I
104TH CONGRESS
1ST SESSION
H. R. 2425
To amend title XVIII of the Social Security Act to preserve and reform
the medicare program.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 29, 1995
Mr. ARCHER (for himself, Mr. BLILEY, Mr. BILIRAKIS, Mr. THOMAS, Mr.
HYDE, Mr. GREENWOOD, Mr. HASTERT, Mrs. JOHNSON of Connecticut,
and Mr. MCCRERY) introduced the following bill; which was referred to
the Committee on Ways and Means, and in addition to the Committees
on Commerce, the Judiciary, and Rules, for a period to be subsequently
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to preserve
and reform the medicare program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. PURPOSE.
The purpose of this Act is to reform the medicare
program, in order to preserve and protect the financial
stability of the program.
TITLE XV—MEDICARE
SEC. 15000. SHORT TITLE OF TITLE; AMENDMENTS AND
REFERENCES TO OBRA; TABLE OF CONTENTS
OF TITLE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Medicare Preservation Act of 1995’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence shall be considered to be made to that section or
other provision of the Social Security Act.
(c) REFERENCES TO OBRA.—In this title, the terms
‘‘OBRA–1986’’, 
‘‘OBRA–1987’’, 
‘‘OBRA–1989’’,
‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus
Budget Reconciliation Act of 1986 (Public Law 99–509),
the Omnibus Budget Reconciliation Act of 1987 (Public
Law 100–203), the Omnibus Budget Reconciliation Act
of 1989 (Public Law 101–239), the Omnibus Budget Rec-
onciliation Act of 1990 (Public Law 101–508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law
103–66), respectively.
(d) TABLE OF CONTENTS OF TITLE.—The table of
contents of this title is as follows:
Sec. 15000. Short title of title; amendments and references to OBRA; table of
contents of title.
Subtitle A—MedicarePlus Program
PART 1—INCREASING CHOICE UNDER THE MEDICARE PROGRAM
Sec. 15001. Increasing choice under medicare.
Sec. 15002. MedicarePlus program.
‘‘PART C—PROVISIONS RELATING TO MEDICAREPLUS
‘‘Sec. 1851. Requirements for MedicarePlus organizations; high deductible/
medisave products.
‘‘Sec. 1852. Requirements relating to benefits, provision of services, enroll-
ment, and premiums.
‘‘Sec. 1853. Patient protection standards.
‘‘Sec. 1854. Provider-sponsored organizations.
‘‘Sec. 1855. Payments to MedicarePlus organizations.
‘‘Sec. 1856. Establishment of standards for MedicarePlus organizations
and products.
‘‘Sec. 1857. MedicarePlus certification.
‘‘Sec. 1858. Contracts with MedicarePlus organizations.
Sec. 15003. Duplication and coordination of medicare-related products.
Sec. 15004. Transitional rules for current medicare HMO program.
PART 2—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS
Sec. 15011. MedicarePlus MSA’s.
Sec. 15012. Certain rebates excluded from gross income.
PART 3—SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS
Sec. 15021. Application of antitrust rule of reason to provider service networks.
PART 4—COMMISSIONS
Sec. 15031. Medicare Payment Review Commission.
Sec. 15032. Commission on the Effect of the Baby Boom Generation on the
Medicare Program.
Sec. 15033. Change in appointment of Administrator of HCFA.
Subtitle B—Preventing Fraud and Abuse
Sec. 15101. Increasing awareness of fraud and abuse.
Sec. 15102. Beneficiary incentive programs.
Sec. 15103. Intermediate sanctions for medicare health maintenance organiza-
tions.
Sec. 15104. Voluntary disclosure program.
Sec. 15105. Revisions to current sanctions.
Sec. 15106. Consolidated funding for anti-fraud and abuse activities under
Medicare Integrity Program.
Sec. 15107. Permitting carriers to carry out prior authorization for certain
items of durable medical equipment.
Sec. 15108. Establishment of Health Care Anti-Fraud Task Force.
Sec. 15109. Study of adequacy of private quality assurance programs.
Subtitle C—Regulatory Relief
PART 1—PHYSICIAN OWNERSHIP REFERRAL REFORM
Sec. 15201. Repeal of prohibitions based on compensation arrangements.
Sec. 15202. Revision of designated health services subject to prohibition.
Sec. 15203. Delay in implementation until promulgation of regulations.
Sec. 15204. Exceptions to prohibition.
Sec. 15205. Repeal of reporting requirements.
Sec. 15206. Preemption of State law.
Sec. 15207. Effective date.
PART 2—OTHER MEDICARE REGULATORY RELIEF
Sec. 15211. Repeal of Medicare and Medicaid Coverage Data Bank.
Sec. 15212. Clarification of level of intent required for imposition of sanctions.
Sec. 15213. Clarification of and additions to exceptions to anti-kickback pen-
alties.
Sec. 15214. Solicitation and publication of modifications to existing safe har-
bors and new safe harbors.
Sec. 15215. Issuance of advisory opinions under title XI.
Sec. 15216. Prior notice of changes in billing and claims processing require-
ments for physicians’ services.
PART 3—PROMOTING PHYSICIAN SELF-POLICING
Sec. 15221. Exemption from antitrust laws for certain activities of medical self-
regulatory entities.
Subtitle D—Medical Liability Reform
PART 1—GENERAL PROVISIONS
Sec. 15301. Federal reform of health care liability actions.
Sec. 15302. Definitions.
Sec. 15303. Effective date.
PART 2—UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS
Sec. 15311. Statute of limitations.
Sec. 15312. Calculation and payment of damages.
Sec. 15313. Alternative dispute resolution.
Subtitle E—Teaching Hospitals and Graduate Medical
Education
PART 1—TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST
FUND
Sec. 15401. Establishment of Fund; payments to teaching hospitals.
‘‘TITLE XXII—TEACHING HOSPITAL AND GRADUATE MEDICAL
EDUCATION TRUST FUND
‘‘PART A—ESTABLISHMENT OF FUND
‘‘Sec. 2201. Establishment of Fund.
‘‘PART B—PAYMENTS TO TEACHING HOSPITALS
‘‘Subpart 1—Requirement of Payments
‘‘Sec. 2211. Formula payments to teaching hospitals.
‘‘Subpart 2—Amount Relating to Indirect Costs of Graduate Medical
Education
‘‘Sec. 2221. Determination of amount relating to indirect costs.
‘‘Sec. 2222. Indirect costs; special rules regarding determination of hos-
pital-specific percentage.
‘‘Sec. 2223. Indirect costs; alternative payments regarding teaching hos-
pitals in certain States.
‘‘Subpart 3—Amount Relating to Direct Costs of Graduate Medical
Education
‘‘Sec. 2231. Determination of amount relating to direct costs.
‘‘Sec. 2232. Direct costs; special rules regarding determination of hospital-
specific percentage.
‘‘Sec. 2233. Direct costs; authority for payments to consortia of providers.
‘‘Sec. 2234. Direct costs; alternative payments regarding teaching hos-
pitals in certain States.
‘‘Subpart 4—General Provisions
‘‘Sec. 2241. Adjustments in payment amounts.
PART 2—AMENDMENTS TO MEDICARE PROGRAM
Sec. 15411. Transfers to Teaching Hospital and Graduate Medical Education
Trust Fund.
Sec. 15412. Modification in payment policies regarding graduate medical edu-
cation.
PART 3—REFORM OF FEDERAL POLICIES REGARDING TEACHING HOSPITALS
AND GRADUATE MEDICAL EDUCATION
Sec. 15421. Establishment of advisory panel for recommending policies.
‘‘PART C—OTHER MATTERS
‘‘Sec. 2251. Advisory Panel on Reform in Financing of Teaching Hospitals
and Graduate Medical Education.
Subtitle F—Provisions Relating to Medicare Part A
PART 1—HOSPITALS
SUBPART A—GENERAL PROVISIONS RELATING TO HOSPITALS
Sec. 15501. Reductions in inflation updates for PPS hospitals.
Sec. 15502. Reductions in disproportionate share payment adjustments.
Sec. 15503. Payments for capital-related costs for inpatient hospital services.
Sec. 15504. Reduction in adjustment for indirect medical education.
Sec. 15505. Treatment of PPS-exempt hospitals.
Sec. 15506. Reduction in payments to hospitals for enrollees’ bad debts.
Sec. 15507. Permanent extension of hemophilia pass-through.
Sec. 15508. Conforming amendment to certification of Christian Science pro-
viders.
SUBPART B—PROVISIONS RELATING TO RURAL HOSPITALS
Sec. 15511. Sole community hospitals.
Sec. 15512. Clarification of treatment of EAC and RPC hospitals.
Sec. 15513. Rural emergency access care hospitals.
Sec. 15514. Classification of rural referral centers.
Sec. 15515. Floor on area wage index.
PART 2—PAYMENTS TO SKILLED NURSING FACILITIES
Sec. 15521. Payments for routine service costs.
Sec. 15522. Incentives for cost effective management of covered non-routine
services.
Sec. 15523. Payments for routine service costs.
Sec. 15524. Reductions in payment for capital-related costs.
Sec. 15525. Treatment of items and services paid for under part B.
Sec. 15526. Certification of facilities meeting revised nursing home reform
standards.
Sec. 15527. Medical review process.
Sec. 15528. Report by Medicare Payment Review Commission.
Sec. 15529. Effective date.
Subtitle G—Provisions Relating to Medicare Part B
PART 1—PAYMENT REFORMS
Sec. 15601. Payments for physicians’ services.
Sec. 15602. Elimination of formula-driven overpayments for certain outpatient
hospital services.
Sec. 15603. Reduction in updates to payment amounts for durable medical
equipment.
Sec. 15604. Reduction in updates to payment amounts for clinical diagnostic
laboratory tests.
Sec. 15605. Extension of reductions in payments for costs of hospital out-
patient services.
Sec. 15606. Freeze in payments for ambulatory surgical center services.
Sec. 15607. Rural emergency access care hospitals.
PART 2—PART B PREMIUM
Sec. 15611. Extension of part B premium.
Sec. 15612. Income-related reduction in medicare subsidy.
Subtitle H—Provisions Relating to Medicare Parts A and B
PART 1—HOME HEALTH SERVICES
Sec. 15701. Payment for home health services.
Sec. 15702. Maintaining savings resulting from temporary freeze on payment
increases for home health services.
Sec. 15703. Extension of waiver of presumption of lack of knowledge of exclu-
sion from coverage for home health agencies.
PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS
Sec. 15711. Extension and expansion of existing requirements.
Sec. 15712. Improvements in recovery of payments.
Sec. 15713. Prohibiting retroactive application of policy regarding ESRD bene-
ficiaries enrolled in primary plans.
PART 3—FAILSAFE
Subtitle A, Part 1
Sec. 15721. Failsafe budget mechanism.
PART 4—ADMINISTRATIVE SIMPLIFICATION
Sec. 15731. Standards for medicare information transactions and data ele-
ments.
PART 5—OTHER PROVISIONS RELATING TO PARTS A AND B
Sec. 15741. Clarification of medicare coverage of items and services associated
with certain medical devices approved for investigational use.
Sec. 15742. Additional exclusion from coverage.
Subtitle I—Clinical Laboratories
Sec. 15801. Exemption of physician office laboratories.
Subtitle A—MedicarePlus Program
PART 1—INCREASING CHOICE UNDER THE
MEDICARE PROGRAM
SEC. 15001. INCREASING CHOICE UNDER MEDICARE.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1804 the following new section:
‘‘PROVIDING FOR CHOICE OF COVERAGE
‘‘SEC. 1805. (a) CHOICE OF COVERAGE.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, every individual who is entitled to bene-
fits under part A and enrolled under part B shall
elect to receive benefits under this title through one
of the following:
‘‘(A) THROUGH
FEE-FOR-SERVICE
SYS-
TEM.—Through the provisions of parts A and
B.
Subtitle A, Part 1
‘‘(B) THROUGH A MEDICAREPLUS PROD-
UCT.—Through a MedicarePlus product (as de-
fined in paragraph (2)), which may be—
‘‘(i) a high deductible/medisave prod-
uct 
(and 
a 
contribution 
into 
a
MedicarePlus 
medical 
savings 
account
(MSA)),
‘‘(ii) a product offered by a provider-
sponsored organization,
‘‘(iii) a product offered by an organi-
zation that is a union, Taft-Hartley plan,
or association, or
‘‘(iv) a product providing for benefits
on a fee-for-service or other basis.
‘‘(2) MEDICAREPLUS PRODUCT DEFINED.—For
purposes this section and part C, the term
‘MedicarePlus product’ means health benefits cov-
erage offered under a policy, contract, or plan by a
MedicarePlus organization (as defined in section
1851(a)) pursuant to and in accordance with a con-
tract under section 1857.
‘‘(3) TERMINOLOGY RELATING TO OPTIONS.—
For purposes of this section and part C—
‘‘(A) NON-MEDICAREPLUS
OPTION.—An
individual who has made the election described
Subtitle A, Part 1
in paragraph (1)(A) is considered to have elect-
ed the ‘Non-MedicarePlus option’.
‘‘(B) MEDICAREPLUS
OPTION.—An indi-
vidual who has made the election described in
paragraph (1)(B) to obtain coverage through a
MedicarePlus product is considered to have
elected the ‘MedicarePlus option’ for that prod-
uct.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE
REQUIREMENT.—Except as
the Secretary may otherwise provide, an individual is
eligible to elect a MedicarePlus product offered by a
MedicarePlus organization only if the organization
in relation to the product serves the geographic area
in which the individual resides.
‘‘(2) AFFILIATION
REQUIREMENTS
FOR
CER-
TAIN PRODUCTS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), an individual is eligible to elect a
MedicarePlus product offered by a limited en-
rollment MedicarePlus organization (as defined
in section 1852(c)(4)(E)) only if—
‘‘(i) the individual is eligible under
section 1852(c)(4) to make such election,
and
Subtitle A, Part 1
‘‘(ii) in the case of a MedicarePlus or-
ganization that is a union sponsor or a
Taft-Hartley sponsor (as defined in section
1852(c)(4)), the individual elected under
this section a MedicarePlus product offered
by the sponsor during the first enrollment
period in which the individual was eligible
to make such election with respect to such
sponsor.
‘‘(B) 
NO
REELECTION
AFTER
DISENROLLMENT
FOR
CERTAIN
PRODUCTS.—
An individual is not eligible to elect a
MedicarePlus 
product 
offered 
by 
a
MedicarePlus organization that is union spon-
sor or a Taft-Hartley sponsor if the individual
previously had elected a MedicarePlus product
offered by the organization and had subse-
quently discontinued to elect such a product of-
fered by the organization.
‘‘(3) SPECIAL
RULE
FOR
CERTAIN
ANNU-
ITANTS.—An individual is not eligible to elect a high
deductible/medisave product if the individual is enti-
tled to benefits under chapter 89 of title 5, United
States Code, as an annuitant or spouse of an annu-
itant.
Subtitle A, Part 1
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process through which elections described in
subsection (a) are made and changed, including the
form and manner in which such elections are made
and changed. Such elections shall be made or
changed only during coverage election periods speci-
fied under subsection (e) and shall become effective
as provided in subsection (f).
‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec-
retary shall establish the process of electing coverage
under this section during the transition period (as
defined in subsection (e)(1)(B)) in such an expedited
manner as will permit such an election for
MedicarePlus products in an area as soon as such
products become available in that area.
‘‘(3) COORDINATION THROUGH MEDICAREPLUS
ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a
MedicarePlus 
product 
offered 
by 
a
MedicarePlus organization to make such elec-
tion through the filing of an appropriate elec-
tion form with the organization.
Subtitle A, Part 1
‘‘(B) 
DISENROLLMENT.—Such 
process
shall permit an individual, who has elected a
MedicarePlus 
product 
offered 
by 
a
MedicarePlus organization and who wishes to
terminate such election, to terminate such elec-
tion through the filing of an appropriate elec-
tion form with the organization.
‘‘(4) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), an individual who fails to make an
election during an initial election period
under subsection (e)(1) is deemed to have
chosen the Non-MedicarePlus option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary shall establish
procedures under which individuals who
are enrolled with a MedicarePlus organiza-
tion at the time of the initial election pe-
riod and who fail to elect to receive cov-
erage other than through the organization
are deemed to have elected an appropriate
MedicarePlus product offered by the orga-
nization.
Subtitle A, Part 1
‘‘(B) CONTINUING PERIODS.—An individ-
ual who has made (or deemed to have made) an
election under this section is considered to have
continued to make such election until such time
as—
‘‘(i) the individual changes the elec-
tion under this section, or
‘‘(ii) a MedicarePlus product is dis-
continued, if the individual had elected
such product at the time of the discontinu-
ation.
‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO-
CIAL SECURITY TO PROMOTE EFFICIENT ADMINIS-
TRATION.—In order to promote the efficient admin-
istration of this section and the MedicarePlus pro-
gram under part C, the Secretary may enter into an
agreement with the Commissioner of Social Security
under which the Commissioner performs administra-
tive responsibilities relating to enrollment and
disenrollment in MedicarePlus products under this
section.
‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO
PROMOTE INFORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to disseminate
Subtitle A, Part 1
broadly information to medicare beneficiaries (and
prospective medicare beneficiaries) on the coverage
options provided under this section in order to pro-
mote an active, informed selection among such op-
tions. Such information shall be made available on
such a timely basis (such as 6 months before the
date an individual would first attain eligibility for
medicare on the basis of age) as to permit individ-
uals to elect the MedicarePlus option during the ini-
tial election period described in subsection (e)(1).
‘‘(2) USE
OF
NONFEDERAL
ENTITIES.—The
Secretary shall, to the maximum extent feasible,
enter into contracts with appropriate non-Federal
entities to carry out activities under this subsection.
‘‘(3) SPECIFIC
ACTIVITIES.—In carrying out
this subsection, the Secretary shall provide for at
least the following activities in all areas in which
MedicarePlus products are offered:
‘‘(A) INFORMATION BOOKLET.—
‘‘(i) IN
GENERAL.—The Secretary
shall publish an information booklet and
disseminate the booklet to all individuals
eligible to elect the MedicarePlus option
under this section during coverage election
periods.
Subtitle A, Part 1
‘‘(ii) INFORMATION
INCLUDED.—The
booklet shall include information presented
in plain English and in a standardized for-
mat regarding—
‘‘(I) the benefits and premiums
for the various MedicarePlus products
in the areas involved;
‘‘(II) the quality of such prod-
ucts, including consumer satisfaction
information; and
‘‘(III) rights and responsibilities
of medicare beneficiaries under such
products.
‘‘(iii) 
PERIODIC
UPDATING.—The
booklet shall be updated on a regular basis
(not less often than once every 12 months)
to reflect changes in the availability of
MedicarePlus products and the benefits
and premiums for such products.
‘‘(B) TOLL-FREE NUMBER.—The Secretary
shall maintain a toll-free number for inquiries
regarding MedicarePlus options and the oper-
ation of part C.
‘‘(C) GENERAL
INFORMATION
IN
MEDI-
CARE HANDBOOK.—The Secretary shall include
Subtitle A, Part 1
information about the MedicarePlus option pro-
vided under this section in the annual notice of
medicare benefits under section 1804.
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL
CHOICE
UPON
ELIGIBILITY
TO
MAKE ELECTION.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who first becomes entitled to benefits
under part A and enrolled under part B after
the beginning of the transition period (as de-
fined in subparagraph (B)), the individual shall
make the election under this section during a
period (of a duration and beginning at a time
specified by the Secretary) at the first time the
individual both is entitled to benefits under part
A and enrolled under part B. Such period shall
be specified in a manner so that, in the case of
an individual who elects a MedicarePlus prod-
uct during the period, coverage under the prod-
uct becomes effective as of the first date on
which the individual may receive such coverage.
‘‘(B) TRANSITION
PERIOD
DEFINED.—In
this subsection, the term ‘transition period’
means, with respect to an individual in an area,
the period beginning on the first day of the first
Subtitle A, Part 1
month in which a MedicarePlus product is first
made available to individuals in the area and
ending with the month preceding the beginning
of the first annual, coordinated election period
under paragraph (3).
‘‘(2) DURING TRANSITION PERIOD.—Subject to
paragraph (6)—
‘‘(A) CONTINUOUS
OPEN
ENROLLMENT
INTO
A
MEDICAREPLUS
OPTION.—During the
transition period, an individual who is eligible
to make an election under this section and who
has elected the non-MedicarePlus option may
change such election to a MedicarePlus option
at any time.
‘‘(B) OPEN DISENROLLMENT BEFORE END
OF TRANSITION PERIOD.—
‘‘(i) IN GENERAL.—During the transi-
tion period, an individual who has elected
a MedicarePlus option for a MedicarePlus
product may change such election to an-
other MedicarePlus product or to the non-
MedicarePlus option.
‘‘(ii) SPECIAL
RULE.—During the
transition period, an individual who has
elected a high deductible/medisave product
Subtitle A, Part 1
may not change such election to a
MedicarePlus product that is not a high
deductible/medisave product unless the in-
dividual has had such election in effect for
12 months.
‘‘(3) ANNUAL, COORDINATED
ELECTION
PE-
RIOD.—
‘‘(A) IN GENERAL.—Subject to paragraph
(5), each individual who is eligible to make an
election under this section may change such
election during annual, coordinated election pe-
riods.
‘‘(B) ANNUAL, COORDINATED
ELECTION
PERIOD.—For purposes of this section, the
term ‘annual, coordinated election period’
means, with respect to a calendar year (begin-
ning with 1998), the month of October before
such year.
‘‘(C) MEDICAREPLUS HEALTH FAIR DUR-
ING OCTOBER, 1996.—In the month of October,
1996, the Secretary shall provide for a nation-
ally coordinated educational and publicity cam-
paign to inform individuals, who are eligible to
elect MedicarePlus products, about such prod-
ucts and the election process provided under
Subtitle A, Part 1
this section (including the annual, coordinated
election periods that occur in subsequent years).
‘‘(4) SPECIAL
90-DAY
DISENROLLMENT
OP-
TION.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who first elects a MedicarePlus option
(other than a high deductible/medisave product)
under this section, the individual may dis-
continue such election through the filing of an
appropriate notice during the 90-day period be-
ginning on the first day on which the individ-
ual’s coverage under the MedicarePlus product
under such option becomes effective.
‘‘(B) EFFECT
OF
DISCONTINUATION
OF
ELECTION.—An individual who discontinues an
election under this paragraph shall be deemed
at the time of such discontinuation to have
elected the non-MedicarePlus option.
‘‘(5) SPECIAL ELECTION PERIODS.—An individ-
ual may discontinue an election of a MedicarePlus
product offered by a MedicarePlus organization
other than during an annual, coordinated election
period and make a new election under this section
if—
Subtitle A, Part 1
‘‘(A) the organization’s or product’s certifi-
cation under part C has been terminated or the
organization has terminated or otherwise dis-
continued providing the product;
‘‘(B) in the case of an individual who has
elected a MedicarePlus product offered by a
MedicarePlus organization, the individual is no
longer eligible to elect the product because of a
change in the individual’s place of residence or
other change in circumstances (specified by the
Secretary, but not including termination of
membership in a qualified association in the
case of a product offered by a qualified associa-
tion or termination of the individual’s enroll-
ment on the basis described in clause (i) or (ii),
section 1852(c)(3)(B));
‘‘(C) the individual demonstrates (in ac-
cordance with guidelines established by the Sec-
retary) that—
‘‘(i) the organization offering the
product substantially violated a material
provision of the organization’s contract
under part C in relation to the individual
and the product; or
Subtitle A, Part 1
‘‘(ii) the organization (or an agent or
other entity acting on the organization’s
behalf) materially misrepresented the prod-
uct’s provisions in marketing the product
to the individual; or
‘‘(D) the individual meets such other con-
ditions as the Secretary may provide.
‘‘(6) SPECIAL RULE FOR HIGH DEDUCTIBLE/
MEDISAVE
PRODUCTS.—Notwithstanding the pre-
vious provisions of this subsection, an individual may
elect a high deductible/medisave product only during
an annual, coordinated election period described in
paragraph (3)(B) or during the month of October,
1996.
‘‘(f) EFFECTIVENESS OF ELECTIONS.—
‘‘(1) DURING INITIAL COVERAGE ELECTION PE-
RIOD.—An election of coverage made during the ini-
tial coverage election period under subsection
(e)(1)(A) shall take effect upon the date the individ-
ual becomes entitled to benefits under part A and
enrolled under part B, except as the Secretary may
provide (consistent with section 1838) in order to
prevent retroactive coverage.
‘‘(2) 
DURING
TRANSITION; 
90-DAY
DISENROLLMENT OPTION.—An election of coverage
Subtitle A, Part 1
made under subsection (e)(2) and an election to dis-
continue a MedicarePlus option under subsection
(e)(4) at any time shall take effect with the first cal-
endar month following the date on which the election
is made.
‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD
AND MEDISAVE ELECTION.—An election of coverage
made during an annual, coordinated election period
(as defined in subsection (e)(3)(B)) in a year or for
a high deductible/medisave product shall take effect
as of the first day of the following year.
‘‘(4) OTHER PERIODS.—An election of coverage
made during any other period under subsection
(e)(5) shall take effect in such manner as the Sec-
retary provides in a manner consistent (to the extent
practicable) with protecting continuity of health ben-
efit coverage.
‘‘(g) EFFECT OF ELECTION OF MEDICAREPLUS OP-
TION.—Subject to the provisions of section 1855(f), pay-
ments under a contract with a MedicarePlus organization
under section 1857(a) with respect to an individual elect-
ing a MedicarePlus product offered by the organization
shall be instead of the amounts which (in the absence of
the contract) would otherwise be payable under parts A
and B for items and services furnished to the individual.
Subtitle A, Part 1
‘‘(h) ADMINISTRATION.—
‘‘(1) IN
GENERAL.—This part and sections
1805 and 1876 shall be administered through an op-
erating division (A) that is established or identified
by the Secretary in the Department of Health and
Human Services, (B) that is separate from the
Health Care Financing Administration, and (C) the
primary function of which is the administration of
this part and such sections. The director of such di-
vision shall be of equal pay and rank to that of the
individual responsible for overall administration of
parts A and B.
‘‘(2) TRANSFER
AUTHORITY.—The Secretary
shall transfer such personnel, administrative support
systems, assets, records, funds, and other resources
in the Health Care Financing Administration to the
operating division referred to in paragraph (1) as
are used in the administration of section 1876 and
as may be required to implement the provisions re-
ferred to in such paragraph promptly and effi-
ciently.’’.
SEC. 15002. MEDICAREPLUS PROGRAM.
(a) IN GENERAL.—Title XVIII is amended by redes-
ignating part C as part D and by inserting after part B
the following new part:
Subtitle A, Part 1
‘‘PART C—PROVISIONS RELATING TO MEDICAREPLUS
‘‘REQUIREMENTS FOR MEDICAREPLUS ORGANIZATIONS;
HIGH DEDUCTIBLE/MEDISAVE PRODUCTS
‘‘SEC. 1851. (a) MEDICAREPLUS ORGANIZATION DE-
FINED.—In this part, subject to the succeeding provisions
of this section, the term ‘MedicarePlus organization’
means a public or private entity that is certified under
section 1857 as meeting the requirements of this part for
such an organization.
‘‘(b) ORGANIZED
AND LICENSED UNDER STATE
LAW.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion shall be organized and licensed under State law
to offer health insurance or health benefits coverage
in each State in which it offers a MedicarePlus prod-
uct.
‘‘(2) EXCEPTION FOR UNION AND TAFT-HART-
LEY SPONSORS.—Paragraph (1) shall not apply to a
MedicarePlus organization that is a union sponsor
or a Taft-Hartley sponsor (as defined in section
1852(c)(4)).
‘‘(3) EXCEPTION
FOR
PROVIDER-SPONSORED
ORGANIZATIONS.—Paragraph (1) shall not apply to
a MedicarePlus organization that is a provider-spon-
Subtitle A, Part 1
vision before they could be secured through the orga-
nization,
‘‘(3) may obtain insurance or make other ar-
rangements for not more than 90 percent of the
amount by which its costs for any of its fiscal years
exceed 115 percent of its income for such fiscal year,
and
‘‘(4) may make arrangements with physicians
or other health professionals, health care institu-
tions, or any combination of such individuals or in-
stitutions to assume all or part of the financial risk
on a prospective basis for the provision of basic
health services by the physicians or other health pro-
fessionals or through the institutions.
‘‘(e) PROVISION AGAINST RISK OF INSOLVENCY.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation shall meet standards under section 1856 re-
lating to the financial solvency and capital adequacy
of the organization. Such standards shall take into
account the nature and type of MedicarePlus prod-
ucts offered by the organization.
‘‘(2) TREATMENT OF UNION AND TAFT-HART-
LEY SPONSORS.—An entity that is a union sponsor
or a Taft-Hartley sponsor is deemed to meet the re-
quirement of paragraph (1).
Subtitle A, Part 1
‘‘(f) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DE-
FINED.—
‘‘(1) IN GENERAL.—In this part, the term ‘high
deductible/medisave product’ means a MedicarePlus
product that—
‘‘(A) provides reimbursement for at least
the items and services described in section
1852(a)(1) in a year but only after the enrollee
incurs countable expenses (as specified under
the product) equal to the amount of a deduct-
ible (described in paragraph (2));
‘‘(B) counts as such expenses (for purposes
of such deductible) at least all amounts that
would have been payable under parts A and B
or by the enrollee if the enrollee had elected to
receive benefits through the provisions of such
parts; and
‘‘(C) provides, after such deductible is met
for a year and for all subsequent expenses for
benefits referred to in subparagraph (A) in the
year, for a level of reimbursement that is not
less than—
‘‘(i) 100 percent of such expenses, or
‘‘(ii) 100 percent of the amounts that
would have been paid (without regard to
Subtitle A, Part 1
any deductibles or coinsurance) under
parts A and B with respect to such ex-
penses,
whichever is less. Such term does not include
the MedicarePlus MSA itself or any contribu-
tion into such account.
‘‘(2) DEDUCTIBLE.—The amount of deductible
under a high deductible/medisave product—
‘‘(A) for contract year 1997 shall be not
more than $10,000; and
‘‘(B) for a subsequent contract year shall
be not more than the maximum amount of such
deductible for the previous contract year under
this paragraph increased by the national aver-
age per capita growth rate under section
1855(c)(3) for the year.
If the amount of the deductible under subparagraph
(B) is not a multiple of $50, the amount shall be
rounded to the nearest multiple of $50.
‘‘(g) ORGANIZATIONS TREATED AS MEDICAREPLUS
ORGANIZATIONS DURING TRANSITION.—Any of the fol-
lowing organizations shall be considered to qualify as a
MedicarePlus organization for contract years beginning
before January 1, 1998:
Subtitle A, Part 1
‘‘(1) 
HEALTH
MAINTENANCE
ORGANIZA-
TIONS.—An organization that is organized under the
laws of any State and that is a qualified health
maintenance organization (as defined in section
1310(d) of the Public Health Service Act), an orga-
nization recognized under State law as a health
maintenance organization, or a similar organization
regulated under State law for solvency in the same
manner and to the same extent as such a health
maintenance organization.
‘‘(2) LICENSED
INSURERS.—An organization
that is organized under the laws of any State and—
‘‘(A) is licensed by a State agency as an
insurer for the offering of health benefit cov-
erage, or
‘‘(B) is licensed by a State agency as a
service benefit plan,
but only for individuals residing in an area in which
the organization is licensed to offer health insurance
coverage.
‘‘(3) CURRENT RISK-CONTRACTORS.—An orga-
nization that is an eligible organization (as defined
in section 1876(b)) and that has a risk-sharing con-
tract in effect under section 1876 as of the date of
the enactment of this section.
Subtitle A, Part 1
‘‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF
SERVICES, ENROLLMENT, AND PREMIUMS
‘‘SEC. 1852. (a) BENEFITS COVERED.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (b), in section 1851(f)(1) with respect to
high deductible/medisave products, and in section
1853(a), each MedicarePlus product offered under
this part shall provide benefits for at least the items
and services for which benefits are available under
parts A and B consistent with the standards for cov-
erage of such items and services applicable under
this title.
‘‘(2) ORGANIZATION AS SECONDARY PAYER.—
Notwithstanding any other provision of law, a
MedicarePlus organization may (in the case of the
provision of items and services to an individual
under this part under circumstances in which pay-
ment under this title is made secondary pursuant to
section 1862(b)(2)) charge or authorize the provider
of such services to charge, in accordance with the
charges allowed under such law or policy—
‘‘(A) the insurance carrier, employer, or
other entity which under such law, plan, or pol-
icy is to pay for the provision of such services,
or
Subtitle A, Part 1
‘‘(B) such individual to the extent that the
individual has been paid under such law, plan,
or policy for such services.
‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi-
zation may not deny, limit, or condition the coverage or
provision of benefits under this part based on the health
status, claims experience, receipt of health care, medical
history, or lack of evidence of insurability, of an individual.
‘‘(c) GUARANTEED ISSUE AND RENEWAL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, a MedicarePlus organization shall pro-
vide that at any time during which elections are ac-
cepted under section 1805 with respect to a
MedicarePlus product offered by the organization,
the organization will accept without restrictions indi-
viduals who are eligible to make such election.
‘‘(2) PRIORITY.—If the Secretary determines
that a MedicarePlus organization, in relation to a
MedicarePlus product it offers, has a capacity limit
and the number of eligible individuals who elect the
product under section 1805 exceeds the capacity
limit, the organization may limit the election of indi-
viduals of the product under such section but only
if priority in election is provided—
Subtitle A, Part 1
‘‘(A) first to such individuals as have elect-
ed the product at that time, and
‘‘(B) then to other such individuals in such
a manner that does not discriminate among the
individuals (who seek to elect the product) on a
basis described in paragraph (1).
‘‘(3) LIMITATION ON TERMINATION OF ELEC-
TION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a MedicarePlus organization may
not for any reason terminate the election of any
individual 
under 
section 
1805 
for 
a
MedicarePlus product it offers.
‘‘(B) BASIS FOR TERMINATION OF ELEC-
TION.—A MedicarePlus organization may ter-
minate an individual’s election under section
1805 with respect to a MedicarePlus product it
offers if—
‘‘(i) any premiums required with re-
spect to such product are not paid on a
timely basis (consistent with standards
under section 1856 that provide for a
grace period for late payment of pre-
miums),
Subtitle A, Part 1
‘‘(ii) the individual has engaged in
disruptive behavior (as specified in such
standards), or
‘‘(iii) the product is terminated with
respect to all individuals under this part.
Any individual whose election is so terminated
is deemed to have elected the Non-MedicarePlus
option (as defined in section 1805(a)(3)(A)).
‘‘(D) ORGANIZATION
OBLIGATION
WITH
RE-
SPECT TO ELECTION FORMS.—Pursuant to a con-
tract under section 1858, each MedicarePlus organi-
zation receiving an election form under section
1805(c)(2) shall transmit to the Secretary (at such
time and in such manner as the Secretary may
specify) a copy of such form or such other informa-
tion respecting the election as the Secretary may
specify.
‘‘(4) SPECIAL
RULES
FOR
LIMITED
ENROLL-
MENT MEDICAREPLUS ORGANIZATIONS.—
‘‘(A) UNIONS.—
‘‘(i) IN
GENERAL.—Subject to sub-
paragraph (D), a union sponsor (as de-
fined in subsection (b)(2)) shall limit eligi-
bility of enrollees under this part for
MedicarePlus products it offers to individ-
Subtitle A, Part 1
uals who are members of the sponsor and
affiliated with the sponsor through an em-
ployment relationship with any employer or
are the spouses of such members.
‘‘(ii) UNION SPONSOR.—In this part
and section 1805, the term ‘union sponsor’
means an employee organization in relation
to a group health plan that is established
or maintained by the organization other
than pursuant to a collective bargaining
agreement.
‘‘(B) TAFT-HARTLEY SPONSORS.—
‘‘(i) IN
GENERAL.—Subject to sub-
paragraph (D), a MedicarePlus organiza-
tion that is a Taft-Hartley sponsor (as de-
fined in clause (ii)) shall limit eligibility of
enrollees under this part for MedicarePlus
products it offers to individuals who are
entitled to obtain benefits through such
products under the terms of an applicable
collective bargaining agreement.
‘‘(ii) TAFT-HARTLEY
SPONSOR.—In
this part and section 1805, the term ‘Taft-
Hartley sponsor’ means, in relation to a
group health plan that is established or
Subtitle A, Part 1
maintained by two or more employers or
jointly by one or more employers and one
or more employee organizations, the asso-
ciation, committee, joint board of trustees,
or other similar group of representatives of
parties who establish or maintain the plan.
‘‘(C) QUALIFIED ASSOCIATIONS.—
‘‘(i) IN
GENERAL.—Subject to sub-
paragraph (D), a MedicarePlus organiza-
tion that is a qualified association (as de-
fined in clause (iii)) shall limit eligibility of
individuals under this part for products it
offers to individuals who are members of
the association (or who are spouses of such
individuals).
‘‘(ii) LIMITATION
ON
TERMINATION
OF COVERAGE.—Such a qualifying associa-
tion offering a MedicarePlus product to an
individual may not terminate coverage of
the individual on the basis that the individ-
ual is no longer a member of the associa-
tion except pursuant to a change of elec-
tion during an open election period occur-
ring on or after the date of the termination
of membership.
Subtitle A, Part 1
‘‘(iii) QUALIFIED
ASSOCIATION.—In
this part and section 1805, the term ‘quali-
fied association’ means an association, reli-
gious fraternal organization, or other orga-
nization (which may be a trade, industry,
or professional association, a chamber of
commerce, or a public entity association)
that the Secretary finds—
‘‘(I) has been formed for pur-
poses other than the sale of any
health insurance and does not restrict
membership based on the health sta-
tus, claims experience, receipt of
health care, medical history, or lack of
evidence of insurability, of an individ-
ual,
‘‘(II) does not exist solely or
principally for the purpose of selling
insurance, and
‘‘(III) has at least 1,000 individ-
ual members or 200 employer mem-
bers.
Such term includes a subsidiary or cor-
poration that is wholly owned by one or
more qualified organizations.
Subtitle A, Part 1
‘‘(D) LIMITATION.—Rules of eligibility to
carry out the previous subparagraphs of this
paragraph shall not have the effect of denying
eligibility to individuals on the basis of health
status, claims experience, receipt of health care,
medical history, or lack of evidence of insurabil-
ity.
‘‘(E) 
LIMITED
ENROLLMENT
MEDICAREPLUS
ORGANIZATION.—In this part
and section 1805, the term ‘limited enrollment
MedicarePlus 
organization’ 
means 
a
MedicarePlus organization that is a union spon-
sor, Taft-Hartley sponsor, or a qualified asso-
ciation.
‘‘(F) EMPLOYER, ETC.—In this paragraph,
the terms ‘employer’, ‘employee organization’,
and ‘group health plan’ have the meanings
given such terms for purposes of part 6 of sub-
title B of title I of the Employee Retirement In-
come Security Act of 1974.
‘‘(d) SUBMISSION AND CHARGING OF PREMIUMS.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation shall file with the Secretary each year, in a
form and manner and at a time specified by the Sec-
retary—
Subtitle A, Part 1
‘‘(A) the amount of the monthly premiums
for coverage under each MedicarePlus product
it offers under this part in each payment area
(as determined for purposes of section 1855) in
which the product is being offered; and
‘‘(B) the enrollment capacity in relation to
the product in each such area.
‘‘(2) AMOUNTS OF PREMIUMS CHARGED.—The
amount of the premium charged by a MedicarePlus
organization for a MedicarePlus product offered in
a payment area to an individual under this part
shall be equal to the amount (if any) by which—
‘‘(A) the amount of the premium for the
product for the area and period involved, as
submitted under paragraph (1), exceeds
‘‘(B) 1⁄12 of the annual MedicarePlus capi-
tation rate specified in section 1855(b)(2) for
the area and period involved.
‘‘(3) UNIFORM PREMIUM.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the premiums charged by a
MedicarePlus organization under this part may
not vary among individuals who reside in the
same payment area.
Subtitle A, Part 1
‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/
MEDISAVE PRODUCTS.—A MedicarePlus organi-
zation shall establish premiums for any high de-
ductible/medisave product it offers in a payment
area in a manner consistent with and based on
each of the risk adjustment categories estab-
lished for purposes of determining the amount
of the payment to MedicarePlus organizations
under section 1855(b)(1).
‘‘(4) TERMS
AND
CONDITIONS
OF
IMPOSING
PREMIUMS.—Each MedicarePlus organization shall
permit the payment of monthly premiums on a
monthly basis and may terminate election of individ-
uals for a MedicarePlus product for failure to make
premium payments only in accordance with sub-
section (c)(3)(B).
‘‘(e) REQUIREMENT
FOR ADDITIONAL BENEFITS,
PART B PREMIUM DISCOUNT REBATES, OR BOTH.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN
GENERAL.—Each MedicarePlus
organization (in relation to a MedicarePlus
product it offers) shall provide that if there is
an excess amount (as defined in subparagraph
(B)) for the product for a contract year, subject
to the succeeding provisions of this subsection,
Subtitle A, Part 1
the organization shall provide to individuals
such additional benefits (as the organization
may specify), a monetary rebate (paid on a
monthly basis) of the part B monthly premium,
or a combination thereof, in a total value which
is at least equal to the adjusted excess amount
(as defined in subparagraph (C)).
‘‘(B) EXCESS AMOUNT.—For purposes of
this paragraph, the ‘excess amount’, for an or-
ganization for a product, is the amount (if any)
by which—
‘‘(i) the average of the capitation pay-
ments made to the organization under this
part for the product at the beginning of
contract year, exceeds
‘‘(ii) the actuarial value of the mini-
mum benefits described in subsection
(a)(1) under the product for individuals
under this part, as determined based upon
an adjusted community rate described in
paragraph (5).
‘‘(C) ADJUSTED
EXCESS
AMOUNT.—For
purposes of this paragraph, the ‘adjusted excess
amount’, for an organization for a product, is
the excess amount reduced to reflect any
Subtitle A, Part 1
amount withheld and reserved for the organiza-
tion for the year under paragraph (3).
‘‘(D) NO APPLICATION TO HIGH DEDUCT-
IBLE/MEDISAVE
PRODUCT.—Subparagraph (A)
shall not apply to a high deductible/medisave
product.
‘‘(E) UNIFORM APPLICATION.—This para-
graph shall be applied uniformly for all enroll-
ees for a product in a service area.
‘‘(F) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
MedicarePlus 
organization 
from 
providing
health care benefits that are in addition to the
benefits otherwise required to be provided under
this paragraph and from imposing a premium
for such additional benefits.
‘‘(2) LIMITATION ON AMOUNT OF PART B PRE-
MIUM
DISCOUNT
REBATE.—In no case shall the
amount of a part B premium discount rebate under
paragraph (1)(A) exceed, with respect to a month,
the amount of premiums imposed under part B (not
taking into account section 1839(b) (relating to pen-
alty for late enrollment) or 1839(h) (relating to af-
fluence testing)), for the individual for the month.
Except as provided in the previous sentence, a
Subtitle A, Part 1
MedicarePlus organization is not authorized to pro-
vide for cash or other monetary rebates as an in-
ducement for enrollment or otherwise.
‘‘(3) STABILIZATION
FUND.—A MedicarePlus
organization may provide that a part of the value of
an excess actuarial amount described in paragraph
(1) be withheld and reserved in the Federal Hospital
Insurance Trust Fund and in the Federal Supple-
mentary Medical Insurance Trust Fund (in such
proportions as the Secretary determines to be appro-
priate) by the Secretary for subsequent annual con-
tract periods, to the extent required to stabilize and
prevent undue fluctuations in the additional benefits
and rebates offered in those subsequent periods by
the organization in accordance with such paragraph.
Any of such value of amount reserved which is not
provided as additional benefits described in para-
graph 
(1)(A) 
to 
individuals 
electing 
the
MedicarePlus product in accordance with such para-
graph prior to the end of such periods, shall revert
for the use of such trust funds.
‘‘(4) DETERMINATION BASED ON INSUFFICIENT
DATA.—For purposes of this subsection, if the Sec-
retary finds that there is insufficient enrollment ex-
perience (including no enrollment experience in the
Subtitle A, Part 1
case of a provider-sponsored organization) to deter-
mine an average of the capitation payments to be
made under this part at the beginning of a contract
period, the Secretary may determine such an aver-
age based on the enrollment experience of other con-
tracts entered into under this part.
‘‘(5) ADJUSTED COMMUNITY RATE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, subject to subparagraph (B), the
term ‘adjusted community rate’ for a service or
services 
means, 
at 
the 
election 
of 
a
MedicarePlus organization, either—
‘‘(i) the rate of payment for that serv-
ice or services which the Secretary annu-
ally determines would apply to an individ-
ual electing a MedicarePlus product under
this part if the rate of payment were deter-
mined under a ‘community rating system’
(as defined in section 1302(8) of the Pub-
lic Health Service Act, other than subpara-
graph (C)), or
‘‘(ii) such portion of the weighted ag-
gregate premium, which the Secretary an-
nually estimates would apply to such an in-
dividual, as the Secretary annually esti-
Subtitle A, Part 1
mates is attributable to that service or
services,
but adjusted for differences between the utiliza-
tion characteristics of the individuals electing
coverage under this part and the utilization
characteristics of the other enrollees with the
organization (or, if the Secretary finds that
adequate data are not available to adjust for
those differences, the differences between the
utilization characteristics of individuals select-
ing other MedicarePlus coverage, or individuals
in the area, in the State, or in the United
States, eligible to elect MedicarePlus coverage
under this part and the utilization characteris-
tics of the rest of the population in the area, in
the State, or in the United States, respectively).
‘‘(B) SPECIAL RULE FOR PROVIDER-SPON-
SORED
ORGANIZATIONS.—In the case of a
MedicarePlus organization that is a provider-
sponsored organization, the adjusted community
rate 
under 
subparagraph 
(A) 
for 
a
MedicarePlus product may be computed (in a
manner specified by the Secretary) using data
in the general commercial marketplace or (dur-
ing a transition period) based on the costs in-
Subtitle A, Part 1
curred by the organization in providing such a
product.
‘‘(f) RULES
REGARDING
PHYSICIAN
PARTICIPA-
TION.—
‘‘(1) PROCEDURES.—Each MedicarePlus orga-
nization shall establish reasonable procedures relat-
ing to the participation (under an agreement be-
tween a physician and the organization) of physi-
cians under MedicarePlus products offered by the
organization under this part. Such procedures shall
include—
‘‘(A) providing notice of the rules regard-
ing participation,
‘‘(B) providing written notice of participa-
tion decisions that are adverse to physicians,
and
‘‘(C) providing a process within the organi-
zation for appealing adverse decisions, including
the presentation of information and views of the
physician regarding such decision.
‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A
MedicarePlus organization shall consult with physi-
cians who have entered into participation agree-
ments with the organization regarding the organiza-
Subtitle A, Part 1
tion’s medical policy, quality, and medical manage-
ment procedures.
‘‘(3) LIMITATIONS
ON
PHYSICIAN
INCENTIVE
PLANS.—
‘‘(A) IN
GENERAL.—Each MedicarePlus
organization may not operate any physician in-
centive plan (as defined in subparagraph (B))
unless the following requirements are met:
‘‘(i) No specific payment is made di-
rectly or indirectly under the plan to a
physician or physician group as an induce-
ment to reduce or limit medically necessary
services provided with respect to a specific
individual enrolled with the organization.
‘‘(ii) If the plan places a physician or
physician group at substantial financial
risk (as determined by the Secretary) for
services not provided by the physician or
physician group, the organization—
‘‘(I) provides stop-loss protection
for the physician or group that is ade-
quate and appropriate, based on
standards developed by the Secretary
that take into account the number of
physicians placed at such substantial
Subtitle A, Part 1
financial risk in the group or under
the plan and the number of individ-
uals enrolled with the organization
who receive services from the physi-
cian or the physician group, and
‘‘(II) conducts periodic surveys of
both individuals enrolled and individ-
uals previously enrolled with the orga-
nization to determine the degree of
access of such individuals to services
provided by the organization and sat-
isfaction with the quality of such serv-
ices.
‘‘(iii) The organization provides the
Secretary with descriptive information re-
garding the plan, sufficient to permit the
Secretary to determine whether the plan is
in compliance with the requirements of this
subparagraph.
‘‘(B) PHYSICIAN
INCENTIVE
PLAN
DE-
FINED.—In this paragraph, the term ‘physician
incentive plan’ means any compensation ar-
rangement between a MedicarePlus organiza-
tion and a physician or physician group that
may directly or indirectly have the effect of re-
Subtitle A, Part 1
ducing or limiting services provided with respect
to individuals enrolled with the organization
under this part.
‘‘(g) PROVISION OF INFORMATION.—A MedicarePlus
organization shall provide the Secretary with such infor-
mation on the organization and each MedicarePlus prod-
uct it offers as may be required for the preparation of
the 
information 
booklet 
described 
in 
section
1805(d)(2)(A).
‘‘(h) COORDINATED ACUTE AND LONG-TERM CARE
BENEFITS UNDER A MEDICAREPLUS PRODUCT.—Noth-
ing in this part shall be construed as preventing a State
from coordinating benefits under its MediGrant program
under title XXI with those provided under a MedicarePlus
product in a manner that assures continuity of a full-
range of acute care and long-term care services to poor
elderly or disabled individuals eligible for benefits under
this title and under such program.
‘‘PATIENT PROTECTION STANDARDS
‘‘SEC. 1853. (a) DISCLOSURE TO ENROLLEES.—A
MedicarePlus organization shall disclose in clear, accurate,
and standardized form, information regarding all of the
following for each MedicarePlus product it offers:
‘‘(1) Benefits under the MedicarePlus product
offered, including exclusions from coverage and, if it
is a high deductible/medisave product, a comparison
Subtitle A, Part 1
of benefits under such a product with benefits under
other MedicarePlus products.
‘‘(2) Rules regarding prior authorization or
other review requirements that could result in
nonpayment.
‘‘(3) Potential liability for cost-sharing for out-
of-network services.
‘‘(4) The number, mix, and distribution of par-
ticipating providers.
‘‘(5) The financial obligations of the enrollee,
including premiums, deductibles, co-payments, and
maximum limits on out-of-pocket losses for items
and services (both in and out of network).
‘‘(6) Statistics on enrollee satisfaction with the
product 
and 
organization, 
including 
rates 
of
reenrollment.
‘‘(7) Enrollee rights and responsibilities, includ-
ing the grievance process provided under subsection
(f).
‘‘(8) A statement that the use of the 911 emer-
gency telephone number is appropriate in emergency
situations and an explanation of what constitutes an
emergency situation.
Subtitle A, Part 1
Such information shall be disclosed to each enrollee under
this part at the time of enrollment and at least annually
thereafter.
‘‘(b) ACCESS TO SERVICES.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion offering a MedicarePlus product may restrict
the providers from whom the benefits under the
product are provided so long as—
‘‘(A) the organization makes such benefits
available and accessible to each individual elect-
ing the product within the product service area
with reasonable promptness and in a manner
which assures continuity in the provision of
benefits;
‘‘(B) when medically necessary the organi-
zation makes such benefits available and acces-
sible 24 hours a day and 7 days a week;
‘‘(C) the product provides for reimburse-
ment with respect to services which are covered
under subparagraphs (A) and (B) and which
are provided to such an individual other than
through the organization, if—
‘‘(i) the services were medically nec-
essary and immediately required because of
Subtitle A, Part 1
an unforeseen illness, injury, or condition,
and
‘‘(ii) it was not reasonable given the
circumstances 
to 
obtain 
the 
services
through the organization; and
‘‘(D) coverage is provided for emergency
services (as defined in paragraph (4)) without
regard to prior authorization or the emergency
care provider’s contractual relationship with the
organization.
‘‘(2) MINIMUM PAYMENT LEVELS WHERE PRO-
VIDING
POINT-OF-SERVICE
COVERAGE.—If 
a
MedicarePlus product provides benefits for items
and services (not described in paragraph (1)(C))
through a network of providers and also permits
payment to be made under the product for such
items and services not provided through such a net-
work, the payment level under the product with re-
spect to such items and services furnished outside
the network shall be at least 70 percent (or, if the
effective cost-sharing rate is 50 percent, at least 35
percent) of the lesser of—
‘‘(A) the payment basis (determined with-
out regard to deductibles and cost-sharing) that
Subtitle A, Part 1
would have applied for such items and services
under parts A and B, or
‘‘(B) the amount charged by the entity fur-
nishing such items and services.
‘‘(3) PROTECTION OF ENROLLEES FOR CERTAIN
OUT-OF-NETWORK SERVICES.—
‘‘(A) PARTICIPATING PROVIDERS.—In the
case of physicians’ services or renal dialysis
services described in subparagraph (C) which
are furnished by a participating physician or
provider of services or renal dialysis facility to
an individual enrolled with a MedicarePlus or-
ganization under this section, the applicable
participation agreement is deemed to provide
that the physician or provider of services or
renal dialysis facility will accept as payment in
full from the organization the amount that
would be payable to the physician or provider of
services or renal dialysis facility under part B
and from the individual under such part, if the
individual were not enrolled with such an orga-
nization under this part.
‘‘(B) NONPARTICIPATING PROVIDERS.—In
the case of physicians’ services described in sub-
paragraph (C) which are furnished by a
Subtitle A, Part 1
nonparticipating physician, the limitations on
actual charges for such services otherwise appli-
cable under part B (to services furnished by in-
dividuals not enrolled with a MedicarePlus or-
ganization under this section) shall apply in the
same manner as such limitations apply to serv-
ices furnished to individuals not enrolled with
such an organization.
‘‘(C) SERVICES
DESCRIBED.—The physi-
cians’ services or renal dialysis services de-
scribed in this subparagraph are physicians’
services or renal dialysis services which are fur-
nished to an enrollee of a MedicarePlus organi-
zation under this part by a physician, provider
of services, or renal dialysis facility who is not
under a contract with the organization.
‘‘(4) DEFINITION OF EMERGENCY SERVICES.—
In this subsection, the term ‘emergency services’
means, with respect to an individual enrolled with an
organization, covered inpatient and outpatient serv-
ices that—
‘‘(A) are furnished by an appropriate
source other than the organization,
‘‘(B) are needed immediately because of an
injury or sudden illness, and
Subtitle A, Part 1
‘‘(C) are needed because the time required
to reach the organization’s providers or suppli-
ers would have meant risk of permanent dam-
age to the patient’s health.
‘‘(c) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE
RECORDS.—Each MedicarePlus organization
shall establish procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information, and
‘‘(2) to maintain accurate and timely medical
records for enrollees.
‘‘(d) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation must have arrangements, established in ac-
cordance with regulations of the Secretary, for an
ongoing quality assurance program for health care
services it provides to such individuals.
‘‘(2) ELEMENTS OF PROGRAM.—The quality as-
surance program shall—
‘‘(A) stress health outcomes;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on
current standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process
Subtitle A, Part 1
followed in the provision of such health care
services;
‘‘(D) monitors and evaluates high volume
and high risk services and the care of acute and
chronic conditions;
‘‘(E) evaluates the continuity and coordi-
nation of care that enrollees receive,
‘‘(F) has mechanisms to detect both under-
utilization and overutilization of services,
‘‘(G) after identifying areas for improve-
ment, establishes or alters practice parameters,
‘‘(H) takes action to improve quality and
assesses the effectiveness of such action
through systematic follow-up,
‘‘(I) makes available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage op-
tions (in such form and on such quality and
outcomes measures as the Secretary determines
to be appropriate), and
‘‘(J) is evaluated on an ongoing basis as to
its effectiveness.
‘‘(e) COVERAGE DETERMINATIONS.—
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
MedicarePlus organization shall make determina-
Subtitle A, Part 1
tions regarding authorization requests for non-
emergency care on a timely basis, depending on the
urgency of the situation.
‘‘(2) APPEALS.—
‘‘(A) IN GENERAL.—Appeals from a deter-
mination of an organization denying coverage
shall be decided within 30 days of the date of
receipt of medical information, but not later
than 60 days after the date of the decision.
‘‘(B) PHYSICIAN
DECISION
ON
CERTAIN
APPEALS.—Appeal decisions relating to a deter-
mination to deny coverage based on a lack of
medical necessity shall be made only by a physi-
cian.
‘‘(C) EMERGENCY
CASES.—Appeals from
such a determination involving a life-threaten-
ing or emergency situation shall be decided on
an expedited basis.
‘‘(f) GRIEVANCES AND APPEALS.—
‘‘(1) 
GRIEVANCE
MECHANISM.—Each
MedicarePlus organization must provide meaningful
procedures for hearing and resolving grievances be-
tween the organization (including any entity or indi-
vidual through which the organization provides
health care services) and enrollees under this part.
Subtitle A, Part 1
‘‘(2) APPEALS.—An enrollee with an organiza-
tion under this part who is dissatisfied by reason of
the enrollee’s failure to receive any health service to
which the enrollee believes is entitled and at no
greater charge than the enrollee believes is required
to pay is entitled, if the amount in controversy is
$100 or more, to a hearing before the Secretary to
the same extent as is provided in section 205(b), and
in any such hearing the Secretary shall make the or-
ganization a party. If the amount in controversy is
$1,000 or more, the individual or organization shall,
upon notifying the other party, be entitled to judicial
review of the Secretary’s final decision as provided
in section 205(g), and both the individual and the
organization shall be entitled to be parties to that
judicial review. In applying sections 205(b) and
205(g) as provided in this subparagraph, and in ap-
plying section 205(l) thereto, any reference therein
to the Commissioner of Social Security or the Social
Security Administration shall be considered a ref-
erence to the Secretary or the Department of Health
and Human Services, respectively.
‘‘(g) INFORMATION
ON ADVANCE DIRECTIVES.—
Each MedicarePlus organization shall meet the require-
Subtitle A, Part 1
ment of section 1866(f) (relating to maintaining written
policies and procedures respecting advance directives).
‘‘(h) APPROVAL OF MARKETING MATERIALS.—
‘‘(1) SUBMISSION.—Each MedicarePlus organi-
zation may not distribute marketing materials un-
less—
‘‘(A) at least 45 days before the date of
distribution the organization has submitted the
material to the Secretary for review, and
‘‘(B) the Secretary has not disapproved the
distribution of such material.
‘‘(2) 
REVIEW.—The 
standards 
established
under section 1856 shall include guidelines for the
review of all such material submitted and under
such guidelines the Secretary shall disapprove such
material if the material is materially inaccurate or
misleading or otherwise makes a material misrepre-
sentation.
‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—
In the case of material that is submitted under sub-
paragraph (A)(i) to the Secretary or a regional office
of the Department of Health and Human Services
and the Secretary or the office has not disapproved
the distribution of marketing materials under sub-
paragraph (A)(ii) with respect to a MedicarePlus
Subtitle A, Part 1
product in an area, the Secretary is deemed not to
have disapproved such distribution in all other areas
covered by the product and organization.
‘‘(4) PROHIBITION
OF
CERTAIN
MARKETING
PRACTICES.—Each MedicarePlus organization shall
conform to fair marketing standards in relation to
MedicarePlus products offered under this part, in-
cluded in the standards established under section
1856. Such standards shall include a prohibition
against an organization (or agent of such an organi-
zation) completing any portion of any election form
under section 1805 on behalf of any individual.
‘‘PROVIDER-SPONSORED ORGANIZATIONS
‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA-
TION DEFINED.—
‘‘(1) IN GENERAL.—In this part, the term ‘pro-
vider-sponsored organization’ means a public or pri-
vate entity that (in accordance with standards estab-
lished under subsection (b)) is a provider, or group
of affiliated providers, that provides a substantial
proportion (as defined by the Secretary under such
standards) of the health care items and services
under the contract under this part directly through
the provider or affiliated group of providers.
Subtitle A, Part 1
‘‘(2) SUBSTANTIAL PROPORTION.—In defining
what is a ‘substantial proportion’ for purposes of
paragraph (1), the Secretary—
‘‘(A) shall take into account the need for
such an organization to assume responsibility
for a substantial proportion of services in order
to assure financial stability and the practical
difficulties in such an organization integrating
a very wide range of service providers; and
‘‘(B) may vary such proportion based upon
relevant differences among organizations, such
as their location in an urban or rural area.
‘‘(3) AFFILIATION.—For purposes of this sub-
section, a provider is ‘affiliated’ with another pro-
vider if, through contract, ownership, or otherwise—
‘‘(A) one provider, directly or indirectly,
controls, is controlled by, or is under common
control with the other,
‘‘(B) each provider is a participant in a
lawful combination under which each provider
shares, directly or indirectly, substantial finan-
cial risk in connection with their operations,
‘‘(C) both providers are part of a con-
trolled group of corporations under section
1563 of the Internal Revenue Code of 1986, or
Subtitle A, Part 1
‘‘(D) both providers are part of an affili-
ated service group under section 414 of such
Code.
‘‘(4) CONTROL.—For purposes of paragraph
(3), control is presumed to exist if one party, di-
rectly or indirectly, owns, controls, or holds the
power to vote, or proxies for, not less than 51 per-
cent of the voting rights or governance rights of an-
other.
‘‘(b) PROCESS FOR ESTABLISHING STANDARDS FOR
PROVIDER-SPONSORED ORGANIZATIONS.—For process of
establishing of standards for provider-sponsored organiza-
tions, see section 1856(c).
‘‘(c) PROCESS FOR STATE CERTIFICATION OF PRO-
VIDER-SPONSORED
ORGANIZATIONS.—For process of
State certification of provider-sponsored organizations, see
section 1857(c).
‘‘(d) CONDITIONS FOR PREEMPTION FROM STATE
INSURANCE LICENSING REQUIREMENTS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (3), notwithstanding any other provision of
law, in the case of a provider-sponsored organization
with respect to a State that—
‘‘(A) only enrolls in the State individuals
who are entitled to benefits under this title, and
Subtitle A, Part 1
‘‘(B) cannot do business as a MedicarePlus
organization in the State because that State by
law, regulation, or otherwise—
‘‘(i) requires that the organization
meet requirements for insurers of health
services or health maintenance organiza-
tions doing business in the State with re-
spect to initial capitalization and establish-
ment of financial reserves against insol-
vency, or
‘‘(ii) imposes requirements that would
prohibit the entity from complying with the
applicable requirements of this part,
such requirements shall not apply to the organiza-
tion so as to prevent it from operating as a
MedicarePlus organization under this part.
‘‘(2) NOT TREATING CERTAIN INDIVIDUALS AS
ENROLLEES.—For purposes of paragraph (1)(A), an
individual who—
‘‘(A) is a participant or beneficiary of an
employee welfare benefit plan to which section
514(a) of the Employee Retirement Income Se-
curity Act of 1974 applies, and
Subtitle A, Part 1
‘‘(B) receives health services from a pro-
vider-sponsored organization under an arrange-
ment with the plan,
shall be considered to be enrolled with the employee
welfare benefit plan and shall not be considered to
be enrolled with the organization.
‘‘(3) TREATMENT OF STATES WITH APPROVED
CERTIFICATION PROGRAMS.—
‘‘(A) IN GENERAL.—In the case of an or-
ganization that is operating in an approved
State (as defined in subparagraph (C)), the
provisions of paragraph (1) and section 1851(b)
shall not apply.
‘‘(B) EFFECTIVE
DATE.—Subparagraph
(A) shall apply—
‘‘(i) in the case of an entity that has
a contract under this part in effect as of
the date the State becomes an approved
State, at the end of the first contract year
that begins after such date, or
‘‘(ii) in the case of any other entity,
for contract years that begin after such
date.
‘‘(C) APPROVED STATE DEFINED.—In this
paragraph, the term ‘approved State’ means a
Subtitle A, Part 1
State with a certification program approved
under section 1857(c) with respect to provider-
sponsored organizations in the State.
‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1855. (a) PAYMENTS.—
‘‘(1) IN
GENERAL.—Under a contract under
section 1858 the Secretary shall pay to each
MedicarePlus organization, with respect to coverage
of an individual under this part in a payment area
for a month, an amount equal to the monthly ad-
justed MedicarePlus capitation rate (as provided
under subsection (b)) with respect to that individual
for that area.
‘‘(2) ANNUAL ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
ties) not later than September 7 before the calendar
year concerned—
‘‘(A) the annual MedicarePlus capitation
rate for each payment area for the year, and
‘‘(B) the factors to be used in adjusting
such rates under subsection (b) for payments
for months in that year.
‘‘(3) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (2) for a year, the
Subtitle A, Part 1
Secretary shall provide for notice to MedicarePlus
organizations of proposed changes to be made in the
methodology or benefit coverage assumptions from
the methodology and assumptions used in the pre-
vious announcement and shall provide such organi-
zations an opportunity to comment on such proposed
changes.
‘‘(4) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (2) for a year,
the Secretary shall include an explanation of the as-
sumptions (including any benefit coverage assump-
tions) and changes in methodology used in the an-
nouncement in sufficient detail so that MedicarePlus
organizations 
can 
compute 
monthly 
adjusted
MedicarePlus capitation rates for classes of individ-
uals located in each payment area which is in whole
or in part within the service area of such an organi-
zation.
‘‘(b) MONTHLY ADJUSTED MEDICAREPLUS CAPITA-
TION RATE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the ‘monthly adjusted MedicarePlus capitation
rate’ under this subsection, for a month in a year
for an individual in a payment area (specified under
paragraph (3)) and in a class (established under
Subtitle A, Part 1
paragraph (4)), is 1⁄12 of the annual MedicarePlus
capitation rate specified in paragraph (2) for that
area for the year, adjusted to reflect the actuarial
value of benefits under this title with respect to indi-
viduals in such class compared to the national aver-
age for individuals in all classes.
‘‘(2) 
ANNUAL
MEDICAREPLUS
CAPITATION
RATES.—For purposes of this section, the annual
MedicarePlus capitation rate for a payment area for
a year is equal to the annual MedicarePlus capita-
tion rate for the area for the previous year (or, in
the case of 1996, the average annual per capita rate
of payment described in section 1876(a)(1)(C) for
the area for 1995) increased by the per capita
growth rate for that area and year (as determined
under subsection (c)).
‘‘(3) PAYMENT AREA DEFINED.—In this sec-
tion, the term ‘payment area’ means a county (or
equivalent area specified by the Secretary), except
that in the case of the population group described in
paragraph (5)(C), the payment area shall be each
State.
‘‘(4) CLASSES.—
‘‘(A) IN GENERAL.—For purposes of this
section, the Secretary shall define appropriate
Subtitle A, Part 1
classes of enrollees, consistent with paragraph
(5), based on age, gender, welfare status, insti-
tutionalization, and such other factors as the
Secretary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such
classes, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) RESEARCH.—The Secretary shall
conduct such research as may be necessary to
provide for greater accuracy in the adjustment
of capitation rates under this subsection. Such
research may include research into the addition
or modification of classes under subparagraph
(A). The Secretary shall submit to Congress a
report on such research by not later than Janu-
ary 1, 1997.
‘‘(5) DIVISION OF MEDICARE POPULATION.—In
carrying out paragraph (4) and this section, the Sec-
retary shall recognize the following separate popu-
lation groups:
‘‘(A) AGED.—Individuals 65 years of age
or older who are not described in subparagraph
(C).
Subtitle A, Part 1
‘‘(B) 
DISABLED.—Disabled 
individuals
who are under 65 years of age and not de-
scribed in subparagraph (C).
‘‘(C) INDIVIDUALS
WITH
END
STAGE
RENAL
DISEASE.—Individuals who are deter-
mined to have end stage renal disease.
‘‘(c) PER CAPITA GROWTH RATES.—
‘‘(1) FOR 1996.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraph (B), the
per capita growth rates for 1996, for a payment
area assigned to a service utilization cohort
under subsection (d), shall be the following:
‘‘(i) LOWEST
SERVICE
UTILIZATION
COHORT.—For areas assigned to the low-
est service utilization cohort, 9.7 percent.
‘‘(ii) LOWER
SERVICE
UTILIZATION
COHORT.—For areas assigned to the lower
service utilization cohort, 8.0 percent.
‘‘(iii) MEDIAN SERVICE UTILIZATION
COHORT.—For areas assigned to the me-
dian service utilization cohort, 5.3 percent.
‘‘(iv) HIGHER
SERVICE
UTILIZATION
COHORT.—For areas assigned to the high-
er service utilization cohort, 4.7 percent.
Subtitle A, Part 1
‘‘(v) HIGHEST SERVICE UTILIZATION
COHORT.—For areas assigned to the high-
est service utilization cohort, 4.0 percent.
‘‘(B) BUDGET
NEUTRAL
ADJUSTMENT.—
The Secretary shall adjust the per capita
growth rates specified in subparagraph (A) for
all the areas by such uniform factor as may be
necessary to assure that the total capitation
payments under this section during 1996 are
the same as the amount such payments would
have been if the per capita growth rate for all
such areas for 1996 were equal to the national
average per capita growth rate, specified in
paragraph (3) for 1996.
‘‘(2) FOR SUBSEQUENT YEARS.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraph (B), the
Secretary shall compute a per capita growth
rate for each year after 1996, for each payment
area as assigned to a service utilization cohort
under subsection (d), consistent with the follow-
ing rules:
‘‘(i) MEDIAN
SERVICE
UTILIZATION
COHORT SET AT NATIONAL AVERAGE PER
CAPITA
GROWTH
RATE.—The per capita
Subtitle A, Part 1
growth rate for areas assigned to the me-
dian service utilization cohort for the year
shall be the national average per capita
growth rate for the year (as specified
under paragraph (3)).
‘‘(ii) HIGHEST SERVICE UTILIZATION
COHORT SET AT 75 PERCENT OF NATIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—
The per capita growth rate for areas as-
signed to the highest service utilization co-
hort for the year shall be 75 percent of the
national average per capita growth rate for
the year.
‘‘(iii) LOWEST SERVICE UTILIZATION
COHORT
SET
AT
187.5
PERCENT
OF
NA-
TIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—The per capita growth rate for
areas assigned to the lowest service utiliza-
tion cohort for the year shall be 187.5 per-
cent of the national average per capita
growth rate for the year.
‘‘(iv) LOWER
SERVICE
UTILIZATION
COHORT
SET
AT
150
PERCENT
OF
NA-
TIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—
Subtitle A, Part 1
‘‘(I) IN
GENERAL.—Subject to
subclause (II), the per capita growth
rate for areas assigned to the lower
service utilization cohort for the year
shall be 150 percent of the national
average per capita growth rate for the
year.
‘‘(II) ADJUSTMENT.—If the Sec-
retary has established under clause
(v) the per capita growth rate for
areas assigned to the higher service
utilization cohort for the year at 75
percent of the national average per
capita growth rate, the Secretary may
provide for a reduced per capita
growth rate under subclause (I) to the
extent necessary to comply with sub-
paragraph (B).
‘‘(v) HIGHER
SERVICE
UTILIZATION
COHORT.—The per capita growth rate for
areas assigned to the higher service utiliza-
tion cohort for set year shall be such per-
cent (not less than 75 percent) of the na-
tional average per capita growth rate, as
Subtitle A, Part 1
the Secretary may determine consistent
with subparagraph (B).
‘‘(B) AVERAGE PER CAPITA GROWTH RATE
AT
NATIONAL
AVERAGE
TO
ASSURE
BUDGET
NEUTRALITY.—The Secretary shall compute per
capita growth rates for a year under subpara-
graph (A) in a manner so that the weighted av-
erage per capita growth rate for all areas for
the year (weighted to reflect the number of
medicare beneficiaries in each area) is equal to
the national average per capita growth rate
under paragraph (3) for the year.
‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH
RATES.—In this subsection, the ‘national average
per capita growth rate’ for—
‘‘(A) 1996 is 5.3 percent,
‘‘(B) 1997 is 3.8 percent,
‘‘(C) 1998 is 4.6 percent,
‘‘(D) 1999 is 4.3 percent,
‘‘(E) 2000 is 3.8 percent,
‘‘(F) 2001 is 5.5 percent,
‘‘(G) 2002 is 5.6 percent, and
‘‘(H) each subsequent year is 5.0 percent.
‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE
UTILIZATION COHORTS.—
Subtitle A, Part 1
‘‘(1) IN GENERAL.—For purposes of determin-
ing per capita growth rates under subsection (c) for
areas for a year, the Secretary shall assign each pay-
ment area to a service utilization cohort (based on
the service utilization index value for that area de-
termined under paragraph (2)) as follows:
‘‘(A) LOWEST
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of less than .80 shall be assigned to the
lowest service utilization cohort.
‘‘(B) LOWER
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least .80 but less than .90 shall be
assigned to the lower service utilization cohort.
‘‘(C) MEDIAN
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least .90 but less than 1.10 shall be
assigned to the median service utilization co-
hort.
‘‘(D) HIGHER
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least 1.10 but less than 1.20 shall
be assigned to the higher service utilization co-
hort.
Subtitle A, Part 1
‘‘(E) HIGHEST SERVICE UTILIZATION CO-
HORT.—Areas with a service utilization index
value of at least 1.20 shall be assigned to the
highest service utilization cohort.
‘‘(2) DETERMINATION OF SERVICE UTILIZATION
INDEX VALUES.—In order to determine the per cap-
ita growth rate for a payment area for each year
(beginning with 1996), the Secretary shall determine
for such area and year a service utilization index
value, which is equal to—
‘‘(A) the annual MedicarePlus capitation
rate under this section for the area for the year
in which the determination is made (or, in the
case of 1996, the average annual per capita
rate 
of 
payment 
(described 
in 
section
1876(a)(1)(C)) for the area for 1995); divided
by
‘‘(B) the input-price-adjusted annual na-
tional MedicarePlus capitation rate (as deter-
mined under paragraph (3)) for that area for
the year in which the determination is made.
‘‘(3) DETERMINATION
OF
INPUT-PRICE-AD-
JUSTED RATES.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the ‘input-price-adjusted annual na-
Subtitle A, Part 1
tional MedicarePlus capitation rate’ for a pay-
ment area for a year is equal to the sum, for
all the types of medicare services (as classified
by the Secretary), of the product (for each such
type) of—
‘‘(i) 
the 
national 
standardized
MedicarePlus capitation rate (determined
under subparagraph (B)) for the year,
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) 
NATIONAL
STANDARDIZED
MEDICAREPLUS
CAPITATION
RATE.—In this
paragraph, 
the 
‘national 
standardized
Subtitle A, Part 1
MedicarePlus capitation rate’ for a year is
equal to—
‘‘(i) the sum (for all payment areas)
of 
the 
product 
of 
(I) 
the 
annual
MedicarePlus capitation rate for that year
for the area under subsection (b)(2), and
(II) the average number of medicare bene-
ficiaries residing in that area in the year;
divided by
‘‘(ii) the total average number of med-
icare beneficiaries residing in all the pay-
ment areas for that year.
‘‘(C) SPECIAL RULES FOR 1996.—In apply-
ing this paragraph for 1996—
‘‘(i) medicare services shall be divided
into 2 types of services: part A services
and part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii) for such types of services
shall be 66 percent and 34 percent respec-
tively;
‘‘(iii) for the part A services, 70 per-
cent of payments attributable to such serv-
ices shall be adjusted by the index used
under section 1886(d)(3)(E) to adjust pay-
Subtitle A, Part 1
ment rates for relative hospital wage levels
for hospitals located in the payment area
involved;
‘‘(iv) for part B services—
‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment area, and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 70
percent shall be adjusted by the index
described in clause (iii);
‘‘(v) the index values shall be com-
puted based only on the beneficiary popu-
lation described in subsection (b)(5)(A).
The Secretary may continue to apply the rules
described in this subparagraph (or similar
rules) for 1997.
‘‘(e) PAYMENT PROCESS.—
‘‘(1) IN GENERAL.—Subject to subsection (f),
the Secretary shall make monthly payments under
this section in advance and in accordance with the
Subtitle A, Part 1
rate determined under subsection (a) to the plan for
each individual enrolled with a MedicarePlus organi-
zation under this part.
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
take into account individuals enrolled dur-
ing the period beginning on the date on
which 
the 
individual 
enrolls 
with 
a
MedicarePlus organization under a product
operated, sponsored, or contributed to by
the individual’s employer or former em-
ployer (or the employer or former employer
Subtitle A, Part 1
of the individual’s spouse) and ending on
the date on which the individual is enrolled
in the organization under this part, except
that for purposes of making such retro-
active adjustments under this subpara-
graph, such period may not exceed 90
days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the disclosure statement described in
section 1853(a) at the time the individual
enrolled with the organization.
‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING
HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—
‘‘(1) IN GENERAL.—In the case of an individual
who has elected a high deductible/medisave product,
notwithstanding the preceding provisions of this sec-
tion—
‘‘(A) the amount of the payment to the
MedicarePlus organization offering the high de-
ductible/medisave product shall not exceed the
premium for the product, and
Subtitle A, Part 1
‘‘(B) subject to paragraph (2), the dif-
ference between the amount of payment that
would otherwise be made and the amount of
payment to such organization shall be made di-
rectly into a MedicarePlus MSA established
(and, if applicable, designated) by the individual
under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE-
QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
the case of an individual who has elected coverage
under a high deductible/medisave product, no pay-
ment shall be made under paragraph (1)(B) on be-
half of an individual for a month unless the individ-
ual—
‘‘(A) has established before the beginning
of the month (or by such other deadline as the
Secretary may specify) a MedicarePlus MSA
(as defined in section 137(b) of the Internal
Revenue Code of 1986), and
‘‘(B) if the individual has established more
than one MedicarePlus MSA, has designated
one of such accounts as the individual’s
MedicarePlus MSA for purposes of this part.
Subtitle A, Part 1
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT CONTRIBUTION.—In the case of an indi-
vidual electing a high deductible/medisave product
effective beginning with a month in a year, the
amount of the contribution to the MedicarePlus
MSA on behalf of the individual for that month and
all successive months in the year shall be deposited
during that first month. In the case of a termination
of such an election as of a month before the end of
a year, the Secretary shall provide for a procedure
for the recovery of deposits attributable to the re-
maining months in the year.
‘‘(g) PAYMENTS FROM TRUST FUND.—The payment
to a MedicarePlus organization under this section for indi-
viduals enrolled under this part with the organization, and
payments to a MedicarePlus MSA under subsection
(f)(1)(B), shall be made from the Federal Hospital Insur-
ance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund in such proportion as the Secretary
determines reflects the relative weight that benefits under
part A and under part B represents of the actuarial value
of the total benefits under this title.
Subtitle A, Part 1
‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
pital (as defined in section 1886(d)(1)(B)) as of the effec-
tive date of the individual’s—
‘‘(1) election under this part of a MedicarePlus
product offered by a MedicarePlus organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicarePlus prod-
uct or Non-MedicarePlus option (as the case
may be) elected before the election with such
organization,
‘‘(B) the elected organization shall not be
financially responsible for payment for such
services until the date after the date of the indi-
vidual’s discharge, and
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the
organization under this part; or
‘‘(2) termination of election with respect to a
MedicarePlus organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
Subtitle A, Part 1
such date and until the date of the individual’s
discharge,
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by succeeding the MedicarePlus organization,
and
‘‘(C) the terminated organization shall not
receive any payment with respect to the individ-
ual under this part during the period the indi-
vidual is not enrolled.
‘‘ESTABLISHMENT OF STANDARDS FOR MEDICAREPLUS
ORGANIZATIONS AND PRODUCTS
‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO STATE-
REGULATED ORGANIZATIONS AND PRODUCTS.—
‘‘(1) RECOMMENDATIONS OF NAIC.—The Sec-
retary shall request the National Association of In-
surance Commissioners to develop and submit to the
Secretary, not later than 12 months after the date
of the enactment of the Medicare Preservation Act
of 1995, proposed standards consistent with the re-
quirements of this part for MedicarePlus organiza-
tions (other than a union sponsors, Taft-Hartley
sponsors, and provider-sponsored organizations) and
MedicarePlus products offered by such organiza-
tions.
Subtitle A, Part 1
‘‘(2) REVIEW.—If the Association submits such
standards on a timely basis, the Secretary shall re-
view such standards to determine if the standards
meet the requirements of the part. The Secretary
shall complete the review of the standards not later
than 90 days after the date of their submission. The
Secretary shall promulgate such proposed standards
to apply to organizations and products described in
paragraph (1) except to the extent that the Sec-
retary modifies such proposed standards because
they do not meet such requirements.
‘‘(3) FAILURE TO SUBMIT.—If the Association
does not submit such standards on a timely basis,
the Secretary shall promulgate such standards by
not later than the date the Secretary would other-
wise have been required to promulgate standards
under paragraph (2).
‘‘(4) USE OF INTERIM RULES.—For the period
in which this part is in effect and standards are
being developed and established under the preceding
provisions of this subsection, the Secretary shall pro-
vide for the application of such interim standards
(without regard to any requirements for notice and
public comment) as may be appropriate to provide
for the expedited implementation of this part. Such
Subtitle A, Part 1
interim standards shall not apply after the date
standards are established under the preceding provi-
sions of this subsection.
‘‘(b) UNION
AND TAFT-HARTLEY SPONSORS
AND
PRODUCTS.—
‘‘(1) IN GENERAL.—The Secretary shall develop
and promulgate by regulation standards consistent
with the requirements of this part for union and
Taft-Hartley sponsors and for MedicarePlus prod-
ucts offered by such sponsors.
‘‘(2) CONSULTATION WITH LABOR.—The Sec-
retary shall consult with the Secretary of Labor with
respect to such standards for such sponsors and
products.
‘‘(3) TIMING.—Standards under this subsection
shall be promulgated at or about the time standards
are promulgated under subsection (a).
‘‘(c) ESTABLISHMENT
OF STANDARDS
FOR PRO-
VIDER-SPONSORED ORGANIZATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish, on an expedited basis and using a negotiated
rulemaking process under subchapter 3 of chapter 5
of title 5, United States Code, standards that enti-
ties must meet to qualify as provider-sponsored or-
ganizations under this part.
Subtitle A, Part 1
‘‘(2) PUBLICATION
OF
NOTICE.—In carrying
out the rulemaking process under this subsection,
the Secretary, after consultation with the National
Association of Insurance Commissioners, the Amer-
ican Academy of Actuaries, organizations represent-
ative of medicare beneficiaries, and other interested
parties, shall publish the notice provided for under
section 564(a) of title 5, United States Code, by not
later than 45 days after the date of the enactment
of Medicare Preservation Act of 1995.
‘‘(3) TARGET
DATE
FOR
PUBLICATION
OF
RULE.—As part of the notice under paragraph (2),
and for purposes of this subsection, the ‘target date
for publication’ (referred to in section 564(a)(5) of
such title) shall be September 1, 1996.
‘‘(4) ABBREVIATED
PERIOD
FOR
SUBMISSION
OF COMMENTS.—In applying section 564(c) of such
title under this subsection, ‘15 days’ shall be sub-
stituted for ‘30 days’.
‘‘(5) APPOINTMENT
OF
NEGOTIATED
RULE-
MAKING COMMITTEE AND FACILITATOR.—The Sec-
retary shall provide for—
‘‘(A) the appointment of a negotiated rule-
making committee under section 565(a) of such
title by not later than 30 days after the end of
Subtitle A, Part 1
the comment period provided for under section
564(c) of such title (as shortened under para-
graph (4)), and
‘‘(B) the nomination of a facilitator under
section 566(c) of such title by not later than 10
days after the date of appointment of the com-
mittee.
‘‘(6) PRELIMINARY COMMITTEE REPORT.—The
negotiated rulemaking committee appointed under
paragraph (5) shall report to the Secretary, by not
later than June 1, 1996, regarding the committee’s
progress on achieving a concensus with regard to the
rulemaking proceeding and whether such consensus
is likely to occur before one month before the target
date for publication of the rule. If the committee re-
ports that the committee has failed to make signifi-
cant progress towards such consensus or is unlikely
to reach such consensus by the target date, the Sec-
retary may terminate such process and provide for
the publication of a rule under this subsection
through such other methods as the Secretary may
provide.
‘‘(7) FINAL COMMITTEE REPORT.—If the com-
mittee is not terminated under paragraph (6), the
rulemaking committee shall submit a report contain-
Subtitle A, Part 1
ing a proposed rule by not later than one month be-
fore the target publication date.
‘‘(8) INTERIM, FINAL EFFECT.—The Secretary
shall publish a rule under this subsection in the Fed-
eral Register by not later than the target publication
date. Such rule shall be effective and final imme-
diately on an interim basis, but is subject to change
and revision after public notice and opportunity for
a period (of not less than 60 days) for public com-
ment. In connection with such rule, the Secretary
shall specify the process for the timely review and
approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such
rules and consistent with this subsection.
‘‘(9) PUBLICATION
OF
RULE
AFTER
PUBLIC
COMMENT.—The Secretary shall provide for consid-
eration of such comments and republication of such
rule by not later than 1 year after the target publi-
cation date.
‘‘(10) PROCESS
FOR
APPROVAL
OF
APPLICA-
TIONS FOR CERTIFICATION.—
‘‘(A) IN
GENERAL.—The Secretary shall
establish a process for the receipt and approval
of applications of entities for certification as
provider-sponsored organizations under this
Subtitle A, Part 1
part. Under such process, the Secretary shall
act upon a complete application submitted with-
in 60 days after the date it is received.
‘‘(B) CIRCULATION OF PROPOSED APPLI-
CATION FORM.—By March 1, 1996, the Sec-
retary, after consultation with the negotiated
rulemaking committee, shall circulate a pro-
posed application form that could be used by
entities considering becoming certified as a pro-
vider-sponsored organization under this part.
‘‘(d) COORDINATION AMONG FINAL STANDARDS.—In
establishing standards (other than on an interim basis)
under the previous provisions of this section, the Secretary
shall seek to provide for consistency (as appropriate)
across the different types of MedicarePlus organizations,
in order to promote equitable treatment of different types
of organizations and consistent protection for individuals
who elect products offered by the different types of
MedicarePlus organizations.
‘‘(e) USE OF CURRENT STANDARDS FOR INTERIM
STANDARDS.—To the extent practicable and consistent
with the requirements of this part, standards established
on an interim basis to carry out requirements of this part
may be based on currently applicable standards, such as
the rules established under section 1876 (as in effect as
Subtitle A, Part 1
of the date of the enactment of this section) to carry out
analogous provisions of such section or standards estab-
lished or developed for application in the private health
insurance market.
‘‘(f) APPLICATION OF NEW STANDARDS TO ENTITIES
WITH A CONTRACT.—In the case of a MedicarePlus orga-
nization with a contract in effect under this part at the
time standards applicable to the organization under this
section are changed, the organization may elect not to
have such changes apply to the organization until the end
of the current contract year (or, if there is less than 6
months remaining in the contract year, until 1 year after
the end of the current contract year).
‘‘(g) RELATION TO STATE LAWS.—The standards es-
tablished under this section shall supersede any State law
or regulation with respect to MedicarePlus products of-
fered under this part to the extent such law or regulation
is inconsistent with such standards.
‘‘MEDICAREPLUS CERTIFICATION
‘‘SEC. 1857. (a) STATE CERTIFICATION PROCESS
FOR STATE-REGULATED ORGANIZATIONS.—
‘‘(1) APPROVAL OF STATE PROCESS.—The Sec-
retary shall approve a MedicarePlus certification and
enforcement program established by a State for ap-
plying the standards established under section 1856
to MedicarePlus organizations (other than union
Subtitle A, Part 1
sponsors, Taft-Hartley sponsors, and provider-spon-
sored organizations) and MedicarePlus products of-
fered by such organizations if the Secretary deter-
mines that the program effectively provides for the
application and enforcement of such standards in
the State with respect to such organizations and
products. Such program shall provide for certifi-
cation of compliance of MedicarePlus organizations
and products with the applicable requirements of
this part not less often than once every 3 years.
‘‘(2) EFFECT OF CERTIFICATION UNDER STATE
PROCESS.—A 
MedicarePlus 
organization 
and
MedicarePlus product offered by such an organiza-
tion that is certified under such program is consid-
ered to have been certified under this subsection
with respect to the offering of the product to individ-
uals residing in the State.
‘‘(3) USER FEES.—The State may impose user
fees on organizations seeking certification under this
subsection in such amounts as the State deems suffi-
cient to finance the costs of such certification. Noth-
ing in this paragraph shall be construed as restrict-
ing a State’s authority to impose premium taxes,
other taxes, or other levies.
Subtitle A, Part 1
‘‘(6) PUBLICATION
OF
LIST
OF
APPROVED
STATE
PROGRAMS.—The Secretary shall publish
(and periodically update) a list of those State pro-
grams which are approved for purposes of this sub-
section.
‘‘(b) FEDERAL CERTIFICATION PROCESS FOR UNION
AND TAFT-HARTLEY SPONSORS
AND PROVIDER-SPON-
SORED ORGANIZATIONS.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a process for the certification of union spon-
sors, Taft-Hartley sponsors, and provider-sponsored
organizations and MedicarePlus products offered by
such sponsors and organizations as meeting the ap-
plicable standards established under section 1856.
‘‘(2) 
INVOLVEMENT
OF
SECRETARY
OF
LABOR.—Such process shall be established and oper-
ated in cooperation with the Secretary of Labor with
respect to union sponsors or Taft-Hartley sponsors.
‘‘(3) USE OF STATE LICENSING AND PRIVATE
ACCREDITATION PROCESSES.—
‘‘(A) IN
GENERAL.—The process under
this subsection shall, to the maximum extent
practicable, provide that MedicarePlus organi-
zations and products that are licensed or cer-
tified through a qualified private accreditation
Subtitle A, Part 1
process that the Secretary finds applies stand-
ards that are no less stringent than the require-
ments of this part are deemed to meet the cor-
responding requirements of this part for such
an organization or product.
‘‘(B) PERIODIC ACCREDITATION.—The use
of an accreditation under subparagraph (A)
shall be valid only for such period as the Sec-
retary specifies.
‘‘(4) USER FEES.—The Secretary may impose
user fees on entities seeking certification under this
subsection in such amounts as the Secretary deems
sufficient to finance the costs of such certification.
‘‘(c) CERTIFICATION OF PROVIDER-SPONSORED OR-
GANIZATIONS BY STATES.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process under which a State may propose to
provide for certification of entities as meeting the re-
quirements of this part to be provider-sponsored or-
ganizations.
‘‘(2) CONDITIONS
FOR
APPROVAL.—The Sec-
retary may not approve such a process unless the
Secretary determines that the certification process
applies standards that are consistent with the stand-
ards and requirements provided under this part and
Subtitle A, Part 1
does not impose requirements more restrictive than
those that would apply if this subsection were not in
effect.
‘‘(d) NOTICE TO ENROLLEES IN CASE OF DECERTI-
FICATION.—If a MedicarePlus organization or product is
decertified under this section, the organization shall notify
each enrollee with the organization and product under this
part of such decertification.
‘‘(e) QUALIFIED ASSOCIATIONS.—In the case of
products offered by a MedicarePlus organization that is
a qualified association, nothing in this section shall be con-
strued as limiting the authority of States to regulate such
products.
‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1858. (a) IN GENERAL.—The Secretary shall
not permit the election under section 1805 of a
MedicarePlus product offered by a MedicarePlus organiza-
tion under this part, and no payment shall be made under
section 1856 to an organization, unless the Secretary has
entered into a contract under this section with an organi-
zation with respect to the offering of such product. Such
a contract with an organization may cover more than one
MedicarePlus product. Such contract shall provide that
the organization agrees to comply with the requirements
of this part and the terms and conditions of payment as
provided for in this part.
Subtitle A, Part 1
‘‘(b) ENROLLMENT REQUIREMENTS.—
‘‘(1) MINIMUM ENROLLMENT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the Secretary may not
enter into a contract under this section with a
MedicarePlus organization (other than a union
sponsor or a Taft-Hartley sponsor) unless the
organization has at least 5,000 individuals (or
1,500 individuals in the case of an organization
that is a provider-sponsored organization) who
are receiving health benefits through the orga-
nization, except that the standards under sec-
tion 1856 may permit the organization to have
a lesser number of beneficiaries (but not less
than 500 in the case of an organization that is
a provider-sponsored organization) if the orga-
nization primarily serves individuals residing
outside of urbanized areas.
‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/
MEDISAVE PRODUCT.—Subparagraph (A) shall
not apply with respect to a contract that relates
only to a high deductible/medisave product.
‘‘(C) ALLOWING
TRANSITION.—The Sec-
retary may waive the requirement of subpara-
Subtitle A, Part 1
graph (A) during the first 3 contract years with
respect to an organization.
‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—
‘‘(1) PERIOD.—Each contract under this sec-
tion shall be for a term of at least one year, as de-
termined by the Secretary, and may be made auto-
matically renewable from term to term in the ab-
sence of notice by either party of intention to termi-
nate at the end of the current term.
‘‘(2) TERMINATION
AUTHORITY.—In accord-
ance with procedures established under subsection
(h), the Secretary may at any time terminate any
such contract or may impose the intermediate sanc-
tions described in an applicable paragraph of sub-
section (g) on the MedicarePlus organization if the
Secretary determines that the organization—
‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner inconsistent with the efficient and effective
administration of this part;
‘‘(C) is operating in a manner that is not
in the best interests of the individuals covered
under the contract; or
Subtitle A, Part 1
‘‘(D) no longer substantially meets the ap-
plicable conditions of this part.
‘‘(3) EFFECTIVE
DATE
OF
CONTRACTS.—The
effective date of any contract executed pursuant to
this section shall be specified in the contract, except
that in no case shall a contract under this section
which provides for coverage under a high deductible/
medisave account be effective before January 1997
with respect to such coverage.
‘‘(4) PREVIOUS TERMINATIONS.—The Secretary
may not enter into a contract with a MedicarePlus
organization if a previous contract with that organi-
zation under this section was terminated at the re-
quest of the organization within the preceding five-
year period, except in circumstances which warrant
special consideration, as determined by the Sec-
retary.
‘‘(5) NO CONTRACTING AUTHORITY.—The au-
thority vested in the Secretary by this part may be
performed without regard to such provisions of law
or regulations relating to the making, performance,
amendment, or modification of contracts of the
United States as the Secretary may determine to be
inconsistent with the furtherance of the purpose of
this title.