.—
(A) IN
GENERAL.—The term ‘‘medical
product’’ means, with respect to the allegation
of a claimant, a drug (as defined in section
201(g)(1) of the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 321(g)(1)) or a medical
device (as defined in section 201(h) of the Fed-
eral Food, Drug, and Cosmetic Act (21 U.S.C.
321(h)) if—
(i) such drug or device was subject to
premarket approval under section 505,
507, or 515 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355, 357, or
360e) or section 351 of the Public Health
Service Act (42 U.S.C. 262) with respect
to the safety of the formulation or per-
formance of the aspect of such drug or de-
211
Title IV, Subtitle A
vice which is the subject of the claimant’s
allegation or the adequacy of the packag-
ing or labeling of such drug or device, and
such drug or device is approved by the
Food and Drug Administration; or
(ii) the drug or device is generally rec-
ognized as safe and effective under regula-
tions issued by the Secretary of Health
and Human Services under section 201(p)
of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(p)).
(B) EXCEPTION
IN
CASE
OF
MISREPRE-
SENTATION OR FRAUD.—Notwithstanding sub-
paragraph (A), the term ‘‘medical product’’
shall not include any product described in such
subparagraph if the claimant shows that the
product is approved by the Food and Drug Ad-
ministration for marketing as a result of with-
held information, misrepresentation, or an ille-
gal payment by manufacturer of the product.
(11) 
NONECONOMIC
DAMAGES.—The 
term
‘‘noneconomic damages’’ means damages paid to
compensate an individual for losses for physical and
emotional pain, suffering, inconvenience, physical
impairment, mental anguish, disfigurement, loss of
212
Title IV, Subtitle B
enjoyment of life, loss of consortium, and other
nonpecuniary losses, but does not include punitive
damages.
(12) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means compensation, in addition to com-
pensation for actual harm suffered, that is awarded
for the purpose of punishing a person for conduct
deemed to be malicious, wanton, willful, or exces-
sively reckless.
(13) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Health and Human Services.
(14) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands,
and Guam.
Subtitle B—Uniform Standards for
Malpractice Claims
SEC. 4101. APPLICABILITY.
Except as provided in section 4110, this subtitle shall
apply to any medical malpractice liability action brought
in a Federal or State court, and to any medical mal-
practice claim subject to an alternative dispute resolution
system, that is initiated on or after January 1, 1996.
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Title IV, Subtitle B
SEC. 4102. REQUIREMENT FOR INITIAL RESOLUTION OF AC-
TION THROUGH ALTERNATIVE DISPUTE RES-
OLUTION.
(a) IN GENERAL.—
(1) STATE CASES.—A medical malpractice li-
ability action may not be brought in any State court
during a calendar year unless the medical mal-
practice liability claim that is the subject of the ac-
tion has been initially resolved under an alternative
dispute resolution system certified for the year by
the Secretary under section 4202(a), or, in the case
of a State in which such a system is not in effect
for the year, under the alternative Federal system
established under section 4202(b).
(2) FEDERAL DIVERSITY ACTIONS.—A medical
malpractice liability action may not be brought in
any Federal court under section 1332 of title 28,
United States Code, during a calendar year unless
the medical malpractice liability claim that is the
subject of the action has been initially resolved
under the alternative dispute resolution system re-
ferred to in paragraph (1) that applied in the State
whose law applies in such action.
(3) CLAIMS AGAINST UNITED STATES.—
(A) ESTABLISHMENT
OF
PROCESS
FOR
CLAIMS.—The Attorney General shall establish
214
Title IV, Subtitle B
an alternative dispute resolution process for the
resolution of tort claims consisting of medical
malpractice liability claims brought against the
United States under chapter 171 of title 28,
United States Code. Under such process, the
resolution of a claim shall occur after the com-
pletion of the administrative claim process ap-
plicable to the claim under section 2675 of such
title.
(B) REQUIREMENT FOR INITIAL RESOLU-
TION UNDER PROCESS.—A medical malpractice
liability action based on a medical malpractice
liability claim described in subparagraph (A)
may not be brought in any Federal court unless
the claim has been initially resolved under the
alternative dispute resolution process estab-
lished by the Attorney General under such sub-
paragraph.
(b) INITIAL
RESOLUTION
OF
CLAIMS
UNDER
ADR.—For purposes of subsection (a), an action is ‘‘ini-
tially resolved’’ under an alternative dispute resolution
system if—
(1) the ADR reaches a decision on whether the
defendant is liable to the plaintiff for damages; and
215
Title IV, Subtitle B
(2) if the ADR determines that the defendant
is liable, the ADR reaches a decision on the amount
of damages assessed against the defendant.
(c) PROCEDURES FOR FILING ACTIONS.—
(1) NOTICE
OF
INTENT
TO
CONTEST
DECI-
SION.—Not later than 60 days after a decision is is-
sued with respect to a medical malpractice liability
claim under an alternative dispute resolution system,
each party affected by the decision shall submit a
sealed statement to a court of competent jurisdiction
indicating whether or not the party intends to con-
test the decision.
(2) DEADLINE FOR FILING ACTION.—A medical
malpractice liability action may not be brought by a
party unless—
(A) the party has filed the notice of intent
required by paragraph (1); and
(B) the party files the action in a court of
competent jurisdiction not later than 90 days
after the decision resolving the medical mal-
practice liability claim that is the subject of the
action is issued under the applicable alternative
dispute resolution system.
216
Title IV, Subtitle B
(3) COURT
OF
COMPETENT
JURISDICTION.—
For purposes of this subsection, the term ‘‘court of
competent jurisdiction’’ means—
(A) with respect to actions filed in a State
court, the appropriate State trial court; and
(B) with respect to actions filed in a Fed-
eral court, the appropriate United States dis-
trict court.
(d) LEGAL EFFECT OF UNCONTESTED ADR DECI-
SION.—The decision reached under an alternative dispute
resolution system shall, for purposes of enforcement by a
court of competent jurisdiction, have the same status in
the court as the verdict of a medical malpractice liability
action adjudicated in a State or Federal trial court. The
previous sentence shall not apply to a decision that is con-
tested by a party affected by the decision pursuant to sub-
section (c)(1).
SEC. 4103. PROCEDURAL REQUIREMENTS FOR FILING OF
ACTIONS.
(a) CERTIFICATE OF MERIT.—
(1) IN GENERAL.—Each individual who files a
medical malpractice liability action shall, not later
than 90 days after filing the action—
(A) submit a certificate of merit described
in subsection (b); or
217
Title IV, Subtitle B
(B) post a surety (or equivalent security)
bond of $4,000 (or, during the 45-day period
that begins on the date the action is filed, a
cost bond of $2,000) with the court.
(2) EXTENSION OF DEADLINE.—On the motion
of any party to the action or upon a written agree-
ment of the parties filed with the court, the court
may extend the deadline specified in paragraph (1)
for a period not to exceed 30 days.
(3) DISMISSAL
FOR
FAILURE
TO
MEET
RE-
QUIREMENT.—If an individual filing a medical mal-
practice liability action fails to meet the require-
ments of paragraph (1)—
(A) the court shall dismiss the action with-
out prejudice to the refiling of the action by the
individual; and
(B) require the individual to pay any court
costs incurred by the defendants as a result of
the filing of the action.
(4) WAIVER FOR GOOD CAUSE.—The court may
waive the application of paragraph (1) to a plaintiff
if the plaintiff shows good cause that such para-
graph should not apply.
(5) CERTIFICATE
OF
MERIT
DESCRIBED.—In
paragraph (1), a ‘‘certificate of merit’’ is, with re-
218
Title IV, Subtitle B
spect to an individual filing a medical malpractice li-
ability action, an affidavit declaring that the individ-
ual (or the individual’s attorney) has obtained a
written opinion from a medical expert who is knowl-
edgeable of the relevant medical issues involved in
the action that the defendant was negligent and the
defendant’s conduct was a proximate cause of the al-
leged injury that is the subject of the action.
(b) RESPONSE
TO STANDARD INTERROGATORIES
AND REQUESTS FOR DOCUMENTS.—
(1) DEADLINE.—Each party to a medical mal-
practice liability action shall respond to the standard
set of interrogatories and requests for production of
documents developed pursuant to paragraph (4) as
follows:
(A) In the case of a plaintiff, the party
shall provide the defendant (or the defendant’s
attorney) with full and complete responses not
later than 45 days after filing the action.
(B) In the case of a defendant, the party
shall provide the plaintiff (or the plaintiff’s at-
torney) with full and complete responses not
later than 45 days after receiving the plaintiff’s
responses under subparagraph (A).
219
Title IV, Subtitle B
(C) In the case of a party who is added to
the action after the action is filed, the party
shall provide all other parties (or such parties’
attorneys) with full and complete responses not
later than 45 days after the date of the filing
of the pleading by which the party is added to
the action.
(2) EXTENSION OF DEADLINE.—On the motion
of any party to the action that is supported by good
cause, or upon a written agreement of the parties
filed with the court, the court shall extend the dead-
line specified in paragraph (1) for a period not to
exceed 30 days.
(3) IMPOSITION OF SANCTIONS FOR FAILURE
TO RESPOND.—If a party to a medical malpractice
liability action fails to respond to the standard set
of interrogatories and requests for production of
documents as required under paragraph (1), the
party shall be subject to sanctions by the court
under any applicable laws, rules, and regulations
governing the imposition of sanctions by the court.
(4) DEVELOPMENT OF STANDARD INTERROG-
ATORIES AND REQUESTS.—
(A) APPOINTMENT OF EXPERT PANELS.—
The Governor of each State shall appoint a
220
Title IV, Subtitle B
panel to develop the standard set of interrog-
atories and requests for production of docu-
ments that will be used for purposes of this
subsection in the courts of the State. The set
shall be comprehensive and designed to expedite
the discovery process in the courts. The Attor-
ney General shall appoint a panel to develop
such set that will be used for purposes of this
subsection in the Federal courts.
(B) COMPOSITION.—Each panel appointed
pursuant to subparagraph (A) shall consist of
not less than 6 and not more than 12 members,
of whom an equal number shall be attorneys
who customarily represent plaintiffs in medical
malpractice liability actions and attorneys who
customarily represent defendants in such ac-
tions.
(C) DEADLINES.—Not later than October
1, 1996, each panel appointed pursuant to sub-
paragraph (A) shall complete and publish the
standard set of interrogatories and requests for
production of documents.
221
Title IV, Subtitle B
SEC. 4104. TREATMENT OF NONECONOMIC AND PUNITIVE
DAMAGES.
(a) LIMITATION ON NONECONOMIC DAMAGES.—The
total amount of noneconomic damages that may be award-
ed to a claimant and the members of the claimant’s family
for losses resulting from the injury which is the subject
of a medical malpractice liability action may not exceed
$250,000, regardless of the number of parties against
whom the action is brought or the number of actions
brought with respect to the injury.
(b) NO AWARD OF PUNITIVE DAMAGES AGAINST
MANUFACTURER OF MEDICAL PRODUCT.—In the case of
a medical malpractice liability action in which the plaintiff
alleges a claim against the manufacturer of a medical
product, no punitive or exemplary damages may be award-
ed against such manufacturer.
(c) SEVERAL LIABILITY FOR NONECONOMIC DAM-
AGES.—The liability of each defendant for noneconomic
damages shall be several only and shall not be joint, and
each defendant shall be liable only for the amount of non-
economic damages allocated to the defendant in direct pro-
portion to the defendant’s percentage of responsibility (as
determined by the trier of fact). The previous sentence
shall not apply if the defendant has been found to be liable
as a result of gross negligence or fraud.
222
Title IV, Subtitle B
(d) ALLOCATION
OF PUNITIVE DAMAGE AWARDS
FOR PROVIDER LICENSING AND DISCIPLINARY ACTIVI-
TIES.—
(1) IN GENERAL.—The total amount of any pu-
nitive damages awarded in a medical malpractice li-
ability action shall be paid to the State in which the
action is brought (or, in a case brought in Federal
court, in the State in which the health care services
that caused the injury that is the subject of the ac-
tion were provided) for the purposes of carrying out
the activities described in paragraph (2).
(2) ACTIVITIES DESCRIBED.—A State shall use
amounts paid pursuant to paragraph (1) to carry
out activities to assure the safety and quality of
health care services provided in the State, including
(but not limited to)—
(A) licensing or certifying health care pro-
fessionals and health care providers in the
State;
(B) implementing health care quality as-
surance programs;
(C) carrying out public education programs
to increase awareness of the availability of com-
parative quality information on accountable
health plans;
223
Title IV, Subtitle B
(D) carrying out programs to reduce mal-
practice-related costs for providers volunteering
to provide services in medically underserved
areas; and
(E) implementing and operating a State
alternative dispute resolution system certified
by the Secretary under section 4202.
(3) MAINTENANCE OF EFFORT.—A State shall
use any amounts paid pursuant to paragraph (1) to
supplement and not to replace amounts spent by the
State for the activities described in paragraph (2).
(e) DEVELOPMENT
OF ALTERNATIVE LIMITS
ON
NONECONOMIC DAMAGES.—
(1) IN GENERAL.—Not later than 1 year after
the date of the enactment of this Act, the Secretary
in consultation with the Attorney General shall de-
velop and transmit to Congress alternative limits on
the amount of noneconomic damages that may be
awarded with respect to medical malpractice liability
claims, together with legislative specifications nec-
essary to replace the limit imposed under subsection
(a) on the amount of such damages with such alter-
native limits. The purpose of the development of the
limits is to provide certainty and fairness in mal-
practice awards and to avoid unwarranted disparities
224
Title IV, Subtitle B
among health care providers and health care profes-
sionals who have engaged in similar conduct.
(2) ESTABLISHMENT OF SEPARATE LIMITS FOR
CATEGORIES
OF
INJURIES.—In developing limits
under paragraph (1), the Secretary shall establish
separate limits for noneconomic damages resulting
from each of the following categories of injuries:
(A) Non-physical injuries.
(B) Insignificant physical injuries.
(C) Temporary minor physical injuries.
(D) Temporary major physical injuries.
(E) Permanent minor physical injuries.
(F) Permanent substantial physical inju-
ries.
(G) Permanent major physical injuries.
(H) Permanent grave physical injuries.
(I) Death.
(3) FACTORS CONSIDERED.—In developing lim-
its under paragraph (1) for each of the categories
described in paragraph (2), the Secretary shall—
(A) examine the most recent available data
on the amount of damages awarded with re-
spect to such claims; and
(B) set specific limits that reasonably com-
pensate most injured parties at the level of
225
Title IV, Subtitle B
compensation currently provided, excluding
those levels of compensation that the Secretary
finds unreasonably large.
(4) 
CONSULTATION.—In 
developing 
limits
under this subsection, the Secretary shall consult
with representatives of each of the following:
(A) Attorneys who represent plaintiffs in
medical malpractice liability actions.
(B) Attorneys who represent health care
professionals and health care providers in medi-
cal malpractice liability actions.
(C) Physicians and other health care pro-
fessionals and providers.
(D) Individuals who have suffered injury
as a result of medical malpractice.
(E) Judges who preside over medical mal-
practice liability actions.
(F) Medical ethicists.
(G) Health care economists.
(H) Liability insurers.
(5) 
GUIDANCE
TO
ENTITIES
RESOLVING
CLAIMS.—If Congress enacts legislation that imposes
the limits developed by the Secretary under this sub-
section on the amount of noneconomic damages that
may be awarded with respect to medical malpractice
226
Title IV, Subtitle B
liability claims, the Secretary shall prepare and dis-
seminate guidelines to assist courts and other enti-
ties resolving such claims in the determination of the
particular category of injury specified in paragraph
(2) to which a claimant’s injury shall be assigned for
purposes of applying the appropriate limit on such
damages.
SEC. 4105. PERIODIC PAYMENTS FOR FUTURE LOSSES.
(a) IN GENERAL.—In any medical malpractice liabil-
ity action in which the damages awarded for future eco-
nomic loss exceeds $100,000, a defendant may not be re-
quired to pay such damages in a single, lump-sum pay-
ment, but may be permitted to make such payments on
a periodic basis. The periods for such payments shall be
determined by the court, based upon projections of when
such expenses are likely to be incurred.
(b) WAIVER.—A court may waive the application of
subsection (a) with respect to a defendant if the court de-
termines that it is not in the best interests of the plaintiff
to receive payments for damages on such a periodic basis.
SEC. 4106. UNIFORM STATUTE OF LIMITATIONS.
(a) IN GENERAL.—No medical malpractice claim
may be initiated after the expiration of the 2-year period
that begins on the date on which the alleged injury that
is the subject of such claim was discovered or the date
227
Title IV, Subtitle B
on which the alleged injury that is the subject of such
claim was discovered or the date on which such injury
should reasonably have been discovered, whichever is ear-
lier.
(b) EXCEPTION FOR MINORS.—In the case of an al-
leged injury suffered by a minor who has not attained 6
years of age, a medical malpractice claim may be initiated
after the expiration of the period described in subsection
(a) if the claim is initiated before the minor attains 8
years of age.
SEC. 4107. SPECIAL PROVISION FOR CERTAIN OBSTETRIC
SERVICES.
(a) IN GENERAL.—In the case of a medical mal-
practice claim relating to services provided during labor
or the delivery of a baby, if the health care professional
or health care provider against whom the claim is brought
did not previously treat the claimant for the pregnancy,
the trier of fact may not find that such professional or
provider committed malpractice and may not assess dam-
ages against such professional or provider unless the mal-
practice is proven by clear and convincing evidence.
(b) APPLICABILITY
TO
GROUP
PRACTICES
OR
AGREEMENTS AMONG PROVIDERS.—For purposes of sub-
section (a), a health care professional shall be considered
to have previously treated an individual for a pregnancy
228
Title IV, Subtitle B
if the professional is a member of a group practice whose
members previously treated the individual for the preg-
nancy or is providing services to the individual during
labor or the delivery of a baby pursuant to an agreement
with another professional.
SEC. 4108. UNIFORM STANDARD FOR DETERMINING LIABIL-
ITY IN ACTIONS BASED ON NEGLIGENCE.
(a) STANDARD
OF REASONABLENESS.—Except as
provided in subsection (b), a defendant in a medical mal-
practice liability action may not be found to have commit-
ted malpractice unless the defendant’s conduct at the time
of providing the health care services that are the subject
of the action was not reasonable.
(b) ACTIONS BROUGHT UNDER STRICT LIABILITY.—
Subsection (a) shall not apply with respect to a medical
malpractice action if (in accordance with applicable State
law) the theory of liability upon which the action is based
is a theory of strict liability.
SEC. 4109. JURISDICTION OF FEDERAL COURTS.
Nothing in this subtitle shall be construed to estab-
lish jurisdiction over any medical malpractice liability ac-
tion in the district courts of the United States on the basis
of sections 1331 or 1337 of title 28, United States Code.
229
Title IV, Subtitle B
SEC. 4110. PREEMPTION.
(a) IN GENERAL.—This subtitle supersedes any State
law only to the extent that the State law permits the recov-
ery by a claimant or the assessment against a defendant
of a greater amount of damages or establishes a less strict
standard of proof for determining whether a defendant has
committed malpractice, than the provisions of this sub-
title.
(b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in this subtitle shall be con-
strued to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground in inconvenient
forum.
230
Title IV, Subtitle C
Subtitle C—Requirements for State
Alternative Dispute Resolution
Systems (ADR)
SEC. 4201. BASIC REQUIREMENTS.
(a) IN GENERAL.—A State’s alternative dispute reso-
lution system meets the requirements of this section if the
system—
(1) applies to all medical malpractice liability
claims under the jurisdiction of the courts of that
State;
(2) requires that a written opinion resolving the
dispute be issued not later than 6 months after the
date by which each party against whom the claim is
filed has received notice of the claim (other than in
exceptional cases for which a longer period is re-
quired for the issuance of such an opinion), and that
the opinion contain—
(A) findings of fact relating to the dispute,
and
(B) a description of the costs incurred in
resolving the dispute under the system (includ-
ing any fees paid to the individuals hearing and
resolving the claim), together with an appro-
priate assessment of the costs against any of
the parties;
231
Title IV, Subtitle C
(3) requires individuals who hear and resolve
claims under the system to meet such qualifications
as the State may require (in accordance with regula-
tions of the Secretary);
(4) is approved by the State or by local govern-
ments in the State;
(5) with respect to a State system that consists
of multiple dispute resolution procedures—
(A) permits the parties to a dispute to se-
lect the procedure to be used for the resolution
of the dispute under the system, and
(B) if the parties do not agree on the pro-
cedure to be used for the resolution of the dis-
pute, assigns a particular procedure to the par-
ties;
(6) provides for the transmittal to the State
agency responsible for monitoring or disciplining
health care professionals and health care providers
of any findings made under the system that such a
professional or provider committed malpractice, un-
less, during the 90-day period beginning on the date
the system resolves the claim against the profes-
sional or provider, the professional or provider
brings an action contesting the decision made under
the system; and
232
Title IV, Subtitle C
(7) provides for the regular transmittal to the
Administrator for Health Care Policy and Research
of information on disputes resolved under the sys-
tem, in a manner that assures that the identity of
the parties to a dispute shall not be revealed.
(b) APPLICATION
OF
MALPRACTICE
LIABILITY
STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—
The provisions of subtitle B (other than sections 4102 and
4103) shall apply with respect to claims brought under
a State alternative dispute resolution system or the alter-
native Federal system in the same manner as such provi-
sions apply with respect to medical malpractice liability
actions brought in the State.
SEC. 4202. CERTIFICATION OF STATE SYSTEMS; APPLICA-
BILITY OF ALTERNATIVE FEDERAL SYSTEM.
(a) CERTIFICATION.—
(1) IN GENERAL.—Not later than October 1 of
each year (beginning with 1996), the Secretary, in
consultation with the Attorney General, shall deter-
mine whether a State’s alternative dispute resolution
system meets the requirements of this part for the
following calendar year.
(2) BASIS FOR CERTIFICATION.—The Secretary
shall certify a State’s alternative dispute resolution
system under this subsection for a calendar year if
233
Title IV, Subtitle C
the Secretary determines under paragraph (1) that
the system meets the requirements of section 4201.
(b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS-
TEM.—
(1) ESTABLISHMENT
AND
APPLICABILITY.—
Not later than October 1, 1996, the Secretary, in
consultation with the Attorney General, shall estab-
lish by rule an alternative Federal ADR system for
the resolution of medical malpractice liability claims
during a calendar year in States that do not have
in effect an alternative dispute resolution system
certified under subsection (a) for the year.
(2) REQUIREMENTS FOR SYSTEM.—Under the
alternative Federal ADR system established under
paragraph (1)—
(A) paragraphs (1), (2), (6), and (7) of
section 4201(a) shall apply to claims brought
under the system;
(B) if the system provides for the resolu-
tion of claims through arbitration, the claims
brought under the system shall be heard and
resolved by arbitrators appointed by the Sec-
retary in consultation with the Attorney Gen-
eral; and
234
Title IV, Subtitle C
(C) with respect to a State in which the
system is in effect, the Secretary may (at the
State’s request) modify the system to take into
account the existence of dispute resolution pro-
cedures in the State that affect the resolution
of medical malpractice liability claims.
(3) TREATMENT
OF
STATES
WITH
ALTER-
NATIVE SYSTEM IN EFFECT.—If the alternative Fed-
eral ADR system established under this subsection is
applied with respect to a State for a calendar year,
the State shall make a payment to the United States
(at such time and in such manner as the Secretary
may require) in an amount equal to 110 percent of
the costs incurred by the United States during the
year as a result of the application of the system with
respect to the State.
SEC. 4203. GRANTS TO STATES.
(a) IN GENERAL.—The Secretary shall make grants
to States for a 2-year period to assist States in implement-
ing and operating alternative dispute resolution systems
that meet the requirements of section 4201.
(b) ELIGIBILITY.—A State is eligible to receive a
grant under this section if the Secretary has certified the
State’s alternative dispute resolution system under section
4202(b).
235
Title IV, Subtitle C
(c) LIMITATION
ON
AMOUNT
OF
GRANT.—The
amount of funds provided to a State under a grant under
this section may not exceed $5,000,000 during the 2-year
period of the grant.
SEC. 4204. REPORTS ON IMPLEMENTATION AND EFFEC-
TIVENESS OF ALTERNATIVE DISPUTE RESO-
LUTION SYSTEMS.
(a) IN GENERAL.—Not later than 5 years after the
date of the enactment of this Act, the Secretary shall pre-
pare and submit to the Congress a report describing and
evaluating State alternative dispute resolution systems op-
erated pursuant to this subtitle and the alternative Fed-
eral system established under section 4202(b).
(b) CONTENTS OF REPORT.—The Secretary shall in-
clude in the report prepared and submitted under sub-
section (a)—
(1) information on—
(A) the effect of the alternative dispute
resolution systems on the cost of health care
within each State,
(B) the impact of such systems on the ac-
cess of individuals to health care within the
State, and
(C) the effect of such systems on the qual-
ity of health care provided within the State; and
236
Title IV, Subtitle D
(2) to the extent that such report does not pro-
vide information on no-fault systems operated by
States as alternative dispute resolution systems pur-
suant to this part, an analysis of the feasibility and
desirability of establishing a system under which
medical malpractice liability claims shall be resolved
on a no-fault basis.
Subtitle D—Grants to States for
Development of Practice Guide-
lines
SEC. 4301. GRANTS TO STATES.
(a) IN GENERAL.—The Secretary shall make grants
to States for a 2-year period for the development of medi-
cal practice guidelines for health care professionals (in-
cluding mid-level practitioners) that may be applied to re-
solve medical malpractice liability claims and actions in
the State.
(b) ELIGIBILITY.—A State is eligible to receive a
grant under this section if the State submits to the Sec-
retary an application at such time, in such form, and con-
taining such information and assurances as the Secretary
may require, including assurances that the State will sub-
mit such periodic reports on the development and applica-
tion of the State’s medical practice guidelines as the Sec-
retary may require.
237
Title V, Subtitle A
(c) NUMBER OF GRANTS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary shall award not less than
10 grants under this section.
(2) EXCEPTION.—Notwithstanding paragraph
(1), the Secretary may award less than 10 grants
under this section if the Secretary determines that
there are an inadequate number of applications sub-
mitted that meet the eligibility and approval require-
ments of this section.
(d) LIMITATION
ON
AMOUNT
OF
GRANT.—The
amount of funds provided to a State under a grant under
this section may not exceed $5,000,000 during the 2-year
period of the grant.
TITLE V—MARKET INCENTIVES
TO CONTAINING COSTS
Subtitle A—Administrative
Simplification
SEC. 5000. PURPOSE.
It is the purpose of this subtitle to improve the effi-
ciency and effectiveness of the health care system, includ-
ing the medicare program under title XVIII of the Social
Security Act and the medicaid program under title XIX
of such Act, by encouraging the development of a health
information network through the adoption of standards
238
Title V, Subtitle A
and the establishment of requirements for the electronic
transmission of certain health information.
SEC. 5001. DEFINITIONS.
For purposes of this subtitle:
(1) CODE SET.—The term ‘‘code set’’ means
any set of codes used for encoding data elements,
such as tables of terms, medical concepts, medical
diagnostic codes, or medical procedure codes.
(2) COORDINATION OF BENEFITS.—The term
‘‘coordination of benefits’’ means determining and
coordinating the financial obligations of plan spon-
sors when health care benefits are payable by more
than one such sponsor.
(3) HEALTH INFORMATION.—The term ‘‘health
information’’ means any information that relates to
the past, present, or future physical or mental health
or condition or functional status of an individual,
the provision of health care to an individual, or pay-
ment for the provision of health care to an individ-
ual.
(4) HEALTH
INFORMATION
NETWORK.—The
term ‘‘health information network’’ means the health
information system that is formed through the appli-
cation of the requirements and standards established
under this subtitle.
239
Title V, Subtitle A
(5) HEALTH
INFORMATION
NETWORK
SERV-
ICE.—The term ‘‘health information network serv-
ice’’—
(A) means a private entity or an entity op-
erated by a State that enters into contracts—
(i) to process or facilitate the process-
ing of nonstandard data elements of health
information into standard data elements;
(ii) to provide the means by which
persons are connected to the health infor-
mation network for purposes of meeting
the requirements of this subtitle, including
the holding of standard data elements of
health information;
(iii) to provide authorized access to
health information through the health in-
formation network; or
(iv) to provide specific information
processing services, such as automated co-
ordination of benefits and claims trans-
action routing; and
(B) includes a health information security
organization.
(6) HEALTH INFORMATION SECURITY ORGANI-
ZATION.—The term ‘‘health information security or-
240
Title V, Subtitle A
ganization’’ means a private entity or an entity oper-
ated by a State that accesses standard data elements
of health information through the health information
network, processes such information into non-identi-
fiable health information, and may store such infor-
mation.
(7) HEALTH
PROVIDER.—The term ‘‘health
provider’’ includes a provider of services (as defined
in section 1861(u) of the Social Security Act), a pro-
vider of medical or other health services (as defined
in section 1861(s) of such Act), and any other per-
son (other than a plan sponsor) furnishing health
care items or services.
(8) INDIVIDUALLY IDENTIFIABLE HEALTH IN-
FORMATION.—The term ‘‘individually identifiable
health information’’ means health information in the
health information network—
(A) that identifies an individual who is the
subject of the information; or
(B) with respect to which there is a rea-
sonable basis to believe that the information
can be used to identify such an individual.
(9) NON-IDENTIFIABLE
HEALTH
INFORMA-
TION.—The term ‘‘non-identifiable health informa-
241
Title V, Subtitle A
tion’’ means health information that is not individ-
ually identifiable health information.
(10) PLAN SPONSOR.—The term ‘‘plan spon-
sor’’ means—
(A) a carrier (as defined in section
1903(2)) providing health insurance coverage
(as defined in section 1903(7));
(B) a group health plan;
(C) an association or other entity which es-
tablishes or maintains a multiple employer wel-
fare 
arrangement 
(as 
defined 
in 
section
1903(12)) providing benefits consisting of medi-
cal care described in section 607(1) of the Em-
ployee Retirement Income Security Act of 1974;
and
(D) a State, or the Federal Government,
acting in a capacity as a provider of health ben-
efits to eligible individuals that is equivalent to
that of a carrier.
(11) STANDARD.—The term ‘‘standard’’, when
used with reference to a transaction or to data ele-
ments of health information, means that the trans-
action or data elements meet any standard adopted
by the Secretary under part 1 that applies to the
transaction or data elements.
242
Title V, Subtitle A
PART 1—STANDARDS FOR DATA ELEMENTS AND
TRANSACTIONS
SEC. 5011. GENERAL REQUIREMENTS ON SECRETARY.
(a) IN GENERAL.—The Secretary shall adopt stand-
ards and modifications to standards under this part that
are—
(1) consistent with the objective of reducing the
costs of providing and paying for health care; and
(2) in use and generally accepted, developed, or
modified by the standard-setting organizations ac-
credited by the American National Standard Insti-
tute.
(b) INITIAL STANDARDS.—The Secretary may de-
velop an expedited process for the adoption of initial
standards under this part.
(c) PROTECTION OF COMMERCIAL INFORMATION.—
In adopting standards under this part, the Secretary may
not require disclosure of trade secrets or confidential com-
mercial information by any person.
SEC. 5012. STANDARDS FOR DATA ELEMENTS OF HEALTH
INFORMATION.
(a) IN GENERAL.—The Secretary shall adopt stand-
ards necessary to make uniform and compatible for elec-
tronic transmission through the health information net-
work the data elements of any health information that the
243
Title V, Subtitle A
Secretary determines is appropriate for transmission in
connection with a transaction described in section 5021.
(b) ADDITIONS.—The Secretary may make additions
to any set of data elements adopted under subsection (a)
as the Secretary determines appropriate in a manner that
minimizes the disruption and cost of compliance with such
additions.
(c) CERTAIN DATA ELEMENTS.—
(1) UNIQUE HEALTH IDENTIFIERS.—The Sec-
retary shall establish a system to provide for a
standard unique health identifier for each individual,
employer, plan sponsor, and health provider for use
in the health care system.
(2) CODE SETS.—
(A) IN GENERAL.—The Secretary, in con-
sultation with experts from the private sector
and Federal agencies, shall—
(i) select code sets for appropriate
data elements from among the code sets
that have been developed by private and
public entities; or
(ii) establish code sets for such data
elements if no code sets for the data ele-
ments have been developed.
244
Title V, Subtitle A
(B) DISTRIBUTION.—The Secretary shall
establish efficient and low-cost procedures for
distribution of code sets and modifications to
code sets.
SEC. 5013. INFORMATION TRANSACTION STANDARDS.
(a) IN GENERAL.—The Secretary shall adopt tech-
nical standards that are consistent with the health infor-
mation network privacy standards adopted under section
5014 relating to the method by which standard data ele-
ments of health information may be transmitted electroni-
cally, including standards with respect to the format in
which such data elements may be transmitted.
(b) SPECIAL RULE FOR COORDINATION OF BENE-
FITS.—Any standard adopted by the Secretary under
paragraph (1) that relates to coordination of benefits shall
provide that a claim for reimbursement for health services
furnished shall be tested, by an algorithm specified by the
Secretary, against all records of enrollment and eligibility
for the individual who received such services that are avail-
able to the recipient of the claim through the health infor-
mation network to determine any primary and secondary
obligors for payment.
(c) ELECTRONIC SIGNATURE.—The Secretary, in co-
ordination with the Secretary of Commerce, shall promul-
gate regulations specifying procedures for the electronic
245
Title V, Subtitle A
transmission and authentication of signatures, compliance
with which shall be deemed to satisfy State and Federal
statutory requirements for written signatures with respect
to transactions described in section 5021 and written sig-
natures on health records and prescriptions.
(d) STANDARDS FOR CLAIMS FOR CLINICAL LABORA-
TORY TESTS.—The standards under this section shall pro-
vide that claims for clinical laboratory tests for which ben-
efits are payable by a plan sponsor shall be submitted di-
rectly by the person or entity that performed (or super-
vised the performance of) the tests to the sponsor in a
manner consistent with (and subject to such exceptions
as are provided under) the requirement for direct submis-
sion of such claims under the medicare program.
SEC. 5014. HEALTH INFORMATION NETWORK PRIVACY
STANDARDS.
The Secretary shall adopt standards respecting the
privacy of individually identifiable health information that
is in the health information network. Such standards shall
include standards concerning at least the following:
(1) The rights of an individual who is the sub-
ject of such information.
(2) The procedures to be established for the ex-
ercise of such rights.
246
Title V, Subtitle A
(3) The uses and disclosures of such informa-
tion that are authorized or required.
(4) Safeguards for the security of such informa-
tion and adequate security practices.
SEC. 5015. TIMETABLES FOR ADOPTION OF STANDARDS.
(a) INITIAL STANDARDS FOR DATA ELEMENTS.—
The Secretary shall adopt standards relating to—
(1) the data elements for the information de-
scribed in section 5012(a) not later than 9 months
after the date of the enactment of this Act (except
in the case of standards with respect to data ele-
ments for claims attachments, which shall be adopt-
ed not later than 24 months after the date of the
enactment of this Act); and
(2) any addition to a set of data elements, in
conjunction with making such an addition.
(b) INITIAL PRIVACY STANDARDS.—The Secretary
shall adopt standards relating to the privacy of individ-
ually identifiable health information in the health informa-
tion network under section 5014 not later than 12 months
after the date of the enactment of this Act.
(c) INITIAL STANDARDS FOR INFORMATION TRANS-
ACTIONS.—The Secretary shall adopt standards relating
to information transactions under section 5013 not later
than 18 months after the date of the enactment of this
247
Title V, Subtitle A
Act (except in the case of standards for claims attach-
ments, which shall be adopted not later than 24 months
after the date of the enactment of this Act).
(d) MODIFICATIONS TO STANDARDS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary shall review the standards
adopted under this part and shall adopt modified
standards as determined appropriate, but not more
frequently than once every 6 months. Any modifica-
tion to standards shall be completed in a manner
which minimizes the disruption to, and costs of com-
pliance incurred by, a plan sponsor, health provider,
or health plan purchasing organization that is re-
quired to comply with part 2.
(2) SPECIAL RULES.—
(A) MODIFICATIONS
DURING
FIRST
12-
MONTH PERIOD.—Except with respect to addi-
tions and modifications to code sets under sub-
paragraph (B), the Secretary may not adopt
any modification to a standard adopted under
this part during the 12-month period beginning
on the date the standard is adopted, unless the
Secretary determines that the modification is
necessary in order to permit a plan sponsor, a
248
Title V, Subtitle A
health provider, or a health plan purchasing or-
ganization to comply with part 2.
(B) ADDITIONS
AND
MODIFICATIONS
TO
CODE SETS.—
(i) IN GENERAL.—The Secretary shall
ensure that procedures exist for the rou-
tine maintenance, testing, enhancement,
and expansion of code sets.
(ii) ADDITIONAL
RULES.—If a code
set is modified under this subsection, the
modified code set shall include instructions
on how data elements that were encoded
prior to the modification are to be con-
verted or translated so as to preserve the
value of the data elements. Any modifica-
tion to a code set under this subsection
shall be implemented in a manner that
minimizes the disruption to, and costs of
compliance incurred by, a plan sponsor,
health provider, or health plan purchasing
organization that is required to comply
with part 2.
(e) EVALUATION
OF STANDARDS.—The Secretary
may establish a process to measure or verify the consist-
ency of standards adopted or modified under this part.
249
Title V, Subtitle A
Such process may include demonstration projects and
analyses of the cost of implementing such standards and
modifications.
PART 2—REQUIREMENTS WITH RESPECT TO
CERTAIN TRANSACTIONS AND INFORMATION
SEC. 5021. STANDARD TRANSACTIONS AND INFORMATION.
(a) TRANSACTIONS BY SPONSORS.—
(1) TRANSACTIONS
WITH
PROVIDERS.—If a
plan sponsor conducts any of the transactions de-
scribed in paragraph (3) with a health provider—
(A) the transaction shall be a standard
transaction; and
(B) the health information transmitted by
the sponsor to the provider or by the provider
to the sponsor in connection with the trans-
action shall be in the form of standard data ele-
ments.
(2) TRANSACTIONS WITH SPONSORS.—If a plan
sponsor conducts any of the transactions described
in paragraph (3) with another plan sponsor—
(A) the transaction shall be a standard
transaction; and
(B) the health information transmitted by
either sponsor in connection with the trans-
250
Title V, Subtitle A
action shall be in the form of standard data ele-
ments.
(3) TRANSACTIONS.—The transactions referred
to in paragraphs (1) and (2) are the following:
(A) Verification of eligibility for benefits.
(B) Coordination of benefits.
(C) Claim submission.
(D) Claim attachment submission.
(E) Claim status notification.
(F) Claim status verification.
(G) Claim adjudication.
(H) Payment and remittance advice.
(I) Certification or authorization of a re-
ferral to a health provider who is not part of a
provider network.
(b) USE OF HEALTH INFORMATION NETWORK SERV-
ICES.—A plan sponsor, a health provider, or a health plan
purchasing organization may comply with any provision
of this section by entering into an agreement or other ar-
rangement with a health information network service cer-
tified under section 5031 pursuant to which the service
undertakes the duties applicable to the sponsor, provider,
or organization under the provision.
251
Title V, Subtitle A
SEC. 5022. ACCESSING HEALTH INFORMATION FOR AU-
THORIZED PURPOSES.
(a) PROCUREMENT RULE FOR GOVERNMENT AGEN-
CIES.—
(1) IN GENERAL.—A health information secu-
rity organization that is certified under section 5031
shall make available to a Federal or State agency,
pursuant to a cost-type contract (as defined under
the Federal Acquisition Regulation), any non-identi-
fiable health information, including non-identifiable
health information that is derived from individually
identifiable health information, that—
(A) is held by the service or may be ob-
tained by the service under paragraph (2) or
subsection (b);
(B) consists of data elements that are sub-
ject to a standard under part 1; and
(C) is requested by the agency to fulfill a
requirement under this Act.
(2) CERTAIN INFORMATION AVAILABLE AT LOW
COST.—If a health information security organization
requires health information consisting of data ele-
ments that are subject to a standard under part 1
from a plan sponsor or a health provider in order to
comply with a request made by a Federal or State
agency under paragraph (1), the sponsor or provider
252
Title V, Subtitle A
shall make such information available to such orga-
nization for a charge that does not exceed the rea-
sonable cost of transmitting the information.
(b) PROCUREMENT RULE FOR INFORMATION SECU-
RITY ORGANIZATIONS.—A health information security or-
ganization that makes non-identifiable health information
available to a Federal or State agency under subsection
(a) shall make such non-identifiable information available,
for a charge that does not exceed the reasonable cost of
transmitting the information, to any other health informa-
tion security organization that—
(A) is certified under section 5031; and
(B) requests the information.
SEC. 5023. ENSURING AVAILABILITY OF INFORMATION.
The Secretary shall establish a procedure under
which a plan sponsor or health provider that does not have
the ability to transmit standard data elements directly,
and does not have access to a health information network
service certified under section 5031, may comply with the
provisions of this part.
SEC. 5024. TIMETABLES FOR COMPLIANCE WITH REQUIRE-
MENTS.
(a) INITIAL COMPLIANCE.—
(1) IN GENERAL.—Not later than 12 months
after the date on which standards are adopted under
254
Title V, Subtitle A
adopted, the time determined appropriate by the
Secretary under paragraph (1) may not be—
(A) earlier than the last day of the 90-day
period beginning on the date the modified
standard is adopted; or
(B) later than the last day of the 12-
month period beginning on the date the modi-
fied standard is adopted.
PART 3—MISCELLANEOUS PROVISIONS
SEC. 5031. STANDARDS AND CERTIFICATION FOR HEALTH
INFORMATION NETWORK SERVICES.
(a) STANDARDS
FOR OPERATION.—The Secretary
shall establish standards with respect to the operation of
health information network services, including standards
ensuring that such services—
(1) develop, operate, and cooperate with one an-
other to form the health information network;
(2) meet all of the standards adopted under
part 1 that are applicable to the services;
(3) make public information concerning their
performance, as measured by uniform indicators
such as accessibility, transaction responsiveness, ad-
ministrative efficiency, reliability, dependability, and
any other indicator determined appropriate by the
Secretary; and
255
Title V, Subtitle A
(4) if they are part of a larger organization,
have policies and procedures in place which isolate
their activities with respect to processing informa-
tion in a manner that prevents access to such infor-
mation by such larger organization.
(b) CERTIFICATION BY THE SECRETARY.—
(1) ESTABLISHMENT.—Not later than 18
months after the date of the enactment of this Act,
the Secretary shall establish a certification proce-
dure for health information network services which
ensures that certified services are qualified to meet
the requirements of this subtitle and the standards
established by the Secretary under this section. Such
certification procedure shall be implemented in a
manner that minimizes the costs and delays of oper-
ations for such services.
(2) APPLICATION.—Each entity desiring to be
certified as a health information network service
shall apply to the Secretary for certification in a
form and manner determined appropriate by the
Secretary.
(3) AUDITS AND REPORTS.—The procedure es-
tablished under paragraph (1) shall provide for au-
dits by the Secretary and reports by an entity cer-
tified under this section as the Secretary determines
256
Title V, Subtitle A
appropriate in order to monitor such entity’s compli-
ance with the requirements of this subtitle and the
standards established by the Secretary under this
section.
(4) RECERTIFICATION.—A health information
network service shall be recertified under this sub-
section at least every 3 years.
(c) LOSS OF CERTIFICATION.—
(1) MANDATORY
TERMINATION.—Except as
provided in paragraph (2), if a health information
network service violates a health information net-
work privacy standard adopted under section 5014
that is applicable to the service, its certification
under this section shall be terminated unless the
Secretary determines that appropriate corrective ac-
tion has been taken.
(2) CONDITIONAL
CERTIFICATION—The Sec-
retary may establish a procedure under which a
health information network service may remain cer-
tified on a conditional basis if the service is operat-
ing consistently with a plan intended to correct any
violations described in paragraph (1). Such proce-
dure may provide for the appointment of a trustee
to continue operation of the service until the require-
ments for full certification are met.
257
Title V, Subtitle A
(d) CERTIFICATION
BY PRIVATE ENTITIES.—The
Secretary may designate private entities to conduct the
certification procedures established by the Secretary under
this section. A health information network service certified
by such an entity in accordance with such designation
shall be considered to be certified by the Secretary.
(e) INFORMATION HELD BY HEALTH INFORMATION
NETWORK SERVICES.—If a health information network
service certified under this section loses its certified status
or takes any action that would threaten the continued
availability of the standard data elements of health infor-
mation held by such service, such data elements shall be
transferred to another health information network service
certified under this section that has been designated by
the Secretary.
SEC. 5032. IMPOSITION OF ADDITIONAL REQUIREMENTS.
(a) IN GENERAL.—Except as provided in subsection
(c), after the Secretary has established standards under
section 5012 that are necessary to make uniform and com-
patible for electronic transmission the data elements that
the Secretary determines are appropriate for transmission
in connection with a transaction described in part 2, an
individual or entity may not require an individual or en-
tity, to provide in any manner any additional data element
in connection with—
258
Title V, Subtitle A
(1) the transaction; or
(2) an inquiry with respect to the transaction.
(b) TRANSMISSION METHOD.—Except as provided in
subsection (c), after the Secretary has established stand-
ards under section 5013 relating to the method by which
data elements that the Secretary determines are appro-
priate for transmission in connection with a transaction
described in part 2 may be transmitted electronically, an
individual or entity may not require an individual or entity
to transmit any data element in a manner inconsistent
with the standards in connection with—
(1) the transaction; or
(2) an inquiry with respect to the transaction.
(c) EXCEPTION.—Subsections (a) and (b) do not
apply if—
(1) an individual or entity voluntarily agrees to
provide the additional data element; or
(2) a waiver is granted under subsection (d) to
permit the requirement to be imposed.
(d) CONDITIONS FOR WAIVERS.—
(1) IN GENERAL.—An individual or entity may
request a waiver from the Secretary in order to im-
pose on an individual or entity a requirement other-
wise prohibited under subsection (a) or (b). Subject
259
Title V, Subtitle A
to paragraph (2), the Secretary may grant such a
waiver.
(2) CONSIDERATION OF WAIVER REQUESTS.—A
waiver may not be granted under this subsection to
impose an otherwise prohibited requirement unless
the Secretary determines that the value of any addi-
tional information to be provided under the require-
ment for research or other purposes significantly
outweighs the administrative cost of the imposition
of the requirement, taking into account the burden
of the timing of the imposition of the requirement.
(e) ANONYMOUS REPORTING.—If an individual or en-
tity attempts to impose on an individual or entity a re-
quirement prohibited under subsection (a) or (b), the indi-
vidual or entity on whom the requirement is being imposed
may contact the Secretary. The Secretary shall develop a
procedure under which an individual or entity that con-
tacts the Secretary under the preceding sentence shall re-
main anonymous. The Secretary shall notify the individual
or entity imposing the requirement that the requirement
may not be imposed unless the other individual or entity
voluntarily agrees to such requirement or a waiver is ob-
tained under subsection (d).
260
Title V, Subtitle A
SEC. 5033. EFFECT ON STATE LAW.
(a) IN GENERAL.—Except as otherwise provided in
this section, a provision, requirement, or standard under
this subtitle shall supersede any contrary provision of
State law.
(b) STATE ‘‘QUILL AND PEN’’ LAWS.—A State may
not establish, continue in effect, or enforce any provision
of State law that requires medical or health plan records
(including billing information) to be maintained or trans-
mitted in written rather than electronic form, except
where the Secretary determines that the provision is nec-
essary to prevent fraud and abuse, with respect to con-
trolled substances, or for other purposes.
(c) PUBLIC HEALTH REPORTING.—Nothing in this
subtitle shall be construed to invalidate or limit the au-
thority, power, or procedures established under any law
providing for the reporting of disease or injury, child
abuse, birth, or death, public health surveillance, or public
health investigation or intervention.
(d) PUBLIC USE FUNCTIONS.—Nothing in this sub-
title shall be construed to limit the authority of a Federal
or State agency to make non-identifiable health informa-
tion available for public use.
(e) PAYMENT FOR HEALTH CARE SERVICES OR PRE-
MIUMS.—Nothing in this subtitle shall be construed to
prohibit a consumer from paying for health care items or
261
Title V, Subtitle B
services, or plan or health insurance coverage premiums,
by debit, credit, or other payment cards or numbers or
other electronic payment means.
Subtitle B—Antitrust
SEC. 5101. PUBLICATION OF ANTITRUST GUIDELINES ON
ACTIVITIES OF HEALTH PLANS.
(a) IN GENERAL.—The Attorney General shall pro-
vide for the development and publication of explicit guide-
lines on the application of antitrust laws to the activities
of health plans. The guidelines shall be designed to facili-
tate development and operation of plans, consistent with
the antitrust laws.
(b) REVIEW PROCESS.—The Attorney General shall
establish a review process under which the administrator
or sponsor of a health plan (or organization that proposes
to administer or sponsor a health plan) may submit a re-
quest to the Attorney General to obtain a prompt opinion
(but in no event later than 90 days after the Attorney
General receives the request) from the Department of Jus-
tice on the plan’s conformity with the Federal antitrust
laws.
(c) DEFINITIONS.—In this section—
(1) the term ‘‘antitrust laws’’—
(A) has the meaning given it in subsection
(a) of the first section of the Clayton Act (15
262
Title V, Subtitle B
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); and
(2) the term ‘‘health plan’’ means any contract
or arrangement under which an entity bears all or
part of the cost of providing health care items and
services, including a hospital or medical expense in-
curred policy or certificate, hospital or medical serv-
ice plan contract, or health maintenance subscriber
contract, but does not include—
(A) coverage only for accident, dental, vi-
sion, disability, or long term care, medicare
supplemental health insurance, or any combina-
tion thereof,
(B) coverage issued as a supplement to li-
ability insurance,
(C) workers’ compensation or similar in-
surance, or
(D) automobile medical-payment insur-
ance.
263
Title V, Subtitle B
SEC. 5102. ISSUANCE OF HEALTH CARE CERTIFICATES OF
PUBLIC ADVANTAGE.
(a) ISSUANCE AND EFFECT OF CERTIFICATE.—The
Attorney General, after consultation with the Secretary,
shall issue in accordance with this section a certificate of
public advantage to each eligible health care collaborative
activity that complies with the requirements in effect
under this section on or after the expiration of the 1-year
period that begins on the date of the enactment of this
Act (without regard to whether or not the Attorney Gen-
eral has promulgated regulations to carry out this section
by such date). Such activity, and the parties to such activ-
ity, shall not be liable under any of the antitrust laws for
conduct described in such certificate and engaged in by
such activity if such conduct occurs while such certificate
is in effect.
(b) REQUIREMENTS APPLICABLE TO ISSUANCE OF
CERTIFICATES.—
(1) STANDARDS
TO
BE
MET.—The Attorney
General shall issue a certificate to an eligible health
care collaborative activity if the Attorney General
finds that—
(A) the benefits that are likely to result
from carrying out the activity outweigh the re-
duction in competition (if any) that is likely to
result from the activity, and
264
Title V, Subtitle B
(B) such reduction in competition is nec-
essary to obtain such benefits.
(2) FACTORS TO BE CONSIDERED.—
(A) WEIGHING OF BENEFITS AGAINST RE-
DUCTION
IN
COMPETITION.—For purposes of
making the finding described in paragraph
(1)(A), the Attorney General shall consider
whether the activity is likely—
(i) to maintain or to increase the
quality of health care by providing new
services not currently offered in the rel-
evant market,
(ii) to increase access to health care,
(iii) to achieve cost efficiencies that
will be passed on to health care consumers,
such as economies of scale, reduced trans-
action costs, and reduced administrative
costs, that cannot be achieved by the provi-
sion of available services and facilities in
the relevant market,
(iv) to preserve the operation of
health care facilities located in underserved
geographical areas,
(v) to improve utilization of health
care resources, and
265
Title V, Subtitle B
(vi) to reduce inefficient health care
resource duplication.
(B) NECESSITY OF REDUCTION IN COM-
PETITION.—For purposes of making the finding
described in paragraph (1)(B), the Attorney
General shall consider—
(i) the ability of the providers of
health care services that are (or likely to
be) affected by the health care collabo-
rative activity and the entities responsible
for making payments to such providers to
negotiate societally optimal payment and
service arrangements,
(ii) the effects of the health care col-
laborative activity on premiums and other
charges imposed by the entities described
in clause (i), and
(iii) the availability of equally effi-
cient, less restrictive alternatives to achieve
the benefits that are intended to be
achieved by carrying out the activity.
(c) ESTABLISHMENT
OF CRITERIA
AND PROCE-
DURES.—Subject to subsections (d) and (e), not later than
1 year after the date of the enactment of this Act, the
Attorney General and the Secretary shall establish jointly
266
Title V, Subtitle B
by rule the criteria and procedures applicable to the issu-
ance of certificates under subsection (a). The rules shall
specify the form and content of the application to be sub-
mitted to the Attorney General to request a certificate,
the information required to be submitted in support of
such application, the procedures applicable to denying and
to revoking a certificate, and the procedures applicable to
the administrative appeal (if such appeal is authorized by
rule) of the denial and the revocation of a certificate. Such
information may include the terms of the health care col-
laborative activity (in the case of an activity in existence
as of the time of the application) and implementation plan
for the collaborative activity.
(d) ELIGIBLE HEALTH CARE COLLABORATIVE AC-
TIVITY.—To be an eligible health care collaborative activ-
ity for purposes of this section, a health care collaborative
activity shall submit to the Attorney General an applica-
tion that complies with the rules in effect under subsection
(c) and that includes—
(1) an agreement by the parties to the activity
that the activity will not foreclose competition by en-
tering into contracts that prevent health care provid-
ers from providing health care in competition with
the activity,