I
106TH CONGRESS
1ST SESSION
H. R. 1200
To provide for health care for every American and to control the cost and
enhance the quality of the health care system.
IN THE HOUSE OF REPRESENTATIVES
MARCH 18, 1999
Mr. MCDERMOTT (for himself, Mr. CONYERS, Mr. SANDERS, Mr. NADLER,
Mr. HINCHEY, Mr. SERRANO, Mr. FATTAH, Mr. OLVER, and Mr. COYNE)
introduced the following bill; which was referred to the Committee on
Commerce, and in addition to the Committees on Ways and Means, Gov-
ernment Reform, and Armed Services, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide for health care for every American and to control
the cost and enhance the quality of the health care system.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘American Health Security Act of 1999’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE 
I—ESTABLISHMENT 
OF 
A 
STATE-BASED 
AMERICAN
HEALTH SECURITY PROGRAM; UNIVERSAL ENTITLEMENT; EN-
ROLLMENT
Sec. 101. Establishment of a State-based American Health Security Program.
Sec. 102. Universal entitlement.
Sec. 103. Enrollment.
Sec. 104. Portability of benefits.
Sec. 105. Effective date of benefits.
Sec. 106. Relationship to existing Federal health programs.
TITLE II—COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE
BENEFITS AND BENEFITS FOR LONG TERM CARE
Sec. 201. Comprehensive benefits.
Sec. 202. Definitions relating to services.
Sec. 203. Special rules for home and community-based long-term care services.
Sec. 204. Exclusions and limitations.
Sec. 205. Certification; quality review; plans of care.
TITLE III—PROVIDER PARTICIPATION
Sec. 301. Provider participation and standards.
Sec. 302. Qualifications for providers.
Sec. 303. Qualifications for comprehensive health service organizations.
Sec. 304. Limitation on certain physician referrals.
TITLE IV—ADMINISTRATION
Subtitle A—General Administrative Provisions
Sec. 401. American Health Security Standards Board.
Sec. 402. American Health Security Advisory Council.
Sec. 403. Consultation with private entities.
Sec. 404. State health security programs.
Sec. 405. Complementary conduct of related health programs.
Subtitle B—Control Over Fraud and Abuse
Sec. 411. Application of Federal sanctions to all fraud and abuse under Amer-
ican Health Security Program.
Sec. 412. Requirements for operation of State health care fraud and abuse con-
trol units.
TITLE V—QUALITY ASSESSMENT
Sec. 501. American Health Security Quality Council.
Sec. 502. Development of certain methodologies, guidelines, and standards.
Sec. 503. State quality review programs.
Sec. 504. Elimination of existing utilization review programs; transition.
TITLE VI—NATIONAL HEALTH SECURITY BUDGET; PAYMENTS;
COST CONTAINMENT MEASURES
Subtitle A—Budgeting and Payments to States
Sec. 601. National health security budget.
Sec. 602. Computation of individual and State capitation amounts.
Sec. 603. State health security budgets.
Sec. 604. Federal payments to States.
Sec. 605. Account for health professional education expenditures.
Subtitle B—Payments by States to Providers
Sec. 611. Payments to hospitals and other facility-based services for operating
expenses on the basis of approved global budgets.
Sec. 612. Payments to health care practitioners based on prospective fee
schedule.
Sec. 613. Payments to comprehensive health service organizations.
Sec. 614. Payments for community-based primary health services.
Sec. 615. Payments for prescription drugs.
Sec. 616. Approved devices and equipment.
Sec. 617. Payments for other items and services.
Sec. 618. Payment incentives for medically underserved areas.
Sec. 619. Authority for alternative payment methodologies.
Subtitle C—Mandatory Assignment and Administrative Provisions
Sec. 621. Mandatory assignment.
Sec. 622. Procedures for reimbursement; appeals.
TITLE VII—PROMOTION OF PRIMARY HEALTH CARE; DEVELOP-
MENT OF HEALTH SERVICE CAPACITY; PROGRAMS TO ASSIST
THE MEDICALLY UNDERSERVED
Subtitle A—Promotion and Expansion of Primary Care Professional Training
Sec. 701. Role of Board; establishment of primary care professional output
goals.
Sec. 702. Establishment of Advisory Committee on Health Professional Edu-
cation.
Sec. 703. Grants for health professions education, nurse education, and the Na-
tional Health Service Corps.
Subtitle B—Direct Health Care Delivery
Sec. 711. Setaside for public health block grants.
Sec. 712. Setaside for primary health care delivery.
Sec. 713. Primary care service expansion grants.
Subtitle C—Primary Care and Outcomes Research
Sec. 721. Set-aside for outcomes research.
Sec. 722. Office of Primary Care and Prevention Research.
Subtitle D—School-Related Health Services
Sec. 731. Authorizations of appropriations.
Sec. 732. Eligibility for development and operation grants.
Sec. 733. Preferences.
Sec. 734. Grants for development of projects.
Sec. 735. Grants for operation of projects.
Sec. 736. Federal administrative costs.
Sec. 737. Definitions.
TITLE VIII—FINANCING PROVISIONS; AMERICAN HEALTH
SECURITY TRUST FUND
Sec. 800. Amendment of 1986 code; section 15 not to apply.
Subtitle A—American Health Security Trust Fund
Sec. 801. American Health Security Trust Fund.
Subtitle B—Taxes Based on Income and Wages
Sec. 811. Payroll tax on employers.
Sec. 812. Health care income tax.
Subtitle C—Increase in Excise Taxes on Tobacco Products
Sec. 821. Increase in excise taxes on tobacco products.
TITLE IX—CONFORMING AMENDMENTS TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974
Sec. 901. ERISA inapplicable to health coverage arrangements under State
health security programs.
Sec. 902. Exemption of State health security programs from ERISA preemp-
tion.
Sec. 903. Prohibition of employee benefits duplicative of benefits under State
health security programs; coordination in case of workers’ com-
pensation.
Sec. 904. Repeal of continuation coverage requirements under ERISA and cer-
tain other requirements relating to group health plans.
Sec. 905. Effective date of title.
TITLE X—ADDITIONAL CONFORMING AMENDMENTS
Sec. 1001. Repeal of certain provisions in Internal Revenue Code of 1986.
Sec. 1002. Repeal of certain provisions in the Employee Retirement Income Se-
curity Act of 1974.
Sec. 1003. Repeal of certain provisions in the Public Health Service Act.
Sec. 1004. Effective date of title.
TITLE I—ESTABLISHMENT OF A
STATE-BASED 
AMERICAN
HEALTH 
SECURITY 
PRO-
GRAM; UNIVERSAL ENTITLE-
MENT; ENROLLMENT
SEC. 101. ESTABLISHMENT OF A STATE-BASED AMERICAN
HEALTH SECURITY PROGRAM.
(a) IN GENERAL.—There is hereby established in the
United States a State-Based American Health Security
Program to be administered by the individual States in
accordance with Federal standards specified in, or estab-
lished under, this Act.
(b) STATE HEALTH SECURITY PROGRAMS.—In order
for a State to be eligible to receive payment under section
604, a State must establish a State health security pro-
gram in accordance with this Act.
(c) STATE DEFINED.—
(1) IN GENERAL.—In this Act, subject to para-
graph (2), the term ‘‘State’’ means each of the fifty
States and the District of Columbia.
(2) ELECTION.—If the Governor of Puerto
Rico, the Virgin Islands, Guam, American Samoa, or
the Northern Mariana Islands certifies to the Presi-
dent that the legislature of the Commonwealth or
territory has enacted legislation desiring that the
Commonwealth or territory be included as a State
under the provisions of this Act, such Common-
wealth or territory shall be included as a ‘‘State’’
under this Act beginning January 1 of the first year
beginning ninety days after the President receives
the notification.
SEC. 102. UNIVERSAL ENTITLEMENT.
(a) IN GENERAL.—Every individual who is a resident
of the United States and is a citizen or national of the
United States or lawful resident alien (as defined in sub-
section (d) is entitled to benefits for health care services
under this Act under the appropriate State health security
program. In this section, the term ‘‘appropriate State
health security program’’ means, with respect to an indi-
vidual, the State health security program for the State in
which the individual maintains a primary residence.
(b) TREATMENT OF CERTAIN NONIMMIGRANTS.—
(1) IN GENERAL.—The American Health Secu-
rity Standards Board (in this Act referred to as the
‘‘Board’’) may make eligible for benefits for health
care services under the appropriate State health se-
curity program under this Act such classes of aliens
admitted to the United States as nonimmigrants as
the Board may provide.
(2) CONSIDERATION.—In providing for eligi-
bility under paragraph (1), the Board shall consider
reciprocity in health care services offered to United
States citizens who are nonimmigrants in other for-
eign states, and such other factors as the Board
determines to be appropriate.
(c) TREATMENT OF OTHER INDIVIDUALS.—
(1) BY BOARD.—The Board also may make eli-
gible for benefits for health care services under the
appropriate State health security program under this
Act other individuals not described in subsection (a)
or (b), and regulate the nature of the eligibility of
such individuals, in order—
(A) to preserve the public health of
communities,
(B) to compensate States for the addi-
tional health care financing burdens created by
such individuals, and
(C) to prevent adverse financial and med-
ical consequences of uncompensated care,
while inhibiting travel and immigration to the
United States for the sole purpose of obtaining
health care services.
(2) BY STATES.—Any State health security pro-
gram may make individuals described in paragraph
(1) eligible for benefits at the expense of the State.
(d) LAWFUL RESIDENT ALIEN DEFINED.—For pur-
poses of this section, the term ‘‘lawful resident alien’’
means an alien lawfully admitted for permanent residence
and any other alien lawfully residing permanently in the
United States under color of law, including an alien with
lawful temporary resident status under section 210, 210A,
or 234A of the Immigration and Nationality Act (8 U.S.C.
1160, 1161, or 1255a).
SEC. 103. ENROLLMENT.
(a) IN GENERAL.—Each State health security pro-
gram shall provide a mechanism for the enrollment of indi-
viduals entitled or eligible for benefits under this Act. The
mechanism shall—
(1) include a process for the automatic enroll-
ment of individuals at the time of birth in the
United States and at the time of immigration into
the United States or other acquisition of lawful resi-
dent status in the United States,
(2) provide for the enrollment, as of January 1,
2001, of all individuals who are eligible to be en-
rolled as of such date, and
(3) include a process for the enrollment of indi-
viduals made eligible for health care services under
subsections (b) and (c) of section 102.
(b) AVAILABILITY OF APPLICATIONS.—Each State
health security program shall make applications for enroll-
ment under the program available—
(1) at employment and payroll offices of em-
ployers located in the State,
(2) at local offices of the Social Security
Administration,
(3) at social services locations,
(4) at out-reach sites (such as provider and
practitioner locations), and
(5) at other locations (including post offices
and schools) accessible to a broad cross-section of
individuals eligible to enroll.
(c) ISSUANCE OF HEALTH SECURITY CARDS.—In
conjunction with an individual’s enrollment for benefits
under this Act, the State health security program shall
provide for the issuance of a health security card which
shall be used for purposes of identification and processing
of claims for benefits under the program. The State health
security program may provide for issuance of such cards
by employers for purposes of carrying out enrollment pur-
suant to subsection (a)(2).
SEC. 104. PORTABILITY OF BENEFITS.
(a) IN GENERAL.—To ensure continuous access to
benefits for health care services covered under this Act,
each State health security program—
(1) shall not impose any minimum period of
residence in the State, or waiting period, in excess
of three months before residents of the State are
entitled to, or eligible for, such benefits under the
program;
(2) shall provide continuation of payment for
covered health care services to individuals who have
terminated their residence in the State and estab-
lished their residence in another State, for the dura-
tion of any waiting period imposed in the State of
new residency for establishing entitlement to, or
eligibility for, such services; and
(3) shall provide for the payment for health
care services covered under this Act provided to indi-
viduals while temporarily absent from the State
based on the following principles:
(A) Payment for such health care services
is at the rate that is approved by the State
health security program in the State in which
the services are provided, unless the States con-
cerned agree to apportion the cost between
them in a different manner.
(B) Payment for such health care services
provided outside the United States is made on
the basis of the amount that would have been
paid by the State health security program for
similar services rendered in the State, with due
regard, in the case of hospital services, to the
size of the hospital, standards of service, and
other relevant factors.
(b) 
CROSS-BORDER
ARRANGEMENTS.—A 
State
health security program for a State may negotiate with
such a program in an adjacent State a reciprocal arrange-
ment for the coverage under such other program of health
care services to enrollees residing in the border region.
SEC. 105. EFFECTIVE DATE OF BENEFITS.
Benefits shall first be available under this Act for
items and services furnished on or after January 1, 2001.
SEC. 106. RELATIONSHIP TO EXISTING FEDERAL HEALTH
PROGRAMS.
(a) MEDICARE AND MEDICAID.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, subject to paragraph (2)—
(A) no benefits shall be available under
title XVIII of the Social Security Act for any
item or service furnished after December 31,
2000,
(B) no individual is entitled to medical as-
sistance under a State plan approved under
title XIX of such Act for any item or service
furnished after such date, and
(C) no payment shall be made to a State
under section 1903(a) of such Act with respect
to medical assistance for any item or service
furnished after such date.
(2) TRANSITION.—In the case of inpatient hos-
pital services and extended care services during a
continuous period of stay which began before Janu-
ary 1, 2001, and which had not ended as of such
date, for which benefits are provided under title
XVIII, or under a State plan under title XIX, of the
Social Security Act, the Secretary of Health and
Human Services and each State plan, respectively,
shall provide for continuation of benefits under such
title or plan until the end of the period of stay.
(b) FEDERAL EMPLOYEES HEALTH BENEFITS PRO-
GRAM.—No benefits shall be made available under chapter
89 of title 5, United States Code, for any part of a cov-
erage period occurring after December 31, 2000.
(c) CHAMPUS.—No benefits shall be made available
under sections 1079 and 1086 of title 10, United States
Code, for items or services furnished after December 31,
2000.
(d) TREATMENT OF BENEFITS FOR VETERANS AND
NATIVE AMERICANS.—Nothing in this Act shall affect the
eligibility of veterans for the medical benefits and services
provided under title 38, United States Code, or of Indians
for the medical benefits and services provided by or
through the Indian Health Service.
TITLE II—COMPREHENSIVE BEN-
EFITS, INCLUDING PREVEN-
TIVE BENEFITS AND BENE-
FITS FOR LONG-TERM CARE
SEC. 201. COMPREHENSIVE BENEFITS.
(a) IN GENERAL.—Subject to the succeeding provi-
sions of this title, individuals enrolled for benefits under
this Act are entitled to have payment made under a State
health security program for the following items and serv-
ices if medically necessary or appropriate for the mainte-
nance of health or for the diagnosis, treatment, or rehabili-
tation of a health condition:
(1) HOSPITAL SERVICES.—Inpatient and out-
patient hospital care, including 24-hour-a-day emer-
gency services.
(2) 
PROFESSIONAL
SERVICES.—Professional
services of health care practitioners authorized to
provide health care services under State law, includ-
ing patient education and training in self-manage-
ment techniques.
(3) 
COMMUNITY-BASED
PRIMARY
HEALTH
SERVICES.—Community-based primary health serv-
ices (as defined in section 202(a)).
(4) PREVENTIVE
SERVICES.—Preventive serv-
ices (as defined in section 202(b)).
(5) LONG-TERM, ACUTE, AND CHRONIC CARE
SERVICES.—
(A) Nursing facility services.
(B) Home health services.
(C) Home and community-based long-term
care services (as defined in section 202(c)) for
individuals described in section 203(a).
(D) Hospice care.
(E) Services in intermediate care facilities
for individuals with mental retardation.
(6) PRESCRIPTION DRUGS, BIOLOGICALS, INSU-
LIN, MEDICAL FOODS.—
(A) Outpatient prescription drugs and
biologicals, as specified by the Board consistent
with section 515.
(B) Insulin.
(C) Medical foods (as defined in section
202(e)).
(7) DENTAL SERVICES.—Dental services (as de-
fined in section 202(h)).
(8) MENTAL HEALTH AND SUBSTANCE ABUSE
TREATMENT
SERVICES.—Mental health and sub-
stance abuse treatment services (as defined in sec-
tion 202(f)).
(9) DIAGNOSTIC TESTS.—Diagnostic tests.
(10) OTHER ITEMS AND SERVICES.—
(A) OUTPATIENT
THERAPY.—Outpatient
physical therapy services, outpatient speech pa-
thology services, and outpatient occupational
therapy services in all settings.
(B) DURABLE MEDICAL EQUIPMENT.—Du-
rable medical equipment.
(C) HOME DIALYSIS.—Home dialysis sup-
plies and equipment.
(D) AMBULANCE.—Emergency ambulance
service.
(E) PROSTHETIC DEVICES.—Prosthetic de-
vices, including replacements of such devices.
(F) ADDITIONAL ITEMS AND SERVICES.—
Such other medical or health care items or
services as the Board may specify.
(b) COST-SHARING.—
(1) IN GENERAL.—Except as provided in this
subsection, there are no deductibles, coinsurance, or
copayments applicable to acute care and preventive
benefits provided under this title.
(2) COST-SHARING
FOR
LONG-TERM
CARE
SERVICES.—
(A) IN GENERAL.—
(i) payments for home and commu-
nity-based long-term care services are sub-
ject to coinsurance of 20 percent, and
(ii) payments for nursing facility serv-
ices are subject to coinsurance of 35 per-
cent.
(B) EXCEPTION.—With respect to the co-
insurance 
established 
under 
subparagraph
(A)—
(i) such coinsurance shall not apply to
an individual with income (as defined by
the Secretary) of not more than 100 per-
cent of the income official poverty line ap-
plicable to a family of the size involved;
and
(ii) in the case of an individual with
such income that exceeds 100 percent, but
is less than 200 percent, of such applicable
poverty line, the coinsurance shall be re-
duced in the same proportion as the pro-
portion of such income is less than 200
percent of such applicable poverty line.
(c) PROHIBITION OF BALANCE BILLING.—As pro-
vided in section 531, no person may impose a charge for
covered services for which benefits are provided under this
Act.
(d) NO DUPLICATE HEALTH INSURANCE.—Each
State health security program shall prohibit the sale of
health insurance in the State if payment under the insur-
ance duplicates payment for any items or services for
which payment may be made under such a program.
(e) STATE PROGRAM MAY PROVIDE ADDITIONAL
BENEFITS.—Nothing in this Act shall be construed as
limiting the benefits that may be made available under a
State health security program to residents of the State
at the expense of the State.
(f) EMPLOYERS MAY PROVIDE ADDITIONAL BENE-
FITS.—Nothing in this Act shall be construed as limiting
the additional benefits that an employer may provide to
employees or their dependents, or to former employees or
their dependents.
SEC. 202. DEFINITIONS RELATING TO SERVICES.
(a) COMMUNITY-BASED PRIMARY HEALTH SERV-
ICES.—In this title, the term ‘‘community-based primary
health services’’ means ambulatory health services
furnished—
(1) by a rural health clinic;
(2) by a Federally qualified health center (as
defined in section 1905(l)(2)(B) of the Social Secu-
rity Act), and which, for purposes of this Act, in-
clude services furnished by State and local health
agencies;
(3) in a school-based setting;
(4) by public educational agencies and other
providers of services to children entitled to assist-
ance under the Individuals with Disabilities Edu-
cation Act for services furnished pursuant to a
written Individualized Family Services Plan or
Individual Education Plan under such Act; and
(5) public and private nonprofit entities receiv-
ing Federal assistance under the Public Health
Service Act.
(b) PREVENTIVE SERVICES.—
(1) IN GENERAL.—In this title, the term ‘‘pre-
ventive services’’ means items and services—
(A) which—
(i) are specified in paragraph (2), or
(ii) the Board determines to be effec-
tive in the maintenance and promotion of
health or minimizing the effect of illness,
disease, or medical condition; and
(B) which are provided consistent with the
periodicity schedule established under para-
graph (3).
(2) SPECIFIED
PREVENTIVE
SERVICES.—The
services specified in this paragraph are as follows:
(A) Basic immunizations.
(B) Prenatal and well-baby care (for in-
fants under one year of age).
(C) Well-child care (including periodic
physical examinations, hearing and vision
screening, and developmental screening and ex-
aminations) for individuals under 18 years of
age.
(D) Periodic screening mammography, Pap
smears, and colorectal examinations and exami-
nations for prostate cancer.
(E) Physical examinations.
(F) Family planning services.
(G) Routine eye examinations, eyeglasses,
and contact lenses.
(H) Hearing aids, but only upon a deter-
mination of a certified audiologist or physician
that a hearing problem exists and is caused by
a condition that can be corrected by use of a
hearing aid.
(3) SCHEDULE.—The Board shall establish, in
consultation with experts in preventive medicine and
public health and taking into consideration those
preventive services recommended by the Preventive
Services Task Force and published as the Guide to
Clinical Preventive Services, a periodicity schedule
for the coverage of preventive services under para-
graph (1). Such schedule shall take into consider-
ation the cost-effectiveness of appropriate preventive
care and shall be revised not less frequently than
once every 5 years, in consultation with experts in
preventive medicine and public health.
(c) HOME
AND
COMMUNITY-BASED
LONG-TERM
CARE SERVICES.—In this title, the term ‘‘home and com-
munity-based long-term care services’’ means the following
services provided to an individual to enable the individual
to remain in such individual’s place of residence within
the community:
(1) Home health aide services.
(2) Adult day health care, social day care or
psychiatric day care.
(3) Medical social work services.
(4) Care coordination services, as defined in
subsection (g)(1).
(5) Respite care, including training for informal
caregivers.
(6) Personal assistance services, and home-
maker services (including meals) incidental to the
provision of personal assistance services.
(d) HOME HEALTH SERVICES.—
(1) IN
GENERAL.—The term ‘‘home health
services’’ means items and services described in sec-
tion 1861(m) of the Social Security Act and includes
home infusion services.
(2) HOME
INFUSION
SERVICES.—The term
‘‘home infusion services’’ includes the nursing, phar-
macy, and related services that are necessary to con-
duct the home infusion of a drug regimen safely and
effectively under a plan established and periodically
reviewed by a physician and that are provided in
compliance with quality assurance requirements es-
tablished by the Secretary.
(e) MEDICAL FOODS.—In this title, the term ‘‘med-
ical foods’’ means foods which are formulated to be con-
sumed or administered enterally under the supervision of
a physician and which are intended for the specific dietary
management of a disease or condition for which distinctive
nutritional requirements, based on recognized scientific
principles, are established by medical evaluation.
(f) MENTAL
HEALTH
AND
SUBSTANCE
ABUSE
TREATMENT SERVICES.—
(1) SERVICES
DESCRIBED.—In this title, the
term ‘‘mental health and substance abuse treatment
services’’ means the following services related to the
prevention, diagnosis, treatment, and rehabilitation
of mental illness and promotion of mental health:
(A) INPATIENT HOSPITAL SERVICES.—In-
patient hospital services furnished primarily for
the diagnosis or treatment of mental illness or
substance abuse for up to 60 days during a
year, reduced by a number of days determined
by the Secretary so that the actuarial value of
providing such number of days of services
under this paragraph to the individual is equal
to the actuarial value of the days of inpatient
residential services furnished to the individual
under subparagraph (B) during the year after
such services have been furnished to the indi-
vidual for 120 days during the year (rounded to
the nearest day), but only if (with respect to
services furnished to an individual described in
section 204(b)(1)) such services are furnished
in conformity with the plan of an organized sys-
tem of care for mental health and substance
abuse services in accordance with section
204(b)(2).
(B) INTENSIVE RESIDENTIAL SERVICES.—
Intensive residential services (as defined in
paragraph (2)) furnished to an individual for
up to 120 days during any calendar year, ex-
cept that—
(i) such services may be furnished to
the individual for additional days during
the year if necessary for the individual to
complete a course of treatment to the ex-
tent that the number of days of inpatient
hospital services described in subparagraph
(A) that may be furnished to the individual
during the year (as reduced under such
subparagraph) is not less than 15; and
(ii) reduced by a number of days de-
termined by the Secretary so that the actu-
arial value of providing such number of
days of services under this paragraph to
the individual is equal to the actuarial
value of the days of intensive community-
based services furnished to the individual
under subparagraph (D) during the year
after such services have been furnished to
the individual for 90 days (or, in the case
of services described in subparagraph
child with serious substance abuse disorder
(as determined in accordance with criteria
established by the Secretary);
(ii) in the case of services described in
section 1861(ff)(2)(C), for up to 180 days
during any calendar year, except that such
services may be furnished to the individual
for a number of additional days during the
year equal to the difference between the
total number of days of intensive residen-
tial services which the individual may re-
ceive during the year under part A (as de-
termined under subparagraph (B)) and the
number of days of such services which the
individual has received during the year, or
(iii) in the case of any other such
services, for up to 90 days during any cal-
endar year, except that such services may
be furnished to the individual for the num-
ber of additional days during the year de-
scribed in clause (ii).
(2) INTENSIVE
RESIDENTIAL
SERVICES
DE-
FINED.—
(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the term ‘‘intensive resi-
dential services’’ means inpatient services pro-
vided in any of the following facilities:
(i) Residential detoxification centers.
(ii) Crisis residential programs or
mental illness residential treatment pro-
grams.
(iii) Therapeutic family or group
treatment homes.
(iv) Residential centers for substance
abuse treatment.
(B) REQUIREMENTS FOR FACILITIES.—No
service may be treated as an intensive residen-
tial service under subparagraph (A) unless the
facility at which the service is provided—
(i) is legally authorized to provide
such service under the law of the State (or
under a State regulatory mechanism pro-
vided by State law) in which the facility is
located or is certified to provide such serv-
ice by an appropriate accreditation entity
approved by the State in consultation with
the Secretary; and
(ii) meets such other requirements as
the Secretary may impose to assure the
quality of the intensive residential services
provided.
(C) SERVICES
FURNISHED
TO
AT-RISK
CHILDREN.—In the case of services furnished
to an individual described in section 204(b)(1),
no service may be treated as an intensive resi-
dential service under this subsection unless the
service is furnished in conformity with the plan
of an organized system of care for mental
health and substance abuse services in accord-
ance with section 204(b)(2).
(D) MANAGEMENT STANDARDS.—No serv-
ice may be treated as an intensive residential
service under subparagraph (A) unless the serv-
ice is furnished in accordance with standards
established by the Secretary for the manage-
ment of such services.
(3) INTENSIVE
COMMUNITY-BASED
SERVICES
DEFINED.—
(A) IN
GENERAL.—The term ‘‘intensive
community-based services’’ means the items
and services described in subparagraph (B) pre-
scribed by a physician (or, in the case of serv-
ices furnished to an individual described in sec-
tion 204(b)(1), by an organized system of care
for mental health and substance abuse services
in accordance with such section) and provided
under a program described in subparagraph
(D) under the supervision of a physician (or, to
the extent permitted under the law of the State
in which the services are furnished, a non-phy-
sician mental health professional) pursuant to
an individualized, written plan of treatment es-
tablished and periodically reviewed by a physi-
cian (in consultation with appropriate staff par-
ticipating in such program) which sets forth the
physician’s diagnosis, the type, amount, fre-
quency, and duration of the items and services
provided under the plan, and the goals for
treatment under the plan, but does not include
any item or service that is not furnished in ac-
cordance with standards established by the Sec-
retary for the management of such services.
(B) ITEMS AND SERVICES DESCRIBED.—
The items and services described in this sub-
paragraph are—
(i) partial hospitalization services con-
sisting of the items and services described
in subparagraph (C);
(ii) psychiatric rehabilitation services;
(iii) day treatment services for indi-
viduals under 19 years of age;
(iv) in-home services;
(v) case management services, includ-
ing collateral services designated as such
case management services by the Sec-
retary;
(vi) ambulatory detoxification services;
(vii) such other items and services as
the Secretary may provide (but in no event
to include meals and transportation),
that are reasonable and necessary for the diag-
nosis or active treatment of the individual’s
condition, reasonably expected to improve or
maintain the individual’s condition and func-
tional level and to prevent relapse or hos-
pitalization, and furnished pursuant to such
guidelines relating to frequency and duration of
services as the Secretary shall by regulation es-
tablish (taking into account accepted norms of
medical practice and the reasonable expectation
of patient improvement).
(C) ITEMS
AND
SERVICES
INCLUDED
AS
PARTIAL
HOSPITALIZATION
SERVICES.—For
purposes of subparagraph (B)(i), partial hos-
pitalization services consist of the following:
(i) Individual and group therapy with
physicians or psychologists (or other men-
tal health professionals to the extent au-
thorized under State law).
(ii) Occupational therapy requiring
the skills of a qualified occupational thera-
pist.
(iii) Services of social workers, trained
psychiatric nurses, behavioral aides, and
other staff trained to work with psychiatric
patients (to the extent authorized under
State law).
(iv) Drugs and biologicals furnished
for therapeutic purposes (which cannot, as
determined in accordance with regulations,
be self-administered).
(v) Individualized activity therapies
that are not primarily recreational or di-
versionary.
(vi) Family counseling (the primary
purpose of which is treatment of the indi-
vidual’s condition).
(vii) Patient training and education
(to the extent that training and edu-
cational activities are closely and clearly
related to the individual’s care and treat-
ment).
(viii) Diagnostic services.
(D) PROGRAMS
DESCRIBED.—A program
described in this subparagraph is a program
(whether facility-based or freestanding) which is
furnished by an entity—
(i) legally authorized to furnish such a
program under State law (or the State reg-
ulatory mechanism provided by State law)
or certified to furnish such a program by
an appropriate accreditation entity ap-
proved by the State in consultation with
the Secretary; and
(ii) meeting such other requirements
as the Secretary may impose to assure the
quality of the intensive community-based
services provided.
(g) CARE COORDINATION SERVICES.—
(1) IN GENERAL.—In this title, the term ‘‘care
coordination services’’ means services provided by
care coordinators (as defined in paragraph (2)) to
individuals described in paragraph (3) for the co-
ordination and monitoring of home and community-
based long term care services to ensure appropriate,
cost-effective utilization of such services in a com-
prehensive and continuous manner, and includes—
(A) transition management between inpa-
tient facilities and community-based services,
including assisting patients in identifying and
gaining access to appropriate ancillary services;
and
(B) evaluating and recommending appro-
priate treatment services, in cooperation with
patients and other providers and in conjunction
with any quality review program or plan of care
under section 205.
(2) CARE COORDINATOR.—
(A) IN GENERAL.—In this title, the term
‘‘care coordinator’’ means an individual or non-
profit or public agency or organization which
the State health security program determines—
(i) is capable of performing directly,
efficiently, and effectively the duties of a
care coordinator described in paragraph
(1), and
(ii) demonstrates capability in estab-
lishing and periodically reviewing and re-
vising plans of care, and in arranging for
and monitoring the provision and quality
of services under any plan.
(B) INDEPENDENCE.—State health secu-
rity programs shall establish safeguards to as-
sure that care coordinators have no financial in-
terest in treatment decisions or placements.
Care coordination may not be provided through
any structure or mechanism through which
quality review is performed.
(3) ELIGIBLE INDIVIDUALS.—An individual de-
scribed in this paragraph is an individual described
in section 203 (relating to individuals qualifying for
long term and chronic care services).
(h) DENTAL SERVICES.—
(1) IN GENERAL.—In this title, subject to sub-
section (b), the term ‘‘dental services’’ means the
following:
(A) Emergency dental treatment, including
extractions, for bleeding, pain, acute infections,
and injuries to the maxillofacial region.
(B) Prevention and diagnosis of dental dis-
ease, including examinations of the hard and
soft tissues of the oral cavity and related struc-
tures, radiographs, dental sealants, fluorides,
and dental prophylaxis.
(C) Treatment of dental disease, including
non-cast fillings, periodontal maintenance serv-
ices, and endodontic services.
(D) Space maintenance procedures to pre-
vent orthodontic complications.
(E) Orthodontic treatment to prevent se-
vere malocclusions.
(F) Full dentures.
(G) Medically necessary oral health care.
(H) Any items and services for special
needs patients that are not described in sub-
paragraphs (A) through (G) and that—
(i) are required to provide such pa-
tients the items and services described in
subparagraphs (A) through (G);
(ii) are required to establish oral func-
tion (including general anesthesia for indi-
viduals with physical or emotional limita-
tions that prevent the provision of dental
care without such anesthesia);
(iii) consist of orthodontic care for se-
vere dentofacial abnormalities; or
(iv) consist of prosthetic dental de-
vices for genetic or birth defects or fitting
for such devices.
(I) Any dental care for individuals with a
seizure disorder that is not described in sub-
paragraphs (A) through (H) and that is re-
quired because of an illness, injury, disorder, or
other health condition that results from such
seizure disorder.
(2) LIMITATIONS.—Dental services are subject
to the following limitations:
(A) PREVENTION AND DIAGNOSIS.—
(i) 
EXAMINATIONS
AND
PROPHY-
LAXIS.—The examinations and prophylaxis
described in paragraph (1)(B) are covered
only consistent with a periodicity schedule
established by the Board, which schedule
may provide for special treatment of indi-
viduals less than 18 years of age and of
special needs patients.
(ii) DENTAL SEALANTS.—The dental
sealants described in such paragraph are
not covered for individuals 18 years of age
or older. Such sealants are covered for in-
dividuals less than 10 years of age for pro-
tection of the 1st permanent molars. Such
sealants are covered for individuals 10
years of age or older for protection of the
2d permanent molars.
(B) TREATMENT OF DENTAL DISEASE.—
Prior to January 1, 2006, the items and serv-
ices described in paragraph (1)(C) are covered
only for individuals less than 18 years of age
and special needs patients. On or after such
date, such items and services are covered for all
individuals enrolled for benefits under this Act,
except that endodontic services are not covered
for individuals 18 years of age or older.
(C) SPACE MAINTENANCE.—The items and
services described in paragraph (1)(D) are cov-
ered only for individuals at least 3 years of age,
but less than 13 years of age and—
(i) are limited to posterior teeth;
(ii) involve maintenance of a space or
spaces for permanent posterior teeth that
would otherwise be prevented from normal
eruption if the space were not maintained;
and
(iii) do not include a space maintainer
that is placed within 6 months of the ex-
pected eruption of the permanent posterior
tooth concerned.
(D) ORTHODONTIC TREATMENT.—Prior to
January 1, 2006, the items and services de-
scribed in paragraph (1)(E) are covered only
for individuals at least 6 years of age, but less
than 12 years of age, who have severe
dentofacial abnormalities. On or after such
date, such items and services are covered only
for individuals at least 6 years of age, but less
than 12 years of age.
(E) DENTURES.—Prior to January 1,
2006, the dentures described in paragraph
(1)(F) are not covered, except for special needs
patients. On or after such date, dentures are
covered for an individual consistent with a peri-
odicity schedule established by the Board, ex-
cept that the limitation of periodicity provided
in such schedule shall not apply to a special
needs patient.
(3) DEFINITIONS.—For purposes of this title:
(A) MEDICALLY NECESSARY ORAL HEALTH
CARE.—The term ‘‘medically necessary oral
health care’’ means oral health care that is re-
quired as a direct result of, or would have a di-
rect impact on, an underlying medical condi-
tion. Such term includes oral health care di-
rected toward control or elimination of pain, in-
fection, or reestablishment of oral function.
(B) SPECIAL NEEDS PATIENT.—The term
‘‘special needs patient’’ includes an individual
with a genetic or birth defect, a developmental
disability, or an acquired medical disability.
(i) NURSING FACILITY; NURSING FACILITY SERV-
ICES.—Except as may be provided by the Board, the
terms ‘‘nursing facility’’ and ‘‘nursing facility services’’
have the meanings given such terms in sections 1919(a)
and 1905(f), respectively, of the Social Security Act.
(j) SERVICES IN INTERMEDIATE CARE FACILITIES
FOR INDIVIDUALS WITH MENTAL RETARDATION.—Ex-
cept as may be provided by the Board—
(1) the term ‘‘intermediate care facility for indi-
viduals with mental retardation’’ has the meaning
specified in section 1905(d) of the Social Security
Act (as in effect before the enactment of this Act);
and
(2) the term ‘‘services in intermediate care fa-
cilities for individuals with mental retardation’’
means services described in section 1905(a)(15) of
such Act (as so in effect) in an intermediate care fa-
cility for individuals with mental retardation to an
individual determined to require such services in ac-
cordance with standards specified by the Board and
comparable to the standards described in section
1902(a)(31)(A) of such Act (as so in effect).
(k) OTHER TERMS.—Except as may be provided by
the Board, the definitions contained in section 1861 of the
Social Security Act shall apply.
SEC. 203. SPECIAL RULES FOR HOME AND COMMUNITY-
BASED LONG-TERM CARE SERVICES.
(a) QUALIFYING INDIVIDUALS.—For purposes of sec-
tion 201(a)(5)(C), individuals described in this subsection
are the following individuals:
(1) ADULTS.—Individuals 18 years of age or
older determined (in a manner specified by the
Board)—
(A) to be unable to perform, without the
assistance of an individual, at least 2 of the fol-
lowing 5 activities of daily living (or who has a
similar level of disability due to cognitive
impairment)—
(i) bathing;
(ii) eating;
(iii) dressing;
(iv) toileting; and
(v) transferring in and out of a bed or
in and out of a chair;
(B) due to cognitive or mental impair-
ments, to require supervision because the indi-
vidual behaves in a manner that poses health or
safety hazards to himself or herself or others;
or
(C) due to cognitive or mental impair-
ments, to require queuing to perform activities
of daily living.
(2) CHILDREN.—Individuals under 18 years of
age determined (in a manner specified by the Board)
to meet such alternative standard of disability for
children as the Board develops. Such alternative
standard shall be comparable to the standard for
adults and appropriate for children.
(b) LIMIT ON SERVICES.—
(1) IN GENERAL.—The aggregate expenditures
by a State health security program with respect to
home and community-based long-term care services
in a period (specified by the Board) may not exceed
65 percent (or such alternative ratio as the Board
establishes under paragraph (2)) of the average of
the amount of payment that would have been made
under the program during the period if all the home-
based long-term care beneficiaries had been resi-
dents of nursing facilities in the same area in which
the services were provided.
(2) ALTERNATIVE RATIO.—The Board may es-
tablish for purposes of paragraph (1) an alternative
ratio (of payments for home and community-based
long term care services to payments for nursing fa-
cility services) as the Board determines to be more
consistent with the goal of providing cost-effective
long-term care in the most appropriate and least
restrictive setting.
SEC. 204. EXCLUSIONS AND LIMITATIONS.
(a) IN GENERAL.—Subject to section 201(e), benefits
for service are not available under this Act unless the
services meet the standards specified in section 201(a).
(b) SPECIAL DELIVERY REQUIREMENTS FOR MEN-
TAL HEALTH AND SUBSTANCE ABUSE TREATMENT SERV-
ICES PROVIDED TO AT-RISK CHILDREN.—
(1) REQUIRING
SERVICES
TO
BE
PROVIDED
THROUGH ORGANIZED SYSTEMS OF CARE.—A State
health security program shall ensure that mental
health services and substance abuse treatment serv-
ices are furnished through an organized system of
care, as described in paragraph (2), if—
(A) the services are provided to an indi-
vidual less than 22 years of age;
(B) the individual has a serious emotional
disturbance or a substance abuse disorder; and
(C) the individual is, or is at imminent risk
of being, subject to the authority of, or in need
of the services of, at least 1 public agency that
serves the needs of children, including an agen-
cy involved with child welfare, special education,
juvenile justice, or criminal justice.
(2) REQUIREMENTS FOR SYSTEM OF CARE.—In
this subsection, an ‘‘organized system of care’’ is a
community-based service delivery network, which
may consist of public and private providers, that
meets the following requirements:
(A) The system has established linkages
with existing mental health services and sub-
stance abuse treatment service delivery pro-
grams in the plan service area (or is in the
process of developing or operating a system
with appropriate public agencies in the area to
coordinate the delivery of such services to indi-
viduals in the area).
(B) The system provides for the participa-
tion and coordination of multiple agencies and
providers that serve the needs of children in the
area, including agencies and providers involved
with child welfare, education, juvenile justice,
criminal justice, health care, mental health, and
substance abuse prevention and treatment.
(C) The system provides for the involve-
ment of the families of children to whom mental
health services and substance abuse treatment
services are provided in the planning of treat-
ment and the delivery of services.
(D) The system provides for the develop-
ment and implementation of individualized
treatment plans by multidisciplinary and multi-
agency teams, which are recognized and fol-
lowed by the applicable agencies and providers
in the area.
(E) The system ensures the delivery and
coordination of the range of mental health serv-
ices and substance abuse treatment services re-
quired by individuals under 22 years of age who
have a serious emotion disturbance or a sub-
stance abuse disorder.
(F) The system provides for the manage-
ment of the individualized treatment plans de-
scribed in subparagraph (D) and for a flexible
response to changes in treatment needs over
time.
(c) TREATMENT OF EXPERIMENTAL SERVICES.—In
applying subsection (a), the Board shall make national
coverage determinations with respect to those services that
are experimental in nature. Such determinations shall be
made consistent with a process that provides for input
from representatives of health care professionals and pa-
tients and public comment.
(d) APPLICATION
OF PRACTICE GUIDELINES.—In
the case of services for which the American Health Secu-
rity Quality Council (established under section 501) has
recognized a national practice guideline, the services are
considered to meet the standards specified in section
201(a) if they have been provided in accordance with such
guideline or in accordance with such guidelines as are pro-
vided by the State health security program consistent with
title V. For purposes of this subsection, a service shall
be considered to have been provided in accordance with
a practice guideline if the health care provider providing
the service exercised appropriate professional discretion to
deviate from the guideline in a manner authorized or an-
ticipated by the guideline.
(e) SPECIFIC LIMITATIONS.—
(1) LIMITATIONS
ON
EYEGLASSES, CONTACT
LENSES, HEARING
AIDS, AND
DURABLE
MEDICAL
EQUIPMENT.—Subject to section 201(e), the Board
may impose such limits relating to the costs and fre-
quency of replacement of eyeglasses, contact lenses,
hearing aids, and durable medical equipment to
which individuals enrolled for benefits under this Act
are entitled to have payment made under a State
health security program as the Board deems appro-
priate.
(2) OVERLAP WITH PREVENTIVE SERVICES.—
The coverage of services described in section 201(a)
(other than paragraph (3)) which also are preventive
services are required to be covered only to the extent
that they are required to be covered as preventive
services.
(3) MISCELLANEOUS EXCLUSIONS FROM COV-
ERED SERVICES.—Covered services under this Act
do not include the following:
(A) Surgery and other procedures (such as
orthodontia) performed solely for cosmetic pur-
poses (as defined in regulations) and hospital or
other services incident thereto, unless—
(i) required to correct a congenital
anomaly;
(ii) required to restore or correct a
part of the body which has been altered as
a result of accidental injury, disease, or
surgery; or
(iii) otherwise determined to be medi-
cally necessary and appropriate under sec-
tion 201(a).
(B) Personal comfort items or private
rooms in inpatient facilities, unless determined
to be medically necessary and appropriate
under section 201(a).
(C) The services of a professional practi-
tioner if they are furnished in a hospital or
other facility which is not a participating pro-
vider.
(f) NURSING
FACILITY
SERVICES
AND
HOME
HEALTH SERVICES.—Nursing facility services and home
health services (other than post-hospital services, as de-
fined by the Board) furnished to an individual who is not
described in section 203(a) are not covered services unless
the services are determined to meet the standards speci-
fied in section 201(a) and, with respect to nursing facility
services, to be provided in the least restrictive and most
appropriate setting.
SEC. 205. CERTIFICATION; QUALITY REVIEW; PLANS OF
CARE.
(a) CERTIFICATIONS.—State health security pro-
grams may require, as a condition of payment for institu-
tional health care services and other services of the type
described in such sections 1814(a) and 1835(a) of the So-
cial Security Act, periodic professional certifications of the
kind described in such sections.
(b) QUALITY REVIEW.—For requirement that each
State health security program establish a quality review
program that meets the requirements for such a program
under title V, see section 404(b)(1)(H).
(c) PLAN OF CARE REQUIREMENTS.—A State health
security program may require, consistent with standards
established by the Board, that payment for services ex-
ceeding specified levels or duration be provided only as
consistent with a plan of care or treatment formulated by
one or more providers of the services or other qualified
professionals. Such a plan may include, consistent with
subsection (b), case management at specified intervals as
a further condition of payment for services.
TITLE III—PROVIDER
PARTICIPATION
SEC. 301. PROVIDER PARTICIPATION AND STANDARDS.
(a) IN GENERAL.—An individual or other entity fur-
nishing any covered service under a State health security
program under this Act is not a qualified provider unless
the individual or entity—
(1) is a qualified provider of the services under
section 302;
(2) has filed with the State health security pro-
gram a participation agreement described in sub-
section (b); and
(3) meets such other qualifications and condi-
tions as are established by the Board or the State
health security program under this Act.
(b) REQUIREMENTS
IN
PARTICIPATION
AGREE-
MENT.—
(1) IN
GENERAL.—A participation agreement
described in this subsection between a State health
security program and a provider shall provide at
least for the following:
(A) Services to eligible persons will be fur-
nished by the provider without discrimination
on the ground of race, national origin, income,
religion, age, sex or sexual orientation, dis-
ability, handicapping condition, or (subject to
the professional qualifications of the provider)
illness. Nothing in this subparagraph shall be
construed as requiring the provision of a type
or class of services which services are outside
the scope of the provider’s normal practice.
(B) No charge will be made for any cov-
ered services other than for payment authorized
by this Act.
(C) The provider agrees to furnish such in-
formation as may be reasonably required by the
Board or a State health security program, in
accordance with uniform reporting standards
established under section 401(g)(1), for—
(i) quality review by designated enti-
ties;
(ii) the making of payments under
this Act (including the examination of
records as may be necessary for the
verification of information on which pay-
ments are based);
(iii) statistical or other studies re-
quired for the implementation of this Act;
and
(iv) such other purposes as the Board
or State may specify.
(D) The provider agrees not to bill the pro-
gram for any services for which benefits are not
available because of section 204(d).
(E) In the case of a provider that is not
an individual, the provider agrees not to employ
or use for the provision of health services any
individual or other provider who or which has
had a participation agreement under this sub-
section terminated for cause.
(F) In the case of a provider paid under a
fee-for-service basis under section 612, the pro-
vider agrees to submit bills and any required
supporting documentation relating to the provi-
sion of covered services within 30 days (or such
shorter period as a State health security pro-
gram may require) after the date of providing
such services.
(2) TERMINATION
OF
PARTICIPATION
AGREE-
MENTS.—
(A) IN
GENERAL.—Participation agree-
ments may be terminated, with appropriate
notice—
(i) by the Board or a State health se-
curity program for failure to meet the
requirements of this title, or
(ii) by a provider.
(B) TERMINATION
PROCESS.—Providers
shall be provided notice and a reasonable oppor-
tunity to correct deficiencies before the Board
or a State health security program terminates
an agreement unless a more immediate termi-
nation is required for public safety or similar
reasons.
SEC. 302. QUALIFICATIONS FOR PROVIDERS.
(a) IN GENERAL.—A health care provider is consid-
ered to be qualified to provide covered services if the pro-
vider is licensed or certified and meets—
(1) all the requirements of State law to provide
such services,
(2) applicable requirements of Federal law to
provide such services, and
(3) any applicable standards established under
subsection (b).
(b) MINIMUM PROVIDER STANDARDS.—
(1) IN GENERAL.—The Board shall establish,
evaluate, and update national minimum standards to
assure the quality of services provided under this
Act and to monitor efforts by State health security
programs to assure the quality of such services. A
State health security program may also establish ad-
ditional minimum standards which providers must
meet.
(2) NATIONAL MINIMUM STANDARDS.—The na-
tional minimum standards under paragraph (1) shall
be established for institutional providers of services,
individual health care practitioners, and comprehen-
sive health service organizations. Except as the
Board may specify in order to carry out this title,
a hospital, nursing facility, or other institutional
provider of services shall meet standards for such a
facility under the medicare program under title
XVIII of the Social Security Act. Such standards
also may include, where appropriate, elements relat-
ing to—
(A) adequacy and quality of facilities;
(B) training and competence of personnel
(including continuing education requirements);
(C) comprehensiveness of service;
(D) continuity of service;
(E) patient satisfaction (including waiting
time and access to services); and
(F) performance standards (including or-
ganization, facilities, structure of services, effi-
ciency of operation, and outcome in palliation,
improvement of health, stabilization, cure, or
rehabilitation).
(3) TRANSITION
IN
APPLICATION.—If the
Board provides for additional requirements for pro-
viders under this subsection, any such additional re-
quirement shall be implemented in a manner that
provides for a reasonable period during which a pre-
viously qualified provider is permitted to meet such
an additional requirement.
(4) EXCHANGE OF INFORMATION.—The Board
shall provide for an exchange, at least annually,
among State health security programs of informa-
tion with respect to quality assurance and cost
containment.
SEC. 303. QUALIFICATIONS FOR COMPREHENSIVE HEALTH
SERVICE ORGANIZATIONS.
(a) IN GENERAL.—For purposes of this Act, a com-
prehensive health service organization (in this section re-
ferred to as a ‘‘CHSO’’) is a public or private organization
which, in return for a capitated payment amount, under-
takes to furnish, arrange for the provision of, or provide
payment with respect to—
(1) a full range of health services (as identified
by the Board), including at least hospital services
and physicians services, and
(2) out-of-area coverage in the case of urgently
needed services,
to an identified population which is living in or near a
specified service area and which enrolls voluntarily in the
organization.
(b) ENROLLMENT.—
(1) IN GENERAL.—All eligible persons living in
or near the specified service area of a CHSO are eli-
gible to enroll in the organization; except that the
number of enrollees may be limited to avoid over-
taxing the resources of the organization.
(2) MINIMUM ENROLLMENT PERIOD.—Subject
to paragraph (3), the minimum period of enrollment
with a CHSO shall be twelve months, unless the en-
rolled individual becomes ineligible to enroll with the
organization.
(3) WITHDRAWAL
FOR
CAUSE.—Each CHSO
shall permit an enrolled individual to disenroll from
the organization for cause at any time.
(c) REQUIREMENTS FOR CHSOS.—
(1) ACCESSIBLE
SERVICES.—Each CHSO, to
the maximum extent feasible, shall make all services
readily and promptly accessible to enrollees who live
in the specified service area.
(2) CONTINUITY OF CARE.—Each CHSO shall
furnish services in such manner as to provide con-
tinuity of care and (when services are furnished by
different providers) shall provide ready referral of
patients to such services and at such times as may
be medically appropriate.
(3) BOARD OF DIRECTORS.—In the case of a
CHSO that is a private organization—
(A) 
CONSUMER
REPRESENTATION.—At
least one-third of the members of the CHSO’s
board of directors must be consumer members
with no direct or indirect, personal or family
financial relationship to the organization.
(B) PROVIDER
REPRESENTATION.—The
CHSO’s board of directors must include at
least one member who represents health care
providers.
(4) PATIENT
GRIEVANCE
PROGRAM.—Each
CHSO must have in effect a patient grievance pro-
gram and must conduct regularly surveys of the sat-
isfaction of members with services provided by or
through the organization.
(5) MEDICAL STANDARDS.—Each CHSO must
provide that a committee or committees of health
care practitioners associated with the organization
will promulgate medical standards, oversee the pro-
fessional aspects of the delivery of care, perform the
functions of a pharmacy and drug therapeutics com-
mittee, and monitor and review the quality of all
health services (including drugs, education, and pre-
ventive services).
(6) PREMIUMS.—Premiums or other charges by
a CHSO for any services not paid for under this Act
must be reasonable.
(7) UTILIZATION AND BONUS INFORMATION.—
Each CHSO must—
(A) comply with the requirements of sec-
tion 1876(i)(8) of the Social Security Act (re-
lating to prohibiting physician incentive plans
that provide specific inducements to reduce or
limit medically necessary services), and
(B) make available to its membership utili-
zation information and data regarding financial
performance, including bonus or incentive pay-
ment arrangements to practitioners.
(8) PROVISION OF SERVICES TO ENROLLEES AT
INSTITUTIONS
OPERATING
UNDER
GLOBAL
BUDG-
ETS.—The organization shall arrange to reimburse
for hospital services and other facility-based services
(as identified by the Board) for services provided to
members of the organization in accordance with the
global operating budget of the hospital or facility ap-
proved under section 611.
(9) BROAD
MARKETING.—Each CHSO must
provide for the marketing of its services (including
dissemination of marketing materials) to potential
enrollees in a manner that is designed to enroll indi-
viduals representative of the different population
groups and geographic areas included within its
service area and meets such requirements as the
Board or a State health security program may
specify.
(10) 
ADDITIONAL
REQUIREMENTS.—Each
CHSO must meet—
(A) such requirements relating to min-
imum enrollment,
(B) such requirements relating to financial
solvency,
(C) such requirements relating to quality
and availability of care, and
(D) such other requirements,
as the Board or a State health security program
may specify.
(d) PROVISION OF EMERGENCY SERVICES TO NON-
ENROLLEES.—A CHSO may furnish emergency services
to persons who are not enrolled in the organization. Pay-
ment for such services, if they are covered services to eligi-
ble persons, shall be made to the organization unless the
organization requests that it be made to the individual
provider who furnished the services.
SEC. 304. LIMITATION ON CERTAIN PHYSICIAN REFERRALS.
(a) APPLICATION TO AMERICAN HEALTH SECURITY
PROGRAM.—Section 1877 of the Social Security Act, as
amended by subsections (b) and (c), shall apply under this
Act in the same manner as it applies under title XVIII
of the Social Security Act; except that in applying such
section under this Act any references in such section to
the Secretary or title XVIII of the Social Security Act are
deemed references to the Board and the American Health
Security Program under this Act, respectively.
(b) EXPANSION OF PROHIBITION TO CERTAIN ADDI-
TIONAL DESIGNATED SERVICES.—Section 1877(h)(6) of
the Social Security Act (42 U.S.C. 1395nn(h)(6)) is
amended by adding at the end the following:
‘‘(L) Ambulance services.
‘‘(M) Home infusion therapy services.’’.
(c) CONFORMING AMENDMENTS.—Section 1877 of
such Act is further amended—
(1) in subsection (a)(1)(A), by striking ‘‘for
which payment otherwise may be made under this
title’’ and by inserting ‘‘for which a charge is
imposed’’;
(2) in subsection (a)(1)(B), by striking ‘‘under
this title’’;
(3) by amending paragraph (1) of subsection
(g) to read as follows:
‘‘(1) DENIAL OF PAYMENT.—No payment may
be made under a State health security program for
a designated health service for which a claim is pre-
sented in violation of subsection (a)(1)(B). No indi-
vidual, third party payor, or other entity is liable for
payment for designated health services for which a
claim is presented in violation of such subsection.’’;
and
(4) in subsection (g)(3), by striking ‘‘for which
payment may not be made under paragraph (1)’’
and by inserting ‘‘for which such a claim may not
be presented under subsection (a)(1)’’.
TITLE IV—ADMINISTRATION
Subtitle A—General Administrative
Provisions
SEC. 
401. 
AMERICAN 
HEALTH 
SECURITY 
STANDARDS
BOARD.
(a) ESTABLISHMENT.—There is hereby established
an American Health Security Standards Board.
(b) APPOINTMENT AND TERMS OF MEMBERS.—
(1) IN
GENERAL.—The Board shall be com-
posed of—
(A) the Secretary of Health and Human
Services, and
(B) 6 other individuals (described in para-
graph (2)) appointed by the President with the
advice and consent of the Senate.
The President shall first nominate individuals under
subparagraph (B) on a timely basis so as to provide
for the operation of the Board by not later than
January 1, 2000.
(2) SELECTION
OF
APPOINTED
MEMBERS.—
With respect to the individuals appointed under
paragraph (1)(B):
(A) They shall be chosen on the basis of
backgrounds in health policy, health economics,
the healing professions, and the administration
of health care institutions.
(B) They shall provide a balanced point of
view with respect to the various health care in-
terests and at least two of them shall represent
the interests of individual consumers.
(C) Not more than three of them shall be
from the same political party.
(D) To the greatest extent feasible, they
shall represent the various geographic regions
of the United States and shall reflect the racial,
ethnic, and gender composition of the popu-
lation of the United States.
(3) TERMS OF APPOINTED MEMBERS.—Individ-
uals appointed under paragraph (1)(B) shall serve
for a term of 6 years, except that the terms of 5 of
the individuals initially appointed shall be, as des-
ignated by the President at the time of their ap-
pointment, for 1, 2, 3, 4, and 5 years. During a
term of membership on the Board, no member shall
engage in any other business, vocation or employ-
ment.
(c) VACANCIES.—
(1) IN GENERAL.—The President shall fill any
vacancy in the membership of the Board in the same
manner as the original appointment. The vacancy
shall not affect the power of the remaining members
to execute the duties of the Board.
(2) VACANCY
APPOINTMENTS.—Any member
appointed to fill a vacancy shall serve for the re-
mainder of the term for which the predecessor of the
member was appointed.
(3) REAPPOINTMENT.—The President may re-
appoint an appointed member of the Board for a
second term in the same manner as the original ap-
pointment. A member who has served for two con-
secutive 6-year terms shall not be eligible for re-
appointment until two years after the member has
ceased to serve.
(4) REMOVAL FOR CAUSE.—Upon confirmation,
members of the Board may not be removed except
by the President for cause.
(d) CHAIR.—The President shall designate one of the
members of the Board, other than the Secretary, to serve
at the will of the President as Chair of the Board.
(e) COMPENSATION.—Members of the Board (other
than the Secretary) shall be entitled to compensation at
a level equivalent to level II of the Executive Schedule,
in accordance with section 5313 of title 5, United States
Code.
(f) GENERAL DUTIES OF THE BOARD.—
(1) IN
GENERAL.—The Board shall develop
policies, procedures, guidelines, and requirements to
carry out this Act, including those related to—
(A) eligibility;
(B) enrollment;
(C) benefits;
(D) provider participation standards and
qualifications, as defined in title III;
(E) national and State funding levels;
(F) methods for determining amounts of
payments to providers of covered services, con-
sistent with subtitle B of title VI;
(G) the determination of medical necessity
and appropriateness with respect to coverage of
certain services;
(H) assisting State health security pro-
grams with planning for capital expenditures
and service delivery;
(I) planning for health professional edu-
cation funding (as specified in title VI);
(J) allocating funds provided under title
VII; and
(K) encouraging States to develop regional
planning mechanisms (described in section
404(a)(3)).
(2) REGULATIONS.—Regulations authorized by
this Act shall be issued by the Board in accordance
with the provisions of section 553 of title 5, United
States Code.
(g) UNIFORM REPORTING STANDARDS; ANNUAL RE-
PORT; STUDIES.—
(1) UNIFORM REPORTING STANDARDS.—
(A) IN GENERAL.—The Board shall estab-
lish uniform reporting requirements and stand-
ards to ensure an adequate national data base
regarding health services practitioners, services
and finances of State health security programs,
approved plans, providers, and the costs of fa-
cilities and practitioners providing services.
Such standards shall include, to the maximum
extent feasible, health outcome measures.
(B) REPORTS.—The Board shall analyze
regularly information reported to it, and to
State health security programs pursuant to
such requirements and standards.
(2) ANNUAL REPORT.—Beginning January 1,
of the second year beginning after the date of the
enactment of this Act, the Board shall annually
report to Congress on the following:
(A) The status of implementation of the
Act.
(B) Enrollment under this Act.
(C) Benefits under this Act.
(D) Expenditures and financing under this
Act.
(E) 
Cost-containment 
measures 
and
achievements under this Act.
(F) Quality assurance.
(G) Health care utilization patterns, in-
cluding any changes attributable to the pro-
gram.
(H) Long-range plans and goals for the de-
livery of health services.
(I) Differences in the health status of the
populations of the different States, including in-
come and racial characteristics.
(J) Necessary changes in the education of
health personnel.
(K) Plans for improving service to medi-
cally underserved populations.
(L) Transition problems as a result of im-
plementation of this Act.
(M) Opportunities for improvements under
this Act.
(3) STATISTICAL ANALYSES AND OTHER STUD-
IES.—The Board may, either directly or by
contract—
(A) make statistical and other studies, on
a nationwide, regional, state, or local basis, of
any aspect of the operation of this Act, includ-
ing studies of the effect of the Act upon the
health of the people of the United States and
the effect of comprehensive health services upon
the health of persons receiving such services;
(B) develop and test methods of providing
through payment for services or otherwise, ad-
ditional incentives for adherence by providers to
standards of adequacy, access, and quality;
methods of consumer and peer review and peer
control of the utilization of drugs, of laboratory
services, and of other services; and methods of
consumer and peer review of the quality of serv-
ices;
(C) develop and test, for use by the Board,
records and information retrieval systems and
budget systems for health services administra-
tion, and develop and test model systems for
use by providers of services;
(D) develop and test, for use by providers
of services, records and information retrieval
systems useful in the furnishing of preventive
or diagnostic services;
(E) develop, in collaboration with the phar-
maceutical profession, and test, improved ad-
ministrative practices or improved methods for
the reimbursement of independent pharmacies
for the cost of furnishing drugs as a covered
service; and
(F) make such other studies as it may con-
sider necessary or promising for the evaluation,
or for the improvement, of the operation of this
Act.
(4) REPORT
ON
USE
OF
EXISTING
FEDERAL
HEALTH CARE FACILITIES.—Not later than one year
after the date of the enactment of this Act, the
Board shall recommend to the Congress one or more
proposals for the treatment of health care facilities
of the Federal Government.
(h) EXECUTIVE DIRECTOR.—
(1) APPOINTMENT.—There is hereby estab-
lished the position of Executive Director of the
Board. The Director shall be appointed by the
Board and shall serve as secretary to the Board and
perform such duties in the administration of this
title as the Board may assign.
(2) DELEGATION.—The Board is authorized to
delegate to the Director or to any other officer or
employee of the Board or, with the approval of the
Secretary of Health and Human Services (and sub-
ject to reimbursement of identifiable costs), to any
other officer or employee of the Department of
Health and Human Services, any of its functions or
duties under this Act other than—
(A) the issuance of regulations; or
(B) the determination of the availability of
funds and their allocation to implement this
Act.
(3) COMPENSATION.—The Executive Director
of the Board shall be entitled to compensation at a
level equivalent to level III of the Executive Sched-
ule, in accordance with section 5314 of title 5,
United States Code.
(i) INSPECTOR GENERAL.—The Inspector General
Act of 1978 (5 U.S.C. App.) is amended—
(1) in section 11(1) by inserting after ‘‘Cor-
poration;’’ the following: ‘‘the Chair of the American
Health Security Standards Board;’’;
(2) in section 11(2) by inserting after ‘‘Infor-
mation Agency,’’ the following: ‘‘the American
Health Security Standards Board,’’; and
(3) by inserting after the second section 8G the
following:
‘‘§ 8I. Special provisions concerning American Health
Security Standards Board
‘‘The Inspector General of the American Health Se-
curity Standards Board, in addition to the other authori-
ties vested by this Act, shall have the same authority, with
respect to the Board and the American Health Security
Program under this Act, as the Inspector General for the
Department of Health and Human Services has with re-
spect to the Secretary of Health and Human Services and
the medicare and medicaid programs, respectively.’’.
(j) STAFF.—The Board shall employ such staff as the
Board may deem necessary.
(k) ACCESS
TO INFORMATION.—The Secretary of
Health and Human Services shall make available to the
Board all information available from sources within the
Department or from other sources, pertaining to the
duties of the Board.
SEC. 402. AMERICAN HEALTH SECURITY ADVISORY COUN-
CIL.
(a) IN GENERAL.—The Board shall provide for an
American Health Security Advisory Council (in this sec-
tion referred to as the ‘‘Council’’) to advise the Board on
its activities.
(b) MEMBERSHIP.—The Council shall be composed
of—
(1) the Chair of the Board, who shall serve as
Chair of the Council, and
(2) twenty members, not otherwise in the em-
ploy of the United States, appointed by the Board
without regard to the provisions of title 5, United
States Code, governing appointments in the competi-
tive service.
The appointed members shall include, in accordance with
subsection (e), individuals who are representative of State
health security programs, public health professionals, pro-
viders of health services, and of individuals (who shall con-
stitute a majority of the Council) who are representative
of consumers of such services, including a balanced rep-
resentation of employers, unions, consumer organizations,
and population groups with special health care needs. To
the greatest extent feasible, the membership of the Council
shall represent the various geographic regions of the
United States and shall reflect the racial, ethnic, and gen-
der composition of the population of the United States.
(c) TERMS OF MEMBERS.—Each appointed member
shall hold office for a term of four years, except that—
(1) any member appointed to fill a vacancy oc-
curring during the term for which the member’s
predecessor was appointed shall be appointed for the
remainder of that term; and
(2) the terms of the members first taking office
shall expire, as designated by the Board at the time
of appointment, five at the end of the first year, five
at the end of the second year, five at the end of the
third year, and five at the end of the fourth year
after the date of enactment of this Act.
(d) VACANCIES.—
(1) IN GENERAL.—The Board shall fill any va-
cancy in the membership of the Council in the same
manner as the original appointment. The vacancy
shall not affect the power of the remaining members
to execute the duties of the Council.
(2) VACANCY
APPOINTMENTS.—Any member
appointed to fill a vacancy shall serve for the re-
mainder of the term for which the predecessor of the
member was appointed.
(3) REAPPOINTMENT.—The Board may re-
appoint an appointed member of the Council for a
second term in the same manner as the original
appointment.
(e) QUALIFICATIONS.—
(1) PUBLIC
HEALTH
REPRESENTATIVES.—
Members of the Council who are representative of
State health security programs and public health
professionals shall be individuals who have extensive
experience in the financing and delivery of care
under public health programs.
(2) PROVIDERS.—Members of the Council who
are representative of providers of health care shall
be individuals who are outstanding in fields related
to medical, hospital, or other health activities, or
who are representative of organizations or associa-
tions of professional health practitioners.
(3) CONSUMERS.—Members who are represent-
ative of consumers of such care shall be individuals,
not engaged in and having no financial interest in
the furnishing of health services, who are familiar
with the needs of various segments of the population
for personal health services and are experienced in
dealing with problems associated with the consump-
tion of such services.
(f) DUTIES.—
(1) IN GENERAL.—It shall be the duty of the
Council—
(A) to advise the Board on matters of gen-
eral policy in the administration of this Act, in
the formulation of regulations, and in the per-
formance of the Board’s duties under section
401; and
(B) to study the operation of this Act and
the utilization of health services under it, with
a view to recommending any changes in the ad-
ministration of the Act or in its provisions
which may appear desirable.
(2) REPORT.—The Council shall make an an-
nual report to the Board on the performance of its
functions, including any recommendations it may
have with respect thereto, and the Board shall
promptly transmit the report to the Congress, to-
gether with a report by the Board on any rec-
ommendations of the Council that have not been
followed.
(g) STAFF.—The Council, its members, and any com-
mittees of the Council shall be provided with such secre-
tarial, clerical, or other assistance as may be authorized
by the Board for carrying out their respective functions.
(h) MEETINGS.—The Council shall meet as fre-
quently as the Board deems necessary, but not less than
four times each year. Upon request by seven or more mem-
bers it shall be the duty of the Chair to call a meeting
of the Council.
(i) COMPENSATION.—Members of the Council shall
be reimbursed by the Board for travel and per diem in
lieu of subsistence expenses during the performance of du-
ties of the Board in accordance with subchapter I of chap-
ter 57 of title 5, United States Code.
(j) FACA NOT APPLICABLE.—The provisions of the
Federal Advisory Committee Act shall not apply to the
Council.
SEC. 403. CONSULTATION WITH PRIVATE ENTITIES.
The Secretary and the Board shall consult with pri-
vate entities, such as professional societies, national asso-
ciations, nationally recognized associations of experts,
medical schools and academic health centers, consumer
groups, and labor and business organizations in the for-
mulation of guidelines, regulations, policy initiatives, and
information gathering to assure the broadest and most in-
formed input in the administration of this Act. Nothing
in this Act shall prevent the Secretary from adopting
guidelines developed by such a private entity if, in the Sec-
retary’s and Board’s judgment, such guidelines are gen-
erally accepted as reasonable and prudent and consistent
with this Act.
SEC. 404. STATE HEALTH SECURITY PROGRAMS.
(a) SUBMISSION OF PLANS.—
(1) IN GENERAL.—Each State shall submit to
the Board a plan for a State health security pro-
gram for providing for health care services to the
residents of the State in accordance with this Act.
(2) REGIONAL PROGRAMS.—A State may join
with one or more neighboring States to submit to
the Board a plan for a regional health security pro-
gram instead of separate State health security
programs.
(3) REGIONAL
PLANNING
MECHANISMS.—The
Board shall provide incentives for States to develop
regional planning mechanisms to promote the ration-
al distribution of, adequate access to, and efficient
use of, tertiary care facilities, equipment, and
services.
(b) REVIEW AND APPROVAL OF PLANS.—
(1) IN
GENERAL.—The Board shall review
plans submitted under subsection (a) and determine
whether such plans meet the requirements for ap-
proval. The Board shall not approve such a plan un-
less it finds that the plan (or State law) provides,
consistent with the provisions of this Act, for the
following:
(A) Payment for required health services
for eligible individuals in the State in accord-
ance with this Act.
(B) Adequate administration, including the
designation of a single State agency responsible
for the administration (or supervision of the
administration) of the program.
(C) The establishment of a State health
security budget.
(D) Establishment of payment methodolo-
gies (consistent with subtitle B of title VII).
(E) Assurances that individuals have the
freedom to choose practitioners and other
health care providers for services covered under
this Act.
(F) A procedure for carrying out long-term
regional management and planning functions
with respect to the delivery and distribution of
health care services that—
(i) ensures participation of consumers
of health services and providers of health
services, and
(ii) gives priority to the most acute
shortages and maldistributions of health
personnel and facilities and the most seri-
ous deficiencies in the delivery of covered
services and to the means for the speedy
alleviation of these shortcomings.
(G) The licensure and regulation of all
health providers and facilities to ensure compli-
ance with Federal and State laws and to
promote quality of care.
(H) Establishment of a quality review sys-
tem in accordance with section 503.
(I) Establishment of an independent om-
budsman for consumers to register complaints
about the organization and administration of
the State health security program and to help
resolve complaints and disputes between con-
sumers and providers.
(J) Publication of an annual report on the
operation of the State health security program,
which report shall include information on cost,
progress towards achieving full enrollment, pub-
lic access to health services, quality review,
health outcomes, health professional training,
and 
the 
needs 
of 
medically 
underserved
populations.
(K) Provision of a fraud and abuse preven-
tion and control unit that the Inspector General
determines meets the requirements of section
412(a).
(L) Prohibit payment in cases of prohib-
ited physician referrals under section 304.
(2) CONSEQUENCES OF FAILURE TO COMPLY.—
If the Board finds that a State plan submitted
under paragraph (1) does not meet the requirements
for approval under this section or that a State
health security program or specific portion of such
program, the plan for which was previously ap-
proved, no longer meets such requirements, the
Board shall provide notice to the State of such fail-
ure and that unless corrective action is taken within
a period specified by the Board, the Board shall
place the State health security program (or specific
portions of such program) in receivership under the
jurisdiction of the Board.
(c) STATE HEALTH SECURITY ADVISORY COUN-
CILS.—
(1) IN GENERAL.—For each State, the Gov-
ernor shall provide for appointment of a State
Health Security Advisory Council to advise and
make recommendations to the Governor and State
with respect to the implementation of the State
health security program in the State.
(2) MEMBERSHIP.—Each State Health Security
Advisory Council shall be composed of at least 11 in-
dividuals. The appointed members shall include indi-
viduals who are representative of the State health
security program, public health professionals, pro-
viders of health services, and of individuals (who
shall constitute a majority) who are representative of
consumers of such services, including a balanced
representation of employers, unions and consumer
organizations. To the greatest extent feasible, the
membership of each State Health Security Advisory
Council shall represent the various geographic re-
gions of the State and shall reflect the racial, ethnic,
and gender composition of the population of the
State.
(3) DUTIES.—
(A) IN GENERAL.—Each State Health Se-
curity Advisory Council shall review, and sub-
mit comments to the Governor concerning the
implementation of the State health security pro-
gram in the State.
(B) ASSISTANCE.—Each State Health Se-
curity Advisory Council shall provide assistance
and technical support to community organiza-
tions and public and private non-profit agencies
submitting applications for funding under ap-
propriate State and Federal public health pro-
grams, with particular emphasis placed on as-
sisting those applicants with broad consumer
representation.
(d) STATE USE OF FISCAL AGENTS.—
(1) IN GENERAL.—Each State health security
program, using competitive bidding procedures, may
enter into such contracts with qualified entities, such
as voluntary associations, as the State determines to
be appropriate to process claims and to perform
other related functions of fiscal agents under the
State health security program.
(2) RESTRICTION.—Except as the Board may
provide for good cause shown, in no case may more
than one contract described in paragraph (1) be
entered into under a State health security program.
SEC. 
405. 
COMPLEMENTARY 
CONDUCT 
OF 
RELATED
HEALTH PROGRAMS.
In performing functions with respect to health per-
sonnel education and training, health research, environ-
mental health, disability insurance, vocational rehabilita-
tion, the regulation of food and drugs, and all other mat-
ters pertaining to health, the Secretary of Health and
Human Services shall direct all activities of the Depart-
ment of Health and Human Services toward contributions
to the health of the people complementary to this Act.
Subtitle B—Control Over Fraud
and Abuse
SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL
FRAUD 
AND 
ABUSE 
UNDER 
AMERICAN
HEALTH SECURITY PROGRAM.
The following sections of the Social Security Act shall
apply to State health security programs in the same man-
ner as they apply to State medical assistance plans under
title XIX of such Act (except that in applying such provi-
sions any reference to the Secretary is deemed a reference
to the Board):
(1) Section 1128 (relating to exclusion of indi-
viduals and entities).
(2) Section 1128A (civil monetary penalties).
(3) Section 1128B (criminal penalties).
(4) Section 1124 (relating to disclosure of own-
ership and related information).
(5) Section 1126 (relating to disclosure of cer-
tain owners).
SEC. 412. REQUIREMENTS FOR OPERATION OF STATE
HEALTH CARE FRAUD AND ABUSE CONTROL
UNITS.
(a) REQUIREMENT.—In order to meet the require-
ment of section 404(b)(1)(K), each State health security
program must establish and maintain a health care fraud
and abuse control unit (in this section referred to as a
‘‘fraud unit’’) that meets requirements of this section and
other requirements of the Board. Such a unit may be a
State medicaid fraud control unit (described in section
1903(q) of the Social Security Act).
(b) STRUCTURE OF UNIT.—The fraud unit must—
(1) be a single identifiable entity of the State
government;
(2) be separate and distinct from the State
agency with principal responsibility for the adminis-
tration of the State health security program; and
(3) meet 1 of the following requirements:
(A) It must be a unit of the office of the
State Attorney General or of another depart-
ment of State government which possesses
statewide authority to prosecute individuals for
criminal violations.
(B) If it is in a State the constitution of
which does not provide for the criminal prosecu-
tion of individuals by a statewide authority and
has formal procedures, approved by the Board,
that (i) assure its referral of suspected criminal
violations relating to the State health insurance
plan to the appropriate authority or authorities
in the States for prosecution, and (ii) assure its
assistance of, and coordination with, such au-
thority or authorities in such prosecutions.
(C) It must have a formal working rela-
tionship with the office of the State Attorney
General and have formal procedures (including
procedures for its referral of suspected criminal
violations to such office) which are approved by
the Board and which provide effective coordina-
tion of activities between the fraud unit and
such office with respect to the detection, inves-
tigation, and prosecution of suspected criminal
violations relating to the State health insurance
plan.
(c) FUNCTIONS.—The fraud unit must—
(1) have the function of conducting a statewide
program for the investigation and prosecution of vio-
lations of all applicable State laws regarding any
and all aspects of fraud in connection with any as-
pect of the provision of health care services and ac-
tivities of providers of such services under the State
health security program;
(2) have procedures for reviewing complaints of
the abuse and neglect of patients of providers and
facilities that receive payments under the State
health security program, and, where appropriate, for
acting upon such complaints under the criminal laws
of the State or for referring them to other State
agencies for action; and
(3) provide for the collection, or referral for col-
lection to a single State agency, of overpayments
that are made under the State health security pro-
gram to providers and that are discovered by the
fraud unit in carrying out its activities.
(d) RESOURCES.—The fraud unit must—
(1) employ such auditors, attorneys, investiga-
tors, and other necessary personnel,
(2) be organized in such a manner, and
(3) provide sufficient resources (as specified by
the Board), as is necessary to promote the effective
and efficient conduct of the unit’s activities.
(e) COOPERATIVE AGREEMENTS.—The fraud unit
must have cooperative agreements (as specified by the
Board) with—
(1) similar fraud units in other States,
(2) the Inspector General, and
(3) the Attorney General of the United States.
(f) REPORTS.—The fraud unit must submit to the
Inspector General an application and annual reports con-
taining such information as the Inspector General deter-
mines to be necessary to determine whether the unit meets
the previous requirements of this section.
TITLE V—QUALITY ASSESSMENT
SEC. 501. AMERICAN HEALTH SECURITY QUALITY COUNCIL.
(a) ESTABLISHMENT.—There is hereby established
an American Health Security Quality Council (in this title
referred to as the ‘‘Council’’).
(b) DUTIES OF THE COUNCIL.—The Council shall
perform the following duties:
(1) PRACTICE GUIDELINES.—The Council shall
review and evaluate each practice guideline devel-
oped under part B of title IX of the Public Health
Service Act. The Council shall determine whether
the guideline should be recognized as a national
practice guideline to be used under section 204(d)
for purposes of determining payments under a State
health security program.
(2) STANDARDS
OF
QUALITY, PERFORMANCE
MEASURES, AND MEDICAL REVIEW CRITERIA.—The
Council shall review and evaluate each standard of
quality, performance measure, and medical review
criterion developed under part B of title IX of the
Public Health Service Act. The Council shall deter-
mine whether the standard, measure, or criterion is
appropriate for use in assessing or reviewing the
quality of services provided by State health security
programs, health care institutions, or health care
professionals.
(3) CRITERIA
FOR
ENTITIES
CONDUCTING
QUALITY REVIEWS.—The Council shall develop min-
imum criteria for competence for entities that can
qualify to conduct ongoing and continuous external
quality review for State quality review programs
under section 503. Such criteria shall require such
an entity to be administratively independent of the
individual or board that administers the State health
security program and shall ensure that such entities
do not provide financial incentives to reviewers to
favor one pattern of practice over another. The
Council shall ensure coordination and reporting by
such entities to assure national consistency in qual-
ity standards.
(4) REPORTING.—The Council shall report to
the Board annually on the conduct of activities
under such title and shall report to the Board annu-
ally specifically on findings from outcomes research
and development of practice guidelines that may af-
fect the Board’s determination of coverage of serv-
ices under section 401(f)(1)(G).
(5) OTHER
FUNCTIONS.—The Council shall
perform the functions of the Council described in
section 502.
(c) APPOINTMENT AND TERMS OF MEMBERS.—
(1) IN GENERAL.—The Council shall be com-
posed of 10 members appointed by the President.
The President shall first appoint individuals on a
timely basis so as to provide for the operation of the
Council by not later than January 1, 2000.
(2) SELECTION OF MEMBERS.—Each member
of the Council shall be a member of a health profes-
sion. Five members of the Council shall be physi-
cians. Individuals shall be appointed to the Council
on the basis of national reputations for clinical and
academic excellence. To the greatest extent feasible,
the membership of the Council shall represent the
various geographic regions of the United States and
shall reflect the racial, ethnic, and gender composi-
tion of the population of the United States.
(3) TERMS
OF
MEMBERS.—Individuals ap-
pointed to the Council shall serve for a term of 5
years, except that the terms of 4 of the individuals
initially appointed shall be, as designated by the
President at the time of their appointment, for 1, 2,
3, and 4 years.
(d) VACANCIES.—
(1) IN GENERAL.—The President shall fill any
vacancy in the membership of the Council in the
same manner as the original appointment. The va-
cancy shall not affect the power of the remaining
members to execute the duties of the Council.
(2) VACANCY
APPOINTMENTS.—Any member
appointed to fill a vacancy shall serve for the re-
mainder of the term for which the predecessor of the
member was appointed.
(3) REAPPOINTMENT.—The President may re-
appoint a member of the Council for a second term
in the same manner as the original appointment. A
member who has served for two consecutive 5-year
terms shall not be eligible for reappointment until
two years after the member has ceased to serve.
(e) CHAIR.—The President shall designate one of the
members of the Council to serve at the will of the Presi-
dent as Chair of the Council.
(f) COMPENSATION.—Members of the Council who
are not employees of the Federal Government shall be en-
titled to compensation at a level equivalent to level II of
the Executive Schedule, in accordance with section 5313
of title 5, United States Code.
SEC. 502. DEVELOPMENT OF CERTAIN METHODOLOGIES,
GUIDELINES, AND STANDARDS.
(a) PROFILING OF PATTERNS OF PRACTICE; IDENTI-
FICATION OF OUTLIERS.—The Council shall adopt meth-
odologies for profiling the patterns of practice of health
care professionals and for identifying outliers (as defined
in subsection (e)).
(b) CENTERS OF EXCELLENCE.—The Council shall
develop guidelines for certain medical procedures des-
ignated by the Board to be performed only at tertiary care
centers which can meet standards for frequency of proce-
dure performance and intensity of support mechanisms
that are consistent with the high probability of desired pa-
tient outcome. Reimbursement under this Act for such a
designated procedure may only be provided if the proce-
dure was performed at a center that meets such stand-
ards.
(c) REMEDIAL ACTIONS.—The Council shall develop
standards for education and sanctions with respect to
outliers so as to assure the quality of health care services
provided under this Act. The Council shall develop criteria
for referral of providers to the State licensing board if edu-
cation proves ineffective in correcting provider practice be-
havior.
(d) DISSEMINATION.—The Council shall disseminate
to the State—
(1) the methodologies adopted under subsection
(a),
(2) the guidelines developed under subsection
(b), and
(3) the standards developed under subsection
(c),
for use by the States under section 503.
(e) OUTLIER DEFINED.—In this title, the term
‘‘outlier’’ means a health care provider whose pattern of
practice, relative to applicable practice guidelines, suggests
deficiencies in the quality of health care services being pro-
vided.
SEC. 503. STATE QUALITY REVIEW PROGRAMS.
(a) REQUIREMENT.—In order to meet the require-
ment of section 404(b)(1)(H), each State health security
program shall establish one or more qualified entities to
conduct quality reviews of persons providing covered serv-
ices under the program, in accordance with standards es-
tablished under subsection (b)(1) (except as provided in
subsection (b)(2)) and subsection (d).
(b) FEDERAL STANDARDS.—
(1) IN GENERAL.—The Council shall establish
standards with respect to—
(A) the adoption of practice guidelines
(whether developed by the Federal Government
or other entities),
(B) the identification of outliers (con-
sistent with methodologies adopted under sec-
tion 502(a)),
(C) the development of remedial programs
and monitoring for outliers, and
(D) the application of sanctions (consistent
with the standards developed under section
502(c)).
(2) STATE DISCRETION.—A State may apply
under subsection (a) standards other than those es-
tablished under paragraph (1) so long as the State
demonstrates to the satisfaction of the Council on an
annual basis that the standards applied have been as
efficacious in promoting and achieving improved
quality of care as the application of the standards
established under paragraph (1). Positive improve-
ments in quality shall be documented by reductions
in the variations of clinical care process and im-
provement in patient outcomes.
(c) QUALIFICATIONS.—An entity is not qualified to
conduct quality reviews under subsection (a) unless the
entity satisfies the criteria for competence for such entities
developed by the Council under section 501(b)(3).
(d) INTERNAL QUALITY REVIEW.—Nothing in this
section shall preclude an institutional provider from estab-
lishing its own internal quality review and enhancement
programs.
SEC. 504. ELIMINATION OF UTILIZATION REVIEW PRO-
GRAMS; TRANSITION.
(a) INTENT.—It is the intention of this title to re-
place by January 1, 2003, random utilization controls with
a systematic review of patterns of practice that com-
promise the quality of care.
(b) SUPERSEDING CASE REVIEWS.—
(1) IN
GENERAL.—Subject to the succeeding
provisions of this subsection, the program of quality
review provided under the previous sections of this
title supersede all existing Federal requirements for
utilization review programs, including requirements
for random case-by-case reviews and programs re-
quiring pre-certification of medical procedures on a
case-by-case basis.
(2) TRANSITION.—Before January 1, 2003, the
Board and the States may employ existing utiliza-
tion review standards and mechanisms as may be
necessary to effect the transition to pattern of prac-
tice-based reviews.
(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed—
(A) as precluding the case-by-case review
of the provision of care—
(i) in individual incidents where the
quality of care has significantly deviated
from acceptable standards of practice, and
(ii) with respect to a provider who has
been determined to be an outlier; or
(B) as precluding the case management of
catastrophic, mental health, or substance abuse
cases or long-term care where such manage-
ment is necessary to achieve appropriate, cost-
effective, and beneficial comprehensive medical
care, as provided for in section 204.
TITLE 
VI—HEALTH 
SECURITY
BUDGET; 
PAYMENTS; 
COST
CONTAINMENT MEASURES
Subtitle A—Budgeting and
Payments to States
SEC. 601. NATIONAL HEALTH SECURITY BUDGET.
(a) NATIONAL HEALTH SECURITY BUDGET.—
(1) IN GENERAL.—By not later than September
1 before the beginning of each year (beginning with
2000), the Board shall establish a national health
security budget, which—
(A) specifies the total expenditures (includ-
ing expenditures for administrative costs) to be
made by the Federal Government and the
States for covered health care services under
this Act, and
(B) allocates those expenditures among the
States consistent with section 604.
Pursuant to subsection (b), such budget for a year
shall not exceed the budget for the preceding year
increased by the percentage increase in gross domes-
tic product.
(2) DIVISION OF BUDGET INTO COMPONENTS.—
The national health security budget shall consist of
at least 4 components:
(A) A component for quality assessment
activities (described in title V).
(B) A component for health professional
education expenditures.
(C) A component for administrative costs.
(D) A component (in this title referred to
as the ‘‘operating component’’) for operating
and other expenditures not described in sub-
paragraphs (A) through (C), consisting of
amounts not included in the other components.
A State may provide for the allocation of this
component between capital expenditures and
other expenditures.
(3) ALLOCATION AMONG COMPONENTS.—Tak-
ing into account the State health security budgets
established and submitted under section 603, the
Board shall allocate the national health security
budget among the components in a manner that—
(A) assures a fair allocation for quality as-
sessment activities (consistent with the national
health security spending growth limit); and
(B) assures that the health professional
education expenditure component is sufficient
to provide for the amount of health professional
education expenditures sufficient to meet the
need for covered health care services (consistent
with the national health security spending
growth limit under subsection (b)(2)).
(b) BASIS FOR TOTAL EXPENDITURES.—
(1) IN GENERAL.—The total expenditures speci-
fied in such budget shall be the sum of the capita-
tion amounts computed under section 602(a) and
the amount of Federal administrative expenditures
needed to carry out this Act.
(2) NATIONAL
HEALTH
SECURITY
SPENDING
GROWTH LIMIT.—For purposes of this subtitle, the
national health security spending growth limit de-
scribed in this paragraph for a year is (A) zero, or,
if greater, (B) the average annual percentage in-
crease in the gross domestic product (in current dol-
lars) during the 3-year period beginning with the
first quarter of the fourth previous year to the first
quarter of the previous year minus the percentage
increase (if any) in the number of eligible individuals
residing in any State the United States from the
first quarter of the second previous year to the first
quarter of the previous year.
(c) DEFINITIONS.—In this title:
(1) CAPITAL EXPENDITURES.—The term ‘‘cap-
ital expenditures’’ means expenses for the purchase,
lease, construction, or renovation of capital facilities
and for equipment and includes return on equity
capital.
(2) HEALTH
PROFESSIONAL
EDUCATION
EX-
PENDITURES.—The term ‘‘health professional edu-
cation expenditures’’ means expenditures in hospitals
and other health care facilities to cover costs associ-
ated with teaching and related research activities.
SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI-
TATION AMOUNTS.
(a) CAPITATION AMOUNTS.—
(1) INDIVIDUAL CAPITATION AMOUNTS.—In es-
tablishing the national health security budget under
section 601(a) and in computing the national aver-
age per capita cost under subsection (b) for each
year, the Board shall establish a method for com-
puting the capitation amount for each eligible indi-
vidual residing in each State. The capitation amount
for an eligible individual in a State classified within
a risk group (established under subsection (d)(2)) is
the product of—
(A) a national average per capita cost for
all covered health care services (computed
under subsection (b)),
(B) the State adjustment factor (estab-
lished under subsection (c)) for the State, and
(C) the risk adjustment factor (established
under subsection (d)) for the risk group.
(2) STATE CAPITATION AMOUNT.—
(A) IN GENERAL.—For purposes of this
title, the term ‘‘State capitation amount’’
means, for a State for a year, the sum of the
capitation amounts computed under paragraph
(1) for all the residents of the State in the year,
as estimated by the Board before the beginning
of the year involved.
(B) USE
OF
STATISTICAL
MODEL.—The
Board may provide for the computation of
State capitation amounts based on statistical
models that fairly reflect the elements that com-
prise the State capitation amount described in
subparagraph (A).
(C) POPULATION INFORMATION.—The Bu-
reau of the Census shall assist the Board in de-
termining the number, place of residence, and
risk group classification of eligible individuals.
(b) COMPUTATION OF NATIONAL AVERAGE PER CAP-
ITA COST.—
(1) FOR 1998.—For 2000, the national average
per capita cost under this paragraph is equal to—
(A) the average per capita health care ex-
penditures in the United States in 1998 (as
estimated by the Board),
(B) increased to 1999 by the Board’s esti-
mate of the actual amount of such per capita
expenditures during 1999, and
(C) updated to 2000 by the national health
security spending growth limit specified in sec-
tion 601(b)(2) for 2000.
(2) FOR SUCCEEDING YEARS.—For each suc-
ceeding year, the national average per capita cost
under this subsection is equal to the national aver-
age per capita cost computed under this subsection
for the previous year increased by the national
health security spending growth limit (specified in
section 601(b)(2)) for the year involved.
(c) STATE ADJUSTMENT FACTORS.—
(1) IN
GENERAL.—Subject to the succeeding
paragraphs of this subsection, the Board shall de-
velop for each State a factor to adjust the national
average per capita costs to reflect differences
between the State and the United States in—
(A) average labor and nonlabor costs that
are necessary to provide covered health services;
(B) any social, environmental, or geo-
graphic condition affecting health status or the
need for health care services, to the extent such
a condition is not taken into account in the es-
tablishment of risk groups under subsection (d);
(C) the geographic distribution of the
State’s population, particularly the proportion
100
of the population residing in medically under-
served areas, to the extent such a condition is
not taken into account in the establishment of
risk groups under subsection (d); and
(D) any other factor relating to operating
costs required to assure equitable distribution
of funds among the States.
(2) MODIFICATION OF HEALTH PROFESSIONAL
EDUCATION COMPONENT.—With respect to the por-
tion of the national health security budget allocated
to expenditures for health professional education, the
Board shall modify the State adjustment factors so
as to take into account—
(A) differences among States in health
professional education programs in operation as
of the date of the enactment of this Act, and
(B) differences among States in their rel-
ative need for expenditures for health profes-
sional education, taking into account the health
professional education expenditures proposed in
State health security budgets under section
603(a).
(3) BUDGET NEUTRALITY.—The State adjust-
ment factors, as modified under paragraph (2), shall
be applied under this subsection in a manner that
101
results in neither an increase nor a decrease in the
total amount of the Federal contributions to all
State health security programs under subsection (b)
as a result of the application of such factors.
(4) PHASE-IN.—In applying State adjustment
factors under this subsection during the five-year pe-
riod beginning with 2000, the Board shall phase-in,
over such period, the use of factors described in
paragraph (1) in a manner so that the adjustment
factor for a State is based on a blend of such factors
and a factor that reflects the relative actual average
per capita costs of health services of the different
States as of the time of enactment of this Act.
(5) PERIODIC
ADJUSTMENT.—In establishing
the national health security budget before the begin-
ning of each year, the Board shall provide for appro-
priate adjustments in the State adjustment factors
under this subsection.
(d) ADJUSTMENTS FOR RISK GROUP CLASSIFICA-
TION.—
(1) IN GENERAL.—The Board shall develop an
adjustment factor to the national average per capita
costs computed under subsection (b) for individuals
classified in each risk group (as designated under
paragraph (2)) to reflect the difference between the
102
average national average per capita costs and the
national average per capita cost for individuals clas-
sified in the risk group.
(2) RISK GROUPS.—The Board shall designate
a series of risk groups, determined by age, health in-
dicators, and other factors that represent distinct
patterns of health care services utilization and costs.
(3) PERIODIC
ADJUSTMENT.—In establishing
the national health security budget before the begin-
ning of each year, the Board shall provide for appro-
priate adjustments in the risk adjustment factors
under this subsection.
SEC. 603. STATE HEALTH SECURITY BUDGETS.
(a) ESTABLISHMENT AND SUBMISSION OF BUDG-
ETS.—
(1) IN GENERAL.—Each State health security
program shall establish and submit to the Board for
each year a proposed and a final State health secu-
rity budget, which specifies the following:
(A) The total expenditures (including ex-
penditures for administrative costs) to be made
under the program in the State for covered
health care services under this Act, consistent
with subsection (b), broken down as follows:
103
(i) By the 4 components (described in
section 601(a)(2)), consistent with sub-
section (b).
(ii) Within the operating component—
(I) expenditures for operating
costs of hospitals and other facility-
based services in the State,
(II) expenditures for payment to
comprehensive health service organiza-
tions,
(III) expenditures for payment of
services provided by health care prac-
titioners, and
(IV) expenditures for other cov-
ered items and services.
Amounts included in the operating compo-
nent include amounts that may be used by
providers for capital expenditures.
(B) The total revenues required to meet
the State health security expenditures.
(2) PROPOSED BUDGET DEADLINE.—The pro-
posed budget for a year shall be submitted under
paragraph (1) not later than June 1 before the year.
(3) FINAL BUDGET.—The final budget for a
year shall—
104
(A) be established and submitted under
paragraph (1) not later than October 1 before
the year, and
(B) take into account the amounts estab-
lished under the national health security budget
under section 601 for the year.
(4) 
ADJUSTMENT
IN
ALLOCATIONS
PER-
MITTED.—
(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), in the case of a final
budget, a State may change the allocation of
amounts among components.
(B) NOTICE.—No such change may be
made unless the State has provided prior notice
of the change to the Board.
(C) DENIAL.—Such a change may not be
made if the Board, within such time period as
the Board specifies, disapproves such change.
(b) EXPENDITURE LIMITS.—
(1) IN GENERAL.—The total expenditures speci-
fied in each State health security budget under sub-
section (a)(1) shall take into account Federal
contributions made under section 604.
(2) LIMIT ON CLAIMS PROCESSING AND BILL-
ING
EXPENDITURES.—Each State health security
105
budget shall provide that State administrative ex-
penditures, including expenditures for claims proc-
essing and billing, shall not exceed 3 percent of the
total expenditures under the State health security
program, unless the Board determines, on a case-by-
case basis, that additional administrative expendi-
tures would improve health care quality and cost
effectiveness.
(3) WORKER ASSISTANCE.—A State health se-
curity program may provide that, for budgets for
years before 2005, up to 1 percent of the budget
may be used for purposes of programs providing as-
sistance to workers who are currently performing
functions in the administration of the health insur-
ance system and who may experience economic dis-
location as a result of the implementation of the
program.
(c) APPROVAL PROCESS
FOR CAPITAL EXPENDI-
TURES PERMITTED.—Nothing in this title shall be con-
strued as preventing a State health security program from
providing for a process for the approval of capital expendi-
tures based on information derived from regional planning
agencies.
106
SEC. 604. FEDERAL PAYMENTS TO STATES.
(a) IN GENERAL.—Each State with an approved
State health security program is entitled to receive, from
amounts in the American Health Security Trust Fund, on
a monthly basis each year, of an amount equal to one-
twelfth of the product of—
(1) the State capitation amount (computed
under section 602(a)(2)) for the State for the year,
and
(2) the Federal contribution percentage (estab-
lished under subsection (b)).
(b) FEDERAL CONTRIBUTION PERCENTAGE.—The
Board shall establish a formula for the establishment of
a Federal contribution percentage for each State. Such
formula shall take into consideration a State’s per capita
income and revenue capacity and such other relevant eco-
nomic indicators as the Board determines to be appro-
priate. In addition, during the 5-year period beginning
with 2000, the Board may provide for a transition adjust-
ment to the formula in order to take into account current
expenditures by the State (and local governments thereof)
for health services covered under the State health security
program. The weighted-average Federal contribution per-
centage for all States shall equal 86 percent and in no
event shall such percentage be less than 81 percent nor
more than 91 percent.
107
(c) USE OF PAYMENTS.—All payments made under
this section may only be used to carry out the State health
security program.
(d) EFFECT OF SPENDING EXCESS OR SURPLUS.—
(1) SPENDING EXCESS.—If a State exceeds it’s
budget in a given year, the State shall continue to
fund covered health services from its own revenues.
(2) SURPLUS.—If a State provides all covered
health services for less than the budgeted amount
for a year, it may retain its Federal payment for
that year for uses consistent with this Act.
SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU-
CATION EXPENDITURES.
(a) SEPARATE ACCOUNT.—Each State health secu-
rity program shall—
(1) include a separate account for health pro-
fessional education expenditures, and
(2) specify the general manner, consistent with
subsection (b), in which such expenditures are to be
distributed among different types of institutions and
the different areas of the State.
(b) DISTRIBUTION
RULES.—The distribution of
funds to hospitals and other health care facilities from the
account must conform to the following principles:
108
(1) The disbursement of funds must be con-
sistent with achievement of the national and pro-
gram goals (specified in section 701(b)) within the
State health security program and the distribution
of funds from the account must be conditioned upon
the receipt of such reports as the Board may require
in order to monitor compliance with such goals.
(2) The distribution of funds from the account
must take into account the potentially higher costs
of placing health professional students in clinical
education programs in health professional shortage
areas.
Subtitle B—Payments by States to
Providers
SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY-
BASED SERVICES FOR OPERATING EXPENSES
ON 
THE 
BASIS 
OF 
APPROVED 
GLOBAL
BUDGETS.
(a) DIRECT PAYMENT UNDER GLOBAL BUDGET.—
Payment for operating expenses for institutional and facil-
ity-based care, including hospital services and nursing fa-
cility services, under State health security programs shall
be made directly to each institution or facility by each
State health security program under an annual prospec-
tive global budget approved under the program. Such a
109
budget shall include payment for outpatient care and non-
facility-based care that is furnished by or through the fa-
cility. In the case of a hospital that is wholly owned (or
controlled) by a comprehensive health service organization
that is paid under section 614 on the basis of a global
budget, the global budget of the organization shall include
the budget for the hospital.
(b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.—
(1) IN GENERAL.—The prospective global budg-
et for an institution or facility shall—
(A) be developed through annual negotia-
tions between (i) a panel of individuals who are
appointed by the Governor of the State and who
represent consumers, labor, business, and the
State government, and (ii) the institution or fa-
cility, and
(B) be based on a nationally uniform sys-
tem of cost accounting established under stand-
ards of the Board.
(2) CONSIDERATIONS.—In developing a budget
through negotiations, there shall be taken into
account at least the following:
(A) With respect to inpatient hospital serv-
ices, the number, and classification by diag-
nosis-related group, of discharges.
110
(B) An institution’s or facility’s past ex-
penditures.
(C) The extent to which debt service for
capital expenditures has been included in the
proposed operating budget.
(D) The extent to which capital expendi-
tures are financed directly or indirectly through
reductions in direct care to patients, including
(but not limited to) reductions in registered
nursing staffing patterns or changes in emer-
gency room or primary care services or avail-
ability.
(E) Change in the consumer price index
and other price indices.
(F) The cost of reasonable compensation
to health care practitioners.
(G) The compensation level of the institu-
tion’s or facility’s work force.
(H) The extent to which the institution or
facility is providing health care services to meet
the needs of residents in the area served by the
institution or facility, including the institution’s
or facility’s occupancy level.
(I) The institution’s or facility’s previous
financial and clinical performance, based on uti-
111
lization and outcomes data provided under this
Act.
(J) The type of institution or facility, in-
cluding whether the institution or facility is
part of a clinical education program or serves
a health professional education, research or
other training purpose.
(K) Technological advances or changes.
(L) Costs of the institution or facility asso-
ciated with meeting Federal and State regula-
tions.
(M) The costs associated with necessary
public outreach activities.
(N) In the case of a for-profit facility, a
reasonable rate of return on equity capital,
independent of those operating expenses nec-
essary to fulfill the objectives of this Act.
(O) Incentives to facilities that maintain
costs below previous reasonable budgeted levels
without reducing the care provided.
(P) With respect to facilities that provide
mental health services and substance abuse
treatment services, any additional costs involved
in the treatment of dually diagnosed individ-
uals.
112
The portion of such a budget that relates to expendi-
tures for health professional education shall be con-
sistent with the State health security budget for
such expenditures.
(3) PROVISION OF REQUIRED INFORMATION; DI-
AGNOSIS-RELATED GROUP.—No budget for an insti-
tution or facility for a year may be approved unless
the institution or facility has submitted on a timely
basis to the State health security program such in-
formation as the program or the Board shall specify,
including in the case of hospitals information on dis-
charges classified by diagnosis-related group.
(c) ADJUSTMENTS IN APPROVED BUDGETS.—
(1) ADJUSTMENTS TO GLOBAL BUDGETS THAT
CONTRACT WITH COMPREHENSIVE HEALTH SERVICE
ORGANIZATIONS.—Each State health security pro-
gram shall develop an administrative mechanism for
reducing operating funds to institutions or facilities
in proportion to payments made to such institutions
or facilities for services contracted for by a com-
prehensive health service organization.
(2) AMENDMENTS.—In accordance with stand-
ards established by the Board, an operating and
capital budget approved under this section for a year
may be amended before, during, or after the year if
113
there is a substantial change in any of the factors
relevant to budget approval.
(d) DONATIONS PERMISSIBLE.—The States health
security programs may permit institutions and facilities
to raise funds from private sources to pay for newly con-
structed facilities, major renovations, and equipment. The
expenditure of such funds, whether for operating or cap-
ital expenditures, does not obligate the State health secu-
rity program to provide for continued support for such ex-
penditures unless included in an approved global budget.
SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS
BASED ON PROSPECTIVE FEE SCHEDULE.
(a) FEE FOR SERVICE.—
(1) IN
GENERAL.—Every independent health
care practitioner is entitled to be paid, for the provi-
sion of covered health services under the State
health security program, a fee for each billable cov-
ered service.
(2) GLOBAL FEE PAYMENT METHODOLOGIES.—
The Board shall establish models and encourage
State health security programs to implement alter-
native payment methodologies that incorporate glob-
al fees for related services (such as all outpatient
procedures for treatment of a condition) or for a
basic group of services (such as primary care serv-
114
ices) furnished to an individual over a period of
time, in order to encourage continuity and efficiency
in the provision of services. Such methodologies shall
be designed to ensure a high quality of care.
(3) BILLING
DEADLINES; ELECTRONIC
BILL-
ING.—A State health security program may deny
payment for any service of an independent health
care practitioner for which it did not receive a bill
and appropriate supporting documentation (which
had been previously specified) within 30 days after
the date the service was provided. Such a program
may require that bills for services for which payment
may be made under this section, or for any class of
such services, be submitted electronically.
(b) PAYMENT RATES BASED ON NEGOTIATED PRO-
SPECTIVE FEE SCHEDULES.—With respect to any pay-
ment method for a class of services of practitioners, the
State health security program shall establish, on a pro-
spective basis, a payment schedule. The State health secu-
rity program may establish such a schedule after negotia-
tions with organizations representing the practitioners in-
volved. Such fee schedules shall be designed to provide in-
centives for practitioners to choose primary care medicine,
including general internal medicine and pediatrics, over
medical specialization. Nothing in this section shall be con-
115
strued as preventing a State from adjusting the payment
schedule amounts on a quarterly or other periodic basis
depending on whether expenditures under the schedule will
exceed the budgeted amount with respect to such expendi-
tures.
(c) BILLABLE COVERED SERVICE DEFINED.—In this
section, the term ‘‘billable covered service’’ means a service
covered under section 201 for which a practitioner is enti-
tled to compensation by payment of a fee determined
under this section.
SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERV-
ICE ORGANIZATIONS.
(a) IN GENERAL.—Payment under a State health se-
curity program to a comprehensive health service organi-
zation to its enrollees shall be determined by the State—
(1) based on a global budget described in sec-
tion 611, or
(2) based on the basic capitation amount de-
scribed in subsection (b) for each of its enrollees.
(b) BASIC CAPITATION AMOUNT.—
(1) IN GENERAL.—The basic capitation amount
described in this subsection for an enrollee shall be
determined by the State health security program on
the basis of the average amount of expenditures that
is estimated would be made under the State health
116
security program for covered health care services for
an enrollee, based on actuarial characteristics (as de-
fined by the State health security program).
(2) 
ADJUSTMENT
FOR
SPECIAL
HEALTH
NEEDS.—The State health security program shall
adjust such average amounts to take into account
the special health needs, including a disproportionate
number of medically underserved individuals, of pop-
ulations served by the organization.
(3) ADJUSTMENT
FOR
SERVICES
NOT
PRO-
VIDED.—The State health security program shall ad-
just such average amounts to take into account the
cost of covered health care services that are not pro-
vided by the comprehensive health service organiza-
tion under section 303(a).
SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY
HEALTH SERVICES.
(a) IN GENERAL.—In the case of community-based
primary health services, subject to subsection (b), pay-
ments under a State health security program shall—
(1) be based on a global budget described in
section 611,
(2) be based on the basic primary care capita-
tion amount described in subsection (c) for each in-
118
(c) BASIC PRIMARY CARE CAPITATION AMOUNT.—
(1) IN GENERAL.—The basic primary care capi-
tation amount described in this subsection for an en-
rollee with a provider of community-based primary
health services shall be determined by the State
health security program on the basis of the average
amount of expenditures that is estimated would be
made under the State health security program for
such an enrollee, based on actuarial characteristics
(as defined by the State health security program).
(2) 
ADJUSTMENT
FOR
SPECIAL
HEALTH
NEEDS.—The State health security program shall
adjust such average amounts to take into account
the special health needs, including a disproportionate
number of medically underserved individuals, of pop-
ulations served by the provider.
(3) ADJUSTMENT
FOR
SERVICES
NOT
PRO-
VIDED.—The State health security program shall ad-
just such average amounts to take into account the
cost of community-based primary health services
that are not provided by the provider.
(d) COMMUNITY-BASED PRIMARY HEALTH SERVICES
DEFINED.—In this section, the term ‘‘community-based
primary health services’’ has the meaning given such term
in section 202(a).
119
SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS.
(a) ESTABLISHMENT OF LIST.—
(1) IN GENERAL.—The Board shall establish a
list of approved prescription drugs and biologicals
that the Board determines are necessary for the
maintenance or restoration of health or of employ-
ability or self-management and eligible for coverage
under this Act.
(2) EXCLUSIONS.—The Board may exclude re-
imbursement under this Act for ineffective, unsafe,
or over-priced products where better alternatives are
determined to be available.
(b) PRICES.—For each such listed prescription drug
or biological covered under this Act, for insulin, and for
medical foods, the Board shall from time to time deter-
mine a product price or prices which shall constitute the
maximum to be recognized under this Act as the cost of
a drug to a provider thereof. The Board may conduct ne-
gotiations, on behalf of State health security programs,
with product manufacturers and distributors in deter-
mining the applicable product price or prices.
(c) CHARGES
BY INDEPENDENT PHARMACIES.—
Each State health security program shall provide for pay-
ment for a prescription drug or biological or insulin fur-
nished by an independent pharmacy based on the drug’s
cost to the pharmacy (not in excess of the applicable prod-
120
uct price established under subsection (b)) plus a dis-
pensing fee. In accordance with standards established by
the Board, each State health security program, after con-
sultation with representatives of the pharmaceutical pro-
fession, shall establish schedules of dispensing fees, de-
signed to afford reasonable compensation to independent
pharmacies after taking into account variations in their
cost of operation resulting from regional differences, dif-
ferences in the volume of prescription drugs dispensed, dif-
ferences in services provided, the need to maintain expend-
itures within the budgets established under this title,
and other relevant factors.
SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIP-
MENT.
(a) ESTABLISHMENT OF LIST.—The Board shall es-
tablish a list of approved durable medical equipment and
therapeutic devices and equipment (including eyeglasses,
hearing aids, and prosthetic appliances), that the Board
determines are necessary for the maintenance or restora-
tion of health or of employability or self-management and
eligible for coverage under this Act.
(b) CONSIDERATIONS AND CONDITIONS.—In estab-
lishing the list under subsection (a), the Board shall take
into consideration the efficacy, safety, and cost of each
item contained on such list, and shall attach to any item
121
such conditions as the Board determines appropriate with
respect to the circumstances under which, or the frequency
with which, the item may be prescribed.
(c) PRICES.—For each such listed item covered under
this Act, the Board shall from time to time determine a
product price or prices which shall constitute the max-
imum to be recognized under this Act as the cost of the
item to a provider thereof. The Board may conduct nego-
tiations, on behalf of State health security programs, with
equipment and device manufacturers and distributors in
determining the applicable product price or prices.
(d) EXCLUSIONS.—The Board may exclude from cov-
erage under this Act ineffective, unsafe, or overpriced
products where better alternatives are determined to be
available.
SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES.
In the case of payment for other covered health serv-
ices, the amount of payment under a State health security
program shall be established by the program—
(1) in accordance with payment methodologies
which are specified by the Board, after consultation
with the American Health Security Advisory Coun-
cil, or methodologies established by the State under
section 620, and
122
(2) consistent with the State health security
budget.
SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDER-
SERVED AREAS.
(a) MODEL PAYMENT METHODOLOGIES.—In addi-
tion to the payment amounts otherwise provided in this
title, the Board shall establish model payment methodolo-
gies and other incentives that promote the provision of
covered health care services in medically underserved
areas, particularly in rural and inner-city underserved
areas.
(b) CONSTRUCTION.—Nothing in this title shall be
construed as limiting the authority of State health security
programs to increase payment amounts or otherwise pro-
vide additional incentives, consistent with the State health
security budget, to encourage the provision of medically
necessary and appropriate services in underserved areas.
SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METH-
ODOLOGIES.
A State health security program, as part of its plan
under section 404(a), may use a payment methodology
other than a methodology required under this subtitle so
long as—
(1) such payment methodology does not affect
the entitlement of individuals to coverage, the
123
weighting of fee schedules to encourage an increase
in the number of primary care providers, the ability
of individuals to choose among qualified providers,
the benefits covered under the program, or the com-
pliance of the program with the State health security
budget under subtitle A, and
(2) the program submits periodic reports to the
Board showing the operation and effectiveness of the
alternative methodology, in order for the Board to
evaluate the appropriateness of applying the alter-
native methodology to other States.
Subtitle C—Mandatory Assignment
and Administrative Provisions
SEC. 631. MANDATORY ASSIGNMENT.
(a) NO BALANCE BILLING.—Payments for benefits
under this Act shall constitute payment in full for such
benefits and the entity furnishing an item or service for
which payment is made under this Act shall accept such
payment as payment in full for the item or service and
may not accept any payment or impose any charge for
any such item or service other than accepting payment
from the State health security program in accordance with
this Act.
(b) ENFORCEMENT.—If an entity knowingly and will-
fully bills for an item or service or accepts payment in
124
violation of subsection (a), the Board may apply sanctions
against the entity in the same manner as sanctions could
have been imposed under section 1842(j)(2) of the Social
Security Act for a violation of section 1842(j)(1) of such
Act. Such sanctions are in addition to any sanctions that
a State may impose under its State health security
program.
SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS.
(a) PROCEDURES FOR REIMBURSEMENT.—In accord-
ance with standards issued by the Board, a State health
security program shall establish a timely and administra-
tively simple procedure to assure payment within 60 days
of the date of submission of clean claims by providers
under this Act.
(b) APPEALS PROCESS.—Each State health security
program shall establish an appeals process to handle all
grievances pertaining to payment to providers under this
title.
125
TITLE VII—PROMOTION OF PRI-
MARY HEALTH CARE; DEVEL-
OPMENT OF HEALTH SERV-
ICE CAPACITY; PROGRAMS TO
ASSIST THE MEDICALLY UN-
DERSERVED
Subtitle A—Promotion and Expan-
sion of Primary Care Profes-
sional Training
SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY
CARE PROFESSIONAL OUTPUT GOALS.
(a) IN GENERAL.—The Board is responsible for—
(1) coordinating health professional education
policies and goals, in consultation with the Secretary
of Health and Human Services (in this title referred
to as the ‘‘Secretary’’), to achieve the national goals
specified in subsection (b);
(2) overseeing the health professional education
expenditures of the State health security programs
from the account established under section 602(c);
(3) developing and maintaining, in cooperation
with the Secretary, a system to monitor the number
and specialties of individuals through their health
professional education, any postgraduate training,
and professional practice; and
126
(4) developing, coordinating, and promoting
other policies that expand the number of primary
care practitioners.
(b) NATIONAL GOALS.—The national goals specified
in this subsection are as follows:
(1) GRADUATE MEDICAL EDUCATION.—By not
later than 5 years after the date of the enactment
of this Act, at least 50 percent of the residents in
medical residency education programs (as defined in
subsection (e)(1)) are primary care residents (as
defined in subsection (e)(3)).
(2) 
MIDLEVEL
PRIMARY
CARE
PRACTI-
TIONERS.—To assure an adequate supply of primary
care practitioners, there shall be a number, specified
by the Board, of midlevel primary care practitioners
(as defined in subsection (e)(2)) employed in the
health care system as of January 1, 2005.
(c) METHOD FOR ATTAINMENT OF NATIONAL GOAL
FOR
GRADUATE
MEDICAL
EDUCATION; 
PROGRAM
GOALS.—
(1) IN GENERAL.—The Board shall establish a
method of applying the national goal in subsection
(b)(1) to program goals for each medical residency
education program or to medical residency education
consortia.
127
(2) 
CONSIDERATION.—The 
program 
goals
under paragraph (1) shall be based on the distribu-
tion of medical schools and other teaching facilities
within each State health security program, and the
number of positions for graduate medical education.
(3) MEDICAL RESIDENCY EDUCATION CONSOR-
TIUM.—In this subsection, the term ‘‘medical resi-
dency education consortium’’ means a consortium of
medical residency education programs in a contig-
uous geographic area (which may be an interstate
area) if the consortium—
(A) includes at least one medical school
with a teaching hospital and related teaching
settings, and
(B) has an affiliation with qualified com-
munity-based primary health service providers
described in section 202(a) and with at least
one comprehensive health service organization
established under section 303.
(4) ENFORCEMENT THROUGH STATE HEALTH
SECURITY
BUDGETS.—The Board shall develop a
formula for reducing payments to State health secu-
rity programs (that provide for payments to a med-
ical residency education program) that failed to meet
128
the goal for the program established under this sub-
section.
(d) METHOD FOR ATTAINMENT OF NATIONAL GOAL
FOR MIDLEVEL PRIMARY CARE PRACTITIONERS.—To as-
sist in attaining the national goal identified in subsection
(b)(2), the Board shall—
(1) advise the Public Health Service on alloca-
tions of funding under titles VII and VIII of the
Public Health Service Act, the National Health
Service Corps, and other programs in order to in-
crease the supply of midlevel primary care practi-
tioners, and
(2) commission a study of the potential benefits
and disadvantages of expanding the scope of practice
authorized under State laws for any class of midlevel
primary care practitioners.
(e) DEFINITIONS.—In this title:
(1) MEDICAL
RESIDENCY
EDUCATION
PRO-
GRAM.—The term ‘‘medical residency education pro-
gram’’ means a program that provides education
and training to graduates of medical schools in order
to meet requirements for licensing and certification
as a physician, and includes the medical school su-
pervising the program and includes the hospital or
other facility in which the program is operated.
129
(2) 
MIDLEVEL
PRIMARY
CARE
PRACTI-
TIONER.—The term ‘‘midlevel primary care practi-
tioner’’ means a clinical nurse practitioner, certified
nurse midwife, physician assistance, or other non-
physician practitioner, specified by the Board, as au-
thorized to practice under State law.
(3) PRIMARY CARE RESIDENT.—The term ‘‘pri-
mary care resident’’ means (in accordance with cri-
teria established by the Board) a resident being
trained in a distinct program of family practice med-
icine, general practice, general internal medicine, or
general pediatrics.
SEC. 702. ESTABLISHMENT OF ADVISORY COMMITTEE ON
HEALTH PROFESSIONAL EDUCATION.
(a) IN GENERAL.—The Board shall provide for an
Advisory Committee on Health Professional Education (in
this section referred to as the ‘‘Committee’’) to advise the
Board on its activities under section 701.
(b) MEMBERSHIP.—The Committee shall be com-
posed of—
(1) the Chair of the Board, who shall serve as
Chair of the Committee, and
(2) 12 members, not otherwise in the employ of
the United States, appointed by the Board without
regard to the provisions of title 5, United States
130
Code, governing appointments in the competitive
service.
The appointed members shall provide a balanced point of
view with respect to health professional education, primary
care disciplines, and health care policy and shall include
individuals who are representative of medical schools,
other health professional schools, residency programs, pri-
mary care practitioners, teaching hospitals, professional
associations, public health organizations, State health
security programs, and consumers.
(c) TERMS OF MEMBERS.—Each appointed member
shall hold office for a term of five years, except that—
(1) any member appointed to fill a vacancy oc-
curring during the term for which the member’s
predecessor was appointed shall be appointed for the
remainder of that term; and
(2) the terms of the members first taking office
shall expire, as designated by the Board at the time
of appointment, two at the end of the second year,
two at the end of the third year, two at the end of
the fourth year, and three at the end of the fifth
year after the date of enactment of this Act.
(d) VACANCIES.—
(1) IN GENERAL.—The Board shall fill any va-
cancy in the membership of the Committee in the
131
same manner as the original appointment. The va-
cancy shall not affect the power of the remaining
members to execute the duties of the Committee.
(2) VACANCY
APPOINTMENTS.—Any member
appointed to fill a vacancy shall serve for the re-
mainder of the term for which the predecessor of the
member was appointed.
(3) REAPPOINTMENT.—The Board may re-
appoint an appointed member of the Committee for
a second term in the same manner as the original
appointment.
(e) DUTIES.—It shall be the duty of the Committee
to advise the Board concerning graduate medical edu-
cation policies under this title.
(f) STAFF.—The Committee, its members, and any
committees of the Committee shall be provided with such
secretarial, clerical, or other assistance as may be author-
ized by the Board for carrying out their respective
functions.
(g) MEETINGS.—The Committee shall meet as fre-
quently as the Board deems necessary, but not less than
4 times each year. Upon request by four or more members
it shall be the duty of the Chair to call a meeting of the
Committee.
132
(h) COMPENSATION.—Members of the Committee
shall be reimbursed by the Board for travel and per diem
in lieu of subsistence expenses during the performance of
duties of the Board in accordance with subchapter I of
chapter 57 of title 5, United States Code.
(i) FACA NOT APPLICABLE.—The provisions of the
Federal Advisory Committee Act shall not apply to the
Committee.
SEC. 703. GRANTS FOR HEALTH PROFESSIONS EDUCATION,
NURSE 
EDUCATION, 
AND 
THE 
NATIONAL
HEALTH SERVICE CORPS.
(a) TRANSFERS
TO PUBLIC HEALTH SERVICE.—
From the amounts provided under subsection (c), the
Board shall make transfers from the American Health Se-
curity Trust Fund to the Public Health Service under sub-
part II of part D of title III, title VII, and title VIII of
the Public Health Service Act for the support of the Na-
tional Health Service Corps, health professions education,
and nursing education, including education of clinical
nurse practitioners, certified registered nurse anesthetists,
certified nurse midwives, and physician assistants. Of the
amounts so transferred in each year, not less than 50 per-
cent shall be expended for the support of the National
Health Service Corps.
133
(b) RANGE OF FUNDS.—The amount of transfers
under subsection (a) for any fiscal year shall be an amount
(specified by the Board each year) not less than 4⁄100 per-
cent and not to exceed 6⁄100 percent of the amounts the
Board estimates will be expended from the Trust Fund
in the fiscal year.
(c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The
funds provided under this section with respect to provision
of services are in addition to, and not in replacement of,
funds made available under the provisions referred to in
subsection (a) and shall be administered in accordance
with the terms of such provisions. The Board shall make
no transfer of funds under this section for any fiscal year
for which the total appropriations for the programs au-
thorized by such provisions are less than the total amount
appropriated for such programs in fiscal year 1998.
Subtitle B—Direct Health Care
Delivery
SEC. 711. SETASIDE FOR PUBLIC HEALTH.
(a) TRANSFERS
TO PUBLIC HEALTH SERVICE.—
From the amounts provided under subsection (c), the
Board shall make transfers from the American Health Se-
curity Trust Fund to the Public Health Service for the
following purposes (other than payment for services cov-
ered under title II):
134
(1) For payments to States under the maternal
and child health block grants under title V of the
Social Security Act.
(2) For prevention and treatment of tuber-
culosis under section 317 of the Public Health Serv-
ice Act.
(3) For the prevention and treatment of sexu-
ally transmitted diseases under section 318 of the
Public Health Service Act.
(4) Preventive health block grants under part A
of title XIX of the Public Health Service Act.
(5) Grants to States for community mental
health services under subpart I of part B of title
XIX of the Public Health Service Act.
(6) Grants to States for prevention and treat-
ment of substance abuse under subpart II of part B
of title XIX of the Public Health Service Act.
(7) Grants for HIV health care services under
parts A, B, and C of title XXVI of the Public
Health Service Act.
(8) Public health formula grants described in
subsection (d).
(b) RANGE OF FUNDS.—The amount of transfers
under subsection (a) for any fiscal year shall be an amount
(specified by the Board each year) not less than 1⁄10 per-
135
cent and not to exceed 14⁄100 percent of the amounts the
Board estimates will be expended from the Trust Fund
in the fiscal year.
(c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The
funds provided under this section with respect to provision
of services are in addition to, and not in replacement of,
funds made available under the programs referred to in
subsection (a) and shall be administered in accordance
with the terms of such programs.
(d) REQUIRED REPORTS ON HEALTH STATUS.—The
Secretary shall require each State receiving funds under
this section to submit annual reports to the Secretary on
the health status of the population and measurable objec-
tives for improving the health of the public in the State.
Such reports shall include the following:
(1) A comparison of the measures of the State
and local public health system compared to relevant
objectives set forth in ‘‘Health People 2000’’ or sub-
sequent national objectives set by the Secretary.
(2) A description of health status measures to
be improved within the State (at the State and local
levels) through expanded public health functions and
health promotion and disease prevention programs.
136
(3) Measurable outcomes and process objectives
for improving health status, and a report on out-
comes from the previous year.
(4) Information regarding how Federal funding
has improved population-based prevention activities
and programs.
(5) A description of the core public health func-
tions to be carried out at the local level.
(6) A description of the relationship between
the State’s public health system, community-based
health promotion and disease prevention providers,
and the State health security program.
(e) LIMITATION ON FUND TRANSFERS.—The Board
shall make no transfer of funds under this section for any
fiscal year for which the total appropriations for such pro-
grams are less than the total amount appropriated for
such programs in fiscal year 1998.
(f) PUBLIC HEALTH FORMULA GRANTS.—The Sec-
retary shall provide stable funds to States through for-
mula grants for the purpose of carrying out core public
health functions to monitor and protect the health of com-
munities from communicable diseases and exposure to
toxic environmental pollutants, occupational hazards,
harmful products, and poor health outcomes. Such func-
tions include the following:
137
(1) Data collection, analysis, and assessment of
public health data, vital statistics, and personal
health data to assess community health status and
outcomes reporting. This function includes the ac-
quisition and installation of hardware and software,
and personnel training and technical assistance to
operate and support automated and integrated infor-
mation systems.
(2) Activities to protect the environment and to
assure the safety of housing, workplaces, food, and
water.
(3) Investigation and control of adverse health
conditions, and threats to the health status of indi-
viduals and the community. This function includes
the identification and control of outbreaks of infec-
tious disease, patterns of chronic disease and injury,
and cooperative activities to reduce the levels of vio-
lence.
(4) Health promotion and disease prevention
activities for which there is a significant need and a
high priority of the Public Health Service.
(5) The provision of public health laboratory
services to complement private clinical laboratory
services, including—
138
(A) screening tests for metabolic diseases
in newborns,
(B) toxicology assessments of blood lead
levels and other environmental toxins,
(C) tuberculosis and other disease requir-
ing partner notification, and
(D) testing for infectious and food-borne
diseases.
(6) Training and education for the public
health professions.
(7) Research on effective and cost-effective pub-
lic health practices. This function includes the devel-
opment, testing, evaluation, and publication of re-
sults of new prevention and public health control
interventions.
(8) Integration and coordination of the preven-
tion programs and services of community-based pro-
viders, local and State health departments, and
other sectors of State and local government that af-
fect health.
SEC. 712. SETASIDE FOR PRIMARY HEALTH CARE DELIV-
ERY.
(a) TRANSFERS
TO PUBLIC HEALTH SERVICE.—
From the amounts provided under subsection (c), the
Board shall make transfers from the American Health Se-
139
curity Trust Fund to the Public Health Service for the
program of primary care service expansion grants under
subpart V of part D of title III of the Public Health
Service Act (as added by section 713 of this Act).
(b) RANGE OF FUNDS.—The amount of transfers
under subsection (a) for any fiscal year shall be an amount
(specified by the Board each year) not less than 6⁄100 per-
cent and not to exceed 1⁄10 percent of the amounts the
Board estimates will be expended from the Trust Fund
in the fiscal year.
(c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The
funds provided under this section with respect to provision
of services are in addition to, and not in replacement of,
funds made available under the sections 329, 330, 340,
340A, 1001, and 2655 of the Public Health Service Act.
The Board shall make no transfer of funds under this sec-
tion for any fiscal year for which the total appropriations
for such sections are less than the total amount appro-
priated under such sections in fiscal year 1998.
SEC. 713. PRIMARY CARE SERVICE EXPANSION GRANTS.
Part D of title III of the Public Health Service Act
(42 U.S.C. 254b et seq.) is amended by adding at the end
thereof the following new subpart:
140
‘‘Subpart IX—Primary Care Expansion
‘‘SEC. 340E. EXPANDING PRIMARY CARE DELIVERY CAPAC-
ITY IN URBAN AND RURAL AREAS.
‘‘(a) GRANTS FOR PRIMARY CARE CENTERS.—From
the amounts described in subsection (c), the American
Health Security Standards Board shall make grants to
public and nonprofit private entities for projects to plan
and develop primary care centers which will serve medi-
cally underserved populations (as defined in section
330(b)(3)) in urban and rural areas and to deliver primary
care services to such populations in such areas. The funds
provided under such a grant may be used for the same
purposes for which a grant may be made under subsection
(c), (e), (f), (g), (h), or (i) of section 330.
‘‘(b) PROCESS OF AWARDING GRANTS.—The provi-
sions of subsection (j)(1) of section 330 shall apply to a
grant under this section in the same manner as they apply
to a grant under the corresponding subsection of such sec-
tion. The provisions of subsection (l)(2)(A) of such section
shall apply to grants for projects to plan and develop pri-
mary care centers under this section in the same manner
as they apply to grants under such section.
‘‘(c) FUNDING AS SET-ASIDE FROM TRUST FUND.—
Funding to carry out this section is provided from the
165
other tax imposed by this subtitle) equal to 2.2 percent
of the taxable income of the taxpayer for the taxable year.
‘‘(b) NO CREDITS AGAINST TAX; NO EFFECT ON
MINIMUM TAX.—The tax imposed by this section shall not
be treated as a tax imposed by this chapter for purposes
of determining—
‘‘(1) the amount of any credit allowable under
this chapter, or
‘‘(2) the amount of the minimum tax imposed
by section 55.
‘‘(c) SPECIAL RULES.—
‘‘(1) TAX TO BE WITHHELD, ETC.—For pur-
poses of this title, the tax imposed by this section
shall be treated as imposed by section 1.
‘‘(2) REIMBURSEMENT OF TAX BY EMPLOYER
NOT INCLUDIBLE IN GROSS INCOME.—The gross in-
come of an employee shall not include any payment
by his employer to reimburse the employee for the
tax paid by the employee under this section.
‘‘(3) OTHER
RULES.—The rules of section
59A(d) shall apply to the tax imposed by this sec-
tion.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 is amended by adding at the
end the following new item:
‘‘Part VIII. Health care income tax on individuals.’’