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1851B(c)(2) (with respect to an individual losing
coverage through an organization’s termination of
contract or discontinuation of coverage).’’.
(2) EFFECTIVE DATE.—The amendment made
by the paragraph (1) is effective after 1996.
(b) STANDARDIZED INFORMATION.—
(1) IN GENERAL.—
(A)(i) Section 1882 (42 U.S.C. 1395ss) is
amended by adding at the end the following:
‘‘(u) Each entity that offers a medicare supplemental
policy shall pay the Secretary for its pro rata share (a
determined by the Secretary) of the estimated costs to be
incurred by the Secretary in carrying out the requirements
of the first sentence of section 1851B(b)(1) and section
4360 of the Omnibus Reconciliation Act of 1990. Those
payments are appropriated to defray the costs described
in the preceding sentence, to remain available until ex-
pended.’’.
(ii) 
Section 
1882(c)(5) 
(42 
U.S.C.
1395ss(c)(5)) is amended by striking ‘‘(t)’’ and
inserting ‘‘(u)’’.
(B) Section 4360(g) of the Omnibus Rec-
onciliation Act of 1990 (42 U.S.C. 1395b–4(g))
is amended to read as follows:
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‘‘(g) FUNDING.—For funding provisions, see section
1851B(b)(2), and section 1882(u), of the Social Security
Act.’’.
(2) EFFECTIVE DATE.—The amendments made
by the preceding paragraphs apply to demonstra-
tions occurring after the date of enactment of this
Act, and to other activities occurring after 1996.
(c) COMMUNITY RATING.—
(1) IN GENERAL.—Section 1882(c) (42 U.S.C.
1395ss(c)) is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (4),
(B) by striking the period at the end of
paragraph (5) and adding ‘‘; and’’, and
(C) by adding after paragraph (5) the fol-
lowing: ‘‘(6) provides for the same premium for
each enrollee.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1882(b)(1)(B) (42 U.S.C. 1395ss(b)(1)(B)) is
amended by striking ‘‘(5)’’ and inserting ‘‘(6)’’.
(3) EFFECTIVE DATE AND TRANSITIONAL PRO-
VISIONS.—The amendments made by the preceding
paragraphs apply to policies and plans as of the be-
ginning of 1997 (whether issued before or after that
time), subject to such transitional rules as the Sec-
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retary may develop after consulting with the Na-
tional Association of Insurance Commissioners.
(d) LONG-TERM CARE INSURANCE SAFE HARBOR.—
(1) IN
GENERAL.—Section 1882(d)(3)(C) is
amended—
(A) by striking ‘‘or (iii)’’ and inserting
‘‘(iii)’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, or (iv) the sale or issuance of a
health insurance policy (or rider to an insur-
ance contract which is not a health insurance
policy) providing benefits only for long-term
care, nursing home care, home health care, or
community-based care, or any combination
thereof, that coordinates against or excludes
items and services available under this title, if
such coordination or exclusion is disclosed in
the policy’s outline of coverage.’’.
(2) EFFECTIVE DATE AND OTHER RULES.—
(A) The amendments made by this section
shall take effect as if included in the enactment
of section 4354 of the Omnibus Budget Rec-
onciliation Act of 1990 (hereafter referred to as
‘‘OBRA–1990’’).
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(B) No penalty shall be imposed under sec-
tion 1882(d)(3)(A)(i) of the Social Security Act
for any set or omission occurring after the ef-
fective date of the amendments made by section
4354 of OBRA–90 and before the date of the
enactment of this Act relating to the sale of a
health insurance policy described in section
1882(d)(3)(C)(iv) of the Social Security Act.
SEC. 11209. STANDARDIZED BENEFITS PACKAGES.
(a) MANAGED CARE.—The Secretary, no later than
July 1, 1996, after consulting with the National Associa-
tion of Insurance Commissioners, consumer groups, man-
aged care plans, providers of health care, and insurers,
shall develop standard packages of benefits (in addition
to the benefits covered under title XVIII of the Social Se-
curity Act (42 U.S.C. 1395 et seq.)) that may be offered
by eligible organizations under part C of that title (as
added by section 11202(a)(2) of this Act).
(b) MEDIGAP.—
(1)(A) The Secretary shall request the National
Association of Insurance Commissioners, in con-
sultation with consumer groups, managed care
plans, providers of health care, and insurers, to ex-
amine (and recommend by March 1, 1997, any re-
structuring needed for) the standard benefit pack-
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ages developed under section 1882(p)(2) of the So-
cial Security Act (42 U.S.C. 1395ss(p)(2)) in order
to facilitate to the maximum extent feasible compari-
son across medicare supplemental policies and bene-
fits offered by eligible organizations under section
1876.
(B) The Secretary, no later than May 1, 1997,
after taking into account any recommendations
made under subparagraph (A) by the National Asso-
ciation of Insurance Commissioners, shall restruc-
ture, as needed, those standard benefit packages.
(2)(A) Section 1882(p) (42 U.S.C. 1395ss(p))
is amended by adding at the end the following:
‘‘(11) The groups or packages of benefits (in-
cluding the core group of basic benefits) under para-
graph (2) shall be modified by any changes made by
the Secretary under section 11209(b)(1)(B) of the
Balanced Budget Act of 1995 for Economic Growth
and Fairness.’’.
(B) The amendment made by subparagraph (A)
applies to services provided after 1997.
MEDICAID LANGUAGE EXPLANATION
The proposal would include language with establish-
ing a per capita cap on the average per beneficiary rate
of growth in the Medicaid program.
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There would be an ‘‘equity adjustor’’ to states with
low per capita expenditures (i.e., their growth rates would
be higher than other states). The national average growth
rate, however, would be tagged to grow by a national index
(compensating for the ‘‘equity adjustor’’).
With respect to savings in the disproportionate share
hospital program, we would phase out the current dis-
proportionate share program and phase in a retargeted
disproportionate share program identical to the Coalition’s
bill.
Funding levels would be as follows:
1996
1997
1998
1999
2000
2001
2002
Phase-out
10.7
8.0
5.3
2.6
0.0
0.0
0.0
Phase-in .
0.0
1.3
2.7
4.0
5.0
5.0
5.0
Total ...
10.7
9.3
8.0
6.6
5.0
5.0
5.0
The program would also include a mandatory set-
aside of payments of $290 million for federally qualified
health centers and $125 million for rural health centers
in FY 1997 to be increased annually by the overall rate
of Medicaid growth in the previous year. We estimate this
would cost approximately $3 billion over the six year pe-
riod.
In addition, we would include language from the con-
ference report for the $3.5 billion for payments to states
for costs incurred for the provision of care to undocu-
mented aliens.
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‘‘(b) FOR UNDOCUMENTED IMMIGRANTS.—
‘‘(1) IN GENERAL.—Each of the 15 States with
the largest number of illegal immigrants (as esti-
mated by the Statistics Division of the Immigration
and Naturalization Service as of October, 1992)
shall be entitled, for each of fiscal years 1996
through 2000, to an amount bearing the same ratio
to the amount specified in paragraph (2) as the ille-
gal immigrant population in all 15 such States.
‘‘(2) AMOUNTS AUTHORIZED.—For purposes of
paragraph (1) amounts authorized to be appro-
priated are—
‘‘(A) $631,000,000 for fiscal year 1996;
‘‘(B) $664,000,000 for fiscal year 1997;
‘‘(C) $699,000,000 for fiscal year 1998;
‘‘(D) $735,000,000 for fiscal year 1999;
and
‘‘(E) $771,000,000 for fiscal year 2000.
‘‘(3) ANNUAL REPORT.—Not later than 90 days
after the end of each fiscal year in which a State re-
ceives or uses amounts pursuant to this subsection,
the State shall submit to the Secretary, and make
available to the public, a report on its use of such
amounts in such fiscal year which includes:
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‘‘(A) a listing of each of the providers re-
ceiving payment from such amounts and the
amount of such payments; and
‘‘(B) such information as the Secretary
may require to provide an assurance that serv-
ices provided with such payments were consist-
ent with the limitations under section 1903(v).
‘‘(c) 
EXTENDED
AVAILABILITY
OF
FUNDS.—
Amounts appropriated pursuant to this section and not
required by a State for the purposes of this section in a
fiscal year may be used by the State for such purposes
in any subsequent fiscal year, and shall remain available
until expended.
‘‘(d) STATE ASSURANCES.—Each State receiving
transitional assistance payments under this section shall
provide assurances satisfactory to the Secretary—
‘‘(1) in the case of payments under subsection
(a), that such payments will be used by the State to
make payments to health care providers for services
which would otherwise be uncompensated; and
‘‘(2) in the case of payments under subsection
(b), that such payments will be used by the State to
make payments for emergency health care services
for illegal immigrants in accordance with section
1903(v).’’.
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(2) PAYMENTS TO STATES.—Section 1903(a) is
amended—
(A) by striking the period at the end of
paragraph (7) and inserting ‘‘; plus’’; and
(B) by adding after paragraph (7) the fol-
lowing new paragraph;
‘‘(8) an amount equal to 100 percent
of payments authorized pursuant to section
1923A’’.
(3) SUNSET.—Effective October 1, 2000, the
amendments made by this subsection are repealed.
SEC. 11303. MEDICAID ELIGIBILITY QUALITY CONTROL
(MEQC) REQUIREMENTS.
Section 1903(u) is amended—
(1) in paragraph (1)(A), to read as follows:
‘‘(A) Notwithstanding subsection (a), the
Secretary shall reduce the aggregate Federal
payment limit applicable to a State for fiscal
year 1997 or any succeeding fiscal year by the
amount, if any, equal to the sum of the prod-
ucts, for each group defined in section 1931(b),
of—
‘‘(i) the number of excess erroneous
enrollments of individuals in each such
group; and
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‘‘(ii) the per beneficiary rate applica-
ble to such group for such fiscal year pur-
suant to section 1931(c).’’;
(2) in paragraph (1)(C), by striking ‘‘erroneous
excess payments for medical assistance’’ and insert-
ing ‘‘excess erroneous enrollments’’;
(3) by striking subparagraphs (D) and (E) of
paragraph (1) and inserting the following:
‘‘(D) CALCULATION
FACTORS.—For pur-
poses of this subsection—
‘‘(i) ERRONEOUS
ENROLLMENTS.—
The term ‘erroneous enrollments’ means,
with respect to a group defined in section
1931(b), the number of individuals that a
State 
reports, 
pursuant 
to 
section
1931(c)(4), as enrolled in such group who
either (I) should have been so reported as
enrolled in another such group which has
a lower per beneficiary base rate, or (II)
were ineligible for medical assistance under
the State plan.
‘‘(ii) EXCLUSION
FROM
ERRONEOUS
ENROLLMENTS.—The term ‘erroneous en-
rollments’ does not include any enroll-
ment—
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‘‘(I) of individuals whose eligi-
bility was determined exclusively by
the Commissioner of Social Security
under an agreement pursuant to sec-
tion 1634, and such other classes of
individuals as the Secretary may by
regulation prescribe whose eligibility
was determined in part under such an
agreement;
‘‘(II) resulting from the failure of
an individual to cooperate or give cor-
rect information with respect to third-
party liability as required under sec-
tion 1912(a)(1)(C) or 402(a)(26)(C);
or
‘‘(III) during a presumptive eligi-
bility period (as defined in section
1920(b)(1)).
‘‘(iii) EXCESS
ERRONEOUS
ENROLL-
MENTS.—The term ‘excess erroneous en-
rollments’ means, with respect to a group
of individuals defined in section 1931(b),
erroneous enrollments in excess of 3 per-
cent of total enrollments of individuals in
such group.’’; and
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(4) in paragraph (2), by striking ‘‘erroneous ex-
cess payments’’ and inserting ‘‘excess erroneous en-
rollments’’.
PART 2—ELIGIBILITY
SEC. 11311. EXTENSION OF COVERAGE TO ADDITIONAL IN-
DIVIDUALS, SUBJECT TO POVERTY-RELATED
OR CASELOAD LIMITS.
(a) EXPANDED ELIGIBILITY.—Section 1902(a)(10)
is amended by adding after subparagraph (F) the follow-
ing new paragraph:
‘‘(G) at the option of a State, for making
medical assistance available to one of the fol-
lowing groups of individuals who would other-
wise be ineligible for such assistance:
‘‘(i) individuals whose income does not
exceed a limit established by the State, not
greater than 150 percent of the Federal
poverty line; or * * *
(b) DISREGARD OF ADDITIONAL ENROLLEES IN CAL-
CULATION
OF
FEDERAL
PAYMENT
LIMIT.—Section
1931(c)(4)(A), as added by section 11301 of this Act, is
amended by adding at the end the following new clause:
‘‘(iii) EXPANDED
ELIGIBILITY
DIS-
REGARD.—The numbers reported by the
State shall not include any individuals en-
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rolled in the State program under this title
pursuant to section 1902(a)(10)(G).’’.
SEC. 11312. ELIMINATION OF AUTHORITY FOR NEW ELIGI-
BILITY EXPANSION DEMONSTRATIONS.
Section 1115(a)(1) is amended by inserting ‘‘(except
that waivers of requirements of section 1902 with respect
to eligibility of individuals for medical assistance shall not
be granted (but may be extended or modified) on or after
October 1, 1996)’’ after ‘‘project’’.
SEC. 11313. UPPER INCOME LIMIT ON ‘‘LESS RESTRICTIVE’’
ELIGIBILITY METHODOLOGIES.
Section 1902(r)(2) is amended—
(1) in paragraph (A), by inserting ‘‘(except as
provided in subparagraph (C))’’ after ‘‘no more re-
strictive’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(C) The methodology described in subparagraph (A)
shall not result in an income eligibility limit (based on
gross income) higher than the higher of—
‘‘(i) 150 percent of the Federal poverty line; or
‘‘(ii) the income eligibility limit applicable under
the State plan in effect in fiscal year 1995 (taking
into account any such limit applicable under a waiv-
er under section 1115).’’.
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PART 3—MANAGED CARE
SEC. 11321. PRIMARY CARE CASE MANAGEMENT SERVICES
AS STATE OPTION WITHOUT NEED FOR WAIV-
ER.
(a) PRIMARY CARE CASE MANAGEMENT SERVICES
DEFINED.—Section 1905 is amended by adding at the end
of the following new subsection:
‘‘(t)(1) The term ‘primary care case management sys-
tem’ means a State program under which individuals eligi-
ble for medical assistance under the State plan under this
title are enrolled with primary care case managers and are
entitled to receive health care items and services covered
under the State plan and specified in such program only
as approved (and arranged or provided) by such man-
agers.
‘‘(2) The term ‘primary care case manager’ means
a provider that has entered into a primary care case man-
agement contract with the State agency and that is—
‘‘(A) a physician, a physician group practice, or
an entity employing or having other arrangements
with physicians who provide case management serv-
ices; or
‘‘(B) at State option—
‘‘(i) a nurse practitioner (as described in
section 1905(a)(21);
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‘‘(ii) a certified nurse-midwife (as defined
in section 1861(gg)); or
‘‘(iii) a physician assistant (as defined in
section 1861(aa)(5).
‘‘(3) The term ‘primary care case management con-
tract’ means a contract with a State agency under which
a primary care case manager undertakes to locate, coordi-
nate and monitor covered primary care, covered primary
care and other services, or covered services specified by
the State, to all individuals enrolled with the primary care
case manager, and which provides for—
‘‘(A) reasonable and adequate hours of oper-
ation, including 24-hour availability of information,
referral, and treatment with respect to medical
emergencies;
‘‘(B) restriction of enrollment to individuals re-
siding sufficiently near a service delivery site of the
entity to be able to reach such site within a reason-
able time using available and affordable modes of
transportation;
‘‘(C) employment of, or contracts or other ar-
rangements with, sufficient numbers of physicians
and other appropriate health car professionals to en-
sure that services under the contract can be fur-
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nished to enrollees promptly and without com-
promise to quality of care;
‘‘(D) a prohibition on discrimination on the
basis of health status or requirements for health
services in enrollment, disenrollment, reenrollment,
or disenrollment of individuals eligible for medical
assistance under this title; and
‘‘(E) a right for enrollees to terminate such en-
rollment without cause during the first month of
each enrollment period, each such enrollment period
not to exceed six months in duration, and to termi-
nate their enrollment at any time for cause.
‘‘(4) The term ‘primary care’ includes all health care
services customarily provided by or under the supervision
of, and all laboratory services customarily provided by or
through, a general practitioner, family medicine physician,
internal medicine physician, obstetrician/gynecologist, or
pediatrician.’’.
(b) INCLUSION IN DEFINITION OF MEDICAL ASSIST-
ANCE.—Section 1905(a) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(24);
(2) by redesignating paragraph (25) as para-
graph (26); and
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(3) by inserting after paragraph (24) the fol-
lowing new paragraph:
‘‘(25) primary care case management services
(as defined in subsection (t)); and’’.
(c) STATE PLAN REQUIREMENT.—Section 1902(a) is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by adding after paragraph (62) the follow-
ing new paragraph:
‘‘(63) provide that any primary care case man-
agement services furnished under the plan will be
furnished in accordance with the provisions of sec-
tion 1905(t).’’.
(d) REPEAL
OF
WAIVER
AUTHORITY.—Section
1915(b) is amended by striking paragraph (1) and redes-
ignating paragraphs (2), (3), and (4) as paragraphs (1),
(2), and (3), respectively.
(e) EXCEPTION
TO FREEDOM
OF CHOICE.—For
State option to mandate enrollment in primary care case
management programs, see section 11322.
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SEC. 11322. STATE OPTIONS TO RESTRICT CHOICE OF PRO-
VIDERS.
(a) 
MANDATORY
ENROLLMENT
IN
MANAGED
CARE.—Section 1915(a) is amended by inserting at the
end the following new paragraph:
‘‘(3) requires individuals eligible for medical as-
sistance for items or services under the State plan
to enroll with an entity that provides or arranges for
services for enrollees under a contract pursuant to
section 1903(m), or with a primary care case man-
ager (as defined in section 1905(t)) (and/or restricts
the number of provider agreements with such enti-
ties under the State plan, consistent with quality of
care), if—
‘‘(A)(i) individuals are permitted to choose
between at least 2 such entities, or 2 such man-
agers, or an entity and a manager, each of
which has sufficient capacity to provide services
to enrollees; or
‘‘(ii) with respect to a rural area—
‘‘(I) individuals who are required to
enroll with a single entity are afforded the
option in appropriate circumstances to ob-
tain covered services by an alternative pro-
vider; and
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‘‘(II) an individual who is offered no
alternative to a single entity or manager is
given a choice between at least two provid-
ers within such entity or through such
manager;
‘‘(iii)(I) the State does not restrict the par-
ticipation of any Indian health program speci-
fied in section 1931(d)(1)(C); and
‘‘(II) in any case in which the State directs
the enrollment of an individual who is an In-
dian (as defined in section 4 of the Indian
Health Care Improvement Act of 1976) in ac-
cordance with this subsection, such individual is
enrolled with a participating entity specified in
subclause (I), if any;
‘‘(B) the State restricts such individuals
from changing their enrollment without cause
for periods no longer than six months (and per-
mits enrollees to change enrollment for cause at
any time); and
‘‘(C) such restrictions do not apply to pro-
viders of family planning services (as defined in
section 1905(a)(4)(C)) and are not conditions
for payment of medicare cost sharing pursuant
to section 1905(p)(3).’’.
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(b) STATE OPTION
FOR SIX-MONTH LOCK-IN
IN
RISK-BASED ARRANGEMENTS.—Section 1903(m)(2) is
amended—
(1) in paragraph (A)(vi)—
(A) by striking ‘‘(I) as provided under sub-
paragraph (F),’’; and
(B) by striking all that follows ‘‘to termi-
nate such enrollment’’ and inserting ‘‘in accord-
ance with the provisions of subparagraph (F);’’;
and
(2) in subparagraph (F), by striking ‘‘In the
case of—’’ and all that follows through ‘‘a State
plan’’ and inserting ‘‘A State plan’’.
SEC. 11323. ELIMINATION OF RESTRICTIONS ON RISK CON-
TRACTS.
(a) 75 PERCENT LIMIT ON MEDICARE AND MEDIC-
AID ENROLLMENT.—
(1) IN
GENERAL.—Section 1903(m)(2)(A) is
amended by striking clause (ii).
(2) 
CONFORMING
AMENDMENTS.—Section
1903(m)(2) is amended—
(A) by striking subparagraphs (C), (D),
and (E); and
(B) in subparagraph (G), by striking
‘‘clauses (i) and (ii)’’ and inserting ‘‘clause (i)’’.
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(b) SECRETARIAL APPROVAL OF CONTRACTS OVER
$100,000.—Section 1903(m)(2)(A) is amended in clause
(iii) by striking all that follow ‘‘actuarially sound basis’’
and inserting a semicolon.
(c) ADDITIONAL
AMENDMENTS.—For additional
amendments to section 1903(m)(2)(A), see section
11341(b).
SEC. 11324. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL
INDIVIDUALS ENROLLED IN MANAGED CARE.
Section 1902(e)(2) is amended—
(1) by striking ‘‘who is enrolled’’ and all that
follows through ‘‘section 1903(m)(2)(A)’’ and insert-
ing ‘‘who is enrolled with a health maintenance orga-
nization (as defined in section 1903(m)), with a pri-
mary care case manager (as defined in section
1905(t),’’; and
(2) by inserting before the period ‘‘or by or
through such case manager’’.
SEC. 11325. REQUIREMENTS TO ENSURE QUALITY OF AND
ACCESS TO CARE UNDER MANAGED CARE
PLANS.
Section 1902(a), as amended by section 11321(c), is
amended—
(1) in paragraph (62), by striking ‘‘; and’’ at
the end and inserting a semicolon;
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(2) by striking the period at the end of para-
graph (63) and inserting ‘‘; and’’; and
(3) by adding after paragraph (63) the follow-
ing new paragraph:
‘‘(64) provide, with respect to all agreements
between the State agency and entities described in
section 1903(m), section 1905(t), and other provid-
ers of managed care services—
‘‘(A) that the State agency will develop
and implement a quality improvement strategy,
consistent with standards established by the
Secretary, which includes—
‘‘(i) standards for the provision of
services under such agreements designed to
ensure reasonable access of enrolled indi-
viduals to covered services meeting applica-
ble standards for quality and safety;
‘‘(ii) procedures for monitoring per-
formance of entities under such agree-
ments, including—
‘‘(I) procedures for collection
from (or reporting by) providers of
patient data; and
‘‘(II) procedures for analysis of
such data;
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‘‘(B) that providers entering into such
agreements under which payment is made on a
prepaid capitated or other risk basis shall be re-
quired—
‘‘(i) to demonstrate a capacity to de-
liver covered services to all enrolled individ-
uals; and
‘‘(ii) to maintain an internal quality
assurance program, meeting such stand-
ards as the Secretary may establish in reg-
ulations, which includes a grievance proc-
ess.’’.
PART 4—BENEFITS
SEC. 11331. HOME- AND COMMUNITY-BASED SERVICES AS
STATE OPTION WITHOUT NEED FOR WAIVER.
(a) ELIMINATION OF WAIVER RESTRICTION.—Sec-
tion 1915(c) is relocated and redesignated as subsection
(u) of section 1905, and is amended—
(1) in paragraph (1), by striking everything
through ‘‘pursuant to a written plan’’ and inserting
‘‘The term ‘home- and community-based services’
means items and services (other than room and
board) which are provided in accordance with the
provisions of this subsection, and pursuant to a writ-
ten plan’’;
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vidual than amounts specified in regulations
with respect to a similarly situated institu-
tionalized individual.’’;
(4) in paragraph (4)—
(A) by striking the matter preceding sub-
paragraph (A) and inserting ‘‘A State plan pro-
viding for home- and community-based services
may—’’;
(B) in subparagraph (A)—
(i) by striking ‘‘benefits under such
waiver’’ and inserting ‘‘such benefits’’;
(ii) by striking ‘‘under such waiver’’
and inserting ‘‘for such benefits’’; and
(iii) by striking ‘‘if the waiver did not
apply’’ and inserting ‘‘if institutionalized’’;
and
(C) by striking the final sentence; and
(5) by striking paragraphs (6) through (10).
(b) INCLUSION IN DEFINITION OF ‘‘MEDICAL AS-
SISTANCE’’.—Section 1905(a)(22) is amended to read
‘‘home- and community-based services (as defined in sub-
section (u));’’.
(c) STATE PLAN REQUIREMENT.—Section 1902(a),
as amended by sections 11321(c) and 11325, is amend-
ed—
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(1) by striking ‘‘and’’ at the end of paragraph
(63);
(2) by striking the period at the end of para-
graph (64) and inserting ‘‘; and’’; and
(3) by adding after paragraph (64) the follow-
ing new paragraph:
‘‘(65) provide that any home- and community-
based services furnished under the plan will be fur-
nished in accordance with the provisions of section
1905(u).’’.
(d) REPEAL OF SUPERSEDED PROVISIONS.—
(1) Sections 1929 and 1930 are repealed.
(2) Section 1905(a) is amended by striking
paragraph (23).
SEC. 11332. ELIMINATION OF REQUIREMENTS TO PAY FOR
PRIVATE INSURANCE.
(a) REPEAL OF STATE PLAN PROVISION.—
(1) Section 1902(a)(25) is amended—
(A) by striking subparagraph (G); and
(B) by redesignating subparagraphs (H)
and (I) as subparagraphs (G) and (H), respec-
tively.
(b) REPEAL
OF ENROLLMENT REQUIREMENTS.—
Section 1906 is repealed.
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(c) REINSTATEMENT
OF STATE OPTION.—Section
1905(a) is amended, in the matter preceding clause (i),
by inserting ‘‘(including, at State option, through pur-
chase or payment of enrollee costs of health insurance)’’
after ‘‘The term ‘medical assistance’ means payment’’.
SEC. 11333. BENEFITS FOR INDIVIDUALS COVERED DURING
TRANSITION TO WORK.
(a) PAYMENT OF GROUP HEALTH COINSURANCE AT
MEDICAID RATES.—
(1) Section 1925(a)(4)(B) is amended—
(A) by striking ‘‘and’’ at the end of clause
(i)(II);
(B) by striking the period at the end of
clause (ii); and
(C) by adding after clause (ii) the following
new clause:
‘‘(iii) the State may limit the amount
of any deductible or copayment for any
health care item or service to the applica-
ble portion of the amount the State would
pay if such item or service had been fur-
nished by a provider participating in the
program under the State plan.’’.
(2) Section 1925(b)(4)(D) is amended by add-
ing at the end the following new sentence: ‘‘If the
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State elects to pay such deductibles and coinsurance,
the State may limit the amount of such payments as
provided in subsection (a)(4)(C)(iii).’’.
(b) ELIMINATION
OF
PREMIUM
LIMIT.—Section
1925 (b)(5)(C) is repealed.
(c) PROVISION CONCERNING REPORTING REQUIRE-
MENTS MADE OPTIONAL.—
(1) 
REPORTING
REQUIREMENT.—Section
1925(b)(2)(B) is amended to read as follows:
‘‘(B) REPORTING
REQUIREMENTS.—Each
State may require, as a condition for additional
extended assistance under this subsection, re-
ports by the family at such times and contain-
ing such information as the State may specify
concerning gross monthly earnings and costs
for child care.’’.
(2) STATE OPTION TO TERMINATE BENEFITS
FOR FAILURE TO REPORT.—Section 1925(b)(3)(A)
is amended (a) in clause (iii), by striking
‘‘(2)(B)(ii)’’ each place it appears and inserting
‘‘(2)(B)’’.
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PART 5—PROVIDER PARTICIPATION AND
PAYMENT RATES
SEC. 11341. METHODS FOR ESTABLISHING PROVIDER PAY-
MENT RATES.
(a) PLAN AMENDMENTS.—Section 1902(a)(13) is
amended—
(1) by striking all that precedes subparagraph
(D) and inserting the following:
‘‘(13) provide—
‘‘(A) for a public process for determination of
rates of payment under the plan (including any pay-
ment adjustments under section 1923) for nursing
facility services and services of intermediate care fa-
cilities for the mentally retarded under which—
‘‘(i) proposed rates are published, and pro-
viders, beneficiaries and their representatives,
and other concerned State residents are given a
reasonable opportunity for review and comment
thereon; and
‘‘(ii) final rates are published, together
with justifications based on the administrative
record; and’’;
(2) by redesignating subsections (D) and (E) as
subsections (B) and (C), respectively;
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(3) in subparagraph (B), as redesignated, by
striking everything through ‘‘of 100 percent of
costs’’ and inserting the following:
‘‘(B) for payment under the plan—
‘‘(i) for all services described in clause (B)
or (C) of section 1905(a)(2) furnished on or be-
fore September 30, 1998; and
‘‘(ii) for services described in clause (i) fur-
nished on or after October 1, 1998, by an en-
tity described in section 1931(d)(1)(C) of 100
percent of costs’’; and
(4) by striking subsection (F).
(b) STUDY AND REPORT TO CONGRESS.—The Sec-
retary shall conduct a study of the effect on access to serv-
ices, and quality and safety of services, of the rate-setting
methods used by States pursuant to section 1902(a)(13)
of the Social Security Act, as amended by subsection (a),
and shall submit a report to the Congress on the conclu-
sions from such study, together with any legislative rec-
ommendations, not later than the date four years after
enactment of this Act.
SEC. 11343. ELIMINATION OF OBSTETRICAL AND PEDI-
ATRIC PAYMENT RATE REQUIREMENTS.
Section 1926 is repealed.
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PART 6—STATE PLAN ADMINISTRATION
SEC. 11351. MMIS REQUIREMENTS.
(a) IN GENERAL.—Section 1903(r) is amended—
(1) by striking all that precedes paragraph (5)
and inserting the following:
‘‘(r) MEDICAID MANAGEMENT INFORMATION SYS-
TEMS (MMIS).—(1) IN GENERAL.—In order to receive
payments under subsection (a) for use of automated data
systems in administration of the State plan under this
title, a State must have in operation mechanized claims
processing and information retrieval systems that meet the
requirements of this subsection and that the Secretary has
found to be—
‘‘(A) adequate to provide efficient, economical,
and effective administration of such State plan;
‘‘(B) compatible with the claims processing and
information retrieval systems used in the adminis-
tration of title XVIII, and for this purpose—
‘‘(i) having a uniform identification coding
system for providers, other payees, and bene-
ficiaries under this title or title XVIII;
‘‘(ii) providing liaison between States and
carriers and intermediaries with agreements
under title XVIII to facilitate timely exchange
of appropriate data; and
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‘‘(iii) providing for exchange of data be-
tween the States and the Secretary with respect
to persons sanctioned under this title or title
XVIII;
‘‘(C) capable of providing accurate and timely
data;
‘‘(D) able to accommodate receipt of provider
claims in standard formats to the extent specified by
the Secretary; and
‘‘(E) able to transmit electronically such data
as is specified by the Secretary.’’.
(2) in paragraph (5)—
(A) by striking all that precedes clause (i)
and inserting the following:
‘‘(2) In order to meet the requirements of this para-
graph, mechanized claims processing and information re-
trieval systems must meet the following requirements:’’;
(B) in clause (iii), by striking ‘‘under para-
graph (6)’’; and
(C) by redesignating clauses (i) through
(iii) as paragraphs (A) through (C); and
(3) by striking paragraphs (6), (7), and (8).
(b) 
CONFORMING
AMENDMENTS.—Section
1902(a)(25)(A)(ii) is amended—
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(1) by striking ‘‘, and’’ at the end of subclause
(I) and inserting a semicolon;
(2) by relocating the matter in subclause (I)
immediately after ‘‘which plan shall’’, after striking
the intervening hyphen and the subclause designa-
tion; and
(3) by striking subclause (II).
SEC. 11352. ELIMINATION OF PERSONNEL REQUIREMENTS.
Section 1902(a)(4) is amended—
(1) in subparagraph (A), to read as follows:
‘‘(A) provide such methods of administration as
found by the Secretary to be necessary for the prop-
er and efficient operation of the plan;’’;
(2) by striking subparagraph (B); and
(3) by redesignating subparagraph (C) as sub-
paragraph (B).
SEC. 11353. ELIMINATION OF REQUIREMENTS FOR COOP-
ERATIVE AGREEMENTS WITH HEALTH AGEN-
CIES.
Section 1902(a)(11) is repealed.
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SEC. 11355. STATE REVIEW OF MENTALLY ILL OR RE-
TARDED 
NURSING 
FACILITY 
RESIDENTS
UPON CHANGE IN PHYSICAL OR MENTAL
CONDITION.
(a) STATE REVIEW ON CHANGE IN RESIDENT’S CON-
DITION.—Section 1919(e)(7)(B)(iii) is amended to read as
follows:
‘‘(iii) Review required upon change in resi-
dent’s condition.—A review and determination
under clause (i) or (ii) must be conducted
promptly after a nursing facility has notified
the State mental health authority or State men-
tal retardation or developmental disability au-
thority, as applicable, with respect to a mentally
ill or mentally retarded resident, that there has
been a significant change in the resident’s phys-
ical or mental condition.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1919(b)(3)(E) is amended by add-
ing at the end the following: ‘‘In addition, a nursing
facility shall notify the State mental health authority
or State mental retardation or developmental disabil-
ity authority, as applicable, promptly after a signifi-
cant change in the physical or mental condition of
a resident who is mentally ill or mentally retarded.’’.
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(2) The heading to section 1919(e)(7)(B) is
amended by striking ‘‘annual’’.
(3) The heading to section 1919(e)(7)(D)(i) is
amended by striking ‘‘annual’’.
SEC. 11356. NURSE AID TRAINING IN MEDICARE AND MED-
ICAID NURSING FACILITIES SUBJECT TO EX-
TENDED 
SURVEY 
AND 
UNDER 
CERTAIN
OTHER CONDITIONS.
(a) MEDICARE.—Section 1819(f)(2)(B)(iii)(I) is
amended, in the matter preceding sub-subclause (a), by
striking ‘‘by or in a skilled nursing facility’’ and inserting
‘‘by a skilled nursing facility (or in such a facility, unless
the State determines that there is no other such program
offered within a reasonable distance, provides notice of the
approval to the State long-term care ombudsman, and
assures, through an oversight effort, that an adequate en-
vironment exists for such a program)’’.
(b) 
MEDICAID.—Section 
1919(f)(2)(B)(iii)(I) 
is
amended, in the matter preceding sub-subclause (a), by
striking ‘‘by or in a nursing facility’’ and inserting ‘‘by
a nursing facility (or in such a facility, unless the State
determines that there is no other such program offered
within a reasonable distance, provides notice of the ap-
proval to the State long-term care ombudsman, and
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assures, through an oversight effort, that an adequate en-
vironment exists for such a program)’’.
SEC. 11357. COMBINED STATE PLAN SUBMISSION.
(a) IN GENERAL.—A State may submit to the Sec-
retary of Health and Human Services a single State plan
(with any amendments) to carry out—
(1) the long-term care grant program estab-
lished by subtitle E;
(2) the program of health insurance for the
temporarily unemployed established by subtitle G;
and
(3) the medical assistance program under title
XIX of the Social Security Act.
(b) EFFECT OF COMBINED SUBMISSION.—A State
plan submitted pursuant to subsection (a) must meet all
requirements of each of the programs specified in such
subsection.
(c) TIMETABLE FOR APPROVAL.—The Secretary
shall, within 90 days after receipt of a State plan submit-
ted pursuant to subsection (a), either approve or dis-
approve the plan, or inform the State that specified addi-
tional information is needed to permit review of the plan.
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SEC. 11358. PUBLIC PROCESS FOR DEVELOPING STATE
PLAN AMENDMENTS.
Section 1902(a), as amended by sections 11321(c),
11325, and 11331(c), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(64);
(2) by striking the period at the end of para-
graph (65) and inserting ‘‘; and’’; and
(3) by adding after paragraph (65) the follow-
ing new paragraph:
‘‘(66) a process for development of amendments
to the State plan that affords an opportunity for re-
view and comment to interested persons and groups,
including beneficiaries, providers, Indian tribes, trib-
al organizations, Indian Health Service facilities,
and urban Indian health organizations.’’.
PART 7—EFFECTIVE DATE
SEC. 11361. EFFECTIVE DATE.
(a) IN GENERAL.—Except where otherwise specifi-
cally provided, the provisions of and amendments made
by this subtitle shall be effective with respect to State pro-
grams under title XIX of the Social Security Act on and
after October 1, 1996.
(b) EXTENSION FOR STATE LAW AMENDMENT.—In
the case of a State plan under title XIX of the Social Se-
curity Act which the Secretary of Health and Human
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Services determines requires State legislation in order for
the plan to meet the additional requirements imposed by
the amendments made by subsection (a), the State plan
shall not be regarded as failing to comply with the require-
ments of such title solely on the basis of its failure to meet
these additional requirements before the first day of the
first calendar quarter beginning after the close of the first
regular session of the State legislature that begins after
the date of enactment of this Act. For purposes of the
previous sentence, 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 legis-
lature.
Subtitle D—Fraud and Abuse
SEC. 11401. SHORT TITLE; TABLE OF CONTENTS OF SUB-
TITLE.
(a) SHORT TITLE.—This subtitle may be cited as the
‘‘Federal Health Care Payment Integrity Act of 1995’’.
(b) TABLE OF CONTENTS OF SUBTITLE.—The table
of contents of this subtitle is as follows:
TABLE OF CONTENTS
Sec. 11401. Short title; table of contents of subtitle.
PART 1—AMENDMENTS TO CURRENT LAW ENFORCEMENT AUTHORITIES
Sec. 11402. Extension of current civil money penalties.
Sec. 11403. Exclusion of persons who defraud Medicare.
Sec. 11404. Illegal remuneration with respect to health care benefit programs
Sec. 11405. Amendments to PRO (quality of care) sanctions provisions.
Sec. 11406. Final adverse action data base.
Sec. 11407. Expansion of authority of medicaid fraud control units.
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Sec. 11408. Recovery of overpayments from bankrupt providers.
Sec. 11409. Grants to States to revoke licenses of unqualified providers.
Sec. 11410. Authorization for interception of wire, oral or electronic commu-
nications.
PART 2—RESOURCES FOR ANTI-FRAUD ACTIVITIES
Sec. 11421. Medicare anti-fraud and abuse program.
Sec. 11422. Medicare beneficiary integrity system.
Sec. 11423. Government-side anti-fraud reinvestment fund.
PART 3—AMENDMENTS TO CRIMINAL LAW
Sec. 11431. Health care fraud.
Sec. 11432. Forfeitures for federal health care offenses.
Sec. 11433. Injunctive relief relating to federal health care offenses.
Sec. 11434. Grand jury disclosure.
Sec. 11435. False statements.
Sec. 11436. Obstruction of criminal investigations, audits or inspections of fed-
eral health care offenses.
Sec. 11437. Theft or embezzlement.
Sec. 11438. Laundering of monetary instruments.
Sec. 11439. Authorized investigative demand procedures.
PART 4—MEDICARE IMPROVEMENTS
Subpart A—Coordination of Benefits
Sec. 11441. Clarification of time and filing limitations.
Sec. 11442. Clarification of liability of third party administrators.
Sec. 11443. Clarification of payment amounts to Medicare.
Sec. 11444. Conditions for double damages.
Sec. 11445. Repeal of excise tax.
Sec. 11446. Information requirements.
Sec. 11447. Technical changes concerning minimum sizes of group health
plans.
Subpart B—Contractor Reform
Sec. 11451. Increased flexibility in contracting for medicare claims processing.
Subpart C—Provisions Relating to Part B of Medicare
Sec. 11461. Replacement of reasonable charge methodology by fee schedules.
Sec. 11462. Application of inherent reasonableness to surgical dressings.
Sec. 11463. Application of competitive acquisition process to certain part B
items and services.
Sec. 11464. Application of competitive acquisition process to laboratory serv-
ices.
Sec. 11465. Changes in payments for clinical laboratory tests.
Subaprt D—Provisions Relating to Parts A and B of Medicare
Sec. 11471. Disclosure of taxpayer identifying numbers and other information.
Sec. 11472. Use of wage index for area in which home health services are fur-
nished.
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PART 1—AMENDMENTS TO CURRENT LAW
ENFORCEMENT AUTHORITIES
SEC. 11402. EXTENSION OF CURRENT CIVIL MONEY PEN-
ALTIES.
(a) GENERAL CIVIL MONEY PENALTIES.—Section
1128A (42 U.S.C. 1320a–7a) is amended—
(1) in the third sentence of subsection (a), by
striking ‘‘programs under title XVIII’’ and inserting
‘‘Federal health care program (as defined in sub-
section (m))’’;
(2) in subsection (f)—
(A) by redesignating paragraph (3) as
paragraph (4); and
(B) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) With respect to amounts recovered arising
out of a claim under a Federal health care program
(as defined in subsection (m)), the portion of such
amounts as is determined to have been paid by the
program shall be repaid to the program, and the
portion of such amount attributable to the amounts
recovered under this section by reason of the amend-
ments made by the Federal Health Care Payment
Integrity Act of 1995 (as estimated by the Sec-
retary) shall be deposited into the Health Care
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Fraud and Abuse Control Account established under
section 11423 of such Act.’’;
(3) in subsection (i)—
(A) in paragraph (2), by striking ‘‘title V,
XVIII, XIX, or XX of this Act’’ and inserting
‘‘a Federal health care program (as defined in
subsection (m))’’;
(B) in paragraph (4), by striking ‘‘a health
insurance or medical services program under
title XVIII or XIX of this Act’’ and inserting
‘‘a Federal health care program (as so de-
fined)’’; and
(C) in paragraph (5), by striking ‘‘title V,
XVIII, XIX, or XX’’ and inserting ‘‘a Federal
health care program (as so defined)’’; and
(4) by adding at the end the following new sub-
section:
‘‘(m)(1) For purposes of this section, with respect to
a Federal health care program not contained in this Act,
references to the Secretary in this section shall be deemed
to be references to the Secretary of Administrator of the
department or agency with jurisdiction over such program
and references to the Inspector General of the Department
of Health and Human Services in this section shall be
deemed to be references to the Inspector General and any
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other office with primary enforcement authority of the ap-
plicable department or agency. With respect to investiga-
tions of an employee welfare benefit plan as defined in
section 3 of the Employee Retirement Income Security
Act, the agency or department shall be deemed to be the
Department of Labor.
‘‘(2)(A) The Secretary and Administrator of the de-
partments and agencies referred to in paragraph (1) may
include, in any action pursuant to this section, claims
within the Jurisdiction of other Federal departments or
agencies as long as the following conditions are satisfied:
‘‘(i) The case involves primarily claims submit-
ted to the Federal health care programs of the de-
partment or agency initiating the action.
‘‘(ii) The Secretary of Administrator and the
Inspector General of the department or agency initi-
ating the action gives notice and an opportunity to
participate in the investigation to the Secretary or
Administrator and the Inspector General of the de-
partment or agency with primary jurisdiction over
the Federal health care programs to which the
claims were submitted. With respect to actions in-
volving an employee welfare benefit plan as defined
in section 3 of the Employee Retirement Income Se-
curity Act, the department with primary jurisdiction
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shall be deemed to be the Department of Labor for
purposes of this notice.
‘‘(B) If the conditions specified in subparagraph (A)
are fulfilled, the Inspector General of the department or
agency initiating the action is authorized to exercise all
powers granted under the Inspector General Act of 1978
with respect to the claims submitted to the other depart-
ments or agencies to the same manner and extent as pro-
vided in that Act with respect to claims submitted to such
departments or agencies.’’.
(b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP
OR CONTROL INTEREST IN PARTICIPATING ENTITY.—
Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(a)(D);
(2) by striking ‘‘, or’’ at the end of paragraph
(2) and inserting a semicolon;
(3) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(4) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) in the case of a person who is not an orga-
nization, agency, or other entity, is excluded from
participating in a program under title XVIII or a
State health care program in accordance with this
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subsection or under section 1128 and who, at the
time of a violation of this subsection, retains a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer
or managing employee (as defined in section
1126(b)) of, an entity that is participating in a pro-
gram under title XVIII or a State health care pro-
gram;’’.
(c) EMPLOYER BILLING FOR SERVICES FURNISHED,
DIRECTED, OR PRESCRIBED
BY
AN EXCLUDED EM-
PLOYEE.—Section 1128A(a)(1) (42 U.S.C. 1320a–
7a(a)(1)) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(C);
(2) by striking ‘‘; or’’ at the end of subpara-
graph (D) and inserting ‘‘, or’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) is for a medical or other item or serv-
ice furnished, directed, or prescribed by an indi-
vidual who is an employee or agent of the per-
son during a period in which such employee or
agent was excluded from the program under
which the claim was made on any of the
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grounds for exclusion described in subpara-
graph (D);’’.
(d) MODIFICATIONS
OF AMOUNTS
OF PENALTIES
AND
ASSESSMENTS.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)), as amended by subsection (b), is amended
in the matter following paragraph (4)—
(1) 
by 
striking 
‘‘$2,000’’ 
and 
inserting
$10,000’’;
(2) by inserting ‘‘; in cases under paragraph
(4), $10,000 for each day the prohibited relationship
occurs’’ after ‘‘false or misleading information was
given’’; and
(3) by striking ‘‘twice the amount’’ and insert-
ing ‘‘3 times the amount’’.
(e) CLAIMS FOR ITEM OR SERVICE BASED ON INCOR-
RECT
CODING.—Section 1128A(a)(1)(A) (42 U.S.C.
1320a–7a(a)(1)(A)) is amended by striking ‘‘claimed,’’
and inserting ‘‘claimed, including any person who engages
in a pattern or practice of presenting or causing to be pre-
sented a claim for an item or service that is based on a
code that the person knows or should know will result in
a greater payment to the person that the code the person
knows or should know is applicable to the item or service
actually provided’’.
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(f) PERMITTING
SECRETARY
TO
IMPOSE
CIVIL
MONEY PENALTY.—Section 1128A(b) (42 U.S.C. 1320a–
7a(b)) is amended by adding the following new subpara-
graph:
‘‘(3) Any person (including any organization,
agency, or other entity, but excluding a beneficiary
as defined in subsection (i)(5)) who the Secretary
determines has violated section 1128B(b) of this
title shall be subject to a civil monetary penalty of
not more that $10,000 for each such violation. In
addition, such person shall be subject to an assess-
ment of not more than twice the total amount of the
remuneration offered, paid, solicited, or received in
violation of section 1128B(b). The total amount of
remuneration subject to all assessments shall be cal-
culated without regard to whether some portion
thereof also may have been intended to serve a pur-
pose 
other 
than 
one 
proscribed 
by 
section
1128B(b).’’.
(g) PROHIBITION AGAINST OFFERING INDUCEMENTS
TO INDIVIDUALS ENROLLED UNDER PROGRAMS.—
(1) 
OFFER
OF
REMUNERATION.—Section
1128A(a) (42 U.S.C. 1320a–7a(a)) as amended by
subsection (b) of this section, is amended—
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(A) by striking ‘‘or’’ at the end of para-
graph (3) and inserting a semicolon;
(B) by inserting ‘‘or’’ after the semicolon
at the end of paragraph (4); and
(C) by inserting after paragraph (4) the
following new paragraph:
‘‘(5) offers to or transfers remuneration to
any individual eligible for benefits under a Fed-
eral health program that such person knows or
should know is likely to influence such individ-
ual to order or receive from a particular pro-
vider, practitioner, or supplier any item or serv-
ice for which payment may be made, in whole
or in part, under such program;’’.
(2) 
REMUNERATION
DEFINED.—Section
2238A(i) (42 U.S.C. 1320a–7a(i)) is amended by
adding the following new paragraph:
‘‘(6) The term ‘remuneration’ includes the waiv-
er of coinsurance and deductible amounts (or any
part thereof), and transfers of items or services for
free or for other than fair market value. The term
‘remuneration’ does not include—
‘‘(A) the waiver of coinsurance and deduct-
ible amounts by a person, if—
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‘‘(i) the waiver is not offered as part
of any advertisement or solicitation;
‘‘(ii) the person does not routinely
waive coinsurance or deductible amounts;
and
‘‘(iii) the person—
‘‘(I) waives the coinsurance and
deductible amount after determining
in good faith that the individual is in
financial need;
‘‘(II) fails to collect coinsurance
or deductible amounts after making
reasonable collection efforts; or
(III) provides for any permissible
waiver 
as 
specified 
in 
section
1128B(b)(3) or in regulations issued
by the Secretary;
‘‘(B) differentials in coinsurance and de-
ductible amounts as part of a benefit plan de-
sign as long as the differentials have been dis-
closed in writing to all beneficiaries, third party
payors, and providers, to whom claims are pre-
sented and as long as the differentials meet the
standards as defined in regulations promulgated
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by the Secretary not later than 180 days after
the date of the enactment of this Act; or
‘‘(C) incentives given to individuals to pro-
mote the delivery of preventive care as deter-
mined by the Secretary in regulations as pro-
mulgated.’’.
(h) DEFINITION OF FEDERAL HEALTH CARE PRO-
GRAM.—Section 1128A (42 U.S.C. 1320a–7b) is amended
by adding at the end the following new subsection:
‘‘(m) FEDERAL HEALTH CARE PROGRAM.—For pur-
poses of this section, the term ‘Federal health care pro-
gram’ means—
‘‘(1) any plan or program (except a plan de-
scribed in section 3(1) of the Employee Retirement
Income Security Act) that provides health benefits,
whether directly, through insurance, or otherwise,
which is funded, in whole or in part, by the United
States Government; or
‘‘(2) any State health care program, as defined
in section 1128(h).’’.
SEC. 11403. EXCLUSION OF PERSONS WHO DEFRAUD MEDI-
CARE.
(a) MINIMUM PERIOD OF EXCLUSION FOR CERTAIN
INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE
EXCLUSION FROM MEDICARE AND STATE HEALTH CARE
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PROGRAMS.—Section 1128(c)(3) (42 U.S.C. 1320a–
7(c)(3)) is amended by adding at the end the following
new subparagraphs:
‘‘(D) In the case of an exclusion of an individ-
ual or entity under paragraph (1), (2), or (3) of sub-
section (b), the period of the exclusion shall be 3
years, unless the Secretary determines in accordance
with published regulations that a longer period is
appropriate because of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individ-
ual or entity under subsection (b)(4) or (b)(5), the
period of the exclusion shall not be less than the pe-
riod during which the individual or entity’s license to
provide health care is revoked, suspended, or surren-
dered, or the individual or the entity is excluded or
suspended from a Federal or State health care pro-
gram.
‘‘(F) In the case of an exclusion of an individ-
ual or entity under subsection (b)(6)(B), the period
of the exclusion shall be not less than 1 year.’’.
(b) PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP OR CONTROL INTEREST IN SANCTIONED EN-
TITIES.—Section 1128(b) (42 U.S.C. 1320a–7(b)) is
amended by adding at the end the following new para-
graph:
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‘‘(15) INDIVIDUALS
CONTROLLING
A
SANC-
TIONED ENTITY.—Any individual who has a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer
or managing employee (as defined in section
1126(b)) of, an entity—
‘‘(A) that has been convicted of any of-
fense described in subsection (a) or in para-
graph (1), (2), or (3) of this subsection; or
‘‘(B) that has been excluded from partici-
pation under a program title XVIII or under a
State health care program.’’.
(c) SANCTIONS AGAINST PROVIDERS FOR EXCESSIVE
FEES
OR PRICES.—Section 1128(b)(6)(A) (42 U.S.C.
1320a–7(b)(6)(A)) is amended—
(1) by inserting after ‘‘substantially in excess of
such individual’s or entity’s usual charges’’ the fol-
lowing: ‘‘(as specified by the Secretary in regula-
tions)’’; and
(2) by striking ‘‘(or in applicable cases, sub-
stantially in excess of such individuals or entities’
costs)’’ and inserting ‘‘, costs or fees’’ before ‘‘for
such items or services.’’.
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(d) APPLICABILITY OF THE BANKRUPTCY CODE TO
PROGRAM SANCTIONS.—
(1) Section 1128 (42 U.S.C. 1320a–7) is
amended by adding at the end the following new
subsection:
‘‘(j) An exclusion imposed under this sec-
tion is not subject to the automatic stay im-
posed under the Bankruptcy Code, 11 U.S.C.
§ 362.’’.
(2) Section 1128A(a) (42 U.S.C. 1320a–7a) is
amended by adding at the end the following sen-
tence: ‘‘An exclusion imposed under this section is
not subject to the automatic stay which is imposed
under 11 U.S.C. § 362, and any penalties and as-
sessments imposed under this section shall be
nondischargeable under the Bankruptcy Code (11
U.S.C. § 101 et seq.).’’.
(3) 
Section 
1892(a)(4) 
(42 
U.S.C.
1395ccc(a)(4)) is amended by adding at the end the
following sentence: ‘‘An exclusion imposed under
paragraph (2)(C)(ii) or paragraph (3)(B) is not sub-
ject to the automatic stay which is imposed under
the Bankruptcy Code (11 U.S.C. § 362).’’.
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SEC. 11404. ILLEGAL REMUNERATION WITH RESPECT TO
HEALTH CARE BENEFIT PROGRAMS.
(a) IN GENERAL.—Chapter 11 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 227. Illegal remuneration with respect to health
care benefit programs
‘‘(a) Whoever knowingly and willfully solicits or re-
ceives any remuneration (including any kickback, bribe, or
rebate) directly or indirectly, overtly or covertly, in cash
or in kind—
‘‘(1) in return for referring any individual to a
person for the furnishing or arranging for the fur-
nishing of any item or service for which payment
may be made in whole or in part by any health care
benefit program; or
‘‘(2) in return for purchasing, leasing, ordering,
or arranging for or recommending purchasing, leas-
ing or ordering any good, facility, service, or item
for which payment may be made in whole or in part
by any health care benefit program, or attempting to
do so,
shall be fined under this title or imprisoned for not more
than 5 years, or both.
‘‘(b) Whoever knowingly and willfully offers or pays
any remuneration (including any kickback, bribe, or re-
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bate) directly or indirectly, overtly, or covertly, in cash or
in kind to any person to induce such person—
‘‘(1) to refer an individual to a person for the
furnishing or arranging for the furnishing of any
item or service for which payment may be made in
whole or in part by any health benefit program; or
‘‘(2) to purchase, lease, order, or arrange for or
recommend purchasing, leasing, or ordering any
good, facility, service, or item for which payment
may be made in whole or in part by any health bene-
fit program or attempts to do so,
shall be fined under this title or imprisoned for not more
than 5 years, or both.
‘‘(c) Subsections (a) and (b) shall not apply to—
‘‘(1) a discount or other reduction in price ob-
tained by a provider of services or other entity under
a health care benefit program if the reduction in
price is properly disclosed and appropriately re-
flected in the costs claimed or charges made by the
provider or entity under a health care benefit pro-
gram;
‘‘(2) any amount paid by an employer to an em-
ployee (who has a bona fide employment relationship
with such employer) for employment in the provision
of covered items or services if the amount of the re-
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muneration under the arrangement is consistent
with the fair market value of the services and is not
determined in a manner that takes into account (di-
rectly or indirectly) the volume or value of any refer-
rals;
‘‘(3) any amount paid by a vendor of goods or
services to a person authorized to act as a purchas-
ing agent for a group of individuals or entities who
are furnishing services reimbursed under a health
care benefit program if—
‘‘(A) the person has a written contract,
with each such individual or entity, which speci-
fies the amount to be paid the person, which
amount may be a fixed amount or a percentage
of the value of the purchases made by each
such individual or entity under the contract,
and
‘‘(B) in the case of an entity that is a pro-
vider of services (as defined in section 1861(u)
of the Social Security Act, the person discloses
(in such form and manner as the Secretary of
Health and Human Services requires) to the
entity and, upon request, to the Secretary the
amount received from each such vendor with re-
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spect to purchases made by or on behalf of the
entity;
‘‘(4) a waiver of any coinsurance under part B
of title XVIII of the Social Security Act by a feder-
ally qualified health care center with respect to an
individual who qualifies for subsidized services under
a provision of the Public Health Service Act; and
‘‘(5) any payment practice specified by the Sec-
retary of Health and Human Services in regulations
promulgated pursuant to section 14(a) of the Medi-
care and Medicaid Patient and Program Protection
act of 1987.
‘‘(d) Any person injured in his business or property
by reason of a violation of this section or section 226 of
this title may sue therefor in any appropriate United
States district court and shall recover threefold the dam-
ages such person sustains and the cost of the suit, includ-
ing a reasonable attorney’s fee.
‘‘(e) As used in this section, ‘health care benefit pro-
gram’ has the meaning given such term in section 1347(b)
of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 11 of title 18, United States
Code, is amended by adding at the end the following:
‘‘227. Illegal remuneration with respect to health care benefit programs.’’.
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(c) CONFORMING AMENDMENT.—Section 1128B of
the Social Security Act (42 U.S.C. 1320a–7b) is amended
by striking subsection (b).
SEC. 11405. AMENDMENTS TO PRO (QUALITY OF CARE)
SANCTIONS PROVISIONS.
(a) MINUMUM PERIOD OF EXCLUSION FOR PRACTI-
TIONERS AND PERSONS FAILING TO MEET STATUTORY
OBLIGATIONS.—
(1) IN
GENERAL.—Section 1156(b)(1) (42
U.S.C. 1320c–5(b)(1)) is amended in the second
sentence by striking ‘‘may prescribe)’’ and inserting
‘‘may prescribe, except that such period may not be
less than 1 year).’’.
(2) 
CONFORMING
AMENDMENT.—Section
1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended
by striking ‘‘shall remain’’ and inserting ‘‘shall (sub-
ject to the minimum period specified in the second
sentence of paragraph (1)) remain’’.
(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI-
TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)
(42 U.S.C. 1320c–5(b)(1) is amended—
(1) in the second sentence, by striking ‘‘and de-
termines’’ and all that follows through ‘‘such obliga-
tions,’’; and
(2) by striking the third sentence.
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(c) SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI-
GATIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3))
is amended by striking ‘‘the actual or estimated cost’’ and
inserting ‘‘up to $10,000 for each instance.’’
SEC. 11406. FINAL ADVERSE ACTION DATA BASE.
(a) GENERAL PURPOSE.—Not later than January 1,
1997, the Secretary of Health and Human Services (in
this section referred to as the ‘‘Secretary’’) shall establish
a national health care fraud and abuse data collection pro-
gram or the reporting of final adverse actions against
health care providers, suppliers, or practitioners as re-
quired by subsection (b), with access as set forth in sub-
section (c).
(b) REPORTING OF INFORMATION.—
(1) IN
GENERAL.—Each government agency
and Federal health care program shall (and each
other health plan may) report to the Secretary any
final adverse action taken against a health care pro-
vider, supplier, or practitioner.
(2) INFORMATION TO BE REPORTED.—The in-
formation to be reported under paragraph (1) in-
cludes:
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(A) The name and TIN (as defined in sec-
tion 7701(a)(41) of the Internal Revenue Code
of 1986) of—
(i) any health care provider, supplier,
or practitioner that is the subject of a final
adverse action, and
(ii) any individual with a relationship
specified in section 1128(b)(8)(A) to an
entity described in clause (i).
(B) The name (if know) of any health care
entity with which a health care provider, sup-
plier, or practitioner is affiliated or associated.
(C) The nature of the final adverse action
and whether such action is on appeal.
(D) A description of the acts of omissions
and injuries upon which the final adverse action
was based, and such other information as the
Secretary determines by regulation is required
for appropriate interpretation of information re-
ported under this section.
(3) CONFIDENTIALITY.—In determining what
information is required, the Secretary shall include
procedures to ensure that the privacy of individuals
receiving health care services is appropriately pro-
tected.
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(4) TIMING AND FORM OF REPORTING.—The
information required to be reported under this sub-
section shall be reported regularly (but less often
than monthly) and in such form and manner as the
Secretary prescribes. Such information shall first be
required to be reported on a date specified by the
Secretary.
(c) DISCLOSURE
AND CORRECTION
OF INFORMA-
TION.—
(1) DISCLOSURE.—With respect to the informa-
tion about final adverse actions reported to the Sec-
retary under this section respecting a health care
provider, supplier, or practitioner, the Secretary
shall, by regulation, provide for—
(A) disclosure of the information, upon re-
quest, to the health care provider, supplier, or
licensed practitioner, and
(B) procedures in the case of disputed ac-
curacy of the information.
(2) CORRECTIONS.—Each Government agency
and health plan shall report corrections of informa-
tion already reported about any final adverse action
taken against a health care provider, supplier, or
practitioner, in such form and manner that the Sec-
retary prescribes by regulation.
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(d) ACCESS TO REPORTED INFORMATION.—
(1) AVAILABILITY.—The information in this
database shall be available to Federal and State gov-
ernment agencies, health plans, and the public pur-
suant to procedures that the Secretary shall provide
by regulation.
(2) FEES
FOR
DISCLOSURE.—The Secretary
may establish or approve reasonable fees for the dis-
closure of information in this database (other than
with respect to requests by Federal agencies). The
amount of such a fee may be sufficient to recover
the full costs of carrying out the provisions of this
section, including reporting, disclosure and adminis-
tration. Such fees shall be available to the Secretary
or, in the Secretary’s discretion to the agency des-
ignated under this section to cover such costs.
(e) PROTECTION FROM LIABILITY
FOR REPORT-
ING.—No person or entity, including the agency des-
ignated by the Secretary in subsection (b)(5) shall be held
liable in any civil action with respect to any report made
as required by this section, without knowledge of the fal-
sity of the information contained in the report.
(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section:
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(1)(A) The term ‘‘final adverse action’’ in-
cludes:
(i) Civil judgments against a health care
provider or practitioner in Federal or State
court related to the delivery of a health care
item or service.
(ii) Federal or State criminal convictions
related to the delivery of a health care item or
service.
(iii) Actions by Federal or State agencies
responsible for the licensing and certifications
of health care providers, suppliers, and licensed
health care practitioners, including—
(I) formal or official actions, such as
revocation or suspension of a license (and
the length of any such suspension), rep-
rimand, censure or probation,
(II) any other loss of license, or the
right to apply for or renew a license of the
provider, supplier, or practitioner, whether
by operation of law, voluntary surrender,
non-renewable or otherwise, or
(III) any other negative action or
finding by such Federal or State agency
that, is publicly available information.
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(iv) Exclusion from participation in Fed-
eral or State health care programs.
(v) Any other adjudicated actions or deci-
sions that the Secretary shall establish by regu-
lation.
(B) The term does not include any action with
respect to a malpractice claim.
(2) The terms ‘‘licensed health care practi-
tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’
mean, with respect to a State, an individual who is
licensed or otherwise authorized by the State to pro-
vide health care services (or any individual who,
without authority holds himself or herself out to be
so licensed or authorized).
(3) The term ‘‘health care provider’’ means a
provider of services as defined in section 1861(u) of
the Social Security Act, and any person or entity, in-
cluding a health maintenance organization, group
medical practice, or any other entity listed by the
Secretary in regulation, that provides health care
services.
(4) The term ‘‘supplier’’ means a supplier of
health care items and services described in section
1819(a) and (b), and section 1861 of the Social Se-
curity Act.
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(5) The term ‘‘Government agency’’ shall in-
clude:
(A) The Department of Justice.
(B) The Department of Health and
Human Services.
(C) Any other Federal agency that either
administers or provides payment for the deliv-
ery of health care services, including, but not
limited to the Department of Defense and the
Veterans’ Administration.
(D) State law enforcement agencies.
(E) State medicaid fraud and abuse units.
(F) Federal or State agencies responsible
for the licensing and certification of health care
providers and licensed health care practitioners.
(6) the term ‘‘Federal health care program’’
has the meaning given such term in section
1128B(b) of the Social Security Act.
(7) The term ‘‘health plan’’ has the meaning
given such term in section 1347 of title 18 of the
United States Code.
(8) For purposes of paragraph (1), the exist-
ence of a conviction shall be determined under sec-
tion 1128 of the Social Security Act.
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(g) CONFORMING AMENDMENT.—Section 1921(d)
(42 U.S.C. 1396r-2(d)) is amended by inserting ‘‘and sec-
tion 105 of the Federal Health Care Payment Integrity
Act of 1995 after ‘‘section 422 of the Health Care Quality
Improvement Act of 1986’’.
SEC. 11407. EXPANSION OF AUTHORITY OF MEDICAID
FRAUD CONTROL UNITS.
(a) EXTENSION OF CONCURRENT AUTHORITY TO IN-
VESTIGATE AND PROSECUTE FRAUD IN OTHER FEDERAL
PROGRAMS.—Section 1903(q)(3) (42 U.S.C. 1396b(q)(3))
is amended by striking ‘‘in connection with’’ and all that
follows and inserting the following:
‘‘in connection with—
‘‘(A) any aspect of the provision of medical
assistance and the activities of providers of
such assistance under the State plan under this
title; and
‘‘(B) (in cases where the entity’s function
is also described by subparagraph (A), and
upon the approval of the relevant Federal agen-
cy) any aspect of the provision of health care
services and activities of providers of such serv-
ices under any Federal health care program (as
defined in section 1128B(b)(1)).’’.
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(b) EXTENSION
OF AUTHORITY TO INVESTIGATE
AND PROSECUTE PATIENT ABUSE
IN NON-MEDICAID
BOARD AND CARE FACILITIES.—Section 1903(q)(4) (42
U.S.C. 1396(b)(q)(4)) is amended to read as follows:
‘‘(4)(A) The entity has—
‘‘(i) procedures for reviewing complaints of
abuse or neglect of patients in health care fa-
cilities which receive payments under the State
plan under this title;
‘‘(ii) at the option of the entity, procedures
for reviewing complaints of abuse or neglect of
patients residing in board and care facilities;
and
‘‘(iii) procedures for acting upon such com-
plaints under the criminal laws of the State or
for referring such complaints to other State
agencies for action.
‘‘(B) For purposes of this paragraph, the term
‘board and care facility’ means a residential setting
which receives payment from or on behalf of two or
more unrelated adults who reside in such facility,
and for whom one or both of the following is pro-
vided:
‘‘(i) Nursing care services provided by, or
under the supervision of, a registered nurse, li-
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censed practical nurse, or licensed nursing as-
sistant.
‘‘(ii) Personal care services that assist resi-
dents with the activities of daily living, includ-
ing personal hygiene, dressing, bathing, eating,
toileting, ambulation, transfer, positioning, self-
medication, body care, travel to medical serv-
ices, essential shopping, meal preparation, laun-
dry, and housework.’’.
(c) AUTHORITY OF INSPECTORS GENERAL.—Nothing
in this Act affects the authority of the Inspectors General
of the Department of Veterans Affairs, the Department
of Defense, and other health care agencies under the In-
spector General Act of 1978 to conduct investigations, au-
dits, inspections, and evaluations of programs and oper-
ations of their respective agencies, including health care
programs and operations.
SEC. 11408. RECOVERY OF MEDICARE OVERPAYMENTS
FROM BANKRUPT PROVIDERS.
(a) MEDICARE PART A.—Section 1815(d) (42 U.S.C.
1395g(d)) is amended by adding at the end the following
sentence: ‘‘Amounts due to the program under this part
are not dischargeable under any title of the Bankruptcy
Code (11 U.S.C. 101 et seq.).’’.
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(b) MEDICARE PART B.—Section 1833(j) (42 U.S.C.
13951(j)) is amended by adding at the end the following
sentence: ‘‘Amounts due to the program under this part
are not dischargeable under any title of the Bankruptcy
Code (11 U.S.C. 101 et seq.).’’.
SEC. 11409. GRANTS TO STATES TO REVOKE LICENSES OF
UNQUALIFIED PROVIDERS.
The Secretary of Health and Human Services is au-
thorized to make grants to States for activities necessary
to revoke the licenses, certification, or other State author-
ization of health care professionals and entities determined
to be unqualified for such authorization on the basis of
exclusion from Federal health care programs under sec-
tion 1128 or 1128A or for any other reason.
SEC. 11410. AUTHORIZATION FOR INTERCEPTION OF WIRE,
ORAL OR ELECTRONIC COMMUNICATIONS.
(a) Section 2516(1)(c) of title 18, United States
Code, is amended—
(1) by inserting ‘‘section 226 (bribery and graft
in connection with health care), section 227 (illegal
remunerations,’’ after ‘‘section 224 (bribery in sport-
ing contests),’’; and
(2) by inserting ‘‘section 1347 (health care
fraud),’’ after ‘‘section 1344 (relating to bank
fraud),’’.
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(b) DEFINITIONS.—Section 1961(1) of title 18, Unit-
ed States Code, is amended—
(1) by inserting ‘‘sections 226 and 227 (relating
to bribery and graft, and illegal remuneration in
connection with health care),’’ after ‘‘section 224
(relating to sports bribery),’’;
(2) by inserting ‘‘section 669 (relating to theft
or embezzlement in connection with health care),’’
after ‘‘section 664 (relating to embezzlement from
pension and welfare funds),’’; and
(3) by inserting ‘‘section 1347 (relating to
health care fraud),’’ after ‘‘section 1344 (relating to
financial institution fraud),’’.
PART 2—RESOURCES FOR ANTI-FRAUD
ACTIVITIES
SEC. 11421. HEALTH CARE FINANCING ADMINISTRATION
AND HHS INSPECTOR GENERAL FUNDING.
(a) FINDINGS AND STATEMENT OF PURPOSE.—
(1) FINDINGS.—The Congress finds that—
(A) a significant amount of funds ex-
pended on the Medicare program are lost to
fraud, medically unnecessary services and other
abuse; and
(B) The Department of Health and
Human Services through activities of the Office
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of Inspector General and Health Care Financ-
ing Administration is effective in combating
Medicare fraud and abuse and returning
misspent funds to the Federal Treasury.
(2) PURPOSE.—It is the purpose of this Act
to—
(A) protect, to the maximum extent prac-
ticable, the Medicare and Medicaid programs
from further losses due to fraud and abuse;
(B) test methods by which the savings that
these activities generate can be properly ac-
counted for when determining funding levels;
and
(C) ensure an adequate source of five-year
funding for HHS Medicare anti-fraud and
abuse activities.
(b) ESTABLISHMENT
OF MEDICARE ANTI-FRAUD
AND ABUSE PROGRAM.—Title XI (42 U.S.C. 1301 et seq.)
is amended by adding at the end thereof the following new
part:
‘‘PART C—MEDICARE ANTI-FRAUD AND ABUSE
PROGRAM
‘‘PURPOSE
‘‘SEC. 1171. The purpose of this part is to provide
funding for activities of the Office of Inspector General
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related to preventing and detecting fraud and abuse in the
programs under title XVIII and determining the accuracy
and appropriateness of expenditures under such programs.
‘‘FUNDING AVAILABLE
‘‘SEC. 1172. (a) COVERED ANTI-FRAUD AND ABUSE
ACTIVITIES.—Funding from the trust funds established
under title XVIII shall be available, in accordance with
subsection (b), for activities conducted by the Inspector
General, either directly or by contract, pursuant to this
Act or the Inspector General Act of 1978, for the purposes
of—
‘‘(1) Prosecuting matters related to the pro-
grams under title XVIII through criminal, civil, and
administrative proceedings.
‘‘(2) Conducting investigations relating to such
programs.
‘‘(3) Performing financial and performance au-
dits of programs and operations relating to the such
programs.
‘‘(4) Performing inspections and other evalua-
tions relating to such programs.
‘‘(5) Conducting provider and consumer edu-
cation activities regarding the requirements of this
title and title XVIII.
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‘‘(b) PAYMENTS FROM TRUST FUNDS.—Obligations
incurred by the Inspector General in carrying out the ac-
tivities designated in subsection (a) shall be paid from—
‘‘(1) funds in the Federal Hospital Insurance
Trust Fund; and
‘‘(2) funds in the Federal Supplementary Medi-
cal Insurance Trust Fund, in the amounts set forth
in subsection (c), allocated between those funds as
the Secretary shall deem fair and equitable after
taking into consideration the expenses attributable
to each of the programs under title XVIII. The Sec-
retary shall make such transfers of moneys between
those funds as may be appropriate to settle accounts
between them in cases where expenses properly pay-
able from one fund have been paid from the other
fund.
‘‘(c) PAYMENT AMOUNTS.—Total amounts paid from
the Trust Funds in accordance with subsection (b) shall
equal—
‘‘(1) $130 million for fiscal year 1996;
‘‘(2) $181 million for fiscal year 1997;
‘‘(3) $204 million for fiscal year 1998;
‘‘(4) $223 million for fiscal year 1999; and
‘‘(5) $244 million for fiscal year 2000.’’.
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SEC. 11422. ESTABLISHMENT OF THE MEDICARE BENE-
FICIARY INTEGRITY SYSTEM.
(a) IN GENERAL.—Part C of title XVIII (42 U.S.C.
1395x et seq.) is amended by inserting after section 1889
the following:
‘‘BENEFICIARY INTEGRITY SYSTEM
‘‘SEC. 1890. (a) Obligations incurred for beneficiary
integrity system activities for each of fiscal years 1996
through 2000 shall be paid from funds in the Federal
Hospital Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund, in the amounts
set forth in subsection (b), allocated between those funds
as the Secretary shall deem fair and equitable after taking
into consideration the expenses attributable to each of the
programs under this title. The Secretary shall make such
transfers or moneys between those funds as may be appro-
priate to settle accounts between them in cases where ex-
penses properly payable from one fund have been paid
from the other fund.
‘‘(b) Total amounts paid from the Trust Funds in
accordance with subsection (a) shall equal—
‘‘(1) $430,000,000 for fiscal year 1996,
‘‘(2) $490,000,000 for fiscal year 1997,
‘‘(3) $550,000,000 for fiscal year 1998,
‘‘(4) $620,000,000 for fiscal year 1999, and
‘‘(5) $670,000,000 for fiscal year 2000.
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‘‘(c) For purposes of this section, beneficiary integ-
rity system activities consist of the following:
‘‘(1) Review of activities of providers of services
or other persons in connection with this title, includ-
ing medical and utilization review and fraud review.
‘‘(2) Audit of cost reports.
‘‘(3) Determination as to whether payment
should not be, or should not have been, made under
this title by reason of section 1862(b), and recovery
of payments that should not have been made.
‘‘(4) Education of providers of services, bene-
ficiaries, and other persons with respect to payment
integrity and beneficiary integrity system issues.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to obligations incurred after fiscal
year 1995.
SEC. 11423. GOVERNMENT-WIDE ANTI-FRAUD REINVEST-
MENT FUND.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—There is hereby established
the Health Care Fraud and Abuse Control Account.
The Health Care Fraud and Abuse Control Account
shall consist of—
(A) such gifts and bequests as may be
made as provided in subparagraph (B);
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(B) such amounts as may be deposited in
the Health Care Fraud and Abuse Control Ac-
count as provided in title XI of the Social Secu-
rity Act; and
(C) such amounts as are transferred to the
Health Care Fraud and Abuse Control Account
under paragraph (3), but in no year shall more
than $10 million be transferred or otherwise de-
posited to the Health Care Fraud and Abuse
Control Account.
(2) AUTHORIZATION TO ACCEPT GIFTS.—The
Health Care Fraud and Abuse Control Account is
authorized to accept on behalf of the United States
money gifts and bequests made unconditionally to
the Health Care Fraud and Abuse Control Account
for the benefit of the Health Care Fraud and Abuse
Control Program or any activity financed through
the Health Care Fraud and Abuse Control Account,
but not to exceed $10 million.
(3) TRANSFER OF AMOUNTS.—The Secretary of
the Treasury shall transfer to the Health Care
Fraud and Abuse Control Account, under rules simi-
lar to the rules in section 9601 of the Internal Reve-
nue Code of 1986, an amount equal to the sum of
the following:
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(A) Civil monetary penalties and assess-
ments recovered (including voluntary settlement
agreements) under titles XI, XVIII, and XIX of
the Social Security Act (except as otherwise
provided by law); the Program Fraud Civil
Remedies Act (31 U.S.C. 3801 et seq.) and
other civil monetary penalties and assessments
imposed in health care cases.
(B) Penalties and damages otherwise cred-
itable to Miscellaneous Receipts, Treasury, ob-
tained (including voluntary settlement agree-
ments) under the False Claims Act (31 U.S.C.
3729 et seq.), in cases involving claims related
to the provision of health care items and serv-
ices (other than funds awarded to a relator or
for the damages sustained by the health plan
because of the acts governed by section 3729).
(b) GENERAL USE OF FUNDS.—
(1) IN GENERAL.—Amounts in the Health Care
Fraud and Abuse Control Account shall be paid, at
the discretion jointly of the Attorney General and
the Secretary of Health and Human Services (acting
through the Inspector General of the Department of
Health and Human Services) to cover the costs (in-
cluding equipment, salaries and benefits, and travel
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and training) of activities designed to prevent and
detect health care fraud and abuse, and to promote
economy and efficiency in Federal health care pro-
grams, such as health care fraud investigations, au-
dits, and inspections, including the costs of—
(A) 
prosecuting 
health 
care 
matters
(through criminal, civil, and administrative pro-
ceedings);
(B) investigations;
(C) financial and performance audits of
health care programs and operations;
(D) inspections and other evaluations; and
(E) provider and consumer education re-
garding compliance with the provisions of this
title.
(2) ERISA PLANS.—Any recoveries in connec-
tion with an employee welfare benefit plan as de-
fined in section 3 of the Employee Retirement In-
come Security Act of 1974 (18 U.S.C. 1002) shall
first be used to make whole participants and bene-
ficiaries of the employee welfare benefit plan.
(3) FUNDS USED TO SUPPLEMENT AGENCY AP-
PROPRIATIONS.—It is intended that disbursements
made from the Health Care Fraud and Abuse con-
trol Account be fairly apportioned among all Federal
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health care agencies and be used to increase and not
supplant the recipient agency’s appropriated operat-
ing budget.
(4) ANNUAL REPORT.—The Secretary and the
Attorney General shall submit jointly an annual re-
port to Congress on the amount of revenue which is
generated and disbursed by the Health Care Fraud
and Abuse Control Account in each fiscal year.
PART 3—AMENDMENTS TO CRIMINAL LAW
SEC. 11431. HEALTH CARE FRAUD.
IN GENERAL.—
(1) FINES AND IMPRISONMENT FOR HEALTH
CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,
United States Code, is amended by adding at the
end the following new section:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever knowingly and willfully executes, or at-
tempts to execute, a scheme or artifice—
‘‘(1) to defraud any health plan or other per-
son, in connection with the delivery of or payment
for health care benefits, items, or services; or
‘‘(2) to obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the
money or property owned by, or under the custody
or control of, any health plan, or person in connec-
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tion with the delivery of or payment for health care
benefits, items, and services;
shall be fined under this title or imprisoned not more than
10 years, or both. If the violation results in serious bodily
injury (as defined in section 1365(g)(3) of this title), such
person may be imprisoned for any term of years.
‘‘(b) For purposes of this section, the term ‘ health
plan means a plan or program that provides health bene-
fits, whether directly, through insurance, or otherwise, and
includes—
‘‘(1) a policy of health insurance;
‘‘(2) a contract of a service benefit organiza-
tion;
‘‘(3) a membership agreement with a health
maintenance organization or other prepaid health
plan; and
‘‘(4) an employee welfare benefit plan or a mul-
tiple employer welfare arrangement (as those terms
are defined in section 3 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002).’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of chapter 63 of title 18,
United States Code, is amended by adding at the
end the following:
‘‘1347. Health care fraud.’’.
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SEC. 11432. FORFEITURES FOR FEDERAL HEALTH CARE OF-
FENSES.
IN GENERAL.—Section 982(a) of title 18, United
States Code, is amended by adding after paragraph (5)
the following new paragraph:
‘‘(6)(A) the court, in imposing sentence on a
person convicted of a Federal health care offense,
shall order the person to forfeit property, real or
personal, that constitutes or is derived, directly or
indirectly, from proceeds traceable to the commission
of the offense.
‘‘(B) For purposes of this paragraph, the term
‘Federal health care offense’ means a violation of, or
a criminal conspiracy to violate—
‘‘(i) section 1347 of this title;
‘‘(ii) section 1128B of the Social Security
Act;
‘‘(iii) sections 287, 371, 664, 666, 1001,
1027, 1341, 1343, 1920, of 1954 of this title
if the violation or conspiracy relates to health
care fraud; or
‘‘(iv) section 501 or 511 of the Employee
Retirement Income Security Act of 1974, if the
violation or conspiracy relates to health care
fraud.’’.
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SEC. 11433. INJUNCTIVE RELIEF RELATING TO FEDERAL
HEALTH CARE OFFENSES.
(a) IN GENERAL.—Section 1345(a)(1) of title 18,
United States Code, is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(A);
(2) by inserting ‘‘or’’ at the end of subpara-
graph (B); and
(3) by adding at the end the following new sub-
paragraph:
‘‘(C) committing or about to commit a
Federal health care offense (as defined in sec-
tion 982(a)(6)(B) of this title);’’.
(b) FREEZING OF ASSETS.—Section 1345(a)(2) of
title 18, United States Code, is amended by inserting ‘‘or
a Federal health care offense (as defined in section
982(a)(6)(B))’’ after ‘‘title)’’.
SEC. 11434. GRAND JURY DISCLOSURE.
Section 3322 of title 18, United States Code, is
amended—
(1) by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively; and
(2) by inserting after subsection (b) the follow-
ing new subsection:
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‘‘(c) A person who is privy to grand jury infor-
mation concerning a Federal health care offense (as de-
fined in section 982(a)(6)(B))—
‘‘(1) received in the course of duty as an attor-
ney for the Government; or
‘‘(2) disclosed under rule 6(a)(3)(A)(ii) of the
Federal Rules of Criminal Procedure;
may disclose that information to an attorney for the
Government to use in any investigation or civil pro-
ceeding relating to health care fraud.’’.
SEC. 11435. FALSE STATEMENTS.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by adding at the end the follow-
ing new section:
‘‘§ 1033. False statements relating to health care mat-
ters
‘‘(a) Whoever, in any matter involving a health plan,
knowingly and willfully falsifies, conceals, or covers up by
any trick, scheme, or device a material fact, or makes any
false, fictitious, or fraudulent statements or representa-
tions, or makes or uses any false writing or document
knowing the same to contain any false, fictitious, or fraud-
ulent statement or entry, shall be fined under this title
or imprisoned not more than 5 years, or both.
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‘‘(b) For purposes of this section, the term ‘health
plan’ has the meaning given such term in section
1347(b).’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 47 of title 18, United States
Code, is amended by adding at the end the following:
‘‘1033. False statements relating to health care matters.’’.
SEC. 11436. OBSTRUCTION OF CRIMINAL INVESTIGATIONS,
AUDITS 
OR 
INSPECTIONS 
OF 
FEDERAL
HEALTH CARE OFFENSES.
(a) IN GENERAL.—Chapter 73 of title 18, United
States Code, is amended by adding at the end the follow-
ing new section:
‘‘§ 1518. Obstruction of criminal investigations, audits
or inspections of Federal health care of-
fenses.
‘‘(a) IN GENERAL.—Whoever willfully prevents, ob-
structs, misleads, delays or attempts to present, obstruct,
mislead, or delay the communication of information or
records relating to a Federal health care offense to a Fed-
eral agent or employee involved in the investigation, audit,
inspection or other related activity shall be fined under
this title or imprisoned not more than 5 years, or both.
‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used
in this section the term ‘Federal health care offense’ has
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the same meaning given such term in section 982(a)(6)(B)
of this title.
‘‘(c) CRIMINAL INVESTIGATOR.—As used in this sec-
tion the term ‘criminal investigator’ means any individual
duly authorized by a department, agency, or armed force
of the Untied States to conduct or engage in investigations
for prosecutions for violations of health care offenses.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 73 of title 18, United States
Code, is amended by adding at the end the following:
‘‘1518. Obstruction of Criminal Investigations, Audits, or Inspections of Federal
Health Care Offenses.’’.
SEC. 11437. THEFT OR EMBEZZLEMENT.
(a) IN GENERAL.—Chapter 31 of title 18, United
States Code, is amended by adding at the end the follow-
ing new section: ‘‘§ 669. Theft or embezzlement in connec-
tion with health care.
‘‘(a) IN GENERAL.—Whoever willfully embezzles,
steals, or otherwise without authority willfully and unlaw-
fully converts to the use of any person other than the
rightful owner, or intentionally misapplies any of the mon-
eys, funds, securities, premiums, credits, property, or
other assets of a health plan, shall be fined under this
title or imprisoned not more than 10 years, or both.
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‘‘(b) HEALTH PLAN.—As, used in this section the
term ‘health plan’ has the meaning given such term in
section 1347(b).’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 31 of title 18, United States
Code, is amended by adding at the end the following:
‘‘669. Theft or Embezzlement in Connection with Health care.’’.
SEC. 11438. LAUNDERING OF MONETARY INSTRUMENTS.
Section 1956(c)(7) of title 18, United States Code,
is amended by adding at the end the following new sub-
paragraph:
‘‘(F) Any act or activity constituting an offense
involving a Federal health care offense as that term
is defined in section 982(a)(6)(B) of this title.’’.
SEC. 11439. AUTHORIZED INVESTIGATIVE DEMAND PROCE-
DURES.
(a) IN GENERAL.—Chapter 233 of title 18, United
States Code, is amended by adding after section 3485 the
following new section:
‘‘§ 3486. Authorized investigative demand procedures.
‘‘(a) AUTHORIZATION.—
‘‘(1) In any investigation relating to functions
set forth in paragraph (2), the Attorney General or
designee may issue in writing and cause to be served
a subpoena compelling production of any records (in-
cluding any books, papers, documents, electronic
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media, or other objects or tangible things), which
may be relevant to an authorized law enforcement
inquiry, that a person or legal entity may possess or
have care, custody, or control. A custodian of
records may be required to give testimony concern-
ing the production and authentication of such
records. The production of records may be required
from any place in any State or in any territory, or
other place subject to the jurisdiction of the United
States at any designated place; except that such pro-
duction shall not be required more than 500 miles
distant from the place where the subpoena is served.
Witnesses summoned under this section shall be paid
the same fees and mileage that are paid witnesses
in the courts of the United States. A subpoena re-
quiring the production of records shall describe the
objects required to be produced and prescribe a re-
turn date within a reasonable period of time within
which the objects can be assembled and made avail-
able.
‘‘(2) Investigative demands utilizing an admin-
istrative subpoena are authorized for any investiga-
tion with respect to any act or activity constituting
or involving health car fraud, including a scheme or
artifice—
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‘‘(A) to defraud any health plan or other
person, in connection with the delivery of or
payment for health care benefits, items, or serv-
ices; or
‘‘(B) to obtain, by means of false or fraud-
ulent pretenses, representations, or promises,
any of the money or property owned by, or
under the custody or control or, any health
plan, or person in connection with the delivery
of or payment for health care benefits, items, or
services.
‘‘(b) SERVICE.—A subpoena issued under this section
may be served by any person designated in the subpoena
to serve it. Service upon a natural person may be made
by personal delivery of the subpoena to such person. Serv-
ice may be made upon a domestic or foreign association
which is subject to suit under a common name, by deliver-
ing the subpoena to an officer, to a managing or general
agent, or to any other agency authorized by appointment
or by law to receive service of process. The affidavit of
the person serving the subpoena entered on a true copy
thereof by the person serving it shall be proof of service.
‘‘(c) ENFORCEMENT.—In the case of contumacy by
or refusal to obey a subpoena issued to any person, the
Attorney General may invoke the aid of any court of the
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United States within the Jurisdiction of which the inves-
tigation is carried on or of which the subpoenaed person
is an inhabitant, or in which such person carries on busi-
ness or may be found, to compel compliance with the sub-
poena. The court may issue an order requiring the subpoe-
naed person to appear before the Attorney General to
produce records, if so ordered, or to give testimony touch-
ing the matter under investigation. Any failure to obey
the order of the court may be punished by the court as
a contempt thereof. All process in any such case may be
served in any Judicial district in which such person may
be found.
‘‘(d) IMMUNITY FROM CIVIL LIABILITY.—Notwith-
standing any Federal, State, or local law, any person, in-
cluding officers, agents, and employees receiving a sub-
poena under this section, who complies in good faith with
the subpoena and thus produces the materials sought,
shall not be liable in any court of any State or the United
States to any customer or other persons for such produc-
tion or for nondisclosure of that production to the cus-
tomer.
‘‘(e) USE IN ACTION AGAINST INDIVIDUALS.—
‘‘(1) Health information about an individual
that is disclosed under this section may not be used
in, or disclosed to any person for use in, any admin-
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istrative, civil, or criminal action or investigation di-
rected against the individual who is the subject of
the information unless the action or investigation
arises out of and is directly related to receipt of
health care or payment for health care or action in-
volving a fraudulent claim related to health; or if au-
thorized by an appropriate order of a court of com-
petent jurisdiction, granted after application showing
good cause therefore.
‘‘(2) In assessing good cause, the court shall
weigh the public interest and the need for disclosure
against the injury to the patient, to the physician-
patient relationship, and to the treatment services.
‘‘(3) Upon the granting of such order, the
court, in determining the extent to which any disclo-
sure of all or any part of any record is necessary,
shall impose appropriate safeguards against unau-
thorized disclosure.
‘‘(f) HEALTH PLAN.—As used in this section the
term ‘health plan’ has the meaning given such term in
section 1347(b).’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 223 of title 18, United States Code, is amend-
ed by inserting after the item relating to section 3405 the
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following new item: § 3486. Authorized investigative de-
mand procedures’’.
(c) 
CONFORMING
AMENDMENT.—Section
1510(b)(3)(B) of title 18, United States Code, is amended
by inserting ‘‘or a Department of Justice subpoena (issued
under section 3486),’’ after ‘‘subpoena’’.
PART 4—MEDICARE IMPROVEMENTS
Subpart A—Coordination of Benefits
SEC. 11441. CLARIFICATION OF TIME AND FILING LIMITA-
TIONS.
(a) IN GENERAL.—Section 1862(b)(2)(B) (42 U.S.C.
1395y(b)(2)(B)) is amended by adding at the end of the
following:
‘‘(v) TIME, FILING, AND RELATED PROVI-
SIONS
UNDER
PRIMARY
PLAN.—Requirements
under a primary plan as to the filing of a claim,
time limitations for the filing of a claim, infor-
mation not maintained by the Secretary, or no-
tification or pre-admission review, shall not
apply to a claim by the United States under
clause (ii) or (iii).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to items and services furnished after
1990.
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SEC. 11442. CLARIFICATION OF LIABILITY OF THIRD PARTY
ADMINISTRATORS.
(a) IN GENERAL.—Section 1862(b)(2)(B)(ii) (42
U.S.C. 1395(b)(2)(B)(ii)) is amended by inserting ‘‘, or
which determines claims under the primary plan’’ after
‘‘primary plan’’.
(b) CLAIMS BETWEEN PARTIES OTHER THAN THE
UNITED STATES.—Section 1862(b)(2)(B) (42 U.S.C.
1395y(b)(2)(B)) (as amended by section 11441(a) of this
Act) is further amended by adding at the end the follow-
ing:
‘‘(vi) CLAIMS BETWEEN PARTIES OTHER THAN
THE UNITED STATES.—A claim by the United States
under clause (ii) or (iii) shall not preclude claims be-
tween other parties.’’.
(c) EFFECTIVE DATE.—The amendments made by
the previous subsections apply to items and services fur-
nished after 1990.
SEC. 11443. CLARIFICATION OF PAYMENT AMOUNTS TO
MEDICARE.
(a) IN
GENERAL.—Section 1862(b)(2)(B)(i) (42
U.S.C. 1395y(b)(2)(B)(i)) is amended to read as follows:
‘‘(i) REPAYMENT REQUIRED.—
‘‘(I) Any payment under this title, with re-
spect to any item or service for which payment
by a primary plan is required under the preced-
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ing provisions of this subsection, shall be condi-
tioned on reimbursement to the appropriate
Trust Fund established by this title when notice
or other information is received that payment
for that item or service has been or should have
been made under those provisions. If reimburse-
ment is not made to the appropriate Trust
Fund before the expiration of the 60-day period
that begins on the date such notice or other in-
formation is received, the Secretary may charge
interest (beginning with the date on which the
notice or other information is received) on the
amount of the reimbursement until reimburse-
ment is made (at a rate determined by the Sec-
retary in accordance with regulations of the
Secretary of the Treasury applicable to charges
for late payments).
‘‘(II) The amount owned by a primary
plan under the first sentence of subclause (I) is
the lesser of the full primary payment required
(if that amount is readily determinable) and the
amount paid under this title for that item or
service.’’.
(b) CONFORMING AND TECHNICAL AMENDMENTS.—
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(1) Subparagraphs (A)(i)(I) and (B)(i) of sec-
tion 1862(b)(1) (42 U.S.C. 1395y(b)(1)) are each
amended by inserting ‘‘(or eligible to be covered)’’
after ‘‘covered’’.
(2) 
Section 
1862(b)(1)(C)(ii) 
(42 
U.S.C.
1395y(b)(1)(C)(ii)) is amended by striking ‘‘covered
by such plan’’.
(3) The matter in section 1862(b)(2)(A) (42
U.S.C. 1395y(b)(2)(A)) preceding clause (i) is
amended by striking ‘‘, except as provided in sub-
paragraph (B),’’.
(c) EFFECTIVE DATE.—The amendments made by
the previous subsections apply to items and services fur-
nished after 1990.
SEC. 11444. CONDITIONS FOR DOUBLE DAMAGES.
(a) IN GENERAL.—Section 1862(b)(2)(B)(ii) (42
U.S.C. 1395y(b)(2)(B)(ii)) is amended—
(1) by striking ‘‘, in accordance with paragraph
(3)(A)’’, and
(2) by inserting ‘‘, unless the entity dem-
onstrates that it did not know, and could not have
known, of its obligation to pay’’ after ‘‘against that
entity.’’
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(b) 
CONFORMING
AMENDMENT.—Section
1862(b)(3)(A) is amended by striking ‘‘(or appropriate re-
imbursement)’’.
SEC. 11445. REPEAL OF EXCISE TAX.
(a) IN GENERAL.—Chapter 47 of the Internal Reve-
nue Code of 1986 (26 U.S.C. 5000) is repealed.
(b) CONFORMING AMENDMENT TO THE INTERNAL
REVENUE CODE OF 1986.—The table of chapters of sub-
title D of the Internal Revenue Code of 1986 (26 U.S.C.
4001 et seq.) is amended by striking the listing for chapter
47.
(c) CONFORMING AMENDMENTS TO THE SOCIAL SE-
CURITY ACT.—
(1) 
Section 
1862(b)(1)(A) 
(42 
U.S.C.
1395y(b)(1)(A)) is amended by striking clause (v).
(2) The matter in section 1862(b)(1)(C) (42
U.S.C. 1395y(b)(1)(C)) preceding clause (i) is
amended by striking ‘‘plan (as defined in subpara-
graph (A)(v))—’’ and inserting ‘‘plan—’’.
(3) 
Section 
1862(b)(1)(E) 
(42 
U.S.C.
1395y(b)(1)(E)) is amended by adding at the end
the following:
‘‘(iv) GROUP
HEALTH
PLAN
DEFINED.—
The term ‘group health plan’ means a plan (in-
cluding a self-insured plan) of, or contributed to
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by, an employer or employee organization to
provide health care (directly or otherwise) to
the employees, former employees, the employer,
others associated or formerly associated with
the employer in a business relationship, or their
families.’’.
(4) Section 1862(b)(3) (42 U.S.C. 1395y(b)(3))
is amended—
(A) by striking subparagraph (B), and
(B) by redesignating subparagraph (C) as
(B).
(5) Subparagraph (A) of the first sentence of
section 1837(i)(1) (42 U.S.C. 1395p(i)(1)), subpara-
graph (B) of the first sentence of section 1837(i)(2)
(42 U.S.C. 1395p(i)(2)), section 1837(i)(3)(A) (42
U.S.C. 1395p(i)(3)(A)), and clause (2) of the second
sentence of section 1839(b) (42 U.S.C. 1395r(b)),
are each amended by striking ‘‘1862(b)(1)(A)(v)’’
and inserting ‘‘1862(b)(1)(E)(iv)’’.
(d) EFFECTIVE DATE.—The amendment made by
subsection (a) applies, with respect to the Internal Reve-
nue Code of 1986, to expenses incurred after 1994.
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SEC. 11446. INFORMATION REQUIREMENTS.
(a) INFORMATION FROM GROUP HEALTH PLANS.—
Section 1862(b) (42 U.S.C. 1395y(b)) is amended by add-
ing at the end the following:
‘‘(7) INFORMATION
FROM
GROUP
HEALTH
PLANS.—
‘‘(A) Provision of information by group
health plans.—The administrator of a group
health plan (other than a plan exempt, under
paragraph (1)(E)(v), from the requirements of
paragraph (1)) shall provide to the Secretary
any or all of the information elements listed in
subparagraph (C), and in such manner and at
such times (but not more frequently than four
times per year), as the Secretary may specify,
with respect to each individual covered under
the plan and entitled to benefits under this
title.
‘‘(B) PROVISION OF INFORMATION BY EM-
PLOYERS AND EMPLOYEE ORGANIZATIONS.—An
employer (or employee organization) that main-
tains or participates in a group health plan
(other than a plan exempt, under paragraph
(1)(E)(v), from the requirements of paragraph
(1)) shall provide to the administrator of the
plan any or all of the information elements list-
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ed in subparagraph (C), and in such manner
and at such times (but not more frequently
than four times per year), as the Secretary may
specify, with respect to each individual covered
under the plan and entitled to benefits under
this title.
‘‘(C) INFORMATION ELEMENTS TO BE PRO-
VIDED.—The information elements to be pro-
vided under subparagraph (A) or (B) are:
‘‘(i) ELEMENTS CONCERNING THE IN-
DIVIDUAL.—
‘‘(I) The individual’s name.
‘‘(II) The individual’s date of
birth.
‘‘(II) The individual’s sex.
‘‘(IV) The individual’s social se-
curity insurance number.
‘‘(V) The number assigned by the
Secretary to the individual for claims
under this title.
‘‘(VI) The family relationship of
the individual to the person who has
current or former employment status
with the employer.
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‘‘(ii) ELEMENTS
CONCERNING
THE
FAMILY
MEMBER
WITH
CURRENT
OR
FORMER EMPLOYMENT STATUS.—
‘‘(I) The name of the person in
the individual’s family who has cur-
rent or former employment status
with the employer.
‘‘(II) That person’s social secu-
rity insurance number.
‘‘(III) The number or other iden-
tifier assigned by the plan to that per-
son.
‘‘(IV) The periods of coverage for
that person under the plan.
‘‘(V) The employment status of
that person (current or former) dur-
ing those periods of coverage.
‘‘(VI) The classes (of that per-
son’s family members) covered under
the plan.
‘‘(iii) PLAN ELEMENTS.—
‘‘(I) The nature of the items and
services covered under the plan.
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‘‘(II) The name and address to
which claims under the plan are to be
sent.
‘‘(iv) ELEMENTS
CONCERNING
THE
EMPLOYER.—
‘‘(I) The employer’s name.
‘‘(II) The employer’s address.
‘‘(III) The employer identifica-
tion number of the employer.
‘‘(D) USE OF IDENTIFIERS.—The adminis-
trator of a group health plan shall utilize an
identifier for the plan (that the Secretary may
furnish) in providing information under sub-
paragraph (A) and in other transactions, as
may be specified by the Secretary, related to
the provisions of this subsection.
‘‘(E) PENALTY
FOR
NONCOMPLIANCE.—
Any entity that knowingly and willfully fails to
comply with a requirement imposed by the pre-
vious subparagraphs shall be subject to a civil
money penalty not to exceed $1000 for each in-
cident of such failure. The provisions of section
1128A (other than subsections (a) and (b))
shall apply to a civil money penalty under the
previous sentence in the same manner as those
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provisions apply to a penalty or proceeding
under section 1128A(a).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) is effective 180 days after the date of enact-
ment of this Act.
SEC. 11447. TECHNICAL CHANGES CONCERNING MINIMUM
SIZES OF GROUP HEALTH PLANS.
(a) CONSOLIDATION OF REQUIREMENTS.—
(1) 
Section 
1862(b)(1)(A) 
(42 
U.S.C.
1395y(b)(1)(A)) (as amended by section 11443 of
this Act) is further amended—
(A) by striking clauses (ii) and (iii), and
(B) by renumbering clause (iv) as (ii).
(2) 
Section 
1862(b)(1)(B) 
(42 
U.S.C.
1395y(b)(1)(B)) is amended—
(A) in clause (i), by striking ‘‘large group
health plan (as defined in clause (iv))’’ and in-
serting ‘‘group health plan’’, and
(B) by striking clause (iv).
(3) 
Section 
1862(b)(1)(E) 
(42 
U.S.C.
1395y(b)(1)(E)) (as amended by section 405(c)(3)
of this Act) is further amended by adding at the end
the following:
‘‘(v) EXCLUSION
OF
GROUP
HEALTH
PLANS OF SMALL AND MEDIUM EMPLOYERS.—
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‘‘(I) Subparagraph (A) shall not apply
to a group health plan unless the plan cov-
ers employees of at least one employer that
has 20 or more employees on at least 50
percent of its business days in each of 20
or more calendar weeks in the current or
preceding calendar year.
‘‘(II) Subparagraph (B) shall not
apply to a group health plan unless the
plan covers employees of at least one em-
ployer that has 100 or more employees on
at least 50 percent of its business days in
each of 20 or more calendar weeks in the
current or preceding calendar year.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
The 
second 
sentence 
of 
section
1862(b)(2)(A) 
(42 
U.S.C. 
1395y(b)(2)(A)) 
is
amended by striking ‘‘or large group health plan’’.
(2) 
Section 
1862 
(b)(3)(C) 
(42 
U.S.C.
1395y(b)(3)(C)) is amended—
(A) in the heading, by striking ‘‘or a large
group health plan’’, and
(B) in the first sentence, by striking ‘‘or a
large group health plan’’.
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(3)(A) Subparagraph (A) of the first sentence
of section 1837(i)(1) (42 U.S.C. 1395p(i)(1)) is
amended by striking ‘‘(or the individual’s spouse’s)
current employment status’’ and inserting ‘‘current
employment status (or the current employment sta-
tus of a family member of the individual).’’.
(B) Section 1837(i)(1) (42 U.S.C. 1395p(i)(1))
is amended by striking the second sentence.
(4)(A) Subparagraph (b) of the first sentence of
section 1837(i)(2) (42 U.S.C. 1395p(i)(2)) is
amended by striking ‘‘(or the individual’s spouse’s)
current employment status’’ and inserting ‘‘current
employment status (or the current employment sta-
tus of a family member of the individual).’’.
(B) Section 1837(i)(2) (42 U.S.C. 1395p(i)(2))
is amended by striking the second sentence.
(5) Section 1837(i)(3) (42 U.S.C. 1395p(i)(3))
is amended—
(A) by striking subparagraph (b), and
(B) by striking ‘‘(3)(A)’’ and inserting
‘‘(3)’’.
(6) Clause (2) of the second sentence of section
1839(b) (42 U.S.C. 1395r(b)) is amended by strik-
ing ‘‘by reason of the individual’s (or the individual’s
spouse’s) current employment status or months dur-
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ing which the individual has not attained the age of
65 and for which the individual can demonstrate
that the individual was enrolled in a large group
health plan’’.
Subpart B—Contractor Reform
SEC. 11451. INCREASED FLEXIBILITY IN CONTRACTING FOR
MEDICARE CLAIMS PROCESSING.
(a) CARRIERS TO INCLUDE ENTITIES THAT ARE NOT
INSURANCE COMPANIES.—
(1) The matter in section 1842(a) (42 U.S.C.
1395u(a)) preceding paragraph (1) is amended by
striking ‘‘with carriers’’ and inserting ‘‘with agencies
and organizations (referred to as carriers)’’.
(2) Section 1842(f) (42 U.S.C. 1394u(f)) is re-
pealed.
(b) CHOICE OF FISCAL INTERMEDIARIES BY PROVID-
ERS OF SERVICES; SECRETARIAL FLEXIBILITY IN ASSIGN-
ING FUNCTIONS TO INTERMEDIARIES AND CARRIERS.—
(1) Section 1816 (42 U.S.C. 1395h) is amended
by striking everything after the heading but before
subsection (b) and inserting the following:
‘‘SEC. 1816. (a)(1) The Secretary may enter into con-
tracts with agencies or organizations to reform any or all
of the following functions, or parts of those functions (or,
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to the extent provided in a contract, to secure performance
thereof by other organizations):
‘‘(A) determine (subject to the provisions of sec-
tion 1878 and to such review by the Secretary as
may be provided for the contracts) the amount of
the payments required pursuant to this part to be
made to providers of services,
‘‘(B) make payments described in subparagraph
(A),
‘‘(C) provide consultative services to institutions
or agencies to enable them to establish and maintain
fiscal records necessary for purposes of this part and
otherwise to qualify as providers of services,
‘‘(D) serve as a center for, and communicate to
individuals entitles to benefits under this part and to
providers of services, any information or instructions
furnished to the agency or organization by the Sec-
retary, and serve as a channel of communication
from individuals entitled to benefits under this part
and from providers of services to the Secretary,
‘‘(E) make such audits of the records of provid-
ers of services as may be necessary to insure that
proper payments are made under this part,
‘‘(F) perform the functions described by sub-
section (d), and
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‘‘(G) perform such other functions as are nec-
essary to carry out the purposes of this part.
‘‘(2) As used in this title and title XI, the term ‘fiscal
intermediary’ means an agency or organization with a con-
tract under this section.’’.
(2) Subsections (d) and (e) of section 1816 (42
U.S.C. 1395h) are amended to read as follows:
‘‘(d) Each provider of services shall have a fiscal
intermediary that—
‘‘(1) acts as a single point of contact for the
provider of services under this part,
‘‘(2) makes its services sufficiently available to
meet the needs of the provider of services, and
‘‘(3) is responsible and accountable for arrang-
ing the resolution of issues raised under this part by
the provider of services.
‘‘(e)(1)(A) The Secretary shall, at least every five
years, permit each provider of services (other than a home
health agency or a hospice program) to choose an agency
or organization (from at least three proposed by the Sec-
retary, of which at least one shall have an office in the
geographic area of the provider of services, except as pro-
vided 
by 
subparagraph 
(B)(ii)(II)) 
as 
the 
fiscal
intermediary under subsection (d) for the provider of serv-
ices. If a contract with that fiscal intermediary is discon-
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tinued, the Secretary shall permit the provider of services
to choose under the same conditions from three other
agencies or organizations
‘‘(B)(i) The Secretary, in carrying out subparagraph
(A), shall permit a group of hospitals (or a group of an-
other class of providers other than home health agencies
or hospice programs) under common ownership by, or con-
trol of, a particular entity to choose one agency or organi-
zation (from at least three proposed by the Secretary) as
the fiscal intermediary under subsection (d) for all the
providers in that group if the conditions specified in clause
(ii) are met
‘‘(ii) the conditions for clause (i) to apply are that—
‘‘(I) the group includes all the providers or
services of that class that are under common owner-
ship by, or control of, that particular entity, and
‘‘(II) all the providers of services in that group
agree that none of the agencies or organizations pro-
posed by the Secretary is required to have an office
in any particular geographic area.
‘‘(2) The Secretary, in evaluating the performance of
a fiscal intermediary, shall solicit comments from provid-
ers of services.’’.
(3)(A) 
Section 
1816(b)(1)(A) 
(42 
U.S.C.
1395h(b)(1)(A)) is amended by striking ‘‘after ap-
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plying the standards, criteria, and procedures’’ and
inserting ‘‘after evaluating the ability of the agency
or organization to fulfill the contract performance
requirements’’.
(B) The first sentence of section 1816(f)(1) (42
U.S.C. 1395h(f)(1)) is amended—
(i) by striking ‘‘develop standards, criteria,
and procedures’’ and inserting ‘‘, after public
notice and opportunity for comment, develop
contract performance requirements’’, and
(ii) by striking ‘‘, and the Secretary shall
establish standards and criteria with respect to
the efficient and effective administration of this
part’’.
(C) 
The 
second 
sentence 
of 
section
1842(b)(2)(A) 
(42 
U.S.C. 
1395u(b)(2)(A)) 
is
amended to read as follows: ‘‘The Secretary shall,
after public notice and opportunity for comment, de-
velop contract performance requirements for the effi-
cient and effective performance of contract obliga-
tions under this section.’’.
(D) 
Section 
1842(b)(2)(A) 
(42 
U.S.C.
1395u(b)(2)(A)) is amended by striking the third
sentence.
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(E) The matter in section 1842(b)(2)(B) (42
U.S.C. 1395u(b)(2)(B)) preceding clause (i) is
amended by striking ‘‘establish standards’’ and in-
serting ‘‘develop contract performance require-
ments’’.
(F) 
Section 
1842(b)(2)(D) 
(42 
U.S.C.
1395u(b)(2)(D)) is amended by striking ‘‘standards
and criteria’’ each place it occurs and inserting
‘‘contract performance requirements’’.
(4)(A) The matter in section 1816(b) (42
U.S.C. 1395h(b)) preceding paragraph (1) is amend-
ed by striking ‘‘an agreement’’ and inserting ‘‘a con-
tract’’.
(B) Paragraphs (1)(B) and (2)(A) of section
1816(b) (42 U.S.C. 1395h(b)) are each amended by
striking ‘‘agreement’’ and inserting ‘‘contract’’.
(C) The first sentence of section 1816(c)(1) (42
U.S.C. 1395h(c)(1)) is amended by striking ‘‘An
agreement’’ and inserting ‘‘A contract’’.
(D) The last sentence of section 1816(c)(1) (42
U.S.C. 1395h(c)(1)) is amended by striking ‘‘an
agreement’’ and inserting ‘‘a contract’’.
(E) The matter in section 1816(c)(2)(A) (42
U.S.C. 1395h(c)(2)(A)) preceding clause (i) is
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amended by striking ‘‘agreement’’ and inserting
‘‘contract’’.
(F) 
Section 
1816(c)(3)(A) 
(42 
U.S.C.
1395h(c)(3)(A)) is amended by striking ‘‘agree-
ment’’ and inserting ‘‘contract’’.
(G) The first sentence of section 1816(f)(1) (42
U.S.C. 1395h(f)(1)) is amended by striking ‘‘an
agreement’’ and inserting ‘‘a contract’’.
(H) Section 1816(h) (42 U.S.C. 1395h(h)) is
amended—
(i) by striking ‘‘An agreement’’ and insert-
ing ‘‘A contract’’, and
(ii) by striking ‘‘the agreement’’ each place
it occurs and inserting ‘‘the contract’’.
(I) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1))
is amended by striking ‘‘an agreement’’ and insert-
ing ‘‘a contract’’.
(J) Section 1816(j) (42 U.S.C. 1395(j)) is
amended by striking ‘‘An agreement’’ and inserting
‘‘A contract’’.
(K) Section 1816(k) (42 U.S.C. 1395h(k)) is
amended by striking ‘‘An agreement’’ and inserting
‘‘A contract’’.
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(L) The matter in section 1842(a) (42 U.S.C.
1395u(a)) preceding paragraph (1) is amended by
striking ‘‘agreements’’ and inserting ‘‘contracts’’.
(M) 
Section 
1842(h)(3)(A) 
(42 
U.S.C.
1395u(h)(3)(A)) is amended by striking ‘‘an agree-
ment’’ and inserting ‘‘a contract’’.
(5) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1))
is amended by striking the second sentence.
(6)(A) The matter in section 1816(c)(2)(A) (42
U.S.C. 1395h(c)(2)(A)) preceding clause (i) is
amended by inserting ‘‘that provides for making
payments under this part’’ after ‘‘this section’’.
(B) 
Section 
1816(c)(3)(A) 
(42 
U.S.C.
1395h(c)(3)(A)) is amended by inserting ‘‘that pro-
vides for making payments under this part’’ after
‘‘this section’’.
(C) Section 1816(k) (42 U.S.C. 1395h(k)) is
amended by inserting ‘‘(as appropriate)’’ after ‘‘sub-
mit’’.
(D) The matter in section 1842(a) (42 U.S.C.
1395u(a)) preceding paragraph (1) is amended by
striking ‘‘some or all of the following functions’’ and
inserting ‘‘any or all of the following functions, or
parts of those functions’’.
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(E) The first sentence of section 1842(b)(2)(C)
(42 U.S.C. 1395u(b)(2)(C)) is amended by inserting
‘‘(as appropriate)’’ after ‘‘carriers’’.
(F) The matter preceding subparagraph (A) in
the first sentence of section 1842(b)(3) (42 U.S.C.
1395u(b)(3)) is amended by inserting ‘‘(as appro-
priate)’’ after ‘‘contract’’.
(G) The matter in section 1842(b)(7)(A) (42
U.S.C. 1395u(b)(7)(A)) preceding clause (i) is
amended by striking ‘‘the carrier’’ and inserting ‘‘a
carrier’’.
(H) The matter in section 1842(b)(11)(A) (42
U.S.C. 1395u(b)(11)(A)) preceding clause (i) is
amended by inserting ‘‘(as appropriate)’’ after ‘‘each
carrier’’.
(I) The first sentence of section 1842(h)(2) (42
U.S.C. 1395u(b)(2)) is amended by inserting ‘‘(as
appropriate)’’ after ‘‘shall’’.
(J) 
Section 
1842(h)(5)(A) 
(42 
U.S.C.
1395u(h)(5)(A) is amended by inserting ‘‘(as appro-
priate)’’ after ‘‘carrier’’.
(7)(A) 
Section 
1816(c)(2)(C) 
(42 
U.S.C.
1395h(c)(2)(C) is amended by striking ‘‘hospital,
rural primary care hospital, skilled nursing facility,
home health agency hospice program, comprehensive
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outpatient rehabilitation facility, or rehabilitation
agency’’ and inserting ‘‘* * * of services’’.
(B) The matter in section 1816(j) (42 U.S.C.
1395(j)) preceding paragraph (1) is amended by
striking ‘‘for home health services, extended care
services, or post-hospital extended care services’’.
(8) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3))
is amended by inserting ‘‘(to and from individuals
enroll under this part and to and from physicians
and other entities that furnish items and services)’’
after ‘‘communication’’.
(c) ELIMINATION OF SPECIAL PROVISIONS FOR TER-
MINATIONS OF CONTRACTS.—
(1) The matter in section 1816(b) (42 U.S.C.
1395h(b)) preceding paragraph (1) is amended by
striking ‘‘or renew’’.
(2) The last sentence of section 1816(c)(1) (42
U.S.C. 1395h(c)(1)) is amended by striking ‘‘or re-
newing’’.
(3) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1))
is amended by striking ‘‘, renew, or terminate’’ and
‘‘, whether the Secretary should assign or reassign
a provider of services to an agency or organization,’’.
(4) Section 1816(g) (42 U.S.C. 1395h(g)) is re-
pealed.
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(5) The last sentence of section 1842(b)(2)(A)
(42 U.S.C. 1395u(b)(2)(A)) is amended by striking
‘‘or renewing’’.
(6) Section 1842(b) (42 U.S.C. 1395u(b)) is
amended by striking paragraph (5).
(d) REPEAL OF FISCAL INTERMEDIARY REQUIRE-
MENTS
THAT
ARE
NOT
COST-EFFECTIVE.—Section
1816(f)(2) (42 U.S.C. 1395h(f)(2)) is amended to read
as follows:
‘‘(2) The contract performance requirements devel-
oped under paragraph (1) shall include, with respect to
claims for services furnished under this part by any pro-
vider of services other than a hospital, whether such agen-
cy or organization is able to process 75 percent of recon-
siderations within 60 days and 90 percent of reconsider-
ations within 90 days.’’.
(e) REPEAL OF COST REIMBURSEMENT REQUIRE-
MENTS.—
(1) The first sentence of section 1816(c)(1) (42
U.S.C. 1395h(c)(1)) is amended—
(A) by striking the comma after ‘‘appro-
priate’’ and inserting ‘‘and’’, and
(B) by striking everything after ‘‘sub-
section (a)’’ up to the period.
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(2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1))
is further amended by striking the second and third
sentences.
(3) The first sentence of section 1842(c)(1)(A)
(42 U.S.C. 1395u(c)(1)(A)) is amended—
(A) by striking ‘‘shall provide’’ the first
place it occurs and inserting ‘‘may provide’’,
and
(B) by striking everything after ‘‘this
part’’ up to the period.
(4) Section 1842(c)(1) (42 U.S.C. 1395u(c)(1))
is further amended by striking the remaining sen-
tences.
(5) Section 2326(a) of the Deficit Reduction
Act of 1984 (42 U.S.C. 1395h nt) is repealed.
(f) COMPETITION REQUIRED FOR NEW CONTRACTS
AND IN CASES OF POOR PERFORMANCE.—
(1) Section 1816(c) (42 U.S.C. 1395h(c)) is
amended by adding at the end the following:
‘‘(4)(A) A contract with a fiscal intermediary under
this section may be renewed from term to term without
regard to any provision of law requiring competition if the
fiscal intermediary has met or exceeded the performance
requirements established in the current contract.
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‘‘(B) Functions may be transferred among fiscal
intermediaries without regard to any provision of law re-
quiring competition.’’.
(2) Section 1842(b) (42 U.S.C. 1395u(b)) is
amended by striking everything before paragraph (2)
and inserting the following:
‘‘(b)(1)(A) A contract with a carrier under subsection
(a) may be renewed from term to term without regard to
any provision of law requiring competition if the carrier
has met or exceeded the performance requirements estab-
lished in the current contract.
‘‘(B) Functions may be transferred among carriers
without regard to any provision of law requiring competi-
tion.’’.
(g) WAIVER OF COMPETITIVE REQUIREMENTS FOR
INITIAL CONTRACTS.—
(1) Contracts whose periods begin during the
one year period that begins on the first day of the
fourth calendar month that begins after the date of
enactment of this Act may be entered into under
section 1816(a) of the Social Security Act (42
U.S.C. 1395h(a)) without regard to any provision of
law requiring competition.
(2) The amendments made by subsection (f)
apply to contracts whose periods begin after the end
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of the one year period specified in paragraph (1) of
this subsection.
(h) EFFECTIVE DATES.—
(1) The amendments made by subsection (c)
apply to contracts whose periods end at, or after, the
end of the third calendar month that begins after
the date of enactment of this Act.
(2) The amendments made by subsections (a),
(b), (d), and (e) apply to contracts whose periods
begin after the third calendar month that begins
after the date of enactment of this Act.
Subpart C—Provisions Relating to Part B of
Medicare
SEC. 11461. REPLACEMENT OF REASONABLE CHARGE
METHODOLOGY BY FEE SCHEDULES.
(a) IN GENERAL.—The matter in section 1833(a)(1)
(42 U.S.C. 13951(a)(1)) preceding clause (A) is amended
by striking ‘‘the reasonable charges for the services’’ and
inserting ‘‘the lesser of the actual charges for the services
and the amounts determined by the applicable fee sched-
ules developed by the Secretary for the particular serv-
ices’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1))
is amended—
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(A) in clause (A), by striking ‘‘reasonable
charges for’’ and inserting ‘‘payment bases oth-
erwise applicable to’’,
(B) in clause (B), by striking ‘‘reasonable
charges’’ and inserting ‘‘fee schedule amounts’’,
and
(C) by inserting after clause (F) the fol-
lowing: ‘‘(G) with respect to services described
in 
clause 
(i), 
(ii), 
or 
(iv) 
of 
section
1861(s)(2)(K) (relating to physician assistants
and nurse practitioners), the amounts paid shall
be 80 percent of the lesser of the actual charge
for the services and the applicable amount de-
termined under subclause (I) of (II) of section
1842(b)(12)(A)(ii),’’.
(2) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2))
is amended—
(A) in the matter in subparagraph (B) pre-
ceding clause (i), by striking ‘‘(C), (D),’’ and
inserting ‘‘(D),’’ and
(B) by striking subparagraph (C).
(3) Section 1833(l) (42 U.S.C. 1395l(l)) is
amended—
(A) in paragraph (3)—
(i) by striking subparagraph (B), and
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(ii) by striking ‘‘(3)(A)’’ and inserting
‘‘(3)’’, and
(B) by striking paragraph (6).
(4) The heading to section 1834(g)(1)(A)(ii)
(42 U.S.C. 1395m(g)(1)(A)(ii)) is amended by strik-
ing ‘‘Reasonable charges for professional’’ and in-
serting ‘‘Professional’’.
(5) Section 1842(a) (42 U.S.C. 1395u(a)) is
amended—
(A) in the matter preceding paragraph (1),
by striking ‘‘reasonable charge’’ and inserting
‘‘fee schedule’’, and
(B) in paragraph (1)(A), by striking ‘‘rea-
sonable charge’’ and inserting ‘‘other’’.
(6)(A) The matter preceding clause (i) in sub-
paragraph (B) of the first sentence of section
1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended by
striking everything after ‘‘assure that,’’ and insert-
ing the following: ‘‘where payment under this part
for a service is on a basis other than a cost basis,
such payment will (except as otherwise provided in
section 1870(f)) be made—’’.
(B) Subparagraph (B)(ii)(I) of the first sen-
tence of section 1842(b)(3) (42 U.S.C. 1395u(b)(3))
is amended to read as follows: ‘‘(I) the amount de-
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termined by the applicable payment basis under this
part is the full charge for the service,’’.
(C) 
Section 
1842(b)(3) 
(42 
U.S.C.
1395u(b)(3)) is amended by striking the second,
third, fourth, fifth, sixth, eight, and ninth sentences.
(7)(A) 
Section 
1842(b)(4) 
(42 
U.S.C.
1395u(b)(4)) is amended to read as follows:
‘‘(4) In the case of an enteral or parenteral
pump that is furnished on a rental basis during a
period of medical need—
‘‘(A) monthly rental payments shall not be
made under this part for more than 15 months
during that period, and
‘‘(B) after monthly rental payments have
been made for 15 months during that period,
payment under this part shall be made for
maintenance and servicing of the pump is such
amounts as the Secretary determines to be rea-
sonable and necessary to ensure the proper op-
eration of the pump.’’.
(B) Section 6112(b) (42 U.S.C. 1395m nt) of
the Omnibus Reconciliation Act of 1989 is repealed.
(8) Section 1842(b)(7) (42 U.S.C. 1395u(b)(7))
is amended—
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(A) in the matter in subparagraph (D)(i)
preceding subclause (I), by striking ‘‘, to the ex-
tent that such payment is otherwise allowed
under this paragraph,’’,
(B) in subparagraph (D)(ii), by striking
‘‘subparagraph’’ and inserting ‘‘paragraph’’,
(C) by striking ‘‘(7)(A) In the case of’’
through the end of subparagraph (C).
(D) by striking ‘‘(D)(i)’’ and inserting
‘‘(7)(A)’’,
(E) by redesignating clauses (ii) and (iii)
as subparagraphs (B) and (C), respectively, and
(F) by redesignating subclauses (I), (II),
and (III), of subparagraph (A) (as redesignated
by subparagraph (D) of this paragraph) as
clauses (i), (ii), and (iii), respectively.
(9)(A) Section 1842(b) (42 U.S.C. 1395u(b)) is
amended by striking paragraphs (8) and (9).
(B) 
The 
first 
sentence 
of 
section
1834(a)(10)(B) (42 U.S.C. 1395m(a)(10(B)) is
amended by striking everything after ‘‘is authorized
to’’ up to the period and inserting the following:
‘‘describe by regulation the factors to be used in de-
termining the cases (of particular items) in which
the application of this subsection results in the de-
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termination of an amount that, by reason of its
being grossly excessive or grossly deficient, is not in-
herently reasonable, and to provide in those cases
for the factors that will be considered in establishing
an amount that is realistic and equitable’’.
(10) 
Section 
1842(b)(10) 
(42 
U.S.C.
1395u(b)(10)) is repealed.
(11) 
Section 
1842(b)(11) 
(42 
U.S.C.
1395u(b)(11)) is amended—
(A) by striking subparagraphs (B) through
(D),
(B) by striking ‘‘(11)(A)’’ and inserting
‘‘(11)’’, and
(C) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B), respectively.
(12) Section 1842(b)(12)(A)(ii) (42 U.S.C.
1395u(b)(12)(A)(ii) is amended—
(A) in the matter preceding subclause (I),
by striking ‘‘prevailing charges determined
under paragraph (3)’’ and inserting ‘‘the
amounts 
determined 
under 
section
1833(a)(1)(G)’’, and
(B) in subclause (II), by striking ‘‘prevail-
ing charge rate’’ and all that follows up to the
period and inserting ‘‘fee schedule amount spec-
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ified in section 1848 for such services per-
formed by physicians’’.
(13) Paragraphs (14) through (17) of section
1842(b) (42 U.S.C. 1395u(b)) are repealed.
(14)(A) Section 1842(b)(18)(A) (42 U.S.C.
1395u(b)(18)(A)) is amended by striking ‘‘reason-
able charge or’’.
(B) Paragraph (18) of section 1842(b) (42
U.S.C. 1395u(b)) is renumbered as paragraph (14).
(15)(A) The matter in section 1842(j) (42
U.S.C. 1395u(j)) preceding paragraph (2) is amend-
ed to read as follows:
‘‘(j)(1) See subsections (k), (l), (m), (n), and (p) as
to the cases in which sanctions may be applied under para-
graph (2).’’.
(B) Section 1842(j)(4) (42 U.S.C. 1395u(j)(4))
is amended by striking ‘‘under paragraph (1)’’.
(16) 
Section 
1842(n)(1)(A) 
(42 
U.S.C.
1395u(n)(1)(A)) is amended by striking ‘‘reasonable
charge (or other applicable limit)’’ and inserting
‘‘other applicable limit’’.
(17) Section 1842(q) 42 U.S.C. 1395u(q) is
amended—
(A) by striking paragraph (1)(B), and
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(B) by striking ‘‘(q)(1)(A)’’ and inserting
‘‘(q)(1)’’.
(18) Section 1845(b)(1) (42 U.S.C. 1395w-
1(b)(1) is amended by striking ‘‘adjustments to the
reasonable charge levels for physicians’ services rec-
ognized under section 1842(b) and’’.
(19) Section 1848(i)(3) (42 U.S.C. 1395w-
4(i)(3)) is repealed.
(20) Clause (ii) of the first sentence of section
1866(a)2)(A) (42 U.S.C. 1395cc(a)(2)(A) is amend-
ed by striking ‘‘reasonable charges’’ through ‘‘pro-
vider)’’ and inserting ‘‘amount customarily charged
for such items and services by such provider’’.
(21) 
Section 
1881(b)(3)(A) 
(42 
U.S.C.
1395rr(b)(3)(A)) is amended by striking ‘‘a reason-
able charge’’ through ‘‘section 1848)’’ and inserting
‘‘the basis described in section 1848’’.
(22) Section 9340 of the Omnibus Budget Rec-
onciliation Act of 1986 (42 U.S.C. 1395u nt) is re-
pealed.
(c) EFFECTIVE DATES.—The amendments made by
the preceding subsections, to the extent they substitute fee
schedules for reasonable charges, apply to particular serv-
ices as of the date specified by the Secretary of Health
and Human Services.
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(d) INITIAL BUDGET NEUTRALITY.—The Secretary,
in developing a fee schedule for particular services (under
the amendments made by subsections (a) and (b)), shall
set amounts for the first year period to which the fee
schedule applies at a level such that the total payments
under title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) for those services for that year period shall
be approximately equal to the estimated total payments
if those amendments had not been made.
SEC. 11462. APPLICATION OF INHERENT REASONABLENESS
TO SURGICAL DRESSINGS.
Section 1834(i) (42 U.S.C. 1395m(i)) is amended by
adding at the end the following:
‘‘(3) ADJUSTMENT
FOR
INHERENT
REASON-
ABLENESS.—The provisions of subsection (a)(10)(B)
shall also apply to surgical dressings.’’.
SEC. 11463. APPLICATION OF COMPETITIVE ACQUISITION
PROCESS TO CERTAIN PART B ITEMS AND
SERVICES.
(a) GENERAL RULE.—Part B of title XVIII (42
U.S.C. 1395j et seq.) is amended by inserting after section
1846 the following:
‘‘COMPETITIVE ACQUISITION OF ITEMS AND SERVICES
‘‘SEC. 1847. (a) ESTABLISHMENT
OF
BIDDING
AREAS.—
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‘‘(1) IN GENERAL.—The Secretary shall estab-
lish competitive acquisition areas for the purposes of
awarding contracts for the furnishing under this
part of the items and services described in sub-
section (c) after 1995. The Secretary may establish
different competitive acquisition areas under this
subsection for different classes of items and services
under this part.
‘‘(2) CRITERIA
FOR
ESTABLISHMENT.—The
competitive acquisition areas established under para-
graph (1) shall—
‘‘(A) initially be, or be within, metropolitan
statistical areas, and
‘‘(B) be chosen based on the availability
and accessibility of entities able to furnish
items and services, and the probable savings to
be realized by the use of competitive bidding in
the furnishing of items and services in the area.
‘‘(b) AWARDING OF CONTRACTS IN AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall con-
duct a competition among individuals and entities
supplying items and services under this part for
each competitive acquisition area established under
subsection (a) for each class of items and services.
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‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—
The Secretary may not award a contract to any en-
tity under the competition conducted pursuant to
paragraph (1) to furnish an item or service under
this part unless the Secretary finds that the entity
meets quality standards specified by the Secretary
for the furnishing of the item or service.
‘‘(3) CONTENTS OF CONTRACT.—A contract en-
tered into with an entity under the competition con-
ducted pursuant to paragraph (1) shall specify (for
all of the items and services within a class)—
‘‘(A) the quantity of items and services the
entity shall provide; and
‘‘(B) such other terms and conditions as
the Secretary may require.
‘‘(c) SERVICES DESCRIBED.—The items and services
to which the provisions of this section shall apply are as
follows:
‘‘(1) Magnetic resonance imaging tests and
computerized axial tomography scans, including phy-
sician’s interpretation of the results of such tests
and scans.
‘‘(2) Enteral and parenteral nutrients, supplies,
and equipment.
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‘‘(3) Such other items as the Secretary may
specify.’’.
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY
THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
(42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14),
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the fol-
lowing:
‘‘(16) where such expenses are for an item or
service furnished in a competitive acquisition area
(as established by the Secretary under section
1847(a)) by an entity other than an entity with
which the Secretary has entered into a contract
under section 1847(b) for the furnishing of such an
item or service in that area, unless the Secretary
finds that such expenses were incurred in a case of
urgent need.’’.
(c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI-
TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC-
TION IN PAYMENTS.—Notwithstanding any provision of
title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.), if the establishment of competitive acquisition
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areas under section 1847 of that Act (as added by this
part) and the furnishing of items and services under that
section during 1997 does not result in a reduction of at
least 15 percent in the projected payment amounts that
would apply to a class of items or services under part B
of that title (42 U.S.C. 1395j et seq.) if that class of items
or services were not to be furnished under that section
1997, the Secretary shall reduce for that year the payment
amounts for that class of items and services by the per-
centage the Secretary determines necessary to result in
that reduction for that year (and those reduced amounts
shall be considered the full payment amounts for that year
in calculating payment amounts for future years).
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) apply to items and services fur-
nished under part B of title XVIII of the Social Security
Act (42 U.S.C. 1395j et seq.) after 1995.
SEC. 11464. APPLICATION OF COMPETITIVE ACQUISITION
PROCESS TO LABORATORY SERVICES.
(a) IN GENERAL.—Section 1847(c), as added by sec-
tion 11463(a) of this Act, is amended by renumbering
paragraph (4) as (5) and inserting after paragraph (3)
the following:
‘‘(4) Clinical diagnostic laboratory tests.’’.
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(b) REDUCTION IN PAYMENT AMOUNTS IF COMPETI-
TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC-
TION IN PAYMENTS.—See section 11463(c) for provisions
that address reductions in payment amounts.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to tests furnished under part B of
title XVIII of the Social Security Act (42 U.S.C. 1395j
et seq.) after 1995.
SEC. 11465. CHANGES IN PAYMENTS FOR CLINICAL LAB-
ORATORY TESTS.
(a) IN GENERAL.—Section 1833(h)(2)(A)(iii) (42
U.S.C. 1395l(h)(2)(A)(iii)) is amended—
(1) by striking the clause designation ‘‘(iii)’’
and inserting ‘‘(iii)(I)’’, and
(2) by adding at the end the following:
‘‘(II) In lieu of the fees established under subclause
I, the Secretary may pay for tests classified as automated
tests on the basis of a nationally uniform fee for a group
of tests (of whatever number) performed together.
‘‘(III) The Secretary shall pay for tests for amylase,
apolipoprotein A, apolipoprotein B, creatine kinase,
gamma glutamyl transferase, iron, lipase, magnesium,
thyroxine, triglyceride, or triiodothyronine uptake on the
same basis as the Secretary pays for other tests classified
as automated tests.
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‘‘(IV) The Secretary may, from time to time, reclas-
sify specific tests as automated or not automated, based
on the volume of a test and the relative frequency by which
the test is performed on automated equipment.’’.
(b) EFFECTIVE DATE AND INITIAL PAYMENT LEV-
ELS.—
(1) The amendments made by subsection (a)
apply to tests performed after 1995.
(2) If the Secretary sets a nationally uniform
fee under subclause (II) of section 1833(h)(2)(A)(iii)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395(h)(2)(A)(iii)), such a fee shall be initially es-
tablished so that estimated aggregate payments
under such fee shall equal the estimated aggregate
amounts that would otherwise have been payable for
the tests under subclause (I).
Subpart D—Provisions Relating to Parts A
and B of Medicare
SEC. 11471. DISCLOSURE OF TAXPAYER IDENTIFYING NUM-
BERS AND OTHER INFORMATION.
(a) PROVIDERS OF SERVICES AND CERTAIN OTHER
ENTITIES.—Section 1124 (42 U.S.C. 1320a–3) is amend-
ed by adding at the end of the following:
‘‘(c) The Secretary may also require a disclosing en-
tity to supply the Secretary with the taxpayer identifying
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number (TIN) of the disclosing entity, of any person con-
cerning whom information is to be supplied under sub-
section (a), or of any other disclosing entity listed under
subsection (b).’’.
(b) ENTITIES THAT FURNISH ITEMS AND SERVICES
UNDER PART B.—
(1) Section 1124A(c)(1) (42 U.S.C. 1320a–
3a(c)(1)) is amended by striking ‘‘on an assignment-
related basis’’.
(2) Section 1124A(a) (42 U.S.C. 1320a–3a(a))
is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (1),
(B) by striking the period at the end of
paragraph (2) and adding ’’; and’’, and
(C) by adding at the end the following:
‘‘(3) on the identity of each individual described
in section 1866(a)(1)(D).’’.
(3) Section 1124A (42 U.S.C. 1320a–3a) is
amended—
(A) by redesignating subsection (c) as (d),
and
(B) by inserting after subsection (b) the
following:
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‘‘(d) The Secretary may also require a disclosing part
B provider to provide the Secretary with the taxpayer
identifying number (TIN) of the disclosing part B pro-
vider, of any person concerning whom information is to
be supplied under subsection (a)(1), and of any managing
employee or entity listed under subsection (a)(2).’’.
(c) VERIFICATION OF TINS WITH THE SECRETARY
OF THE TREASURY.—Section 6103(m) of the Internal
Revenue Code of 1986 (26 U.S.C. 6103(m)) is amended
by adding at the end the following:
‘‘(8) Individuals and other entities involved in
furnishing health care items and services under Fed-
eral (or federally supported) programs.—Upon writ-
ten request by the Secretary of Health and Human
Services, the Secretary shall disclose to the Sec-
retary of Health and Human Services the name of
each person or entity whose TIN has been obtained
under section 1124(c) or 1124A(d) of the Social Se-
curity Act.’’.
SEC. 11472. USE OF WAGE INDEX FOR AREA IN WHICH
HOME HEALTH SERVICES ARE FURNISHED.
(a) IN GENERAL.—Section 1861(v)(1)(L)(iii) (42
U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking ‘‘the
home health agency is located’’ and inserting ‘‘services are
furnished’’.
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(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished after 1996.
CHANGES TO ADMINISTRATION BILL
(1) SNF PPS (Section 11113): Advance effective
date by one year to October 1, 1997. Interim PPS con-
tained in Section 11112 would apply between October 1,
1996 and September 30, 1997.
(2) Medical Education (Section 11105): Delete all
but subsections (a)(1) and (b)(1). The only thing that re-
mains is the freeze on interns and residents at the hos-
pital-specific level in the aggregate and for non-primary
care slots, for both Medicare IME and GME payments.
Plus the 2 proposals on the attached sheet.
(3) AAPCC Add-Ons (Section 11115): Change sub-
section (c) (new section 1886(d)(11)(F)) to payback of
100 percent of IME, GME and DSH (rather than 75 per-
cent), effective 1/1/98. See change in removal of add-ons
in managed care section.
(4) Oxygen (Section 11126): Delete Section 11126
from Administration bill. Substitute Section 8233 from
H.R. 2530 (the Coalition bill).
(5) Rural Provisions: Keep Section 11116 (Sole Com-
munity Hospitals) and Section 11117 (Rural Primary
Care Hospital Program). Add Section 7021 (Rural Refer-
ral Center), Section 7024 (PA/NP), Section 7025
(Telemedicine). Section 7026 (Rural Health Outreach
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Grants), Section 7028 (DSH threshold) from the Senate
Democratic Plan (printed in the Congressional Record on
Nov. 1).
(6) Managed Care: See attachment.
(7) Preventive benefits demonstration program sun-
sets in 2001 unless the Secretary determines these bene-
fits are cost-effective.
ADDITIONAL GMF PROPOSALS
Medical Education: Add provision from Administra-
tion package to allow hospitals to count residents in non-
hospital settings for purposes of their IME adjustment as
long as their resident-to-bed ratio does not increase, effec-
tive 7/1/96.
Medical Education: Add provision from Administra-
tion package to allow DGME payments to be made to cer-
tain non-hospital settings when the non-hospital is paying
for the resident’s salary in that setting, effective 7/1/96.
(c) UPGRADED DURABLE MEDICAL EQUIPMENT.—
Section 1834(a) (42 U.S.C. 1395m(a)) is amended by in-
serting after paragraph (15) the following new paragraph:
‘‘(16) CERTAIN UPGRADED ITEMS.—
‘‘(A) INDIVIDUAL’S RIGHT TO CHOOSE UP-
GRADED
ITEM.—Notwithstanding any other
provision of law, effective on the date on which
the Secretary issues regulations under subpara-
graph (C), an individual may purchase or rent
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from a supplier an item of upgraded durable
medical equipment for which payment would be
made under this subsection if the item were a
standard item.
‘‘(B) PAYMENTS
TO
SUPPLIER.—In the
case of the purchase or rental of an upgraded
item under subparagraph (A)—
‘‘(i) the supplier shall receive payment
under this subsection with respect to such
item as if such item were a standard item;
and
‘‘(ii) the individual purchasing or
renting the item shall pay the supplier an
amount equal to the difference between the
supplier’s charge and the amount under
clause (i).
In no event may the supplier’s charge for an
upgraded item exceed the applicable fee sched-
ule amount (if any) for such item.
‘‘(C) 
CONSUMER
PROTECTION
SAFE-
GUARDS.—The Secretary shall issue regulations
providing for consumer protection standards
with respect to the furnishing of upgraded
equipment under subparagraph (A). Such regu-
lations shall provide for—
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‘‘(i) determination of fair market
prices with respect to an upgraded item;
‘‘(ii) full disclosure of the availability
and price of standard items and proof of
receipt of such disclosure information by
the beneficiary before the furnishing of the
upgraded item;
‘‘(iii) conditions of participation for
suppliers in the simplified billing arrange-
ment;
‘‘(iv) sanctions of suppliers who are
determined to engage in coercive or abu-
sive practices, including exclusion; and
‘‘(v) such other safeguards as the Sec-
retary determines are necessary.’’.
OTHER MEDICARE CHANGES TO ADMINISTRATION’S
ORIGINAL PLAN CHOICES
Expanded Secretarial discretion over 50/50 and mini-
mum enrollment: The Administration bill would establish
minimum enrollment requirements of 5,000 members in
urban areas and 1,500 members in rural areas, and main-
tain the 50/50 enrollment composition requirement in
urban and rural areas, counting members for whom the
entity is ‘‘substantially at risk’’. The 50/50 requirement
could be waived in certain situations.
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This change would give the Secretary authority to
contract with organizations not meeting either the initial
enrollment or the 50/50 requirements, subject to: (1) an
evaluation that the entity has as the ability to manage
risk; (2) capacity limits imposed by the Secretary; (3)
meeting appropriate financial solvency requirements; and
(4) a higher level of monitoring.
Secretarial authority to contract out with entities: El-
igible health plans would include those specified in the Ad-
ministration bill, with the addition of an ‘‘other’’ category
for new types of plans that meet specified standards. The
Secretary would retain discretion as to which plans could
contract with Medicare.
Nurses and PSO issue: The Administration bill limits
who can establish PSOs to various mixtures of physicians
and/or hospitals. This change would treat nurse
practioners on a par with physicians for purposes of creat-
ing PSOs.
BENEFITS
Barium enemas with sigmoidoscopy for high risk
beneficiaries: The Administration bill would cover
colonoscopy for beneficiaries at high risk of colon cancer.
Under this change, Medicare would cover either (1) a
colonoscopy 
or 
(2) 
a 
combination 
of 
a 
flexible
sigmoidoscopy and an air contrast barium enema. The
original estimate for the complete colon screening benefit
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was $1.1 billion; the original proposal was repriced, based
on new information, at $1.365 billion. The total cost esti-
mate, including this change, is $1.355 billion, or estimated
lower costs of $10 million over 7 years. (The combination
of sigmoidoscopy and air contrast barium enema cost
slightly less than colonoscopy.) Because HCFA expects a
small net savings, we do not anticipate this change would
affect CBO’s estimate.
REGULATORY REFORM
CLIA compromise: The ‘‘Blue Dog’’ proposal would
exempt all physician office laboratories (POLs) from
CLIA requirements, except when they perform Pap smear
tests. An identical provision was deleted under the Byrd
rule from the Reconciliation Bill. This provision would
leave a majority of the nation’s labs with no quality over-
sight at all. Various compromise proposals for reducing
CLIA burdens on POLs have been discussed on Capitol
Hill. One such compromise, drafted by Democrats on the
House Commerce Committee, would (1) remove the re-
quirement of biennial laboratory inspections, allowing as-
needed inspections based on criteria set by the Secretary;
(2) mandate that all routine inspections be announced;
and (3) reduce application requirements for CLIA certifi-
cates and remove biennial re-application requirements.
This change would reduce burdens related to inspections
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and paperwork without compromising the quality of lab-
oratory testing.
Self-referral compensation exception: The Adminis-
tration bill includes no provision in this area; the Rec-
onciliation Bill would substantially weaken current protec-
tions.
This change, modeled after Mr. Stark’s bill, would:
1. Add exceptions for shared facility services and for
capitated payments (if designated health services are in-
cluded).
2. Entirely exclude intraocular lens, eyeglasses, and
contact lenses from designated health services subject to
prohibitions.
3. Include DME and parenteral and enteral nutri-
ents, equipment and supplies in the exception for in-office
ancillary services.
4. Delineate the requirements for permissible com-
pensation arrangements, thus making the requirements
uniform for all arrangements.
5. Repeal the exception for physicians’ services.
The ‘‘General Exceptions to both Ownership and
Compensation Arrangement Prohibitions’’ would then be:
(1) shared facility services (new); (2) in-office ancillary
services (including DME, parenteral and enteral nutrients,
equipment, and supplies) (altered); (3) pre-paid plans (un-
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changed); (4) capitated payments (new); and (5) other
permissible exceptions (unchanged).
OTHER
OPD/PPS: Add a PPS for OPDs. In particular, in
FY 2002, establish a PPS that would be budget neutral
relative to what Medicare payments would have been in
2002 and also budget neutral relative to what total bene-
ficiary coinsurance would have been in 2002.
Hospice: Under current law, hospice care is excepted
from the package of services provided by risk plans. If
beneficiaries elect hospice care, Medicare makes payments
directly to the hospice, and the HMOs and CMPs receive
the full monthly capitation amount (less an amount paid
to the hospice for attending physician services). Thus, hos-
pices are not required to contract directly with HMOs and
CMPs. This technical change would retain the current
provision under the new authority for Medicare managed
care contracting.
SNF minimum data set: This change would require
the continuation of standardized resident assessments con-
tained in the minimum data set (MDS). The MDS data
is necessary for developing a case-mix adjustor for a SNF
PPS, proposed elsewhere in the bills. Current Congres-
sional proposals eliminate the requirement that this data
be collected by eliminating certain nursing home quality
standards.
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Home health agency data for case mix system: This
change would allow the Secretary to mandate the collec-
tion of data that may be necessary to develop a case mix
adjustor for HH PPS. There is currently no requirement
that such data be collected.
Rural Primary Care Hospital Program (Sec. 11117
in President’s bill)
(1) Sen. Baucus is seeking an extension of the MAF
demonstration project until 2002, such as the one that
was included in the Conference Agreement. Since our
Rural Primary Care Hospital (RPCH) expansion proposal
makes RPCHs much more similar to MAFs in all key as-
pects, we suggest grandfathering all MAFs as RPCHs as
of the date of implementation of the national program.
This would effectively make all MAFs permanent, so that
extensions of the MAF demonstration would no longer be
necessary.
Centers of excellence: This change would replace the
term ‘‘rebates’’ with ‘‘beneficiary incentives.’’
TITLE V—WELFARE REFORM
SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.
Except as otherwise expressly provided, wherever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
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sion, the reference shall be considered to be made to a
section or other provision of the Social Security Act.
Subtitle A—Temporary
Employment Assistance
SEC. 9101. STATE PLAN.
(a) IN GENERAL.—Title IV (42 U.S.C. 601 et seq.)
is amended by striking part A and inserting the following:
‘‘PART A—TEMPORARY EMPLOYMENT ASSISTANCE
‘‘SEC. 400. APPROPRIATION.
‘‘For the purpose of providing assistance to families
with needy children and assisting parents of children in
such families to obtain and retain private sector work to
the extent possible, and public sector or volunteer work
if necessary, through the Work First Employment Block
Grant program (hereafter in this title referred to as the
‘Work First program’), there is hereby authorized to be
appropriated, and is hereby appropriated, for each fiscal
year a sum sufficient to carry out the purposes of this
part. The sums made available under this section shall be
used for making payments to States which have approved
State plans for temporary employment assistance.
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‘‘SUBPART 1—STATE PLANS FOR TEMPORARY
EMPLOYMENT ASSISTANCE
‘‘SEC. 401. ELEMENTS OF STATE PLANS.
‘‘A State plan for temporary employment assistance
shall provide a description of the State program which car-
ries out the purpose described in section 400 and shall
meet the requirements of the following sections of this
subpart.
‘‘SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOY-
MENT ASSISTANCE.
‘‘(a) IN GENERAL.—The State plan shall provide that
any family—
‘‘(1) with 1 or more children (or any expectant
family, at the option of the State), defined as needy
by the State; and
‘‘(2) which fulfills the conditions set forth in
subsection (b),
shall be eligible for cash assistance under the plan, except
as otherwise provided under this part.
‘‘(b) 
INDIVIDUAL
RESPONSIBILITY
PLAN.—The
State plan shall provide that not later than 30 days after
the approval of the application for temporary employment
assistance, a parent qualifying for assistance shall execute
an individual responsibility plan as described in section
403. If a child otherwise eligible for assistance under this
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part is residing with a relative other than a parent, the
State plan may require the relative to execute such a plan
as a condition of the family receiving such assistance.
‘‘(c) LIMITATIONS ON ELIGIBILITY.—
‘‘(1) LENGTH OF TIME.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraphs (B), (C), (D), and (E), the
State plan shall provide that the family of an
individual who, after attaining age 18 years (or
age 19 years, at the option of the State), has
received assistance under the plan for 60
months, shall no longer be eligible for cash as-
sistance under the plan.
‘‘(B) HARDSHIP
EXCEPTION.—With re-
spect to any family, the State plan shall not in-
clude in the determination of the 60-month pe-
riod under subparagraph (A) any month in
which—
‘‘(i) at the option of the State, the
family includes an individual working 20
hours per week (or more, at the option of
the State);
‘‘(ii) the family resides in an area
with an unemployment rate exceeding 8
percent; or
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‘‘(iii) the family is experiencing other
special hardship circumstances which make
it appropriate for the State to provide an
exemption for such month, except that the
total number of exemptions under this
clause for any month shall not exceed 15
percent of the number of families to which
the State is providing assistance under the
plan.
‘‘(C) EXCEPTION FOR TEEN PARENTS.—
With respect to any family, the State plan shall
not include in the determination of the 60-
month period under subparagraph (A) any
month in which the parent—
‘‘(i) is under age 18 (or age 19, at the
option of the State); and
‘‘(ii) is making satisfactory progress
while attending high school or an alter-
native technical preparation school.
‘‘(D) EXCEPTION
FOR
INDIVIDUALS
EX-
EMPT FROM WORK REQUIREMENTS.—With re-
spect to any family, the State plan shall not in-
clude in the determination of the 60-month pe-
riod under subparagraph (A) any month in
which 1 or each of the parents—
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‘‘(i) is seriously ill, incapacitated, or
of advanced age;
‘‘(ii)(I) except for a child described in
subclause (II), is responsible for a child
under age 1 year (or age 6 months, at the
option of the State), or
‘‘(II) in the case of a second or subse-
quent child born during such period, is re-
sponsible for a child under age 3 months;
‘‘(iii) is pregnant in the third tri-
mester; or
‘‘(iv) is caring for a family member
who is ill or incapacitated.
‘‘(E) 
EXCEPTION
FOR
CHILD-ONLY
CASES.—With respect to any child who has not
attained age 18 (or age 19, at the option of the
State) and who is eligible for assistance under
this part, but not as a member of a family oth-
erwise eligible for assistance under this part
(determined without regard to this paragraph),
the State plan shall not include in the deter-
mination of the 60-month period under sub-
paragraph (A) any month in which such child
has not attained such age.
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‘‘(F) OTHER PROGRAM ELIGIBILITY.—The
State plan shall provide that if a family is no
longer eligible for cash assistance under the
plan due to the imposition of the 60-month pe-
riod under subparagraph (A) or due to the im-
position of a penalty under subparagraph
(A)(ii) or (B)(ii) of section 403(e)(1)—
‘‘(i) for purposes of determining eligi-
bility for any other Federal or federally as-
sisted program based on need, such family
shall continue to be considered eligible for
such cash assistance;
‘‘(ii) for purposes of determining the
amount of assistance under any other Fed-
eral or federally assisted program based on
need, such family shall continue to be con-
sidered receiving such cash assistance; and
‘‘(iii) the State may, at the option of
the State, after having assessed the needs
of the child or children of the family, pro-
vide for such needs with a voucher for such
family—
‘‘(I) determined on the same
basis as the State would provide as-
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sistance under the State plan to such
a family with 1 less individual,
‘‘(II) designed appropriately to
pay third parties for shelter, goods,
and services received by the child or
children, and
‘‘(III) payable directly to such
third parties.
‘‘(2) TREATMENT OF INTERSTATE MIGRANTS.—
The State plan may apply to a category of families
the rules for such category under a plan of another
State approved under this part, if a family in such
category has moved to the State from the other
State and has resided in the State for less than 12
months.
‘‘(3) INDIVIDUALS ON OLD-AGE ASSISTANCE OR
SSI INELIGIBLE FOR TEMPORARY EMPLOYMENT AS-
SISTANCE.—The State plan shall provide that no as-
sistance shall be furnished any individual under the
plan with respect to any period with respect to which
such individual is receiving old-age assistance under
the State plan approved under section 102 of title
I or supplemental security income under title XVI.
‘‘(4) CHILDREN FOR WHOM FEDERAL, STATE,
OR LOCAL FOSTER CARE MAINTENANCE OR ADOP-
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TION ASSISTANCE PAYMENTS ARE MADE.—A child
with respect to whom foster care maintenance pay-
ments or adoption assistance payments are made
under part E or under State or local law shall not,
for the period for which such payments are made, be
regarded as a needy child under this part, and such
child’s income and resources shall be disregarded in
determining the eligibility of the family of such child
for temporary employment assistance.
‘‘(5) DENIAL OF ASSISTANCE FOR 10 YEARS TO
A PERSON FOUND TO HAVE FRAUDULENTLY MIS-
REPRESENTED RESIDENCE IN ORDER TO OBTAIN AS-
SISTANCE IN 2 OR MORE STATES.—The State plan
shall provide that no assistance will be furnished any
individual under the plan during the 10-year period
that begins on the date the individual is convicted in
Federal or State court of having made, a fraudulent
statement or representation with respect to the place
of residence of the individual in order to receive ben-
efits or services simultaneously from 2 or more
States under programs that are funded under this
part, title XIX, or the Food Stamp Act of 1977, or
benefits in 2 or more States under the supplemental
security income program under title XVI.
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‘‘(6) DENIAL
OF
ASSISTANCE
FOR
FUGITIVE
FELONS
AND
PROBATION
AND
PAROLE
VIOLA-
TORS.—
‘‘(A) IN GENERAL.—The State plan shall
provide that no assistance will be furnished any
individual under the plan for any period if dur-
ing such period the State agency has knowledge
that such individual is—
‘‘(i) fleeing to avoid prosecution, or
custody or confinement after conviction,
under the laws of the place from which the
individual flees, for a crime, or an attempt
to commit a crime, which is a felony under
the laws of the place from which the indi-
vidual flees, or which, in the case of the
State of New Jersey, is a high mis-
demeanor under the laws of such State; or
‘‘(ii) violating a condition of probation
or parole imposed under Federal or State
law.
‘‘(B) EXCHANGE OF INFORMATION WITH
LAW ENFORCEMENT AGENCIES.—Notwithstand-
ing any other provision of law, the State plan
shall provide that the State shall furnish any
Federal, State, or local law enforcement officer,
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upon the request of the officer, with the current
address of any recipient of assistance under the
plan, if the officer furnishes the agency with the
name of the recipient and notifies the agency
that—
‘‘(i) such recipient—
‘‘(I) is described in clause (i) or
(ii) of subparagraph (A); or
‘‘(II) has information that is nec-
essary for the officer to conduct the
officer’s official duties; and
‘‘(ii) the location or apprehension of
the recipient is within such officer’s official
duties.
‘‘(d) DETERMINATION OF ELIGIBILITY.—
‘‘(1) DETERMINATION
OF
NEED.—The State
plan shall provide that the State agency take into
consideration any income and resources of any indi-
vidual the State determines should be considered in
determining the need of the child or relative claim-
ing temporary employment assistance, subject to sec-
tion 407.
‘‘(2) RESOURCE
AND
INCOME
DETERMINA-
TION.—In determining the total resources and in-
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come of the family of any needy child, the State plan
shall provide the following:
‘‘(A) RESOURCES.—The State’s resource
limit, including a description of the policy deter-
mined by the State regarding any exclusion al-
lowed for vehicles owned by family members, re-
sources set aside for future needs of a child, in-
dividual development accounts, or other policies
established by the State to encourage savings.
‘‘(B) FAMILY
INCOME.—The extent to
which earned or unearned income is disregarded
in determining eligibility for, and amount of,
assistance.
‘‘(C) CHILD SUPPORT.—The State’s policy,
if any, for determining the extent to which child
support received in excess of $50 per month on
behalf of a member of the family is disregarded
in determining eligibility for, and the amount
of, assistance.
‘‘(D) CHILD’S EARNINGS.—The treatment
of earnings of a child living in the home.
‘‘(E) EARNED INCOME TAX CREDIT.—The
State agency shall disregard any refund of Fed-
eral income taxes made to a family receiving
temporary employment assistance by reason of
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section 32 of the Internal Revenue Code of
1986 (relating to earned income tax credit) and
any payment made to such a family by an em-
ployer under section 3507 of such Code (relat-
ing to advance payment of earned income cred-
it).
‘‘(3) VERIFICATION SYSTEM.—The State plan
shall provide that information is requested and ex-
changed for purposes of income and eligibility ver-
ification in accordance with a State system which
meets the requirements of section 1137.
‘‘SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.
‘‘(a) ASSESSMENT.—The State agency responsible
for administering the State plan shall make an initial as-
sessment of the skills, prior work experience, and employ-
ability of each applicant for, or recipient of, assistance
under the State plan who—
‘‘(1) has attained 18 years of age; or
‘‘(2) has not completed high school or obtained
a certificate of high school equivalency, and is not
attending secondary school.
‘‘(b) INDIVIDUAL RESPONSIBILITY PLANS.—
‘‘(1) IN GENERAL.—On the basis of the assess-
ment made under subsection (a) with respect to an
individual, the State agency, in consultation with the
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individual, shall develop an individual responsibility
plan for the individual, which—
‘‘(A) shall provide that participation by the
individual in job search activities shall be a con-
dition of eligibility for assistance under the
State plan approved under part A, except dur-
ing any period for which the individual is em-
ployed full-time in an unsubsidized job in the
private sector;
‘‘(B) sets forth an employment goal for the
individual and a plan for moving the individual
immediately into private sector employment;
‘‘(C) sets forth the obligations of the indi-
vidual, which may include a requirement that
the individual attend school, maintain certain
grades and attendance, keep school age children
of the individual in school, immunize children,
attend parenting and money management class-
es, or do other things that will help the individ-
ual become and remain employed in the private
sector;
‘‘(D) may require that the individual enter
the State program established under part F, if
the caseworker determines that the individual
will need education, training, job placement as-
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sistance, wage enhancement, or other services
to become employed in the private sector;
‘‘(E) shall provide that the individual
must—
‘‘(i) assign to the State any rights to
support from any other person the individ-
ual may have in such individual’s own be-
half or in behalf of any other family mem-
ber for whom the individual is applying for
or receiving assistance; and
‘‘(ii) cooperate with the State—
‘‘(I) in establishing the paternity
of a child born out of wedlock with re-
spect to whom assistance is claimed,
and
‘‘(II) in obtaining support pay-
ments for the individual and for a
child with respect to whom such as-
sistance is claimed, or in obtaining
any other payments or property due
the individual or the child,
unless (in either case) the individual is found to
have good cause for refusing to cooperate as de-
termined by the State agency in accordance
with standards prescribed by the Secretary,
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which standards shall take into consideration
the best interests of the child on whose behalf
assistance is claimed.
‘‘(F) to the greatest extent possible shall
be designed to move the individual into what-
ever private sector employment the individual is
capable of handling as quickly as possible, and
to increase the responsibility and amount of
work the individual is to handle over time;
‘‘(G) shall describe what services the State
will provide the individual so that the individual
will be able to obtain and keep employment in
the private sector, and describe the job counsel-
ing and other services that will be provided by
the State; and
‘‘(H) at the option of the State, may re-
quire the individual to undergo appropriate sub-
stance abuse treatment.
‘‘(2) TIMING.—The State agency shall comply
with paragraph (1) with respect to an individual—
‘‘(A) within 90 days (or, at the option of
the State, 180 days) after the effective date of
this part, in the case of an individual who, as
of such effective date, is a recipient of assist-
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ance under the State plan approved under this
part; or
‘‘(B) within 30 days (or, at the option of
the State, 90 days) after the individual is deter-
mined to be eligible for such assistance, in the
case of any other individual.
‘‘(c) PROVISION OF PROGRAM AND EMPLOYMENT IN-
FORMATION.—The State shall inform all applicants for
and recipients of assistance under the State plan approved
under this part of all available services under the State
plan for which they are eligible.
‘‘(d) REQUIREMENT THAT RECIPIENTS ENTER THE
WORK FIRST PROGRAM.—
‘‘(1) IN GENERAL.—Beginning with fiscal year
2004, the State shall place recipients of assistance
under the State plan approved under this part, who
have not become employed in the private sector with-
in 1 year after signing an individual responsibility
plan, in the first available slot in the State program
established under part F, except as provided in
paragraph (2).
‘‘(2) EXCEPTIONS.—A state may not be re-
quired to place a recipient of such assistance in the
State program established under part F if the recipi-
ent—
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‘‘(A) is ill, incapacitated, or of advanced
age;
‘‘(B) has not attained 18 years of age;
‘‘(C) is caring for a child or parent who is
ill or incapacitated; or
‘‘(D) is enrolled in school or in educational
or training programs that will lead to private
sector employment.
‘‘(e) PENALTIES.—
‘‘(1) STATE NOT OPERATING A WORK FIRST OR
WORKFARE PROGRAM.—In the case of a State that
is not operating a program under part F or G:
‘‘(A) FAILURE TO COMPLY WITH INDIVID-
UAL RESPONSIBILITY PLAN OR AGREEMENT OF
MUTUAL RESPONSIBILITY.—
‘‘(i) PROGRESSIVE
REDUCTIONS
IN
ASSISTANCE
FOR
1ST
AND
2ND
FAIL-
URES.—The amount of assistance other-
wise to be provided under the State plan
approved under this part to a family that
includes an individual who fails without
good cause to comply with an individual
responsibility plan (or, if the State has es-
tablished a program under subpart 1 of
part F and the individual is required to
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participate in the program, an agreement
of mutual responsibility) signed by the in-
dividual (other than by reason of conduct
described in paragraph (2)) shall be re-
duced by—
‘‘(I) 33 percent for the 1st such
act of noncompliance; or
‘‘(II) 66 percent for the 2nd such
act of noncompliance.
‘‘(ii) DENIAL OF ASSISTANCE FOR 3RD
FAILURE.—In the case of the 3rd such act
of noncompliance, the family of which the
individual is a member shall not thereafter
be eligible for assistance under the State
plan approved under this part.
‘‘(iii) ACTS
OF
NONCOMPLIANCE.—
For purposes of this paragraph, a 1st act
of noncompliance by an individual that
continues for more than 1 calendar month
shall be considered a 2nd act of noncompli-
ance, and a 2nd act of noncompliance that
continues for more than 3 calendar months
shall be considered a 3rd act of noncompli-
ance.
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‘‘(B) DENIAL OF ASSISTANCE TO ADULTS
REFUSING TO WORK, LOOK FOR WORK, OR AC-
CEPT A BONA FIDE OFFER OF EMPLOYMENT.—
‘‘(i) REFUSAL TO WORK OR LOOK FOR
WORK.—If an unemployed individual who
has attained 18 years of age refuses to
work or look for work—
‘‘(I) in the case of the 1st such
refusal, assistance under the State
plan approved under this part shall
not be payable with respect to the in-
dividual until the later of—
‘‘(aa) a period of not less
than 6 months after the date of
the first such refusal; or
‘‘(bb) the first date the indi-
vidual agrees to work or look for
work; or
‘‘(II) in the case of the 2nd such
refusal, the family of which the indi-
vidual is a member shall not there-
after be eligible for assistance under
the State plan approved under this
part.
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‘‘(ii) REFUSAL
TO
ACCEPT
A
BONA
FIDE OFFER OF EMPLOYMENT.—If an un-
employed individual who has attained 18
years of age refuses to accept a bona fide
offer of employment, the family of which
the individual is a member shall not there-
after be eligible for assistance under the
State plan approved under this part.
‘‘(2) OTHER STATES.—In the case of any other
State, the State shall reduce, by such amount as the
State considers appropriate, the amount of assist-
ance otherwise payable under the State plan ap-
proved under this part to a family that includes an
individual who fails without good cause to comply
with an individual responsibility plan signed by the
individual.
‘‘SEC. 404. PAYMENT OF ASSISTANCE.
‘‘(a) STANDARDS OF ASSISTANCE.—The State plan
shall specify standards of assistance, including—
‘‘(1) the composition of the unit for which as-
sistance will be provided;
‘‘(2) a standard, expressed in money amounts,
to be used in determining the need of applicants and
recipients;
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‘‘(3) a standard, expressed in money amounts,
to be used in determining the amount of the assist-
ance payment; and
‘‘(4) the methodology to be used in determining
the payment amount received by assistance units.
‘‘(b) LEVEL OF ASSISTANCE.—Except as otherwise
provided in this title, the State plan shall provide that—
‘‘(1) the determination of need and the amount
of assistance for all applicants and recipients shall
be made on an objective and equitable basis; and
‘‘(2) families of similar composition with similar
needs and circumstances shall be treated similarly.
‘‘(c) CORRECTION OF PAYMENTS.—The State plan
shall provide that the State agency will promptly take all
necessary 
steps 
to 
correct 
any 
overpayment 
or
underpayment of assistance under such plan, including the
request for Federal tax refund intercepts as provided
under section 416.
‘‘(d) 
OPTIONAL
VOLUNTARY
DIVERSION
PRO-
GRAM.—The State plan shall, at the option of the State,
and in such part or parts of the State as the State may
select, provide that—
‘‘(1) upon the recommendation of the case-
worker who is handling the case of a family eligible
for assistance under the State plan, the State shall,
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in lieu of any other assistance under the State plan
to the family during a time period of not more than
3 months, make a lump-sum payment to the family
for the time period in an amount not to exceed—
‘‘(A) the value of the monthly benefits that
would otherwise be provided to the family under
the State plan; multiplied by
‘‘(B) the number of months in the time pe-
riod;
‘‘(2) a lump-sum payment pursuant to subpara-
graph (A) shall not be made more than once to any
family; and
‘‘(3) if, during a time period for which the
State has made a lump-sum payment to a family
pursuant to subparagraph (A), the family applies for
and (but for the lump-sum payment) would be eligi-
ble under the State plan for a monthly benefit that
is greater than the value of the monthly benefit
which would have been provided to the family under
the State plan at the time of the calculation of the
lump sum payment, then, notwithstanding subpara-
graph (A), the State shall, for that part of the time
period that remains after the family becomes eligible
for the greater monthly benefit, provide monthly
benefits to the family in an amount not to exceed—
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HR 2903 IH
‘‘(A) the amount by which the value of the
greater monthly benefit exceeds the value of the
former monthly benefit, multiplied by the num-
ber of months in the time period; divided by
‘‘(B) the whole number of months remain-
ing in the time period.
‘‘SEC. 405. OTHER PROGRAMS.
‘‘(a) WORK FIRST PROGRAM; WORKFARE OR JOB
PLACEMENT VOUCHER PROGRAM.—The State plan shall
provide that the State has in effect and operation—
‘‘(1) a work first program that meets the re-
quirements of part F; and
‘‘(2) a workfare program that meets the re-
quirements of part G, or a job placement voucher
program that meets the requirements of part H, but
not both.
‘‘(b) PROVISION OF POSITIONS AND VOUCHERS.—
The State plan shall provide that the State shall provide
a position in the workfare program established by the
State under part G, or a job placement voucher under the
job placement voucher program established by the State
under part H to any individual who, by reason of section
487(b), is prohibited from participating in the work first
program operated by the State, and shall not provide such
a position or such a voucher to any other individual.
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‘‘(c) PROVISION
OF
CASE
MANAGEMENT
SERV-
ICES.—The State plan shall provide that the State shall
provide to participants in such programs such case man-
agement services as are necessary to ensure the integrated
provision of benefits and services under such programs.
‘‘(d) STATE CHILD SUPPORT AGENCY.—The State
plan shall—
‘‘(1) provide that the State has in effect a plan
approved under part D and operates a child support
program in substantial compliance with such plan;
‘‘(2) provide that the State agency administer-
ing the plan approved under this part shall be re-
sponsible for assuring that—
‘‘(A) the benefits and services provided
under plans approved under this part and part
D are furnished in an integrated manner, in-
cluding coordination of intake procedures with
the agency administering the plan approved
under part D;
‘‘(B) all applicants for, and recipients of,
temporary employment assistance are encour-
aged, assisted, and required (as provided under
section 403(b)(1)(E)(ii)) to cooperate in the es-
tablishment and enforcement of paternity and
child support obligations and are notified about
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the services available under the State plan ap-
proved under part D; and
‘‘(C) procedures require referral of pater-
nity and child support enforcement cases to the
agency administering the plan approved under
part D not later than 10 days after the applica-
tion for temporary employment assistance; and
‘‘(3) provide for prompt notice (including the
transmittal of all relevant information) to the State
child support collection agency established pursuant
to part D of the furnishing of temporary employ-
ment assistance with respect to a child who has been
deserted or abandoned by a parent (including a child
born out-of-wedlock without regard to whether the
paternity of such child has been established).
‘‘(e) CHILD WELFARE SERVICES AND FOSTER CARE
AND ADOPTION ASSISTANCE.—The State plan shall pro-
vide that the State has in effect—
‘‘(1) a State plan for child welfare services ap-
proved under part B; and
‘‘(2) a State plan for foster care and adoption
assistance approved under part E,
and operates such plans in substantial compliance with the
requirements of such parts.
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‘‘(f) REPORT OF CHILD ABUSE, ETC.—The State
plan shall provide that the State agency will—
‘‘(1) report to an appropriate agency or official,
known or suspected instances of physical or mental
injury, sexual abuse or exploitation, or negligent
treatment or maltreatment of a child receiving as-
sistance under the State plan under circumstances
which indicate that the child’s health or welfare is
threatened thereby; and
‘‘(2) provide such information with respect to a
situation described in paragraph (1) as the State
agency may have.
‘‘(g) AVAILABILITY OF ASSISTANCE IN RURAL AREAS
OF STATE.—The State plan shall consider and address the
needs of rural areas in the State to ensure that families
in such areas receive assistance to become self-sufficient.
‘‘(h) FAMILY PRESERVATION.—
‘‘(1) IN GENERAL.—The State plan shall de-
scribe the efforts by the State to promote family
preservation and stability, including efforts—
‘‘(A) to encourage fathers to stay home
and be a part of the family;
‘‘(B) to keep families together to the ex-
tent possible; and
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‘‘(C) except to the extent provided in para-
graph (2), to treat 2-parent families and 1-par-
ent families equally with respect to eligibility
for assistance.
‘‘(2) MAINTENANCE
OF
TREATMENT.—The
State may impose eligibility limitations relating spe-
cifically to 2-parent families to the extent such limi-
tations are no more restrictive than such limitations
in effect in the State plan in fiscal year 1995.
‘‘SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE
PLAN.
‘‘(a) STATEWIDE PLAN.—The State plan shall be in
effect in all political subdivisions of the State, and, if ad-
ministered by the subdivisions, be mandatory upon such
subdivisions. If such plan is not administered uniformly
throughout the State, the plan shall describe the adminis-
trative variations.
‘‘(b) SINGLE ADMINISTRATING AGENCY.—The State
plan shall provide for the establishment or designation of
a single State agency to administer the plan or supervise
the administration of the plan.
‘‘(c) FINANCIAL PARTICIPATION.—The State plan
shall provide for financial participation by the State in the
same manner and amount as such State participates
under title XIX, except that with respect to the sums ex-
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pended for the administration of the State plan, the per-
centage shall be 50 percent.
‘‘(d) REASONABLE PROMPTNESS.—The State plan
shall provide that all individuals wishing to make applica-
tion for temporary employment assistance shall have op-
portunity to do so, and that such assistance be furnished
with reasonable promptness to all eligible individuals.
‘‘(e) AUTOMATED DATA PROCESSING SYSTEM.—The
State plan shall, at the option of the State, provide for
the establishment and operation of an automated state-
wide management information system designed effectively
and efficiently, to assist management in the administra-
tion of the State plan approved under this part, so as—
‘‘(1) to control and account for—
‘‘(A) all the factors in the total eligibility
determination process under such plan for as-
sistance, and
‘‘(B) the costs, quality, and delivery of
payments and services furnished to applicants
for and recipients of assistance; and
‘‘(2) to notify the appropriate officials for child
support, food stamp, and social service programs,
and the medical assistance program approved under
title XIX, whenever a recipient becomes ineligible for
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such assistance or the amount of assistance provided
to a recipient under the State plan is changed.
‘‘(f) DISCLOSURE OF INFORMATION.—The State plan
shall provide for safeguards which restrict the use or dis-
closure of information concerning applicants or recipients.
‘‘(g) DETECTION OF FRAUD.—The State plan shall
provide, in accordance with regulations issued by the Sec-
retary, for appropriate measures to detect fraudulent ap-
plications for temporary employment assistance before the
establishment of eligibility for such assistance.
‘‘SUBPART 2—ADMINISTRATIVE PROVISIONS
‘‘SEC. 411. APPROVAL OF PLAN.
‘‘(a) IN GENERAL.—The Secretary shall approve a
State plan which fulfills the requirements under subpart
1 within 120 days of the submission of the plan by the
State to the Secretary.
‘‘(b) DEEMED APPROVAL.—If a State plan has not
been rejected by the Secretary during the period specified
in subsection (a), the plan shall be deemed to have been
approved.
‘‘SEC. 412. COMPLIANCE.
In the case of any State plan for temporary employ-
ment assistance which has been approved under section
411, if the Secretary, after reasonable notice and oppor-
tunity for hearing to the State agency administering or
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supervising the administration of such plan, finds that in
the administration of the plan there is a failure to comply
substantially with any provision required by subpart 1 to
be included in the plan, the Secretary shall notify such
State agency that further payments will not be made to
the State (or in the Secretary’s discretion, that payments
will be limited to categories under or parts of the State
plan not affected by such failure) until the Secretary is
satisfied that such prohibited requirement is no longer so
imposed, and that there is no longer any such failure to
comply. Until the Secretary is so satisfied the Secretary
shall make no further payments to such State (or shall
limit payments to categories under or parts of the State
plan not affected by such failure).
‘‘SEC. 413. PAYMENTS TO STATES.
‘‘(a) COMPUTATION OF AMOUNT.—Subject to section
412, from the sums appropriated therefor, the Secretary
of the Treasury shall pay to each State which has an ap-
proved plan for temporary employment assistance, for
each quarter, beginning with the quarter commencing Oc-
tober 1, 1996, an amount equal to the Federal medical
assistance percentage (as defined in section 1905(b)) of
the expenditures by the State under such plan.
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‘‘(b) METHOD OF COMPUTATION AND PAYMENT.—
The method of computing and paying such amounts shall
be as follows:
‘‘(1) The Secretary shall, prior to the beginning
of each quarter, estimate the amount to be paid to
the State for such quarter under the provisions of
subsection (a), such estimate to be based on—
‘‘(A) a report filed by the State containing
its estimate of the total sum to be expended in
such quarter in accordance with the provisions
of such subsection and stating the amount ap-
propriated or made available by the State and
its political subdivisions for such expenditures
in such quarter, and if such amount is less than
the State’s proportionate share of the total sum
of such estimated expenditures, the source or
sources from which the difference is expected to
be derived;
‘‘(B) records showing the number of needy
children in the State; and
‘‘(C) such other information as the Sec-
retary may find necessary.
‘‘(2) The Secretary of Health and Human Serv-
ices shall then certify to the Secretary of the Treas-
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quarter greater or less than the amount estimated
by the Secretary of Health and Human Services for
such prior quarter.
‘‘(c) METHOD OF PAYMENT.—The Secretary of the
Treasury shall thereupon, through the Fiscal Service of
the Department of the Treasury and prior to audit or set-
tlement by the General Accounting Office, pay to the
State, at the time or times fixed by the Secretary of
Health and Human Services, the amount so certified.
‘‘SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND
REPORTING SYSTEM.
‘‘(a) QUALITY ASSURANCE.—
‘‘(1) IN GENERAL.—Under the State plan, a
quality assurance system shall be developed based
upon a collaborative effort involving the Secretary,
the State, the political subdivisions of the State, and
assistance recipients, and shall include quantifiable
program outcomes related to self sufficiency in the
categories of welfare-to-work, payment accuracy, and
child support.
‘‘(2) MODIFICATIONS TO SYSTEM.—As deemed
necessary, but not more often than every 2 years,
the Secretary, in consultation with the State, the po-
litical subdivisions of the State, and assistance re-
cipients, shall make appropriate changes in the de-
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sign and administration of the quality assurance sys-
tem, including changes in benchmarks, measures,
and data collection or sampling procedures.
‘‘(b) DATA COLLECTION AND REPORTING.—
‘‘(1) IN GENERAL.—The State plan shall pro-
vide for a quarterly report to the Secretary regard-
ing the data described in paragraphs (2) and (3)
and such additional data needed for the quality as-
surance system. The data collection and reporting
system under this subsection shall promote account-
ability, continuous improvement, and integrity in the
State plans for temporary employment assistance
and Work First.
‘‘(2) DISAGGREGATED DATA.—The State shall
collect the following data items on a monthly basis
from disaggregated case records of applicants for
and recipients of temporary employment assistance
from the previous month:
‘‘(A) The age of adults and children (in-
cluding pregnant women).
‘‘(B) Marital or familial status of cases:
married (2-parent family), widowed, divorced,
separated, or never married; or child living with
other adult relative.
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‘‘(C) The gender, race, educational attain-
ment, work experience, disability status (wheth-
er the individual is seriously ill, incapacitated,
or caring for a disabled or incapacitated child)
of adults.
‘‘(D) The amount of cash assistance and
the amount and reason for any reduction in
such assistance. Any other data necessary to
determine the timeliness and accuracy of bene-
fits and welfare diversions.
‘‘(E) Whether any member of the family
receives benefits under any of the following:
‘‘(i) Any housing program.
‘‘(ii) The food stamp program under
the Food Stamp Act of 1977.
‘‘(iii) The Head Start programs car-
ried out under the Head Start Act.
‘‘(iv) Any job training program.
‘‘(F) The number of months since the most
recent application for assistance under the plan.
‘‘(G) The total number of months for
which assistance has been provided to the fami-
lies under the plan.
‘‘(H) 
The 
employment 
status, 
hours
worked, and earnings of individuals while re-
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ceiving assistance, whether the case was closed
due to employment, and other data needed to
meet the work performance rate.
‘‘(I) Status in Work First and workfare,
including the number of hours an individual
participated and the component in which the in-
dividual participated.
‘‘(J) The number of persons in the assist-
ance unit and their relationship to the youngest
child. Nonrecipients in the household and their
relationship to the youngest child.
‘‘(K) Citizenship status.
‘‘(L) Shelter arrangement.
‘‘(M) Unearned income (not including tem-
porary employment assistance), such as child
support, and assets.
‘‘(N) The number of children who have a
parent who is deceased, incapacitated, or unem-
ployed.
‘‘(O) Geographic location.
‘‘(3) AGGREGATED DATA.—The State shall col-
lect the following data items on a monthly basis
from aggregated case records of applicants for and
recipients of temporary employment assistance from
the previous month:
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‘‘(A) The number of adults receiving as-
sistance.
‘‘(B) The number of children receiving as-
sistance.
‘‘(C) The number of families receiving as-
sistance.
‘‘(D) The number of assistance units who
had their grants reduced or terminated and the
reason for the reduction or termination, includ-
ing sanction, employment, and meeting the time
limit for assistance).
‘‘(E) The number of applications for as-
sistance; the number approved and the number
denied and the reason for denial.
‘‘(4) LONGITUDINAL STUDIES.—The State shall
submit selected data items for a cohort of individ-
uals who are tracked over time. This longitudinal
sample shall be used for selected data items de-
scribed in paragraphs (2) and (3), as determined ap-
propriate by the Secretary.
‘‘(c) ADDITIONAL DATA.—The report required by
subsection (b) for a fiscal year quarter shall also include
the following:
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‘‘(1) REPORT ON USE OF FEDERAL FUNDS TO
COVER ADMINISTRATIVE COSTS AND OVERHEAD.—A
statement of—
‘‘(A) the percentage of the Federal funds
paid to the State under this part for the fiscal
year quarter that are used to cover administra-
tive costs or overhead; and
‘‘(B) the total amount of State funds that
are used to cover such costs or overhead.
‘‘(2) REPORT
ON
STATE
EXPENDITURES
ON
PROGRAMS FOR NEEDY FAMILIES.—A statement of
the total amount expended by the State during the
fiscal year quarter on programs for needy families,
with the amount spent on the program under this
part, and the purposes for which such amount was
spent, separately stated.
‘‘(3) REPORT ON NONCUSTODIAL PARENTS PAR-
TICIPATING IN WORK ACTIVITIES.—The number of
noncustodial parents in the State who participated
in work activities during the fiscal year quarter.
‘‘(4) 
REPORT
ON
CHILD
SUPPORT
COL-
LECTED.—The total amount of child support col-
lected by the State agency administering the State
plan under part D on behalf of a family receiving as-
sistance under this part.
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assistance, funded by the compliance penalties imposed
* * *
SEC. 9201. EXTENSION OF PROVISION PROVIDING ADDI-
TIONAL ELIGIBILITY FOR MEDICAID.
Subsection (f) of section 1925 of the Social Security
Act (42 U.S.C. 1396r–6(f)) is amended by striking
‘‘1998’’ and inserting ‘‘2002’’.
SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PRO-
VIDED TO APPLICANTS AND FORMER RECIPI-
ENTS OF TEMPORARY FAMILY ASSISTANCE,
FOOD STAMPS, AND MEDICAID.
(a) TEMPORARY FAMILY ASSISTANCE.—Section 406,
as added by the amendment made by section 9101(a) of
this Act, is amended by adding at the end the following:
‘‘(h) NOTICE
OF AVAILABILITY
OF EITC.—The
State plan shall provide that the State agency referred to
in subsection (b) must provide written notice of the exist-
ence and availability of the earned income credit under
section 32 of the Internal Revenue Code of 1986 to—
‘‘(1) any individual who applies for assistance
under the State plan, upon receipt of the applica-
tion; and
‘‘(2) any individual whose assistance under the
State plan (or under the State plan approved under
part A of this title (as in effect before the effective
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date of title IX of the Omnibus Budget Reconcili-
ation Act of 1995) is terminated, in the notice of
termination of benefits.’’.
(b) FOOD STAMPS.—Section 11(e) of the Food
Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended—
(1) in paragraph (24) by striking ‘‘and’’ at the
end;
(2) in paragraph (25) by striking the period at
the end and inserting ‘‘; and’’; and
(3) by inserting after paragraph (25) the fol-
lowing:
‘‘(26) that whenever a household applies for
food stamp benefits, and whenever such benefits are
terminated with respect to a household, the State
agency shall provide to each member of such house-
hold notice of—
‘‘(A) the existence of the earned income
tax credit under section 32 of the Internal Rev-
enue Code of 1986; and
‘‘(B) the fact that such credit may be ap-
plicable to such member.’’.
(c) 
MEDICAID.—Section 
1902(a) 
(42 
U.S.C.
1396a(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
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(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (62) the fol-
lowing new paragraph:
‘‘(63) provide that the State shall provide notice
of the existence and availability of the earned income
tax credit under section 32 of the Internal Revenue
Code of 1986 to each individual applying for medical
assistance under the State plan and to each individ-
ual whose eligibility for medical assistance under the
State plan is terminated.’’.
SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME
TAX CREDIT AND DEPENDENT CARE TAX
CREDIT TO BE INCLUDED ON W–4 FORM.
(a) IN GENERAL.—Section 11114 of the Omnibus
Budget Reconciliation Act of 1990 (26 U.S.C. 21 note),
relating to program to increase public awareness, is
amended by adding at the end the following new sentence:
‘‘Such means shall include printing a notice of the avail-
ability of such credits on the forms used by employees to
determine the proper number of withholding exemptions
under chapter 24 of such Code.’’
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SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX
CREDIT THROUGH STATE DEMONSTRATION
PROGRAMS.
(a) IN GENERAL.—Section 3507 of the Internal Rev-
enue Code of 1986 (relating to the advance payment of
the earned income tax credit) is amended by adding at
the end the following:
‘‘(g) STATE DEMONSTRATIONS.—
‘‘(1) IN GENERAL.—In lieu of receiving earned
income advance amounts from an employer under
subsection (a), a participating resident shall receive
advance earned income payments from a responsible
State agency pursuant to a State Advance Payment
Program that is designated pursuant to paragraph
(2).
‘‘(2) DESIGNATIONS.—
‘‘(A) IN
GENERAL.—From among the
States submitting proposals satisfying the re-
quirements of paragraph (3), the Secretary (in
consultation with the Secretary of Health and
Human Services) may designate not more than
4 State Advance Payment Demonstrations.
States selected for the demonstrations may
have, in the aggregate, no more than 5 percent
of the total number of households participating
in the program under the Food Stamp program
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in the immediately preceding fiscal year. Ad-
ministrative costs of a State in conducting a
demonstration under this section may be in-
cluded for matching under section 413(a) of the
Social Security Act and section 16(a) of the
Food Stamp Act of 1977.
‘‘(B) 
WHEN
DESIGNATION
MAY
BE
MADE.—Any designation under this paragraph
shall be made no later than December 31,
1996.
‘‘(C) PERIOD FOR WHICH DESIGNATION IS
IN EFFECT.—
‘‘(i) 
IN
GENERAL.—Designations
made under this paragraph shall be effec-
tive for advance earned income payments
made after December 31, 1996, and before
January 1, 2000.
‘‘(ii) SPECIAL RULES.—
‘‘(I) REVOCATION
OF
DESIGNA-
TIONS.—The Secretary may revoke
any designation made under this
paragraph if the Secretary determines
that the State is not complying sub-
stantially with the proposal described
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in paragraph (3) submitted by the
State.
‘‘(II) AUTOMATIC
TERMINATION
OF DESIGNATIONS.—Any failure by a
State to comply with the reporting re-
quirements described in paragraphs
(3)(F) and (3)(G) shall have the ef-
fect of immediately terminating the
designation under this paragraph and
rendering paragraph (5)(A)(ii) inap-
plicable to subsequent payments.
‘‘(3) PROPOSALS.—No State may be designated
under paragraph (2) unless the State’s proposal for
such designation—
‘‘(A) identifies the responsible State agen-
cy,
‘‘(B) describes how and when the advance
earned income payments will be made by that
agency, including a description of any other
State or Federal benefits with which such pay-
ments will be coordinated,
‘‘(C) describes how the State will obtain
the information on which the amount of ad-
vance earned income payments made to each
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participating resident will be determined in ac-
cordance with paragraph (4),
‘‘(D) describes how State residents who
will be eligible to receive advance earned income
payments will be selected, notified of the oppor-
tunity to receive advance earned income pay-
ments from the responsible State agency, and
given the opportunity to elect to participate in
the program,
‘‘(E) describes how the State will verify, in
addition to receiving the certifications and
statement described in paragraph (7)(D)(iv),
the eligibility of participating residents for the
earned income tax credit,
‘‘(F) commits the State to furnishing to
each participating resident by January 31 of
each year a written statement showing—
‘‘(i) the name and taxpayer identifica-
tion number of the participating resident,
and
‘‘(ii) the total amount of advance
earned income payments made to the par-
ticipating resident during the prior cal-
endar year,
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‘‘(G) commits the State to furnishing to
the Secretary by December 1 of each year a
written statement showing the name and tax-
payer identification number of each participat-
ing resident,
‘‘(H) commits the State to treat any ad-
vance earned income payments as described in
paragraph (5) and any repayments of excessive
advance earned income payments as described
in paragraph (6),
‘‘(I) commits the State to assess the devel-
opment and implementation of its State Ad-
vance Payment Program, including an agree-
ment to share its findings and lessons with
other interested States in a manner to be de-
scribed by the Secretary, and
‘‘(J) is submitted to the Secretary on or
before June 30, 1996.
‘‘(4) AMOUNT
AND
TIMING
OF
ADVANCE
EARNED INCOME PAYMENTS.—
‘‘(A) AMOUNT.—
‘‘(i) IN
GENERAL.—The method for
determining the amount of advance earned
income payments made to each participat-
ing resident shall conform to the fullest ex-
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tent possible with the provisions of sub-
section (c).
‘‘(ii) SPECIAL RULE.—A State may,
at its election, apply the rules of subsection
(c)(2)(B) by substituting ‘between 60 per-
cent and 75 percent of the credit percent-
age in effect under section 32(b)(1) for an
individual with the corresponding number
of qualifying children’ for ‘60 percent of
the credit percentage in effect under sec-
tion 32(b)(1) for such an eligible individual
with 1 qualifying child’ in clause (i) and
‘the same percentage (as applied in clause
(i))’ for ‘60 percent’ in clause (ii).
‘‘(B) TIMING.—The frequency of advance
earned income payments may be determined on
the basis of the payroll periods of participating
residents, on a single statewide schedule, or on
any other reasonable basis prescribed by the
State in its proposal; however, in no event may
advance earned income payments be made to
any participating resident less frequently than
on a calendar-quarter basis.
‘‘(5) PAYMENTS TO BE TREATED AS PAYMENTS
OF WITHHOLDING AND FICA TAXES.—
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‘‘(A) IN GENERAL.—For purposes of this
title, advance earned income payments during
any calendar quarter—
‘‘(i) shall neither be treated as a pay-
ment of compensation nor be included in
gross income, and
‘‘(ii) shall be treated as made out of—
‘‘(I) amounts required to be de-
ducted by the State and withheld for
the calendar quarter by the State
under section 3401 (relating to wage
withholding),
‘‘(II) amounts required to be de-
ducted for the calendar quarter under
section 3102 (relating to FICA em-
ployee taxes), and
‘‘(III) amounts of the taxes im-
posed on the State for the calendar
quarter under section 3111 (relating
to FICA employer taxes),
as if the State had paid to the Secretary,
on the day on which payments are made to
participating residents, an amount equal to
such payments.