and General Schedule pay rates, ex-
cept that an individual so appointed
may not receive pay in excess of 120
percent of the annual rate of basic
pay payable for GS–15 of the General
Schedule.
(III) DETAILED
PERSONNEL.—
Upon request of the Chair, the head
of any Federal department or agency
may detail any of the personnel of
that department or agency to the
Commission to assist the Commission
in carrying out its duties under this
Act.
(iv) OTHER AUTHORITY.—
(I) CONTRACT
SERVICES.—The
Commission may procure by contract,
to the extent funds are available, the
temporary or intermittent services of
experts or consultants pursuant to
section 3109 of title 5, United States
Code.
(II) LEASES, ETC.—The Com-
mission may lease space and acquire
personal property to the extent funds
are available.
(2) CONSIDERATION.—
(A) IN GENERAL.—The proposal described
in paragraph (1)(B) shall be considered by the
Congress under the procedures for consider-
ation of an ‘‘approval resolution’’ as described
in subparagraph (D).
(B) EFFECTIVE
DATE
OF
IMPLEMENTA-
TION.—The provisions of the proposal shall be-
come effective on January 1, 1997.
(C) PERIOD FOR RESUBMISSION OF PRO-
POSAL IN CASE OF NONAPPROVAL.—If the pro-
posal of the Commission described in subpara-
graph (A) is not approved by Congress, the
Commission shall by not later than January 1,
1996, submit a new proposal to Congress.
(D) RULES
GOVERNING
CONGRESSIONAL
CONSIDERATION.—
(i) RULES OF HOUSE OF REPRESENT-
ATIVES AND SENATE.—This subparagraph
is enacted by the Congress—
(I) as an exercise of the rule-
making power of the House of Rep-
resentatives and the Senate, respec-
tively, and as such is deemed a part
of the rules of each House, respec-
tively, but applicable only with respect
to the procedure to be followed in that
House in the case of approval resolu-
tions described in clause (ii), and su-
persedes other rules only to the extent
that such rules are inconsistent there-
with; and
(II) with full recognition of the
constitutional right of either House to
change the rules (so far as relating to
the procedure of that House) at any
time, in the same manner and to the
same extent as in the case of any
other rule of that House.
(ii) TERMS
OF
THE
RESOLUTION.—
For purposes of subparagraph (A), the
term ‘‘approval resolution’’ means only a
joint resolution of the 2 Houses of the
Congress, providing in—
(I) the matter after the resolving
clause of which is as follows: ‘‘That
the 
Congress 
approves 
the 
rec-
ommendations of the Benefits Cash
Out Commission as submitted by the
Commission on lllllll’’, the
blank space being filled in with the
appropriate date; and
(II) the title of which is as fol-
lows: ‘‘Joint Resolution approving the
recommendation of the Benefits Cash
Out Commission’’.
(iii) 
INTRODUCTION
AND
REFER-
RAL.—On the day on which the rec-
ommendation of the Commission is trans-
mitted to the House of Representatives
and the Senate, an approval resolution
with respect to such recommendation shall
be introduced (by request) in the House of
Representatives by the Majority Leader of
the House, for himself or herself and the
Minority Leader of the House, or by Mem-
bers of the House designated by the Ma-
jority Leader and Minority Leader of the
House; and shall be introduced (by re-
quest) in the Senate by the Majority Lead-
er of the Senate, for himself or herself and
the Minority Leader of the Senate, or by
Members of the Senate designated by the
Majority Leader and Minority Leader of
the Senate. If either House is not in ses-
sion on the day on which such rec-
ommendation is transmitted, the approval
resolution with respect to such rec-
ommendation shall be introduced in the
House, as provided in the preceding sen-
tence, on the first day thereafter on which
the House is in session. The approval reso-
lution introduced in the House of Rep-
resentatives and the Senate shall be re-
ferred to the appropriate committees of
each House.
(iv) AMENDMENTS PROHIBITED.—No
amendment to an approval resolution shall
be in order in either the House of Rep-
resentatives or the Senate; and no motion
to suspend the application of this clause
shall be in order in either House, nor shall
it be in order in either House for the Pre-
siding Officer to entertain a request to sus-
pend the application of this clause by
unanimous consent.
(v) PERIOD
FOR
COMMITTEE
AND
FLOOR CONSIDERATION.—
(I) IN GENERAL.—Except as pro-
vided in subclause (II), if the commit-
tee or committees of either House to
which an approval resolution has been
referred have not reported it at the
close of the 30th day after its intro-
duction, such committee or commit-
tees shall be automatically discharged
from further consideration of the ap-
proval resolution and it shall be
placed on the appropriation calendar.
A vote on final passage of the ap-
proval resolution shall be taken in
each House on or before the close of
the 30th day after the approval reso-
lution is reported by the committees
or committee of that House to which
it was referred, or after such commit-
tee or committees have been dis-
charged from further consideration of
the approval resolution. If prior to the
passage by 1 House of an approval
resolution of that House, that House
receives the same approval resolution
from the other House then the proce-
dure in that House shall be the same
as if no approval resolution had been
received from the other House, but
the vote on final passage shall be on
the approval resolution of the other
House.
(II) COMPUTATION
OF
DAYS.—
For purposes of subclause (I), in com-
puting a number of days in either
House, there shall be excluded any
day on which the House is not in ses-
sion.
(vi) FLOOR CONSIDERATION IN THE
HOUSE OF REPRESENTATIVES.—
(I) MOTION
TO
PROCEED.—A
motion in the House of Representa-
tives to proceed to the consideration
of an approval resolution shall be
highly privileged and not debatable.
An amendment to the motion shall
not be in order, nor shall it be in
order to move to reconsider the vote
by which the motion is agreed to or
disagreed to.
(II) DEBATE.—Debate in the
House of Representatives on an ap-
proval resolution shall be limited to
not more than 20 hours, which shall
be divided equally between those fa-
voring and those opposing the bill or
resolution. A motion further to limit
debate shall not be debatable. It shall
not be in order to move to recommit
an approval resolution or to move to
reconsider the vote by which an ap-
proval resolution is agreed to or dis-
agreed to.
(III) MOTION
TO
POSTPONE.—
Motions to postpone, made in the
House of Representatives with respect
to the consideration of an approval
resolution, and motions to proceed to
the consideration of other business,
shall be decided without debate.
(IV) APPEALS.—All appeals from
the decisions of the Chair relating to
the application of the Rules of the
House of Representatives to the pro-
cedure relating to an approval resolu-
tion shall be decided without debate.
(V) GENERAL
RULES
APPLY.—
Except to the extent specifically pro-
vided in the preceding provisions of
this clause, consideration of an ap-
proval resolution shall be governed by
the Rules of the House of Representa-
tives applicable to other bills and reso-
lutions in similar circumstances.
(vii) FLOOR CONSIDERATION IN THE
SENATE.—
(I) MOTION
TO
PROCEED.—A
motion in the Senate to proceed to the
consideration of an approval resolu-
tion shall be privileged and not debat-
able. An amendment to the motion
shall not be in order, nor shall it be
in order to move to reconsider the
vote by which the motion is agreed to
or disagreed to.
(II) GENERAL DEBATE.—Debate
in the Senate on an approval resolu-
tion, and all debatable motions and
appeals in connection therewith, shall
be limited to not more than 20 hours.
The time shall be equally divided be-
tween, and controlled by, the Majority
Leader and the Minority Leader or
their designees.
(III) DEBATE OF MOTIONS AND
APPEALS.—Debate in the Senate on
any debatable motion or appeal in
connection with an approval resolution
shall be limited to not more than 1
hour, to be equally divided between,
and controlled by, the mover and the
manager of the approval resolution,
except that in the event the manager
of the approval resolution is in favor
of any such motion or appeal, the
time in opposition thereto, shall be
controlled by the Minority Leader or
his designee. Such leaders, or either of
them, may, from time under their
control on the passage of an approval
resolution, allot additional time to any
Senator during the consideration of
any debatable motion or appeal.
(IV) OTHER
MOTIONS.—A mo-
tion in the Senate to further limit de-
bate is not debatable. A motion to re-
commit an approval resolution is not
in order.
SEC. 126. ENFORCEMENT.
(a) IN GENERAL.—Chapter 47 of the Internal Reve-
nue Code of 1986 (relating to excise taxes on qualified
pension, etc. plans) is amended by inserting after section
5000 the following new sections:
‘‘SEC. 5000A. FAILURE OF EMPLOYERS WITH RESPECT TO
HEALTH INSURANCE.
‘‘(a) GENERAL RULE.—There is hereby imposed a
tax on the failure of any person to comply with the re-
quirements of sections 121 and 125(a) of the Consumer
Choice Health Security Act of 1994 with respect to any
employee of the person.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect
to an employee shall be $50 for each day in the non-
compliance period with respect to such failure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes
of this section, the term ‘noncompliance period’
means, with respect to any failure, the period—
‘‘(A) beginning on the date such failure
first occurs, and
‘‘(B) ending on the date such failure is
corrected.
‘‘(3) CORRECTION.—A failure of a person to
comply with the requirements of section 121 or
125(a) of the Consumer Choice Health Security Act
of 1994 with respect to any employee of the person
shall be treated as corrected if—
‘‘(A) such failure is retroactively undone to
the extent possible, and
‘‘(B) the employee is placed in a financial
position which is as good as such employee
would have been in had such failure not oc-
curred.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a)
on any failure during any period for which it is es-
tablished to the satisfaction of the Secretary that
none of the persons referred to in subsection (d)
knew, or exercising reasonable diligence would have
known, that such failure existed.
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed
by subsection (a) on any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the first date any of
the persons referred to in subsection (d) knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the following shall be liable
for the tax imposed by subsection (a) on a failure:
‘‘(A) In the case of a health insurance plan
other than a multiemployer plan, the employer.
‘‘(B) In the case of a multiemployer plan,
the plan.
‘‘(C) Each person who is responsible (other
than in a capacity as an employee) for admin-
istering or providing benefits under the health
insurance plan and whose act or failure to act
caused (in whole or in part) the failure.
‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED
IN PARAGRAPH (1)(C).—A person described in sub-
paragraph (C) (and not in subparagraphs (A) and
(B)) of paragraph (1) shall be liable for the tax im-
posed by subsection (a) on any failure only if such
person assumed (under a legally enforceable written
agreement) responsibility for the performance of the
act to which the failure relates.
‘‘SEC. 5000B. FAILURE OF CARRIERS WITH RESPECT TO
HEALTH INSURANCE.
‘‘(a) GENERAL RULE.—There is hereby imposed a
tax on the failure of any carrier offering any health insur-
ance plan to comply with the requirements of sections 122
and 123 of the Consumer Choice Health Security Act of
1994.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of tax imposed
by subsection (a) by reason of 1 or more failures
during a taxable year shall be equal to 50 percent
of the gross premiums received during such taxable
year with respect to all health insurance plans issued
by the carrier on whom such tax is imposed.
‘‘(2) GROSS PREMIUMS.—For purposes of para-
graph (1), gross premiums shall include any consid-
eration received with respect to any health insurance
contract.
‘‘(3) CONTROLLED GROUPS.—For purposes of
paragraph (1)—
‘‘(A) CONTROLLED
GROUP
OF
CORPORA-
TIONS.—All corporations which are members of
the same controlled group of corporations shall
be treated as 1 carrier. For purposes of the pre-
ceding sentence, the term ‘controlled group of
corporations’ has the meaning given to such
term by section 1563(a), except that—
‘‘(i) ‘more than 50 percent’ shall be
substituted for ‘at least 80 percent’ each
place it appears in section 1563(a)(1), and
‘‘(ii) the determination shall be made
without regard to subsections (a)(4) and
(e)(3)(C) of section 1563.
‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,
ETC., WHICH ARE UNDER COMMON CONTROL.—
Under regulations prescribed by the Secretary,
all trades or business (whether or not incor-
porated) which are under common control shall
be treated as 1 carrier. The regulations pre-
scribed under this subparagraph shall be based
on principles similar to the principles which
apply in the case of subparagraph (A).
‘‘(c) LIMITATION ON TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a)
with respect to any failure for which it is established
to the satisfaction of the Secretary that the carrier
on whom the tax is imposed did not know, and exer-
cising reasonable diligence would not have known,
that such failure existed.
‘‘(2) TAX
NOT
TO
APPLY
WHERE
FAILURES
CORRECTED WITHIN 30 DAYS.—No tax shall be im-
posed by subsection (a) with respect to any failure
if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the 1st date any of
the carriers on whom the tax is imposed knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.’’.
(b) CLERICAL AMENDMENTS.—The table of sections
for such chapter 47 is amended by adding at the end
thereof the following new items:
‘‘Sec. 5000A. Failure of employers with respect to health insur-
ance.
‘‘Sec. 5000B. Failure of carriers with respect to health insur-
ance.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
Subtitle D—Federal Preemption
SEC. 131. FEDERAL PREEMPTION OF CERTAIN STATE LAWS.
All State laws in existence on January 1, 1998, in
the following areas are preempted:
(1) MANDATED INSURANCE BENEFIT LAWS.—
Laws requiring health insurance policies to cover
specific diseases, services, or providers.
(2) ANTI-MANAGED
CARE
LAWS.—Laws re-
stricting the ability of managed care plans to selec-
tively contract with providers of their choice.
(3) MANDATED
COST-SHARING
LAWS.—Laws
restricting the extent to which insurers may require
enrollee cost sharing as part of their plans, or re-
stricting the extent to which managed care plans
may impose different levels of cost sharing on en-
rollee claims for treatment by providers not partici-
pating in the plan.
Subtitle E—Report
SEC. 141. REPORT ON HEALTH INSURANCE COVERAGE.
The Secretary of Health and Human Services shall
submit to the Congress, not later than 5 years after the
date of the enactment of this Act, a report on the follow-
ing:
(1) The number and demographic profile of
Americans who have purchased health insurance
pursuant to the provisions of this Act, including in-
formation concerning the type of coverage purchased
and its cost.
(2) The number and demographic profile of
Americans who have chosen to forgo health insur-
ance coverage.
(3) The estimated health care costs incurred by
the insured and the extent to which such costs have
been—
(A) paid for directly by the uninsured, or
(B) shifted to individuals with health in-
surance coverage and to Federal, State, and
local governmental entities.
TITLE II—MEDICARE AND
MEDICAID REFORMS
Subtitle A—Medicare
SEC. 201. STUDY OF MEDICARE PRIVATE HEALTH INSUR-
ANCE PROGRAM.
(a) STUDY.—The Secretary shall conduct a study of
the feasibility of permitting future medicare beneficiaries
to elect, upon attaining medicare eligibility, to retain pri-
vate health insurance coverage and receive, in lieu of the
medicare benefits such beneficiaries would otherwise be
entitled to, certificates for use in purchasing private health
insurance coverage. The study shall recommend—
(1) certificate amounts which—
(A) provide the maximum assistance pos-
sible to eligible individuals,
(B) are adjusted for different classes of
beneficiaries on the basis of age, sex, and geog-
raphy to reflect actuarial differences in the cost
of insurance, and
(C) will not further jeopardize the future
solvency of the medicare program, as projected
by the trustees of the medicare trust funds as
of the date of the report of the study,
(2) a mechanism for annually adjusting such
amounts, and
(3) legislative, regulatory, and administrative
reforms necessary or desirable for establishing such
a program.
(b) REPORT.—The Secretary shall submit a report
regarding the study described in subsection (a) to the Con-
gress no later than January 1, 1997.
SEC. 202. ELIMINATION OF MEDICARE HOSPITAL DIS-
PROPORTIONATE SHARE ADJUSTMENT PAY-
MENTS.
Section 1886(d)(5)(F)(i) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(F)(i)) is amended by inserting
‘‘and before September 30, 1994,’’ after ‘‘1986,’’.
SEC. 203. REDUCTION IN ADJUSTMENT FOR INDIRECT MED-
ICAL EDUCATION.
Section 1886(d)(5)(B)(ii) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as
follows:
‘‘(ii) For purposes of clause (i)(II), the indirect
teaching adjustment factor is equal to c * (((1+r)
to the nth power) - 1), where ‘r’ is the ratio of the
hospital’s full-time equivalent interns and residents
to beds and ‘n’ equals .405. For discharges occur-
ring on or after—
‘‘(I) May 1, 1986, and before October 1,
1994, ‘c’ is equal to 1.89,
‘‘(II) October 1, 1994, and before October
1, 1995, ‘c’ is equal to 1.395, and
‘‘(III) October 1, 1995, ‘c’ is equal to
0.74.’’.
SEC. 204. IMPOSITION OF COPAYMENT FOR SKILLED NURS-
ING FACILITY SERVICES.
(a) IN GENERAL.—Paragraph (3) of section 1813(b)
of the Social Security Act (42 U.S.C. 1395e(b)) is amend-
ed to read as follows:
‘‘(3) The amount payable for post-hospital extended
care services furnished an individual during any spell of
illness shall be reduced by a copayment amount equal to
20 percent of the average of all per day costs for such
services furnished under this title (as determined by the
Secretary on a prospective basis for services furnished
during a calendar year).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to post-hospital extended care
services furnished on or after October 1, 1994.
SEC. 205. SHIFT PAYMENT UPDATES TO JANUARY FOR ALL
PAYMENT RATES UNDER HOSPITAL INSUR-
ANCE PROGRAM.
(a) PPS HOSPITALS.—
(1) IN GENERAL.—Section 1886(b)(3)(B)(i) of
the 
Social 
Security 
Act 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended—
(A) in the matter preceding subclause (I),
by striking ‘‘fiscal year’’ and inserting ‘‘particu-
lar time period’’,
(B) in subclause (IX), by striking ‘‘fiscal
year 1994’’, and inserting ‘‘the 15-month pe-
riod beginning on October 1, 1993’’,
(C) in subclauses (X), (XI), and (XII), by
striking ‘‘fiscal year’’, and
(D) in subclause (XIII), by striking ‘‘fiscal
year 1998 and each subsequent fiscal year’’ and
inserting ‘‘1998 and each subsequent calendar
year’’.
(2) OTHER HOSPITALS.—
(A) 
IN
GENERAL.—Section
1886(b)(3)(B)(ii) of such Act (42 U.S.C.
1395ww(b)(3)(B)(ii)) is amended—
(i) in subclause (V)—
(I) by striking ‘‘fiscal years 1994
through 1997’’ and inserting ‘‘the 15-
ceeds the hospital’s target amount (as determined
under subparagraph (A)) for such cost reporting pe-
riod, increased for each calendar year (beginning
with 1995) by the sum of any of the hospital’s appli-
cable reductions under subclause (VI) for previous
years; and
‘‘(II) the ‘applicable reduction’ with respect to
a hospital for a calendar year is the lesser of 1 per-
centage point or the percentage point difference be-
tween 10 percent and the hospital’s update adjust-
ment percentage for the calendar year.’’.
(3) SOLE COMMUNITY AND MEDICARE-DEPEND-
ENT, SMALL RURAL HOSPITALS.—
(A) 
IN
GENERAL.—Section
1886(b)(3)(B)(iv) of such Act (42 U.S.C.
1395ww(b)(3)(B)(iv)) is amended—
(i) in subclause (II), by striking ‘‘fis-
cal year 1994’’ and inserting ‘‘the 15-
month period beginning on October 1,
1993’’,
(ii) in subclause (III), by striking ‘‘fis-
cal year’’, and
(iii) in subclause (IV), by striking
‘‘fiscal year 1996 and each subsequent fis-
cal year’’ and inserting ‘‘1996 and each
subsequent calendar year’’.
(B) TARGET AMOUNT ADJUSTMENT.—Sec-
tion 1886(b)(3)(C) of such Act (42 U.S.C.
1395ww(b)(3)(C)) is amended—
(i) in clause (iii), by inserting ‘‘or por-
tion of a cost reporting period occurring
before December 31, 1994,’’ before ‘‘the
target amount’’, and
(ii) in clause (iv), by striking ‘‘fiscal
year 1995 and each subsequent fiscal
year’’ and inserting ‘‘1995 and each subse-
quent year’’.
(C) EXTENSION
OF
REGIONAL
FLOOR.—
Section 1886(d)(1)(A)(iii)(II) of such Act (42
U.S.C. 1395ww(d)(1)(A)(iii)(II)) is amended—
(i) by striking ‘‘for discharges occur-
ring during a fiscal year ending on or be-
fore September 30, 1996’’ and inserting
‘‘for discharges occurring during the 15-
month period beginning on October 1,
1993, and during any calendar year ending
on or before December 31, 1996’’, and
(ii) by striking ‘‘such fiscal year’’ and
inserting ‘‘such 15-month period or such
calendar year, as the case may be’’.
(4) CONFORMING AMENDMENTS.—
(A) Section 1886(b)(3)(B)(iii) of such Act
(42 U.S.C. 1395ww(b)(3)(B)(iii)) is amended—
(i) by inserting ‘‘beginning in’’ after
‘‘cost reporting periods’’,
(ii) by striking ‘‘fiscal year’’ the first
place it appears and inserting ‘‘particular
time period’’,
(iii) by striking ‘‘or fiscal year’’ the
first and second place it appears, and
(iv) by striking ‘‘cost reporting period
or fiscal year’’ and inserting ‘‘period’’.
(B) Section 1886(d)(1)(A) of such Act (42
U.S.C. 1395ww(d)(1)(A)) is amended in the
matter preceding clause (i) by inserting ‘‘or cal-
endar’’ after ‘‘fiscal’’.
(C) Section 1886(d)(2)(D) of such Act (42
U.S.C. 1395ww(d)(2)(D)) is amended by insert-
ing ‘‘or calendar’’ after ‘‘fiscal’’ each place it
appears.
(D) Section 1886(d)(3) of such Act (42
U.S.C. 1395ww(d)(3)) is amended in the first
sentence by inserting ‘‘or calendar’’ after ‘‘fis-
cal’’ the first place it appears and by inserting
‘‘for each fiscal year through 1994’’ after ‘‘in
the United States, and’’.
(E) Section 1886(d)(3)(A)(ii) of such Act
(42 U.S.C. 1395ww(d)(3)(A)(ii)) is amended—
(i) by striking ‘‘1994,’’ and inserting
‘‘1993, and occurring in the 15-month pe-
riod beginning on October 1, 1993,’’, and
(ii) by striking ‘‘fiscal year’’ the sec-
ond and last place it appears and inserting
‘‘time period’’.
(F) Section 1886(d)(3)(A)(iii) of such Act
(42 U.S.C. 1395ww(d)(3)(A)(iii)) is amended
by striking ‘‘the fiscal year beginning on Octo-
ber 1, 1994’’ and inserting ‘‘1995’’.
(G) Section 1886(d)(3)(A)(iv) of such Act
(42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—
(i) by striking ‘‘fiscal year beginning
on or after October 1, 1995’’ and inserting
‘‘year beginning on or after January 1,
1996’’,
(ii) by striking ‘‘and within each re-
gion’’, and
(iii) by striking ‘‘fiscal’’ each place it
appears.
(H) Section 1886(d)(3)(D) of such Act (42
U.S.C. 1395ww(d)(3)(D)) is amended—
(i) by inserting ‘‘or calendar’’ after
‘‘fiscal’’ each place it appears, and
(ii) by inserting ‘‘for each fiscal year
through 1994’’ after ‘‘and shall establish’’.
(I) Section 1886(d)(3)(E) of such Act (42
U.S.C. 1395ww(d)(3)(E)) is amended—
(i) in the second sentence, by striking
‘‘at least every 12 months thereafter’’ and
inserting ‘‘beginning January 1, 1995, at
least every 12 months thereafter’’, and
(ii) in the last sentence, by inserting
‘‘or calendar’’ after ‘‘fiscal’’ the first and
last place it appears.
(J)(i) Section 1886(d)(4)(C)(iii) of such
Act (42 U.S.C. 1395ww(d)(4)(C)(iii)) is amend-
ed—
(I) by inserting ‘‘or calendar’’ after
‘‘fiscal’’ the first place it appears, and
(II) by deleting ‘‘fiscal’’ the last place
it appears.
(ii) The requirements of paragraphs (3)(E)
and (4)(C)(iii) of section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)(4)(C)(iii))
shall be applied on a 15-month basis for the pe-
riod beginning on October 1, 1993, and ending
on December 31, 1994.
(K)(i) Section 1886(d)(5)(A) of such Act
(42 U.S.C. 1395ww(d)(5)(A)) is amended—
(I) in clause (i), by striking ‘‘fiscal
years ending on or before September 30,
1997’’ and inserting ‘‘calendar years end-
ing on or before December 31, 1997’’,
(II) in clause (ii), by striking ‘‘fiscal
years beginning on or after October 1,
1994’’ and inserting ‘‘calendar years begin-
ning on or after January 1, 1995’’,
(III) in clause (iv), by inserting ‘‘or
calendar’’ after ‘‘fiscal’’,
(IV) in clause (v), by striking ‘‘fiscal
year’’ each place it appears, and
(V) in clause (vi), by striking ‘‘fiscal’’
and inserting ‘‘calendar’’.
(ii) 
The 
requirement 
of 
section
1886(d)(5)(A)(iv) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(A)(iv)) shall be ap-
plied on a 15-month basis for the period begin-
ning on October 1, 1993, and ending on De-
cember 31, 1994.
(L) Section 1886(d)(5)(E)(ii) of such Act
(42 U.S.C. 1395ww(d)(5)(E)(ii)) is amended by
inserting ‘‘or calendar’’ after ‘‘fiscal’’.
(M) Section 1886(d)(6) of such Act (42
U.S.C. 1395ww(d)(6)) is amended by inserting
‘‘or December 1 of each calendar year (begin-
ning with calendar year 1995)’’ after ‘‘1984)’’.
(N) Section 1886(d)(9)(A) of such Act (42
U.S.C. 1395ww(d)(9)(A)) is amended in the
matter preceding clause (i) by striking ‘‘fiscal
year’’ and inserting ‘‘particular time period’’.
(O) Section 1886(d)(9)(C)(i) of such Act
(42 U.S.C. 1395ww(d)(9)(C)(i)) is amended—
(i) by striking ‘‘fiscal year’’ the first
place it appears and inserting ‘‘time pe-
riod’’,
(ii) by striking ‘‘for fiscal year 1989’’,
and
(iii) by striking ‘‘fiscal years’’ and in-
serting ‘‘time periods’’.
(P) Section 1886(d)(10)(C) of such Act
(42 U.S.C. 1395ww(d)(10)(C)) is amended—
(i) in clause (i), by striking ‘‘fiscal
year’’ and inserting ‘‘particular time pe-
riod’’, and
(ii) in clause (ii), by inserting ‘‘or cal-
endar’’ after ‘‘fiscal’’ the first place it ap-
pears and striking ‘‘fiscal’’ the last place it
appears.
(Q) Section 1886(e)(2) of such Act (42
U.S.C. 1395ww(e)(2)) is amended—
(i) in subparagraph (A), by striking
‘‘fiscal years’’ and inserting ‘‘particular
time periods’’, and
(ii) in subparagraph (B), by striking
‘‘fiscal year’’ each place it appears and in-
serting ‘‘particular time period’’.
(R) Section 1886(e)(3) of such Act (42
U.S.C. 1395ww(e)(3)) is amended—
(i) in subparagraph (A)—
(I) by striking ‘‘before the begin-
ning of each fiscal year (beginning
with fiscal year 1986)’’, and
(II) by striking ‘‘that fiscal year’’
and inserting ‘‘the succeeding year’’,
and
(ii) in subparagraph (B)—
(I) by striking ‘‘before the begin-
ning of each fiscal year (beginning
with fiscal year 1989)’’, and
(II) by striking ‘‘that fiscal year’’
and inserting ‘‘the succeeding year’’.
(S) Section 1886(e)(4)(A) of such Act (42
U.S.C. 1395ww(e)(4)(A)) is amended in the
first sentence by striking ‘‘fiscal’’ the first and
last place it appears and by striking ‘‘(begin-
ning with fiscal year 1988)’’.
(T) Section 1886(e)(4)(B) of such Act (42
U.S.C. 1395ww(e)(4)(B)) is amended by strik-
ing ‘‘fiscal’’ the first place it appears and by
striking ‘‘(beginning with fiscal year 1992)’’.
(U) Section 1886(e)(5) of such Act (42
U.S.C. 1395ww(e)(5)) is amended—
(i) in subparagraph (A), by striking
‘‘the May 1 before each fiscal year (begin-
ning with fiscal year 1986) and inserting
‘‘May 1’’ and by striking ‘‘that fiscal year’’
and inserting ‘‘the succeeding year’’, and
(ii) in subparagraph (B), by striking
‘‘fiscal’’.
(V) The second and third sentences of sec-
tion 1886(e)(5) of such Act (42 U.S.C.
1395ww(e)(5)) are each amended by striking
‘‘fiscal’’ each place it appears.
(W) Section 1886(g)(1)(A) of such Act (42
U.S.C. 1395ww(g)(1)(A)) is amended—
(i) by striking ‘‘fiscal years 1992,
through 1995’’ and inserting ‘‘fiscal years
1992 and 1993, the 15-month period be-
ginning on October 1, 1993, and calendar
year 1995’’, and
(ii) by striking ‘‘such fiscal year’’ and
inserting ‘‘such period’’.
(5) 
CLERICAL
AMENDMENTS
CONCERNING
TRANSITIONAL
PAYMENTS
FOR
A
RECLASSIFIED
HOSPITAL.—
(A) Section 1886(d)(8)(A) of such Act (42
U.S.C. 1395ww(d)(8)(A)) is amended in the
matter preceding clause (i), by striking ‘‘cost
reporting periods’’ and inserting ‘‘years’’.
(B) Section 1886(d)(8)(A)(i) of such Act
(42 U.S.C. 1395ww(d)(8)(A)(i)) is amended—
(i) in the matter preceding subclause
(I), by striking ‘‘cost reporting period’’ and
inserting ‘‘year’’ and by striking ‘‘reporting
period’’ and inserting ‘‘year’’,
(ii) in subclause (I), by striking ‘‘re-
porting period’’ and inserting ‘‘year’’, and
(iii) in subclause (II), by striking ‘‘re-
porting period’’ and inserting ‘‘year’’.
(C) Section 1886(d)(8)(A)(ii) of such Act
(42 U.S.C. 1395ww(d)(8)(A)(ii)) is amended—
(i) in the matter preceding subclause
(I), by striking ‘‘cost reporting period’’ and
inserting ‘‘year’’ and by striking ‘‘reporting
period’’ and inserting ‘‘year’’,
(ii) in subclause (I), by striking ‘‘re-
porting period’’ and inserting ‘‘year’’, and
(iii) in subclause (II), by striking ‘‘re-
porting period’’ and inserting ‘‘year’’.
(b) HOME HEALTH AGENCIES.—Clause (iii) of sec-
tion 
1861(v)(1)(L) 
of 
such 
Act 
(42 
U.S.C.
1395x(v)(1)(L)) is amended by striking ‘‘July 1, 1991,
and annually thereafter (but not for cost reporting periods
beginning on and after July 1, 1994, and before July 1,
1996)’’ and inserting ‘‘July 1 of 1991, 1992, and 1993
(but not for cost reporting periods beginning on and after
July 1, 1994, and before January 1, 1997), and annually
thereafter’’.
(c) HOSPICE CARE.—
(1) IN
GENERAL.—Clause (ii) of section
1814(i)(1)(C) 
of 
such 
Act 
(42 
U.S.C.
1395f(i)(1)(C)) is amended—
(A) in subclause (II), by striking ‘‘fiscal
year 1994’’ and inserting ‘‘the 15-month period
beginning on October 1, 1993’’, and
(B) in subclauses (III), (IV), (V), and
(VI), by striking ‘‘fiscal year’’ each place it ap-
pears and inserting ‘‘calendar year’’.
(2) 
CONFORMING
AMENDMENT.—Section
1814(i)(2) of such Act (42 U.S.C. 1395f(i)(2)) is
amended by adding at the end the following new
subparagraph:
‘‘(D) For purposes of subparagraph (A), the term
‘accounting year’ means—
‘‘(i) fiscal years 1985 through 1993,
‘‘(ii) the 15-month period beginning on October
1, 1993, and
‘‘(iii) calendar years beginning on or after Jan-
uary 1, 1995.’’.
(d) SKILLED NURSING FACILITY SERVICES.—
(1) IN GENERAL.—The last sentence of section
1888(a) of such Act (42 U.S.C. 1395yy(b)) is
amended by striking ‘‘October 1, 1995’’ and insert-
ing ‘‘January 1, 1996’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 1888(d)(4) of such Act (42
U.S.C. 1395yy(d)(4)) is amended by striking
‘‘fiscal’’ each place it appears.
(B) Subsections (a)(1) and (b) of section
13503 of the Omnibus Budget Reconciliation
Act of 1993 are amended by striking ‘‘fiscal
years 1994 and 1995’’ each place it appears
and inserting ‘‘the 15-month period beginning
on October 1, 1993, and calendar year 1995’’.
SEC. 206. ACCELERATION OF TRANSITION TO PROSPEC-
TIVE RATES FOR FACILITY COSTS IN HOS-
PITAL OUTPATIENT DEPARTMENTS.
(a) 
OUTPATIENT
SURGERY.—Section
1833(i)(3)(B)(ii) of the Social Security Act (42 U.S.C.
1395l(i)(3)(B)(ii)) is amended—
(1) in subclause (I)—
(A) by striking ‘‘and 42 percent’’ and in-
serting ‘‘42 percent’’, and
(B) by striking ‘‘1991’’ and inserting
‘‘1991, and beginning on or before September
30, 1994, 25 percent for portions of cost re-
porting periods beginning in fiscal year 1995,
and 0 percent for portions of cost reporting pe-
riods beginning on or after October 1, 1995’’,
and
(2) in subclause (II)—
(A) by striking ‘‘and 58 percent’’ and in-
serting ‘‘58 percent’’, and
(B) by striking ‘‘1991’’ and inserting
‘‘1991, and beginning on or before September
30, 1994, 75 percent for portions of cost re-
porting periods beginning in fiscal year 1995,
and 100 percent for portions of cost reporting
periods beginning on or after October 1, 1995’’.
(b) OUTPATIENT
RADIOLOGY
AND
DIAGNOSTIC
SERVICES.—Section 1833(n)(1)(B)(ii)(I) of the Social Se-
curity Act (42 U.S.C. 1395l(n)(1)(B)(ii)(I)) is amended
by striking ‘‘January 1, 1991.’’ and inserting ‘‘January
1, 1991, and beginning on or before September 30, 1994.
The term means 25 percent for portions of cost reporting
periods beginning in fiscal year 1995 and 0 percent for
portions of cost reporting periods beginning on or after
October 1, 1995.’’.
Subtitle B—Medicaid
SEC. 211. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE
MEDICAL SERVICES UNDER THE MEDICAID
PROGRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended by redesignating
section 1931 as section 1932 and by inserting after section
1930 the following new section:
‘‘CAP ON FEDERAL PAYMENT MADE FOR ACUTE MEDICAL
SERVICES FURNISHED UNDER THE MEDICAID PROGRAM
‘‘SEC. 1931. (a) ANNUAL FEDERAL CAP.—For pur-
poses of furnishing acute medical services to eligible indi-
viduals, the Secretary shall pay to a State for a fiscal year
under section 1903 an amount that does not exceed the
State’s total funding amount for such fiscal year deter-
mined under subsection (b).
‘‘(b) STATE TOTAL FUNDING AMOUNT.—
‘‘(1) IN
GENERAL.—A State’s total funding
amount for a fiscal year is an amount equal to the
lesser of—
‘‘(A) the sum of—
‘‘(i) the product of—
‘‘(I) 
the 
per-adult 
funding
amount for the State for such fiscal
year, and
‘‘(II) the total number of eligible
individuals who are at least 21 years
of age who will receive acute medical
services in the State during the fiscal
year; and
‘‘(ii) the product of—
‘‘(I) 
the 
per-child 
funding
amount for the State for such fiscal
year, and
‘‘(II) the total number of eligible
individuals who are under 21 years of
age who will receive acute medical
services in the State during the fiscal
year; or
‘‘(B) the maximum Federal amount for
such State (as determined under paragraph
(3)).
‘‘(2) PER-ADULT
AND
PER-CHILD
FUNDING
AMOUNTS.—The Secretary shall calculate for each
State a per-adult funding amount and a per-child
funding amount for each fiscal year as follows:
‘‘(A) IN GENERAL.—
‘‘(i) FISCAL
YEAR
1995.—For fiscal
year 1995—
‘‘(I) 
the 
per-adult 
funding
amount for a State shall be an
amount equal to the base per-adult
funding amount determined under
subparagraph (B) increased by 20
percent of such amount; and
‘‘(II) 
the 
per-child 
funding
amount for the State shall be an
amount equal to the base per-child
funding amount for the State deter-
mined under subparagraph (C) in-
creased by 20 percent of such amount.
‘‘(ii) SUBSEQUENT
FISCAL
YEARS.—
For fiscal year 1996 and subsequent fiscal
years, the per-adult funding amount for a
State and the per-child funding amount for
a State, respectively, shall be an amount
equal to the amount determined under this
subparagraph for the previous fiscal year
updated, through the midpoint of the pe-
riod, by the estimated percentage change
in the Consumer Price Index during the
12-month period ending at that midpoint,
with appropriate adjustments to reflect
previous 
underestimations 
or 
overesti-
mations under this clause in the projected
percentage change in the Consumer Price
Index, plus 1 percentage point.
‘‘(B) 
BASE
PER-ADULT
FUNDING
AMOUNT.—The base per-adult funding amount
for a State is an amount equal to—
‘‘(i) the total amount of Federal funds
paid to such State under section 1903(a)
for fiscal year 1993 for providing acute
medical services to eligible individuals who
were at least 21 years of age; divided by
‘‘(ii) the total number of eligible indi-
viduals who were at least 21 years of age
who received acute medical services in such
State during fiscal year 1993.
‘‘(C) 
BASE
PER-CHILD
FUNDING
AMOUNT.—The base per-child funding amount
for a State is an amount equal to—
‘‘(i) the total amount of Federal funds
paid to such State under section 1903(a)
for fiscal year 1993 for providing acute
medical services to eligible individuals who
were under 21 years of age; divided by
‘‘(ii) the total number of eligible indi-
viduals who were under 21 years of age
who received acute medical services in such
State during fiscal year 1993.
‘‘(3) MAXIMUM FEDERAL AMOUNT.—The Sec-
retary shall calculate for each State a maximum
Federal amount for each fiscal year as follows:
‘‘(A) IN GENERAL.—
‘‘(i) FISCAL
YEAR
1995.—For fiscal
year 1995, the maximum Federal amount
for a State shall be an amount equal to the
base maximum Federal amount determined
under subparagraph (C) increased by 20
percent of such amount.
‘‘(ii) SUBSEQUENT
FISCAL
YEARS.—
For fiscal year 1996 and subsequent fiscal
years, the maximum Federal amount for a
State shall be an amount equal to the
amount determined under this subpara-
graph for the previous fiscal year updated,
through the midpoint of the period, by the
estimated 
percentage 
change 
in 
the
Consumer Price Index during the 12-
month period ending at that midpoint,
with appropriate adjustments to reflect
previous 
underestimations 
or 
overesti-
mations under this clause in the projected
percentage change in the Consumer Price
Index, plus 2.5 percentage points.
‘‘(B) 
BASE
MAXIMUM
FEDERAL
AMOUNT.—
‘‘(i) IN
GENERAL.—The base maxi-
mum Federal amount for a State is an
amount equal to the State’s applicable per-
centage (as determined under clause (ii))
of the State’s total maximum amount (as
determined under clause (iii)).
‘‘(ii) STATE’S APPLICABLE PERCENT-
AGE.—A State’s applicable percentage de-
termined under this clause is a percentage
equal to the quotient of—
‘‘(I) the amount of Federal funds
paid to the State for the furnishing of
acute medical services to eligible indi-
viduals and the provision of adminis-
trative services to such individuals in
fiscal year 1993, divided by
‘‘(II) the amount of Federal
funds paid to all States for the fur-
nishing of acute medical services to el-
igible individuals and the provision of
administrative services to such indi-
viduals in fiscal year 1993.
‘‘(iii) 
STATE’S
TOTAL
MAXIMUM
AMOUNT.—A 
State’s 
total 
maximum
amount determined under this clause is an
amount equal to the applicable percentage
of the total amount of Federal funds paid
to all States for the furnishing of acute
medical services to eligible individuals and
the provision of administrative services to
such individuals in fiscal year 1993.
‘‘(c) MINIMUM EXPENDITURE BY STATES.—
‘‘(1) IN GENERAL.—For the purpose of furnish-
ing acute medical services to eligible individuals and
providing administrative services to such individuals
in a fiscal year, a State shall incur expenditures
which are at least equal to the product of—
‘‘(A) the State’s updated per capita
amount, and
‘‘(B) the total number of eligible individ-
ual’s receiving acute medical services in the
State during such fiscal year.
‘‘(2) UPDATED PER CAPITA AMOUNT.—For pur-
poses of paragraph (1)(A)—
‘‘(A) IN GENERAL.—The updated per cap-
ita amount for a State shall be—
‘‘(i) for fiscal year 1995, an amount
equal to the State’s base per capita
amount, and
‘‘(ii) for fiscal year 1996 and each
succeeding fiscal year, an amount equal to
the amount determined under this sub-
paragraph for the first preceding fiscal
year updated by the percentage change in
the consumer price index between such
first preceding fiscal year and the second
preceding fiscal year (as determined by the
Secretary of Commerce).
‘‘(B) BASE
PER
CAPITA
AMOUNT.—The
base per capita amount for a State shall be an
amount equal to the quotient of—
‘‘(i) the total amount of State expend-
itures in fiscal year 1993 for the furnish-
ing of acute medical services to eligible in-
dividuals and the provision of administra-
tive services to such individuals, divided by
‘‘(ii) the total number of eligible indi-
viduals receiving acute medical services
during fiscal year 1993.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) ACUTE
MEDICAL
SERVICES.—The term
‘acute medical services’ means all of the care and
services furnished to individuals eligible under a
State plan under this title except the following:
‘‘(A) Nursing facility services (as defined
in section 1905(f)).
‘‘(B) Intermediate care facility for the
mentally retarded services (as defined in section
1905(d)).
‘‘(C) Personal care services (as described
in section 1905(a)(24)).
‘‘(D) Private duty nursing services (as re-
ferred to in section 1905(a)(8)).
‘‘(E) Home or community-based services
furnished under a waiver granted under sub-
section (c), (d), or (e) of section 1915.
‘‘(F) Home and community care furnished
to functionally disabled elderly individuals
under section 1929.
‘‘(G) Community supported living arrange-
ments services under section 1930.
‘‘(H) Case-management services (as de-
scribed in section 1915(g)(2)).
‘‘(I) Home health care services (as referred
to in section 1905(a)(7)).
‘‘(J) Hospice care (as defined in section
1905(o)).
‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means an individual who is eligible to re-
ceive medical assistance under the State plan under
this title.
‘‘(3) FEDERAL
FUNDS.—The term ‘Federal
funds’ means funds paid to a State under section
1903, excluding funds paid under such section with
respect to expenditures by such State in the form of
payment adjustments made by such State in order
to comply with the requirement under section
1902(a)(13)(A) (as in effect on the date of the en-
actment of this section) that payments to hospitals
to take into account the situation of hospitals which
serve a disproportionate number of low income pa-
tients with special needs.
‘‘(4) STATE EXPENDITURES.—The term ‘State
expenditures’ means expenditures by a State under
its plan under this title, excluding expenditures in
the form of payment adjustments made by such
State in order to comply with the requirement under
section 1902(a)(13)(A) (as in effect on the date of
the enactment of this section) that payments made
by the State to hospitals take into account the situa-
tion of hospitals which serve a disproportionate
number of low income patients with special needs.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall be effective with respect to fiscal years
beginning after September 30, 1994.
SEC. 212. WAIVERS FOR THE FURNISHING OF ACUTE MEDI-
CAL SERVICES UNDER THE MEDICAID PRO-
GRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended by redesignating
section 1932 as section 1933 and by inserting after section
1931 the following new section:
‘‘WAIVERS FOR THE FURNISHING OF ACUTE MEDICAL
SERVICES UNDER THE MEDICAID PROGRAM
‘‘SEC. 1932. (a) IN GENERAL.—The Secretary shall
establish a process under which a State with a State plan
approved under this title may apply for waivers of any
of the requirements under this title in order to establish
innovative and cost effective programs for furnishing acute
medical services (as defined in section 1931(d)(1)) to eligi-
ble individuals (as defined in section 1931(d)(2)).
‘‘(b) APPLICATION FOR WAIVERS.—
‘‘(1) IN GENERAL.—In order to receive a waiver
under subsection (a), a State shall submit an appli-
100
cation to the Secretary at such time and containing
such information as the Secretary determines appro-
priate.
‘‘(2) APPROVAL OF APPLICATION.—
‘‘(A) INITIAL
REVIEW.—Within 60 days
after an application is submitted by the State
under this subsection, the Secretary shall review
and approve such application or provide the
State with a list of the modifications that are
necessary for such application to be approved.
‘‘(B) ADDITIONAL
REVIEW.—Within 60
days after a State resubmits any application
under this subsection, the Secretary shall review
and approve such application or provide the
State with a summary of which items included
on the list provided to the State under subpara-
graph (A) remain unsatisfied. A State may re-
submit an application under this subparagraph
as many times as necessary to gain approval.
‘‘(c) DURATION OF WAIVERS.—Except as provided in
subsection (d), any waiver under this section shall be
granted for a period of 5 years, and renewed for subse-
quent 5-year periods, unless the Secretary determines that
the State has failed to furnish acute medical services in
accordance with the terms of the waiver and any provi-
101
sions of this title with respect to which the Secretary has
not granted a waiver.
‘‘(d) TERMINATION
OF WAIVERS.—The Secretary
may terminate a waiver granted under this section at any
time if the Secretary determines that the State has failed
to furnish acute medical services in accordance with the
terms of the waiver and any provisions of this title with
respect to which the Secretary has not granted a waiver.
‘‘(e) REPORTS.—
‘‘(1) IN GENERAL.—The State shall, through
an independent entity, evaluate the programs oper-
ated under a waiver granted under this section and
submit interim and final reports to the Secretary at
such times and containing such information as the
Secretary shall require.
‘‘(2) REPORT TO CONGRESS.—Not later than
60 days after the receipt of a final report by the
State regarding a waiver granted under this section,
the Secretary shall submit a report to Congress.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall be effective with respect to fiscal years
beginning after September 30, 1994.
SEC. 213. TERMINATION OF DISPROPORTIONATE SHARE
PAYMENTS.
(a) IN GENERAL.—
102
(1) ELIMINATION
OF
STATE
PLAN
REQUIRE-
MENT.—Section 1902(a)(13) of the Social Security
Act (42 U.S.C. 1396a(a)(13)) is amended by strik-
ing ‘‘which, in the case of hospitals, take into ac-
count the situation of hospitals which serve a dis-
proportionate number of low income patients with
special needs and’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1923 of such Act (42 U.S.C. 1396r–4) is repealed.
(B) Section 1902(a)(55) of such Act (42 U.S.C.
1396a(a)(55)) is amended by striking ‘‘facilities de-
fined as disproportionate share hospitals under sec-
tion 1923(a)(1)(A) and’’.
(C) Section 1902(s) of such Act (42 U.S.C.
1396a(s)) is amended by striking ‘‘, and to children
who have not attained the age of 6 years and who
receive such services in a disproportionate share hos-
pital described in section 1923(b)(1),’’.
(D) Section 1903(a)(1) of such Act (42 U.S.C.
1396b(a)(1)) is amended by striking ‘‘and sub-
section 1923(f)’’.
(E) Section 1903(d)(6) of such Act (42 U.S.C.
1396b(d)(6)) is amended—
(i) by striking ‘‘(6)(A)’’ and inserting
‘‘(6)’’,
103
(ii) by striking ‘‘(i)’’ and ‘‘(ii)’’ and insert-
ing ‘‘(A)’’ and ‘‘(B)’’, respectively, and
(iii) by striking subparagraph (B).
(b) EFFECTIVE DATE.—The amendments made by
this section shall be effective on and after October 1,
1996.
SEC. 214. GRANTS FOR HEALTH INSURANCE COVERAGE,
ACUTE 
MEDICAL 
SERVICES, 
PREVENTIVE
CARE, AND DISEASE PREVENTION.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended by redesignating
section 1933 as section 1934 and by inserting after section
1932 the following new section:
‘‘GRANTS
FOR
HEALTH
INSURANCE
COVERAGE, ACUTE
MEDICAL
SERVICES, PREVENTIVE
CARE, AND
DIS-
EASE PREVENTION
‘‘SEC. 1933. (a) IN GENERAL.—The Secretary shall
provide grants to States for the purpose of conducting
State programs under which individuals with incomes
below 150 percent of the income official poverty line are
provided health insurance coverage, acute medical serv-
ices, preventive care, and disease prevention services. A
State receiving a grant under this section shall conduct
a program described in this section in consultation with
the Secretary and in any manner determined appropriate
by the State which is in accordance with subsection (b).
104
‘‘(b) REQUIREMENTS ON PROGRAMS.—
‘‘(1) PRIORITY
OF
BENEFITS.—A State pro-
gram conducted under this section shall give priority
to individuals who—
‘‘(A) are ineligible for benefits under a
State plan under title XIX of the Social Secu-
rity Act,
‘‘(B) are eligible for the tax credit estab-
lished under section 34A of the Internal Reve-
nue Code of 1986, and
‘‘(C) has unreimbursed expenses for health
insurance coverage and medical care—
‘‘(i) exceeding 5 percent of the indi-
vidual’s adjusted gross income, and
‘‘(ii) not otherwise taken into account
in determining the credit under section
34A of the Internal Revenue Code of 1986
for such individual.
‘‘(2) SERVICES.—
‘‘(A) MANDATORY.—A State program con-
ducted under this section shall provide financial
assistance as determined by the State for pur-
chasing health insurance coverage and paying
medical bills to individuals described in para-
graph (1).
105
‘‘(B) OPTIONAL.—A State program con-
ducted under this section may provide—
‘‘(i) medical services directly to eligi-
ble individuals,
‘‘(ii) primary and preventive care serv-
ices to underserved populations,
‘‘(iii) funding for community and mi-
grant health centers,
‘‘(iv) delivery of outpatient primary
and preventive health services,
‘‘(v) improvements to the availability
and quality of emergency medical services
and trauma care,
‘‘(vi) transportation of victims of med-
ical emergencies, including air transpor-
tation for victims of medical emergencies
in rural areas, and
‘‘(vii) telecommunications systems be-
tween rural medical facilities and other
medical facilities which have expertise in
certain areas or equipment that can be uti-
lized by rural facilities through such sys-
tems.
‘‘(c) FEDERAL FUNDS AVAILABLE FOR GRANTS.—
106
‘‘(1) IN GENERAL.—The total amount of Fed-
eral funds available under this title for grants to
States under this section shall be—
‘‘(A) $14,200,000,000 for fiscal year 1997,
‘‘(B) $15,800,000,000 for fiscal year 1998,
‘‘(C) $17,400,000,000 for fiscal year 1999,
‘‘(D) $20,000,000,000 for fiscal year
2000, and
‘‘(E) for each fiscal year thereafter, the
amount for the preceding fiscal year increased
by 7.5 percent of such amount.
‘‘(2) 
FORMULA
FOR
DISTRIBUTION
OF
GRANTS.—
‘‘(A) IN
GENERAL.—The Secretary shall
pay to each State conducting a program under
this section for a fiscal year an amount equal
to the State’s percentage (as determined under
subparagraph (B)) of the total amount available
for grants under this section as provided in
paragraph (1).
‘‘(B) STATE PERCENTAGE.—
‘‘(i) IN GENERAL.—A State’s percent-
age determined under this subparagraph
for a fiscal year is a percentage equal to
the quotient of—
107
‘‘(I) the number of individuals in
the State’s needy population (as de-
fined in clause (ii)) for such fiscal
year, divided by
‘‘(II) the total number of individ-
uals in the needy populations of all
States for the fiscal year.
‘‘(ii) STATE
NEEDY
POPULATION.—
The 
term 
‘State’s 
needy 
population’
means, with respect to a fiscal year, the
number of individuals equal to the product
of—
‘‘(I) the average number of indi-
viduals in the State with incomes
below the income official poverty line
during the 3 preceding fiscal years (as
determined by the Secretary), and
(II) the State’s Federal percent-
age (as determined under clause (iii)).
‘‘(iii) 
STATE
FEDERAL
PERCENT-
AGE.—
‘‘(I) IN
GENERAL.—A State’s
Federal percentage for a fiscal year is
the greater of—
108
‘‘(aa) 1 minus the percent-
age determined under subclause
(II), or
‘‘(bb) 40 percent.
‘‘(II) 
PERCENTAGE
DETER-
MINED.—The percentage determined
under this subclause is the product
of—
‘‘(aa) .40, and
‘‘(bb) the product of the
amount 
determined 
under
subclause (III) multiplied by it-
self.
‘‘(III) AMOUNT DETERMINED.—
The amount determined under this
subclause is the quotient of—
‘‘(aa) the State’s share of
total taxable resources, divided
by
‘‘(bb) the State’s share of
need.
‘‘(d) STATE EXPENDITURES.—
‘‘(1) IN GENERAL.—For a fiscal year, a State
shall expend for purposes of conducting the State
109
program described in subsection (a) an amount at
least equal to—
‘‘(A) for fiscal year 1998, the base year
DSH payment for the State (as defined in
paragraph (2)) updated by the percentage
change in the consumer price index between fis-
cal year 1997 and fiscal year 1996 (as deter-
mined by the Secretary of Commerce), and
‘‘(B) for fiscal year 1999 and each suc-
ceeding fiscal year, an amount equal to the
amount determined under this clause for the
first preceding fiscal year updated by the per-
centage change in the consumer price index be-
tween such first preceding fiscal year and the
second preceding fiscal year (as determined by
the Secretary of Commerce).
‘‘(2) BASE YEAR DSH PAYMENT.—For purposes
of paragraph (1), the term ‘base year DSH pay-
ment’ means the amount of expenditures made by
the State in fiscal year 1997 in the form of payment
adjustments in order to comply with the requirement
under section 1902(a)(13)(A) (as in effect on the
date of the enactment of this section) that payments
made by the State to hospitals take into account the
110
situation of hospitals which serve a disproportionate
number of low income patients with special needs.
‘‘(e) OTHER DEFINITIONS.—
‘‘(1) INCOME
OFFICIAL
POVERTY
LINE.—For
purposes of this section, the term ‘income official
poverty line’ means the income official poverty line
(as defined by the Office of Management and Budg-
et, and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of
1981).
‘‘(2) STATE’S SHARE OF TOTAL TAXABLE RE-
SOURCES.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘State share of
total taxable resources’ for a fiscal year means
an amount equal to the quotient of—
‘‘(i) the average of total taxable re-
sources for the State (as determined by the
Secretary of the Treasury based on data
available for the 3 most recent calendar
years), divided by
‘‘(ii) the average of the total taxable
resources for all States (as determined by
the Secretary of the Treasury based on
111
data available for the 3 most recent cal-
endar years).
‘‘(B) SPECIAL RULE FOR THE DISTRICT OF
COLUMBIA.—Notwithstanding 
subparagraph
(A), with respect to the District of Columbia,
the term ‘State share of total taxable resources’
for a fiscal year means an amount equal to the
quotient of—
‘‘(i) the average of the total personal
income in such District for the 3 preceding
calendar years (as determined by the Sec-
retary of Commerce), divided by
‘‘(ii) the average of the total personal
income for all States for the 3 preceding
calendar years (as determined by the Sec-
retary of Commerce).
‘‘(3) STATE’S
SHARE
OF
NEED.—The term
‘State’s share of need’ for a fiscal year means the
quotient of—
‘‘(A) the average number of individuals in
the State with incomes below the income official
poverty line for the 3 preceding fiscal years (as
determined by the Secretary), divided by
‘‘(B) the average number of individuals in
all States with incomes below the income offi-
112
cial poverty line for the 3 preceding fiscal years
(as determined by the Secretary).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall be effective with respect to fiscal years
beginning after September 30, 1997.
TITLE III—HEALTH CARE
LIABILITY REFORM
SEC. 301. SHORT TITLE.
This title may be cited as the ‘‘Health Care Liability
Reform Act of 1994’’.
SEC. 302. DEFINITIONS.
For purposes of this title the term—
(1) ‘‘approved by the Food and Drug Adminis-
tration’’ means, with respect to a health care prod-
uct, that the health care product—
(A) was subject to premarket approval by
the Food and Drug Administration with respect
to the safety of the formulation or performance
of the aspect of such drug or device which
caused the claimant’s harm or the adequacy of
the packaging or labeling of such drug or de-
vice, and such drug or device was approved by
the Food and Drug Administration; or
(B) is generally recognized as safe and ef-
fective under conditions established by the Food
113
and Drug Administration and applicable regula-
tions, including packaging and labeling regula-
tions;
(2) ‘‘arbitration’’ means a dispute resolution
process in which the parties submit the dispute out-
side of a Federal or State civil justice system for
resolution by a person or panel of persons;
(3) ‘‘economic losses’’ means losses for hospital
and medical expenses, lost wages, lost employment,
and other pecuniary losses;
(4) ‘‘health care malpractice action’’ means a
civil action alleging a health care malpractice claim
against a health care provider or health care profes-
sional;
(5) ‘‘health care malpractice claim’’ means any
claim relating to the provision of (or the failure to
provide) health care services based on negligence or
gross negligence, breach of express or implied war-
ranty or contract, or failure to discharge a duty to
warn or instruct to obtain consent;
(6) ‘‘health care product’’ means a drug, as de-
fined under section 201(g)(1) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a
medical device, as defined under section 201(h) of
114
the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 321(h)), or any combination thereof;
(7) ‘‘health care product liability action’’ means
a civil action alleging a health care product liability
claim against a manufacturer or seller of a health
care product or against a health care provider or
health care professional;
(8) ‘‘health care product liability claim’’ means
any claim relating to harm alleged to have been
caused by a health care product;
(9) ‘‘health care professional’’ means any indi-
vidual who provides health care services in a State
and who is required by State law or regulation to be
licensed or certified by the State to provide such
services in the State, including a physician, nurse,
chiropractor, nurse midwife, physical therapist, so-
cial worker, or physician assistant;
(10) ‘‘health care provider’’ means any organi-
zation or institution that is engaged in the delivery
of health care services in a State and that is re-
quired by State law or regulation to be licensed or
certified by the State to engage in the delivery of
such services in the State;
115
(11) ‘‘injury’’ means any injury, illness, disease,
or other harm that is the subject of a health care
malpractice claim; and
(12) ‘‘noneconomic losses’’ means losses for
physical and emotional pain, suffering, inconven-
ience, physical impairment, mental anguish, dis-
figurement, loss of enjoyment of life, and other
nonpecuniary losses.
SEC. 303. HEALTH CARE MALPRACTICE.
(a) APPLICATION.—The provisions of this section
shall apply to any health care malpractice action filed in
any Federal or State court and any health care mal-
practice claim resolved through arbitration.
(b) PAYMENTS.—No person may be required to pay
more than $100,000 in a single payment in damages for
expenses to be incurred in the future, but such person
shall be permitted to make such payments on a periodic
basis. The periods for such payments shall be determined
by the court, based on projections of when expenses are
likely to be incurred.
(c) DAMAGES.—(1) The total amount of damages re-
ceived by an individual shall be reduced, in accordance
with paragraph (2), by any other payment which has been
made or which will be made to such individual to com-
116
pensate such individual for an injury, including payments
under—
(A) Federal or State disability or sickness pro-
grams;
(B) Federal, State, or private health insurance
programs;
(C) private disability insurance programs;
(D) employer wage continuation programs; and
(E) any other source of payment intended to
compensate such individual for such injury.
(2) The amount by which an award of damages to
an individual for an injury shall be reduced under para-
graph (1) shall be—
(A) the total amount of any payments (other
than such award) which have been made or which
will be made to such individual to compensate such
individual for such injury; minus
(B) the amount paid by such individual (or by
the spouse, parent, or legal guardian of such individ-
ual) to secure the payments described under sub-
paragraph (A).
(d) STATUTE OF LIMITATIONS.—(1) Except as pro-
vided under paragraph (2), no health care malpractice
claim may be initiated after the expiration of the 2-year
period that begins on the date the alleged injury should
117
reasonably have been discovered, or the expiration of the
4-year period that begins on the date the alleged injury
occurred, whichever is later.
(2) In the case of an alleged injury suffered by a
minor who has not attained 6 years of age, no health care
malpractice claim may be initiated after the expiration of
the 2-year period that begins on the date the alleged injury
should reasonably have been discovered, or the date on
which the minor attains 10 years of age, whichever is
later.
(e) ATTORNEYS’ FEES.—With respect to any health
care malpractice action or any health care malpractice
claim, attorneys’ fees may not exceed—
(1) 40 percent of the first $50,000 of any
award or settlement under such action or claim;
(2) 331⁄3 percent of the next $50,000 of any
award or settlement under such action or claim;
(3) 25 percent of the next $500,000 of any
award or settlement under such action or claim; and
(4) 15 percent of any additional amounts.
SEC. 304. HEALTH CARE PRODUCT LIABILITY OF MANUFAC-
TURER OR SELLER.
(a) NONAPPLICATION
OF
STRICT
LIABILITY.—A
manufacturer or seller of a health care product approved
118
by the Food and Drug Administration shall not be strictly
liable for any injury alleged to have resulted from—
(1) a defect in the design of the health care
product; or
(2) a failure to warn or instruct regarding a
risk posed by the health care product that was nei-
ther known nor reasonably knowable at the time the
health care product left the control of the manufac-
turer or seller.
(b) DUTY TO WARN.—(1) A manufacturer or seller
of a health care product that is to be prescribed by, or
used at the direction of, a health care professional shall
not be liable for harm allegedly caused by a failure to warn
or instruct the ultimate user or recipient of the product
about a risk if the manufacturer or seller provided ade-
quate warning or instruction to the user’s or recipient’s
health care professional.
(2) This subsection shall not apply to any health care
product to which the Food and Drug Administration spe-
cifically provides that a warning or instruction regarding
such product shall be given by the manufacturer or seller
directly to the ultimate user or recipient.
119
SEC. 305. GENERAL PROVISIONS RELATING TO HEALTH
CARE LIABILITY.
(a) LIMITATION ON NONECONOMIC DAMAGES.—(1)
Except as provided under paragraph (2), the total amount
of damages which may be awarded to an individual and
the family members of such individual for noneconomic
losses resulting from an injury which is the subject of a
health care malpractice claim or a health care product li-
ability claim may not exceed $250,000, regardless of the
number of defendants against whom the claim is brought,
the number of claims brought with respect to the injury,
or the number of actions brought with respect to the in-
jury.
(2)(A) In any jury trial, the jury shall not be in-
formed of the limitation established under paragraph (1).
If the jury awards an amount for noneconomic damages
that exceeds $250,000, the court shall reduce the award
to $250,000 unless the court finds that special cir-
cumstances (such as egregious injury) would make such
reduction unjust.
(B) In any case in which the court finds a reduction
under subparagraph (A) would be unjust, the court may—
(i) decline to reduce such award; or
(ii) reduce such award by a lesser amount than
provided for under subparagraph (A).
120
(b) SEVERAL LIABILITY FOR NONECONOMIC LOSS.—
(1) In any health care malpractice action or health care
product liability action the liability of each defendant for
noneconomic loss and for punitive damages shall be sev-
eral only and shall not be joint. Each defendant shall be
liable only for the amount of noneconomic loss and puni-
tive damages allocated to such defendant in direct propor-
tion to such defendant’s percentage of responsibility as de-
termined under paragraph (2). A separate judgment shall
be rendered against such defendant for that amount.
(2) For purposes of this subsection, the trier of fact
shall determine the proportion of responsibility of each
party for the claimant’s harm.
SEC. 306. PUNITIVE DAMAGES.
(a) IN GENERAL.—Punitive damages may, if other-
wise permitted by applicable law, be awarded against a
defendant in a health care malpractice action or a health
care product liability action only if the claimant estab-
lishes by clear and convincing evidence that the harm suf-
fered by the claimant was the result of conduct manifest-
ing conscious, flagrant indifference to the health of the
claimant or to the health of those persons who might be
harmed by the health care product.
(b) DETERMINATION OF AMOUNT.—The amount of
any punitive damages award shall be determined (subject
121
to appellate review as permitted by applicable law) by the
trial judge.
(c) LIMITATION CONCERNING CERTAIN HEALTH
CARE PRODUCTS.—Punitive damages shall not be award-
ed against a manufacturer or seller of a health care prod-
uct approved by the Food and Drug Administration where
that health care product caused the claimant’s harm.
SEC. 307. EXCEPTIONS.
The provisions of sections 304(a) and 306(c) shall
not apply in any case in which—
(1) the defendant, before or after premarket ap-
proval of a drug or device, withheld from or mis-
represented to the Food and Drug Administration or
any other agency or official of the Federal Govern-
ment required information that is material and rel-
evant to the performance of such drug or device and
is causally related to the harm which the claimant
allegedly suffered; or
(2) the defendant made an illegal payment to
an official of the Food and Drug Administration for
the purpose of either securing or maintaining ap-
proval of such drug or device.
SEC. 308. RULES OF CONSTRUCTION.
Nothing in this title shall be construed to—
122
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation;
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the grounds of inconvenient
forum;
(6) restrict or limit the preemptive effect of any
other Federal law; or
(7) create any cause of action under Federal
law.
123
TITLE IV—ADMINISTRATIVE
COST SAVINGS
Subtitle A—Standardization of
Claims Processing
SEC. 
401. 
ADOPTION 
OF 
DATA 
ELEMENTS, 
UNIFORM
CLAIMS, AND UNIFORM ELECTRONIC TRANS-
MISSION STANDARDS.
(a) IN GENERAL.—The Secretary shall adopt stand-
ards relating to each of the following:
(1) Data elements for use in paper and elec-
tronic claims processing under health insurance
plans, as well as for use in utilization review and
management of care (including data fields, formats,
and medical nomenclature, and including plan bene-
fit and insurance information).
(2) Uniform claims forms (including uniform
procedure and billing codes for uses with such forms
and including information on other health insurance
plans that may be liable for benefits).
(3) Uniform electronic transmission of the data
elements (for purposes of billing and utilization re-
view).
Standards under paragraph (3) relating to electronic
transmission of data elements for claims for services shall
supersede (to the extent specified in such standards) the
124
standards adopted under paragraph (2) relating to the
submission of paper claims for such services. Standards
under paragraph (3) shall include protections to assure
the confidentiality of patient-specific information and to
protect against the unauthorized use and disclosure of in-
formation.
(b) USE OF TASK FORCES.—In adopting standards
under this section—
(1) the Secretary shall take into account the
recommendations of current task forces, including at
least the Workgroup on Electronic Data Inter-
change, National Uniform Billing Committee, the
Uniform Claim Task Force, and the Computer-based
Patient Record Institute;
(2) the Secretary shall consult with the Na-
tional Association of Insurance Commissioners (and,
with respect to standards under subsection (a)(3),
the American National Standards Institute); and
(3) the Secretary shall, to the maximum extent
practicable, seek to make the standards consistent
with any uniform clinical data sets which have been
adopted and are widely recognized.
(c) DEADLINES
FOR PROMULGATION.—The Sec-
retary shall promulgate the standards under—
125
(1) subsection (a)(1) relating to claims process-
ing data, by not later than 12 months after the date
of the enactment of this Act;
(2) subsection (a)(2) (relating to uniform
claims forms) by not later than 12 months after the
date of the enactment of this Act; and
(3)(A) subsection (a)(3) relating to trans-
mission of information concerning hospital and phy-
sicians services, by not later than 24 months after
the date of the enactment of this Act, and
(B) subsection (a)(3) relating to transmission
of information on other services, by such later date
as the Secretary may determine it to be feasible.
(d) REPORT TO CONGRESS.—Not later than 3 years
after the date of the enactment of this Act, the Secretary
shall report to Congress recommendations regarding re-
structuring the medicare peer review quality assurance
program given the availability of hospital data in elec-
tronic form.
SEC. 402. APPLICATION OF STANDARDS.
(a) IN GENERAL.—If the Secretary determines, at
the end of the 2-year period beginning on the date that
standards are adopted under section 401 with respect to
classes of services, that a significant number of claims for
benefits for such services under health insurance plans are
126
not being submitted in accordance with such standards,
the Secretary may require, after notice in the Federal
Register of not less than 6 months, that all providers of
such services must submit claims to health insurance plans
in accordance with such standards. The Secretary may
waive the application of such a requirement in such cases
as the Secretary finds that the imposition of the require-
ment would not be economically practicable.
(b) SIGNIFICANT NUMBER.—The Secretary shall
make an affirmative determination described in subsection
(a) for a class of services only if the Secretary finds that
there would be a significant, measurable additional gain
in efficiencies in the health care system that would be ob-
tained by imposing the requirement described in such
paragraph with respect to such services.
(c) APPLICATION OF REQUIREMENT.—
(1) IN GENERAL.—If the Secretary imposes the
requirement under subsection (a)—
(A) in the case of a requirement that im-
poses the standards relating to electronic trans-
mission of claims for a class of services, each
health care provider that furnishes such services
for which benefits are payable under a health
insurance plan shall transmit electronically and
directly to the plan on behalf of the beneficiary
127
involved a claim for such services in accordance
with such standards;
(B) any health insurance plan may reject
any claim subject to the standards adopted
under section 401 but which is not submitted in
accordance with such standards;
(C) it is unlawful for a health insurance
plan (i) to reject any such claim on the basis
of the form in which it is submitted if it is sub-
mitted in accordance with such standards or (ii)
to require, for the purpose of utilization review
or as a condition of providing benefits under
the plan, a provider to transmit medical data
elements that are inconsistent with the stand-
ards established under section 401(a)(1); and
(D) the Secretary may impose a civil
money penalty on any provider that knowingly
and repeatedly submits claims in violation of
such standards or on any health insurance plan
(other than a health insurance plan described in
paragraph (2)) that knowingly and repeatedly
rejects claims in violation of subparagraph (B),
in an amount not to exceed $100 for each such
claim.
128
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under subparagraph (D) in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health insurance plan—
(A) that is subject to regulation by a
State, and
(B) with respect to which the Secretary
finds that—
(i) the State provides for application
of the standards established under section
401, and
(ii) the State regulatory program pro-
vides for the appropriate and effective en-
forcement of such standards.
(d) TREATMENT OF REJECTIONS.—If a plan rejects
a claim pursuant to subsection (c)(1), the plan shall per-
mit the person submitting the claim a reasonable oppor-
tunity to resubmit the claim on a form or in an electronic
manner that meets the requirements for acceptance of the
claim under such subsection.
129
SEC. 403. PERIODIC REVIEW AND REVISION OF STAND-
ARDS.
(a) IN GENERAL.—The Secretary shall—
(1) provide for the ongoing receipt and review
of comments and suggestions for changes in the
standards adopted and promulgated under section
401;
(2) establish a schedule for the periodic review
of such standards; and
(3) based upon such comments, suggestions,
and review, revise such standards and promulgate
such revisions.
(b) APPLICATION OF REVISED STANDARDS.—If the
Secretary under subsection (a) revises the standards de-
scribed in 401, then, in the case of any claim for benefits
submitted under a health insurance plan more than the
minimum period (of not less than 6 months specified by
the Secretary) after the date the revision is promulgated
under subsection (a)(3), such standards shall apply under
section 402 instead of the standards previously promul-
gated.
SEC. 404. HEALTH INSURANCE PLAN DEFINED.
In this title, the term ‘‘health insurance plan’’ has
the meaning given such term in section 111(b) and in-
cludes—
130
(1) the medicare program (under title XVIII of
the Social Security Act) and medicare supplemental
health insurance, and
(2) a State medicaid plan (approved under title
XIX of such Act).
Subtitle B—Electronic Medical
Data Standards
SEC. 411. MEDICAL DATA STANDARDS FOR HOSPITALS AND
OTHER PROVIDERS.
(a) PROMULGATION
OF HOSPITAL DATA STAND-
ARDS.—
(1) IN GENERAL.—Between July 1, 1995, and
January 1, 1996, the Secretary shall promulgate
standards described in subsection (b) for hospitals
concerning electronic medical data.
(2) REVISION.—The Secretary may from time
to time revise the standards promulgated under this
subsection.
(b) CONTENTS OF DATA STANDARDS.—The stand-
ards promulgated under subsection (a) shall include at
least the following:
(1) A definition of a standard set of data ele-
ments for use by utilization and quality control peer
review organizations.
131
(2) A definition of the set of comprehensive
data elements, which set shall include for hospitals
the standard set of data elements defined under
paragraph (1).
(3) Standards for an electronic patient care in-
formation system with data obtained at the point of
care, including standards to protect against the un-
authorized use and disclosure of information.
(4) A specification of, and manner of presen-
tation of, the individual data elements of the sets
and system under this subsection.
(5) Standards concerning the transmission of
electronic medical data.
(6) Standards relating to confidentiality of pa-
tient-specific information.
The standards under this section shall be consistent with
standards for data elements established under section 401.
(c) OPTIONAL DATA STANDARDS FOR OTHER PRO-
VIDERS.—
(1) IN GENERAL.—The Secretary may promul-
gate standards described in paragraph (2) concern-
ing electronic medical data for providers that are not
hospitals. The Secretary may from time to time re-
vise the standards promulgated under this sub-
section.
132
(2) CONTENTS
OF
DATA
STANDARDS.—The
standards promulgated under paragraph (1) for non-
hospital providers may include standards comparable
to the standards described in paragraphs (2), (4),
and (5) of subsection (b) for hospitals.
(d) CONSULTATION.—In promulgating and revising
standards under this section, the Secretary shall—
(1) consult with the American National Stand-
ards Institute, hospitals, with the advisory commis-
sion established under section 415, and with other
affected providers, health insurance plans, and other
interested parties, and
(2) take into consideration, in developing stand-
ards under subsection (b)(1), the data set used by
the utilization and quality control peer review pro-
gram under part B of title XI of the Social Security
Act.
SEC. 412. APPLICATION OF ELECTRONIC DATA STANDARDS
TO CERTAIN HOSPITALS.
(a) MEDICARE REQUIREMENT
FOR SHARING
OF
HOSPITAL INFORMATION.—As of January 1, 1996, sub-
ject to paragraph (2), each hospital, as a requirement of
each participation agreement under section 1866 of the
Social Security Act, shall—
133
(1) maintain clinical data included in the set of
comprehensive 
data 
elements 
under 
section
411(b)(2) in electronic form on all inpatients,
(2) upon request of the Secretary or of a utili-
zation and quality control peer review organization
(with which the Secretary has entered into a con-
tract under part B of title XI of such Act), transmit
electronically the data set, and
(3) upon request of the Secretary, or of a fiscal
intermediary or carrier, transmit electronically any
data (with respect to a claim) from such data set,
in accordance with the standards promulgated under sec-
tion 411(a).
(b) WAIVER AUTHORITY.—Until January 1, 2000:
(1) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is a small rural hospital, for such period as the
hospital demonstrates compliance with such require-
ments would constitute an undue financial hardship.
(2) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is in the process of developing a system to pro-
vide the required data set and executes agreements
with its fiscal intermediary and its utilization and
quality control peer review organization that the hos-
134
pital will meet the requirements of subsection (a) by
a specified date (not later than January 1, 2000).
(3) The Secretary may waive the application of
the requirement of subsection (a)(1) for a hospital
that agrees to obtain from its records the data ele-
ments that are needed to meet the requirements of
paragraphs (2) and (3) of subsection (a) and agrees
to subject its data transfer process to a quality as-
surance program specified by the Secretary.
(c) APPLICATION TO HOSPITALS OF THE DEPART-
MENT OF VETERANS AFFAIRS.—
(1) IN GENERAL.—The Secretary of Veterans
Affairs shall provide that each hospital of the De-
partment of Veterans Affairs shall comply with the
requirements of subsection (a) in the same manner
as such requirements would apply to the hospital if
it were participating in the Medicare program.
(2) WAIVER.—The Secretary of Veterans Af-
fairs may waive the application of such requirements
to a hospital in the same manner as the Secretary
of Health and Human Services may waive under
subsection (b) the application of the requirements of
subsection (a).
135
SEC. 413. ELECTRONIC TRANSMISSION TO FEDERAL AGEN-
CIES.
(a) IN GENERAL.—Effective January 1, 2000, if a
provider is required under a Federal program to transmit
a data element that is subject to a presentation or trans-
mission standard (as defined in subsection (b)), the head
of the Federal agency responsible for such program (if not
otherwise authorized) is authorized to require the provider
to present and transmit the data element electronically in
accordance with such a standard.
(b) PRESENTATION
OR TRANSMISSION STANDARD
DEFINED.—In subsection (a), the term ‘‘presentation or
transmission standard’’ means a standard, promulgated
under subsection (b) or (c) of section 411, described in
paragraph (4) or (5) of section 411(b).
SEC. 414. LIMITATION ON DATA REQUIREMENTS WHERE
STANDARDS IN EFFECT.
(a) IN GENERAL.—If standards with respect to data
elements are promulgated under section 411 with respect
to a class of provider, a health insurance plan may not
require, for the purpose of utilization review or as a condi-
tion of providing benefits under the plan, that a provider
in the class—
(1) provide any data element not in the set of
comprehensive data elements specified under such
standards, or
136
(2) transmit or present any such data element
in a manner inconsistent with the applicable stand-
ards for such transmission or presentation.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health insurance plan
(other than a health insurance plan described in
paragraph (2)) that fails to comply with subsection
(a) in an amount not to exceed $100 for each such
failure. The provisions of section 1128A of the So-
cial Security Act (other than the first sentence of
subsection (a) and other than subsection (b)) shall
apply to a civil money penalty under this paragraph
in the same manner as such provisions apply to a
penalty or proceeding under section 1128A(a) of
such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health insurance plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
137
SEC. 415. ADVISORY COMMISSION.
(a) IN GENERAL.—The Secretary shall establish an
advisory commission including hospital executives, hospital
data base managers, physicians, health services research-
ers, and technical experts in collection and use of data
and operation of data systems. Such commission shall in-
clude, as ex officio members, a representative of the Direc-
tor of the National Institutes of Health, the Administrator
for Health Care Policy and Research, the Secretary of
Veterans Affairs, and the Director of the Centers for Dis-
ease Control.
(b) FUNCTIONS.—The advisory commission shall
monitor and advise the Secretary concerning—
(1) the standards established under this sub-
title, and
(2) operational concerns about the implementa-
tion of such standards under this subtitle.
(c) STAFF.—From the amounts appropriated under
subsection (d), the Secretary shall provide sufficient staff
to assist the advisory commission in its activities under
this section.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $2,000,000 for each of
fiscal years 1995 through 2000 to carry out this section.
138
Subtitle C—Development and Dis-
tribution of Comparative Value
Information
SEC. 421. STATE COMPARATIVE VALUE INFORMATION PRO-
GRAMS FOR HEALTH CARE PURCHASING.
(a) PURPOSE.—In order to assure the availability of
comparative value information to purchasers of health
care in each State, the Secretary shall determine whether
each State is developing and implementing a health care
value information program that meets the criteria and
schedule set forth in subsection (b).
(b) CRITERIA
AND SCHEDULE
FOR STATE PRO-
GRAMS.—The criteria and schedule for a State health care
value information program in this subsection shall be spec-
ified by the Secretary as follows:
(1) The State begins promptly after enactment
of this Act to develop (directly or through contrac-
tual or other arrangements with 1 or more States,
coalitions of health insurance purchasers, other enti-
ties, or any combination of such arrangements) in-
formation systems regarding comparative health val-
ues.
(2) The information contained in such systems
covers at least the average prices of common health
care services (as defined in subsection (d)) and
139
health insurance plans, and, where available, meas-
ures of the variability of these prices within a State
or other market areas.
(3) The information described in paragraph (2)
is made available within the State beginning not
later than 1 year after the date of the enactment of
this Act, and is revised as frequently as reasonably
necessary, but at intervals of no greater than 1 year.
(4) Not later than 6 years after the date of the
enactment of this Act the State has developed infor-
mation systems that provide comparative costs, qual-
ity, and outcomes data with respect to health insur-
ance plans and hospitals and made the information
broadly available within the relevant market areas.
Nothing in this section shall preclude a State from provid-
ing additional information, such as information on prices
and benefits of different health insurance plans available.
(c) GRANTS TO STATES FOR THE DEVELOPMENT OF
STATE PROGRAMS.—
(1) GRANT
AUTHORITY.—The Secretary may
make grants to each State to enable such State to
plan the development of its health care value infor-
mation program and, if necessary, to initiate the im-
plementation of such program. Each State seeking
such a grant shall submit an application therefor,
140
containing such information as the Secretary finds
necessary to assure that the State is likely to de-
velop and implement a program in accordance with
the criteria and schedule in subsection (b).
(2) OFFSET AUTHORITY.—If, at any time with-
in the 3-year period following the receipt by a State
of a grant under this subsection, the Secretary is re-
quired by section 422 to implement a health care in-
formation program in the State, the Secretary may
recover the amount of the grant under this sub-
section by offset against any other amount payable
to the State under the Social Security Act. The
amount of the offset shall be made available (from
the appropriation account with respect to which the
offset was taken) to the Secretary to carry out such
section.
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated such sums
as are necessary to make grants under this sub-
section, to remain available until expended.
(d) COMMON HEALTH CARE SERVICES DEFINED.—
In this section, the term ‘‘common health care services’’
includes such procedures as the Secretary may specify and
any additional health care services which a State may wish
to include in its comparative value information program.
141
(e) STATE DEFINED.—In this title, the term ‘‘State’’
includes the District of Columbia, Puerto Rico, the Virgin
Islands, Guam, and American Samoa.
SEC. 422. FEDERAL IMPLEMENTATION.
(a) IN GENERAL.—If the Secretary finds, at any
time, that a State has failed to develop or to continue to
implement a health care value information program in ac-
cordance with the criteria and schedule in section 421(b),
the Secretary shall take the actions necessary, directly or
through grants or contract, to implement a comparable
program in the State.
(b) FEES.—Fees may be charged by the Secretary
for the information materials provided pursuant to a pro-
gram under this section. Any amounts so collected shall
be deposited in the appropriation account from which the
Secretary’s costs of providing such materials were met,
and shall remain available for such purposes until ex-
pended.
SEC. 423. COMPARATIVE VALUE INFORMATION CONCERN-
ING FEDERAL PROGRAMS.
(a) DEVELOPMENT.—The head of each Federal agen-
cy with responsibility for the provision of health insurance
or of health care services to individuals shall promptly de-
velop health care value information relating to each pro-
gram that such head administers and covering the same
142
types of data that a State program meeting the criteria
of section 421(b) would provide.
(b) DISSEMINATION OF INFORMATION.—Such infor-
mation shall be made generally available to States and to
providers and consumers of health care services.
Subtitle D—Preemption of State
Quill Pen Laws
SEC. 431. PREEMPTION OF STATE QUILL PEN LAWS.
(a) IN GENERAL.—Effective January 1, 1996, no ef-
fect shall be given to any provision of State law that re-
quires medical or health insurance records (including bill-
ing information) to be maintained in written, rather than
electronic form.
(b) SECRETARIAL AUTHORITY.—The Secretary may
issue regulations to carry out subsection (a). Such regula-
tions may provide for such exceptions to subsection (a)
as the Secretary determines to be necessary to prevent
fraud and abuse, with respect to controlled substances,
and in such other cases as the Secretary deems appro-
priate.
143
TITLE V—ANTI-FRAUD
Subtitle A—Criminal Prosecution
of Health Care Fraud
SEC. 501. PENALTIES FOR HEALTH CARE FRAUD.
(a) IN GENERAL.—Chapter 63 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1347. Health care fraud
‘‘(a) OFFENSE.—Whoever, being a health care pro-
vider, knowingly engages in any scheme or artifice to de-
fraud any person in connection with the provision of
health care shall be fined under this title or imprisoned
not more than 5 years, or both.
‘‘(b) DEFINITION.—In this section, the term ‘health
care provider’ means—
‘‘(1) a physician, nurse, dentist, therapist, phar-
macist, or other professional provider of health care;
and
‘‘(2) a hospital, health maintenance organiza-
tion, pharmacy, laboratory, clinic, or other health
care facility or a provider of medical services, medi-
cal devices, medical equipment, or other medical sup-
plies.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 63 of title 18, United States
144
Code, is amended by adding at the end the following new
item:
‘‘1347. Health care fraud.’’.
SEC. 502. REWARDS FOR INFORMATION LEADING TO PROS-
ECUTION AND CONVICTION.
Section 3059 of title 18, United States Code, is
amended by adding at the end the following new sub-
section:
‘‘(c)(1) In special circumstances and in the Attorney
General’s sole discretion, the Attorney General may make
a payment of up to $10,000 to a person who furnishes
information unknown to the Government relating to a pos-
sible prosecution under section 1101.
‘‘(2) A person is not eligible for a payment under
paragraph (1) if—
‘‘(A) the person is a current or former officer
or employee of a Federal or State government agen-
cy or instrumentality who furnishes information dis-
covered or gathered in the course of government em-
ployment;
‘‘(B) the person knowingly participated in the
offense;
‘‘(C) the information furnished by the person
consists of allegations or transactions that have been
disclosed to the public—
145
‘‘(i) in a criminal, civil, or administrative
proceeding;
‘‘(ii) in a congressional, administrative or
General Accounting Office report, hearing,
audit, or investigation; or
‘‘(iii) by the news media, unless the person
is the original source of the information; or
‘‘(D) when, in the judgment of the Attorney
General, it appears that a person whose illegal ac-
tivities are being prosecuted or investigated could
benefit from the award.
‘‘(3) For the purposes of paragraph (2)(C)(iii), the
term ‘original source’ means a person who has direct and
independent knowledge of the information that is fur-
nished and has voluntarily provided the information to the
Government prior to disclosure by the news media.
‘‘(4) Neither the failure of the Attorney General to
authorize a payment under paragraph (1) nor the amount
authorized shall be subject to judicial review.’’.
146
Subtitle B—Coordination of Health
Care Anti-Fraud and Abuse Ac-
tivities
SEC. 511. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD
AND ABUSE SANCTIONS TO ALL FRAUD AND
ABUSE AGAINST ANY HEALTH INSURANCE
PLAN.
(a) CIVIL MONETARY PENALTIES.—Section 1128A
of the Social Security Act (42 U.S.C. 1320a–7a) is amend-
ed as follows:
(1) In subsection (a)(1), in the matter before
subparagraph (A), by inserting ‘‘or of any health in-
surance plan,’’ after ‘‘subsection (i)(1)),’’.
(2) In subsection (b)(1)(A), by inserting ‘‘or
under a health insurance plan’’ after ‘‘title XIX’’.
(3) In subsection (f)—
(A) by redesignating paragraph (3) as
paragraph (4); and
(B) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) With respect to amounts recovered arising
out of a claim under a health insurance plan, the
portion of such amounts as is determined to have
been paid by the plan shall be repaid to the plan.’’.
(4) In subsection (i)—
147
(A) in paragraph (2), by inserting ‘‘or
under a health insurance plan’’ before the pe-
riod at the end, and
(B) in paragraph (5), by inserting ‘‘or
under a health insurance plan’’ after ‘‘or XX’’.
(b) CRIMES.—
(1) SOCIAL SECURITY ACT.—Section 1128B of
such Act (42 U.S.C. 1320a–7b) is amended as fol-
lows:
(A) In the heading, by adding at the end
the following: ‘‘OR HEALTH INSURANCE PLANS’’.
(B) In subsection (a)(1)—
(i) by striking ‘‘title XVIII or’’ and
inserting ‘‘title XVIII,’’, and
(ii) by adding at the end the follow-
ing: ‘‘or a health insurance plan (as de-
fined in section 1128(i)),’’.
(C) In subsection (a)(5), by striking ‘‘title
XVIII or a State health care program’’ and in-
serting ‘‘title XVIII, a State health care pro-
gram, or a health insurance plan’’.
(D) In the second sentence of subsection
(a)—
148
(i) by inserting after ‘‘title XIX’’ the
following: ‘‘or a health insurance plan’’,
and
(ii) by inserting after ‘‘the State’’ the
following: ‘‘or the plan’’.
(E) In subsection (b)(1), by striking ‘‘title
XVIII or a State health care program’’ each
place it appears and inserting ‘‘title XVIII, a
State health care program, or a health insur-
ance plan’’.
(F) In subsection (b)(2), by striking ‘‘title
XVIII or a State health care program’’ each
place it appears and inserting ‘‘title XVIII, a
State health care program, or a health insur-
ance plan’’.
(G) In subsection (b)(3), by striking ‘‘title
XVIII or a State health care program’’ each
place it appears in subparagraphs (A) and (C)
and inserting ‘‘title XVIII, a State health care
program, or a health insurance plan’’.
(H) In subsection (d)(2)—
(i) by striking ‘‘title XIX,’’ and insert-
ing ‘‘title XIX or under a health insurance
plan,’’, and
149
(ii) by striking ‘‘State plan,’’ and in-
serting ‘‘State plan or the health insurance
plan,’’.
(2) TREBLE
DAMAGES
FOR
CRIMINAL
SANC-
TIONS.—Section 1128B of such Act (42 U.S.C.
1320a–7b) is amended by adding at the end the fol-
lowing new subsection:
‘‘(f) In addition to the fines that may be imposed
under subsection (a), (b), or (c), any individual found to
have violated the provisions of any of such subsections
may be subject to treble damages.’’.
(3) IDENTIFICATION OF COMMUNITY SERVICE
OPPORTUNITIES.—Section 1128B of such Act (42
U.S.C. 1320a–7b) is further amended by adding at
the end the following new subsection:
‘‘(g) The Secretary shall—
‘‘(1) in consultation with State and local health
care officials, identify opportunities for the satisfac-
tion of community service obligations that a court
may impose upon the conviction of an offense under
this section, and
‘‘(2) make information concerning such oppor-
tunities available to Federal and State law enforce-
ment officers and State and local health care offi-
cials.’’.
150
(c) HEALTH INSURANCE PLAN DEFINED.—Section
1128 of such Act (42 U.S.C. 1320a–7) is amended by re-
designating subsection (i) as subsection (j) and by insert-
ing after subsection (h) the following new subsection:
‘‘(i) HEALTH INSURANCE PLAN DEFINED.—For pur-
poses of sections 1128A and 1128B, the term ‘health in-
surance plan’ means a health insurance program other
than the medicare program, the medicaid program, or a
State health care program.’’.
(d) 
CONFORMING
AMENDMENT.—Section
1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–
7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in-
serting ‘‘1128A (other than a penalty arising from a
health insurance plan, as defined in subsection (i))’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect January 1, 1995.
TITLE VI—ANTITRUST
PROVISIONS
SEC. 601. EXEMPTION FROM ANTITRUST LAWS FOR CER-
TAIN COMPETITIVE AND COLLABORATIVE
ACTIVITIES.
(a) EXEMPTION DESCRIBED.—An activity relating to
the provision of health care services shall be exempt from
the antitrust laws if—
151
(1) the activity is within one of the categories
of safe harbors described in section 602;
(2) the activity is within an additional safe har-
bor designated by the Attorney General under sec-
tion 603; or
(3) the activity is specified in and in compliance
with the terms of a certificate of review issued by
the Attorney General under section 604 and the ac-
tivity occurs—
(A) while the certificate is in effect, or
(B) in the case of a certificate issued dur-
ing the 2-year period beginning on the date of
the enactment of this Act, at any time on or
after the first day of the 2-year period that
ends on the date the certificate takes effect.
(b) AWARD OF ATTORNEY’S FEES AND COSTS OF
SUIT.—
(1) IN GENERAL.—If any person brings an ac-
tion alleging a claim under the antitrust laws and
the activity on which the claim is based is found by
the court to be exempt from such laws under sub-
section (a), the court shall, at the conclusion of the
action—
152
(A) award to a substantially prevailing
claimant the cost of suit attributable to such
claim, including a reasonable attorney’s fee, or
(B) award to a substantially prevailing
party defending against such claim the cost of
such suit attributable to such claim, including
reasonable attorney’s fee, if the claim, or the
claimant’s conduct during litigation of the
claim, was frivolous, unreasonable, without
foundation, or in bad faith.
(2) OFFSET
IN
CASES
OF
BAD
FAITH.—The
court may reduce an award made pursuant to para-
graph (1) in whole or in part by an award in favor
of another party for any part of the cost of suit (in-
cluding a reasonable attorney’s fee) attributable to
conduct during the litigation by any prevailing party
that the court finds to be frivolous, unreasonable,
without foundation, or in bad faith.
SEC. 602. SAFE HARBORS.
The following activities are safe harbors for purposes
of section 601(a)(1):
(1) COMBINATIONS
WITH
MARKET
SHARE
BELOW
THRESHOLD.—Activities relating to health
care services of any combination of health care pro-
viders if the number of each type or specialty of pro-
153
vider in question does not exceed 20 percent of the
total number of such type or specialty of provider in
the relevant market area.
(2) ACTIVITIES OF MEDICAL SELF-REGULATORY
ENTITIES.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), any activity of a medical self-regu-
latory entity relating to standard setting or
standard enforcement activities that are de-
signed to promote the quality of health care
provided to patients.
(B) EXCEPTION.—No activity of a medical
self-regulatory entity may be deemed to fall
under the safe harbor established under this
paragraph if the activity is conducted for pur-
poses of financial gain.
(3) PARTICIPATION IN SURVEYS.—The partici-
pation of a provider of health care services in a writ-
ten survey of the prices of services, reimbursement
levels, or the compensation and benefits of employ-
ees and personnel, but only if—
(A) the survey is conducted by a third
party, such as a purchaser of health care serv-
ices, governmental entity, institution of higher
education, or trade association;
154
(B) the information provided by partici-
pants in the survey is based on prices charged,
reimbursements received, or compensation and
benefits paid prior to the third month preceding
the month in which the information is provided;
and
(C) if the results of the survey are dissemi-
nated, the results are aggregated in a manner
that ensures that no recipient of the results
may identify the prices charged, reimbursement
received, or compensation and benefits paid by
any particular provider.
(4) JOINT VENTURES FOR HIGH TECHNOLOGY
AND COSTLY EQUIPMENT AND SERVICES.—Any ac-
tivity of a health care cooperative venture relating to
the purchase, operation, or marketing of high tech-
nology or other expensive medical equipment, or the
provision of high cost or complex services, but only
if the number of participants in the venture does not
exceed the lowest number needed to support the ven-
ture. Other providers may be included in the ven-
ture, but only if such other providers could not pur-
chase, operate, or market such equipment or provide
a competing service either alone or through the for-
mation of a competing venture.
155
(5) HOSPITAL MERGERS.—Activities relating to
a merger of 2 hospitals if, during the 3-year period
preceding the merger, one of the hospitals had an
average of 150 or fewer operational beds and an av-
erage daily inpatient census of less than 50 percent
of such beds.
(6) JOINT PURCHASING ARRANGEMENTS.—Any
joint purchasing arrangement among health care
providers if—
(A) the purchases under the arrangement
represent less than 35 percent of the total sales
of the product or service purchased in the rel-
evant market; and
(B) the cost of the products and services
purchased jointly accounts for less than 20 per-
cent of the total revenues from all products or
services sold by each participant in the joint
purchasing arrangement.
(7) NEGOTIATIONS.—Activities consisting of
good faith negotiations to carry out any activity—
(A) described in this section,
(B) within an additional safe harbor des-
ignated by the Attorney General under section
603,
156
(C) that is the subject of an application for
a certificate of review under section 604, or
(D) that is deemed a submission of a noti-
fication under section 605(a)(2)(B),
without regard to whether such an activity is carried
out.
SEC. 603. DESIGNATION OF ADDITIONAL SAFE HARBORS.
(a) IN GENERAL.—
(1) SOLICITATION OF PROPOSALS.—Not later
than 30 days after the date of the enactment of this
Act, the Attorney General shall publish a notice in
the Federal Register soliciting proposals for addi-
tional safe harbors.
(2) REVIEW AND REPORT ON PROPOSED SAFE
HARBORS.—Not later than 180 days after the date
of the enactment of this Act, the Attorney General
(in consultation with the Secretary of Health and
Human Services and the Chair of the Federal Trade
Commission) shall—
(A) review the proposed safe harbors sub-
mitted under paragraph (1); and
(B) submit a report to Congress describing
the proposals to be included in the publication
of additional safe harbors described in para-
157
graph (3) and the proposals that are not to be
so included, together with explanations therefor.
(3) PUBLICATION OF ADDITIONAL SAFE HAR-
BORS.—Not later than 180 days after the date of
the enactment of this Act, the Attorney General (in
consultation with the Secretary of Health and
Human Services and the Chair of the Federal Trade
Commission) shall publish in the Federal Register
proposed additional safe harbors for purposes of sec-
tion 601(a)(2) for providers of health care services.
Not later than 180 days after publishing such pro-
posed safe harbors in the Federal Register, the At-
torney General shall issue final rules establishing
such safe harbors.
(b) CRITERIA FOR SAFE HARBORS.—In establishing
safe harbors under subsection (a), the Attorney General
shall take into account the following:
(1) The extent to which a competitive or col-
laborative activity will accomplish any of the follow-
ing:
(A) An increase in access to health care
services.
(B) The enhancement of the quality of
health care services.
158
(C) The establishment of cost efficiencies
that will be passed on to consumers, including
economies of scale and reduced transaction and
administrative costs.
(D) An increase in the ability of health
care facilities to provide services in medically
underserved areas or to medically underserved
populations.
(E) An improvement in the utilization of
health care resources or the reduction in the in-
efficient duplication of the use of such re-
sources.
(2) Whether the designation of an activity as a
safe harbor under subsection (a) will result in the
following outcomes:
(A) Health plans and other health care in-
surers, consumers of health care services, and
health care providers will be better able to ne-
gotiate payment and service arrangements
which will reduce costs to consumers.
(B) Taking into consideration the charac-
teristics of the particular purchasers and pro-
viders involved, competition will not be unduly
restricted.
159
(C) Equally efficient and less restrictive al-
ternatives do not exist to meet the criteria de-
scribed in paragraph (1).
(D) The activity will not unreasonably
foreclose competition by denying competitors a
necessary element of competition.
SEC. 604. CERTIFICATES OF REVIEW.
(a) ESTABLISHMENT OF PROGRAM.—In consultation
with the Secretary and the Chair, the Attorney General
shall (not later than 180 days after the date of the enact-
ment of this Act) issue certificates of review in accordance
with this section for providers of health care services and
advise and assist any person with respect to applying for
such a certificate of review.
(b) PROCEDURES FOR APPLICATION FOR CERTIFI-
CATE.—
(1) FORM; CONTENT.—To apply for a certifi-
cate of review, a person shall submit to the Attorney
General a written application which—
(A) specifies the activities relating to the
provision of health care services which satisfy
the criteria described in section 603(b) and
which will be included in the certificate; and
(B) is in a form and contains any informa-
tion, including information pertaining to the
160
overall market in which the applicant operates,
required by rule or regulation promulgated
under section 607.
(2) PUBLICATION OF NOTICE IN FEDERAL REG-
ISTER.—Within 10 days after an application submit-
ted under paragraph (1) is received by the Attorney
General, the Attorney General shall publish in the
Federal Register a notice that announces that an
application for a certificate of review has been sub-
mitted, identifies each person submitting the appli-
cation, and describes the conduct for which the ap-
plication is submitted.
(3) ESTABLISHMENT OF PROCEDURES FOR IS-
SUANCE OF CERTIFICATE.—In consultation with the
Chair and the Secretary, the Attorney General shall
establish procedures to be used in applying for and
in determining whether to approve an application for
a certificate of review under this title. Under such
procedures the Attorney General shall approve an
application if the Attorney General determines that
the activities to be covered under the certificate will
satisfy the criteria described in section 603(b) for
additional safe harbors designated under such sec-
tion and that the benefits of the issuance of the cer-
161
tificate will outweigh any disadvantages that may re-
sult from reduced competition.
(4) TIMING FOR DECISION ON APPLICATION.—
(A) IN GENERAL.—Within 90 days after
the Attorney General receives an application for
a certificate of review, the Attorney General
shall determine whether the applicant’s health
care market activities are in accordance with
the procedures described in paragraph (3). If
the Attorney General, with the concurrence of
the Secretary, determines that such procedures
are met, the Attorney General shall issue to the
applicant a certificate of review. The certificate
of review shall specify—
(i) the health care market activities to
which the certificate applies,
(ii) the person to whom the certificate
of review is issued, and
(iii) any terms and conditions the At-
torney General or the Secretary deems nec-
essary to assure compliance with the appli-
cable procedures described in paragraph
(3).
(B) APPLICATIONS DEEMED APPROVED.—
If the Attorney General does not reject an ap-
162
plication before the expiration of the 90-day pe-
riod beginning on the date the Attorney General
receives the application, the Attorney General
shall be deemed to have approved the applica-
tion and to have issued a certificate of review
relating to the applicant’s health care market
activities covered under the application.
(5) EXPEDITED ACTION.—If the applicant indi-
cates a special need for prompt disposition, the At-
torney General and the Secretary may expedite ac-
tion on the application, except that no certificate of
review may be issued within 30 days of publication
of notice in the Federal Register under subsection
(b)(2).
(6) ACTIONS UPON DENIAL.—
(A) NOTIFICATION.—If the Attorney Gen-
eral denies in whole or in part an application
for a certificate, the Attorney General shall no-
tify the applicant of the Attorney General’s de-
termination and the reasons for it.
(B) REQUEST
FOR
RECONSIDERATION.—
An applicant may, within 30 days of receipt of
notification that the application has been denied
in whole or in part, request the Attorney Gen-
eral to reconsider the determination. The Attor-
163
ney General, with the concurrence of the Sec-
retary, shall notify the applicant of the deter-
mination upon reconsideration within 30 days
of receipt of the request.
(C) RETURN OF DOCUMENTS.—If the At-
torney General denies an application for the is-
suance of a certificate of review and thereafter
receives from the applicant a request for the re-
turn of documents submitted by the applicant
in connection with the application for the cer-
tificate, the Attorney General and the Secretary
shall return to the applicant, not later than 30
days after receipt of the request, the documents
and all copies of the documents available to the
Attorney General and the Secretary, except to
the extent that the information has been made
public under an exception to the rule against
public 
disclosure 
described 
in 
subsection
(g)(2)(B).
(7) FRAUDULENT
PROCUREMENT.—A certifi-
cate of review shall be void ab initio with respect to
any health care market activities for which the cer-
tificate was procured by fraud.
(c) AMENDMENT
AND REVOCATION
OF CERTIFI-
CATES.—
164
(1) NOTIFICATION
OF
CHANGES.—Any appli-
cant who receives a certificate of review—
(A) shall promptly report to the Attorney
General any change relevant to the matters
specified in the certificate; and
(B) may submit to the Attorney General
an application to amend the certificate to re-
flect the effect of the change on the conduct
specified in the certificate.
(2) AMENDMENT TO CERTIFICATE.—An appli-
cation for an amendment to a certificate of review
shall be treated as an application for the issuance of
a certificate. The effective date of an amendment
shall be the date on which the application for the
amendment is submitted to the Attorney General.
(3) REVOCATION.—
(A) GROUNDS FOR REVOCATION.—In ac-
cordance with this paragraph, the Attorney
General may revoke in whole or in part a cer-
tificate of review issued under this section. The
following shall be considered grounds for the
revocation of a certificate:
(i) After the expiration of the 2-year
period beginning on the date a person’s
certificate is issued, the activities of the
165
person have not substantially accomplished
the purposes for the issuance of the certifi-
cate.
(ii) The person has failed to comply
with any of the terms or conditions im-
posed under the certificate by the Attorney
General or the Secretary under subsection
(b)(4).
(iii) The activities covered under the
certificate no longer satisfy the criteria set
forth in section 603(b).
(B) REQUEST FOR COMPLIANCE INFORMA-
TION.—If the Attorney General or Secretary
has reason to believe that any of the grounds
for revocation of a certificate of review de-
scribed in subparagraph (A) may apply to a
person holding the certificate, the Attorney
General shall request such information from
such person as the Attorney General or the Sec-
retary deems necessary to resolve the matter of
compliance. Failure to comply with such request
shall be grounds for revocation of the certificate
under this paragraph.
(C) PROCEDURES
FOR
REVOCATION.—If
the Attorney General or the Secretary deter-
166
mines that any of the grounds for revocation of
a certificate of review described in subpara-
graph (A) apply to a person holding the certifi-
cate, or that such person has failed to comply
with a request made under subparagraph (B),
the Attorney General shall give written notice of
the determination to such person. The notice
shall include a statement of the circumstances
underlying, and the reasons in support of, the
determination. In the 60-day period beginning
30 days after the notice is given, the Attorney
General shall revoke the certificate or modify it
as the Attorney General or the Secretary deems
necessary to cause the certificate to apply only
to activities that meet the procedures for the is-
suance of certificates described in subsection
(b)(2).
(D) 
INVESTIGATION
AUTHORITY.—For
purposes of carrying out this paragraph, the
Attorney General may conduct investigations in
the same manner as the Attorney General con-
ducts investigations under section 3 of the Anti-
trust Civil Process Act, except that no civil in-
vestigative demand may be issued to a person
167
to whom a certificate of review is issued if such
person is the target of such investigation.
(d) REVIEW OF DETERMINATIONS.—
(1) AVAILABILITY OF REVIEW FOR CERTAIN AC-
TIONS.—If the Attorney General denies, in whole or
in part, an application for a certificate of review or
for an amendment to a certificate, or revokes or
modifies a certificate pursuant to paragraph (3), the
applicant or certificate holder (as the case may be)
may, within 30 days of the denial or revocation,
bring an action in any appropriate district court of
the United States to set aside the determination on
the ground that such determination is erroneous
based on the preponderance of the evidence.
(2) NO
OTHER
REVIEW
PERMITTED.—Except
as provided in paragraph (1), no action by the At-
torney General or the Secretary pursuant to this
title shall be subject to judicial review.
(3) EFFECT
OF
REJECTED
APPLICATION.—If
the Attorney General denies, in whole or in part, an
application for a certificate of review or for an
amendment to a certificate, or revokes or amends a
certificate, neither the negative determination nor
the statement of reasons therefore shall be admissi-
ble in evidence, in any administrative or judicial pro-
168
ceeding, concerning any claim under the antitrust
laws.
(e) PUBLICATION
OF DECISIONS.—The Attorney
General shall publish a notice in the Federal Register on
a timely basis of each decision made with respect to an
application for a certificate of review under this section
or the amendment or revocation of such a certificate, in
a manner that protects the confidentiality of any propri-
etary information relating to the application.
(f) ANNUAL REPORTS.—Every person to whom a cer-
tificate of review is issued shall submit to the Attorney
General an annual report, in such form and at such time
as the Attorney General may require, that contains any
necessary updates to the information required under sub-
section (b) and a description of the activities of the holder
under the certificate during the preceding year.
(g) RESTRICTIONS ON DISCLOSURE OF INFORMA-
TION.—
(1) WAIVER
OF
DISCLOSURE
REQUIREMENTS
UNDER
ADMINISTRATIVE
PROCEDURE
ACT.—Infor-
mation submitted by any person in connection with
the issuance, amendment, or revocation of a certifi-
cate of review shall be exempt from disclosure under
section 552 of title 5, United States Code.
169
(2) RESTRICTIONS
ON
DISCLOSURE
OF
COM-
MERCIAL OR FINANCIAL INFORMATION.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), no officer or employee of the
United States shall disclose commercial or fi-
nancial information submitted in connection
with the issuance, amendment, or revocation of
a certificate of review if the information is priv-
ileged or confidential and if disclosure of the in-
formation would cause harm to the person who
submitted the information.
(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply with respect to information dis-
closed—
(i) upon a request made by the Con-
gress or any committee of the Congress,
(ii) in a judicial or administrative pro-
ceeding, subject to appropriate protective
orders,
(iii) with the consent of the person
who submitted the information,
(iv) in the course of making a deter-
mination with respect to the issuance,
amendment, or revocation of a certificate
of review, if the Attorney General deems
170
disclosure of the information to be nec-
essary in connection with making the de-
termination,
(v) in accordance with any require-
ment imposed by a statute of the United
States, or
(vi) in accordance with any rule or
regulation promulgated under subsection
(i) permitting the disclosure of the infor-
mation to an agency of the United States
or of a State on the condition that the
agency will disclose the information only
under 
the 
circumstances 
specified 
in
clauses (i) through (v).
(3) PROHIBITION AGAINST USE OF INFORMA-
TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI-
TRUST LAWS.—Any information disclosed in an ap-
plication for a certificate of review under this section
shall only be admissible into evidence in a judicial or
administrative proceeding for the sole purpose of es-
tablishing that a person is entitled to the protection
provided by such a certificate.
171
SEC. 605. NOTIFICATIONS PROVIDING REDUCTION IN CER-
TAIN PENALTIES UNDER ANTITRUST LAW
FOR 
HEALTH 
CARE 
COOPERATIVE 
VEN-
TURES.
(a) NOTIFICATIONS DESCRIBED.—
(1) SUBMISSION
OF
NOTIFICATION
BY
VEN-
TURE.—Any party to a health care cooperative ven-
ture, acting on such venture’s behalf, may, not later
than 90 days after entering into a written agreement
to form such venture or not later than 90 days after
the date of the enactment of this Act, whichever is
later, file with the Attorney General a written notifi-
cation disclosing—
(A) the identities of the parties to such
venture,
(B) the nature and objectives of such ven-
ture, and
(C) such additional information as the At-
torney General may require by regulation.
(2) ACTIVITIES DEEMED SUBMISSION OF NOTI-
FICATION.—The following health care cooperative
ventures shall be deemed to have filed a written noti-
fication with respect to the venture under paragraph
(1):
(A) SUBMISSION
OF
APPLICATION
FOR
CERTIFICATE OF REVIEW.—Any health care co-
172
operative venture for which an application for a
certificate of review is filed with the Attorney
General under section 603.
(B) CERTAIN VENTURES.—Any health care
cooperative venture meeting the following re-
quirements:
(i) The venture consists of a network
of non-institutional providers not greater
than—
(I) in the case of a nonexclusive
network in which the participating
members are permitted to create or
join other competing networks, 50
percent of the providers of health care
services in the relevant geographic
area and 50 percent of the members
of the provider specialty group in the
relevant market; or
(II) in the case of an exclusive
network in which the participating
members are not permitted to create
or join other competing networks, 35
percent of the providers of health care
services in the relevant geographic
area and 35 percent of the members
173
of the provider specialty group in the
relevant market.
(ii) Each member of the venture as-
sumes substantial financial risk for the op-
eration of the venture through risk-sharing
arrangements, including (but not limited
to)—
(I) the acceptance of capitation
contracts;
(II) the acceptance of contracts
with fee withholding mechanisms re-
lating to the ability to meet estab-
lished goals for utilization review and
management; and
(III) the holding by members of
significant ownership or equity inter-
ests in the venture, where the capital
contributed by the members is used to
fund the operational costs of the ven-
ture such as administration, market-
ing, and computer-operated medical
information, if the venture develops
and operates comprehensive programs
for utilization management and qual-
ity assurance that include controls
174
over the use of institutional, special-
ized, and ancillary medical services.
(3) SUBMISSION
OF
ADDITIONAL
INFORMA-
TION.—
(A) REQUEST OF ATTORNEY GENERAL.—
At any time after receiving a notification filed
under paragraph (1), the Attorney General may
require the submission of additional information
or documentary material relevant to the pro-
posed health care cooperative venture.
(B) PARTIES TO VENTURE.—Any party to
a health care cooperative venture may submit
such additional information on the venture’s be-
half as may be appropriate to ensure that the
venture will receive the protections provided
under subsection (b).
(C) REQUIRED SUBMISSION OF INFORMA-
TION
ON
CHANGES
TO
VENTURE.—A health
care cooperative venture for which a notification
is in effect under this section shall submit infor-
mation on any change in the membership of the
venture not later than 90 days after such
change occurs.
(4) PUBLICATION OF NOTIFICATION.—
180
subsection (a)(4) shall only be admissible into
evidence in a judicial or administrative proceed-
ing for the sole purpose of establishing that a
party to a health care cooperative venture is en-
titled to the protections described in this sub-
section.
(B) ACTIONS OF ATTORNEY GENERAL.—
No action taken by the Attorney General pursu-
ant to this section shall be admissible into evi-
dence in any judicial or administrative proceed-
ing for the purpose of supporting or answering
any claim under the antitrust laws.
SEC. 606. REVIEW AND REPORTS ON SAFE HARBORS AND
CERTIFICATES OF REVIEW.
(a) IN GENERAL.—The Attorney General (in con-
sultation with the Secretary and the Chair) shall periodi-
cally review the safe harbors described in section 602, the
additional safe harbors designated under section 603, and
the certificates of review issued under section 604, and—
(1) with respect to the safe harbors described in
section 602, submit such recommendations to Con-
gress as the Attorney General considers appropriate
for modifications of such safe harbors;
(2) with respect to the additional safe harbors
under designated under section 603, issue proposed
187
qualified long-term care services and bene-
fits incidental to such coverage,
‘‘(ii) the maximum benefit under the
policy for expenses incurred for any day
does not exceed $200,
‘‘(iii) such contract does not cover ex-
penses incurred for services or items to the
extent that such expenses are reimbursable
under title XVIII of the Social Security
Act or would be so reimbursable but for
the application of a deductible or coinsur-
ance amount,
‘‘(iv) such contract is guaranteed re-
newable,
‘‘(v) such contract does not have any
cash surrender value, and
‘‘(vi) all refunds of premiums, and all
policyholder dividends or similar amounts,
under such contract are to be applied as a
reduction in future premiums or to in-
crease future benefits.
‘‘(B) SPECIAL RULES.—
‘‘(i) PER DIEM, ETC. PAYMENTS PER-
MITTED.—A contract shall not fail to be
treated as described in subparagraph
201
(25) The program of rental assistance pay-
ments pursuant to contracts entered into under sec-
tion 521(a)(2)(A) of the Housing Act of 1949 (42
U.S.C. 1490a(a)(2)(A)).
(26) The program of assistance payments on
behalf of homeowners under section 235 of the Na-
tional Housing Act (12 U.S.C. 1715z).
(27) The program of rent supplement payments
on behalf of qualified tenants pursuant to contracts
entered into under section 101 of the Housing and
Urban Development Act of 1965 (12 U.S.C. 1701s).
(28) The loan and grant programs under sec-
tion 504 of the Housing Act of 1949 (42 U.S.C.
1474) for repairs and improvements to rural dwell-
ings.
(29) The loan and assistance programs under
sections 514 and 516 of the Housing Act of 1949
(42 U.S.C. 1484, 1486) for housing for farm labor.
(30) The program of grants for preservation
and rehabilitation of housing under section 533 of
the Housing Act of 1949 (42 U.S.C. 1490m).
(31) The program of grants and loans for mu-
tual and self-help housing and technical assistance
under section 523 of the Housing Act of 1949 (42
U.S.C. 1490c).