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‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e) used
to adjust payment rates for physicians’
services furnished in the payment area,
and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 70
percent shall be adjusted by the index
described in clause (iii);
‘‘(v) the index values shall be computed
based only on the beneficiary population
who are 65 years of age or older who are
not determined to have end stage renal dis-
ease.
The Secretary may continue to apply the rules
described in this subparagraph (or similar rules)
for 1997.
‘‘(5) BUDGET
NEUTRALITY
ADJUSTMENT
FAC-
TOR.—For each year, the Secretary shall compute a
budget neutrality adjustment factor so that the aggre-
gate of the payments under this part shall not exceed
the aggregate payments that would have been made
under this part if the area-specific percentage for the
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year had been 100 percent and the national percent-
age had been 0 percent.
‘‘(6) NATIONAL AVERAGE PER CAPITA GROWTH
PERCENTAGE DEFINED.—In this part, the ‘national
average per capita growth percentage’ for—
‘‘(A) 1996 is 8.0 percent,
‘‘(B) 1997 is 3.8 percent,
‘‘(C) 1998 is 4.6 percent,
‘‘(D) 1999 is 4.3 percent,
‘‘(E) 2000 is 3.8 percent,
‘‘(F) 2001 is 5.5 percent,
‘‘(G) 2002 is 5.6 percent, and
‘‘(H) each subsequent year is 5.0 percent.
‘‘(d) MEDICAREPLUS PAYMENT AREA DEFINED.—
‘‘(1) IN GENERAL.—In this part, except as pro-
vided in paragraph (3), the term ‘MedicarePlus pay-
ment area’ means a county, or equivalent area speci-
fied by the Secretary.
‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the
case of individuals who are determined to have end
stage renal disease, the MedicarePlus payment area
shall be each State.
‘‘(3) GEOGRAPHIC ADJUSTMENT.—
‘‘(A) IN GENERAL.—Upon request of a State
for a contract year (beginning after 1996) made
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at least 7 months before the beginning of the
year, the Secretary shall make a geographic ad-
justment to a MedicarePlus payment areas in
the State otherwise determined under paragraph
(1)—
‘‘(i) to a single statewide MedicarePlus
payment area,
‘‘(ii) to the metropolitan based system
described in subparagraph (C), or
‘‘(iii) to consolidating into a single
MedicarePlus payment area noncontinuous
counties (or equivalent areas described in
paragraph (1)) within a State.
Such adjustment shall be effective for payments
for months beginning with January of the year
following the year in which the request is re-
ceived.
‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—
In the case of a State requesting an adjustment
under this paragraph, the Secretary shall adjust
the payment rates otherwise established under
this paragraph for MedicarePlus payment areas
in the State in a manner so that the aggregate
of the payments under this section in the State
shall not exceed the aggregate payments that
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would have been made under this section for
MedicarePlus payment areas in the State in the
absence of the adjustment under this paragraph.
‘‘(C) METROPOLITAN BASED SYSTEM.—The
metropolitan based system described in this sub-
paragraph is one in which—
‘‘(i) all the portions of each metropoli-
tan statistical area in the State or in the
case of a consolidated metropolitan statis-
tical area, all of the portions of each pri-
mary metropolitan statistical area within
the consolidated area within the State, are
treated as a single MedicarePlus payment
area, and
‘‘(ii) all areas in the State that do not
fall within a metropolitan statistical area
are treated as a single MedicarePlus pay-
ment area.
‘‘(D) AREAS.—In subparagraph (C), the
terms ‘metropolitan statistical area’, ‘consoli-
dated metropolitan statistical area’, and ‘pri-
mary metropolitan statistical area’ mean any
area designated as such by the Secretary of Com-
merce.
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‘‘(e) SPECIAL RULES
FOR INDIVIDUALS ELECTING
HIGH DEDUCTIBLE PLANS.—
‘‘(1) IN GENERAL.—In the case of an individual
who has elected a high deductible plan, notwithstand-
ing the preceding provisions of this section—
‘‘(A) the amount of the monthly payment to
the MedicarePlus organization offering the high
deductible plan shall not exceed the monthly pre-
mium for the plan, and
‘‘(B) subject to paragraph (2), the difference
between the amount of payment that would oth-
erwise be made and the amount of payment to
such organization shall be made directly into a
High Deductible MedicarePlus MSA established
(and, if applicable, designated) by the individual
under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE-
QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In the
case of an individual who has elected coverage under
a high deductible plan, no payment shall be made
under paragraph (1)(B) on behalf of an individual
for a month unless the individual—
‘‘(A) has established before the beginning of
the month (or by such other deadline as the Sec-
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retary 
may 
specify) 
a 
High 
Deductible
MedicarePlus MSA (as defined in section
137(b)(2) of the Internal Revenue Code of 1986),
and
‘‘(B) if the individual has established more
than one High Deductible MedicarePlus MSA,
has designated one of such accounts as the indi-
vidual’s High Deductible MedicarePlus MSA for
purposes of this part.
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT CONTRIBUTION.—In the case of an individ-
ual electing a high deductible plan effective beginning
with a month in a year, the amount of the contribu-
tion to the High Deductible MedicarePlus MSA on be-
half of the individual for that month and all succes-
sive months in the year shall be deposited during that
first month. In the case of a termination of such an
election as of a month before the end of a year, the
Secretary shall provide for a procedure for the recov-
ery of deposits attributable to the remaining months
in the year.
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‘‘(4) 
PERMITTING
CONTRIBUTIONS
INTO
MEDICAREPLUS MSA.—Effective January 1, 1997, if a
member of a Federally-qualified health maintenance
organization certifies that a Rebate MedicarePlus
MSA (as defined in section 137(c) of the Internal
Revenue Code of 1986) has been established for the
benefit of such member, the health maintenance orga-
nization may reduce the basic health services pay-
ment otherwise determined under otherwise applicable
law by requiring the payment of a deductible by the
member for basic health services.
‘‘(f) PAYMENTS OF REBATES.—
‘‘(1) IN GENERAL.—If the amount of the monthly
premium for a MedicarePlus plan (other than a high
deductible plan) for an MedicarePlus payment area
for a year is less than 1⁄12 of the annual MedicarePlus
capitation rate applied under this section 1854 for
the area and year involved, at the election of an indi-
vidual enrolled under the plan the Secretary shall ei-
ther—
‘‘(A) in the case of an individual who has
a Rebate MedicarePlus MSA account (as defined
in section 137(b)(3) of the Internal Revenue Code
of 1986), to deposit 100 percent of such difference
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in such an account specified by the individual;
or
‘‘(B)(i) pay to the MedicarePlus organiza-
tion on behalf of such individual the monthly
amount equal to 100 percent of such difference
up to the amount of the premium amount of
such individual for supplemental benefits de-
scribed in section 1895H(b),
‘‘(ii) pay to such individual an amount
equal to 75 percent of the remainder of such dif-
ference, and
‘‘(iii) deposit any remainder of such dif-
ference in the Federal Hospital Insurance Trust
Fund.
‘‘(2) TIME FOR PAYMENT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), payments and deposits described in
paragraph (1) shall be made on a monthly basis.
‘‘(B) CASH
REBATES.—A rebate under
paragraph (1)(B)(ii) shall be paid as of the close
of the calendar year to which the enrollment ap-
plied.
‘‘(g) PAYMENTS FROM TRUST FUND.—The payment to
a MedicarePlus organization under this section for individ-
uals enrolled under this part with the organization, and
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payments to a High Deductible or Rebate MedicarePlus
MSA under subsection (e)(1)(B) or subsection (f), shall be
made from the Federal Hospital Insurance Trust Fund and
the Federal Supplementary Medical Insurance Trust Fund
in such proportion as the Secretary determines reflects the
relative weight that benefits under part A and under part
B represents of the actuarial value of the total benefits
under this title.
‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
pital (as defined in section 1886(d)(1)(B)) as of the effective
date of the individual’s—
‘‘(1) election under this part of a MedicarePlus
plan offered by a MedicarePlus organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicarePlus plan or
the Medicare fee-for-service program option de-
scribed in section 1851(a)(1)(A) (as the case may
be) elected before the election with such organiza-
tion,
‘‘(B) the elected organization shall not be fi-
nancially responsible for payment for such serv-
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ices until the date after the date of the individ-
ual’s discharge, and
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the or-
ganization under this part; or
‘‘(2) termination of election with respect to a
MedicarePlus organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the individual’s
discharge,
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicarePlus organization,
and
‘‘(C) the terminated organization shall not
receive any payment with respect to the individ-
ual under this part during the period the indi-
vidual is not enrolled.
‘‘PREMIUMS AND REBATES
‘‘SEC. 1855. (a) SUBMISSION AND CHARGING OF PRE-
MIUMS.—
‘‘(1) IN
GENERAL.—Subject to paragraph (3),
each MedicarePlus organization shall file with the
Secretary each year, in a form and manner and at
a time specified by the Secretary—
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‘‘(A) the amount of the monthly premium
for coverage for services under section 1852(a)
under each MedicarePlus plan it offers under
this part in each MedicarePlus payment area (as
defined in section 1854(d)) in which the plan is
being offered; and
‘‘(B) the enrollment capacity in relation to
the plan in each such area.
‘‘(2) TERMINOLOGY.—In this part—
‘‘(A) the term ‘monthly premium’ means,
with respect to a MedicarePlus plan offered by a
MedicarePlus organization, the monthly pre-
mium filed under paragraph (1), not taking into
account the amount of any payment made to-
ward the premium under section 1854; and
‘‘(B) the term ‘net monthly premium’
means, with respect to such a plan and an indi-
vidual enrolled with the plan, the premium (as
defined in subparagraph (A)) for the plan re-
duced by the amount of payment made toward
such premium under section 1854.
‘‘(3) LIMITATION ON PORTION OF MONTHLY PRE-
MIUM ATTRIBUTABLE TO REQUIRED COVERAGE.—In
no case may the portion of the monthly premium for
a MedicarePlus plan for an area and year attrib-
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utable to required services under section 1852(a)(1)
exceed the adjusted community rate for the plan (as
defined in subsection (f)(5)).
‘‘(b) NET MONTHLY PREMIUM.—The amount of the net
monthly premium charged by a MedicarePlus organization
for a MedicarePlus plan offered in a MedicarePlus payment
area to an individual under this part shall be equal to the
amount (if any) by which—
‘‘(1) the amount of the monthly premium for the
plan for the period involved, exceeds
‘‘(2) 1⁄12 of the annual MedicarePlus capitation
rate applied under section 1854 for the area and year
involved.
‘‘(c) UNIFORM PREMIUM.—The monthly premium and
net monthly premium (including rebates offered) by a
MedicarePlus organization under this part may not vary
among individuals who reside in the same MedicarePlus
payment area.
‘‘(d) TERMS
AND CONDITIONS
OF IMPOSING PRE-
MIUMS.—Each MedicarePlus organization shall permit the
payment of net monthly premiums on a monthly basis and
may terminate election of individuals for a MedicarePlus
plan for failure to make premium payments only in accord-
ance with section 1851(g)(3)(B)(i).
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plan for a contract year, subject to the succeed-
ing provisions of this subsection, the organiza-
tion shall provide to individuals such additional
benefits (as the organization may specify), a
monetary rebate (paid on a monthly basis), or a
combination thereof, in a total value which is at
least equal to the adjusted excess amount (as de-
fined in subparagraph (C)).
‘‘(B) EXCESS
AMOUNT.—For purposes of
this paragraph, the ‘excess amount’, for an orga-
nization for a plan, is the amount (if any) by
which—
‘‘(i) the average of the capitation pay-
ments made to the organization under sec-
tion 1854 for the plan at the beginning of
contract year, exceeds
‘‘(ii) the actuarial value of the required
benefits described in section 1852(a)(1)
under the plan for individuals under this
part, as determined based upon an adjusted
community rate described in paragraph (5)
(as reduced for the actuarial value of the co-
insurance and deductibles under parts A
and B).
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‘‘(C) ADJUSTED
EXCESS
AMOUNT.—For
purposes of this paragraph, the ‘adjusted excess
amount’, for an organization for a plan, is the
excess amount reduced to reflect any amount
withheld and reserved for the organization for
the year under paragraph (3).
‘‘(D) NO APPLICATION TO HIGH DEDUCT-
IBLE PLANS.—Subparagraph (A) shall not apply
to a high deductible plan.
‘‘(E) UNIFORM
APPLICATION.—This para-
graph shall be applied uniformly for all enrollees
for a plan in a MedicarePlus payment area.
‘‘(F) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing a
MedicarePlus organization from providing health
care benefits that are in addition to the benefits
otherwise required to be provided under this
paragraph and from imposing a premium for
such additional benefits.
‘‘(2) RULES IN RELATION TO REBATES.—To the
extent that the adjusted excess amount for a plan ex-
ceeds the value of additional benefits provided under
subparagraph (A) by the MedicarePlus organization
in relation to the plan for a month, then the organi-
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zation shall provide for payment of the amount of
such excess as follows:
‘‘(A) REBATE MEDICAREPLUS MSA.—If the
individual has a Rebate MedicarePlus MSA and
elects treatment under this subparagraph, the or-
ganization shall provide for payment of such ex-
cess into such MSA.
‘‘(B) ADDITIONAL AMOUNT.—The organiza-
tion shall provide for payment of the amount of
any additional excess as follows:
‘‘(i) 75 percent of such excess to the in-
dividual.
‘‘(ii) 25 percent to the Federal Hos-
pital Insurance Trust Fund.
‘‘(3) STABILIZATION FUND.—A MedicarePlus or-
ganization may provide that a part of the value of an
excess actuarial amount described in paragraph (1)
be withheld and reserved in the Federal Hospital In-
surance Trust Fund and in the Federal Supple-
mentary Medical Insurance Trust Fund (in such pro-
portions as the Secretary determines to be appro-
priate) by the Secretary for subsequent annual con-
tract periods, to the extent required to stabilize and
prevent undue fluctuations in the additional benefits
and rebates offered in those subsequent periods by the
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organization in accordance with such paragraph. Any
of such value of the amount reserved which is not pro-
vided as additional benefits described in paragraph
(1)(A) to individuals electing the MedicarePlus plan
of the organization in accordance with such para-
graph prior to the end of such periods, shall revert for
the use of such trust funds.
‘‘(4) DETERMINATION BASED ON INSUFFICIENT
DATA.—For purposes of this subsection, if the Sec-
retary finds that there is insufficient enrollment expe-
rience (including no enrollment experience in the case
of a provider-sponsored organization) to determine an
average of the capitation payments to be made under
this part at the beginning of a contract period, the
Secretary may determine such an average based on
the enrollment experience of other contracts entered
into under this part.
‘‘(5) ADJUSTED COMMUNITY RATE.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, subject to subparagraph (B), the term
‘adjusted community rate’ for a service or serv-
ices means, at the election of a MedicarePlus or-
ganization, either—
‘‘(i) the rate of payment for that serv-
ice or services which the Secretary annually
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determines would apply to an individual
electing a MedicarePlus plan under this
part if the rate of payment were determined
under a ‘community rating system’ (as de-
fined in section 1302(8) of the Public
Health Service Act, other than subpara-
graph (C)), or
‘‘(ii) such portion of the weighted ag-
gregate premium, which the Secretary an-
nually estimates would apply to such an in-
dividual, as the Secretary annually esti-
mates is attributable to that service or serv-
ices,
but adjusted for differences between the utiliza-
tion characteristics of the individuals electing
coverage under this part and the utilization
characteristics of the other enrollees with the or-
ganization (or, if the Secretary finds that ade-
quate data are not available to adjust for those
differences, the differences between the utilization
characteristics of individuals selecting other
MedicarePlus coverage, or MedicarePlus eligible
individuals in the area, in the State, or in the
United States, eligible to elect MedicarePlus cov-
erage under this part and the utilization charac-
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teristics of the rest of the population in the area,
in the State, or in the United States, respec-
tively).
‘‘(B) SPECIAL RULE FOR PROVIDER-SPON-
SORED
ORGANIZATIONS.—In the case of a
MedicarePlus organization that is a provider-
sponsored organization, the adjusted community
rate under subparagraph (A) for a MedicarePlus
plan of the organization may be computed (in a
manner specified by the Secretary) using data in
the general commercial marketplace or (during a
transition period) based on the costs incurred by
the organization in providing such a plan.
‘‘(g) TRANSITIONAL FILE AND USE FOR CERTAIN RE-
QUIREMENTS.—
‘‘(1) 
IN
GENERAL.—In 
the 
case 
of 
a
MedicarePlus plan proposed to be offered before the
end of the transition period (as defined in section
1851(e)(1)(B)) by a MedicarePlus organization de-
scribed in section 1853(f)(3) or by a MedicarePlus or-
ganization with a contract in effect under section
1857, if the organization submits complete informa-
tion to the Secretary regarding the plan demonstrat-
ing that the plan meets the requirements and stand-
ards under section 1852(a) and subsections (a)
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through (f) of this section (relating to benefits and
premiums), the plan shall be deemed as meeting such
requirements and standards under such provisions
unless the Secretary disapproves the plan within 60
days after the date of submission of the complete in-
formation.
‘‘(2) CONSTRUCTION.—Nothing in paragraph (1)
shall be construed as waiving the requirement of a
contract under section 1857 or waiving requirements
and standards not referred to in paragraph (1).
‘‘ESTABLISHMENT OF STANDARDS; CERTIFICATION OF
ORGANIZATIONS AND PLANS
‘‘SEC. 1856. (a) ESTABLISHMENT OF STANDARDS.—
‘‘(1) STANDARDS APPLICABLE TO STATE-REGU-
LATED
ORGANIZATIONS
AND
PLANS
AND
NON-SOL-
VENCY STANDARDS FOR PROVIDER-SPONSORED ORGA-
NIZATIONS.—
‘‘(A) RECOMMENDATIONS
OF
NAIC.—The
Secretary shall request the National Association
of Insurance Commissioners to develop and sub-
mit to the Secretary, not later than 12 months
after the date of the enactment of the Medicare
Preservation Act of 1995, proposed standards
consistent with the requirements of this part for
MedicarePlus organizations (other than union
sponsors and Taft-Hartley sponsors, and other
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would otherwise have been required to promul-
gate standards under subparagraph (B).
‘‘(D) USE OF INTERIM RULES.—For the pe-
riod in which this part is in effect and standards
are being developed and established under the
preceding provisions of this subsection, the Sec-
retary shall provide by not later than June 1,
1996, for the application of such interim stand-
ards (without regard to any requirements for no-
tice and public comment) as may be appropriate
to provide for the expedited implementation of
this part. Such interim standards shall not
apply after the date standards are established
under the preceding provisions of this para-
graph.
‘‘(2) ESTABLISHMENT OF STANDARDS FOR UNION
AND TAFT-HARTLEY SPONSORS, QUALIFIED ASSOCIA-
TION SPONSORS, AND PLANS.—
‘‘(A) IN GENERAL.—The Secretary shall de-
velop and promulgate by regulation standards
consistent with the requirements of this part for
union and Taft-Hartley sponsors, for qualified
association sponsors, and for MedicarePlus plans
offered by such organizations (other than
MedicarePlus plans offered by qualified associa-
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tion sponsors that are issued by organizations to
which section 1853(a)(1) applies).
‘‘(B) CONSULTATION WITH SECRETARY OF
LABOR.—The Secretary shall consult with the
Secretary of Labor with respect to such stand-
ards for such sponsors and plans.
‘‘(C) TIMING.—Standards under this para-
graph shall be promulgated at or about the time
standards are promulgated under paragraph (1).
‘‘(3) COORDINATION AMONG FINAL STANDARDS.—
In establishing standards (other than on an interim
basis) under this subsection and subsection (b), the
Secretary shall seek to provide for consistency (as ap-
propriate) across the different types of MedicarePlus
organizations, in order to promote equitable treat-
ment of different types of organizations and consistent
protection for individuals who elect plans offered by
the different types of MedicarePlus organizations.
‘‘(4) USE OF CURRENT STANDARDS FOR INTERIM
STANDARDS.—To the extent practicable and consistent
with the requirements of this part, standards estab-
lished on an interim basis to carry out requirements
of this part may be based on currently applicable
standards, such as the rules established under section
1876 (as in effect as of the date of the enactment of
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this section) to carry out analogous provisions of such
section or standards established or developed for ap-
plication in the private health insurance market.
‘‘(5) APPLICATION OF NEW STANDARDS TO ENTI-
TIES
WITH
A
CONTRACT.—In 
the 
case 
of 
a
MedicarePlus organization with a contract in effect
under this part at the time standards applicable to
the organization under this section are changed, the
organization may elect not to have such changes
apply to the organization until the end of the current
contract year (or, if there is less than 6 months re-
maining in the contract year, until 1 year after the
end of the current contract year).
‘‘(6) RELATION TO STATE LAWS.—The standards
established under this subsection shall supersede any
State law or regulation with respect to MedicarePlus
plans which are offered by MedicarePlus organiza-
tions under this part and are issued by organizations
to which section 1853(a)(1) applies, to the extent such
law or regulation is inconsistent with such standards.
‘‘(b) ESTABLISHMENT OF SOLVENCY STANDARDS FOR
PROVIDER-SPONSORED ORGANIZATIONS.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish, on an expedited basis and using a nego-
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tiated rulemaking process under subchapter 3 of
chapter 5 of title 5, United States Code, stand-
ards described in section 1853(e) (relating to the
financial solvency and capital adequacy of the
organization) that entities must meet to qualify
as provider-sponsored organizations under this
part.
‘‘(B) FACTORS TO CONSIDER.—In establish-
ing solvency standards under subparagraph (A)
for provider-sponsored organizations, the Sec-
retary shall consult with interested parties and
shall take into account—
‘‘(i) the delivery system assets of such
an organization and ability of such an or-
ganization to provide services directly to en-
rollees through affiliated providers, and
‘‘(ii) alternative means of protecting
against insolvency, including reinsurance,
unrestricted surplus, letters of credit, guar-
antees, organizational insurance coverage,
partnerships with other licensed entities,
and valuation attributable to the ability of
such an organization to meet its service ob-
ligations through direct delivery of care.
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‘‘(2) PUBLICATION OF NOTICE.—In carrying out
the rulemaking process under this subsection, the Sec-
retary, after consultation with the National Associa-
tion of Insurance Commissioners, the American Acad-
emy of Actuaries, organizations representative of
medicare beneficiaries, and other interested parties,
shall publish the notice provided for under section
564(a) of title 5, United States Code, by not later
than 45 days after the date of the enactment of Medi-
care Preservation Act of 1995.
‘‘(3) TARGET
DATE
FOR
PUBLICATION
OF
RULE.—As part of the notice under paragraph (2),
and for purposes of this subsection, the ‘target date
for publication’ (referred to in section 564(a)(5) of
such title) shall be September 1, 1996.
‘‘(4) ABBREVIATED PERIOD FOR SUBMISSION OF
COMMENTS.—In applying section 564(c) of such title
under this subsection, ‘15 days’ shall be substituted
for ‘30 days’.
‘‘(5) APPOINTMENT
OF
NEGOTIATED
RULE-
MAKING
COMMITTEE
AND
FACILITATOR.—The Sec-
retary shall provide for—
‘‘(A) the appointment of a negotiated rule-
making committee under section 565(a) of such
title by not later than 30 days after the end of
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the comment period provided for under section
564(c) of such title (as shortened under para-
graph (4)), and
‘‘(B) the nomination of a facilitator under
section 566(c) of such title by not later than 10
days after the date of appointment of the com-
mittee.
‘‘(6) PRELIMINARY
COMMITTEE
REPORT.—The
negotiated rulemaking committee appointed under
paragraph (5) shall report to the Secretary, by not
later than June 1, 1996, regarding the committee’s
progress on achieving a consensus with regard to the
rulemaking proceeding and whether such consensus is
likely to occur before one month before the target date
for publication of the rule. If the committee reports
that the committee has failed to make significant
progress towards such consensus or is unlikely to
reach such consensus by the target date, the Secretary
may terminate such process and provide for the publi-
cation of a rule under this subsection through such
other methods as the Secretary may provide.
‘‘(7) FINAL COMMITTEE REPORT.—If the commit-
tee is not terminated under paragraph (6), the rule-
making committee shall submit a report containing a
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proposed rule by not later than one month before the
target publication date.
‘‘(8) INTERIM, FINAL
EFFECT.—The Secretary
shall publish a rule under this subsection in the Fed-
eral Register by not later than the target publication
date. Such rule shall be effective and final imme-
diately on an interim basis, but is subject to change
and revision after public notice and opportunity for
a period (of not less than 60 days) for public com-
ment. In connection with such rule, the Secretary
shall specify the process for the timely review and ap-
proval of applications of entities to be certified as
provider-sponsored organizations pursuant to such
rules and consistent with this subsection.
‘‘(9) PUBLICATION OF RULE AFTER PUBLIC COM-
MENT.—The Secretary shall provide for consideration
of such comments and republication of such rule by
not later than 1 year after the target publication
date.
‘‘(10) PROCESS FOR APPROVAL OF APPLICATIONS
FOR CERTIFICATION OF SOLVENCY.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish a process for the receipt and approval of
applications of entities for certification of sol-
vency of provider-sponsored organizations under
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this part. Under such process, the Secretary shall
act upon a complete application submitted with-
in 60 days after the date it is received.
‘‘(B) CIRCULATION OF PROPOSED APPLICA-
TION FORM.—By March 1, 1996, the Secretary,
after consultation with the negotiated rule-
making committee, shall circulate a proposed ap-
plication form that could be used by entities con-
sidering being certified for solvency under this
part.
‘‘(c) CERTIFICATION PROCESS.—
‘‘(1) STATE CERTIFICATION PROCESS FOR STATE-
REGULATED
ORGANIZATIONS
AND
NON-SOLVENCY
STANDARDS
FOR
PROVIDER-SPONSORED
ORGANIZA-
TIONS.—
‘‘(A) APPROVAL OF STATE PROCESS.—The
Secretary shall approve a MedicarePlus certifi-
cation and enforcement program established by a
State for applying the standards established
under this section to MedicarePlus organizations
(other than union sponsors and Taft-Hartley
sponsors and other than solvency standards for
provider-sponsored 
organizations) 
and
MedicarePlus plans offered by such organizations
if the Secretary determines that the program ef-
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fectively provides for the application and en-
forcement of such standards in the State with re-
spect to such organizations and plans and does
not discriminate in its application by type of or-
ganization or plan. Such program shall provide
for certification of compliance of MedicarePlus
organizations and plans with the applicable re-
quirements of this part not less often than once
every 3 years.
‘‘(B) EFFECT
OF
CERTIFICATION
UNDER
STATE PROCESS.—A MedicarePlus organization
and MedicarePlus plan offered by such an orga-
nization that is certified under such program is
considered to have been certified under this para-
graph with respect to the offering of the plan to
individuals residing in the State.
‘‘(C) USER FEES.—The State may impose
user fees on organizations seeking certification
under this paragraph in such amounts as the
State deems sufficient to finance the costs of such
certification. Nothing in this subparagraph shall
be construed as restricting a State’s authority to
impose premium taxes, other taxes, or other lev-
ies.
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‘‘(D) REVIEW.—The Secretary periodically
shall review State programs approved under sub-
paragraph (A) to determine if they continue to
provide for certification and enforcement de-
scribed in such paragraph. If the Secretary finds
that a State program no longer so provides, be-
fore making a final determination, the Secretary
shall provide the State an opportunity to adopt
such a plan of correction as would permit the
State program to meet the requirements of para-
graph (1). If the Secretary makes a final deter-
mination that the State program, after such an
opportunity, fails to meet such requirements, the
provisions of subsection (b) shall apply to
MedicarePlus organizations and plans in the
State.
‘‘(E) EFFECT OF NO STATE PROGRAM.—Be-
ginning on the date standards are established
under section 1856, in the case of organizations
and plans in States in which a certification pro-
gram has not been approved and in operation
under subparagraph (A), the Secretary shall es-
tablish a process for the certification of
MedicarePlus organizations (other than union
sponsors and Taft-Hartley sponsors and other
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than solvency standards for provider-sponsored
organizations) and plans of such organizations
as meeting such standards.
‘‘(F) PUBLICATION OF LIST OF APPROVED
STATE PROGRAMS.—The Secretary shall publish
(and periodically update) a list of those State
programs which are approved for purposes of
this paragraph.
‘‘(2) FEDERAL
CERTIFICATION
PROCESS
FOR
UNION SPONSORS AND TAFT-HARTLEY SPONSORS.—
‘‘(A) ESTABLISHMENT.—The Secretary shall
establish a process for the certification of union
sponsors 
and 
Taft-Hartley 
sponsors 
and
MedicarePlus plans offered by such sponsors and
organizations as meeting the applicable stand-
ards established under this section.
‘‘(B) INVOLVEMENT
OF
SECRETARY
OF
LABOR.—Such process shall be established and
operated in cooperation with the Secretary of
Labor with respect to union sponsors and Taft-
Hartley sponsors.
‘‘(C) USE OF STATE LICENSING AND PRI-
VATE ACCREDITATION PROCESSES.—
‘‘(i) IN GENERAL.—The process under
this paragraph shall, to the maximum ex-
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tent practicable, provide that MedicarePlus
organizations and plans that are licensed or
certified through a qualified private accred-
itation process that the Secretary finds ap-
plies standards that are no less stringent
than the requirements of this part are
deemed to meet the corresponding require-
ments of this part for such an organization
or plan.
‘‘(ii) PERIODIC ACCREDITATION.—The
use of an accreditation under clause (i)
shall be valid only for such period as the
Secretary specifies.
‘‘(D) USER FEES.—The Secretary may im-
pose user fees on entities seeking certification
under this paragraph in such amounts as the
Secretary deems sufficient to finance the costs of
such certification.
‘‘(3) NOTICE TO ENROLLEES IN CASE OF DECER-
TIFICATION.—If a MedicarePlus organization or plan
is decertified under this subsection, the organization
shall notify each enrollee with the organization and
plan under this part of such decertification.
‘‘(4) QUALIFIED
ASSOCIATION
SPONSORS.—In
the case of MedicarePlus plans offered by a
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MedicarePlus organization that is a qualified associa-
tion sponsor and issued by an organization to which
section 1853(a)(1) applies or by a provider-sponsored
organization, nothing in this subsection shall be con-
strued as limiting the authority of States to regulate
such plans.
‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1857. (a) IN GENERAL.—The Secretary shall
not permit the election under section 1851 of a
MedicarePlus plan offered by a MedicarePlus organization
under this part, and no payment shall be made under sec-
tion 1854 to an organization, unless the Secretary has en-
tered into a contract under this section with an organiza-
tion with respect to the offering of such plan. Such a con-
tract with an organization may cover more than one
MedicarePlus plan. Such contract shall provide that the or-
ganization agrees to comply with the applicable require-
ments and standards of this part and the terms and condi-
tions of payment as provided for in this part.
‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2)
and (3), the Secretary may not enter into a contract
under this section with a MedicarePlus organization
(other than a union sponsor or Taft-Hartley sponsor)
unless the organization has at least 5,000 individuals
(or 1,500 individuals in the case of an organization
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that is a provider-sponsored organization) who are re-
ceiving health benefits through the organization, ex-
cept that the standards under section 1856 may per-
mit the organization to have a lesser number of bene-
ficiaries (but not less than 500 in the case of an orga-
nization that is a provider-sponsored organization) if
the organization primarily serves individuals resid-
ing outside of urbanized areas.
‘‘(2) 
EXCEPTION
FOR
HIGH
DEDUCTIBLE
PLAN.—Paragraph (1) shall not apply with respect to
a contract that relates only to a high deductible plan.
‘‘(3) ALLOWING
TRANSITION.—The Secretary
may waive the requirement of paragraph (1) during
the first 3 contract years with respect to an organiza-
tion.
‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—
‘‘(1) PERIOD.—Each contract under this section
shall be for a term of at least one year, as determined
by the Secretary, and may be made automatically re-
newable from term to term in the absence of notice by
either party of intention to terminate at the end of
the current term.
‘‘(2) TERMINATION AUTHORITY.—In accordance
with procedures established under subsection (h), the
Secretary may at any time terminate any such con-
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tract or may impose the intermediate sanctions de-
scribed in an applicable paragraph of subsection (g)
on the MedicarePlus organization if the Secretary de-
termines that the organization—
‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner inconsistent with the efficient and effective
administration of this part; and
‘‘(C) no longer substantially meets the ap-
plicable conditions of this part.
‘‘(3) EFFECTIVE DATE OF CONTRACTS.—The ef-
fective date of any contract executed pursuant to this
section shall be specified in the contract, except that
in no case shall a contract under this section which
provides for coverage under a high deductible account
be effective before January 1997 with respect to such
coverage.
‘‘(4) PREVIOUS TERMINATIONS.—The Secretary
may not enter into a contract with a MedicarePlus
organization if a previous contract with that organi-
zation under this section was terminated at the re-
quest of the organization within the preceding five-
year period, except in circumstances which warrant
special consideration, as determined by the Secretary.
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HR 2491 EAS
‘‘(5) NO CONTRACTING AUTHORITY.—The author-
ity vested in the Secretary by this part may be per-
formed without regard to such provisions of law or
regulations relating to the making, performance,
amendment, or modification of contracts of the Unit-
ed States as the Secretary may determine to be incon-
sistent with the furtherance of the purpose of this
title.
‘‘(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY
PROTECTIONS.—
‘‘(1) INSPECTION
AND
AUDIT.—Each contract
under this section shall provide that the Secretary, or
any person or organization designated by the Sec-
retary—
‘‘(A) shall have the right to inspect or other-
wise evaluate (i) the quality, appropriateness,
and timeliness of services performed under the
contract and (ii) the facilities of the organization
when there is reasonable evidence of some need
for such inspection, and
‘‘(B) shall have the right to audit and in-
spect any books and records of the MedicarePlus
organization that pertain (i) to the ability of the
organization to bear the risk of potential finan-
cial losses, or (ii) to services performed or deter-
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minations of amounts payable under the con-
tract.
‘‘(2) ENROLLEE
NOTICE
AT
TIME
OF
TERMI-
NATION.—Each contract under this section shall re-
quire the organization to provide (and pay for) writ-
ten notice in advance of the contract’s termination, as
well as a description of alternatives for obtaining ben-
efits under this title, to each individual enrolled with
the organization under this part.
‘‘(3) DISCLOSURE.—
‘‘(A) IN GENERAL.—Each MedicarePlus or-
ganization shall, in accordance with regulations
of the Secretary, report to the Secretary finan-
cial information which shall include the follow-
ing:
‘‘(i) Such information as the Secretary
may require demonstrating that the organi-
zation has a fiscally sound operation.
‘‘(ii) A copy of the report, if any, filed
with the Health Care Financing Adminis-
tration containing the information required
to be reported under section 1124 by disclos-
ing entities.
‘‘(iii) A description of transactions, as
specified by the Secretary, between the orga-
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nization and a party in interest. Such
transactions shall include—
‘‘(I) any sale or exchange, or leas-
ing of any property between the orga-
nization and a party in interest;
‘‘(II) any furnishing for consider-
ation of goods, services (including
management services), or facilities be-
tween the organization and a party in
interest, but not including salaries
paid to employees for services provided
in the normal course of their employ-
ment and health services provided to
members by hospitals and other pro-
viders and by staff, medical group (or
groups), individual practice associa-
tion (or associations), or any combina-
tion thereof; and
‘‘(III) any lending of money or
other extension of credit between an or-
ganization and a party in interest.
The Secretary may require that information re-
ported respecting an organization which controls,
is controlled by, or is under common control
with, another entity be in the form of a consoli-
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dated financial statement for the organization
and such entity.
‘‘(B) PARTY IN INTEREST DEFINED.—For
the purposes of this paragraph, the term ‘party
in interest’ means—
‘‘(i) any director, officer, partner, or
employee responsible for management or ad-
ministration of a MedicarePlus organiza-
tion, any person who is directly or indi-
rectly the beneficial owner of more than 5
percent of the equity of the organization,
any person who is the beneficial owner of a
mortgage, deed of trust, note, or other inter-
est secured by, and valuing more than 5
percent of the organization, and, in the case
of a MedicarePlus organization organized
as a nonprofit corporation, an incorporator
or member of such corporation under appli-
cable State corporation law;
‘‘(ii) any entity in which a person de-
scribed in clause (i)—
‘‘(I) is an officer or director;
‘‘(II) is a partner (if such entity
is organized as a partnership);
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‘‘(III) has directly or indirectly a
beneficial interest of more than 5 per-
cent of the equity; or
‘‘(IV) has a mortgage, deed of
trust, note, or other interest valuing
more than 5 percent of the assets of
such entity;
‘‘(iii) any person directly or indirectly
controlling, controlled by, or under common
control with an organization; and
‘‘(iv) any spouse, child, or parent of an
individual described in clause (i).
‘‘(C) 
ACCESS
TO
INFORMATION.—Each
MedicarePlus organization shall make the infor-
mation reported pursuant to subparagraph (A)
available to its enrollees upon reasonable request.
‘‘(4) LOAN INFORMATION.—The contract shall re-
quire the organization to notify the Secretary of loans
and other special financial arrangements which are
made between the organization and subcontractors,
affiliates, and related parties.
‘‘(e) ADDITIONAL CONTRACT TERMS.—The contract
shall contain such other terms and conditions not inconsist-
ent with this part (including requiring the organization to
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provide the Secretary with such information) as the Sec-
retary may find necessary and appropriate.
‘‘(f) INTERMEDIATE SANCTIONS.—
‘‘(1) IN GENERAL.—If the Secretary determines
that a MedicarePlus organization with a contract
under this section—
‘‘(A) fails substantially to provide medically
necessary items and services that are required
(under law or under the contract) to be provided
to an individual covered under the contract, if
the failure has adversely affected (or has substan-
tial likelihood of adversely affecting) the individ-
ual;
‘‘(B) imposes net monthly premiums on in-
dividuals enrolled under this part in excess of
the net monthly premiums permitted;
‘‘(C) acts to expel or to refuse to re-enroll an
individual in violation of the provisions of this
part;
‘‘(D) engages in any practice that would
reasonably be expected to have the effect of deny-
ing or discouraging enrollment (except as per-
mitted by this part) by eligible individuals with
the organization whose medical condition or his-
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tory indicates a need for substantial future medi-
cal services;
‘‘(E) misrepresents or falsifies information
that is furnished—
‘‘(i) to the Secretary under this part,
or
‘‘(ii) to an individual or to any other
entity under this part;
‘‘(F) fails to comply with the requirements
of section 1852(j)(3); or
‘‘(G) employs or contracts with any indi-
vidual or entity that is excluded from participa-
tion under this title under section 1128 or 1128A
for the provision of health care, utilization re-
view, medical social work, or administrative
services or employs or contracts with any entity
for the provision (directly or indirectly) through
such an excluded individual or entity of such
services;
the Secretary may provide, in addition to any other
remedies authorized by law, for any of the remedies
described in paragraph (2).
‘‘(2) REMEDIES.—The remedies described in this
paragraph are—
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‘‘(A) civil money penalties of not more than
$25,000 for each determination under paragraph
(1) or, with respect to a determination under
subparagraph (D) or (E)(i) of such paragraph,
of not more than $100,000 for each such deter-
mination, plus, with respect to a determination
under paragraph (1)(B), double the excess
amount charged in violation of such paragraph
(and the excess amount charged shall be deducted
from the penalty and returned to the individual
concerned), and plus, with respect to a deter-
mination under paragraph (1)(D), $15,000 for
each individual not enrolled as a result of the
practice involved,
‘‘(B) suspension of enrollment of individ-
uals under this part after the date the Secretary
notifies the organization of a determination
under paragraph (1) and until the Secretary is
satisfied that the basis for such determination
has been corrected and is not likely to recur, or
‘‘(C) suspension of payment to the organiza-
tion under this part for individuals enrolled
after the date the Secretary notifies the organiza-
tion of a determination under paragraph (1)
and until the Secretary is satisfied that the basis
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for such determination has been corrected and is
not likely to recur.
‘‘(3) OTHER INTERMEDIATE SANCTIONS.—In the
case of a MedicarePlus organization for which the
Secretary makes a determination under subsection
(c)(2) the basis of which is not described in para-
graph (1), the Secretary may apply the following in-
termediate sanctions:
‘‘(A) civil money penalties of not more than
$25,000 for each determination under subsection
(c)(2) if the deficiency that is the basis of the de-
termination has directly adversely affected (or
has the substantial likelihood of adversely affect-
ing) an individual covered under the organiza-
tion’s contract;
‘‘(B) civil money penalties of not more than
$10,000 for each week beginning after the initi-
ation of procedures by the Secretary under sub-
section (h) during which the deficiency that is
the basis of a determination under subsection
(c)(2) exists; and
‘‘(C) suspension of enrollment of individuals
under this part after the date the Secretary noti-
fies the organization of a determination under
subsection (c)(2) and until the Secretary is satis-
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HR 2491 EAS
fied that the deficiency that is the basis for the
determination has been corrected and is not like-
ly to recur.
‘‘(4) PROCEEDINGS.—The provisions of section
1128A (other than subsections (a) and (b)) shall
apply to a civil money penalty under paragraph (1)
or (2) in the same manner as they apply to a civil
money penalty or proceeding under section 1128A(a).
‘‘(g) PROCEDURES FOR IMPOSING SANCTIONS.—The
Secretary may terminate a contract with a MedicarePlus
organization under this section or may impose the inter-
mediate sanctions described in subsection (f) on the organi-
zation in accordance with formal investigation and compli-
ance procedures established by the Secretary under which—
‘‘(1) the Secretary provides the organization with
the reasonable opportunity to develop and implement
a corrective action plan to correct the deficiencies that
were the basis of the Secretary’s determination under
subsection (c)(2);
‘‘(2) the Secretary shall impose more severe sanc-
tions on organizations that have a history of defi-
ciencies or that have not taken steps to correct defi-
ciencies the Secretary has brought to their attention;
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HR 2491 EAS
‘‘(3) there are no unreasonable or unnecessary
delays between the finding of a deficiency and the im-
position of sanctions; and
‘‘(4) the Secretary provides the organization with
reasonable notice and opportunity for hearing (in-
cluding the right to appeal an initial decision) before
imposing any sanction or terminating the contract.
‘‘STANDARDS FOR MEDICAREPLUS AND MEDICARE
INFORMATION TRANSACTIONS AND DATA ELEMENTS
‘‘SEC. 1858. (a) ADOPTION OF STANDARDS FOR DATA
ELEMENTS.—
‘‘(1) IN GENERAL.—Pursuant to subsection (b),
the Secretary shall adopt standards for information
transactions and data elements of MedicarePlus and
medicare information and modifications to the stand-
ards under this section that are—
‘‘(A) consistent with the objective of reduc-
ing the administrative costs of providing and
paying for health care; and
‘‘(B) developed or modified by a standard
setting organization (as defined in subsection
(h)(8)).
‘‘(2) SPECIAL
RULE
RELATING
TO
DATA
ELE-
MENTS.—The Secretary may adopt or modify a
standard relating to data elements that is different
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HR 2491 EAS
from the standard developed by a standard setting or-
ganization, if—
‘‘(A) the different standard or modification
will substantially reduce administrative costs to
health care providers and health plans compared
to the alternative; and
‘‘(B) the standard or modification is pro-
mulgated in accordance with the rulemaking
procedures of subchapter III of chapter 5 of title
5, United States Code.
‘‘(3) SECURITY STANDARDS FOR HEALTH INFOR-
MATION NETWORK.—
‘‘(A) IN
GENERAL.—Each person, who
maintains or transmits MedicarePlus and medi-
care 
information 
or 
data 
elements 
of
MedicarePlus and medicare information and is
subject to this section, shall maintain reasonable
and appropriate administrative, technical, and
physical safeguards—
‘‘(i) to ensure the integrity and con-
fidentiality of the information;
‘‘(ii) to protect against any reasonably
anticipated—
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‘‘(I) threats or hazards to the se-
curity or integrity of the information;
and
‘‘(II) unauthorized uses or disclo-
sures of the information; and
‘‘(iii) to otherwise ensure compliance
with this section by the officers and employ-
ees of such person.
‘‘(B) 
SECURITY
STANDARDS.—The 
Sec-
retary shall establish security standards and
modifications to such standards with respect to
MedicarePlus and medicare information network
services, health plans, and health care providers
that—
‘‘(i) take into account—
‘‘(I) the technical capabilities of
record 
systems 
used 
to 
maintain
MedicarePlus and medicare informa-
tion;
‘‘(II) the costs of security meas-
ures;
‘‘(III) the need for training per-
sons who have access to MedicarePlus
and medicare information; and
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HR 2491 EAS
‘‘(IV) the value of audit trails in
computerized record systems; and
‘‘(ii) ensure that a MedicarePlus and
medicare information network service, if it
is part of a larger organization, has policies
and security procedures which isolate the
activities of such service with respect to
processing information in a manner that
prevents unauthorized access to such infor-
mation by such larger organization.
The security standards established by the Sec-
retary shall be based on the standards developed
or modified by standard setting organizations. If
such standards do not exist, the Secretary shall
rely on the recommendations of the MedicarePlus
and Medicare Information Advisory Committee
(established under subsection (g)) and shall con-
sult with appropriate government agencies and
private organizations in accordance with para-
graph (5).
‘‘(4) IMPLEMENTATION
SPECIFICATIONS.—The
Secretary shall establish specifications for implement-
ing each of the standards and the modifications to the
standards adopted pursuant to paragraph (1) or (3).
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‘‘(5) ASSISTANCE TO THE SECRETARY.—In com-
plying with the requirements of this section, the Sec-
retary 
shall 
rely 
on 
recommendations 
of 
the
MedicarePlus and Medicare Information Advisory
Committee established under subsection (g) and shall
consult with appropriate Federal and State agencies
and private organizations. The Secretary shall pub-
lish in the Federal Register the recommendations of
the MedicarePlus and Medicare Information Advisory
Committee regarding the adoption of a standard
under this section.
‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS
AND DATA ELEMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards for transactions and data elements to make
MedicarePlus and medicare information uniformly
available to be exchanged electronically, that is—
‘‘(A) appropriate for the following financial
and administrative transactions: claims (includ-
ing coordination of benefits) or equivalent en-
counter 
information, 
enrollment 
and
disenrollment, eligibility, premium payments,
and referral certification and authorization; and
‘‘(B) related to other financial and admin-
istrative transactions determined appropriate by
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the Secretary consistent with the goals of im-
proving the operation of the health care system
and reducing administrative costs.
‘‘(2) UNIQUE HEALTH IDENTIFIERS.—
‘‘(A) ADOPTION OF STANDARDS.—The Sec-
retary shall adopt standards providing for a
standard unique health identifier for each indi-
vidual, employer, health plan, and health care
provider for use in the MedicarePlus and medi-
care information system. In developing unique
health identifiers for each health plan and health
care provider, the Secretary shall take into ac-
count multiple uses for identifiers and multiple
locations and specialty classifications for health
care providers.
‘‘(B) PENALTY
FOR
IMPROPER
DISCLO-
SURE.—A person who knowingly uses or causes
to be used a unique health identifier under sub-
paragraph (A) for a purpose that is not author-
ized by the Secretary shall—
‘‘(i) be fined not more than $50,000,
imprisoned not more than 1 year, or both;
or
‘‘(ii) if the offense is committed under
false pretenses, be fined not more than
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HR 2491 EAS
$100,000, imprisoned not more than 5
years, or both.
‘‘(3) CODE SETS.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the MedicarePlus and Medicare
Information Advisory Committee, experts from
the private sector, and Federal and State agen-
cies, shall—
‘‘(i) select code sets for appropriate
data elements from among the code sets that
have been developed by private and public
entities; or
‘‘(ii) establish code sets for such data
elements if no code sets for the data ele-
ments have been developed.
‘‘(B) DISTRIBUTION.—The Secretary shall
establish efficient and low-cost procedures for
distribution (including electronic distribution) of
code sets and modifications made to such code
sets under subsection (c)(2).
‘‘(4) ELECTRONIC SIGNATURE.—
‘‘(A) IN
GENERAL.—The Secretary, after
consultation with the MedicarePlus and Medi-
care Information Advisory Committee, shall pro-
mulgate regulations specifying procedures for the
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electronic transmission and authentication of
signatures, compliance with which will be
deemed to satisfy Federal and State statutory re-
quirements for written signatures with respect to
information transactions required by this section
and written signatures on enrollment and
disenrollment forms.
‘‘(B) PAYMENTS FOR SERVICES AND PRE-
MIUMS.—Nothing in this section shall be con-
strued to prohibit the payment of health care
services or health plan premiums by debit, cred-
it, payment card or numbers, or other electronic
means.
‘‘(5) TRANSFER
OF
INFORMATION
BETWEEN
HEALTH PLANS.—The Secretary shall develop rules
and procedures—
‘‘(A) for determining the financial liability
of health plans when health care benefits are
payable under two or more health plans; and
‘‘(B) for transferring among health plans
appropriate standard data elements needed for
the coordination of benefits, the sequential proc-
essing of claims, and other data elements for in-
dividuals who have more than one health plan.
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‘‘(6) COORDINATION
OF
BENEFITS.—If, at the
end of the 5-year period beginning on the date of the
enactment of this section, the Secretary determines
that additional transaction standards for coordinat-
ing benefits are necessary to reduce administrative
costs or duplicative (or inappropriate) payment of
claims, the Secretary shall establish further trans-
action standards for the coordination of benefits be-
tween health plans.
‘‘(7) PROTECTION OF TRADE SECRETS.—Except
as otherwise required by law, the standards adopted
under this section shall not require disclosure of trade
secrets or confidential commercial information by an
entity operating a MedicarePlus and medicare infor-
mation network.
‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—
‘‘(1) INITIAL
STANDARDS.—Not later than 18
months after the date of the enactment of this section,
the Secretary shall adopt standards relating to the in-
formation 
transactions, 
data 
elements 
of
MedicarePlus and medicare information and security
described in subsections (a) and (b).
‘‘(2) ADDITIONS AND MODIFICATIONS TO STAND-
ARDS.—
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‘‘(A) IN GENERAL.—The Secretary shall re-
view the standards adopted under this section
and shall adopt additional or modified stand-
ards, that have been developed or modified by a
standard setting organization, as determined ap-
propriate, but not more frequently than once
every 12 months. Any addition or modification
to such standards shall be completed in a man-
ner which minimizes the disruption and cost of
compliance.
‘‘(B) ADDITIONS
AND
MODIFICATIONS
TO
CODE SETS.—
‘‘(i) IN GENERAL.—The Secretary shall
ensure that procedures exist for the routine
maintenance, testing, enhancement, and ex-
pansion of code sets.
‘‘(ii) ADDITIONAL
RULES.—If a code
set is modified under this paragraph, the
modified code set shall include instructions
on how data elements of MedicarePlus and
medicare information that were encoded
prior to the modification may be converted
or translated so as to preserve the informa-
tional value of the data elements that ex-
isted before the modification. Any modifica-
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tion to a code set under this paragraph
shall be implemented in a manner that
minimizes the disruption and cost of com-
plying with such modification.
‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—
‘‘(1) IN GENERAL.—If a person desires to con-
duct any of the information transactions described in
subsection (b)(1) with a health plan as a standard
transaction, the health plan shall conduct such stand-
ard transaction in a timely manner and the informa-
tion transmitted or received in connection with such
transaction shall be in the form of standard data ele-
ments of MedicarePlus and medicare information.
‘‘(2) 
SATISFACTION
OF
REQUIREMENTS.—A
health plan may satisfy the requirement imposed on
such plan under paragraph (1) by directly transmit-
ting standard data elements of MedicarePlus and
medicare information or submitting nonstandard
data elements to a MedicarePlus and medicare infor-
mation network service for processing into standard
data elements and transmission.
‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE-
QUIREMENTS.—Not later than 24 months after the
date on which standards are adopted under sub-
sections (a) and (b) with respect to any type of infor-
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mation transaction or data element of MedicarePlus
and medicare information or with respect to security,
a health plan shall comply with the requirements of
this section with respect to such transaction or data
element.
‘‘(4) 
COMPLIANCE
WITH
MODIFIED
STAND-
ARDS.—If the Secretary adopts a modified standard
under subsection (a) or (b), a health plan shall be re-
quired to comply with the modified standard at such
time as the Secretary determines appropriate taking
into account the time needed to comply due to the na-
ture and extent of the modification. However, the time
determined appropriate under the preceding sentence
shall be not earlier than the last day of the 180-day
period beginning on the date such modified standard
is adopted. The Secretary may extend the time for
compliance for small health plans, if the Secretary de-
termines such extension is appropriate.
‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY
WITH REQUIREMENTS AND STANDARDS.—
‘‘(1) GENERAL PENALTY.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the Secretary shall impose on
any person that violates a requirement or stand-
ard—
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‘‘(i) with respect to MedicarePlus and
medicare information transactions, data
elements of MedicarePlus and medicare in-
formation, or security imposed under sub-
section (a) or (b); or
‘‘(ii) with respect to health plans im-
posed under subsection (d);
a penalty of not more than $100 for each such
violation of a specific standard or requirement,
but the total amount imposed for all such viola-
tions of a specific standard or requirement dur-
ing the calendar year shall not exceed $25,000.
‘‘(B) PROCEDURES.—The provisions of sec-
tion 1128A (other than subsections (a) and (b)
and the second sentence of subsection (f)) shall
apply to the imposition of a civil money penalty
under this paragraph in the same manner as
such provisions apply to the imposition of a pen-
alty under such section 1128A.
‘‘(C) DENIAL OF PAYMENT.—Except as pro-
vided in paragraph (2), the Secretary may deny
payment under this title for an item or service
furnished by a person if the person fails to com-
ply with an applicable requirement or standard
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for MedicarePlus and medicare information re-
lating to that item or service.
‘‘(2) LIMITATIONS.—
‘‘(A) NONCOMPLIANCE NOT DISCOVERED.—
A penalty may not be imposed under paragraph
(1) if it is established to the satisfaction of the
Secretary that the person liable for the penalty
did not know, and by exercising reasonable dili-
gence would not have known, that such person
failed to comply with the requirement or stand-
ard described in paragraph (1).
‘‘(B) FAILURES
DUE
TO
REASONABLE
CAUSE.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), a penalty may not be im-
posed under paragraph (1) if—
‘‘(I) the failure to comply was due
to reasonable cause and not to willful
neglect; and
‘‘(II) the failure to comply is cor-
rected during the 30-day period begin-
ning on the first date the person liable
for the penalty knew, or by exercising
reasonable diligence would have known,
that the failure to comply occurred.
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‘‘(ii) EXTENSION OF PERIOD.—
‘‘(I) NO PENALTY.—The period re-
ferred to in clause (i)(II) may be ex-
tended as determined appropriate by
the Secretary based on the nature and
extent of the failure to comply.
‘‘(II) ASSISTANCE.—If the Sec-
retary determines that a health plan
failed to comply because such plan was
unable to comply, the Secretary may
provide technical assistance to such
plan during the period described in
clause (i)(II). Such assistance shall be
provided in any manner determined
appropriate by the Secretary.
‘‘(C) REDUCTION.—In the case of a failure
to comply which is due to reasonable cause and
not to willful neglect, any penalty under para-
graph (1) that is not entirely waived under sub-
paragraph (B) may be waived to the extent that
the payment of such penalty would be excessive
relative to the compliance failure involved.
‘‘(f) EFFECT ON STATE LAW.—
‘‘(1) GENERAL EFFECT.—
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‘‘(A) GENERAL RULE.—Except as provided
in subparagraph (B), a provision, requirement,
or standard under this section shall supersede
any contrary provision of State law, including a
provision of State law that requires medical or
health plan records (including billing informa-
tion) to be maintained or transmitted in written
rather than electronic form.
‘‘(B) EXCEPTIONS.—A provision, require-
ment, or standard under this section shall not
supersede a contrary provision of State law if
the Secretary determines that the provision of
State law should be continued for any reason,
including for reasons relating to prevention of
fraud and abuse or regulation of controlled sub-
stances.
‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in
this section shall be construed to invalidate or limit
the authority, power, or procedures established under
any law providing for the reporting of disease or in-
jury, child abuse, birth, or death, public health sur-
veillance, or public health investigation or interven-
tion.
‘‘(g) MEDICAREPLUS AND MEDICARE INFORMATION
ADVISORY COMMITTEE.—
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‘‘(1) ESTABLISHMENT.—There is established a
committee to be known as the MedicarePlus and Med-
icare Information Advisory Committee (in this sub-
section referred to as the ‘committee’).
‘‘(2) DUTIES.—The committee shall—
‘‘(A) advise the Secretary in the develop-
ment of standards under this section; and
‘‘(B) be generally responsible for advising
the Secretary and the Congress on the status and
the future of the MedicarePlus and medicare in-
formation network.
‘‘(3) MEMBERSHIP.—
‘‘(A) IN
GENERAL.—The committee shall
consist of 9 members of whom—
‘‘(i) 3 shall be appointed by the Presi-
dent;
‘‘(ii) 3 shall be appointed by the
Speaker of the House of Representatives
after consultation with the minority leader
of the House of Representatives; and
‘‘(iii) 3 shall be appointed by the
President pro tempore of the Senate after
consultation with the minority leader of the
Senate.
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The appointments of the members shall be made
not later than 60 days after the date of the en-
actment of this section. The President shall des-
ignate 1 member as the Chair.
‘‘(B) EXPERTISE.—The membership of the
committee shall consist of individuals who are of
recognized standing and distinction in the areas
of information systems, information networking
and integration, consumer health, or health care
financial management, and who possess the dem-
onstrated capacity to discharge the duties im-
posed on the committee.
‘‘(C) TERMS.—Each member of the commit-
tee shall be appointed for a term of 5 years, ex-
cept that the members first appointed shall serve
staggered terms such that the terms of not more
than 3 members expire at one time.
‘‘(D) INITIAL MEETING.—Not later than 30
days after the date on which a majority of the
members have been appointed, the committee
shall hold its first meeting.
‘‘(4) REPORTS.—Not later than 1 year after the
date of the enactment of this section, and annually
thereafter, the committee shall submit to Congress and
the Secretary a report regarding—
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‘‘(A) the extent to which entities using the
MedicarePlus and medicare information network
are meeting the standards adopted under this
section and working together to form an inte-
grated network that meets the needs of its users;
‘‘(B) the extent to which such entities are
meeting the security standards established pursu-
ant to this section and the types of penalties as-
sessed for noncompliance with such standards;
‘‘(C) any problems that exist with respect to
implementation of the MedicarePlus and medi-
care information network; and
‘‘(D) the extent to which timetables under
this section are being met.
Reports made under this subsection shall be made
available to health care providers, health plans, and
other entities that use the MedicarePlus and medicare
information network to exchange MedicarePlus and
medicare information.
‘‘(h) DEFINITIONS.—For purposes of this section:
‘‘(1) CODE SET.—The term ‘code set’ means any
set of codes used for encoding data elements, such as
tables of terms, enrollment information, and encoun-
ter data.
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‘‘(2) COORDINATION
OF
BENEFITS.—The term
‘coordination of benefits’ means determining and co-
ordinating the financial obligations of health plans
when health care benefits are payable under such a
plan and under this title (including under a
MedicarePlus plan).
‘‘(3) MEDICAREPLUS AND MEDICARE INFORMA-
TION.—The term ‘MedicarePlus and medicare infor-
mation’ means any information that relates to the en-
rollment of individuals under this title (including in-
formation relating to elections of MedicarePlus plans
under section 1851) and the provision of health bene-
fits (including benefits provided under such plans)
under this title.
‘‘(4) MEDICAREPLUS AND MEDICARE INFORMA-
TION NETWORK.—The term ‘MedicarePlus and medi-
care information network’ means the MedicarePlus
and medicare information system that is formed
through the application of the requirements and
standards established under this section.
‘‘(5) MEDICAREPLUS AND MEDICARE INFORMA-
TION
NETWORK
SERVICE.—The term ‘MedicarePlus
and medicare information network service’ means a
public or private entity that—
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‘‘(A) processes or facilitates the processing
of nonstandard data elements of MedicarePlus
and medicare information into standard data
elements;
‘‘(B) provides the means by which persons
may meet the requirements of this section; or
‘‘(C) provides specific information process-
ing services.
‘‘(6) HEALTH
PLAN.—The term ‘health plan’
means a plan which provides, or pays the cost of,
health benefits. Such term includes the following, or
any combination thereof:
‘‘(A) Part A or part B of this title, and in-
cludes a MedicarePlus plan.
‘‘(B) The medicaid program under title XIX
and the MediGrant program under title XXI.
‘‘(C) A medicare supplemental policy (as
defined in section 1882(g)(1)).
‘‘(D) Worker’s compensation or similar in-
surance.
‘‘(E) Automobile or automobile medical-
payment insurance.
‘‘(F) A long-term care policy, other than a
fixed indemnity policy.
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‘‘(G) The Federal Employees Health Benefit
Plan under chapter 89 of title 5, United States
Code.
‘‘(H) An employee welfare benefit plan, as
defined in section 3(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(1)), but only to the extent the plan is estab-
lished or maintained for the purpose of provid-
ing health benefits.
‘‘(7) 
INDIVIDUALLY
IDENTIFIABLE
MEDICAREPLUS AND MEDICARE INFORMATION.—The
term ‘individually identifiable MedicarePlus and
medicare information’ means MedicarePlus and med-
icare enrollment information, including demographic
information collected from an individual, that—
‘‘(A) is created or received by a health care
provider, health plan, employer, or MedicarePlus
and medicare information network service, and
‘‘(B) identifies an individual.
‘‘(8) STANDARD
SETTING
ORGANIZATION.—The
term ‘standard setting organization’ means a stand-
ard setting organization accredited by the American
National Standards Institute and includes the Na-
tional Council for Prescription Drug Program.
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‘‘(9) 
STANDARD
TRANSACTION.—The 
term
‘standard transaction’ means, when referring to an
information transaction or to data elements of
MedicarePlus and medicare information, any trans-
action that meets the requirements and implementa-
tion specifications adopted by the Secretary under
subsections (a) and (b).
‘‘DEFINITIONS; MISCELLANEOUS PROVISIONS
‘‘SEC. 
1859. 
(a) 
DEFINITIONS
RELATING
TO
MEDICAREPLUS ORGANIZATIONS.—In this part—
‘‘(1) MEDICAREPLUS ORGANIZATION.—The term
‘MedicarePlus organization’ means a public or pri-
vate entity that is certified under section 1857 as
meeting the requirements and standards of this part
for such an organization.
‘‘(2) PROVIDER-SPONSORED
ORGANIZATION.—
The term ‘provider-sponsored organization’ is defined
in section 1853(e).
‘‘(3) QUALIFIED
ASSOCIATION
SPONSOR.—The
term ‘qualified association sponsor’ means an associa-
tion, religious fraternal organization, or other organi-
zation (which may be a trade, industry, or profes-
sional association, a chamber of commerce, or a pub-
lic entity association) that the Secretary finds—
‘‘(A) is organized for purposes other than to
market a health plan,
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‘‘(B) may not condition its membership on
health status, health claims experience, receipt of
health care, medical history, or lack of evidence
of insurability of a potential member,
‘‘(C) may not exclude a member or spouse
of a member from health plan coverage based on
factors described in clause (ii);
‘‘(D) does not exist solely or principally for
the purpose of selling insurance,
‘‘(E) has at least 1,000 individual members
or 200 employer members,
‘‘(F) is a permanent entity which receives a
substantial proportion of its financial support
from active members; and
‘‘(G) is not owned or controlled by an in-
surance company.
Such term includes a subsidiary or corporation that
is wholly owned by one or more qualified organiza-
tions.
‘‘(4) TAFT-HARTLEY SPONSOR.—The term ‘Taft-
Hartley sponsor’ means, in relation to a group health
plan that is established or maintained by two or more
employers or jointly by one or more employers and
one or more employee organizations, the association,
committee, joint board of trustees, or other similar
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group of representatives of parties who establish or
maintain the plan.
‘‘(5) UNION SPONSOR.—The term ‘union sponsor’
means an employee organization in relation to a
group health plan that is established or maintained
by the organization other than pursuant to a collec-
tive bargaining agreement.
‘‘(6) EMPLOYER, ETC.—In this subsection and
section 1851(b), the terms ‘employer’, ‘employee orga-
nization’, and ‘group health plan’ have the meanings
given such terms for purposes of part 6 of subtitle B
of title I of the Employee Retirement Income Security
Act of 1974.
‘‘(b) DEFINITIONS
RELATING
TO
MEDICAREPLUS
PLANS.—
‘‘(1) 
MEDICAREPLUS
PLAN.—The 
term
‘MedicarePlus plan’ means health benefits coverage of-
fered under a policy, contract, or plan by a
MedicarePlus organization pursuant to and in ac-
cordance with a contract under section 1857.
‘‘(2) HIGH DEDUCTIBLE PLAN.—
‘‘(A) IN GENERAL.—The term ‘high deduct-
ible plan’ means a MedicarePlus plan that—
‘‘(i) provides reimbursement for at
least the items and services described in sec-
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tion 1852(a)(1) in a year but only after the
enrollee incurs countable expenses (as speci-
fied under the plan) equal to the amount of
a deductible (described in subparagraph
(B));
‘‘(ii) counts as such expenses (for pur-
poses of such deductible) at least all
amounts that would have been payable
under parts A and B or by the enrollee if
the enrollee had elected to receive benefits
through the provisions of such parts; and
‘‘(iii) provides, after such deductible is
met for a year and for all subsequent ex-
penses for benefits referred to in clause (i)
in the year, for a level of reimbursement
that is not less than—
‘‘(I) 100 percent of such expenses,
or
‘‘(II) 100 percent of the amounts
that would have been paid (without re-
gard to any deductibles or coinsurance)
under parts A and B with respect to
such expenses,
whichever is less.
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‘‘(B) DEDUCTIBLE.—The amount of deduct-
ible under a high deductible plan—
‘‘(i) for contract year 1997 shall be not
more than $6,000; and
‘‘(ii) for a subsequent contract year
shall be not more than the maximum
amount of such deductible for the previous
contract year under this subparagraph in-
creased by the national average per capita
growth percentage under section 1854(c)(6)
for the year.
If the amount of the deductible under clause (ii)
is not a multiple of $50, the amount shall be
rounded to the nearest multiple of $50.
‘‘(3) MEDICAREPLUS
UNRESTRICTED
FEE-FOR-
SERVICE PLAN.—The term ‘MedicarePlus unrestricted
fee-for-service plan’ means a MedicarePlus plan that
provides for coverage of benefits without restrictions
relating to utilization and without regard to whether
the provider has a contract or other arrangement with
the organization offering the plan for the provision of
such benefits.
‘‘(c) OTHER REFERENCES TO OTHER TERMS.—
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‘‘(1) MEDICAREPLUS
ELIGIBLE
INDIVIDUAL.—
The term ‘MedicarePlus eligible individual’ is defined
in section 1851(a)(3).
‘‘(2) MEDICAREPLUS PAYMENT AREA.—The term
‘MedicarePlus payment area’ is defined in section
1854(d).
‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH
PERCENTAGE.—The ‘national average per capita
growth percentage’ is defined in section 1854(c)(6).
‘‘(4) MONTHLY PREMIUM; NET MONTHLY PRE-
MIUM.—The terms ‘monthly premium’ and ‘net
monthly premium’ are defined in section 1855(a)(2).
‘‘(d) COORDINATED ACUTE
AND LONG-TERM CARE
BENEFITS UNDER A MEDICAREPLUS PLAN.—Nothing in
this part shall be construed as preventing a State from co-
ordinating benefits under its MediGrant program under
title XXI with those provided under a MedicarePlus plan
in a manner that assures continuity of a full-range of acute
care and long-term care services to poor elderly or disabled
individuals eligible for benefits under this title and under
such program.’’.
(b) CONFORMING REFERENCES TO PREVIOUS PART
C.—Any reference in law (in effect before the date of the
enactment of this Act) to part C of title XVIII of the Social
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Security Act is deemed a reference to part D of such title
(as in effect after such date).
(c) USE OF INTERIM, FINAL REGULATIONS.—In order
to carry out the amendment made by subsection (a) in a
timely manner, the Secretary of Health and Human Serv-
ices may promulgate regulations that take effect on an in-
terim basis, after notice and pending opportunity for public
comment.
(d) ADVANCE DIRECTIVES.—Section 1866(f)(1) (42
U.S.C. 1395cc(f)(1)) is amended—
(1) by inserting ‘‘1853(g),’’ after ‘‘1833(s),’’, and
(2) by inserting ‘‘, MedicarePlus organization,’’
after ‘‘provider of services’’.
(e) 
CONFORMING
AMENDMENT.—Section
1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended by
inserting before the semicolon at the end the following: ‘‘and
in the case of hospitals to accept as payment in full for
inpatient hospital services that are emergency services (as
defined in section 1853(b)(4)) that are covered under this
title and are furnished to any individual enrolled under
part C with a MedicarePlus organization which does not
have a contract establishing payment amounts for services
furnished to members of the organization the amounts that
would be made as a payment in full under this title if the
individuals were not so enrolled’’.
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(f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO-
POSAL.—Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of Health and Human Serv-
ices shall submit to the appropriate committees of Congress
a legislative proposal providing for such technical and con-
forming amendments in the law as are required by the pro-
visions of this chapter.
SEC. 8002. DUPLICATION AND COORDINATION OF MEDI-
CARE-RELATED PLANS.
(a) TREATMENT
OF CERTAIN HEALTH INSURANCE
POLICIES AS NONDUPLICATIVE.—
(1) IN
GENERAL.—Section 1882(d)(3)(A) (42
U.S.C. 1395ss(d)(3)(A)) is amended—
(A) by amending clause (i) to read as fol-
lows:
‘‘(i) It is unlawful for a person to sell or issue to an
individual entitled to benefits under part A or enrolled
under part B of this title or electing a MedicarePlus plan
under section 1851—
‘‘(I) a health insurance policy (other than a
medicare supplemental policy) with knowledge that
the policy duplicates health benefits to which the indi-
vidual is otherwise entitled under this title or title
XIX,
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‘‘(II) in the case of an individual not electing a
MedicarePlus plan, a medicare supplemental policy
with knowledge that the individual is entitled to bene-
fits under another medicare supplemental policy, or
‘‘(III) in the case of an individual electing a
MedicarePlus plan, a medicare supplemental policy
with knowledge that the policy duplicates health bene-
fits to which the individual is otherwise entitled
under this title or under another medicare supple-
mental policy.’’;
(B) in clause (iii), by striking ‘‘clause (i)’’
and inserting ‘‘clause (i)(II)’’; and
(C) by adding at the end the following new
clauses:
‘‘(iv) For purposes of this subparagraph a health in-
surance policy shall be considered to ‘duplicate’ benefits
under this title only when, under its terms, the policy pro-
vides specific reimbursement for identical items and serv-
ices to the extent paid for under this title, and a health
insurance policy providing for benefits which are payable
to or on behalf of an individual without regard to other
health benefit coverage of such individual is not considered
to ‘duplicate’ any health benefits under this title.
‘‘(v) For purposes of this subparagraph, a health in-
surance policy (or a rider to an insurance contract which
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is not a health insurance policy), including a policy (such
as a qualified long-term care insurance contract described
in section 7702B(b) of the Internal Revenue Code of 1986,
as added by the Revenue Reconciliation Act of 1995) pro-
viding benefits for long-term care, nursing home care, home
health care, or community-based care, that coordinates
against or excludes items and services available or paid for
under this title and (for policies sold or issued after Janu-
ary 1, 1996) that discloses such coordination or exclusion
in the policy’s outline of coverage, is not considered to ‘du-
plicate’ health benefits under this title. For purposes of this
clause, the terms ‘coordinates’ and ‘coordination’ mean,
with respect to a policy in relation to health benefits under
this title, that the policy under its terms is secondary to,
or excludes from payment, items and services to the extent
available or paid for under this title.
‘‘(vi) A State may not impose, with respect to the sale
or issuance of a policy (or rider) that meets the require-
ments of this title pursuant to clause (iv) or (v) to an indi-
vidual entitled to benefits under part A or enrolled under
part B or enrolled under a MedicarePlus plan under part
C, any requirement based on the premise that such a policy
or rider duplicates health benefits to which the individual
is otherwise entitled under this title.’’.
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(2) 
CONFORMING
AMENDMENTS.—Section
1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—
(A) in subparagraph (B), by inserting ‘‘(in-
cluding any MedicarePlus plan)’’ after ‘‘health
insurance policies’’;
(B) in subparagraph (C)—
(i) by striking ‘‘with respect to (i)’’
and inserting ‘‘with respect to’’, and
(ii) by striking ‘‘, (ii) the sale’’ and all
that follows up to the period at the end; and
(C) by striking subparagraph (D).
(3) MEDICAREPLUS
PLANS
NOT
TREATED
AS
MEDICARE
SUPPLEMENTARY
POLICIES.—Section
1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by
inserting ‘‘a MedicarePlus plan or’’ after ‘‘and does
not include’’.
(b) ADDITIONAL RULES RELATING TO INDIVIDUALS
ENROLLED IN MEDICAREPLUS PLANS.—Section 1882 (42
U.S.C. 1395ss) is further amended by adding at the end
the following new subsection:
‘‘(u)(1) Notwithstanding the previous provisions of
this section, this section shall not apply to the sale or issu-
ance of a medicare supplemental policy to an individual
who has elected to enroll in a MedicarePlus plan under sec-
tion 1851.
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‘‘(2)(A) It is unlawful for a person to sell or issue a
policy described in subparagraph (B) to an individual with
knowledge that the individual has in effect under section
1851 an election of a high deductible plan.
‘‘(B) A policy described in this subparagraph is a
health insurance policy that provides for coverage of ex-
penses that are otherwise required to be counted toward
meeting the annual deductible amount provided under the
high deductible plan.’’.
SEC. 8003. TRANSITIONAL RULES FOR CURRENT MEDICARE
HMO PROGRAM.
(a) IN GENERAL.—Section 1876 (42 U.S.C. 1395mm)
is amended—
(1) in subsection (c)(3)(A)(i), by striking ‘‘would
result in failure to meet the requirements of sub-
section (f) or’’;
(2) by amending subsection (f) to read as follows:
‘‘(f)(1) Except as provided in paragraph (3), the Sec-
retary shall not enter into, renew, or continue any risk-
sharing contract under this section with an eligible organi-
zation for any contract year beginning on or after—
‘‘(A) the date standards for MedicarePlus organi-
zations and plans are first established under section
1856(a) with respect to MedicarePlus organizations
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that are insurers or health maintenance organiza-
tions, or
‘‘(B) in the case of in the case of such an organi-
zation with such a contract in effect as of the date
such standards were first established, 1 year after
such date.
‘‘(2) The Secretary shall not enter into, renew, or con-
tinue any risk-sharing contract under this section with an
eligible organization for any contract year beginning on or
after January 1, 2000.
‘‘(3) An individual who is enrolled in part B only and
is enrolled in an eligible organization with a risk-sharing
contract under this section on December 31, 1996, may con-
tinue enrollment in such organization. Not later then July
1, 1996, the Secretary shall issue regulations relating to
such individuals and such organizations.
‘‘(4) Notwithstanding subsection (a), the Secretary
shall provide that payment amounts under risk-sharing
contracts under this section for months in a year (beginning
with January 1996) shall be computed—
‘‘(A) with respect to individuals entitled to bene-
fits under both parts A and B, by substituting pay-
ment rates under section 1854(a) for the payment
rates otherwise established under subsection 1876(a),
and
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‘‘(B) with respect to individuals only entitled to
benefits under part B, by substituting an appropriate
proportion of such rates (reflecting the relative pro-
portion of payments under this title attributable to
such part) for the payment rates otherwise established
under subsection (a).
For purposes of carrying out this paragraph for payments
for months in 1996, the Secretary shall compute, announce,
and apply the payment rates under section 1854(a) (not-
withstanding any deadlines specified in such section) in as
timely a manner as possible and may (to the extent nec-
essary) provide for retroactive adjustment in payments
made under this section not in accordance with such
rates.’’; and
(3) in subsection (i)(1)(C), by striking ‘‘(e), and
(f)’’ and inserting ‘‘and (e)’’.
CHAPTER 
2—SPECIAL 
RULES 
FOR
MEDICAREPLUS MEDICAL SAVINGS AC-
COUNTS
SEC. 8011. MEDICAREPLUS MSA.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 of the Internal Revenue Code of 1986 (relating to amounts
specifically excluded from gross income) is amended by re-
designating section 137 as section 138 and by inserting
after section 136 the following new section:
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‘‘SEC. 137. MEDICAREPLUS MSA.
‘‘(a) EXCLUSION.—Gross income shall not include any
payment to the MedicarePlus MSA of an individual by the
Secretary of Health and Human Services under part C of
title XVIII of the Social Security Act.
‘‘(b) MEDICAREPLUS MSA.—For purposes of this sec-
tion—
‘‘(1) 
MEDICAREPLUS
MSA.—The 
term
‘MedicarePlus MSA’ means a medical savings account
(as defined in section 222(d))—
‘‘(A) which is designated as a MedicarePlus
MSA,
‘‘(B) notwithstanding section 222(f)(5),
with respect to which no contribution may be
made other than—
‘‘(i) a contribution made by the Sec-
retary of Health and Human Services pur-
suant to part C of title XVIII of the Social
Security Act, or
‘‘(ii) a trustee-to-trustee transfer de-
scribed in subsection (c)(4), and
‘‘(C) the governing instrument of which pro-
vides that trustee-to-trustee transfers described in
subsection (c)(4) may be made to and from such
account.
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‘‘(2) HIGH DEDUCTIBLE MSA.—The term ‘High
Deductible MedicarePlus MSA’ means a MedicarePlus
MSA which is established in connection with a high
deductible plan described in section 1859(b)(2) of the
Social Security Act.
‘‘(3) REBATE
MEDICAREPLUS
MSA.—The term
‘Rebate MedicarePlus MSA’ means a MedicarePlus
MSA other than a High Deductible MedicarePlus
MSA.
‘‘(c) SPECIAL RULES FOR DISTRIBUTIONS.—
‘‘(1) DISTRIBUTIONS
FOR
QUALIFIED
MEDICAL
EXPENSES.—In applying section 222—
‘‘(A) to a High Deductible MedicarePlus
MSA, qualified medical expenses shall include
only expenses for medical care of the account
holder, and
‘‘(B) to a Rebate MedicarePlus MSA, quali-
fied medical expenses shall include only expenses
for medical care of the account holder and of the
spouse of the account holder if such spouse is en-
titled to benefits under part A of title XVIII of
the Social Security Act and is enrolled under
part B of such title.
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‘‘(2) PENALTY FOR DISTRIBUTIONS FROM HIGH
DEDUCTIBLE MSA NOT USED FOR QUALIFIED MEDICAL
EXPENSES IF MINIMUM BALANCE NOT MAINTAINED.—
‘‘(A) IN
GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is a payment or distribution from a High De-
ductible MedicarePlus MSA which is not used ex-
clusively to pay the qualified medical expenses of
the account holder shall be increased by 50 per-
cent of the excess (if any) of—
‘‘(i) the amount of such payment or
distribution, over
‘‘(ii) the excess (if any) of—
‘‘(I) the fair market value of the
assets in such MSA as of the close of
the calendar year preceding the cal-
endar year in which the taxable year
begins, over
‘‘(II) an amount equal to 60 per-
cent of the deductible under the high
deductible plan covering the account
holder as of January 1 of the calendar
year in which the taxable year begins.
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Section 222(f)(2) shall not apply to any pay-
ment or distribution from a High Deductible
MedicarePlus MSA.
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if the payment or distribution is
made on or after the date the account holder—
‘‘(i) becomes disabled within the mean-
ing of section 72(m)(7), or
‘‘(ii) dies.
‘‘(C) SPECIAL RULES.—For purposes of sub-
paragraph (A)—
‘‘(i) all High Deductible MedicarePlus
MSAs of the account holder shall be treated
as 1 account,
‘‘(ii) all payments and distributions
not used exclusively to pay the qualified
medical expenses of the account holder dur-
ing any taxable year shall be treated as 1
distribution, and
‘‘(iii) any distribution of property
shall be taken into account at its fair mar-
ket value on the date of the distribution.
‘‘(3) WITHDRAWAL
OF
ERRONEOUS
CONTRIBU-
TIONS.—Section 222(f)(2) and paragraph (2) of this
subsection shall not apply to any payment or dis-
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tribution from a MedicarePlus MSA to the Secretary
of Health and Human Services of an erroneous con-
tribution to such MSA and of the net income attrib-
utable to such contribution.
‘‘(4) TRUSTEE-TO-TRUSTEE
TRANSFERS.—Sec-
tion 222(f)(2) and paragraph (2) of this subsection
shall not apply to—
‘‘(A) any trustee-to-trustee transfer from a
High Deductible MedicarePlus MSA of an ac-
count 
holder 
to 
another 
High 
Deductible
MedicarePlus MSA of such account holder, and
‘‘(B) any trustee-to-trustee transfer from a
Rebate MedicarePlus MSA of an account holder
to another Rebate MedicarePlus MSA of such ac-
count holder.
‘‘(d) SPECIAL RULES FOR TREATMENT OF ACCOUNT
AFTER DEATH OF ACCOUNT HOLDER.—Notwithstanding
section 222(f)(1)(B), if, as of the date of the death of the
account holder, the spouse of such holder is not entitled to
benefits under title XVIII of the Social Security Act, then
after the date of such death—
‘‘(1) the Secretary of Health and Human Serv-
ices 
may 
not 
make 
any 
payments 
to 
such
MedicarePlus MSA, other than payments attributable
to periods before such date, and
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‘‘(2) such MSA shall be treated as medical sav-
ings account which is not a MedicarePlus MSA.
‘‘(e) REPORTS.—In the case of a MedicarePlus MSA,
the report under section 222(h)—
‘‘(1) shall include the fair market value of the as-
sets in such MedicarePlus MSA as of the close of each
calendar year, and
‘‘(2) shall be furnished to the account holder—
‘‘(A) not later than January 31 of the cal-
endar year following the calendar year to which
such reports relate, and
‘‘(B) in such manner as the Secretary pre-
scribes in such regulations.’’
(b) CONFORMING AMENDMENTS.—
(1) The last sentence of section 4973(d) of such
Code, as added by section 11066(f)(4), is amended by
‘‘or section 137(c)(3)’’ after ‘‘section 222(f)(3)’’.
(2) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following:
‘‘Sec. 137. MedicarePlus MSA.
‘‘Sec. 138. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1996.
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SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS
INCOME.
(a) IN GENERAL.—Section 105 of the Internal Revenue
Code of 1986 (relating to amounts received under accident
and health plans) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY
ACT.—Gross income does not include any rebate received
under part C of title XVIII of the Social Security Act dur-
ing the taxable year.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to amounts received after the date
of the enactment of this Act.
CHAPTER 3—MEDICARE PAYMENT REVIEW
COMMISSION
SEC. 8021. MEDICARE PAYMENT REVIEW COMMISSION.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1804 the following new section:
‘‘MEDICARE PAYMENT REVIEW COMMISSION
‘‘SEC. 1805. (a) ESTABLISHMENT.—There is hereby es-
tablished the Medicare Payment Review Commission (in
this section referred to as the ‘Commission’).
‘‘(b) DUTIES.—
‘‘(1) GENERAL DUTIES AND REPORTS.—
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‘‘(A) IN GENERAL.—The Commission shall
review, and make recommendations to Congress
concerning, payment policies under this title.
‘‘(B) ANNUAL REPORTS.—By not later than
June 1 of each year, the Commission shall sub-
mit a report to Congress containing an examina-
tion of issues affecting the medicare program, in-
cluding the implications of changes in health
care delivery in the United States and in the
market for health care services on the medicare
program.
‘‘(C) ADDITIONAL REPORTS.—The Commis-
sion may submit to Congress from time to time
such other reports as the Commission deems ap-
propriate. By not later than May 1, 1997, the
Commission shall submit to Congress a report on
the matter described in paragraph (2)(G).
‘‘(D) 
AVAILABILITY
OF
REPORTS.—The
Commission shall transmit to the Secretary a
copy of each report submitted to Congress under
this subsection and shall make such reports
available to the public.
‘‘(2) 
SPECIFIC
DUTIES
RELATING
TO
MEDICAREPLUS PROGRAM.—Specifically, the Commis-
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MedicarePlus plans are made available to indi-
viduals residing in the county; and
‘‘(G) other major issues in implementation
and further development of the MedicarePlus
program.
‘‘(3) SPECIFIC DUTIES RELATING TO THE FEE-
FOR-SERVICE SYSTEM.—Specifically, the Commission
shall review payment policies under parts A and B,
including—
‘‘(A) the factors affecting expenditures for
services in different sectors, including the process
for updating hospital, physician, and other fees,
‘‘(B) payment methodologies; and
‘‘(C) the impact of payment policies on ac-
cess and quality of care for medicare bene-
ficiaries.
‘‘(4) SPECIFIC
DUTIES
RELATING
TO
INTER-
ACTION OF PAYMENT POLICIES WITH HEALTH CARE
DELIVERY GENERALLY.—Specifically the Commission
shall review the effect of payment policies under this
title on the delivery of health care services under this
title and assess the implications of changes in the
health services market on the medicare program.
‘‘(c) MEMBERSHIP.—
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‘‘(1) NUMBER AND APPOINTMENT.—The Commis-
sion shall be composed of 15 members appointed by
the Comptroller General.
‘‘(2) QUALIFICATIONS.—The membership of the
Commission shall include individuals with national
recognition for their expertise in health finance and
economics, actuarial science, health facility manage-
ment, health plans and integrated delivery systems,
reimbursement of health facilities, allopathic and os-
teopathic physicians, and other providers of services,
and other related fields, who provide a mix of dif-
ferent professionals, broad geographic representation,
and a balance between urban and rural representa-
tives, including physicians and other health profes-
sionals, employers, third party payors, individuals
skilled in the conduct and interpretation of bio-
medical, health services, and health economics re-
search and expertise in outcomes and effectiveness re-
search and technology assessment. Such membership
shall also include representatives of consumers and
the elderly.
‘‘(3) TERMS.—
‘‘(A) IN GENERAL.—The terms of members
of the Commission shall be for 3 years except
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that the Comptroller General shall designate
staggered terms for the members first appointed.
‘‘(B) VACANCIES.—Any member appointed
to fill a vacancy occurring before the expiration
of the term for which the member’s predecessor
was appointed shall be appointed only for the re-
mainder of that term. A member may serve after
the expiration of that member’s term until a suc-
cessor has taken office. A vacancy in the Com-
mission shall be filled in the manner in which
the original appointment was made.
‘‘(4) COMPENSATION.—While serving on the busi-
ness of the Commission (including traveltime), a
member of the Commission shall be entitled to com-
pensation at the per diem equivalent of the rate pro-
vided for level IV of the Executive Schedule under sec-
tion 5315 of title 5, United States Code; and while so
serving away from home and member’s regular place
of business, a member may be allowed travel expenses,
as authorized by the Chairman of the Commission.
Physicians serving as personnel of the Commission
may be provided a physician comparability allow-
ance by the Commission in the same manner as Gov-
ernment physicians may be provided such an allow-
ance by an agency under section 5948 of title 5, Unit-
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ed States Code, and for such purpose subsection (i) of
such section shall apply to the Commission in the
same manner as it applies to the Tennessee Valley
Authority. For purposes of pay (other than pay of
members of the Commission) and employment bene-
fits, rights, and privileges, all personnel of the Com-
mission shall be treated as if they were employees of
the United States Senate.
‘‘(5) CHAIRMAN; VICE CHAIRMAN.—The Comp-
troller General shall designate a member of the Com-
mission, at the time of appointment of the member,
as Chairman and a member as Vice Chairman for
that term of appointment.
‘‘(6) MEETINGS.—The Commission shall meet at
the call of the Chairman.
‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT-
ANTS.—Subject to such review as the Comptroller General
deems necessary to assure the efficient administration of the
Commission, the Commission may—
‘‘(1) employ and fix the compensation of an Ex-
ecutive Director (subject to the approval of the Comp-
troller General) and such other personnel as may be
necessary to carry out its duties (without regard to
the provisions of title 5, United States Code, govern-
ing appointments in the competitive service);
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‘‘(2) seek such assistance and support as may be
required in the performance of its duties from appro-
priate Federal departments and agencies;
‘‘(3) enter into contracts or make other arrange-
ments, as may be necessary for the conduct of the
work of the Commission (without regard to section
3709 of the Revised Statutes (41 U.S.C. 5));
‘‘(4) make advance, progress, and other pay-
ments which relate to the work of the Commission;
‘‘(5) provide transportation and subsistence for
persons serving without compensation; and
‘‘(6) prescribe such rules and regulations as it
deems necessary with respect to the internal organiza-
tion and operation of the Commission.
‘‘(e) POWERS.—
‘‘(1) OBTAINING OFFICIAL DATA.—The Commis-
sion may secure directly from any department or
agency of the United States information necessary to
enable it to carry out this section. Upon request of the
Chairman, the head of that department or agency
shall furnish that information to the Commission on
an agreed upon schedule.
‘‘(2) DATA COLLECTION.—In order to carry out
its functions, the Commission shall collect and assess
information to—
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‘‘(A) utilize existing information, both pub-
lished and unpublished, where possible, collected
and assessed either by its own staff or under
other arrangements made in accordance with
this section,
‘‘(B) carry out, or award grants or con-
tracts for, original research and experimentation,
where existing information is inadequate, and
‘‘(C) adopt procedures allowing any inter-
ested party to submit information for the Com-
mission’s use in making reports and rec-
ommendations.
‘‘(3) ACCESS
OF
GAO
TO
INFORMATION.—The
Comptroller General shall have unrestricted access to
all deliberations, records, and data of the Commis-
sion, immediately upon request.
‘‘(4) PERIODIC AUDIT.—The Commission shall be
subject to periodic audit by the General Accounting
Office.
‘‘(5) OPEN MEETINGS, ETC..—Pursuant to regu-
lations of the Comptroller General, rules based upon
the requirements of section 10 of the Federal Advisory
Committee Act shall apply with respect to the Com-
mission.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—
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‘‘(1) 
REQUEST
FOR
APPROPRIATIONS.—The
Commission shall submit requests for appropriations
in the same manner as the Comptroller General sub-
mits requests for appropriations, but amounts appro-
priated for the Commission shall be separate from
amounts appropriated for the Comptroller General.
‘‘(2) AUTHORIZATION.—There are authorized to
be appropriated such sums as may be necessary to
carry out the provisions of this section. 60 percent of
such appropriation shall be payable from the Federal
Hospital Insurance Trust Fund, and 40 percent of
such appropriation shall be payable from the Federal
Supplementary Medical Insurance Trust Fund.’’.
(b) ABOLITION OF PROPAC AND PPRC.—
(1) PROPAC.—
(A) IN
GENERAL.—Section 1886(e) (42
U.S.C. 1395ww(e)) is amended—
(i) by striking paragraphs (2) and (6);
and
(ii) in paragraph (3), by striking ‘‘(A)
The Commission’’ and all that follows
through ‘‘(B)’’.
(B) 
CONFORMING
AMENDMENT.—Section
1862 (42 U.S.C. 1395y) is amended by striking
‘‘Prospective Payment Assessment Commission’’
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each place it appears in subsection (a)(1)(D)
and subsection (i) and inserting ‘‘Medicare Pay-
ment Review Commission’’.
(2) PPRC.—
(A) IN GENERAL.—Title XVIII is amended
by striking section 1845 (42 U.S.C. 1395w–1).
(B) CONFORMING AMENDMENTS.—
(i) Section 1834(b)(2) (42 U.S.C.
1395m(b)(2)) is amended by striking ‘‘Phy-
sician Payment Review Commission’’ and
inserting ‘‘Medicare Payment Review Com-
mission’’.
(ii) 
Section 
1842(b) 
(42 
U.S.C.
1395u(b)) is amended by striking ‘‘Physi-
cian Payment Review Commission’’ each
place it appears in paragraphs (9)(D) and
(14)(C)(i) and inserting ‘‘Medicare Pay-
ment Review Commission’’.
(iii) Section 1848 (42 U.S.C. 1395w–
4) is amended by striking ‘‘Physician Pay-
ment Review Commission’’ and inserting
‘‘Medicare Payment Review Commission’’
each 
place 
it 
appears 
in 
paragraph
(2)(A)(ii), (2)(B)(iii), and (5) of subsection
(c), subsection (d)(2)(F), paragraphs (1)(B),
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(3), and (4)(A) of subsection (f), and para-
graphs (6)(C) and (7)(C) of subsection (g).
(c) EFFECTIVE DATE; TRANSITION.—
(1) IN GENERAL.—The Comptroller General shall
first provide for appointment of members to the Medi-
care Payment Review Commission (in this subsection
referred to as ‘‘MPRC’’) by not later than September
30, 1996.
(2) TRANSITION.—Effective January 1, 1997, the
Prospective Payment Assessment Commission (in this
subsection referred to as ‘‘ProPAC’’) and the Physi-
cian Payment Review Commission (in this subsection
referred to as ‘‘PPRC’’) are terminated and amend-
ments made by subsection (b) shall become effective.
The Comptroller General, to the maximum extent fea-
sible, shall provide for the transfer to the MPRC of
assets and staff of ProPAC and PPRC, without any
loss of benefits or seniority by virtue of such transfers.
Fund balances available to the ProPAC or PPRC for
any period shall be available to the MPRC for such
period for like purposes.
(3) 
CONTINUING
RESPONSIBILITY
FOR
RE-
PORTS.—The MPRC shall be responsible for the prep-
aration and submission of reports required by law to
be submitted (and which have not been submitted by
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the date of establishment of the MPRC) by the
ProPAC and PPRC, and, for this purpose, any ref-
erence in law to either such Commission is deemed,
after the appointment of the MPRC, to refer to the
MPRC.
CHAPTER 4—TREATMENT OF HOSPITALS
WHICH PARTICIPATE IN PROVIDER-
SPONSORED ORGANIZATIONS
SEC. 8031. TREATMENT OF HOSPITALS WHICH PARTICIPATE
IN PROVIDER-SPONSORED ORGANIZATIONS.
(a) IN GENERAL.—Section 501 of the Internal Revenue
Code of 1986 (relating to exemption from tax on corpora-
tions, certain trusts, etc.), as amended by title XI, is amend-
ed by redesignating subsection (o) as subsection (p) and by
inserting after subsection (n) the following new subsection:
‘‘(o) TREATMENT OF HOSPITALS PARTICIPATING IN
PROVIDER-SPONSORED ORGANIZATIONS.—An organization
shall not fail to be treated as organized and operated exclu-
sively for a charitable purpose for purposes of subsection
(c)(3) solely because a hospital which is owned and operated
by such organization participates in a provider-sponsored
organization (as defined in section 1853 of the Social Secu-
rity Act), whether or not the provider-sponsored organiza-
tion is exempt from tax. For purposes of subsection (c)(3),
any person with a material financial interest in such a
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provider-sponsored organization shall be treated as a pri-
vate shareholder or individual with respect to the hospital.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of the enactment
of this Act.
Subtitle B—Health Care Fraud and
Abuse Prevention
CHAPTER 1—FRAUD AND ABUSE CONTROL
PROGRAM
SEC. 8101. FRAUD AND ABUSE CONTROL PROGRAM.
(a) ESTABLISHMENT
OF PROGRAM.—Title XI (42
U.S.C. 1301 et seq.) is amended by inserting after section
1128B the following new section:
‘‘FRAUD AND ABUSE CONTROL PROGRAM
‘‘SEC. 1128C. (a) ESTABLISHMENT OF PROGRAM.—
‘‘(1) IN GENERAL.—Not later than January 1,
1996, the Secretary, acting through the Office of the
Inspector General of the Department of Health and
Human Services, and the Attorney General shall es-
tablish a program—
‘‘(A) to coordinate Federal, State, and local
law enforcement programs to control fraud and
abuse with respect to health plans,
‘‘(B) to conduct investigations, audits, eval-
uations, and inspections relating to the delivery
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of and payment for health care in the United
States,
‘‘(C) to facilitate the enforcement of the pro-
visions of sections 1128, 1128A, and 1128B and
other statutes applicable to health care fraud and
abuse,
‘‘(D) to provide for the modification and es-
tablishment of safe harbors and to issue interpre-
tative rulings and special fraud alerts pursuant
to section 1128D, and
‘‘(E) to provide for the reporting and disclo-
sure of certain final adverse actions against
health care providers, suppliers, or practitioners
pursuant to the data collection system established
under section 1128E.
‘‘(2) COORDINATION WITH HEALTH PLANS.—In
carrying out the program established under para-
graph (1), the Secretary and the Attorney General
shall consult with, and arrange for the sharing of
data with representatives of health plans.
‘‘(3) GUIDELINES.—
‘‘(A) IN GENERAL.—The Secretary and the
Attorney General shall issue guidelines to carry
out the program under paragraph (1). The pro-
visions of sections 553, 556, and 557 of title 5,
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United States Code, shall not apply in the issu-
ance of such guidelines.
‘‘(B) INFORMATION GUIDELINES.—
‘‘(i) IN
GENERAL.—Such guidelines
shall include guidelines relating to the fur-
nishing of information by health plans, pro-
viders, and others to enable the Secretary
and the Attorney General to carry out the
program 
(including 
coordination 
with
health plans under paragraph (2)).
‘‘(ii) CONFIDENTIALITY.—Such guide-
lines shall include procedures to assure that
such information is provided and utilized
in a manner that appropriately protects the
confidentiality of the information and the
privacy of individuals receiving health care
services and items.
‘‘(iii) QUALIFIED IMMUNITY FOR PRO-
VIDING
INFORMATION.—The provisions of
section 1157(a) (relating to limitation on
liability) shall apply to a person providing
information to the Secretary or the Attor-
ney General in conjunction with their per-
formance of duties under this section.
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‘‘(4) ENSURING ACCESS TO DOCUMENTATION.—
The Inspector General of the Department of Health
and Human Services is authorized to exercise such
authority described in paragraphs (3) through (9) of
section 6 of the Inspector General Act of 1978 (5
U.S.C. App.) as necessary with respect to the activi-
ties under the fraud and abuse control program estab-
lished under this subsection.
‘‘(5) AUTHORITY
OF
INSPECTOR
GENERAL.—
Nothing in this Act shall be construed to diminish the
authority of any Inspector General, including such
authority as provided in the Inspector General Act of
1978 (5 U.S.C. App.).
‘‘(b) ADDITIONAL USE OF FUNDS BY INSPECTOR GEN-
ERAL.—
‘‘(1) REIMBURSEMENTS FOR INVESTIGATIONS.—
The Inspector General of the Department of Health
and Human Services is authorized to receive and re-
tain for current use reimbursement for the costs of
conducting investigations and audits and for mon-
itoring compliance plans when such costs are ordered
by a court, voluntarily agreed to by the payer, or oth-
erwise.
‘‘(2) CREDITING.—Funds received by the Inspec-
tor General under paragraph (1) as reimbursement
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for costs of conducting investigations shall be depos-
ited to the credit of the appropriation from which ini-
tially paid, or to appropriations for similar purposes
currently available at the time of deposit, and shall
remain available for obligation for 1 year from the
date of the deposit of such funds.
‘‘(c) HEALTH PLAN DEFINED.—For purposes of this
section, the term ‘health plan’ means a plan or program
that provides health benefits, whether directly, through in-
surance, or otherwise, and includes—
‘‘(1) a policy of health insurance;
‘‘(2) a contract of a service benefit organization;
and
‘‘(3) a membership agreement with a health
maintenance organization or other prepaid health
plan.’’.
(b) ESTABLISHMENT OF HEALTH CARE FRAUD AND
ABUSE CONTROL ACCOUNT IN FEDERAL HOSPITAL INSUR-
ANCE TRUST FUND.—Section 1817 (42 U.S.C. 1395i) is
amended by adding at the end the following new subsection:
‘‘(k) HEALTH CARE FRAUD AND ABUSE CONTROL AC-
COUNT.—
‘‘(1) ESTABLISHMENT.—There is hereby estab-
lished in the Trust Fund an expenditure account to
be known as the ‘Health Care Fraud and Abuse Con-
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trol Account’ (in this subsection referred to as the ‘Ac-
count’).
‘‘(2) 
APPROPRIATED
AMOUNTS
TO
TRUST
FUND.—
‘‘(A) IN GENERAL.—There are hereby ap-
propriated to the Trust Fund—
‘‘(i) such gifts and bequests as may be
made as provided in subparagraph (B);
‘‘(ii) such amounts as may be depos-
ited in the Trust Fund as provided in sec-
tions 8141(b) and 8142(c) of the Medicare
Preservation Act of 1995, and title XI; and
‘‘(iii) such amounts as are transferred
to the Trust Fund under subparagraph (C).
‘‘(B) AUTHORIZATION TO ACCEPT GIFTS.—
The Trust Fund is authorized to accept on behalf
of the United States money gifts and bequests
made unconditionally to the Trust Fund, for the
benefit of the Account or any activity financed
through the Account.
‘‘(C) TRANSFER OF AMOUNTS.—The Manag-
ing Trustee shall transfer to the Trust Fund,
under rules similar to the rules in section 9601
of the Internal Revenue Code of 1986, an amount
equal to the sum of the following:
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‘‘(i) Criminal fines recovered in cases
involving a Federal health care offense (as
defined in section 982(a)(6)(B) of title 18,
United States Code).
‘‘(ii) Civil monetary penalties and as-
sessments imposed in health care cases, in-
cluding amounts recovered under titles XI,
XVIII, and XXI, and chapter 38 of title 31,
United States Code (except as otherwise
provided by law).
‘‘(iii) Amounts resulting from the for-
feiture of property by reason of a Federal
health care offense.
‘‘(iv) Penalties and damages obtained
and otherwise creditable to miscellaneous re-
ceipts of the general fund of the Treasury
obtained under sections 3729 through 3733
of title 31, United States Code (known as
the False Claims Act), in cases involving
claims related to the provision of health
care items and services (other than funds
awarded to a relator, for restitution or oth-
erwise authorized by law).
‘‘(3) APPROPRIATED AMOUNTS TO ACCOUNT FOR
FRAUD AND ABUSE CONTROL PROGRAM, ETC.—
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‘‘(A) 
DEPARTMENTS
OF
HEALTH
AND
HUMAN SERVICES AND JUSTICE.—
‘‘(i) IN
GENERAL.—There are hereby
appropriated to the Account from the Trust
Fund such sums as the Secretary and the
Attorney General certify are necessary to
carry out the purposes described in sub-
paragraph (C), to be available without fur-
ther appropriation, in an amount not to ex-
ceed—
‘‘(I) 
for 
fiscal 
year 
1996,
$104,000,000, and
‘‘(II) for each of the fiscal years
1997 through 2002, the limit for the
preceding fiscal year, increased by 15
percent; and
‘‘(III) for each fiscal year after
fiscal year 2002, the limit for fiscal
year 2002.
‘‘(ii) MEDICARE AND MEDIGRANT AC-
TIVITIES.—For each fiscal year, of the
amount appropriated in clause (i), the fol-
lowing amounts shall be available only for
the purposes of the activities of the Office of
the Inspector General of the Department of
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Health and Human Services with respect to
the medicare and MediGrant programs—
‘‘(I) for fiscal year 1996, not less
than $60,000,000 and not more than
$70,000,000;
‘‘(II) for fiscal year 1997, not less
than $80,000,000 and not more than
$90,000,000;
‘‘(III) for fiscal year 1998, not
less than $90,000,000 and not more
than $100,000,000;
‘‘(IV) for fiscal year 1999, not less
than $110,000,000 and not more than
$120,000,000;
‘‘(V) for fiscal year 2000, not less
than $120,000,000 and not more than
$130,000,000;
‘‘(VI) for fiscal year 2001, not less
than $140,000,000 and not more than
$150,000,000; and
‘‘(VII) for each fiscal year after
fiscal 
year 
2001, 
not 
less 
than
$150,000,000 and not more than
$160,000,000.
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‘‘(B) FEDERAL
BUREAU
OF
INVESTIGA-
TIONS.—There are hereby appropriated from the
general fund of the United States Treasury and
hereby appropriated to the Account for transfer
to the Federal Bureau of Investigations to carry
out the purposes described in subparagraph
(C)(i), to be available without further appropria-
tion—
‘‘(i) for fiscal year 1996, $47,000,000;
‘‘(ii) for fiscal year 1997, $56,000,000;
‘‘(iii) for fiscal year 1998, $66,000,000;
‘‘(iv) for fiscal year 1999, $76,000,000;
‘‘(v) for fiscal year 2000, $88,000,000;
‘‘(vi) 
for 
fiscal 
year 
2001,
$101,000,000; and
‘‘(vii) for each fiscal year after fiscal
year 2001, $114,000,000.
‘‘(C) USE
OF
FUNDS.—The purposes de-
scribed in this subparagraph are as follows:
‘‘(i) GENERAL USE.—To cover the costs
(including equipment, salaries and benefits,
and travel and training) of the administra-
tion and operation of the health care fraud
and abuse control program established
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under section 1128C(a), including the costs
of—
‘‘(I) prosecuting health care mat-
ters (through criminal, civil, and ad-
ministrative proceedings);
‘‘(II) investigations;
‘‘(III) financial and performance
audits of health care programs and op-
erations;
‘‘(IV) inspections and other eval-
uations; and
‘‘(V) provider and consumer edu-
cation regarding compliance with the
provisions of title XI.
‘‘(ii) USE
BY
STATE
MEDIGRANT
FRAUD
CONTROL
UNITS
FOR
INVESTIGATION
REIM-
BURSEMENTS.—To reimburse the various State
MediGrant fraud control units established under
section 2134(a) upon request to the Secretary for
the costs of the activities authorized under sec-
tion 2134(b).
‘‘(4) APPROPRIATED AMOUNTS TO ACCOUNT FOR
MEDICARE INTEGRITY PROGRAM.—
‘‘(A) IN GENERAL.—There are hereby ap-
propriated to the Account from the Trust Fund
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for each fiscal year such amounts as are nec-
essary to carry out the Medicare Integrity Pro-
gram under section 1893, subject to subpara-
graph (B) and to be available without further
appropriation.
‘‘(B) AMOUNTS
SPECIFIED.—The amount
appropriated under subparagraph (A) for a fis-
cal year is as follows:
‘‘(i) For fiscal year 1996, such amount
shall be not less than $430,000,000 and not
more than $440,000,000.
‘‘(ii) For fiscal year 1997, such
amount shall be not less than $490,000,000
and not more than $500,000,000.
‘‘(iii) For fiscal year 1998, such
amount shall be not less than $550,000,000
and not more than $560,000,000.
‘‘(iv) For fiscal year 1999, such
amount shall be not less than $620,000,000
and not more than $630,000,000.
‘‘(v) For fiscal year 2000, such amount
shall be not less than $670,000,000 and not
more than $680,000,000.
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‘‘(vi) For fiscal year 2001, such
amount shall be not less than $690,000,000
and not more than $700,000,000.
‘‘(vii) For each fiscal year after fiscal
year 2001, such amount shall be not less
than $710,000,000 and not more than
$720,000,000.
‘‘(5) 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, and the justification for such
disbursements, by the Account in each fiscal year.’’.
SEC. 8102. MEDICARE INTEGRITY PROGRAM.
(a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO-
GRAM.—Title XVIII is amended by adding at the end the
following new section:
‘‘MEDICARE INTEGRITY PROGRAM
‘‘SEC. 1893. (a) ESTABLISHMENT
OF PROGRAM.—
There is hereby established the Medicare Integrity Program
(in this section referred to as the ‘Program’) under which
the Secretary shall promote the integrity of the medicare
program by entering into contracts in accordance with this
section with eligible private entities to carry out the activi-
ties described in subsection (b).
‘‘(b) ACTIVITIES DESCRIBED.—The activities described
in this subsection are as follows:
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‘‘(1) Review of activities of providers of services
or other individuals and entities furnishing items and
services for which payment may be made under this
title (including skilled nursing facilities and home
health agencies), including medical and utilization
review and fraud review (employing similar stand-
ards, processes, and technologies used by private
health plans, including equipment and software tech-
nologies which surpass the capability of the equip-
ment and technologies used in the review of claims
under this title as of the date of the enactment of this
section).
‘‘(2) Audit of cost reports.
‘‘(3) Determinations 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 benefit quality assurance issues.
‘‘(5) Developing (and periodically updating) a
list of items of durable medical equipment in accord-
ance with section 1834(a)(15) which are subject to
prior authorization under such section.
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‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible
to enter into a contract under the Program to carry out
any of the activities described in subsection (b) if—
‘‘(1) the entity has demonstrated capability to
carry out such activities;
‘‘(2) in carrying out such activities, the entity
agrees to cooperate with the Inspector General of the
Department of Health and Human Services, the At-
torney General of the United States, and other law
enforcement agencies, as appropriate, in the inves-
tigation and deterrence of fraud and abuse in relation
to this title and in other cases arising out of such ac-
tivities;
‘‘(3) the entity demonstrates to the Secretary
that the entity’s financial holdings, interests, or rela-
tionships will not interfere with its ability to perform
the functions to be required by the contract in an ef-
fective and impartial manner; and
‘‘(4) the entity meets such other requirements as
the Secretary may impose.
In the case of the activity described in subsection (b)(5),
an entity shall be deemed to be eligible to enter into a con-
tract under the Program to carry out the activity if the
entity is a carrier with a contract in effect under section
1842.
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‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—The
Secretary shall enter into contracts under the Program in
accordance with such procedures as the Secretary shall by
regulation establish, except that such procedures shall in-
clude the following:
‘‘(1) The Secretary shall determine the appro-
priate number of separate contracts which are nec-
essary to carry out the Program and the appropriate
times at which the Secretary shall enter into such
contracts.
‘‘(2)(A) Except as provided in subparagraph
(B), the provisions of section 1153(e)(1) shall apply
to contracts and contracting authority under this sec-
tion.
‘‘(B) Competitive procedures must be used when
entering into new contracts under this section, or at
any other time considered appropriate by the Sec-
retary, except that the Secretary may contract with
entities that are carrying out the activities described
in this section pursuant to agreements under section
1816 or contracts under section 1842 in effect on the
date of the enactment of this section.
‘‘(3) A contract under this section may be re-
newed without regard to any provision of law requir-
ing competition if the contractor has met or exceeded
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the performance requirements established in the cur-
rent contract.
‘‘(e) LIMITATION
ON CONTRACTOR LIABILITY.—The
Secretary shall by regulation provide for the limitation of
a contractor’s liability for actions taken to carry out a con-
tract under the Program, and such regulation shall, to the
extent the Secretary finds appropriate, employ the same or
comparable standards and other substantive and procedural
provisions as are contained in section 1157.’’.
(b) ELIMINATION OF FI AND CARRIER RESPONSIBIL-
ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO-
GRAM.—
(1) 
RESPONSIBILITIES
OF
FISCAL
INTERMEDIARIES UNDER PART A.—Section 1816 (42
U.S.C. 1395h) is amended by adding at the end the
following new subsection:
‘‘(l) No agency or organization may carry out (or re-
ceive payment for carrying out) any activity pursuant to
an agreement under this section to the extent that the activ-
ity is carried out pursuant to a contract under the Medicare
Integrity Program under section 1893.’’.
(2) RESPONSIBILITIES
OF
CARRIERS
UNDER
PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is
amended by adding at the end the following new
paragraph:
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‘‘(6) No carrier may carry out (or receive payment for
carrying out) any activity pursuant to a contract under
this subsection to the extent that the activity is carried out
pursuant to a contract under the Medicare Integrity Pro-
gram under section 1893. The previous sentence shall not
apply with respect to the activity described in section
1893(b)(5) (relating to prior authorization of certain items
of durable medical equipment under section 1834(a)(15)).’’.
SEC. 8103. BENEFICIARY INCENTIVE PROGRAMS.
(a) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—The Secretary of
Health and Human Services (in this section referred to as
the ‘‘Secretary’’) shall provide an explanation of benefits
under the medicare program under title XVIII of the Social
Security Act with respect to each item or service for which
payment may be made under the program which is fur-
nished to an individual, without regard to whether or not
a deductible or coinsurance may be imposed against the in-
dividual with respect to the item or service.
(b) PROGRAM TO COLLECT INFORMATION ON FRAUD
AND ABUSE.—
(1) ESTABLISHMENT
OF
PROGRAM.—Not later
than 3 months after the date of the enactment of this
Act, the Secretary shall establish a program under
which the Secretary shall encourage individuals to re-
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port to the Secretary information on individuals and
entities who are engaging or who have engaged in
acts or omissions which constitute grounds for the im-
position of a sanction under section 1128, section
1128A, or section 1128B of the Social Security Act,
or who have otherwise engaged in fraud and abuse
against the medicare program for which there is a
sanction provided under law. The program shall dis-
courage provision of, and not consider, information
which is frivolous or otherwise not relevant or mate-
rial to the imposition of such a sanction.
(2) PAYMENT
OF
PORTION
OF
AMOUNTS
COL-
LECTED.—If an individual reports information to the
Secretary under the program established under para-
graph (1) which serves as the basis for the collection
by the Secretary or the Attorney General of any
amount of at least $100 (other than any amount paid
as a penalty under section 1128B of the Social Secu-
rity Act), the Secretary may pay a portion of the
amount collected to the individual (under procedures
similar to those applicable under section 7623 of the
Internal Revenue Code of 1986 to payments to indi-
viduals providing information on violations of such
Code).
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(c) PROGRAM TO COLLECT INFORMATION ON PROGRAM
EFFICIENCY.—
(1) ESTABLISHMENT
OF
PROGRAM.—Not later
than 3 months after the date of the enactment of this
Act, the Secretary shall establish a program under
which the Secretary shall encourage individuals to
submit to the Secretary suggestions on methods to im-
prove the efficiency of the medicare program.
(2) PAYMENT
OF
PORTION
OF
PROGRAM
SAV-
INGS.—If an individual submits a suggestion to the
Secretary under the program established under para-
graph (1) which is adopted by the Secretary and
which results in savings to the program, the Secretary
may make a payment to the individual of such
amount as the Secretary considers appropriate.
SEC. 8104. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD
AND ABUSE SANCTIONS TO FRAUD AND
ABUSE AGAINST FEDERAL HEALTH CARE
PROGRAMS.
(a) IN GENERAL.—Section 1128B (42 U.S.C. 1320a–
7b) is amended as follows:
(1) In the heading, by striking ‘‘MEDICARE OR
STATE
HEALTH
CARE
PROGRAMS’’ and inserting
‘‘FEDERAL HEALTH CARE PROGRAMS’’.
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(2) In subsection (a)(1), by striking ‘‘a program
under title XVIII or a State health care program (as
defined in section 1128(h))’’ and inserting ‘‘a Federal
health care program’’.
(3) In subsection (a)(5), by striking ‘‘a program
under title XVIII or a State health care program’’
and inserting ‘‘a Federal health care program’’.
(4) In the second sentence of subsection (a)—
(A) by striking ‘‘a State plan approved
under title XIX’’ and inserting ‘‘a Federal health
care program’’, and
(B) by striking ‘‘the State may at its option
(notwithstanding any other provision of that
title or of such plan)’’ and inserting ‘‘the admin-
istrator of such program may at its option (not-
withstanding any other provision of such pro-
gram)’’.
(5) In subsection (b), by striking ‘‘title XVIII or
a State health care program’’ each place it appears
and inserting ‘‘a Federal health care program’’.
(6) In subsection (c), by inserting ‘‘(as defined
in section 1128(h))’’ after ‘‘a State health care pro-
gram’’.
(7) By adding at the end the following new sub-
section:
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‘‘(f) For purposes of this section, the term ‘Federal
health care program’ means—
‘‘(1) any plan or program that provides health
benefits, whether directly, through insurance, or other-
wise, which is funded directly, in whole or in part,
by the United States Government; or
‘‘(2) any State health care program, as defined
in section 1128(h).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 1996.
SEC. 
8105. 
GUIDANCE 
REGARDING 
APPLICATION 
OF
HEALTH CARE FRAUD AND ABUSE SANC-
TIONS.
Title XI (42 U.S.C. 1301 et seq.), as amended by sec-
tion 8101, is amended by inserting after section 1128C the
following new section:
‘‘GUIDANCE REGARDING APPLICATION OF HEALTH CARE
FRAUD AND ABUSE SANCTIONS
‘‘SEC. 1128D. (a) SOLICITATION AND PUBLICATION OF
MODIFICATIONS TO EXISTING SAFE HARBORS AND NEW
SAFE HARBORS.—
‘‘(1) IN GENERAL.—
‘‘(A) SOLICITATION
OF
PROPOSALS
FOR
SAFE
HARBORS.—Not later than January 1,
1996, and not less than annually thereafter, the
Secretary shall publish a notice in the Federal
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Register soliciting proposals, which will be ac-
cepted during a 60-day period, for—
‘‘(i) modifications to existing safe har-
bors issued pursuant to section 14(a) of the
Medicare and Medicaid Patient and Pro-
gram Protection Act of 1987 (42 U.S.C.
1320a–7b note);
‘‘(ii) additional safe harbors specifying
payment practices that shall not be treated
as 
a 
criminal 
offense 
under 
section
1128B(b) and shall not serve as the basis
for an exclusion under section 1128(b)(7);
‘‘(iii) interpretive rulings to be issued
pursuant to subsection (b); and
‘‘(iv) special fraud alerts to be issued
pursuant to subsection (c).
‘‘(B) PUBLICATION OF PROPOSED MODIFICA-
TIONS AND PROPOSED ADDITIONAL SAFE HAR-
BORS.—After considering the proposals described
in clauses (i) and (ii) of subparagraph (A), the
Secretary, in consultation with the Attorney
General, shall publish in the Federal Register
proposed modifications to existing safe harbors
and proposed additional safe harbors, if appro-
priate, with a 60-day comment period. After
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considering any public comments received dur-
ing this period, the Secretary shall issue final
rules modifying the existing safe harbors and es-
tablishing new safe harbors, as appropriate.
‘‘(C) REPORT.—The Inspector General of
the Department of Health and Human Services
(in this section referred to as the ‘Inspector Gen-
eral’) shall, in an annual report to Congress or
as part of the year-end semiannual report re-
quired by section 5 of the Inspector General Act
of 1978 (5 U.S.C. App.), describe the proposals
received under clauses (i) and (ii) of subpara-
graph (A) and explain which proposals were in-
cluded in the publication described in subpara-
graph (B), which proposals were not included in
that publication, and the reasons for the rejection
of the proposals that were not included.
‘‘(2) CRITERIA FOR MODIFYING AND ESTABLISH-
ING SAFE HARBORS.—In modifying and establishing
safe harbors under paragraph (1)(B), the Secretary
may consider the extent to which providing a safe
harbor for the specified payment practice may result
in any of the following:
‘‘(A) An increase or decrease in access to
health care services.
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‘‘(B) An increase or decrease in the quality
of health care services.
‘‘(C) An increase or decrease in patient free-
dom of choice among health care providers.
‘‘(D) An increase or decrease in competition
among health care providers.
‘‘(E) An increase or decrease in the ability
of health care facilities to provide services in
medically underserved areas or to medically un-
derserved populations.
‘‘(F) An increase or decrease in the cost to
Federal health care programs (as defined in sec-
tion 1128B(f)).
‘‘(G) An increase or decrease in the poten-
tial overutilization of health care services.
‘‘(H) The existence or nonexistence of any
potential financial benefit to a health care pro-
fessional or provider which may vary based on
their decisions of—
‘‘(i) whether to order a health care
item or service; or
‘‘(ii) whether to arrange for a referral
of health care items or services to a particu-
lar practitioner or provider.
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‘‘(I) Any other factors the Secretary deems
appropriate in the interest of preventing fraud
and abuse in Federal health care programs (as
so defined).
‘‘(b) INTERPRETIVE RULINGS.—
‘‘(1) IN GENERAL.—
‘‘(A) REQUEST
FOR
INTERPRETIVE
RUL-
ING.—Any person may present, at any time, a
request to the Inspector General for a statement
of the Inspector General’s current interpretation
of the meaning of a specific aspect of the appli-
cation of sections 1128A and 1128B (in this sec-
tion referred to as an ‘interpretive ruling’).
‘‘(B) ISSUANCE AND EFFECT OF INTERPRE-
TIVE RULING.—
‘‘(i) IN GENERAL.—If appropriate, the
Inspector General shall in consultation with
the Attorney General, issue an interpretive
ruling not later than 90 days after receiv-
ing a request described in subparagraph
(A). Interpretive rulings shall not have the
force of law and shall be treated as an in-
terpretive rule within the meaning of sec-
tion 553(b) of title 5, United States Code.
All interpretive rulings issued pursuant to
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this clause shall be published in the Federal
Register or otherwise made available for
public inspection.
‘‘(ii) REASONS
FOR
DENIAL.—If the
Inspector General does not issue an inter-
pretive ruling in response to a request de-
scribed in subparagraph (A), the Inspector
General shall notify the requesting party of
such decision not later than 60 days after
receiving such a request and shall identify
the reasons for such decision.
‘‘(2) CRITERIA FOR INTERPRETIVE RULINGS.—
‘‘(A) IN GENERAL.—In determining whether
to issue an interpretive ruling under paragraph
(1)(B), the Inspector General may consider—
‘‘(i) whether and to what extent the re-
quest identifies an ambiguity within the
language of the statute, the existing safe
harbors, or previous interpretive rulings;
and
‘‘(ii) whether the subject of the re-
quested interpretive ruling can be ade-
quately addressed by interpretation of the
language of the statute, the existing safe
harbor rules, or previous interpretive rul-
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ings, or whether the request would require a
substantive ruling (as defined in section
552 of title 5, United States Code) not au-
thorized under this subsection.
‘‘(B) NO RULINGS ON FACTUAL ISSUES.—
The Inspector General shall not give an interpre-
tive ruling on any factual issue, including the
intent of the parties or the fair market value of
particular leased space or equipment.
‘‘(c) SPECIAL FRAUD ALERTS.—
‘‘(1) IN GENERAL.—
‘‘(A) 
REQUEST
FOR
SPECIAL
FRAUD
ALERTS.—Any person may present, at any time,
a request to the Inspector General for a notice
which informs the public of practices which the
Inspector General considers to be suspect or of
particular concern under the medicare program
or a State health care program, as defined in
section 1128(h) (in this subsection referred to as
a ‘special fraud alert’).
‘‘(B) ISSUANCE AND PUBLICATION OF SPE-
CIAL FRAUD ALERTS.—Upon receipt of a request
described in subparagraph (A), the Inspector
General shall investigate the subject matter of the
request to determine whether a special fraud
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alert should be issued. If appropriate, the Inspec-
tor General shall issue a special fraud alert in
response to the request. All special fraud alerts
issued pursuant to this subparagraph shall be
published in the Federal Register.
‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—In
determining whether to issue a special fraud alert
upon a request described in paragraph (1), the In-
spector General may consider—
‘‘(A) whether and to what extent the prac-
tices that would be identified in the special fraud
alert may result in any of the consequences de-
scribed in subsection (a)(2); and
‘‘(B) the volume and frequency of the con-
duct that would be identified in the special fraud
alert.’’.
CHAPTER 2—REVISIONS TO CURRENT
SANCTIONS FOR FRAUD AND ABUSE
SEC. 8111. MANDATORY EXCLUSION FROM PARTICIPATION
IN MEDICARE AND STATE HEALTH CARE PRO-
GRAMS.
(a) INDIVIDUAL CONVICTED OF FELONY RELATING TO
HEALTH CARE FRAUD.—
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(1) IN GENERAL.—Section 1128(a) (42 U.S.C.
1320a–7(a)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3) FELONY CONVICTION RELATING TO HEALTH
CARE
FRAUD.—Any individual or entity that has
been convicted after the date of the enactment of the
Medicare Preservation Act of 1995, under Federal or
State law, in connection with the delivery of a health
care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in paragraph (1)) operated by
or financed in whole or in part by any Federal,
State, or local government agency, of a criminal of-
fense consisting of a felony relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or
other financial misconduct.’’.
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 1128(b) (42 U.S.C. 1320a–7(b)) is amended
to read as follows:
‘‘(1) CONVICTION RELATING TO FRAUD.—Any in-
dividual or entity that has been convicted after the
date of the enactment of the Medicare Preservation
Act of 1995, under Federal or State law—
‘‘(A) of a criminal offense consisting of a
misdemeanor relating to fraud, theft, embezzle-
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ment, breach of fiduciary responsibility, or other
financial misconduct—
‘‘(i) in connection with the delivery of
a health care item or service, or
‘‘(ii) with respect to any act or omis-
sion in a health care program (other than
those specifically described in subsection
(a)(1)) operated by or financed in whole or
in part by any Federal, State, or local gov-
ernment agency; or
‘‘(B) of a criminal offense relating to fraud,
theft, embezzlement, breach of fiduciary respon-
sibility, or other financial misconduct with re-
spect to any act or omission in a program (other
than a health care program) operated by or fi-
nanced in whole or in part by any Federal,
State, or local government agency.’’.
(b) INDIVIDUAL CONVICTED OF FELONY RELATING TO
CONTROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) (42 U.S.C.
1320a–7(a)), as amended by subsection (a), is amend-
ed by adding at the end the following new paragraph:
‘‘(4) FELONY
CONVICTION
RELATING
TO
CON-
TROLLED SUBSTANCE.—Any individual or entity that
has been convicted after the date of the enactment of
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the Medicare Preservation Act of 1995, under Federal
or State law, of a criminal offense consisting of a fel-
ony relating to the unlawful manufacture, distribu-
tion, prescription, or dispensing of a controlled sub-
stance.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(3) (42 U.S.C. 1320a–7(b)(3)) is amended—
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR
CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
SEC. 8112. ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND
ENTITIES SUBJECT TO PERMISSIVE EXCLU-
SION FROM MEDICARE AND STATE HEALTH
CARE PROGRAMS.
Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is
amended by adding at the end the following new subpara-
graphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraph (1), (2), or (3) of subsection (b),
the period of the exclusion shall be 3 years, unless the Sec-
retary determines in accordance with published regulations
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that a shorter period is appropriate because of mitigating
circumstances or that a longer period is appropriate be-
cause of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or
entity under subsection (b)(4) or (b)(5), the period of the
exclusion shall not be less than the period during which the
individual’s or entity’s license to provide health care is re-
voked, suspended, or surrendered, or the individual or the
entity is excluded or suspended from a Federal or State
health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
SEC. 8113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP 
OR 
CONTROL 
INTEREST 
IN
SANCTIONED ENTITIES.
Section 1128(b) (42 U.S.C. 1320a–7(b)) is amended by
adding at the end the following new paragraph:
‘‘(15) INDIVIDUALS CONTROLLING A SANCTIONED
ENTITY.—(A) Any individual—
‘‘(i) who has a direct or indirect ownership
or control interest in a sanctioned entity and
who knows or should know (as defined in section
1128A(i)(6)) of the action constituting the basis
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for the conviction or exclusion described in sub-
paragraph (B); or
‘‘(ii) who is an officer or managing em-
ployee (as defined in section 1126(b)) of such an
entity.
‘‘(B) For purposes of subparagraph (A), the term
‘sanctioned entity’ means an entity—
‘‘(i) that has been convicted of any offense
described in subsection (a) or in paragraph (1),
(2), or (3) of this subsection; or
‘‘(ii) that has been excluded from participa-
tion under a program under title XVIII or under
a State health care program.’’.
SEC. 8114. SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATU-
TORY OBLIGATIONS.
(a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI-
TIONERS AND PERSONS FAILING TO MEET STATUTORY OB-
LIGATIONS.—
(1) IN GENERAL.—The second sentence of section
1156(b)(1) (42 U.S.C. 1320c–5(b)(1)) is amended by
striking ‘‘may prescribe)’’ and inserting ‘‘may pre-
scribe, except that such period may not be less than
1 year)’’.
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(2) 
CONFORMING
AMENDMENT.—Section
1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended by
striking ‘‘shall remain’’ and inserting ‘‘shall (subject
to the minimum period specified in the second sen-
tence of paragraph (1)) remain’’.
(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDITION
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.
SEC. 8115. INTERMEDIATE SANCTIONS FOR MEDICARE
HEALTH MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR
ANY PROGRAM VIOLATIONS.—
(1) IN GENERAL.—Section 1876(i)(1) (42 U.S.C.
1395mm(i)(1)) is amended by striking ‘‘the Secretary
may terminate’’ and all that follows and inserting
‘‘in accordance with procedures established under
paragraph (9), the Secretary may at any time termi-
nate any such contract or may impose the intermedi-
ate sanctions described in paragraph (6)(B) or (6)(C)
(whichever is applicable) on the eligible organization
if the Secretary determines that the organization—
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‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner substantially inconsistent with the efficient
and effective administration of this section; or
‘‘(C) no longer substantially meets the ap-
plicable conditions of subsections (b), (c), (e),
and (f).’’.
(2) OTHER INTERMEDIATE SANCTIONS FOR MIS-
CELLANEOUS
PROGRAM
VIOLATIONS.—Section
1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by
adding at the end the following new subparagraph:
‘‘(C) In the case of an eligible organization for which
the Secretary makes a determination under paragraph (1)
the basis of which is not described in subparagraph (A),
the Secretary may apply the following intermediate sanc-
tions:
‘‘(i) Civil money penalties of not more than
$25,000 for each determination under paragraph (1)
if the deficiency that is the basis of the determination
has directly adversely affected (or has the substantial
likelihood of adversely affecting) an individual cov-
ered under the organization’s contract.
‘‘(ii) Civil money penalties of not more than
$10,000 for each week beginning after the initiation
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of procedures by the Secretary under paragraph (9)
during which the deficiency that is the basis of a de-
termination under paragraph (1) exists.
‘‘(iii) Suspension of enrollment of individuals
under this section after the date the Secretary notifies
the organization of a determination under paragraph
(1) and until the Secretary is satisfied that the defi-
ciency that is the basis for the determination has been
corrected and is not likely to recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—
Section 1876(i) (42 U.S.C. 1395mm(i)) is amended
by adding at the end the following new paragraph:
‘‘(9) The Secretary may terminate a contract with an
eligible organization under this section or may impose the
intermediate sanctions described in paragraph (6) on the
organization in accordance with formal investigation and
compliance procedures established by the Secretary under
which—
‘‘(A) the Secretary first provides the organiza-
tion with the reasonable opportunity to develop and
implement a corrective action plan to correct the defi-
ciencies that were the basis of the Secretary’s deter-
mination under paragraph (1) and the organization
fails to develop or implement such a plan;
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‘‘(B) in deciding whether to impose sanctions,
the Secretary considers aggravating factors such as
whether an organization has a history of deficiencies
or has not taken action to correct deficiencies the Sec-
retary has brought to the organization’s attention;
‘‘(C) there are no unreasonable or unnecessary
delays between the finding of a deficiency and the im-
position of sanctions; and
‘‘(D) the Secretary provides the organization
with reasonable notice and opportunity for hearing
(including the right to appeal an initial decision) be-
fore imposing any sanction or terminating the con-
tract.’’.
(4) 
CONFORMING
AMENDMENTS.—Section
1876(i)(6)(B) 
(42 
U.S.C. 
1395mm(i)(6)(B)) 
is
amended by striking the second sentence.
(b) AGREEMENTS WITH PEER REVIEW ORGANIZA-
TIONS.—Section 
1876(i)(7)(A) 
(42 
U.S.C.
1395mm(i)(7)(A)) is amended by striking ‘‘an agreement’’
and inserting ‘‘a written agreement’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to contract years beginning
on or after January 1, 1996.
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SEC. 8116. ADDITIONAL EXCEPTION TO ANTI-KICKBACK
PENALTIES FOR DISCOUNTING AND MAN-
AGED CARE ARRANGEMENTS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.
1320a-7b(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D);
(2) by striking the period at the end of subpara-
graph (E) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) any remuneration between an organization
and an individual or entity providing items or serv-
ices, or a combination thereof, pursuant to a written
agreement between the organization and the individ-
ual or entity if the organization is a MedicarePlus or-
ganization under part C of title XVIII or if the writ-
ten agreement places the individual or entity at sub-
stantial financial risk for the cost or utilization of the
items or services, or a combination thereof, which the
individual or entity is obligated to provide, whether
through a withhold, capitation, incentive pool, per
diem payment, or any other similar risk arrangement
which places the individual or entity at substantial
financial risk.’’.
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(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to written agreements entered into on
or after January 1, 1996.
SEC. 8117. PENALTIES FOR THE FRAUDULENT CONVERSION
OF ASSETS IN ORDER TO OBTAIN STATE
HEALTH CARE PROGRAM BENEFITS.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is amended
by striking ‘‘or’’ at the end of paragraph (4), by inserting
‘‘or’’ at the end of paragraph (5), and by inserting after
paragraph (5) the following new paragraph:
‘‘(6) knowingly and willfully converts assets, by
transfer (including any transfer in trust), aiding in
such a transfer, or otherwise, in order for an individ-
ual to become eligible for benefits under a State health
care program,’’.
SEC. 8118. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this chapter shall take effect January 1, 1996.
CHAPTER 3—ADMINISTRATIVE AND
MISCELLANEOUS PROVISIONS
SEC. 8121. ESTABLISHMENT OF THE HEALTH CARE FRAUD
AND ABUSE DATA COLLECTION PROGRAM.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),
as amended by sections 8101 and 8105, is amended by in-
serting after section 1128D the following new section:
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‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION
PROGRAM
‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later than
January 1, 1996, the Secretary shall establish a national
health care fraud and abuse data collection program for the
reporting of final adverse actions (not including settlements
in which no findings of liability have been made) against
health care providers, suppliers, or practitioners as required
by subsection (b), with access as set forth in subsection (c).
‘‘(b) REPORTING OF INFORMATION.—
‘‘(1) IN
GENERAL.—Each government agency
and health plan shall report any final adverse action
(not including settlements in which no findings of li-
ability have been made) taken against a health care
provider, supplier, or practitioner.
‘‘(2) INFORMATION TO BE REPORTED.—The in-
formation to be reported under paragraph (1) in-
cludes:
‘‘(A) The name and TIN (as defined in sec-
tion 7701(a)(41) of the Internal Revenue Code of
1986) of any health care provider, supplier, or
practitioner who is the subject of a final adverse
action.
‘‘(B) The name (if known) of any health
care entity with which a health care provider,
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supplier, or practitioner is affiliated or associ-
ated.
‘‘(C) The nature of the final adverse action
and whether such action is on appeal.
‘‘(D) A description of the acts or 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 assure that the privacy of individuals
receiving health care services is appropriately pro-
tected.
‘‘(4) TIMING AND FORM OF REPORTING.—The in-
formation required to be reported under this sub-
section shall be reported regularly (but not 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 Sec-
retary.
‘‘(5) TO WHOM REPORTED.—The information re-
quired to be reported under this subsection shall be re-
ported to the Secretary.
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‘‘(c) DISCLOSURE
AND CORRECTION
OF INFORMA-
TION.—
‘‘(1) DISCLOSURE.—With respect to the informa-
tion about final adverse actions (not including settle-
ments in which no findings of liability have been
made) reported to the Secretary under this section re-
specting a health care provider, supplier, or practi-
tioner, the Secretary shall, by regulation, provide
for—
‘‘(A) disclosure of the information, upon re-
quest, to the health care provider, supplier, or li-
censed 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.
‘‘(d) ACCESS TO REPORTED INFORMATION.—
‘‘(1) AVAILABILITY.—The information in this
database shall be available to Federal and State gov-
ernment agencies and health plans pursuant to proce-
dures that the Secretary shall provide by regulation.
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‘‘(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 shall be sufficient to recover the
full costs of operating the database. Such fees shall be
available to the Secretary or, in the Secretary’s dis-
cretion to the agency designated under this section to
cover such costs.
‘‘(e) PROTECTION FROM LIABILITY FOR REPORTING.—
No person or entity, including the agency designated 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 falsity of the infor-
mation contained in the report.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section:
‘‘(1) FINAL ADVERSE ACTION.—
‘‘(A) IN GENERAL.—The term ‘final adverse
action’ includes:
‘‘(i) Civil judgments against a health
care provider, supplier, or practitioner in
Federal or State court related to the deliv-
ery of a health care item or service.
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‘‘(ii) Federal or State criminal convic-
tions related to the delivery of a health care
item or service.
‘‘(iii) Actions by Federal or State
agencies responsible for the licensing and
certification of health care providers, sup-
pliers, and licensed health care practition-
ers, including—
‘‘(I) formal or official actions,
such as revocation or suspension of a
license (and the length of any such sus-
pension), reprimand, censure or proba-
tion,
‘‘(II) any other loss of license or
the right to apply for, or renew, a li-
cense of the provider, supplier, or prac-
titioner, whether by operation of law,
voluntary surrender, non-renewability,
or otherwise, or
‘‘(III) any other negative action
or finding by such Federal or State
agency that is publicly available infor-
mation.
‘‘(iv) Exclusion from participation in
Federal or State health care programs.
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‘‘(v) Any other adjudicated actions or
decisions that the Secretary shall establish
by regulation.
‘‘(B) EXCEPTION.—The term does not in-
clude any action with respect to a malpractice
claim.
‘‘(2) PRACTITIONER.—The terms ‘licensed health
care practitioner’, ‘licensed practitioner’, and ‘practi-
tioner’ mean, with respect to a State, an individual
who is licensed or otherwise authorized by the State
to provide health care services (or any individual
who, without authority holds himself or herself out to
be so licensed or authorized).
‘‘(3) GOVERNMENT AGENCY.—The term ‘Govern-
ment agency’ shall include:
‘‘(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 delivery
of health care services, including, but not limited
to the Department of Defense and the Veterans’
Administration.
‘‘(D) State law enforcement agencies.
‘‘(E) State MediGrant fraud control units.
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‘‘(F) Federal or State agencies responsible
for the licensing and certification of health care
providers and licensed health care practitioners.
‘‘(4) HEALTH PLAN.—The term ‘health plan’ has
the meaning given such term by section 1128C(c).
‘‘(5) DETERMINATION OF CONVICTION.—For pur-
poses of paragraph (1), the existence of a conviction
shall be determined under paragraph (4) of section
1128(i).’’.
(b) IMPROVED PREVENTION IN ISSUANCE OF MEDI-
CARE PROVIDER NUMBERS.—Section 1842(r) (42 U.S.C.
1395u(r)) is amended by adding at the end the following
new sentence: ‘‘Under such system, the Secretary may im-
pose appropriate fees on such physicians to cover the costs
of investigation and recertification activities with respect
to the issuance of the identifiers.’’.
CHAPTER 4—CIVIL MONETARY PENALTIES
SEC. 8131. SOCIAL SECURITY ACT CIVIL MONETARY PEN-
ALTIES.
(a) GENERAL CIVIL MONETARY PENALTIES.—Section
1128A (42 U.S.C. 1320a–7a) is amended as follows:
(1) In the third sentence of subsection (a), by
striking ‘‘programs under title XVIII’’ and inserting
‘‘Federal health care programs (as defined in section
1128B(f)(1))’’.
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(2) In subsection (f)—
(A) by redesignating paragraph (3) as
paragraph (4); and
(B) by inserting after paragraph (2) the fol-
lowing new paragraph:
‘‘(3) With respect to amounts recovered arising
out of a claim under a Federal health care program
(as defined in section 1128B(f)), the portion of such
amounts as is determined to have been paid by the
program shall be repaid to the program, and the por-
tion of such amounts attributable to the amounts re-
covered under this section by reason of the amend-
ments made by the Medicare Preservation Act of 1995
(as estimated by the Secretary) shall be deposited into
the Federal Hospital Insurance Trust Fund pursuant
to section 1817(k)(2)(C).’’.
(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 sec-
tion 1128B(f))’’,
(B) in paragraph (4), by striking ‘‘a health
insurance or medical services program under
title XVIII or XIX of this Act’’ and inserting ‘‘a
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Federal health care program (as so defined)’’,
and
(C) in paragraph (5), by striking ‘‘title V,
XVIII, XIX, or XX’’ and inserting ‘‘a Federal
health care program (as so defined)’’.
(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 or Administrator of the de-
partment 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 of the appli-
cable department or agency.
‘‘(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 with-
in 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 depart-
ment or agency initiating the action.
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‘‘(ii) The Secretary or Administrator of the de-
partment or agency initiating the action gives notice
and an opportunity to participate in the investiga-
tion to the Inspector General of the department or
agency with primary jurisdiction over the Federal
health care programs to which the claims were sub-
mitted.
‘‘(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.—Sec-
tion 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(1)(D);
(2) by striking ‘‘, or’’ at the end of paragraph
(2) and inserting a semicolon;
(3) by striking the semicolon at the end of para-
graph (3) and inserting ‘‘; or’’; and