258
under this part) as to whether or not such an
individual has met the prescription drug de-
ductible 
established 
under 
section
1834(e)(1)(A) for a year; and
‘‘(K) will enter into such contracts with organi-
zations described in subsection (f)(3) as the Sec-
retary determines may be necessary to implement
and operate (and for related functions with respect
to) the electronic system established under sub-
section (o)(4) for covered outpatient drugs under
this part;’’.
(3) SPECIAL CONTRACT PROVISIONS FOR ELEC-
TRONIC CLAIMS SYSTEM.—
(A) PAYMENT
ON
OTHER
THAN
A
COST
BASIS.—Section 1842(c)(1)(A) of such Act (42
U.S.C. 1395u(c)(1)(A)) is amended—
(i) 
by 
inserting 
‘‘(i)’’ 
after
‘‘(c)(1)(A)’’;
(ii) in the first sentence, by inserting
‘‘, except as provided in clause (ii),’’ after
‘‘under this part, and’’; and
(iii) by adding at the end the follow-
ing new clause:
‘‘(ii) To the extent that a contract under this section
provides for implementation and operation (and related
259
functions) of the electronic system established under sub-
section (o)(4) for covered outpatient drugs, the Secretary
may provide for payment for such activities based on any
method of payment determined by the Secretary to be ap-
propriate.’’.
(B) APPLICATION
OF
DIFFERENT
PER-
FORMANCE
STANDARDS.—The Secretary of
Health and Human Services, before entering
into contracts under section 1842 of the Social
Security Act with respect to the implementation
and operation (and related functions) of the
electronic system for covered outpatient drugs,
shall establish standards with respect to per-
formance with respect to such activities. The
provisions of section 1153(e)(2) and paragraphs
(1) and (2) of section 1153(h) of such Act shall
apply to such activities in the same manner as
they apply to contracts with peer review organi-
zations, instead of the requirements of the last
2 sentences of section 1842(b)(2) of such Act.
(C) USE OF REGIONAL CARRIERS.—Section
1842(b)(2)(A) 
of 
such 
Act 
(42 
U.S.C.
1395u(b)(2)(A)) is amended by adding at the
end the following new sentence: ‘‘With respect
to activities relating to implementation and op-
260
eration (and related functions) of the electronic
system established under subsection (o)(4), the
Secretary may enter into contracts with carriers
under this section to perform such activities on
a regional basis.’’.
(4) DELAY IN APPLICATION OF COORDINATED
BENEFITS WITH MEDIGAP.—The provisions of sub-
paragraph (B) of section 1842(h)(3) of the Social
Security Act shall not apply to covered outpatient
drugs (other than drugs described in section
1861(s)(2)(J) of such Act as of the date of the en-
actment of this Act) dispensed before January 1,
1999.
(5) BATCH PROMPT PROCESSING OF CLAIMS.—
Section 1842(c) (42 U.S.C. 1395u(c)) is amended—
(A) in paragraphs (2)(A) and (3)(A), by
striking ‘‘Each’’ and inserting ‘‘Except as pro-
vided in paragraph (3), each’’;
(B) by adding at the end the following new
paragraph:
‘‘(4)(A) Each contract under this section which pro-
vides for the disbursement of funds, as described in sub-
section (a)(1)(B), with respect to claims for payment for
covered outpatient drugs shall provide for a payment cycle
under which each carrier will, on a monthly basis, make
261
a payment with respect to all claims which were received
and approved for payment in the period since the most
recent date on which such a payment was made with re-
spect to the participating pharmacy or individual submit-
ting the claim.
‘‘(B) If payment is not issued, mailed, or otherwise
transmitted within 5 days of when such a payment is re-
quired to be made under subparagraph (A), interest shall
be paid at the rate used for purposes of section 3902(a)
of title 31, United States Code (relating to interest pen-
alties for failure to make prompt payments) for the period
beginning on the day after such 5-day period and ending
on the date on which payment is made.’’.
(f) MODIFICATION OF HMO/CMP CONTRACTS.—
(1) SEPARATE
ACTUARIAL
DETERMINATION
FOR COVERED OUTPATIENT DRUG BENEFIT.—Sec-
tion 
1876(e)(1) 
of 
such 
Act 
(42 
U.S.C.
1395mm(e)(1)) is amended by adding at the end
thereof the following new sentence: ‘‘The preceding
sentence shall be applied separately with respect to
covered outpatient drugs.’’.
(2) ADDITIONAL OPTIONAL BENEFITS.—Section
1876(g)(3)(A) 
of 
such 
Act 
(42 
U.S.C.
1395mm(g)(3)(A)) is amended by striking ‘‘rate’’
and inserting ‘‘rates’’.
262
(g) CONFORMING AMENDMENTS.—
(1) The first sentence of section 1866(a)(2)(A)
(42 U.S.C. 1395cc(a)(2)(A)) is amended—
(A) 
by 
inserting 
‘‘1834(e),’’ 
after
‘‘1833(b),’’; and
(B) by inserting ‘‘and in the case of cov-
ered outpatient drugs, applicable coinsurance
percent (specified in section 1834(e)(2)(C)) of
the lesser of the actual charges for the drugs or
the payment limit (established under section
1834(e)(3))’’ after ‘‘established by the Sec-
retary’’.
(2) Section 1903(i)(5) (42 U.S.C. 1396b(i)(5))
is amended by striking ‘‘section 1862(c)’’ and insert-
ing ‘‘section 1862(c)(1)’’.
(h) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to items dispensed on or
after July 1, 1997.
(2) CARRIERS.—The amendments made by sub-
section (e) shall take effect on the date of the enact-
ment of this Act; except that the amendments made
by subsection (e)(5) shall take effect on January 1,
263
1998, but shall not be construed as requiring pay-
ment before February 1, 1998.
(3) HMO/CMP ENROLLMENTS.—The amend-
ment made by subsection (f) shall apply to enroll-
ments effected on or after January 1, 1997.
SEC. 422. ESTABLISHMENT OF PRESCRIPTION DRUG PAY-
MENT REVIEW COMMISSION.
Part B of title XVIII of the Social Security Act is
amended by inserting after section 1846 the following new
section:
‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION
‘‘SEC. 1847. (a)(1) The Director of the Congressional
Office of Technology Assessment (in this section referred
to as the ‘Director’ and the ‘Office’, respectively) shall
provide for the appointment of a Prescription Drug Pay-
ment Review Commission (in this section referred to as
the ‘Commission’), to be composed of individuals with ex-
pertise in the provision and financing of covered out-
patient drugs appointed by the Director (without regard
to the provisions of title 5, United States Code, governing
appointments in the competitive service).
‘‘(2) The Commission shall consist of 11 individuals.
Members of the Commission shall first be appointed by
no later than January 1, 1996, for a term of 3 years, ex-
cept that the Director may provide initially for such short-
264
er terms as will insure that (on a continuing basis) the
terms of no more than 4 members expire in any one year.
‘‘(3) The membership of the Commission shall in-
clude recognized experts in the fields of health care eco-
nomics, medicine, pharmacology, pharmacy, and prescrip-
tion drug reimbursement, as well as at least one individual
who is a medicare beneficiary.
‘‘(b)(1) The Commission shall submit to Congress an
annual report no later than May 1 of each year, beginning
with 1997, concerning methods of determining payment
for covered outpatient drugs under this part.
‘‘(2) Such report, in 1998 and thereafter, shall in-
clude, with respect to the previous year, information on—
‘‘(A) increases in manufacturers’ prices for cov-
ered outpatient drugs and in charges of pharmacists
for covered outpatient drugs,
‘‘(B) the level of utilization of covered out-
patient drugs by medicare beneficiaries, and
‘‘(C) administrative costs relating to covered
outpatient drugs.
‘‘(3) The report submitted in 1998 shall include the
Commissions’s recommendations regarding the feasibility
and desirability of establishing coverage rules for covered
outpatient drugs under which the Secretary may exclude
from coverage or deny payment—
265
‘‘(A) for specific covered outpatient drugs, or a
specific class of covered outpatient drug; or
‘‘(B) for the specific use of such a drug for a
specific indication (in addition to exclusions pursu-
ant to section 1862(a)(1) based on a finding by the
Secretary that such use is not safe or is not effec-
tive).
‘‘(c) Section 1845(c)(1) shall apply to the Commis-
sion in the same manner as it applies to the Physician
Payment Review Commission.
‘‘(d) There are authorized to be appropriated such
sums as may be necessary to carry out the provisions of
this section. Such sums shall be payable from the Federal
Supplementary Medical Insurance Trust Fund.’’.
SEC. 423. COVERAGE OF PRESCRIPTION DRUGS FOR QUALI-
FIED MEDICARE BENEFICIARIES AND QUALI-
FIED DISABLED AND WORKING INDIVIDUALS.
(a) IN GENERAL.—Section 1902(a)(10)(E) of the So-
cial Security Act (42 U.S.C. 1396a(a)(10)(E)) is amend-
ed—
(1) by striking the semicolon at the end of
clause (i) and inserting a comma;
(2) by striking ‘‘; and’’ at the end of clause (ii)
and inserting a comma;
266
(3) by striking the semicolon at the end of
clause (iii) and inserting ‘‘, and’’; and
(4) by adding at the end the following new
clause:
‘‘(iv) for making available prescribed drugs
for qualified medicare beneficiaries described in
section 1905(p)(1), qualified disabled and work-
ing individuals described in section 1905(s),
and individuals described in clause (iii);’’.
(b) FULL
FEDERAL
PAYMENT
FOR
INCREASED
COSTS.—Section 1903(w)(2) of such Act, as added by sec-
tion 403, is amended—
(1) in subparagraph (D), by striking ‘‘(C)’’ and
inserting ‘‘(D)’’;
(2) by redesignating subparagraph (D) as sub-
paragraph (E); and
(3) by inserting after subparagraph (C) the fol-
lowing new subparagraph:
‘‘(D) The amount of expenditures for medical
assistance attributable to individuals with respect to
whom the State plan would not be required to pro-
vide such assistance but for the amendments made
by section 423(a) of the Health Care Cost Contain-
ment and Reform Act of 1993.’’.
267
(c) 
CONFORMING
AMENDMENT.—Section
1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)) is
amended in clause (VIII) of the matter following subpara-
graph (E) by striking ‘‘1905(p)(3),’’ and inserting
‘‘1905(p)(3) and for prescribed drugs,’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar quarters beginning on
or after January 1, 1996, without regard to whether or
not regulations to implement such amendments are pro-
mulgated by such date.
PART 3—QUALIFIED MEDICARE BENEFICIARY
ENROLLMENT
SEC. 431. QUALIFIED MEDICARE BENEFICIARY ENROLL-
MENT.
(a) ENROLLMENT.—The Secretary of Health and
Human Services shall establish and implement a method
for obtaining information from newly eligible medicare
beneficiaries that may be used (beginning with fiscal year
1997) to determine whether such beneficiaries may be eli-
gible for medical assistance for medicare cost-sharing
under State medicaid plans as qualified medicare bene-
ficiaries, and for transmitting such information to the
State in which such a beneficiary resides. If, under such
method, the Secretary determines that an individual is eli-
gible for medical assistance for such cost-sharing under
268
the medicaid plan of a State, the Secretary shall enroll
the individual in such plan for quarters beginning after
the date on which the Secretary makes such determina-
tion.
(b) EXPLANATIONS IN ANNUAL NOTICE OF BENE-
FITS.—
(1) IN GENERAL.—Section 1804 of the Social
Security Act (42 U.S.C. 1395b–2) is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (2);
(B) by striking the period at the end of
paragraph (3) and inserting ‘‘, and’’; and
(C) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) a general description in clear language of
the availability of and the requirements for obtaining
medical assistance for medicare cost-sharing under
State plans approved under title XIX.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to annual notices under
section 1804 of the Social Security Act for years be-
ginning with 1996.
269
Subtitle C—Health Insurance
Deduction for the Self-Employed
SEC. 441. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS MADE PERMA-
NENT AND INCREASED.
(a) DEDUCTION MADE PERMANENT.—
(1) IN GENERAL.—Subsection (l) of section 162
of the Internal Revenue Code of 1986 (relating to
special rules for health insurance costs of self-em-
ployed individuals) is amended by striking paragraph
(6).
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after June 30, 1992.
(b) INCREASE IN DEDUCTION.—
(1) IN
GENERAL.—Paragraph (1) of section
162(l) of such Code is amended by striking ‘‘25 per-
cent of’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1993.
270
Subtitle D—Health Insurance
Program for Children
SEC. 451. HEALTH INSURANCE FOR CHILDREN.
(a) IN GENERAL.—The Social Security Act, as
amended by section 302, is amended by adding at the end
the following new title:
‘‘TITLE XXII—HEALTH INSURANCE FOR
CHILDREN
‘‘SEC. 2200. ESTABLISHMENT OF PROGRAM OF HEALTH IN-
SURANCE FOR CHILDREN.
‘‘There is hereby established a program of health in-
surance for children under 19 years of age.
‘‘PART A—ELIGIBILITY AND ENROLLMENT
‘‘SEC. 2201. ELIGIBILITY.
‘‘(a) IN GENERAL.—Every eligible child (as defined
in subsection (b)) is eligible to enroll for benefits under
this title.
‘‘(b) ELIGIBLE CHILD DEFINED.—In this title, the
term ‘eligible child’ means, for a month, an individual
who—
‘‘(1) is under 19 years of age as of the last day
of the month;
‘‘(2) is a resident of the United States; and
‘‘(3) is a citizen or national of the United
States, an alien lawfully admitted for permanent res-
271
idence, or an alien otherwise permanently residing in
the United States under color of law.
‘‘SEC. 2202. ENROLLMENT PERIODS.
‘‘(a) IN GENERAL.—An eligible individual may enroll
in the program under this title only in such manner and
form as may be prescribed by regulations, and only during
an enrollment period prescribed in or under this section.
‘‘(b) GENERAL ENROLLMENT PERIOD.—There shall
be a general enrollment period during the month of Sep-
tember of each year (beginning with 1995).
‘‘(c) INITIAL SPECIAL ENROLLMENT PERIODS.—
‘‘(1) BIRTH.—With respect to each eligible indi-
vidual who becomes an eligible individual by reason
of birth during a month after the end of first gen-
eral enrollment period, there shall be a special en-
rollment period during the 30-day period beginning
on the date of the birth.
‘‘(2) OBTAINING LAWFUL RESIDENT STATUS.—
With respect to each eligible individual who does not
meet the requirements of paragraphs (2) and (3) of
section 2201(a) at the time of birth and who be-
comes an eligible individual during a month after the
end of the first general enrollment period, there shall
be a special enrollment period during the 30-day pe-
272
riod beginning on the first date on which the individ-
ual is an eligible individual.
‘‘(d) CONTINUATION SPECIAL ENROLLMENT PERI-
ODS.—In the case of an eligible individual—
‘‘(1) who at the time the individual first be-
comes an eligible individual (or, if later, the first
month of the first general enrollment period) is en-
rolled in a group health plan (including continuation
coverage under such a plan), and
‘‘(2) whose coverage under such a plan (includ-
ing continuation coverage under such a plan) is ter-
minated due to a qualifying event (within the mean-
ing of section 4980B(f)(3) of the Internal Revenue
Code of 1986) or due to expiration of the period of
continuation coverage,
there shall be a special enrollment period during the 3-
month period beginning 1 month before the effective date
of termination of coverage under such a plan.
‘‘SEC. 2203. EMPLOYMENT-BASED ENROLLMENT.
‘‘(a) IN GENERAL.—Subject to subsection (d), the
Secretary shall permit the sponsor of a group health plan
to elect to offer coverage to eligible children under a group
health plan through enrollment under this title in accord-
ance with this section. Except as specifically provided in
this section, the terms and period of the coverage effected
273
pursuant to such election shall be the same as the terms
and period of coverage that would be provided if the indi-
vidual were enrolled under this title not pursuant to such
election.
‘‘(b) CONDITIONS FOR ELECTION.—An election is
available under this section with respect to a group health
plan only if the sponsor provides assurances, satisfactory
to the Secretary, that the following conditions are met:
‘‘(1) OFFER TO ALL ELIGIBLE CHILDREN.—The
offer of coverage under the election must be made
(at such times, including at the time of initial em-
ployment, and in such manner as the Secretary de-
termines to be consistent with the provisions of this
title) to every eligible child for every individual to
whom health benefits are made available under the
plan.
‘‘(2) PAYMENT TOWARDS PREMIUM.—
‘‘(A) IN
GENERAL.—Under the election,
the plan shall provide for payment of the pre-
miums imposed under this title and may not
collect from any such child or the parent or
guardian of such a child more than 20 percent
of the amount of such premiums paid by the
plan with respect to such a child.
274
‘‘(B) TREATMENT OF CONTINUATION COV-
ERAGE.—Subparagraph (A) shall not apply to
children of those individuals who are eligible for
benefits under the group health plan only on
the basis of continuation coverage (such as that
described in section 4980B of the Internal Rev-
enue Code of 1986).
‘‘(3) NO MANDATED ENROLLMENT.—The plan
may not require an individual, as a condition for the
receipt of benefits under the group health plan, to
accept the offer of enrollment under the election.
‘‘(c) TERMINATION OF ELECTION.—If the Secretary
determines that a group health plan has failed to meet
the conditions described in subsection (b), the Secretary,
after notice and opportunity for correction, shall terminate
the election and shall provide individuals enrolled under
the election the opportunity to enroll directly as individ-
uals under this title.
‘‘(d) LIMITATION.—In the case of a sponsor of a
group health plan that offers coverage (other than under
the election under this section) for some or all classes of
eligible children as of any date, the election under this sec-
tion shall not be available during the 2-year period follow-
ing such date.
275
‘‘SEC. 2204. COVERAGE PERIOD.
‘‘(a) IN GENERAL.—No payments may be made
under this title with respect to the expenses of an eligible
child unless such expenses were incurred by such child
during a period which, with respect to the individual, is
a coverage period provided under this section.
‘‘(b) ENROLLMENT DURING GENERAL ENROLLMENT
PERIOD.—In the case of an eligible child who enrolls
under this title during a general enrollment period in a
year, the period during which the individual is entitled to
benefits under the program under this title shall begin on
January 1 of the following year.
‘‘(c) ENROLLMENT DURING SPECIAL ENROLLMENT
PERIODS.—
‘‘(1) BIRTH.—In the case of an eligible child
who enrolls under this title during a special enroll-
ment period described in section 2202(c)(1), the pe-
riod during which the individual is entitled to bene-
fits under the program under this title shall begin
as of the date of birth.
‘‘(2) OBTAINING LAWFUL RESIDENT STATUS.—
In the case of an eligible child who enrolls under this
title during a special enrollment period described in
section 2202(c)(2), the period during which the indi-
vidual is entitled to benefits under the program
276
under this title shall begin as of the first day of the
month in which the individual enrolls.
‘‘(3) CONTINUATION
OF
COVERAGE.—In the
case of an eligible child who enrolls under this title
during a special enrollment period described in sec-
tion 2202(d), the period during which the individual
is entitled to benefits under the program under this
title shall begin as of the first day of the month in
which the individual enrolls (or, if later, the first day
of the month in which coverage under the group
health plan, including continuation coverage under
such a plan, terminates).
‘‘(d) TERMINATION OF ENROLLMENT.—
‘‘(1) INITIAL
MINIMUM
1-YEAR
PERIOD.—Ex-
cept as provided in paragraph (5), an individual’s
coverage period shall continue until terminated
under paragraph (2), (3), or (4), and termination
under such paragraph may not occur before the end
of the 12-month period beginning with the first
month in which the coverage period begins.
‘‘(2) TERMINATION.—
‘‘(A) INDIVIDUAL
NOTICE.—With respect
to coverage after the minimum coverage period
required under paragraph (1), an individual
may terminate coverage under this title by the
277
filing of notice that the individual no longer
wishes to participate in the program under this
title. The termination of coverage under this
subparagraph shall take effect at the close of
the month following the month in which the no-
tice is filed.
‘‘(B) FAILURE
TO
PAY
PREMIUMS.—The
Secretary shall terminate coverage under this
title 
in 
the 
case 
of 
an 
individual 
for
nonpayment of premiums, but such termination
shall not be effective for coverage before the
end of the minimum coverage required under
paragraph (1). The Secretary may provide by
regulation for a grace period before coverage is
terminated under this subparagraph.
‘‘(3) AGE.—An individual’s coverage period
shall in no case continue beyond the end of the
month in which the individual attains 19 years of
age or in which the individual dies.
‘‘(4) MEDICARE
COVERAGE.—An individual’s
coverage period shall be terminated in the month in
which the individual becomes entitled to benefits
under part A of title XVIII.
‘‘(5) 
COVERAGE
UNDER
GROUP
HEALTH
PLAN.—The 12-month minimum enrollment period
278
under paragraph (1) shall not apply in the case of
an eligible child if it is demonstrated (to the satis-
faction of the Secretary) that at the time of termi-
nation of enrollment under this title the child will be
covered under a group health plan.
‘‘PART B—BENEFITS; PAYMENTS FOR BENEFITS
‘‘SEC. 2211. SCOPE OF BENEFITS.
‘‘(a) IN GENERAL.—Except as provided in the suc-
ceeding provisions of this section, the benefits provided to
an individual by the program established by this title shall
consist of the same benefits that are available under title
XVIII (including benefits for well-child services under sec-
tion 1861(ll)) to individuals entitled to benefits under part
A of that title and enrolled under part B of that title.
‘‘(b) NEWBORN AND WELL-BABY CARE; WAIVER OF
COST-SHARING FOR WELL-CHILD SERVICES AND OF DE-
DUCTIBLE FOR COVERED OUTPATIENT SERVICES.—
‘‘(1) IN GENERAL.—In addition to the benefits
described in subsection (a), the benefits under this
title shall include entitlement to have payment made
(in the same manner as for physicians’ services
under part B of title XVIII) for newborn and well-
baby care, including normal newborn care and pedia-
trician services for high-risk deliveries, without the
application 
of 
deductibles, 
coinsurance, 
or
279
copayments, subject to the periodicity schedule es-
tablished with respect to the services under para-
graph (2).
‘‘(2) PERIODICITY SCHEDULE.—The Secretary,
in consultation with the American Academy of Pedi-
atrics, shall establish a schedule of periodicity which
reflects the general, appropriate frequency with
which services described in paragraph (1) should be
provided to healthy newborns and babies.
‘‘(c) WAIVER OF COST-SHARING FOR WELL-CHILD
SERVICES.—For purposes of this title, payment shall be
made under this title for well-child services (as defined in
section 1861(ll)) without regard to any deductible or coin-
surance.
‘‘(d) SPECIAL RULE FOR DEDUCTIBLE FOR COV-
ERED OUTPATIENT DRUGS.—For purposes of this title,
payment shall be made under this title for covered out-
patient drugs without regard to the deductible specified
under section 1834(e)(1).
‘‘SEC. 2212. EXCLUSIONS.
‘‘(a) IN GENERAL.—Except as provided in sub-
sections (b) and (c), section 1862 shall apply to expenses
incurred for items and services provided under this title
the same manner as such section applies to items and
services provided under title XVIII.