able year exceeds the cost of the lowest cost avail-
able market health plan.
‘‘(2) EMPLOYEE
MUST
HAVE
CATASTROPHIC
COVERAGE.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to any employee unless such employee
has minimum catastrophic coverage throughout
such taxable year for such employee, such em-
ployee’s spouse, and each dependent (as defined
in section 152) of such employee.
‘‘(B) 
MINIMUM
CATASTROPHIC
COV-
ERAGE.—For purposes of subparagraph (A),
the term ‘minimum catastrophic coverage’
means an insurance plan which pay a minimum
of 80 percent of all emergency care expenses
per year to the extent such expenses incurred
during such year exceed $4,000.
‘‘(3) EXCLUSION
LIMITED
TO
EMPLOYEES
WITHOUT
OTHER
EMPLOYER-PROVIDED
HEALTH
BENEFITS.—This section shall not apply to any em-
ployee for the taxable year if any amount is exclud-
able from the gross income of such employee under
section 106 for such taxable year.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) HEALTH CARE SAVINGS ACCOUNT.—The
term ‘health care savings account’ means a trust
created or organized in the United States exclusively
for the purpose of paying the health care expenses
of the account beneficiary, but only if the written
governing instrument creating the trust meets the
following requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash.
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which such person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(2) HEALTH
CARE
EXPENSES.—The term
‘health care expenses’ means, with respect to the ac-
count beneficiary, the amount paid by such bene-
ficiary during the taxable year which would be allow-
able as a deduction for the taxable year under sec-
tion 213 but for the threshold based on adjusted
gross income.
‘‘(3) ACCOUNT
BENEFICIARY.—The term ‘ac-
count beneficiary’ means the employee for whose
benefit the health care savings account is estab-
lished.
‘‘(4) 
LOWEST
COST
AVAILABLE
MARKET
HEALTH
PLAN.—The term ‘lowest cost available
market health plan’ means the regional price of the
lowest cost health insurance plan containing a mini-
mum level of health care benefits (as determined by
the Secretary of Health and Human Services).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any amount paid or dis-
tributed out of a health care savings account shall
be included in the gross income of the individual for
whose benefit such account was established unless
such amount is used exclusively to pay the health
care expenses of such individual.
‘‘(2) PENALTY FOR AMOUNTS INCLUDED IN IN-
COME BEFORE THE CLOSE OF CALENDAR YEAR.—If
any amount is includible in the gross income of the
account beneficiary before the last business day dur-
ing the taxable year, such beneficiary’s tax imposed
by this chapter shall be increased by 10 percent of
the amount so includible.
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution of any contribution paid
during a taxable year to a health care savings ac-
count to the extent that such contribution exceeds
the amount excludable under subsection (a) if—
‘‘(A) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for filing
such individual’s return for such taxable year,
and
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which it is received.
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—
The individual for whose benefit a health care sav-
ings account is established shall be treated for pur-
poses of this title as the owner thereof and shall be
subject to tax thereon in accordance with subpart E
of part I of subchapter J of this chapter (relating
to grantors and others treated as substantial own-
ers).
‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN-
GAGES IN PROHIBITED TRANSACTION.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the individual for whose benefit the
health care savings account was established,
such individual engages in any transaction pro-
hibited by section 4975 with respect to the ac-
count, the account ceases to be a health care
savings account as of the first day of that tax-
able year.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a health care savings account
by reason of subparagraph (A) on the first day
of any taxable year, paragraph (1) of subsection
(h) shall be applied as if there were a distribu-
tion on such first day in an amount equal to
the fair market value (on such first day) of all
assets in the account (on such first day) and no
portion of such distribution were used to pay
health care expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a health care savings account was es-
tablished uses the account or any portion thereof as
security for a loan, the portion so used is treated as
distributed to that individual and not used to pay
health care expenses.
‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if—
‘‘(1) the assets of such account are held by a
bank (as defined in section 408(n)) or another per-
son who demonstrates to the satisfaction of the Sec-
retary that the manner in which he will administer
the account will be consistent with the requirements
of this section, and
‘‘(2) the custodial account would, except for the
fact that it is not a trust, constitute a health care
savings account described in subsection (g).
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(g) REPORTS.—The trustee of a health care savings
account shall make such reports regarding such account
to the Secretary and to the individual for whose benefit
the account is maintained with respect to contributions,
distributions, and such other matters as the Secretary
may require under regulations. The reports required by
this subsection shall be filed at such time and in such
manner and furnished to such individuals at such time and
in such manner as may be required by those regulations.
‘‘(h) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) EMPLOYER.—The term ‘employer’ includes
persons treated as an employer under section
401(c)(4).
‘‘(2) EMPLOYEE.—The term ‘employee’ in-
cludes—
‘‘(A) an individual who is an employee
within the meaning of section 401(c)(1), and
‘‘(B) former employees.
‘‘(3) TYPE OF COVERAGE.—The types of cov-
erage are—
‘‘(A) self-only coverage, and
‘‘(B) coverage other than self-only cov-
erage.
‘‘(4) HEALTH
INSURANCE
PLAN.—The term
‘health insurance plan’ means any contract or ar-
rangement under which an insurer bears all or part
of the cost or risk 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 (including any self-insured health insurance
plan), 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.’’
(b) EXCLUSION APPLIES
FOR EMPLOYMENT TAX
PURPOSES.—
(1) SOCIAL SECURITY TAXES.—
(A) Paragraph (20) of section 3121(a) of
such Code is amended by striking ‘‘or 132’’ and
inserting ‘‘132, or 137’’.
(B) Paragraph (17) of section 209(a) of
the Social Security Act is amended by striking
‘‘or 132’’ and inserting ‘‘132, or 137’’.
(2) RAILROAD RETIREMENT TAX.—Paragraph
(5) of section 3231(e) of such Code is amended by
striking ‘‘or 132’’ and inserting ‘‘132, or 137’’.
(3) UNEMPLOYMENT TAX.—Paragraph (16) of
section 3306(b) of such Code is amended by striking
‘‘or 132’’ and inserting ‘‘132, or 137’’.
(4) WITHHOLDING
TAX.—Paragraph (19) of
section 3401(a) of such Code is amended by striking
‘‘or 132’’ and inserting ‘‘, 132, or 137’’.
(c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of such Code (relating to tax on excess contributions to
individual retirement accounts, certain section 403(b) con-
tracts, and certain individual retirement annuities) is
amended—
(1) by inserting ‘‘HEALTH
CARE
SAVINGS
ACCOUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading
of such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a health care savings account (within the
meaning of section 137(g)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
‘‘(d) EXCESS CONTRIBUTIONS
TO HEALTH CARE
SAVINGS ACCOUNTS.—For purposes of this section, in the
case of a health care savings account (within the meaning
of section 137(g)), the term ‘excess contributions’ means
the amount by which the amount contributed for the tax-
able year to the account exceeds the amount excludable
from gross income under section 137 for such taxable
year. For purposes of this subsection, any contribution
which is distributed out of the health care savings account
in a distribution to which section 137(h)(2) applies shall
be treated as an amount not contributed.’’
(d) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR HEALTH CARE SAV-
INGS ACCOUNTS.—An individual for whose benefit a
health care savings account (within the meaning of
section 137(g)) is established shall be exempt from
the tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
a health care savings account by reason of the appli-
cation of section 137(h)(2)(A) to such account.’’,
and
(2) by inserting ‘‘or a health care savings ac-
count described in section 137(g)’’ in subsection
(e)(1) after ‘‘described in section 408(a)’’.
(e) FAILURE TO PROVIDE REPORTS ON HEALTH
CARE SAVINGS ACCOUNTS.—Section 6693 of such Code
(relating to failure to provide reports on individual retire-
ment account or annuities) is amended—
(1) by inserting ‘‘OR ON HEALTH CARE SAV-
INGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the
heading of such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 137(g) to
file a report regarding a health care savings account
at the time and in the manner required by such sec-
tion shall pay a penalty of $50 for each failure un-
less it is shown that such failure is due to reasonable
cause.’’
(f) HEALTH CARE SAVINGS ACCOUNT CONTRIBU-
TIONS NOT SUBJECT
TO WELFARE BENEFIT FUND
RULES.—Paragraph (2) of section 419(e) of such Code
(defining welfare benefit) is amended by striking ‘‘or’’ at
the end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting ‘‘, or’’, and by
adding at the end thereof the following new subparagraph:
‘‘(D) section 137 applies.’’
(g) CLERICAL AMENDMENTS.—
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following:
‘‘Sec. 137. Health care savings accounts.
‘‘Sec. 138. Cross references to other Acts.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, health care savings accounts, certain
403(b) contracts, and certain individual retirement
annuities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on health care savings accounts’’ after ‘‘annuities’’
in the item relating to section 6693.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the close of the calendar year which includes the date of
the enactment of this Act.
TITLE II—HEALTH CARE COST
CONTAINMENT
Subtitle A—Health Care Liability
Reform
SEC. 201. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This subtitle shall apply with
respect to any health care liability claim and to any health
care liability action brought in any State or Federal court
(except as provided in section 203), except that this sub-
title shall not apply to a claim or action for damages aris-
ing from a vaccine-related injury or death to the extent
that title XXI of the Public Health Service Act applies
to the action.
(b) PREEMPTION OF STATE LAW.—Subject to section
208, this subtitle supersedes State law only to the extent
that State law differs from any provision of law estab-
lished by or under this subtitle. Any issue that is not gov-
erned by any provision of law established by or under this
subtitle shall be governed by otherwise applicable State or
Federal law.
(c) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of sections 1331 or 1337 of
title 28, United States Code.
SEC. 202. STATUTE OF LIMITATIONS.
(a) IN GENERAL.—No health care liability claim may
be brought against any party after the expiration of the
10-year period that begins on the date the party commit-
ted the action which caused the alleged injury that is the
subject of the claim.
(b) EXCEPTION
FOR CLAIMS BASED
ON INTEN-
TIONAL ACTION.—Subsection (a) shall not apply to a
claim brought against a party if the claimant’s sole allega-
tion is an allegation of an intentional tort.
SEC. 203. REQUIREMENT FOR INITIAL RESOLUTION OF AC-
TIONS IN FEDERAL COURT THROUGH ALTER-
NATIVE DISPUTE RESOLUTION.
(a) REQUIREMENT.—
(1) IN GENERAL.—No health care liability ac-
tion may be brought in any Federal court during a
calendar year unless the health care liability claim
that is the subject of the action has been initially re-
solved under the alternative dispute resolution sys-
tem established by the Secretary under subsection
(b).
(2) INITIAL
RESOLUTION
OF
CLAIMS
UNDER
ADR.—For purposes of paragraph (1), an action is
‘‘initially resolved’’ under an alternative dispute res-
olution system if—
(A) the ADR reaches a decision on wheth-
er the defendant is liable to the plaintiff for
damages; and
(B) if the ADR determines that the de-
fendant is liable, the ADR reaches a decision on
the amount of damages assessed against the de-
fendant.
(3) EXCLUSION OF COURTS OF DISTRICT OF
COLUMBIA.—For purposes of paragraph (1), the
term ‘‘Federal court’’ does not include the Superior
Court of the District of Columbia or the District of
Columbia Court of Appeals.
(b) ESTABLISHMENT OF SYSTEM.—
(1) IN GENERAL.—The Attorney General shall
establish an alternative dispute resolution system
that meets the requirements of paragraph (2) for
the resolution of health care liability claims under
the jurisdiction of the Federal courts.
(2) REQUIREMENTS
DESCRIBED.—The ADR
system established by the Attorney General under
paragraph (1) meets the requirements of this para-
graph if the system—
(A) applies to all health care liability
claims under the jurisdiction of the Federal
courts;
(B) requires that a written opinion resolv-
ing the dispute be issued not later than 6
months after the date by which each party
against whom the claim is filed has received no-
tice of the claim (other than in exceptional
cases for which a longer period is required for
the issuance of such an opinion), and that the
opinion contain—
(i) findings of fact relating to the dis-
pute, and
(ii) a description of the costs incurred
in resolving the dispute under the system
(including any fees paid to the individuals
hearing and resolving the claim), together
with an appropriate assessment of the
costs against any of the parties;
(C) provides that claims brought under the
system shall be heard and resolved by arbitra-
tors appointed by the Secretary in consultation
with the Attorney General;
(D) requires all parties to present (or to
make all reasonable efforts to present) all rel-
evant information relating to the claim to the
arbitrator, and permits the arbitrator to request
the court of relevant jurisdiction to impose
criminal penalties against any party that know-
ingly or intentionally fails to present (or to
make all reasonable efforts to present) such in-
formation;
(E) provides for the transmittal to the
State agency responsible for monitoring or dis-
ciplining health care professionals and health
care providers of any findings made under the
system that such a professional or provider
committed malpractice, unless, during the 90-
day period beginning on the date the system re-
solves the claim against the professional or pro-
vider, the professional or provider brings a
health care liability action contesting the deci-
sion made under the system; and
(F) provides for the regular transmittal to
the Administrator for Health Care Policy and
Research of information on disputes resolved
under the system, in a manner that assures
that the identity of the parties to a dispute
shall not be revealed.
(c) APPLICATION
OF
HEALTH
CARE
LIABILITY
STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—
The provisions of this subtitle shall apply with respect to
claims brought under the alternative dispute resolution
system established under this section in the same manner
as such provisions apply with respect to health care liabil-
ity actions.
(d) RULES FOR HEALTH CARE LIABILITY ACTIONS
CONTESTING ADR RULING.—
(1) REQUIRING PARTY CONTESTING ADR RUL-
ING TO PAY ATTORNEY’S FEES AND OTHER COSTS.—
(A) IN GENERAL.—In each health care li-
ability action brought in a Federal court, the
court shall require the party that contested the
ruling of the alternative dispute resolution sys-
tem with respect to the health care liability
claim that is the subject of the action to pay to
the opposing party the costs incurred by the op-
posing party under the action, including attor-
ney’s fees, fees paid to expert witnesses, and
other litigation expenses (but not including any
fees or costs associated with the resolution of
the claim under the alternative dispute resolu-
tion system).
(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if—
(i) the party contesting the ruling
made under the previous alternative dis-
pute resolution system shows that—
(I) the ruling was procured by
corruption, fraud, or undue means,
(II) there was partiality or cor-
ruption under the system,
(III) there was other misconduct
under the system that materially prej-
udiced the party’s rights, or
(IV) the ruling was based on an
error of law;
(ii) the party contesting the ruling
made under the previous alternative dis-
pute resolution system presents new evi-
dence before the trier of fact that was not
available for presentation under the ADR
system; or
(iii) the court finds that the applica-
tion of such paragraph to a party would
constitute an undue hardship, and issues
an order waiving or modifying the applica-
tion of such paragraph that specifies the
grounds for the court’s decision.
(2) 
RESTRICTIONS
ON
EVIDENCE
PRE-
SENTED.—In any health care liability action brought
in a Federal court, no party may present any evi-
dence to the court that the party did not present
during the previous proceeding under the alternative
dispute resolution system unless the court finds
that—
(A) the party could not reasonably have
been aware of the existence of such evidence or
its availability for presentation at the time of
the ADR proceeding; or
(B) the restriction against the ability of
the party to present such evidence would con-
stitute an undue hardship against the party.
(e) ESTABLISHMENT OF MODEL STATE SYSTEM.—
Not later than 4 years after the date of the enactment
of this Act, the Secretary (in consultation with the Attor-
ney General) shall establish a model alternative dispute
resolution system that a State may (at its option) apply
to health care liability claims under the jurisdiction of its
courts.
SEC. 204. CALCULATION AND PAYMENT OF DAMAGES.
(a) LIMITATION ON NONECONOMIC DAMAGES.—
(1) IN GENERAL.—Subject to paragraph (2),
the total amount of noneconomic damages that may
be awarded to a plaintiff and the members of the
plaintiff’s family for losses resulting from the injury
which is the subject of a health care 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 in-
jury.
(2) 
MAXIMUM
LIABILITY.—The 
maximum
amount of the liability of any defendant for any
event, action, or product with respect to all plaintiffs
(and potential plaintiffs) in a health care liability ac-
tion for noneconomic damages may not exceed
$1,000,000.
(b) ALLOCATION OF PUNITIVE DAMAGES TO UNIN-
SURED RISK POOL.—Of the total amount of punitive dam-
ages imposed under a health care liability action—
(1) 15 percent shall be paid to the plaintiff; and
(2) 85 percent shall be paid to the United
States for the deposit into the Treasury as mis-
cellaneous revenues (for the purpose of financing of
tax credits provided under section 35 of the Internal
Revenue Code of 1986).
SEC. 205. TREATMENT OF ATTORNEY’S FEES.
If the plaintiff in a health care liability action has
entered into an agreement with the plaintiff’s attorney to
pay the attorney’s fees on a contingency basis, the attor-
ney’s fees for the action may not exceed—
(1) 30 percent of the first $100,000 of any
award or settlement paid to the plaintiff;
(2) 20 percent of the next $100,000 of such
award or settlement paid to the plaintiff; or
(3) 10 percent of any additional amounts paid
to the plaintiff.
SEC. 206. JOINT AND SEVERAL LIABILITY.
The liability of each defendant in a health care liabil-
ity action shall be several only and shall not be joint, and
each defendant shall be liable only for the amount of dam-
ages allocated to the defendant in direct proportion to the
defendant’s percentage of responsibility (as determined by
the trier of fact).
SEC. 207. MANDATORY OFFSETS FOR DAMAGES PAID BY A
COLLATERAL SOURCE.
(a) IN GENERAL.—The total amount of damages re-
ceived by a plaintiff in a health care liability action shall
be reduced (in accordance with subsection (b)) by any
other payment that has been or will be made to the indi-
vidual to compensate the plaintiff for the injury that was
the subject of the action, including payment under—
(1) Federal or State disability or sickness pro-
grams;
(2) Federal, State, or private health insurance
programs;
(3) private disability insurance programs;
(4) employer wage continuation programs; and
(5) any other source of payment intended to
compensate the plaintiff for such injury.
(b) AMOUNT OF REDUCTION.—The amount by which
an award of damages to a plaintiff shall be reduced under
subsection (a) shall be—
(1) the total amount of any payments (other
than such award) that have been made or that will
be made to the plaintiff to compensate the plaintiff
for the injury that was the subject of the action;
minus
(2) the amount paid by the plaintiff (or by the
spouse, parent, or legal guardian of the plaintiff) to
secure the payments described in paragraph (1).
SEC. 208. PREEMPTION.
(a) IN GENERAL.—This subtitle supersedes any State
law only to the extent that State law—
(1) permits the recovery of a greater amount of
damages by a plaintiff;
(2) permits the collection of a greater amount
of attorneys’ fees by a plaintiff’s attorney; or
(3) establishes a longer period during which a
health care liability claim may be initiated.
(b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (a) shall be
construed 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 of inconvenient
forum.
SEC. 209. DEFINITIONS.
As used in this subtitle:
(1) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means the system established by
the Attorney General under section 203 that pro-
vides for the resolution of health care liability claims
under the jurisdiction of the Federal courts in a
manner other than through health care liability ac-
tions.
(2) CLAIMANT.—The term ‘‘claimant’’ means
any person who alleges a health care liability claim,
or, in the case of an individual who is deceased, in-
competent, or a minor, the person on whose behalf
such a claim is alleged.
(3) 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.
(4) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion (other than an action in which the plaintiff’s
sole allegation is an allegation of an intentional tort)
brought in a State or Federal court against a health
care provider or health care professional (regardless
of the theory of liability on which the action is
based) in which the plaintiff alleges a health care li-
ability claim, and includes an action in which the
plaintiff alleges harm arising from the use of a med-
ical product.
(5) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that injury was caused by
the provision of (or the failure to provide) health
care services or the use of a medical product.
(6) 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.
(7) 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 and that is required by State
law or regulation to be licensed or certified by the
State to engage in the delivery of such services in
the State.
(8) INJURY.—The term ‘‘injury’’ means any ill-
ness, disease, or other harm that is the subject of
a health care liability action or claim.
(9) MEDICAL
PRODUCT.—The term ‘‘medical
product’’ means a device (as defined in section
201(h) of the Federal Food, Drug, and Cosmetic
Act) or a drug (as defined in section 201(g)(1) of
the Federal Food, Drug, and Cosmetic Act).
(10) 
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
enjoyment of life, loss of consortium, and other
nonpecuniary losses, but does not include punitive
damages.
(11) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Health and Human Services.
(12) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and American Samoa.
SEC. 210. EFFECTIVE DATE.
This subtitle shall apply with respect to claims accru-
ing or actions brought on or after the expiration of the
1-year period that begins on the date of the enactment
of this Act.
Subtitle B—Limit on Self-Referrals
by Health Care Provider
SEC. 221. LIMITATION ON SELF-REFERRALS BY HEALTH
CARE PROVIDERS.
(a) IN GENERAL.—If a health care provider refers
a patient to any facility in which the provider (or a family
member) has a financial interest for the performance of
any health care service, the provider—
(1) must disclose to the patient the nature of
such interest;
(2) must present the patient with a list of the
3 closest reasonably known available facilities which
perform the service; and
(3) may not place undue pressure on the pa-
tient to obtain the service from the facility in which
the provider (or a family member) has a financial in-
terest.
(b) ENFORCEMENT.—
(1) INITIAL VIOLATION.—If a health care pro-
vider violates a requirement of subsection (a) and
has not previously been subject to a sanction under
this subsection, the provider is subject to a civil
money penalty in an amount specified under sub-
section (c).
(2) SECOND VIOLATION.—If a health care pro-
vider violates a requirement of subsection (a) and
has previously been subject to a sanction under this
subsection, the provider is subject to—
(A) a civil money penalty in an amount
specified under subsection (c), and
(B) a suspension of the right of the pro-
vider to provide health care services for a period
of time specified under subsection (c).
(3) THIRD VIOLATION.—If a health care pro-
vider violates a requirement of subsection (a), and
has previously been subject to a suspension under
this subsection—
(A) the provider is subject to a civil money
penalty in an amount specified under subsection
(c), and
(B) the provider’s right to provide health
care services is permanently revoked.
(c) AMOUNT OF CIVIL MONEY PENALTY AND PERIOD
OF SUSPENSION.—The amount of a civil money penalty
under subsection (b) and the period of any suspension of
the right to provide health care services under subsection
(b) shall be established by the Secretary of Health and
Human Services based upon the recommendations of the
National Association of Insurance Commissioners and
other health care representatives.
(d) ENFORCEMENT PROCESS.—The Secretary of
Health and Human Services shall establish a process for
the imposition of sanctions under subsection (b).
(e) DEFINITIONS.—In this section:
(1) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(2) The term ‘‘financial interest’’ includes any
ownership, income rights, or other pecuniary inter-
est.
(3) The term ‘‘family member’’ includes the
spouse, child, grandchild, parent, or sibling, or
spouse of such a child, grandchild, parent, or sibling.
(f) EFFECTIVE DATE.—This section shall apply to
referrals made later than 1 year after the date of the en-
actment of this Act.
Subtitle C—Administrative Cost
Savings
SEC. 230. DEFINITIONS.
For purposes of this subtitle:
(1) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means any hospital or medical
expense incurred policy or certificate, hospital or
medical service plan contract, or health maintenance
subscriber contract, or a multiple employer welfare
arrangement or employee benefit plan (as defined
under the Employee Retirement Income Security Act
of 1974) which provides benefits with respect to
health care services. The term includes the medicare
program (under title XVIII of the Social Security
Act), medicare supplemental health insurance, and a
State medicaid plan (approved under title XIX of
such Act). The term does not include—
(A) coverage only for accident, dental, vi-
sion, disability income, or long-term care insur-
ance, or any combination thereof,
(B) coverage issued as a supplement to li-
ability insurance,
(C) worker’s compensation or similar in-
surance, or
(D) automobile medical-payment insur-
ance,
or any combination thereof.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(3) STATE.—The term ‘‘State’’ means any of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and American Samoa.
PART 1—STANDARDIZATION OF CLAIMS PROCESSING
SEC. 
231. 
ADOPTION 
OF 
DATA 
ELEMENTS, 
UNIFORM
CLAIMS, AND UNIFORM ELECTRONIC TRANS-
MISSION STANDARDS.
(a) IN GENERAL.—The Secretary shall adopt stand-
ards relating to each of the following:
(1) Data elements for use in paper and elec-
tronic claims processing under health benefit plans,
as well as for use in utilization review and manage-
ment of care (including data fields, formats, and
medical nomenclature, and including plan benefit
and insurance information).
(2) Uniform claims forms (including uniform
procedure and billing codes for uses with such forms
and including information on other health benefit
plans that may be liable for benefits).
(3) Uniform electronic transmission of the data
elements (for purposes of billing and utilization re-
view).
Standards under paragraph (3) relating to electronic
transmission of data elements for claims for services shall
supersede (to the extent specified in such standards) the
standards adopted under paragraph (2) relating to the
submission of paper claims for such services. Standards
under paragraph (3) shall include protections to assure
the confidentiality of patient-specific information and to
protect against the unauthorized use and disclosure of in-
formation.
(b) USE OF TASK FORCES.—In adopting standards
under this section—
(1) the Secretary shall take into account the
recommendations of current taskforces, including at
least the Workgroup on Electronic Data Inter-
change, National Uniform Billing Committee, the
Uniform Claim Task Force, and the Computer-based
Patient Record Institute;
(2) the Secretary shall consult with the Na-
tional Association of Insurance Commissioners (and,
with respect to standards under subsection (a)(3),
the American National Standards Institute); and
(3) the Secretary shall, to the maximum extent
practicable, seek to make the standards consistent
with any uniform clinical data sets which have been
adopted and are widely recognized.
(c) DEADLINES
FOR PROMULGATION.—The Sec-
retary shall promulgate the standards under—
(1) subsection (a)(1) relating to claims process-
ing data, by not later than 12 months after the date
of the enactment of this Act;
(2) subsection (a)(2) (relating to uniform
claims forms) by not later than 12 months after the
date of the enactment of this Act; and
(3)(A) subsection (a)(3) relating to trans-
mission of information concerning hospital and phy-
sicians services, by not later than 24 months after
the date of the enactment of this Act, and
(B) subsection (a)(3) relating to transmission
of information on other services, by such later date
as the Secretary may determine it to be feasible.
(d) REPORT TO CONGRESS.—Not later than 3 years
after the date of the enactment of this Act, the Secretary
shall report to Congress recommendations regarding re-
structuring the medicare peer review quality assurance
program given the availability of hospital data in elec-
tronic form.
SEC. 232. APPLICATION OF STANDARDS.
(a) IN GENERAL.—If the Secretary determines, at
the end of the 2-year period beginning on the date that
standards are adopted under section 231 with respect to
classes of services, that a significant number of claims for
benefits for such services under health benefit plans are
not being submitted in accordance with such standards,
the Secretary may require, after notice in the Federal
Register of not less than 6 months, that all providers of
such services must submit claims to health benefit plans
in accordance with such standards. The Secretary may
waive the application of such a requirement in such cases
as the Secretary finds that the imposition of the require-
ment would not be economically practicable.
(b) SIGNIFICANT NUMBER.—The Secretary shall
make an affirmative determination described in subsection
(a) for a class of services only if the Secretary finds that
there would be a significant, measurable additional gain
in efficiencies in the health care system that would be ob-
tained by imposing the requirement described in such
paragraph with respect to such services.
(c) APPLICATION OF REQUIREMENT.—
(1) IN GENERAL.—If the Secretary imposes the
requirement under subsection (a)—
(A) in the case of a requirement that im-
poses the standards relating to electronic trans-
mission of claims for a class of services, each
health care provider that furnishes such services
for which benefits are payable under a health
benefit plan shall transmit electronically and di-
rectly to the plan on behalf of the beneficiary
involved a claim for such services in accordance
with such standards;
(B) any health benefit plan may reject any
claim subject to the standards adopted under
section 231 but which is not submitted in ac-
cordance with such standards;
(C) it is unlawful for a health benefit plan
(i) to reject any such claim on the basis of the
form in which it is submitted if it is submitted
in accordance with such standards or (ii) to re-
quire, for the purpose of utilization review or as
a condition of providing benefits under the plan,
a provider to transmit medical data elements
that are inconsistent with the standards estab-
lished under section 231(a)(1); and
(D) the Secretary may impose a civil
money penalty on any provider that knowingly
and repeatedly submits claims in violation of
such standards or on any health benefit plan
(other than a health benefit plan described in
paragraph (2)) that knowingly and repeatedly
rejects claims in violation of subparagraph (B),
in an amount not to exceed $100 for each such
claim.
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under subparagraph (D) in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan—
(A) that is subject to regulation by a
State; and
(B) with respect to which the Secretary
finds that—
(i) the State provides for application
of the standards established under section
231, and
(ii) the State regulatory program pro-
vides for the appropriate and effective en-
forcement of such standards.
(d) TREATMENT OF REJECTIONS.—If a plan rejects
a claim pursuant to subsection (c)(1), the plan shall per-
mit the person submitting the claim a reasonable oppor-
tunity to resubmit the claim on a form or in an electronic
manner that meets the requirements for acceptance of the
claim under such subsection.
SEC. 233. PERIODIC REVIEW AND REVISION OF STAND-
ARDS.
(a) IN GENERAL.—The Secretary shall—
(1) provide for the ongoing receipt and review
of comments and suggestions for changes in the
standards adopted and promulgated under section
231;
(2) establish a schedule for the periodic review
of such standards; and
(3) based upon such comments, suggestions,
and review, revise such standards and promulgate
such revisions.
(b) APPLICATION OF REVISED STANDARDS.—If the
Secretary under subsection (a) revises the standards de-
scribed in 231, then, in the case of any claim for benefits
submitted under a health benefit plan more than the mini-
mum period (of not less than 6 months specified by the
Secretary) after the date the revision is promulgated
under subsection (a)(3), such standards shall apply under
section 232 instead of the standards previously promul-
gated.
PART 2—ELECTRONIC MEDICAL DATA STANDARDS
SEC. 241. MEDICAL DATA STANDARDS FOR HOSPITALS AND
OTHER PROVIDERS.
(a) PROMULGATION
OF HOSPITAL DATA STAND-
ARDS.—
(1) IN GENERAL.—Between July 1, 1994, and
January 1, 1995, the Secretary shall promulgate
standards described in subsection (b) for hospitals
concerning electronic medical data.
(2) REVISION.—The Secretary may from time
to time revise the standards promulgated under this
subsection.
(b) CONTENTS OF DATA STANDARDS.—The stand-
ards promulgated under subsection (a) shall include at
least the following:
(1) A definition of a standard set of data ele-
ments for use by utilization and quality control peer
review organizations.
(2) A definition of the set of comprehensive
data elements, which set shall include for hospitals
the standard set of data elements defined under
paragraph (1).
(3) Standards for an electronic patient care in-
formation system with data obtained at the point of
care, including standards to protect against the un-
authorized use and disclosure of information.
(4) A specification of, and manner of presen-
tation of, the individual data elements of the sets
and system under this subsection.
(5) Standards concerning the transmission of
electronic medical data.
(6) Standards relating to confidentiality of pa-
tient-specific information.
The standards under this section shall be consistent with
standards for data elements established under section 231.
(c) OPTIONAL DATA STANDARDS FOR OTHER PRO-
VIDERS.—
(1) IN GENERAL.—The Secretary may promul-
gate standards described in paragraph (2) concern-
ing electronic medical data for providers that are not
hospitals. The Secretary may from time to time re-
vise the standards promulgated under this sub-
section.
(2) CONTENTS
OF
DATA
STANDARDS.—The
standards promulgated under paragraph (1) for non-
hospital providers may include standards comparable
to the standards described in paragraphs (2), (4),
and (5) of subsection (b) for hospitals.
(d) CONSULTATION.—In promulgating and revising
standards under this section, the Secretary shall—
(1) consult with the American National Stand-
ards Institute, hospitals, with the advisory commis-
sion established under section 244, and with other
affected providers, health benefit plans, and other
interested parties, and
(2) take into consideration, in developing stand-
ards under subsection (b)(1), the data set used by
the utilization and quality control peer review pro-
gram under part B of title XI of the Social Security
Act.
SEC. 242. APPLICATION OF ELECTRONIC DATA STANDARDS
TO CERTAIN HOSPITALS.
(a) MEDICARE REQUIREMENT
FOR SHARING
OF
HOSPITAL INFORMATION.—As of January 1, 1996, sub-
ject to paragraph (2), each hospital, as a requirement of
each participation agreement under section 1866 of the
Social Security Act, shall—
(1) maintain clinical data included in the set of
comprehensive 
data 
elements 
under 
section
241(b)(2) in electronic form on all inpatients,
(2) upon request of the Secretary or of a utili-
zation and quality control peer review organization
(with which the Secretary has entered into a con-
tract under part B of title XI of such Act), transmit
electronically the data set, and
(3) upon request of the Secretary, or of a fiscal
intermediary or carrier, transmit electronically any
data (with respect to a claim) from such data set,
in accordance with the standards promulgated under sec-
tion 241(a).
(b) WAIVER AUTHORITY.—Until January 1, 2000:
(1) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is a small rural hospital, for such period as the
hospital demonstrates compliance with such require-
ments would constitute an undue financial hardship.
(2) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is in the process of developing a system to pro-
vide the required data set and executes agreements
with its fiscal intermediary and its utilization and
quality control peer review organization that the hos-
pital will meet the requirements of subsection (a) by
a specified date (not later than January 1, 2000).
(3) The Secretary may waive the application of
the requirement of subsection (a)(1) for a hospital
that agrees to obtain from its records the data ele-
ments that are needed to meet the requirements of
paragraphs (2) and (3) of subsection (a) and agrees
to subject its data transfer process to a quality as-
surance program specified by the Secretary.
(c) APPLICATION TO HOSPITALS OF THE DEPART-
MENT OF VETERANS AFFAIRS.—
(1) IN GENERAL.—The Secretary of Veterans
Affairs shall provide that each hospital of the De-
partment of Veterans Affairs shall comply with the
requirements of subsection (a) in the same manner
as such requirements would apply to the hospital if
it were participating in the Medicare program.
(2) WAIVER.—Such Secretary may waive the
application of such requirements to a hospital in the
same manner as the Secretary of Health and
Human Services may waive under subsection (b) the
application of the requirements of subsection (a).
SEC. 243. ELECTRONIC TRANSMISSION TO FEDERAL AGEN-
CIES.
(a) IN GENERAL.—Effective January 1, 2000, if a
provider is required under a Federal program to transmit
a data element that is subject to a presentation or trans-
mission standard (as defined in subsection (b)), the head
of the Federal agency responsible for such program (if not
otherwise authorized) is authorized to require the provider
to present and transmit the data element electronically in
accordance with such a standard.
(b) PRESENTATION
OR TRANSMISSION STANDARD
DEFINED.—In subsection (a), the term ‘‘presentation or
transmission standard’’ means a standard, promulgated
under subsection (b) or (c) of section 241, described in
paragraph (4) or (5) of section 241(b).
SEC. 244. ADVISORY COMMISSION.
(a) IN GENERAL.—The Secretary shall establish an
advisory commission including hospital executives, hospital
data base managers, physicians, health services research-
ers, and technical experts in collection and use of data
and operation of data systems. Such commission shall in-
clude, as ex officio members, a representative of the Direc-
tor of the National Institutes of Health, the Administrator
for Health Care Policy and Research, the Secretary of
Veterans Affairs, and the Director of the Centers for Dis-
ease Control.
(b) FUNCTIONS.—The advisory commission shall
monitor and advise the Secretary concerning—
(1) the standards established under this part,
and
(2) operational concerns about the implementa-
tion of such standards under this part.
(c) STAFF.—From the amounts appropriated under
subsection (d), the Secretary shall provide sufficient staff
to assist the advisory commission in its activities under
this section.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $2,000,000 for each of
fiscal years 1994 through 1999 to carry out this section.
PART 3—DEVELOPMENT AND DISTRIBUTION OF
COMPARATIVE VALUE INFORMATION
SEC. 251. STATE COMPARATIVE VALUE INFORMATION PRO-
GRAMS FOR HEALTH CARE PURCHASING.
(a) PURPOSE.—In order to assure the availability of
comparative value information to purchasers of health
care in each State, the Secretary shall determine whether
each State is developing and implementing a health care
value information program that meets the criteria and
schedule set forth in subsection (b).
(b) CRITERIA
AND SCHEDULE
FOR STATE PRO-
GRAMS.—The criteria and schedule for a State health care
value information program in this subsection shall be spec-
ified by the Secretary as follows:
(1) The State begins promptly after enactment
of this Act to develop (directly or through contrac-
tual or other arrangements with one or more States,
coalitions of health insurance purchasers, other enti-
ties, or any combination of such arrangements) in-
formation systems regarding comparative health val-
ues.
(2) The information contained in such systems
covers at least the average prices of common health
care services (as defined in subsection (d)) and
health insurance plans, and, where available, meas-
ures of the variability of these prices within a State
or other market areas.
(3) The information described in paragraph (2)
is made available within the State beginning not
later than 1 year after the date of the enactment of
this Act, and is revised as frequently as reasonably
necessary, but at intervals of no greater than 1 year.
(4) Not later than 6 years after the date of the
enactment of this Act the State has developed infor-
mation systems that provide comparative costs, qual-
ity, and outcomes data with respect to health insur-
ance plans and hospitals and made the information
broadly available within the relevant market areas.
Nothing in this section shall preclude a State from provid-
ing additional information, such as information on prices
and benefits of different health benefit plans, available.
(c) GRANTS TO STATES FOR THE DEVELOPMENT OF
STATE PROGRAMS.—
(1) GRANT
AUTHORITY.—The Secretary may
make grants to each State to enable such State to
plan the development of its health care value infor-
mation program and, if necessary, to initiate the im-
plementation of such program. Each State seeking
such a grant shall submit an application therefore,
containing such information as the Secretary finds
necessary to assure that the State is likely to de-
velop and implement a program in accordance with
the criteria and schedule in subsection (b).
(2) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated such sums
as are necessary to make grants under this sub-
section, to remain available until expended.
(d) COMMON HEALTH CARE SERVICES DEFINED.—
In this section, the term ‘‘common health care services’’
includes such procedures as the Secretary may specify and
any additional health care services which a State may wish
to include in its comparative value information program.
SEC. 252. COMPARATIVE VALUE INFORMATION CONCERN-
ING FEDERAL PROGRAMS.
(a) DEVELOPMENT.—The head of each Federal agen-
cy with responsibility for the provision of health insurance
or of health care services to individuals shall promptly de-
velop health care value information relating to each pro-
gram that such head administers and covering the same
types of data that a State program meeting the criteria
of section 251(b) would provide.
(b) DISSEMINATION OF INFORMATION.—Such infor-
mation shall be made generally available to States and to
providers and consumers of health care services.
SEC. 253. DEVELOPMENT OF MODEL SYSTEMS.
(a) IN GENERAL.—The Secretary shall, directly or
through grant or contract, develop model systems to facili-
tate—
(1) the gathering of data on health care cost,
quality, and outcome described in section 251(b)(4),
and
(2) analyzing such data in a manner that will
permit the valid comparison of such data among
providers and among health plans.
(b) EXPERIMENTATION.—The Secretary shall sup-
port experimentation with different approaches to achieve
the objectives of subsection (a) in the most cost effective
manner (relative to the accuracy and timeliness of the
data secured) and shall evaluate the various methods to
determine their relative success.
(c) STANDARDS.—When the Secretary considers it
appropriate, the Secretary may establish standards for the
collection and reporting of data on health care cost, qual-
ity and outcomes in order to facilitate analysis and com-
parisons among States and nationally.
(d) REPORT.—By not later than 3 years after the
date of the enactment of this Act, the Secretary shall re-
port to the Congress and the States on the models devel-
oped, and experiments conducted, under this section.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as are nec-
essary for each fiscal year beginning with fiscal year 1994
to enable the Secretary to carry out this section, including
evaluation of the different approaches tested under sub-
section (b) and their relative cost effectiveness.
PART 4—ADDITIONAL STANDARDS AND REQUIREMENTS
SEC. 261. STANDARDS RELATING TO USE OF MEDICARE
AND MEDICAID MAGNETIZED HEALTH BENE-
FIT CARDS; SECONDARY PAYER DATA BANK.
(a) MAGNETIZED IDENTIFICATION CARDS UNDER
MEDICARE PROGRAM.—The Secretary shall adopt stand-
ards relating to the design and use of magnetized medi-
care identification cards in order to assist health care pro-
viders providing medicare covered services to individuals—
(1) in determining whether individuals are eligi-
ble for benefits under the medicare program, and
(2) in billing the medicare program for such
services provided to eligible individuals.
Such cards shall be designed to be compatible with ma-
chines currently employed to transmit information on
credit cards. Such cards also shall be designed to be able
to be used with respect to the provision of benefits under
medicare supplemental policies.
(b) ADOPTION UNDER MEDICAID PLANS.—
(1) IN
GENERAL.—The Secretary shall take
such steps as may be necessary to encourage and as-
sist States to design and use magnetized medicaid
identification cards that meet such standards, for
use under their medicaid plans.
(2) LIMITATION ON MMIS FUNDS.—In applying
section 1903(a)(3) of the Social Security Act, the
Secretary may determine that Federal financial par-
ticipation is not available under that section to a
State which has provided for a magnetized card sys-
tem that is inconsistent with the standards adopted
under subsection (a).
(c) MEDICARE AND MEDICAID SECONDARY PAYER
DATA BANK.—The Secretary shall establish a medicare
and medicaid information system which is designed to pro-
vide information on those group health plans and other
health benefit plans that are primary payers to the medi-
care program and medicaid program under section
1862(b) or section 1905(a)(25) of the Social Security Act.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated, in equal proportions
from the Federal Hospital Insurance Trust Fund and
from the Federal Supplementary Medical Insurance Trust
Fund, a total of $25,000,000 to carry out subsections (a)
and (c), including the issuance of magnetized cards to
medicare beneficiaries.
SEC. 262. PREEMPTION OF STATE QUILL PEN LAWS.
(a) IN GENERAL.—Effective January 1, 1994, no ef-
fect shall be given to any provision of State law that re-
quires medical or health insurance records (including bill-
ing information) to be maintained in written, rather than
electronic form.
(b) SECRETARIAL AUTHORITY.—The Secretary may
issue regulations to carry out subsection (a). Such regula-
tions may provide for such exceptions to subsection (a)
as the Secretary determines to be necessary to prevent
fraud and abuse, with respect to controlled substances,
and in such other cases as the Secretary deems appro-
priate.
SEC. 263. USE OF STANDARD IDENTIFICATION NUMBERS.
(a) IN GENERAL.—Effective January 1, 1994, each
health benefit plan shall—
(1) for each of its beneficiaries that has a social
security account number, use that number as the
personal identifier for claims processing and related
purposes, and
(2) for each provider that has a unique identi-
fier for purposes of title XVIII of the Social Security
Act and that furnishes health care items or services
to a beneficiary under the plan, use that identifier
as the identifier of that provider for claims process-
ing and related purposes.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with standards established
under subsection (a) in an amount not to exceed
$100 for each such failure. The provisions of section
1128A of the Social Security Act (other than the
first sentence of subsection (a) and other than sub-
section (b)) shall apply to a civil money penalty
under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under
section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
Subtitle D—Limitation of Antitrust
Recovery for Certain Hospital
Joint Ventures
SEC. 271. PURPOSE.
The purpose of this subtitle is to encourage coopera-
tion among hospitals in order to contain costs and achieve
a more efficient health care delivery system through the
elimination of unnecessary duplication and proliferation of
expensive high technology equipment, medical services, or
ancillary services.
SEC. 272. DEFINITIONS.
For the purposes of this subtitle:
(1) The term ‘‘antitrust laws’’ has the meaning
given it in subsection (a) of the first section of the
Clayton Act (15 U.S.C. 12(a)), except that such
term includes—
(A) section 5 of the Federal Trade Com-
mission Act (15 U.S.C. 45) to the extent such
section applies to unfair methods of competi-
tion, and
(B) any State law similar to the antitrust
laws.
(2) The term ‘‘high technology equipment’’
means equipment and devices utilized in medical
care, and the technical support systems for them,
that—
(A) have acquisition costs greater than
$1,000,000 or annual operating costs greater
than $500,000, and
(B) use technologies with respect to which
there is a reasonable expectation that shared
ownership will avoid a significant degree of ac-
tual or anticipated excess capacity of service in
the geographical area to be served.
(3) The term ‘‘medical services’’ means services
that are involved in providing medical care to pa-
tients and that—
(A) have annual operating costs greater
than $1,000,000, and
(B) with respect to which there is a rea-
sonable expectation that shared ownership will
avoid a significant degree of the actual or an-
ticipated excess capacity of such services in the
geographical area to be served,
and may include mobile services.
(4) The term ‘‘ancillary services’’ means sup-
port functions associated with operating a hospital
(laundry, billing, patient transportation, data proc-
essing, and other similar services) the predominant
function of which does not involve the provision of
medical treatment to patients.
(5) The term ‘‘hospital’’ means a hospital
that—
(A) has entered into, and has in effect a
participation agreement under section 1866(a)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395cc(a)), or
(B) has in effect a participation agreement
under title XIX of such Act (42 U.S.C. 1396 et
seq.) with the State in which the hospital is lo-
cated.
(6) The term ‘‘hospital joint venture’’ means an
agreement between 2 or more hospitals that is en-
tered into solely for the purpose of sharing in the
purchase or operation of high technology equipment,
medical services, or ancillary services, and that in-
volves substantial integration or financial risk-shar-
ing between the parties. The term excludes—
(A) exchanging information among com-
petitors relating to costs, sales, profitability,
prices, marketing, or distribution of any prod-
uct, process, or service that is not reasonably
required to carry out such agreement,
(B) entering into any arrangement or en-
gaging in any other conduct to restrict, require,
or otherwise involve the marketing by any party
to such agreement of any product, process, or
service that is not reasonably required to carry
out such agreement, and
(C) entering into any arrangement or en-
gaging in any other conduct to restrict or re-
quire the participation by any party to such
agreement in conduct that is not reasonably re-
quired to carry out such agreement.
(7) The term ‘‘Attorney General’’ means the
Attorney General of the United States.
(8) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(9) The term ‘‘Commission’’ means the Federal
Trade Commission.
SEC. 273. LIMITATION ON DAMAGES FOR ANTITRUST VIO-
LATIONS.
Monetary recovery on a claim in any action brought
under the antitrust laws against a hospital that is a party
to a hospital joint venture shall be limited to actual dam-
ages if—
(1) the hospitals forming such venture meet the
notification requirements specified in section 274,
(2) the claim results from conduct that is with-
in the scope of the notification filed under section
274, and
(3) the action is filed after such notification be-
comes effective pursuant to section 274(c).
SEC. 274. DISCLOSURE OF HOSPITAL JOINT VENTURE.
(a) WRITTEN NOTIFICATIONS; FILING.—Any hos-
pital that is a party to a hospital joint venture, acting on
the venture’s behalf, not later than 90 days after entering
into a written agreement to form the venture, or not later
than 90 days after, the date of the enactment of this Act,
whichever is later, may file simultaneously with the Attor-
ney General, the Secretary, and the Commission, a written
notification disclosing—
(1) the identities of the parties to the venture,
and
(2) the nature, objectives, and planned activity
of the venture.
Any hospital that is a party to a hospital joint venture,
acting on the venture’s behalf, may file additional disclo-
sure notifications pursuant to this section as are appro-
priate to extend the protections of section 273. In order
to maintain the protections of section 273, the venture,
not later than 90 days after a change in its membership
or its planned activity, shall file simultaneously with the
Attorney General, the Secretary, and the Commission a
written notification disclosing such change.
(b) PUBLICATION; FEDERAL REGISTER; NOTICE.—
Not later than 30 days after receiving a notification filed
under subsection (a), the Secretary, after consultation
with the Attorney General and the Commission, shall pub-
lish in the Federal Register a notice with respect to the
hospital joint venture that identifies the parties to the ven-
ture and that describes the planned activity of the venture.
Prior to its publication, the contents of such notice shall
be made available to the parties to the venture.
(c) EFFECT OF THE NOTICE.—If with respect to a
notification filed under subsection (a) of this section, no-
tice is published in the Federal Register, then such notifi-
cation shall operate to convey the protections of section
273 as of the earlier of—
(1) the date of the publication of notice under
subsection (b), or
(2) if such notice is not so published within the
time required by subsection (b) of this section, after
the expiration of the 30-day period beginning on the
date that the Attorney General, the Secretary, or the
Commission receives the applicable information de-
scribed in subsection (a).
to subsection (b) and shall not confer the protections of
section 273.
(f) JUDICIAL REVIEW: INAPPLICABLE WITH RE-
SPECT
TO NOTIFICATIONS.—Any action taken or not
taken by the Attorney General, the Secretary, or the Com-
mission with respect to notifications filed pursuant to this
section shall not be subject to judicial review.
(g) ADMISSIBILITY INTO EVIDENCE: DISCLOSURE OF
CONDUCT; PUBLICATION OF NOTICE; SUPPORTING OR
ANSWERING CLAIMS UNDER ANTITRUST LAWS.—
(1) Except as provided in paragraph (2), the
fact of disclosure of conduct under subsection (a)
and the fact of publication of a notice under sub-
section (b) shall be admissible into evidence in any
judicial or administrative proceeding for the sole
purpose of establishing that a person is entitled to
the protections of section 273.
(2) No action by the Attorney General, the Sec-
retary, or the Commission taken pursuant to this
section shall be admissible into evidence in any pro-
ceeding for the purpose of supporting or answering
any claim under the antitrust laws.
Subtitle E—Medicaid Program
Flexibility
SEC. 281. MODIFICATION OF FEDERAL REQUIREMENTS TO
ALLOW STATES MORE FLEXIBILITY IN CON-
TRACTING FOR COORDINATED CARE SERV-
ICES UNDER MEDICAID.
(a) IN GENERAL.—Section 1903(m) of the Social Se-
curity Act (42 U.S.C. 1396b(m)) is amended—
(1) by striking all that precedes paragraph (4)
and inserting the following:
‘‘(m) COORDINATED CARE.—
‘‘(1) PAYMENT
CONDITIONED
ON
COMPLI-
ANCE.—
‘‘(A) GENERAL RULE.—No payment shall
be made under this title to a State with respect
to expenditures incurred by it for payment to a
risk contracting entity or primary care case
management entity (as defined in subparagraph
(B)), or with respect to an undertaking de-
scribed in paragraph (6), unless the State and
the entity or undertaking meet the applicable
requirements of this subsection. For purposes
of determining whether payment may be made
under this section, the Secretary may reject a
State’s determination of compliance with any
provision of this subsection.
‘‘(B) GENERAL
DEFINITIONS.—For pur-
poses of this title—
‘‘(i) RISK
CONTRACTING
ENTITY.—
The term ‘risk contracting entity’ means
an entity that has a contract with the
State agency under which the entity—
‘‘(I) provides or arranges for the
provision of health care items or serv-
ices to individuals eligible for medical
assistance under the State plan under
this title, and
‘‘(II) is at risk (as defined in
clause (iv)) for part or all of the cost
of such items or services furnished to
such individuals.
‘‘(ii) PRIMARY
CARE
CASE
MANAGE-
MENT PROGRAM.—The term ‘primary care
case management program’ means a State
program under which individuals eligible
for medical assistance under the State plan
under this title are enrolled with primary
care case management entities, and are en-
titled to receive specified health care items
and services covered under such plan only
as arranged for and approved by such enti-
ties.
‘‘(iii) AT RISK.—An entity is ‘at risk’,
for purposes of this subparagraph, if it has
a contract with the State agency under
which it is paid a fixed amount for provid-
ing or arranging for the provision of speci-
fied health care items or services to an in-
dividual eligible for medical assistance and
enrolled with the entity, regardless of
whether such items or services are fur-
nished to such individual, and is liable for
all or part of the cost of furnishing such
items or services, regardless of whether or
the extent to which such cost exceeds such
fixed payment.
‘‘(iv) PRIMARY CARE CASE MANAGE-
MENT
ENTITY.—The term ‘primary care
case management entity’ means a health
care provider (whether an individual or an
entity) that, under a State primary care
case management program meeting the re-
quirements of paragraph (7), has a con-
tract with the State agency under which
the entity arranges for or authorizes the
provision of health care items and services
to individuals eligible for medical assist-
ance under the State plan under this title,
but is not at risk (as defined in clause (iv))
for the cost of such items or services pro-
vided to such individuals.
‘‘(2) GENERAL REQUIREMENTS FOR RISK CON-
TRACTING ENTITIES.—
‘‘(A) FEDERAL
OR
STATE
QUALIFICA-
TION.—Subject to paragraph (3), a risk con-
tracting entity meets the requirements of this
subsection only if it either—
‘‘(i) is a qualified health maintenance
organization as defined in section 1310(d)
of the Public Health Service Act, as deter-
mined by the Secretary pursuant to section
1312 of that Act, or
‘‘(ii) is an entity which the State
agency has determined—
‘‘(I) affords, to individuals eligi-
ble for medical assistance under the
State plan and enrolled with the en-
tity, access to health care items and
services furnished by the entity, with-
in the area served by the entity, at
least equivalent to the access such in-
dividuals would have to such health
care items and services in such area if
not enrolled with the entity, and
‘‘(II) has made adequate provi-
sion against the risk of insolvency,
and assures that individuals eligible
for medical assistance under this title
are not held liable for the entity’s
debts in case of the entity’s insol-
vency.
‘‘(B) CONTRACT WITH STATE AGENCY.—
Subject to paragraph (3), a risk contracting en-
tity meets the requirements of this subsection
only if the entity has a written contract with
the State agency that provides—
‘‘(i) that the entity will comply with
all applicable provisions of this subsection;
‘‘(ii) for a payment methodology based
on experience rating or another actuarially
sound methodology approved by the Sec-
retary, which guarantees (as demonstrated
by such models or formulas as the Sec-
retary may approve) that payments to the