viders of health services, and of individuals (who shall con-
stitute a majority of the Council) who are representative 
of consumers of such services, including a balanced rep-
resentation of employers, unions, consumer organizations, 
and population groups with special health care needs. To 
the greatest extent feasible, the membership of the Council 
shall represent the various geographic regions of the 
United States and shall reflect the racial, ethnic, and gen-
der composition of the population of the United States. 
(c) TERMS OF MEMBERS.—Each appointed member 
shall hold office for a term of 4 years, except that— 
(1) any member appointed to fill a vacancy oc-
curring during the term for which the member’s 
predecessor was appointed shall be appointed for the 
remainder of that term; and 
(2) the terms of the members first taking office 
shall expire, as designated by the Board at the time 
of appointment, 5 at the end of the first year, 5 at 
the end of the second year, 5 at the end of the third 
year, and 5 at the end of the fourth year after the 
date of enactment of this Act. 
(d) VACANCIES.— 
(1) IN GENERAL.—The Board shall fill any va-
cancy in the membership of the Council in the same 
manner as the original appointment. The vacancy 
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shall not affect the power of the remaining members 
to execute the duties of the Council. 
(2) VACANCY
APPOINTMENTS.—Any member 
appointed to fill a vacancy shall serve for the re-
mainder of the term for which the predecessor of the 
member was appointed. 
(3) REAPPOINTMENT.—The Board may re-
appoint an appointed member of the Council for a 
second term in the same manner as the original ap-
pointment. 
(e) QUALIFICATIONS.— 
(1) PUBLIC
HEALTH
REPRESENTATIVES.— 
Members of the Council who are representative of 
State health security programs and public health 
professionals shall be individuals who have extensive 
experience in the financing and delivery of care 
under public health programs. 
(2) PROVIDERS.—Members of the Council who 
are representative of providers of health care shall 
be individuals who are outstanding in fields related 
to medical, hospital, or other health activities, or 
who are representative of organizations or associa-
tions of professional health practitioners. 
(3) CONSUMERS.—Members who are represent-
ative of consumers of such care shall be individuals, 
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not engaged in and having no financial interest in 
the furnishing of health services, who are familiar 
with the needs of various segments of the population 
for personal health services and are experienced in 
dealing with problems associated with the consump-
tion of such services. 
(f) DUTIES.— 
(1) IN GENERAL.—It shall be the duty of the 
Council— 
(A) to advise the Board on matters of gen-
eral policy in the administration of this Act, in 
the formulation of regulations, and in the per-
formance of the Board’s duties under section 
401; and 
(B) to study the operation of this Act and 
the utilization of health services under it, with 
a view to recommending any changes in the ad-
ministration of the Act or in its provisions 
which may appear desirable. 
(2) REPORT.—The Council shall make an an-
nual report to the Board on the performance of its 
functions, including any recommendations it may 
have with respect thereto, and the Board shall 
promptly transmit the report to the Congress, to-
gether with a report by the Board on any rec-
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ommendations of the Council that have not been fol-
lowed. 
(g) STAFF.—The Council, its members, and any com-
mittees of the Council shall be provided with such secre-
tarial, clerical, or other assistance as may be authorized 
by the Board for carrying out their respective functions. 
(h) MEETINGS.—The Council shall meet as fre-
quently as the Board deems necessary, but not less than 
4 times each year. Upon request by 7 or more members 
it shall be the duty of the Chair to call a meeting of the 
Council. 
(i) COMPENSATION.—Members of the Council shall 
be reimbursed by the Board for travel and per diem in 
lieu of subsistence expenses during the performance of du-
ties of the Board in accordance with subchapter I of chap-
ter 57 of title 5, United States Code. 
(j) FACA NOT APPLICABLE.—The provisions of the 
Federal Advisory Committee Act shall not apply to the 
Council. 
SEC. 403. CONSULTATION WITH PRIVATE ENTITIES. 
The Secretary and the Board shall consult with pri-
vate entities, such as professional societies, national asso-
ciations, nationally recognized associations of experts, 
medical schools and academic health centers, consumer 
groups, and labor and business organizations in the for-
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mulation of guidelines, regulations, policy initiatives, and 
information gathering to assure the broadest and most in-
formed input in the administration of this Act. Nothing 
in this Act shall prevent the Secretary from adopting 
guidelines developed by such a private entity if, in the Sec-
retary’s and Board’s judgment, such guidelines are gen-
erally accepted as reasonable and prudent and consistent 
with this Act. 
SEC. 404. STATE HEALTH SECURITY PROGRAMS. 
(a) SUBMISSION OF PLANS.— 
(1) IN GENERAL.—Each State shall submit to 
the Board a plan for a State health security pro-
gram for providing for health care services to the 
residents of the State in accordance with this Act. 
(2) REGIONAL PROGRAMS.—A State may join 
with 1 or more neighboring States to submit to the 
Board a plan for a regional health security program 
instead of separate State health security programs. 
(3) REGIONAL
PLANNING
MECHANISMS.—The 
Board shall provide incentives for States to develop 
regional planning mechanisms to promote the ration-
al distribution of, adequate access to, and efficient 
use of, tertiary care facilities, equipment, and serv-
ices. 
(b) REVIEW AND APPROVAL OF PLANS.— 
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(1) IN
GENERAL.—The Board shall review 
plans submitted under subsection (a) and determine 
whether such plans meet the requirements for ap-
proval. The Board shall not approve such a plan un-
less it finds that the plan (or State law) provides, 
consistent with the provisions of this Act, for the fol-
lowing: 
(A) Payment for required health services 
for eligible individuals in the State in accord-
ance with this Act. 
(B) Adequate administration, including the 
designation of a single State agency responsible 
for the administration (or supervision of the ad-
ministration) of the program. 
(C) The establishment of a State health se-
curity budget. 
(D) Establishment of payment methodolo-
gies (consistent with subtitle B of title VII). 
(E) Assurances that individuals have the 
freedom to choose practitioners and other 
health care providers for services covered under 
this Act. 
(F) A procedure for carrying out long-term 
regional management and planning functions 
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with respect to the delivery and distribution of 
health care services that— 
(i) ensures participation of consumers 
of health services and providers of health 
services; and 
(ii) gives priority to the most acute 
shortages and maldistributions of health 
personnel and facilities and the most seri-
ous deficiencies in the delivery of covered 
services and to the means for the speedy 
alleviation of these shortcomings. 
(G) The licensure and regulation of all 
health providers and facilities to ensure compli-
ance with Federal and State laws and to pro-
mote quality of care. 
(H) Establishment of a quality review sys-
tem in accordance with section 503. 
(I) Establishment of an independent om-
budsman for consumers to register complaints 
about the organization and administration of 
the State health security program and to help 
resolve complaints and disputes between con-
sumers and providers. 
(J) Publication of an annual report on the 
operation of the State health security program, 
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which report shall include information on cost, 
progress towards achieving full enrollment, pub-
lic access to health services, quality review, 
health outcomes, health professional training, 
and the needs of medically underserved popu-
lations. 
(K) Provision of a fraud and abuse preven-
tion and control unit that the Inspector General 
determines meets the requirements of section 
412(a). 
(L) Prohibit payment in cases of prohib-
ited physician referrals under section 304. 
(2) CONSEQUENCES OF FAILURE TO COMPLY.— 
If the Board finds that a State plan submitted 
under paragraph (1) does not meet the requirements 
for approval under this section or that a State 
health security program or specific portion of such 
program, the plan for which was previously ap-
proved, no longer meets such requirements, the 
Board shall provide notice to the State of such fail-
ure and that unless corrective action is taken within 
a period specified by the Board, the Board shall 
place the State health security program (or specific 
portions of such program) in receivership under the 
jurisdiction of the Board. 
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(c) STATE HEALTH SECURITY ADVISORY COUN-
CILS.— 
(1) IN GENERAL.—For each State, the Gov-
ernor shall provide for appointment of a State 
Health Security Advisory Council to advise and 
make recommendations to the Governor and State 
with respect to the implementation of the State 
health security program in the State. 
(2) MEMBERSHIP.—Each State Health Security 
Advisory Council shall be composed of at least 11 in-
dividuals. The appointed members shall include indi-
viduals who are representative of the State health 
security program, public health professionals, pro-
viders of health services, and of individuals (who 
shall constitute a majority) who are representative of 
consumers of such services, including a balanced 
representation of employers, unions and consumer 
organizations. To the greatest extent feasible, the 
membership of each State Health Security Advisory 
Council shall represent the various geographic re-
gions of the State and shall reflect the racial, ethnic, 
and gender composition of the population of the 
State. 
(3) DUTIES.— 
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(A) IN GENERAL.—Each State Health Se-
curity Advisory Council shall review, and sub-
mit comments to the Governor concerning the 
implementation of the State health security pro-
gram in the State. 
(B) ASSISTANCE.—Each State Health Se-
curity Advisory Council shall provide assistance 
and technical support to community organiza-
tions and public and private non-profit agencies 
submitting applications for funding under ap-
propriate State and Federal public health pro-
grams, with particular emphasis placed on as-
sisting those applicants with broad consumer 
representation. 
(d) STATE USE OF FISCAL AGENTS.— 
(1) IN GENERAL.—Each State health security 
program, using competitive bidding procedures, may 
enter into such contracts with qualified entities, such 
as voluntary associations, as the State determines to 
be appropriate to process claims and to perform 
other related functions of fiscal agents under the 
State health security program. 
(2) RESTRICTION.—Except as the Board may 
provide for good cause shown, in no case may more 
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than 1 contract described in paragraph (1) be en-
tered into under a State health security program. 
SEC. 
405. 
COMPLEMENTARY 
CONDUCT 
OF 
RELATED 
HEALTH PROGRAMS. 
In performing functions with respect to health per-
sonnel education and training, health research, environ-
mental health, disability insurance, vocational rehabilita-
tion, the regulation of food and drugs, and all other mat-
ters pertaining to health, the Secretary of Health and 
Human Services shall direct all activities of the Depart-
ment of Health and Human Services toward contributions 
to the health of the people complementary to this Act. 
Subtitle B—Control Over Fraud 
and Abuse 
SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL 
FRAUD 
AND 
ABUSE 
UNDER 
AMERICAN 
HEALTH SECURITY PROGRAM. 
The following sections of the Social Security Act shall 
apply to State health security programs in the same man-
ner as they apply to State medical assistance plans under 
title XIX of such Act (except that in applying such provi-
sions any reference to the Secretary is deemed a reference 
to the Board): 
(1) Section 1128 (relating to exclusion of indi-
viduals and entities). 
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(2) Section 1128A (civil monetary penalties). 
(3) Section 1128B (criminal penalties). 
(4) Section 1124 (relating to disclosure of own-
ership and related information). 
(5) Section 1126 (relating to disclosure of cer-
tain owners). 
SEC. 412. REQUIREMENTS FOR OPERATION OF STATE 
HEALTH CARE FRAUD AND ABUSE CONTROL 
UNITS. 
(a) REQUIREMENT.—In order to meet the require-
ment of section 404(b)(1)(K), each State health security 
program must establish and maintain a health care fraud 
and abuse control unit (in this section referred to as a 
‘‘fraud unit’’) that meets requirements of this section and 
other requirements of the Board. Such a unit may be a 
State medicaid fraud control unit (described in section 
1903(q) of the Social Security Act). 
(b) STRUCTURE OF UNIT.—The fraud unit must— 
(1) be a single identifiable entity of the State 
government; 
(2) be separate and distinct from the State 
agency with principal responsibility for the adminis-
tration of the State health security program; and 
(3) meet 1 of the following requirements: 
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(A) It must be a unit of the office of the 
State Attorney General or of another depart-
ment of State government which possesses 
statewide authority to prosecute individuals for 
criminal violations. 
(B) If it is in a State the constitution of 
which does not provide for the criminal prosecu-
tion of individuals by a statewide authority and 
has formal procedures, approved by the Board, 
that— 
(i) assure its referral of suspected 
criminal violations relating to the State 
health insurance plan to the appropriate 
authority or authorities in the States for 
prosecution; and 
(ii) assure its assistance of, and co-
ordination with, such authority or authori-
ties in such prosecutions. 
(C) It must have a formal working rela-
tionship with the office of the State Attorney 
General and have formal procedures (including 
procedures for its referral of suspected criminal 
violations to such office) which are approved by 
the Board and which provide effective coordina-
tion of activities between the fraud unit and 
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such office with respect to the detection, inves-
tigation, and prosecution of suspected criminal 
violations relating to the State health insurance 
plan. 
(c) FUNCTIONS.—The fraud unit must— 
(1) have the function of conducting a statewide 
program for the investigation and prosecution of vio-
lations of all applicable State laws regarding any 
and all aspects of fraud in connection with any as-
pect of the provision of health care services and ac-
tivities of providers of such services under the State 
health security program; 
(2) have procedures for reviewing complaints of 
the abuse and neglect of patients of providers and 
facilities that receive payments under the State 
health security program, and, where appropriate, for 
acting upon such complaints under the criminal laws 
of the State or for referring them to other State 
agencies for action; and 
(3) provide for the collection, or referral for col-
lection to a single State agency, of overpayments 
that are made under the State health security pro-
gram to providers and that are discovered by the 
fraud unit in carrying out its activities. 
(d) RESOURCES.—The fraud unit must— 
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(1) employ such auditors, attorneys, investiga-
tors, and other necessary personnel; 
(2) be organized in such a manner; and 
(3) provide sufficient resources (as specified by 
the Board), 
as is necessary to promote the effective and efficient con-
duct of the unit’s activities. 
(e) COOPERATIVE AGREEMENTS.—The fraud unit 
must have cooperative agreements (as specified by the 
Board) with— 
(1) similar fraud units in other States; 
(2) the Inspector General; and 
(3) the Attorney General of the United States. 
(f) REPORTS.—The fraud unit must submit to the 
Inspector General an application and annual reports con-
taining such information as the Inspector General deter-
mines to be necessary to determine whether the unit meets 
the previous requirements of this section. 
TITLE V—QUALITY ASSESSMENT 
SEC. 501. AMERICAN HEALTH SECURITY QUALITY COUNCIL. 
(a) ESTABLISHMENT.—There is hereby established 
an American Health Security Quality Council (in this title 
referred to as the ‘‘Council’’). 
(b) DUTIES OF THE COUNCIL.—The Council shall 
perform the following duties: 
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(1) PRACTICE GUIDELINES.—The Council shall 
review and evaluate each practice guideline devel-
oped under part B of title IX of the Public Health 
Service Act. The Council shall determine whether 
the guideline should be recognized as a national 
practice guideline to be used under section 204(d) 
for purposes of determining payments under a State 
health security program. 
(2) STANDARDS
OF
QUALITY, PERFORMANCE 
MEASURES, AND MEDICAL REVIEW CRITERIA.—The 
Council shall review and evaluate each standard of 
quality, performance measure, and medical review 
criterion developed under part B of title IX of the 
Public Health Service Act. The Council shall deter-
mine whether the standard, measure, or criterion is 
appropriate for use in assessing or reviewing the 
quality of services provided by State health security 
programs, health care institutions, or health care 
professionals. 
(3) CRITERIA
FOR
ENTITIES
CONDUCTING 
QUALITY REVIEWS.—The Council shall develop min-
imum criteria for competence for entities that can 
qualify to conduct ongoing and continuous external 
quality review for State quality review programs 
under section 503. Such criteria shall require such 
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