654
Title VII, Subtitle A
‘‘(vi) the issuer of the policy makes available to
individuals, in addition to the policy described in this
subsection, any policy (otherwise offered by the is-
suer to individuals in the State) that meets the 1991
Model NAIC Regulation or 1991 Federal Regulation
and other requirements of this section without re-
gard to this subsection.
‘‘(C)(i) A policy described in this subparagraph—
‘‘(I) is offered by an eligible organization (as
defined in section 1876(b)),
‘‘(II) is not a policy or plan providing benefits
pursuant to a contract under section 1876 or an ap-
proved demonstration project described in section
603(c) of the Social Security Amendments of 1983,
section 2355 of the Deficit Reduction Act of 1984,
or section 9412(b) of the Omnibus Budget Reconcili-
ation Act of 1986, and
‘‘(III) provides benefits which, when combined
with benefits which are available under this title, are
substantially similar to benefits under policies of-
fered to individuals who are not entitled to benefits
under this title.
‘‘(ii) In making a determination under subclause (III)
of clause (i) as to whether certain benefits are substan-
tially similar, there shall not be taken into account, except
655
Title VII, Subtitle A
in the case of preventive services, benefits provided under
policies offered to individuals who are not entitled to bene-
fits under this title which are in addition to the benefits
covered by this title and which are benefits an entity must
provide in order to meet the definition of an eligible orga-
nization under section 1876(b)(1).’’.
(c) RENEWABILITY
OF MEDICARE SELECT POLI-
CIES.—Section 1882(q)(1) of the Social Security Act (42
U.S.C. 1395ss(q)(1)) is amended—
(1) by striking ‘‘(1) Each’’ and inserting
‘‘(1)(A) Except as provided in subparagraph (B),
each’’;
(2) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B)(i) Except as provided in clause (ii), in the
case of a policy that meets the requirements of sub-
section (t), an issuer may cancel or nonrenew such
policy with respect to an individual who leaves the
service area of such policy.
‘‘(ii) If an individual described in clause (i)
moves to a geographic area where an issuer de-
scribed in clause (i), or where an affiliate of such is-
suer, is issuing medicare supplemental policies, such
656
Title VII, Subtitle A
individual must be permitted to enroll in any medi-
care supplemental policy offered by such issuer or
affiliate that provides benefits comparable to or less
than the benefits provided in the policy being can-
celed or nonrenewed. An individual whose coverage
is canceled or nonrenewed under this subparagraph
shall, as part of the notice of termination or
nonrenewal, be notified of the right to enroll in other
medicare supplemental policies offered by the issuer
or its affiliates.
‘‘(iii) For purposes of this subparagraph, the
term ‘affiliate’ shall have the meaning given such
term by the 1991 NAIC Model Regulation.’’.
(d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of
the Social Security Act (42 U.S.C. 1395ss(t)(2)) is
amended—
(1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;
(2) by redesignating subparagraphs (A), (B),
(C), and (D) as clauses (i), (ii), (iii), and (iv), re-
spectively;
(3) in clause (iv), as so redesignated—
(A) by striking ‘‘paragraph (1)(E)(i)’’ and
inserting ‘‘paragraph (1)(B)(v)(I), and
(B) by striking ‘‘paragraph (1)(E)(ii)’’ and
inserting ‘‘paragraph (1)(B)(v)(II)’’;
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Title VII, Subtitle A
(4) by striking ‘‘the previous sentence’’ and in-
serting ‘‘this subparagraph’’; and
(5) by adding at the end the following new sub-
paragraph:
‘‘(B) If the Secretary determines that an issuer of
a policy approved under paragraph (1) has made a mis-
representation to the Secretary or has provided the Sec-
retary with false information regarding such policy, the
issuer is subject to a civil money penalty in an amount
not to exceed $100,000 for each such determination. The
provisions of section 1128A (other than the first sentence
of subsection (a) and other than subsection (b)) shall
apply to a civil money penalty under this subparagraph
in the same manner as such provisions apply to a penalty
or proceeding under section 1128A(a).’’.
(e) EFFECTIVE DATES.—
(1) NAIC STANDARDS.—If, within 6 months
after the date of the enactment of this Act, the Na-
tional Association of Insurance Commissioners
(hereafter in this subsection referred to as the
‘‘NAIC’’) makes changes in the 1991 NAIC Model
Regulation (as defined in section 1882(p)(1)(A) of
the Social Security Act) to incorporate the additional
requirements imposed by the amendments made by
this section, section 1882(g)(2)(A) of such Act shall
658
Title VII, Subtitle A
be applied in each State, effective for policies issued
to policyholders on and after the date specified in
paragraph (3), as if the reference to the Model Reg-
ulation adopted on June 6, 1979, were a reference
to the 1991 NAIC Model Regulation (as so defined)
as changed under this paragraph (such changed
Regulation referred to in this subsection as the
‘‘1994 NAIC Model Regulation’’).
(2) SECRETARY
STANDARDS.—If the NAIC
does not make changes in the 1991 NAIC Model
Regulation (as so defined) within the 6-month period
specified in paragraph (1), the Secretary of Health
and Human Services (in this subsection as the ‘‘Sec-
retary’’) shall promulgate a regulation and section
1882(g)(2)(A) of the Social Security Act shall be ap-
plied in each State, effective for policies issued to
policyholders on and after the date specified in para-
graph (3), as if the reference to the Model Regula-
tion adopted in June 6, 1979, were a reference to
the 1991 NAIC Model Regulation (as so defined) as
changed by the Secretary under this paragraph
(such changed Regulation referred to in this sub-
section as the ‘‘1994 Federal Regulation’’).
(3) DATE SPECIFIED.—
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Title VII, Subtitle A
(A) IN
GENERAL.—Subject to subpara-
graph (B), the date specified in this paragraph
for a State is the earlier of—
(i) the date the State adopts the 1994
NAIC Model Regulation or the 1994 Fed-
eral Regulation; or
(ii) 1 year after the date the NAIC or
the Secretary first adopts such regulations.
(B) ADDITIONAL LEGISLATIVE ACTION RE-
QUIRED.—In the case of a State which the Sec-
retary identifies, in consultation with the NAIC,
as—
(i) requiring State legislation (other
than legislation appropriating funds) in
order for medicare supplemental policies to
meet the 1994 NAIC Model Regulation or
the 1994 Federal Regulation, but
(ii) having a legislature which is not
scheduled to meet in 1995 in a legislative
session in which such legislation may be
considered,
the date specified in this paragraph is the first
day of the first calendar quarter beginning after
the close of the first legislative session of the
State legislature that begins on or after Janu-
660
Title VII, Subtitle A
ary 1, 1995. For purposes of the previous sen-
tence, in the case of a State that has a 2-year
legislative session, each year of such session
shall be deemed to be a separate regular session
of the State legislature.
SEC. 7003. INCLUDING NOTICE OF AVAILABLE HEALTH
MAINTENANCE ORGANIZATIONS IN ANNUAL
NOTICE TO BENEFICIARIES.
Section 1804 of the Social Security Act (42 U.S.C.
1395b–2) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘, and’’; and
(3) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) with respect to the area in which the indi-
vidual receiving the notice resides, a description of
the eligible organizations under section 1833(a)(1)
or section 1876 and the carriers offering a medicare
supplemental policy described in section 1882(t)(1)
which serve the area in which the individual receiv-
ing the notice resides.’’.
661
Title VII, Subtitle A
SEC. 7004. LEGISLATIVE PROPOSAL ON ENROLLING MEDI-
CARE BENEFICIARIES IN QUALIFIED HEALTH
PLANS.
(a) IN GENERAL.—
(1) LEGISLATIVE PROPOSAL.—Not later than 1
year after the date of the enactment of this Act, the
Secretary shall develop and submit to Congress a
proposal for legislation which provides for the vol-
untary enrollment of medicare beneficiaries in pri-
vate health insurance plans.
(2) MEDICARE BENEFICIARY.—For purposes of
this section, the term ‘‘medicare beneficiary’’ means
an individual who is eligible for benefits under part
A of title XVIII of the Social Security Act and is en-
rolled under part B of such title.
(b) CONTENTS OF THE PROPOSAL.—A proposal for
legislation submitted under subsection (a) shall—
(1) provide for an appropriate methodology by
which the Secretary shall make payment to private
health insurance plans for the enrollment of medi-
care beneficiaries;
(2) provide individuals the opportunity to re-
main enrolled in such a plan without an interruption
in coverage upon becoming medicare beneficiaries;
and
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Title VII, Subtitle A
(3) provide medicare beneficiaries with the op-
portunity to enroll in a private health insurance
plan.
SEC. 7005. OPTIONAL INTERIM ENROLLMENT OF MEDICARE
BENEFICIARIES IN PRIVATE HEALTH PLANS.
(a) INTERIM ENROLLMENT
OF MEDICARE BENE-
FICIARIES IN QUALIFIED HEALTH PLANS.—
(1) IN GENERAL.—Notwithstanding title XVIII
of the Social Security Act, the Secretary shall pro-
vide for a monthly payment as provided under sub-
section (b)(1) to a private health insurance plan on
behalf of enrolled medicare beneficiaries who choose
to enroll in such a plan.
(2) MEDICARE BENEFICIARY.—For purposes of
this section, the term ‘‘medicare beneficiary’’ means
an individual who is eligible for benefits under part
A of title XVIII of the Social Security Act and is en-
rolled under part B of such title.
(b) PAYMENT SPECIFIED.—
(1) FEDERAL PAYMENT.—
(A) IN
GENERAL.—The amount of pay-
ment specified in this paragraph for an individ-
ual who is enrolled in a private health insurance
plan is the lesser of—
663
Title VII, Subtitle A
(i) the applicable rate specified in sec-
tion 1876(a)(1)(C) of the Social Security
Act; or
(ii) the monthly premium charged the
individual for coverage under the private
health insurance plan.
(B) SOURCE OF PAYMENT.—The payment
to a private health insurance plan under this
paragraph for individuals entitled to benefits
under part A and enrolled under part B of title
XVIII of the Social Security Act shall be made
from the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical
Insurance Trust Fund, with the allocation to be
determined by the Secretary.
(2) INDIVIDUAL’S SHARE.—If the monthly pre-
mium for the private plan in which the individual is
enrolled is greater than the amount specified under
paragraph (1)(A)(i), the individual shall be respon-
sible for paying to the plan the difference between
the monthly premium charged the individual for cov-
erage under the plan and the amount specified in
paragraph (1)(A)(i).
(3) BUDGET-NEUTRALITY.—The total amount
of payments made by the Secretary under this sec-
664
Title VII, Subtitle A
tion with respect to a beneficiary for a year may not
exceed the amount of payment that would have been
made under title XVIII of the Social Security Act
during the year if the beneficiary did not choose to
enroll in a private health insurance plan during the
year.
(c) PAYMENTS UNDER THIS SECTION AS SOLE MED-
ICARE BENEFITS.—Payments made under this section
shall be instead of the amounts that would otherwise be
payable, pursuant to sections 1814(b) and 1833(a) of the
Social Security Act, for services furnished to medicare
beneficiaries.
(d) INCLUSION
IN ANNUAL NOTICE
TO BENE-
FICIARIES.—Section 1804 of the Social Security Act (42
U.S.C. 1395b–2), as amended by section 7003, is amend-
ed—
(1) by striking ‘‘and’’ at the end of paragraph
(3);
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘, and’’; and
(3) by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) a description of the option provided pursu-
ant to section 7005 of the Bipartisan Health Care
Reform Act of 1994 for payment to be made by the
665
Title VII, Subtitle A
Secretary on the individual’s behalf for enrollment in
a private health insurance plan.’’.
PART 2—IMPROVED PROGRAM EFFICIENCY
SEC. 7011. IMPROVED EFFICIENCY THROUGH CONSOLIDA-
TION 
OF 
ADMINISTRATION 
OF 
PARTS 
A
AND B.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall take such steps as may be necessary
to consolidate the administration (including processing
systems) of parts A and B of the medicare program (under
title XVIII of the Social Security Act) over a 5-year pe-
riod.
(b) COMBINATION OF INTERMEDIARY AND CARRIER
FUNCTIONS.—In taking such steps, the Secretary shall
contract with a single entity that combines the fiscal
intermediary and carrier functions in each area except
where the Secretary finds that special regional or national
contracts are appropriate.
(c) SUPERSEDING CONFLICTING REQUIREMENTS.—
The provisions of sections 1816 and 1842 of the Social
Security Act (including provider nominating provisions in
such section 1816) are superseded to the extent required
to carry out this section.
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Title VII, Subtitle A
PART 3—NOTICE OF ADVANCE DIRECTIVE
RIGHTS
SEC. 7021. PROVIDING NOTICE OF RIGHTS REGARDING
MEDICAL CARE TO INDIVIDUALS ENTERING
MEDICARE.
(a) IN GENERAL.—Section 1804 of the Social Secu-
rity Act (42 U.S.C. 1395b–2) is amended—
(1) in paragraph (2), by striking ‘‘and’’ at the
end;
(2) in paragraph (3), by striking the period at
the end and inserting ‘‘, and’’; and
(3) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) a description of an individual’s rights
under State law to make decisions concerning medi-
cal care, including the right to accept or refuse med-
ical or surgical treatment and the right to formulate
advance 
directives 
(as 
defined 
in 
section
1866(f)(3)).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to notices provided under section
1804 of the Social Security Act on or after January 1
of the first year beginning after the date of the enactment
of this Act.
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Title VII, Subtitle B
Subtitle B—Savings
PART 1—SAVINGS RELATING TO PART A
SEC. 7101. REDUCTION IN UPDATE FOR PAYMENTS FOR IN-
PATIENT HOSPITAL SERVICES.
Section 1886(b)(3)(B)(i) of the Social Security Act
(42 U.S.C. 1395ww(b)(3)(B)(i)) is amended—
(1) in subclause (XII)—
(A) by striking ‘‘fiscal year 1997’’ and in-
serting ‘‘for each of the fiscal years 1997
through 2000’’, and
(B) by striking ‘‘0.5 percentage point’’ and
inserting ‘‘2.0 percentage points’’; and
(2) in subclause (XIII), by striking ‘‘fiscal year
1998’’ and inserting ‘‘fiscal year 2005’’.
SEC. 7102. REDUCTION IN PAYMENTS FOR CAPITAL-RELAT-
ED COSTS FOR INPATIENT HOSPITAL SERV-
ICES.
(a) PPS HOSPITALS.—
(1) REDUCTION IN BASE PAYMENT RATES.—
Section 1886(g)(1)(A) of the Social Security Act (42
U.S.C. 1395ww(g)(1)(A)) is amended by adding at
the end the following new sentence: ‘‘In addition to
the reduction described in the preceding sentence,
for discharges occurring after September 30, 1995,
the Secretary shall reduce by 7.31 percent the
668
Title VII, Subtitle B
unadjusted standard Federal capital payment rate
(as described in 42 CFR 412.308(c), as in effect on
the date of the enactment of the Bipartisan Health
Care Reform Act of 1994) and shall reduce by 10.41
percent the unadjusted hospital-specific rate (as de-
scribed in 42 CFR 412.328(e)(1), as in effect on the
date of the enactment of the Health Security Act).’’.
(2) 
REDUCTION
IN
UPDATE.—Section
1886(g)(1) of such Act (42 U.S.C. 1395ww(g)(1)) is
amended—
(A) in subparagraph (B)(i)—
(i) by striking ‘‘and (II)’’ and insert-
ing ‘‘(II)’’, and
(ii) by striking the semicolon at the
end and inserting the following: ‘‘, and
(III) an annual update factor established
for the prospective payment rates applica-
ble to discharges in a fiscal year which
(subject to reduction under subparagraph
(C)) will be based upon such factor as the
Secretary determines appropriate to take
into account amounts necessary for the ef-
ficient and effective delivery of medically
appropriate and necessary care of high
quality;’’;
669
Title VII, Subtitle B
(B) by redesignating subparagraph (C) as
subparagraph (D); and
(C) by inserting after subparagraph (B)
the following new subparagraph:
‘‘(C)(i) With respect to payments attributable
to portions of cost reporting periods or discharges
occurring during each of the fiscal years 1996
through 2005, the Secretary shall include a reduc-
tion in the annual update factor established under
subparagraph (B)(i)(III) for discharges in the year
equal to the applicable update reduction described in
clause (ii) to adjust for excessive increases in capital
costs per discharge for fiscal years prior to fiscal
year 1992 (but in no event may such reduction re-
sult in an annual update factor less than zero).
‘‘(ii) In clause (i), the term ‘applicable update
reduction’ means, with respect to the update factor
for a fiscal year—
‘‘(I) 4.9 percentage points; or
‘‘(II) if the annual update factor for the
previous fiscal year was less than the applicable
update reduction for the previous year, the sum
of 4.9 percentage points and the difference be-
tween the annual update factor for the previous
670
Title VII, Subtitle B
year and the applicable update reduction for the
previous year.’’.
(b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1)
of such Act (42 U.S.C. 1395x(v)(1)) is further amended
by adding at the end the following new subparagraph:
‘‘(T) Such regulations shall provide that, in determin-
ing the amount of the payments that may be made under
this title with respect to the capital-related costs of inpa-
tient hospital services furnished by a hospital that is not
a subsection (d) hospital (as defined in section
1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital
(as defined in section 1886(d)(9)(A)), the Secretary shall
reduce the amounts of such payments otherwise estab-
lished under this title by 15 percent for payments attrib-
utable to portions of cost reporting periods occurring dur-
ing each of the fiscal years 1996 through 2005.’’.
PART 2—SAVINGS RELATING TO PART B
SEC. 7111. ESTABLISHMENT OF CUMULATIVE EXPENDI-
TURE GOALS FOR PHYSICIAN SERVICES.
(a) USE OF CUMULATIVE PERFORMANCE STAND-
ARD.—Section 1848(f)(2) of the Social Security Act (42
U.S.C. 1395w–4(f)(2)) is amended—
(1) in subparagraph (A)—
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Title VII, Subtitle B
(A) in the heading, by striking ‘‘IN GEN-
ERAL’’ and inserting ‘‘FISCAL
YEARS
1991
THROUGH 1994.—’’,
(B) in the matter preceding clause (i), by
striking ‘‘a fiscal year (beginning with fiscal
year 1991)’’ and inserting ‘‘fiscal years 1991,
1992, 1993, and 1994’’, and
(C) in the matter following clause (iv), by
striking ‘‘subparagraph (B)’’ and inserting
‘‘subparagraph (C)’’;
(2) in subparagraph (B), by striking ‘‘subpara-
graph (A)’’ and inserting ‘‘subparagraphs (A) and
(B)’’;
(3) by redesignating subparagraphs (B) and
(C) as subparagraphs (C) and (D); and
(4) by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) FISCAL YEARS BEGINNING WITH FIS-
CAL
YEAR
1995.—Unless Congress otherwise
provides, the performance standard rate of in-
crease, for all physicians’ services and for each
category of physicians’ services, for a fiscal year
beginning with fiscal year 1995 shall be equal
to the performance standard rate of increase