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TITLE II—HEALTH CARE COST
CONTAINMENT AND QUALITY
ENHANCEMENT
Subtitle A—Medical Malpractice
Liability Reform
PART 1—GENERAL PROVISIONS
SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE
LIABILITY ACTIONS.
(a) APPLICABILITY.—This subtitle shall apply with
respect to any medical malpractice liability claim and to
any medical malpractice liability action brought in any
State or Federal court, except that this subtitle shall not
apply to a claim or action for damages arising from a vac-
cine-related injury or death to the extent that title XXI
of the Public Health Service Act applies to the claim or
action.
(b) PREEMPTION.—The provisions of this subtitle
shall preempt any State law to the extent such law is in-
consistent with the limitations contained in such provi-
sions. The provisions of this subtitle shall not preempt any
State law that provides for defenses or places limitations
on a person’s liability in addition to those contained in
this subtitle, places greater limitations on the amount of
attorneys’ fees that can be collected, or otherwise imposes
greater restrictions than those provided in this subtitle.
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(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
(d) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over medical
malpractice liability actions on the basis of section 1331
or 1337 of title 28, United States Code.
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SEC. 2002. DEFINITIONS.
As used in this subtitle:
(1) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolu-
tion system’’ or ‘‘ADR’’ means a system established
under this subtitle that provides for the resolution of
medical malpractice liability claims in a manner
other than through medical malpractice liability ac-
tions.
(2) CLAIMANT.—The term ‘‘claimant’’ means
any person who alleges a medical malpractice liabil-
ity claim, and any person on whose behalf such a
claim is alleged, including the decedent in the case
of an action brought through or on behalf of an es-
tate.
(3) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established,
except that such measure or degree of proof is more
than that required under preponderance of the evi-
dence, but less than that required for proof beyond
a reasonable doubt.
(4) ECONOMIC DAMAGES.—The term ‘‘economic
damages’’ means damages paid to compensate an in-
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dividual for hospital and other medical expenses, lost
wages, lost employment, and other pecuniary losses.
(5) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means any individual who
provides health care services in a State and who is
required by the laws or regulations of the State to
be licensed or certified by the State to provide such
services in the State.
(6) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any organization or
institution that is engaged in the delivery of health
care services in a State and that is required by the
laws or regulations of the State to be licensed or cer-
tified by the State to engage in the delivery of such
services in the State.
(7) INJURY.—The term ‘‘injury’’ means any ill-
ness, disease, or other harm that is the subject of
a medical malpractice liability action or a medical
malpractice liability claim.
(8) MEDICAL
MALPRACTICE
LIABILITY
AC-
TION.—The term ‘‘medical malpractice liability ac-
tion’’ means a civil action brought in a State or Fed-
eral court against a health care provider or health
care professional in which the plaintiff alleges a
medical malpractice liability claim, but does not in-
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clude any action in which the plaintiff’s sole allega-
tion is an allegation of an intentional tort.
(9) 
MEDICAL
MALPRACTICE
LIABILITY
CLAIM.—The term ‘‘medical malpractice liability
claim’’ means a claim in which the claimant alleges
that injury was caused by the provision of (or the
failure to provide) health care services or the use of
a medical product.
(10) MEDICAL PRODUCT.—
(A) IN
GENERAL.—The term ‘‘medical
product’’ means, with respect to the allegation
of a claimant, a drug (as defined in section
201(g)(1) of the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 321(g)(1)) or a medical
device (as defined in section 201(h) of the Fed-
eral Food, Drug, and Cosmetic Act (21 U.S.C.
321(h)) if—
(i) such drug or device was subject to
premarket approval under section 505,
507, or 515 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355, 357, or
360e) or section 351 of the Public Health
Service Act (42 U.S.C. 262) with respect
to the safety of the formulation or per-
formance of the aspect of such drug or de-
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vice which is the subject of the claimant’s
allegation or the adequacy of the packag-
ing or labeling of such drug or device, and
such drug or device is approved by the
Food and Drug Administration; or
(ii) the drug or device is generally rec-
ognized as safe and effective under regula-
tions issued by the Secretary of Health
and Human Services under section 201(p)
of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(p)).
(B) EXCEPTION
IN
CASE
OF
MISREPRE-
SENTATION OR FRAUD.—Notwithstanding sub-
paragraph (A), the term ‘‘medical product’’
shall not include any product described in such
subparagraph if the claimant shows that the
product is approved by the Food and Drug Ad-
ministration for marketing as a result of with-
held information, misrepresentation, or an ille-
gal payment by manufacturer of the product.
(11) 
NONECONOMIC
DAMAGES.—The 
term
‘‘noneconomic damages’’ means damages paid to
compensate an individual for physical and emotional
pain, suffering, inconvenience, physical impairment,
mental anguish, disfigurement, loss of enjoyment of
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life, loss of consortium, and other nonpecuniary
losses, but does not include punitive damages.
(12) PUNITIVE
DAMAGES; EXEMPLARY
DAM-
AGES.—The terms ‘‘punitive damages’’ and ‘‘exem-
plary damages’’ mean compensation, in addition to
compensation for actual harm suffered, that is
awarded for the purpose of punishing a person for
conduct deemed to be malicious, wanton, willful, or
excessively reckless.
(13) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Health and Human Services.
(14) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and American Samoa.
SEC. 2003. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in subsection
(b) and section 2017(c), this subtitle shall apply with re-
spect to claims accruing or actions brought on or after
the expiration of the 3-year period that begins on the date
of the enactment of this Act.
(b) EXCEPTION FOR STATES REQUESTING EARLIER
IMPLEMENTATION OF REFORMS.—
(1) APPLICATION.—A State may submit an ap-
plication to the Secretary requesting the early imple-
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mentation of this subtitle with respect to claims or
actions brought in the State.
(2) DECISION BY SECRETARY.—The Secretary
shall issue a response to a State’s application under
paragraph (1) not later than 90 days after receiving
the application. If the Secretary determines that the
State meets the requirements of this subtitle at the
time of submitting its application, the Secretary
shall approve the State’s application, and this sub-
title shall apply with respect to actions brought in
the State on or after the expiration of the 90-day
period that begins on the date the Secretary issues
the response. If the Secretary denies the State’s ap-
plication, the Secretary shall provide the State with
a written explanation of the grounds for the deci-
sion.
PART 2—MEDICAL MALPRACTICE AND
PRODUCT LIABILITY REFORM
SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF AC-
TION THROUGH ALTERNATIVE DISPUTE RES-
OLUTION.
(a) IN GENERAL.—
(1) STATE CASES.—A medical malpractice li-
ability action may not be brought in any State court
during a calendar year unless the medical mal-
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practice liability claim that is the subject of the ac-
tion has been initially resolved under an alternative
dispute resolution system certified for the year by
the Secretary under section 2032(a), or, in the case
of a State in which such a system is not in effect
for the year, under the alternative Federal system
established under section 2032(b).
(2) FEDERAL DIVERSITY ACTIONS.—A medical
malpractice liability action may not be brought in
any Federal court under section 1332 of title 28,
United States Code, during a calendar year unless
the medical malpractice liability claim that is the
subject of the action has been initially resolved
under the alternative dispute resolution system re-
ferred to in paragraph (1) that applied in the State
whose law applies in such action.
(3) CLAIMS AGAINST UNITED STATES.—
(A) ESTABLISHMENT
OF
PROCESS
FOR
CLAIMS.—The Attorney General shall establish
an alternative dispute resolution process for the
resolution of tort claims consisting of medical
malpractice liability claims brought against the
United States under chapter 171 of title 28,
United States Code. Under such process, the
resolution of a claim shall occur after the com-
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pletion of the administrative claim process ap-
plicable to the claim under section 2675 of such
title.
(B) REQUIREMENT FOR INITIAL RESOLU-
TION UNDER PROCESS.—A medical malpractice
liability action based on a medical malpractice
liability claim described in subparagraph (A)
may not be brought in any Federal court unless
the claim has been initially resolved under the
alternative dispute resolution process estab-
lished by the Attorney General under such sub-
paragraph.
(b) INITIAL
RESOLUTION
OF
CLAIMS
UNDER
ADR.—For purposes of subsection (a), an action is ‘‘ini-
tially resolved’’ under an alternative dispute resolution
system if—
(A) the ADR reaches a decision on wheth-
er the defendant is liable to the plaintiff for
damages; and
(B) if the ADR determines that the de-
fendant is liable, the ADR reaches a decision on
the amount of damages assessed against the de-
fendant.
(c) PROCEDURES FOR FILING ACTIONS.—
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(1) NOTICE
OF
INTENT
TO
CONTEST
DECI-
SION.—Not later than 60 days after a decision is is-
sued with respect to a medical malpractice liability
claim under an alternative dispute resolution system,
each party affected by the decision shall submit a
sealed statement to a court of competent jurisdiction
indicating whether or not the party intends to con-
test the decision.
(2) DEADLINE FOR FILING ACTION.—A medical
malpractice liability action may not be brought by a
party unless—
(A) the party has filed the notice of intent
required by paragraph (1); and
(B) the party files the action in a court of
competent jurisdiction not later than 90 days
after the decision resolving the medical mal-
practice liability claim that is the subject of the
action is issued under the applicable alternative
dispute resolution system.
(3) COURT
OF
COMPETENT
JURISDICTION.—
For purposes of this subsection, the term ‘‘court of
competent jurisdiction’’ means—
(A) with respect to actions filed in a State
court, the appropriate State trial court; and
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(B) with respect to actions filed in a Fed-
eral court, the appropriate United States dis-
trict court.
(d) LEGAL EFFECT OF UNCONTESTED ADR DECI-
SION.—The decision reached under an alternative dispute
resolution system shall, for purposes of enforcement by a
court of competent jurisdiction, have the same status in
the court as the verdict of a medical malpractice liability
action adjudicated in a State or Federal trial court. The
previous sentence shall not apply to a decision that is con-
tested by a party affected by the decision pursuant to sub-
section (c)(1).
SEC. 2012. CALCULATION AND PAYMENT OF DAMAGES.
(a) LIMITATION ON NONECONOMIC DAMAGES.—The
total amount of noneconomic damages that may be award-
ed to a claimant and the members of the claimant’s family
for losses resulting from the injury which is the subject
of a medical malpractice liability action may not exceed
$250,000, regardless of the number of parties against
whom the action is brought or the number of actions
brought with respect to the injury.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) BASIS FOR RECOVERY.—Punitive or exem-
plary damages shall not be awarded in a medical
malpractice liability action unless the claimant es-
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tablishes by clear and convincing evidence that the
injury suffered was the direct result of conduct
manifesting a malicious, wanton, willful, or exces-
sively reckless disregard of the safety of others.
(2) NO
AWARD
AGAINST
MANUFACTURER
OF
MEDICAL PRODUCT.—In the case of a medical mal-
practice liability action in which the plaintiff alleges
a claim against the manufacturer of a medical prod-
uct, no punitive or exemplary damages may be
awarded against such manufacturer.
(3) PAYMENTS TO STATE FOR MEDICAL QUAL-
ITY ASSURANCE ACTIVITIES.—
(A) IN GENERAL.—Any punitive or exem-
plary damages awarded in a medical mal-
practice liability action shall be paid to the
State in which the action is brought or, in a
case brought in Federal court, in the State in
which the health care services that caused the
injury that is the subject of the action were
provided.
(B) ACTIVITIES
DESCRIBED.—A State
shall use amounts paid pursuant to subpara-
graph (A) to carry out activities to assure the
safety and quality of health care services pro-
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vided in the State, including (but not limited
to)—
(i) licensing or certifying health care
professionals and health care providers in
the State;
(ii) operating alternative dispute reso-
lution systems;
(iii) carrying out public education pro-
grams relating to medical malpractice and
the availability of alternative dispute reso-
lution systems in the State; and
(iv) carrying out programs to reduce
malpractice-related costs for retired provid-
ers or other providers volunteering to pro-
vide services in medically underserved
areas.
(C) MAINTENANCE OF EFFORT.—A State
shall use any amounts paid pursuant to sub-
paragraph (A) to supplement and not to replace
amounts spent by the State for the activities
described in subparagraph (B).
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL
RULE.—In any medical mal-
practice liability action in which the damages award-
ed for future economic loss exceeds $100,000, a de-
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fendant may not be required to pay such damages
in a single, lump-sum payment, but shall be per-
mitted to make such payments periodically based on
when the damages are found likely to occur, as such
payments are determined by the court.
(2) WAIVER.—A court may waive the applica-
tion of paragraph (1) with respect to a defendant if
the court determines that it is not in the best inter-
ests of the plaintiff to receive payments for damages
on such a periodic basis.
SEC. 2013. TREATMENT OF ATTORNEY’S FEES AND OTHER
COSTS.
(a) LIMITATION
ON AMOUNT
OF CONTINGENCY
FEES.—
(1) IN GENERAL.—An attorney who represents,
on a contingency fee basis, a claimant in a medical
malpractice liability claim may not charge, demand,
receive, or collect for services rendered in connection
with such claim in excess of the following amount re-
covered by judgment or settlement under such claim:
(A) 25 percent of the first $150,000 (or
portion thereof) recovered, plus
(B) 10 percent of any amount in excess of
$150,000 recovered.
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(2) CALCULATION OF PERIODIC PAYMENTS.—In
the event that a judgment or settlement includes
periodic or future payments of damages, the amount
recovered for purposes of computing the limitation
on the contingency fee under paragraph (1) shall be
based on the cost of the annuity or trust established
to make the payments. In any case in which an an-
nuity or trust is not established to make such pay-
ments, such amount shall be based on the present
value of the payments.
(b) REQUIRING PARTY CONTESTING ADR RULING
TO PAY ATTORNEY’S FEES AND OTHER COSTS.—
(1) IN GENERAL.—The court in a medical mal-
practice liability action shall require the party that
(pursuant to section 2011(c)(1)) contested the ruling
of the alternative dispute resolution system with re-
spect to the medical malpractice liability claim that
is the subject of the action to pay to the opposing
party the costs incurred by the opposing party under
the action, including attorney’s fees, fees paid to ex-
pert witnesses, and other litigation expenses (but not
including court costs, filing fees, or other expenses
paid directly by the party to the court, or any fees
or costs associated with the resolution of the claim
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under the alternative dispute resolution system), but
only if—
(A) in the case of an action in which the
party that contested the ruling is the claimant,
the amount of damages awarded to the party
under the action does not exceed the amount of
damages awarded to the party under the ADR
system by at least 10 percent; and
(B) in the case of an action in which the
party that contested the ruling is the defendant,
the amount of damages assessed against the
party under the action is not at least 10 per-
cent less than the amount of damages assessed
under the ADR system.
(2) EXCEPTIONS.—Paragraph (1) shall not
apply if—
(A) the party contesting the ruling made
under the previous alternative dispute resolu-
tion system shows that—
(i) the ruling was procured by corrup-
tion, fraud, or undue means,
(ii) there was partiality or corruption
under the system,
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(iii) there was other misconduct under
the system that materially prejudiced the
party’s rights, or
(iv) the ruling was based on an error
of law;
(B) the party contesting the ruling made
under the alternative dispute resolution system
presents new evidence before the trier of fact
that was not available for presentation under
the ADR system;
(C) the medical malpractice liability action
raised a novel issue of law; or
(D) the court finds that the application of
such paragraph to a party would constitute an
undue hardship, and issues an order waiving or
modifying the application of such paragraph
that specifies the grounds for the court’s deci-
sion.
(3) 
REQUIREMENT
FOR
PERFORMANCE
BOND.—The court in a medical malpractice liability
action shall require the party that (pursuant to sec-
tion 2011(c)(1)) contested the ruling of the alter-
native dispute resolution system with respect to the
medical malpractice liability claim that is the subject
of the action to post a performance bond (in such
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amount and consisting of such funds and assets as
the court determines to be appropriate), except that
the court may waive the application of such require-
ment to a party if the court determines that the
posting of such a bond is not necessary to ensure
that the party shall meet the requirements of this
subsection to pay the opposing party the costs in-
curred by the opposing party under the action.
(4) LIMIT ON ATTORNEY’S FEES PAID.—Attor-
neys’ fees that are required to be paid under para-
graph (1) by the contesting party shall not exceed
the amount of the attorneys’ fees incurred by the
contesting party in the action. If the attorneys’ fees
of the contesting party are based on a contingency
fee agreement, the amount of attorneys’ fees for
purposes of the preceding sentence shall not exceed
the reasonable value of those services.
(5) RECORDS.—In order to receive attorneys’
fees under paragraph (1), counsel of record in the
medical malpractice liability action involved shall
maintain accurate, complete records of hours worked
on the action, regardless of the fee arrangement
with the client involved.
(c) CONTINGENCY FEE DEFINED.—As used in this
section, the term ‘‘contingency fee’’ means any fee for pro-
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fessional legal services which is, in whole or in part, con-
tingent upon the recovery of any amount of damages,
whether through judgment or settlement.
SEC. 2014. JOINT AND SEVERAL LIABILITY.
Except as provided in subsection (b), a defendant
may be held severally but not jointly liable in a medical
malpractice action. A person found liable for damages in
any such action may be found liable, if at all, only for
those damages directly attributable to the person’s propor-
tionate share of fault or responsibility for the injury, and
may not be found liable for damages attributable to the
proportionate share of fault or responsibility of any other
person (without regard to whether that person is a party
to the action) for the injury, including any person bringing
the action.
SEC. 2015. STATUTE OF LIMITATIONS.
A medical malpractice liability claim may not be
brought after the expiration of the 7-year period that be-
gins on the date the alleged injury that is the subject of
the claim occurred. If the commencement of such an ac-
tion is stayed or enjoined, the running of the statute of
limitations under this section shall be suspended for the
period of the stay or injunction.
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SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEG-
LIGENCE.
A defendant in a medical malpractice liability action
may not be found to have acted negligently unless the de-
fendant’s conduct at the time of providing the health care
services that are the subject of the action was not reason-
able.
SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC
SERVICES.
(a) IMPOSITION OF HIGHER STANDARD OF PROOF.—
In the case of a medical malpractice liability claim relating
to services provided during labor or the delivery of a baby,
if the health care professional against whom the claim is
brought did not previously treat the individual alleged to
have been injured for the pregnancy, the trier of fact may
not find that the defendant committed malpractice and
may not assess damages against the health care profes-
sional unless the malpractice is proven by clear and con-
vincing evidence.
(b) APPLICABILITY
TO
GROUP
PRACTICES
OR
AGREEMENTS AMONG PROVIDERS.—For purposes of sub-
section (a), a health care professional shall be considered
to have previously treated an individual for a pregnancy
if the professional is a member of a group practice whose
members previously treated the individual for the preg-
nancy or is providing services to the individual during
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labor or the delivery of a baby pursuant to an agreement
with another health care professional.
(c) EFFECTIVE DATE.—This section shall apply with
respect to claims accruing or actions brought on or after
the expiration of the 2-year period that begins on the date
of the enactment of this Act.
PART 3—REQUIREMENTS FOR STATE AL-
TERNATIVE 
DISPUTE 
RESOLUTION
SYSTEMS (ADR)
SEC. 2031. BASIC REQUIREMENTS.
(a) IN GENERAL.—A State’s alternative dispute reso-
lution system meets the requirements of this section if the
system—
(1) applies to all medical malpractice liability
claims under the jurisdiction of the courts of that
State;
(2) requires that a written opinion resolving the
dispute be issued not later than 6 months after the
date by which each party against whom the claim is
filed has received notice of the claim (other than in
exceptional cases for which a longer period is re-
quired for the issuance of such an opinion), and that
the opinion contain—
(A) findings of fact relating to the dispute,
and
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(B) a description of the costs incurred in
resolving the dispute under the system (includ-
ing any fees paid to the individuals hearing and
resolving the claim), together with an appro-
priate assessment of the costs against any of
the parties;
(3) requires individuals who hear and resolve
claims under the system to meet such qualifications
as the State may require (in accordance with regula-
tions of the Secretary);
(4) is approved by the State or by local govern-
ments in the State;
(5) with respect to a State system that consists
of multiple dispute resolution procedures—
(A) permits the parties to a dispute to se-
lect the procedure to be used for the resolution
of the dispute under the system, and
(B) if the parties do not agree on the pro-
cedure to be used for the resolution of the dis-
pute, assigns a particular procedure to the par-
ties;
(6) provides for the transmittal to the State
agency responsible for monitoring or disciplining
health care professionals and health care providers
of any findings made under the system that such a
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professional or provider committed malpractice, un-
less, during the 90-day period beginning on the date
the system resolves the claim against the profes-
sional or provider, the professional or provider
brings an action contesting the decision made under
the system; and
(7) provides for the regular transmittal to the
Administrator for Health Care Policy and Research
of information on disputes resolved under the sys-
tem, in a manner that assures that the identity of
the parties to a dispute shall not be revealed.
(b) APPLICATION
OF
MALPRACTICE
LIABILITY
STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—
The provisions of part 2 shall apply with respect to claims
brought under a State alternative dispute resolution sys-
tem or the alternative Federal system in the same manner
as such provisions apply with respect to medical mal-
practice liability actions brought in the State.
SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICA-
BILITY OF ALTERNATIVE FEDERAL SYSTEM.
(a) CERTIFICATION.—
(1) IN GENERAL.—Not later than October 1 of
each year (beginning with 1994), the Secretary, in
consultation with the Attorney General, shall deter-
mine whether a State’s alternative dispute resolution
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system meets the requirements of this part for the
following calendar year.
(2) BASIS FOR CERTIFICATION.—The Secretary
shall certify a State’s alternative dispute resolution
system under this subsection for a calendar year if
the Secretary determines under paragraph (1) that
the system meets the requirements of section 2031.
(b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS-
TEM.—
(1) ESTABLISHMENT
AND
APPLICABILITY.—
Not later than October 1, 1994, the Secretary, in
consultation with the Attorney General, shall estab-
lish by rule an alternative Federal ADR system for
the resolution of medical malpractice liability claims
during a calendar year in States that do not have
in effect an alternative dispute resolution system
certified under subsection (a) for the year.
(2) REQUIREMENTS FOR SYSTEM.—Under the
alternative Federal ADR system established under
paragraph (1)—
(A) paragraphs (1), (2), (6), and (7) of
section 2031(a) shall apply to claims brought
under the system;
(B) if the system provides for the resolu-
tion of claims through arbitration, the claims
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brought under the system shall be heard and
resolved by arbitrators appointed by the Sec-
retary in consultation with the Attorney Gen-
eral; and
(C) with respect to a State in which the
system is in effect, the Secretary may (at the
State’s request) modify the system to take into
account the existence of dispute resolution pro-
cedures in the State that affect the resolution
of medical malpractice liability claims.
(3) TREATMENT
OF
STATES
WITH
ALTER-
NATIVE SYSTEM IN EFFECT.—If the alternative Fed-
eral ADR system established under this subsection is
applied with respect to a State for a calendar year—
(A) the State shall reimburse the United
States (at such time and in such manner as the
Secretary may require) for the costs incurred
by the United States during the year as a result
of the application of the system with respect to
the State; and
(B) notwithstanding any other provision of
law, no funds may be paid to the State (or to
any unit of local government in the State) or to
any entity in the State pursuant to the Public
Health Service Act.
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SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFEC-
TIVENESS OF ALTERNATIVE DISPUTE RESO-
LUTION SYSTEMS.
(a) IN GENERAL.—Not later than 5 years after the
date of the enactment of this Act, the Secretary shall pre-
pare and submit to the Congress a report describing and
evaluating State alternative dispute resolution systems op-
erated pursuant to this part and the alternative Federal
system established under section 2032(b).
(b) CONTENTS OF REPORT.—The Secretary shall in-
clude in the report prepared and submitted under sub-
section (a)—
(1) information on—
(A) the effect of the alternative dispute
resolution systems on the cost of health care
within each State,
(B) the impact of such systems on the ac-
cess of individuals to health care within the
State, and
(C) the effect of such systems on the qual-
ity of health care provided within the State; and
(2) to the extent that such report does not pro-
vide information on no-fault systems operated by
States as alternative dispute resolution systems pur-
suant to this part, an analysis of the feasibility and
desirability of establishing a system under which
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medical malpractice liability claims shall be resolved
on a no-fault basis.
PART 4—OTHER PROVISIONS RELATING
TO MEDICAL MALPRACTICE LIABILITY
SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES
TO PARTICIPATE IN DISCIPLINARY ACTIVI-
TIES.
(a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith-
standing any other provision of State or Federal law, a
State agency responsible for the conduct of disciplinary
actions for a type of health care practitioner may enter
into agreements with State or county professional societies
of such type of health care practitioner to permit such so-
cieties to participate in the licensing of such health care
practitioner, and to review any health care malpractice ac-
tion, health care malpractice claim or allegation, or other
information concerning the practice patterns of any such
health care practitioner. Any such agreement shall comply
with subsection (b).
(b) REQUIREMENTS OF AGREEMENTS.—Any agree-
ment entered into under subsection (a) for licensing activi-
ties or the review of any health care malpractice action,
health care malpractice claim or allegation, or other infor-
mation concerning the practice patterns of a health care
practitioner shall provide that—
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(1) the health care professional society conducts
such activities or review as expeditiously as possible;
(2) after the completion of such review, such so-
ciety shall report its findings to the State agency
with which it entered into such agreement;
(3) the conduct of such activities or review and
the reporting of such findings be conducted in a
manner which assures the preservation of confiden-
tiality of health care information and of the review
process; and
(4) no individual affiliated with such society is
liable for any damages or injury directly caused by
the individual’s actions in conducting such activities
or review.
(c) AGREEMENTS NOT MANDATORY.—Nothing in
this section may be construed to require a State to enter
into agreements with societies described in subsection (a)
to conduct the activities described in such subsection.
(d) EFFECTIVE DATE.—This section shall take effect
2 years after the date of the enactment of this Act.
SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOL-
UNTARY SERVICE BY PHYSICIANS.
(a) STUDY.—The Secretary shall conduct a study
analyzing the existence and effectiveness of incentives
adopted by State and local governments, insurers, medical
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societies, and other entities to encourage physicians
(whether practicing or retired) to volunteer to provide
health care services in medically underserved areas.
(b) REPORTS.—(1) Not later than 1 year after the
date of the enactment of this Act, the Secretary shall sub-
mit an interim report to Congress on the study conducted
under subsection (a), together with the Secretary’s rec-
ommendations for actions to increase the number of physi-
cians volunteering to provide health care services in medi-
cally underserved areas.
(2) Not later than 5 years after the date of the enact-
ment of this Act, the Secretary shall submit a final report
to the Congress on the study conducted under subsection
(a) (taking into account the effects of this subtitle on the
incidence and costs of medical malpractice), together with
the Secretary’s recommendations for actions to increase
the number of physicians volunteering to provide health
care services in medically underserved areas.
SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PRO-
GRAMS.
(a) REQUIREMENTS FOR PROVIDERS.—Each State
shall require each health care professional and health care
provider providing services in the State to participate in
a risk management program to prevent and provide early
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warning of practices which may result in injuries to pa-
tients or which otherwise may endanger patient safety.
(b) REQUIREMENTS
FOR INSURERS.—Each State
shall require each entity which provides health care profes-
sional or provider liability insurance to health care profes-
sionals and health care providers in the State to—
(1) establish risk management programs based
on data available to such entity or sanction pro-
grams of risk management for health care profes-
sionals and health care providers provided by other
entities; and
(2) require each such professional or provider,
as a condition of maintaining insurance, to partici-
pate in one program described in paragraph (1) at
least once in each 3-year period.
(c) EFFECTIVE DATE.—This section shall take effect
2 years after the date of the enactment of this Act.
SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.
(a) RESEARCH ON MEDICAL INJURY PREVENTION
AND COMPENSATION.
(1) IN GENERAL.—The Secretary shall make
grants for the conduct of basic research in the pre-
vention of and compensation for injuries resulting
from health care professional or health care provider
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malpractice, and research of the outcomes of health
care procedures.
(2) PREFERENCE FOR RESEARCH ON CERTAIN
ACTIVITIES.—In making grants under paragraph
(1), the Secretary shall give preference to applica-
tions for grants to conduct research on the behavior
of health care providers and health care profes-
sionals in carrying out their professional duties and
of other participants in systems for compensating in-
dividuals injured by medical malpractice, the effects
of financial and other incentives on such behavior,
the determinants of compensation system outcomes,
and the costs and benefits of alternative compensa-
tion policy options.
(3) APPLICATION.—The Secretary may not
make a grant under paragraph (1) unless an appli-
cant submits an application to the Secretary at such
time, in such form, in such manner, and containing
such information as the Secretary may require.
(b) GRANTS FOR LICENSING AND DISCIPLINARY AC-
TIVITIES.—
(1) IN GENERAL.—The Secretary shall make
grants to States to assist States in improving the
State’s ability to license and discipline health care
professionals.
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(2) USES FOR GRANTS.—A State may use a
grant awarded under subsection (a) to develop and
implement improved mechanisms for monitoring the
practices of health care professionals or for conduct-
ing disciplinary activities.
(3) TECHNICAL
ASSISTANCE.—The Secretary
shall provide technical assistance to States receiving
grants under paragraph (1) to assist them in evalu-
ating their medical practice acts and procedures and
to encourage the use of efficient and effective early
warning systems and other mechanisms for detecting
practices which endanger patient safety and for dis-
ciplining health care professionals.
(4) APPLICATIONS.—The Secretary may not
make a grant under paragraph (1) unless the appli-
cant submits an application to the Secretary at such
time, in such form, in such manner, and containing
such information as the Secretary shall require.
(c) GRANTS FOR PUBLIC EDUCATION PROGRAMS.—
(1) IN GENERAL.—The Secretary shall make
grants to States and to local governments, private
nonprofit organizations, and health professional
schools (as defined in paragraph (3)) for—
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(A) educating the general public about the
appropriate use of health care and realistic ex-
pectations of medical intervention;
(B) educating the public about the re-
sources and role of health care professional li-
censing and disciplinary boards in investigating
claims of incompetence or health care mal-
practice; and
(C) developing programs of faculty train-
ing and curricula for educating health care pro-
fessionals in quality assurance, risk manage-
ment, and medical injury prevention.
(2) APPLICATIONS.—The Secretary may not
make a grant under paragraph (1) unless the appli-
cant submits an application to the Secretary at such
time, in such form, in such manner, and containing
such information as the Secretary shall require.
(3) 
HEALTH
PROFESSIONAL
SCHOOL
DE-
FINED.—In paragraph (1), the term ‘‘health profes-
sional school’’ means a school of nursing (as defined
in section 853(2) of the Public Health Service Act)
or a school or program under section 799(1) of such
Act.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated not more than
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$15,000,000 for each of the first 5 fiscal years beginning
on or after the date of the enactment of this Act for grants
under this section.
Subtitle B—Administrative Cost
Savings
PART 1—STANDARDIZATION OF CLAIMS
PROCESSING
SEC. 2101. ADOPTION OF DATA ELEMENTS, UNIFORM
CLAIMS, AND UNIFORM ELECTRONIC TRANS-
MISSION STANDARDS.
(a) IN GENERAL.—The Secretary of Health and
Human Services (in this subtitle referred to as the ‘‘Sec-
retary’’) shall adopt standards relating to each of the fol-
lowing:
(1) Data elements for use in paper and elec-
tronic claims processing under health benefit plans,
as well as for use in utilization review and manage-
ment of care (including data fields, formats, and
medical nomenclature, and including plan benefit
and insurance information).
(2) Uniform claims forms (including uniform
procedure and billing codes for uses with such forms
and including information on other health benefit
plans that may be liable for benefits).
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(3) Uniform electronic transmission of the data
elements (for purposes of billing and utilization re-
view).
Standards under paragraph (3) relating to electronic
transmission of data elements for claims for services shall
supersede (to the extent specified in such standards) the
standards adopted under paragraph (2) relating to the
submission of paper claims for such services. Standards
under paragraph (3) shall include protections to assure
the confidentiality of patient-specific information and to
protect against the unauthorized use and disclosure of in-
formation.
(b) USE OF TASK FORCES.—In adopting standards
under this section—
(1) the Secretary shall take into account the
recommendations of current taskforces, including at
least the Workgroup on Electronic Data Inter-
change, National Uniform Billing Committee, the
Uniform Claim Task Force, and the Computer-based
Patient Record Institute;
(2) the Secretary shall consult with the Na-
tional Association of Insurance Commissioners (and,
with respect to standards under subsection (a)(3),
the American National Standards Institute); and
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(3) the Secretary shall, to the maximum extent
practicable, seek to make the standards consistent
with any uniform clinical data sets which have been
adopted and are widely recognized.
(c) DEADLINES
FOR PROMULGATION.—The Sec-
retary shall promulgate the standards under—
(1) subsection (a)(1) relating to claims process-
ing data, by not later than 12 months after the date
of the enactment of this Act;
(2) subsection (a)(2) (relating to uniform
claims forms) by not later than 12 months after the
date of the enactment of this Act; and
(3)(A) subsection (a)(3) relating to trans-
mission of information concerning hospital and phy-
sicians services, by not later than 24 months after
the date of the enactment of this Act, and
(B) subsection (a)(3) relating to transmission
of information on other services, by such later date
as the Secretary may determine it to be feasible.
(d) REPORT TO CONGRESS.—Not later than 3 years
after the date of the enactment of this Act, the Secretary
shall report to Congress recommendations regarding re-
structuring the medicare peer review quality assurance
program given the availability of hospital data in elec-
tronic form.
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SEC. 2102. APPLICATION OF STANDARDS.
(a) IN GENERAL.—If the Secretary determines, at
the end of the 2-year period beginning on the date that
standards are adopted under section 2101 with respect to
classes of services, that a significant number of claims for
benefits for such services under health benefit plans are
not being submitted in accordance with such standards,
the Secretary may require, after notice in the Federal
Register of not less than 6 months, that all providers of
such services must submit claims to health benefit plans
in accordance with such standards. The Secretary may
waive the application of such a requirement in such cases
as the Secretary finds that the imposition of the require-
ment would not be economically practicable.
(b) SIGNIFICANT NUMBER.—The Secretary shall
make an affirmative determination described in subsection
(a) for a class of services only if the Secretary finds that
there would be a significant, measurable additional gain
in efficiencies in the health care system that would be ob-
tained by imposing the requirement described in such
paragraph with respect to such services.
(c) APPLICATION OF REQUIREMENT.—
(1) IN GENERAL.—If the Secretary imposes the
requirement under subsection (a)—
(A) in the case of a requirement that imposes
the standards relating to electronic trans-
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mission of claims for a class of services, each
health care provider that furnishes such services
for which benefits are payable under a health
benefit plan shall transmit electronically and di-
rectly to the plan on behalf of the beneficiary
involved a claim for such services in accordance
with such standards;
(B) any health benefit plan may reject any
claim subject to the standards adopted under
section 2101 but which is not submitted in ac-
cordance with such standards;
(C) it is unlawful for a health benefit plan
(i) to reject any such claim on the basis of the
form in which it is submitted if it is submitted
in accordance with such standards or (ii) to re-
quire, for the purpose of utilization review or as
a condition of providing benefits under the plan,
a provider to transmit medical data elements
that are inconsistent with the standards estab-
lished under section 2101(a)(1); and
(D) the Secretary may impose a civil
money penalty on any provider that knowingly
and repeatedly submits claims in violation of
such standards or on any health benefit plan
(other than a health benefit plan described in
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paragraph (2)) that knowingly and repeatedly
rejects claims in violation of subparagraph (B),
in an amount not to exceed $100 for each such
claim.
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under subparagraph (D) in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan—
(A) that is subject to regulation by a
State, and
(B) with respect to which the Secretary
finds that—
(i) the State provides for application
of the standards established under section
2101, and
(ii) the State regulatory program pro-
vides for the appropriate and effective en-
forcement of such standards.
(d) TREATMENT OF REJECTIONS.—If a plan rejects
a claim pursuant to subsection (c)(1), the plan shall per-
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mit the person submitting the claim a reasonable oppor-
tunity to resubmit the claim on a form or in an electronic
manner that meets the requirements for acceptance of the
claim under such subsection.
SEC. 
2103. 
PERIODIC 
REVIEW 
AND 
REVISION 
OF
STANDARDS.
(a) IN GENERAL.—The Secretary shall—
(1) provide for the ongoing receipt and review
of comments and suggestions for changes in the
standards adopted and promulgated under section
2101;
(2) establish a schedule for the periodic review
of such standards; and
(3) based upon such comments, suggestions,
and review, revise such standards and promulgate
such revisions.
(b) APPLICATION OF REVISED STANDARDS.—If the
Secretary under subsection (a) revises the standards de-
scribed in 2101, then, in the case of any claim for benefits
submitted under a health benefit plan more than the mini-
mum period (of not less than 6 months specified by the
Secretary) after the date the revision is promulgated
under subsection (a)(3), such standards shall apply under
section 2102 instead of the standards previously promul-
gated.
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SEC. 2104. HEALTH BENEFIT PLAN DEFINED.
In this subtitle, the term ‘‘health benefit plan’’ has
the meaning given such term in section 112(6) and in-
cludes—
(1) the medicare program (under title XVIII of
the Social Security Act) and medicare supplemental
health insurance, and
(2) a State medicaid plan (approved under title
XIX of such Act).
PART 2—ELECTRONIC MEDICAL DATA
STANDARDS
SEC. 2111. MEDICAL DATA STANDARDS FOR HOSPITALS
AND OTHER PROVIDERS.
(a) PROMULGATION
OF HOSPITAL DATA STAND-
ARDS.—
(1) IN GENERAL.—Between July 1, 1994, and
January 1, 1995, the Secretary shall promulgate
standards described in subsection (b) for hospitals
concerning electronic medical data.
(2) REVISION.—The Secretary may from time
to time revise the standards promulgated under this
subsection.
(b) CONTENTS OF DATA STANDARDS.—The stand-
ards promulgated under subsection (a) shall include at
least the following:
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(1) A definition of a standard set of data ele-
ments for use by utilization and quality control peer
review organizations.
(2) A definition of the set of comprehensive
data elements, which set shall include for hospitals
the standard set of data elements defined under
paragraph (1).
(3) Standards for an electronic patient care in-
formation system with data obtained at the point of
care, including standards to protect against the un-
authorized use and disclosure of information.
(4) A specification of, and manner of presen-
tation of, the individual data elements of the sets
and system under this subsection.
(5) Standards concerning the transmission of
electronic medical data.
(6) Standards relating to confidentiality of pa-
tient-specific information.
The standards under this section shall be consistent with
standards for data elements established under section
2101.
(c) OPTIONAL DATA STANDARDS FOR OTHER PRO-
VIDERS.—
(1) IN GENERAL.—The Secretary may promul-
gate standards described in paragraph (2) concern-
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ing electronic medical data for providers that are not
hospitals. The Secretary may from time to time re-
vise the standards promulgated under this sub-
section.
(2) CONTENTS
OF
DATA
STANDARDS.—The
standards promulgated under paragraph (1) for non-
hospital providers may include standards comparable
to the standards described in paragraphs (2), (4),
and (5) of subsection (b) for hospitals.
(d) CONSULTATION.—In promulgating and revising
standards under this section, the Secretary shall—
(1) consult with the American National Stand-
ards Institute, hospitals, with the advisory commis-
sion established under section 2115, and with other
affected providers, health benefit plans, and other
interested parties, and
(2) take into consideration, in developing stand-
ards under subsection (b)(1), the data set used by
the utilization and quality control peer review pro-
gram under part B of title XI of the Social Security
Act.
SEC. 2112. APPLICATION OF ELECTRONIC DATA STAND-
ARDS TO CERTAIN HOSPITALS.
(a) MEDICARE REQUIREMENT
FOR SHARING
OF
HOSPITAL INFORMATION.—As of January 1, 1996, sub-
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ject to paragraph (2), each hospital, as a requirement of
each participation agreement under section 1866 of the
Social Security Act, shall—
(1) maintain clinical data included in the set of
comprehensive 
data 
elements 
under 
section
2111(b)(2) in electronic form on all inpatients,
(2) upon request of the Secretary or of a utili-
zation and quality control peer review organization
(with which the Secretary has entered into a con-
tract under part B of title XI of such Act), transmit
electronically the data set, and
(3) upon request of the Secretary, or of a fiscal
intermediary or carrier, transmit electronically any
data (with respect to a claim) from such data set,
in accordance with the standards promulgated under sec-
tion 2111(a).
(b) WAIVER AUTHORITY.—Until January 1, 2000:
(1) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is a small rural hospital, for such period as the
hospital demonstrates compliance with such require-
ments would constitute an undue financial hardship.
(2) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is in the process of developing a system to pro-
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vide the required data set and executes agreements
with its fiscal intermediary and its utilization and
quality control peer review organization that the hos-
pital will meet the requirements of subsection (a) by
a specified date (not later than January 1, 2000).
(3) The Secretary may waive the application of
the requirement of subsection (a)(1) for a hospital
that agrees to obtain from its records the data ele-
ments that are needed to meet the requirements of
paragraphs (2) and (3) of subsection (a) and agrees
to subject its data transfer process to a quality as-
surance program specified by the Secretary.
(c) APPLICATION TO HOSPITALS OF THE DEPART-
MENT OF VETERANS AFFAIRS.—
(1) IN GENERAL.—The Secretary of Veterans
Affairs shall provide that each hospital of the De-
partment of Veterans Affairs shall comply with the
requirements of subsection (a) in the same manner
as such requirements would apply to the hospital if
it were participating in the Medicare program.
(2) WAIVER.—Such Secretary may waive the
application of such requirements to a hospital in the
same manner as the Secretary of Health and
Human Services may waive under subsection (b) the
application of the requirements of subsection (a).
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SEC. 2113. ELECTRONIC TRANSMISSION TO FEDERAL AGEN-
CIES.
(a) IN GENERAL.—Effective January 1, 2000, if a
provider is required under a Federal program to transmit
a data element that is subject to a presentation or trans-
mission standard (as defined in subsection (b)), the head
of the Federal agency responsible for such program (if not
otherwise authorized) is authorized to require the provider
to present and transmit the data element electronically in
accordance with such a standard.
(b) PRESENTATION
OR TRANSMISSION STANDARD
DEFINED.—In subsection (a), the term ‘‘presentation or
transmission standard’’ means a standard, promulgated
under subsection (b) or (c) of section 2111, described in
paragraph (4) or (5) of section 2111(b).
SEC. 2114. LIMITATION ON DATA REQUIREMENTS WHERE
STANDARDS IN EFFECT.
(a) IN GENERAL.—If standards with respect to data
elements are promulgated under section 2111 with respect
to a class of provider, a health benefit plan may not re-
quire, for the purpose of utilization review or as a condi-
tion of providing benefits under the plan, that a provider
in the class—
(1) provide any data element not in the set of
comprehensive data elements specified under such
standards, or
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(2) transmit or present any such data element
in a manner inconsistent with the applicable stand-
ards for such transmission or presentation.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with subsection (a) in an
amount not to exceed $100 for each such failure.
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under this paragraph in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
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SEC. 2115. ADVISORY COMMISSION.
(a) IN GENERAL.—The Secretary shall establish an
advisory commission including hospital executives, hospital
data base managers, physicians, health services research-
ers, and technical experts in collection and use of data
and operation of data systems. Such commission shall in-
clude, as ex officio members, a representative of the Direc-
tor of the National Institutes of Health, the Administrator
for Health Care Policy and Research, the Secretary of
Veterans Affairs, and the Director of the Centers for Dis-
ease Control.
(b) FUNCTIONS.—The advisory commission shall
monitor and advise the Secretary concerning—
(1) the standards established under this part,
and
(2) operational concerns about the implementa-
tion of such standards under this part.
(c) STAFF.—From the amounts appropriated under
subsection (d), the Secretary shall provide sufficient staff
to assist the advisory commission in its activities under
this section.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $2,000,000 for each of
fiscal years 1994 through 1999 to carry out this section.
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PART 3—DEVELOPMENT AND DISTRIBU-
TION OF COMPARATIVE VALUE INFOR-
MATION
SEC. 2121. STATE COMPARATIVE VALUE INFORMATION
PROGRAMS FOR HEALTH CARE PURCHASING.
(a) PURPOSE.—In order to assure the availability of
comparative value information to purchasers of health
care in each State, the Secretary shall determine whether
each State is developing and implementing a health care
value information program that meets the criteria and
schedule set forth in subsection (b).
(b) CRITERIA
AND SCHEDULE
FOR STATE PRO-
GRAMS.—The criteria and schedule for a State health care
value information program in this subsection shall be spec-
ified by the Secretary as follows:
(1) The State begins promptly after enactment
of this Act to develop (directly or through contrac-
tual or other arrangements with one or more States,
coalitions of health insurance purchasers, other enti-
ties, or any combination of such arrangements) in-
formation systems regarding comparative health val-
ues.
(2) The information contained in such systems
covers at least the average prices of common health
care services (as defined in subsection (d)) and
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•HR 3080 SC2
health insurance plans, and, where available, meas-
ures of the variability of these prices within a State
or other market areas.
(3) The information described in paragraph (2)
is made available within the State beginning not
later than one year after the date of the enactment
of this Act, and is revised as frequently as reason-
ably necessary, but at intervals of no greater than
one year.
(4) Not later than 6 years after the date of the
enactment of this Act the State has developed infor-
mation systems that provide comparative costs, qual-
ity, and outcomes data with respect to health insur-
ance plans and hospitals and made the information
broadly available within the relevant market areas.
Nothing in this section shall preclude a State from provid-
ing additional information, such as information on prices
and benefits of different health benefit plans, available.
(c) GRANTS TO STATES FOR THE DEVELOPMENT OF
STATE PROGRAMS.—
(1) GRANT
AUTHORITY.—The Secretary may
make grants to each State to enable such State to
plan the development of its health care value infor-
mation program and, if necessary, to initiate the im-
plementation of such program. Each State seeking
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such a grant shall submit an application therefore,
containing such information as the Secretary finds
necessary to assure that the State is likely to de-
velop and implement a program in accordance with
the criteria and schedule in subsection (b).
(2) OFFSET AUTHORITY.—If, at any time with-
in the 3-year period following the receipt by a State
of a grant under this subsection, the Secretary is re-
quired by section 2122 to implement a health care
information program in the State, the Secretary may
recover the amount of the grant under this sub-
section by offset against any other amount payable
to the State under the Social Security Act. The
amount of the offset shall be made available (from
the appropriation account with respect to which the
offset was taken) to the Secretary to carry out such
section.
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated such sums
as are necessary to make grants under this sub-
section, to remain available until expended.
(d) COMMON HEALTH CARE SERVICES DEFINED.—
In this section, the term ‘‘common health care services’’
includes such procedures as the Secretary may specify and
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any additional health care services which a State may wish
to include in its comparative value information program.
(e) STATE DEFINED.—In this subtitle, the term
‘‘State’’ includes the District of Columbia, Puerto Rico,
the Virgin Islands, Guam, and American Samoa.
SEC. 2122. FEDERAL IMPLEMENTATION.
(a) IN GENERAL.—If the Secretary finds, at any
time, that a State has failed to develop or to continue to
implement a health care value information program in ac-
cordance with the criteria and schedule in section 2121(b),
the Secretary shall take the actions necessary, directly or
through grants or contract, to implement a comparable
program in the State.
(b) FEES.—Fees may be charged by the Secretary
for the information materials provided pursuant to a pro-
gram under this section. Any amounts so collected shall
be deposited in the appropriation account from which the
Secretary’s costs of providing such materials were met,
and shall remain available for such purposes until ex-
pended.
SEC. 2123. COMPARATIVE VALUE INFORMATION CONCERN-
ING FEDERAL PROGRAMS.
(a) DEVELOPMENT.—The head of each Federal agen-
cy with responsibility for the provision of health insurance
or of health care services to individuals shall promptly de-
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velop health care value information relating to each pro-
gram that such head administers and covering the same
types of data that a State program meeting the criteria
of section 2121(b) would provide.
(b) DISSEMINATION OF INFORMATION.—Such infor-
mation shall be made generally available to States and to
providers and consumers of health care services.
SEC. 2124. DEVELOPMENT OF MODEL SYSTEMS.
(a) IN GENERAL.—The Secretary shall, directly or
through grant or contract, develop model systems to facili-
tate—
(1) the gathering of data on health care cost,
quality, 
and 
outcome 
described 
in 
section
2121(b)(4), and
(2) analyzing such data in a manner that will
permit the valid comparison of such data among
providers and among health plans.
(b) EXPERIMENTATION.—The Secretary shall sup-
port experimentation with different approaches to achieve
the objectives of subsection (a) in the most cost effective
manner (relative to the accuracy and timeliness of the
data secured) and shall evaluate the various methods to
determine their relative success.
(c) STANDARDS.—When the Secretary considers it
appropriate, the Secretary may establish standards for the
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collection and reporting of data on health care cost, qual-
ity and outcomes in order to facilitate analysis and com-
parisons among States and nationally.
(d) REPORT.—By not later than 3 years after the
date of the enactment of this Act, the Secretary shall re-
port to the Congress and the States on the models devel-
oped, and experiments conducted, under this section.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as are nec-
essary for each fiscal year beginning with fiscal year 1994
to enable the Secretary to carry out this section, including
evaluation of the different approaches tested under sub-
section (b) and their relative cost effectiveness.
PART 4—ADDITIONAL STANDARDS AND
REQUIREMENTS; 
RESEARCH 
AND
DEMONSTRATIONS
SEC. 2131. STANDARDS RELATING TO USE OF MEDICARE
AND MEDICAID MAGNETIZED HEALTH BENE-
FIT CARDS; SECONDARY PAYOR DATA BANK.
(a) MAGNETIZED IDENTIFICATION CARDS UNDER
MEDICARE PROGRAM.—The Secretary shall adopt stand-
ards relating to the design and use of magnetized medi-
care identification cards in order to assist health care pro-
viders providing medicare covered services to individuals—
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(1) in determining whether individuals are eligi-
ble for benefits under the medicare program, and
(2) in billing the medicare program for such
services provided to eligible individuals.
Such cards shall be designed to be compatible with ma-
chines currently employed to transmit information on
credit cards. Such cards also shall be designed to be able
to be used with respect to the provision of benefits under
medicare supplemental policies.
(b) ADOPTION UNDER MEDICAID PLANS.—
(1) IN
GENERAL.—The Secretary shall take
such steps as may be necessary to encourage and as-
sist States to design and use magnetized medicaid
identification cards that meet such standards, for
use under their medicaid plans.
(2) LIMITATION ON MMIS FUNDS.—In applying
section 1903(a)(3) of the Social Security Act, the
Secretary may determine that Federal financial par-
ticipation is not available under that section to a
State which has provided for a magnetized card sys-
tem that is inconsistent with the standards adopted
under subsection (a).
(c) MEDICARE AND MEDICAID SECONDARY PAYOR
DATA BANK.—The Secretary shall establish a medicare
and medicaid information system which is designed to pro-
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vide information on those group health plans and other
health benefit plans that are primary payors to the medi-
care program and medicaid program under section
1862(b) or section 1905(a)(25) of the Social Security Act.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated, in equal proportions
from the Federal Hospital Insurance Trust Fund and
from the Federal Supplementary Medical Insurance Trust
Fund, a total of $25,000,000 to carry out subsections (a)
and (c), including the issuance of magnetized cards to
medicare beneficiaries.
SEC. 2132. PREEMPTION OF STATE QUILL PEN LAWS.
(a) IN GENERAL.—Effective January 1, 1994, no ef-
fect shall be given to any provision of State law that re-
quires medical or health insurance records (including bill-
ing information) to be maintained in written, rather than
electronic form.
(b) SECRETARIAL AUTHORITY.—The Secretary of
Health and Human Services may issue regulations to
carry out subsection (a). Such regulations may provide for
such exceptions to subsection (a) as the Secretary deter-
mines to be necessary to prevent fraud and abuse, with
respect to controlled substances, and in such other cases
as the Secretary deems appropriate.
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SEC. 2133. USE OF STANDARD IDENTIFICATION NUMBERS.
(a) IN GENERAL.—Effective January 1, 1995, each
health benefit plan shall—
(1) for each of its beneficiaries that has a social
security account number, use that number as the
personal identifier for claims processing and related
purposes, and
(2) for each provider that has a unique identi-
fier for purposes of title XVIII of the Social Security
Act and that furnishes health care items or services
to a beneficiary under the plan, use that identifier
as the identifier of that provider for claims process-
ing and related purposes.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with standards established
under subsection (a) in an amount not to exceed
$100 for each such failure. The provisions of section
1128A of the Social Security Act (other than the
first sentence of subsection (a) and other than sub-
section (b)) shall apply to a civil money penalty
under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under
section 1128A(a) of such Act.
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(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
SEC. 2134. COORDINATION OF BENEFIT STANDARDS.
(a) REVIEW OF COORDINATION OF BENEFIT PROB-
LEMS.—Between July 1, 1994, and January 1, 1995, the
Secretary shall determine whether problems relating to—
(1) the rules for determining the liability of
health benefit plans when benefits are payable under
two or more such plans, or
(2) the availability of information among such
health benefit plans when benefits are so payable,
cause significant administrative costs.
(b) CONTINGENT PROMULGATION OF STANDARDS.—
(1) IN GENERAL.—If the Secretary determines
that such problems do cause significant administra-
tive costs that could be significantly reduced through
the implementation of standards, the Secretary shall
promulgate standards concerning—
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(A) the liability of health benefit plans
when benefits are payable under two or more
such plans, and
(B) the transfer among health benefit
plans of appropriate information (which may in-
clude standards for the use of unique identifi-
ers, and for the listing of all individuals covered
under a health benefit plan) in determining li-
ability in cases when benefits are payable under
two or more such plans.
(2) EFFECTIVE DATE.—The standards promul-
gated under paragraph (1) shall become effective on
a date specified by the Secretary, which date shall
be not earlier than one year after the date of pro-
mulgation of the standards.
(c) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with standards promulgated
under subsection (b) in an amount not to exceed
$100 for each such failure. The provisions of section
1128A of the Social Security Act (other than the
first sentence of subsection (a) and other than sub-
section (b)) shall apply to a civil money penalty
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under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under
section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the standards established under subsection (b),
and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such standards with respect to such plans.
(d) REVISION OF STANDARDS.—If the Secretary es-
tablishes standards under subsection (b), the Secretary
may revise such standards from time to time and such
revised standards shall be applied under subsection (c) on
or after such date (not earlier than 6 months after the
date the revision is promulgated) as the Secretary shall
specify.
SEC. 2135. RESEARCH AND DEMONSTRATIONS.
(a) DEMONSTRATIONS AND RESEARCH ON MONITOR-
ING AND IMPROVING PATIENT CARE.—
(1) The Secretary shall provide grants to quali-
fied entities to demonstrate (and conduct research
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concerning) the application of comprehensive infor-
mation systems—
(A) in continuously monitoring patient
care, and
(B) in improving patient care.
(2) To make grants under this subsection, there
are authorized to be appropriated from the Federal
Hospital Insurance Trust Fund $10,000,000 for
each fiscal year (beginning with fiscal year 1994 and
ending with fiscal year 1998).
(b) COMMUNICATION LINKS.—
(1) The Secretary may make grants to at least
two, but not more than five, community organiza-
tions, or coalitions of health care providers, health
benefit plans, and purchasers, to establish and docu-
ment the efficacy of communication links between
the information systems of health benefit plans and
of health care providers.
(2) To make grants under this subsection, there
are authorized to be appropriated such sums as may
be necessary for fiscal year 1994, to remain avail-
able until expended.
(c) REGIONAL OR COMMUNITY BASED CLINICAL IN-
FORMATION SYSTEMS.—
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•HR 3080 SC2
(1) The Secretary may make grants to at least
two, but not more than five, public or private non-
profit entities for the development of regional or
community-based clinical information systems.
(2) To make grants under this subsection, there
are authorized to be appropriated such sums as may
be necessary for fiscal year 1994, to remain avail-
able until expended.
(d) AMBULATORY CARE DATA SETS.—
(1) The Secretary may make grants to public or
private non-profit entities to develop and test, for
electronic medical data generated by physicians and
other entities (other than hospitals) that provide
health care services—
(A) the definition of a comprehensive set of
data elements, and
(B) the specification of, and manner of
presentation of, the individual data elements of
the set under subparagraph (A).
(2) To make grants under this subsection, there
are authorized to be appropriated such sums as may
be necessary for fiscal year 1994, to remain avail-
able until expended.
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Subtitle C—Deduction for Cost of
Catastrophic Health Plan; Medi-
cal Savings Accounts
SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM
GROSS INCOME FOR COST OF CATASTROPHIC
HEALTH PLAN.
(a) IN GENERAL.—Subsection (a) of section 62 of the
Internal Revenue Code of 1986, as amended by title I,
is amended by inserting after paragraph (16) the following
new paragraph:
‘‘(17) MEDICAL EXPENSES ATTRIBUTABLE TO
CATASTROPHIC HEALTH PLAN COVERAGE.—
‘‘(A) IN GENERAL.—The deduction allowed
by section 213 to the extent attributable to cov-
erage under a catastrophic health plan (as de-
fined in section 220(c)(2)).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to coverage of an individual who
has 
coverage 
described 
in 
section
220(c)(1)(B)(i).’’.
(b) COORDINATION WITH DEDUCTION FOR OTHER
MEDICAL EXPENSES.—Subsection (a) of section 213 of
such Code is amended to read as follows:
‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be
allowed as a deduction the expenses paid during the tax-
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•HR 3080 SC2
able year, not compensated by insurance or otherwise, for
medical care of the taxpayer, his spouse, or a dependent
(as defined in section 152) in an amount equal to the sum
of—
‘‘(1) the portion of such expenses attributable
to coverage under a catastrophic health plan (as de-
fined in section 220(c)(2)), and
‘‘(2) the excess of such expenses (other than ex-
penses described in paragraph (1)) over 7.5 percent
of the adjusted gross income of the taxpayer.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 2202. MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 220 as section 221 and by insert-
ing after section 219 the following new section:
‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—
‘‘(1) IN GENERAL.—In the case of an eligible
individual, there shall be allowed as a deduction the
applicable percentage of the amounts paid in cash
during the taxable year by or on behalf of such indi-
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vidual to a medical savings account for the benefit
of such individual and (if any) such individual’s
spouse and dependents if such spouse and depend-
ents are eligible individuals.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the term ‘applicable percentage’
means—
‘‘(A) 25 percent for taxable years begin-
ning in 1994 or 1995,
‘‘(B) 50 percent for taxable years begin-
ning in 1996 or 1997, and
‘‘(C) 100 percent for taxable years begin-
ning after 1997.
‘‘(b) LIMITATIONS.—
‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as
provided in regulations prescribed by this Secretary,
no deduction shall be allowed under subsection (a)
for amounts paid to any medical savings account for
the benefit of an individual, such individual’s spouse,
or any dependent of such individual or spouse if
such individual, spouse, or dependent is a beneficiary
of any other medical savings account.
‘‘(2) DOLLAR LIMITATION.—The amount allow-
able as a deduction under subsection (a) for the tax-
able year shall not exceed the lesser of—
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•HR 3080 SC2
‘‘(A) the lowest deductible under any cata-
strophic health plan providing coverage to any
beneficiary of the medical savings account, or
‘‘(B)(i) $2,500, or
‘‘(ii) $5,000 if the catastrophic health plan
covering the taxpayer provides coverage for
more than 1 individual.
A beneficiary of such account who has attained age
65 before the close of the taxable year shall not be
taken into account in determining the limitation
under the preceding sentence.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means any individual who is covered
under a catastrophic health plan throughout the
calendar year in which or with which the tax-
able year ends.
‘‘(B) LIMITATIONS.—Such term does not
include—
‘‘(i) an individual who is 65 years of
age or older, unless the individual is cov-
ered under a catastrophic health plan that
is a primary plan (within the meaning of
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•HR 3080 SC2
section 1862(b)(2)(A) of the Social Secu-
rity Act); and
‘‘(ii) an individual who has coverage
under a group health plan or health insur-
ance plan (other than a plan described in
1107(4)(B) of the Affordable Health Care
Now Act of 1993) that has either a de-
ductible that is less than the minimum de-
ductible required under a catastrophic
health plan (as defined in paragraph (2))
or has an actuarial value that is greater
than the value for MedAccess catastrophic
coverage (as provided in section 1102(d) of
such Act).
‘‘(C) DEDUCTION NOT ALLOWED BEFORE
1999
TO
INDIVIDUALS
ELIGIBLE
FOR
EM-
PLOYER-SUBSIDIZED
COVERAGE.—In the case
of any taxable year beginning before January 1,
1999, such term does not include an individ-
ual—
‘‘(i) who is eligible to participate in
any subsidized health plan maintained by
an employer of such individual or the
spouse of such individual, or
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•HR 3080 SC2
‘‘(ii) who is (or whose spouse is) a
member of a subsidized class of employees
of an employer.
The rules of subparagraphs (B) and (C) of sec-
tion 213(f)(3) shall apply for purposes of this
preceding sentence.
‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur-
poses of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘cata-
strophic health plan’ means a health plan cover-
ing specified expenses incurred by an individual
for medical care for such individual and the
spouse and dependents (as defined in section
152) of such individual only to the extent such
expenses covered by the plan for any calendar
year exceed $1,800 ($3,600 if the catastrophic
health plan covering the taxpayer provides cov-
erage for more than 1 individual) or such high-
er amounts as may be specified by the plan.
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—In
the case of any calendar year after 1994, each
dollar amount in subparagraph (A) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
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•HR 3080 SC2
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year.
If any increase under the preceding sentence is
not a multiple of $50, such increase shall be
rounded to the nearest multiple of $50.
‘‘(d) MEDICAL SAVINGS ACCOUNTS.—For purposes
of this section—
‘‘(1) MEDICAL SAVINGS ACCOUNT.—
‘‘(A) IN
GENERAL.—The term ‘medical
savings account’ means a trust created or orga-
nized in the United States exclusively for the
purpose of paying the medical expenses of the
beneficiaries of such trust, but only if the writ-
ten governing instrument creating the trust
meets the following requirements:
‘‘(i) Except in the case of a rollover
contribution described in subsection (e)(4),
no contribution will be accepted unless it is
in cash, and contributions will not be ac-
cepted in excess of the amount allowed as
a deduction under this section for the tax-
able year (or would be allowed as such a
deduction but for subsection (c)(1)(C)).
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‘‘(ii) The trustee is a bank (as defined
in section 408(n)) or another person who
demonstrates to the satisfaction of the Sec-
retary that the manner in which such per-
son will administer the trust will be con-
sistent with the requirements of this sec-
tion.
‘‘(iii) No part of the trust assets will
be invested in life insurance contracts.
‘‘(iv) The assets of the trust will not
be commingled with other property except
in a common trust fund or common invest-
ment fund.
‘‘(v) The interest of an individual in
the balance in his account is nonforfeit-
able.
‘‘(vi) Under regulations prescribed by
the Secretary, rules similar to the rules of
section 401(a)(9) shall apply to the dis-
tribution of the entire interest of bene-
ficiaries of such trust.
‘‘(B) TREATMENT
OF
COMPARABLE
AC-
COUNTS
HELD
BY
INSURANCE
COMPANIES.—
For purposes of this section, an account held by
an insurance company in the United States
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shall be treated as a medical savings account
(and such company shall be treated as a bank)
if—
‘‘(i) such account is part of a health
insurance plan that includes a catastrophic
health plan (as defined in subsection
(c)(2)),
‘‘(ii) such account is exclusively for
the purpose of paying the medical expenses
of the beneficiaries of such account who
are covered under such catastrophic health
plan, and
‘‘(iii) the written instrument govern-
ing the account meets the requirements of
clauses (i), (v), and (vi) of subparagraph
(A).
‘‘(2) MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘medical ex-
penses’ means, with respect to an individual,
amounts paid or incurred by such individual
for—
‘‘(i) medical care (as defined in sec-
tion 213), or
‘‘(ii) long-term care (as defined in
paragraph (3)),
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•HR 3080 SC2
for such individual, the spouse of such individ-
ual, and any dependent (as defined in section
152) of such individual, but only to the extent
such amounts are not compensated for by in-
surance or otherwise.
‘‘(B) HEALTH PLAN COVERAGE MAY NOT
BE PURCHASED FROM ACCOUNT.—
‘‘(i) IN
GENERAL.—Such term shall
not include any amount paid for coverage
under a health plan.
‘‘(ii) EXCEPTION.—Clause (i) shall
not apply—
‘‘(I) in the case of coverage of an
individual under 65 years of age
under a catastrophic health plan or
under a long-term care insurance
plan, or
‘‘(II) in the case of coverage of
an individual 65 years of age or older
under a medicare supplemental policy
or under a long-term care insurance
plan or for payment of premiums
under part A or part B of title XVIII
of the Social Security Act.
‘‘(3) LONG-TERM CARE.—
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‘‘(A) IN GENERAL.—The term ‘long-term
care’ means diagnostic, preventive, therapeutic,
rehabilitative, maintenance, or personal care
services which are required by, and provided to,
a chronically ill individual, which have as their
primary purpose the direct provision of needed
assistance with 1 or more activities of daily liv-
ing (or the alleviation of the conditions neces-
sitating such assistance) that the individual is
certified under subparagraph (B) as being un-
able to perform, and which are provided in a
setting other than an acute care unit of a hos-
pital pursuant to a continuing plan of care pre-
scribed by a physician or registered professional
nurse. Such term does not include food or lodg-
ing provided in an institutional or other setting,
or basic living services associated with the
maintenance of a household or participation in
community life, such as case management,
transportation or legal services, or the perform-
ance of home maintenance or household chores.
‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The
term ‘chronically ill individual’ means an indi-
vidual who is certified by a physician or reg-
istered professional nurse as being unable to
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perform at least 3 activities of daily living with-
out substantial assistance from another individ-
ual. For purposes of this paragraph, the term
‘activities of daily living’ means bathing, dress-
ing, eating, toileting, transferring, and walking.
‘‘(4) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A contribution shall be deemed to be made
on the last day of the preceding taxable year if the
contribution is made on account of such taxable year
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any amount paid or dis-
tributed out of a medical savings account shall be in-
cluded in the gross income of the individual for
whose benefit such account was established unless
such amount is used exclusively to pay the medical
expenses of such individual.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution of any contribution paid
during a taxable year to a medical savings account
to the extent that such contribution exceeds the
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amount allowable as a deduction under subsection
(a) if—
‘‘(A) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for filing
such individual’s return for such taxable year,
and
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which it is received.
‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED
FOR MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is a payment or distribution from a medical
savings account which is not used to pay the
medical expenses of the individual for whose
benefit the account was established shall be in-
creased by 10 percent of the amount of such
payment or distribution which is includible in
gross income under paragraph (1).
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‘‘(B) ACCOUNT
BALANCE
LIMITATION.—
If—
‘‘(i) the tax imposed by this chapter is
required to be increased under subpara-
graph (A) by reason of a distribution, and
‘‘(ii) after such distribution, the ag-
gregate balance of all medical savings ac-
counts established for the benefit of the in-
dividual, is less than the amount of the de-
ductible under the catastrophic health plan
covering such individual,
subparagraph (A) shall be applied by substitut-
ing ‘50 percent’ for ‘10 percent’.
‘‘(4) ROLLOVERS.—Paragraph (1) shall not
apply to any amount paid or distributed out of a
medical savings account to the individual for whose
benefit the account is maintained if the entire
amount received (including money and any other
property) is paid into another medical savings ac-
count for the benefit of such individual not later
than the 60th day after the day on which he received
the payment or distribution.
‘‘(5) PENALTY
FOR
MANDATORY
DISTRIBU-
TIONS NOT MADE FROM ACCOUNT.—
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‘‘(A) IN GENERAL.—If during any taxable
year—
‘‘(i) there is a payment of a manda-
tory distribution expense incurred by a
beneficiary of a medical savings account,
and
‘‘(ii) the person making such payment
is not reimbursed for such payment with a
distribution from such account before the
60th day after such payment,
the taxpayer’s tax imposed by this chapter for
such taxable year shall be increased by 100 per-
cent of the excess of the amount of such pay-
ment over the amount of reimbursement made
before such 60th day.
‘‘(B) 
MANDATORY
DISTRIBUTION
EX-
PENSE.—For purposes of subparagraph (A),
the term ‘mandatory distribution expense’
means—
‘‘(i) any expense incurred which may
be counted towards a deductible, or for a
copayment or coinsurance, under the cata-
strophic health plan covering such bene-
ficiary, and
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‘‘(ii) in the case of a beneficiary who
has attained age 65, any expense for cov-
erage 
described 
in 
subsection
(d)(2)(B)(ii)(II) and any expense incurred
which may be counted toward a deductible,
or for a copyment or coinsurance, under
title XVIII of the Social Security Act.
‘‘(f) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—Any medical sav-
ings account is exempt from taxation under this sub-
title unless such account has ceased to be a medical
savings account by reason of paragraph (2) or (3).
Notwithstanding the preceding sentence, any such
account shall be subject to the taxes imposed by sec-
tion 511 (relating to imposition of tax on unrelated
business income of charitable, etc. organizations).
‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN-
GAGES IN PROHIBITED TRANSACTION.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the individual for whose benefit the
medical savings account was established, such
individual engages in any transaction prohibited
by section 4975 with respect to the account, the
account ceases to be a medical savings account
as of the first day of that taxable year.
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‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a medical savings account by
reason of subparagraph (A) on the first day of
any taxable year, paragraph (1) of subsection
(e) shall be applied as if there were a distribu-
tion on such first day in an amount equal to
the fair market value (on such first day) of all
assets in the account (on such first day) and no
portion of such distribution were used to pay
medical expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a medical savings account was estab-
lished uses the account or any portion thereof as se-
curity for a loan, the portion so used is treated as
distributed to that individual and not used to pay
medical expenses.
‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if—
‘‘(1) the assets of such account are held by a
bank (as defined in section 408(n)) or another per-
son who demonstrates to the satisfaction of the Sec-
retary that the manner in which he will administer
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the account will be consistent with the requirements
of this section, and
‘‘(2) the custodial account would, except for the
fact that it is not a trust, constitute a medical sav-
ings account described in subsection (d).
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(h) REPORTS.—The trustee of a medical savings ac-
count shall make such reports regarding such account to
the Secretary and to the individual for whose benefit the
account is maintained with respect to contributions, dis-
tributions, and such other matters as the Secretary may
require under regulations. The reports required by this
subsection shall be filed at such time and in such manner
and furnished to such individuals at such time and in such
manner as may be required by those regulations.’’
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by inserting after
paragraph (17) the following new paragraph:
‘‘(18) MEDICAL SAVINGS ACCOUNTS.—The de-
duction allowed by section 220.’’
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(c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC-
COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC-
TION.—Section 213 of such Code is amended by adding
at the end thereof the following new subsection:
‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC-
COUNTS.—The amount otherwise taken into account
under subsection (a) as expenses paid for medical care
shall be reduced by the amount (if any) of the distribu-
tions from any medical savings account of the taxpayer
during the taxable year which is not includible in gross
income by reason of being used for medical care.’’
(d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO
MEDICAL
SAVINGS
ACCOUNTS
FROM
EMPLOYMENT
TAXES.—
(1) SOCIAL SECURITY TAXES.—
(A) Subsection (a) of section 3121 of such
Code is amended by striking ‘‘or’’ at the end of
paragraph (20), by striking the period at the
end of paragraph (21) and inserting ‘‘; or’’, and
by inserting after paragraph (21) the following
new paragraph:
‘‘(22) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
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sonable to believe that a corresponding deduc-
tion is allowable under section 220.’’
(B) Subsection (a) of section 209 of the Social
Security Act is amended by striking ‘‘or’’ at the end
of paragraph (17), by striking the period at the end
of paragraph (18) and inserting ‘‘; or’’, and by in-
serting after paragraph (18) the following new para-
graph:
‘‘(19) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220 of the Internal Revenue Code of
1986.’’
(2) RAILROAD RETIREMENT TAX.—Subsection
(e) of section 3231 of such Code is amended by add-
ing at the end thereof the following new paragraph:
‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL
SAVINGS ACCOUNTS.—The term ‘compensation’ shall
not include any payment made to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 220.’’
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(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 of such Code is amended by striking
‘‘or’’ at the end of paragraph (15), by striking the
period at the end of paragraph (16) and inserting ‘‘;
or’’, and by inserting after paragraph (16) the fol-
lowing new paragraph:
‘‘(17) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
sonable to believe that a corresponding deduc-
tion is allowable under section 220.’’
(4) WITHHOLDING TAX.—Subsection (a) of sec-
tion 3401 of such Code is amended by striking ‘‘or’’
at the end of paragraph (19), by striking the period
at the end of paragraph (20) and inserting ‘‘; or’’,
and by inserting after paragraph (20) the following
new paragraph:
‘‘(21) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
sonable to believe that a corresponding deduc-
tion is allowable under section 220.’’
(e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of such Code (relating to tax on excess contributions to
individual retirement accounts, certain section 403(b) con-
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tracts, and certain individual retirement annuities) is
amended—
(1) by inserting ‘‘MEDICAL
SAVINGS
AC-
COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of
such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a medical savings account (within the
meaning of section 220(d)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS
ACCOUNTS.—For purposes of this section, in the case of
a medical savings account (within the meaning of section
220(d)), the term ‘excess contributions’ means the amount
by which the amount contributed for the taxable year to
the account exceeds the amount excludable from gross in-
come under section 220 for such taxable year. For pur-
poses of this subsection, any contribution which is distrib-
uted out of the medical savings account in a distribution
to which section 220(e)(2) applies shall be treated as an
amount not contributed.’’
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(f) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC-
COUNTS.—An individual for whose benefit a medical
savings account (within the meaning of section
220(d)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a medi-
cal savings account by reason of the application of
section 220(e)(2)(A) to such account.’’, and
(2) by inserting ‘‘or a medical savings account
described in section 220(d)’’ in subsection (e)(1)
after ‘‘described in section 408(a)’’.
(g) FAILURE TO PROVIDE REPORTS ON MEDICAL
SAVINGS ACCOUNTS.—Section 6693 of such Code (relat-
ing to failure to provide reports on individual retirement
account or annuities) is amended—
(1) by inserting ‘‘OR ON MEDICAL SAVINGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
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(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 220(h) to
file a report regarding a medical savings account at
the time and in the manner required by such section
shall pay a penalty of $50 for each failure unless it
is shown that such failure is due to reasonable
cause.’’
(h) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following:
‘‘Sec. 220. Medical savings accounts.
‘‘Sec. 221. Cross reference.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, certain 403(b)
contracts, and certain individual retirement annu-
ities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on medical savings accounts’’ after ‘‘annuities’’ in
the item relating to section 6693.
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
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Subtitle D—Anti-Fraud
PART 1—CRIMINAL PROSECUTION OF
HEALTH CARE FRAUD
SEC. 2301. PENALTIES FOR HEALTH CARE FRAUD.
(a) IN GENERAL.—Chapter 63 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1347. Health care fraud
‘‘(a) OFFENSE.—Whoever, being a health care pro-
vider, knowingly engages in any scheme or artifice to de-
fraud any person in connection with the provision of
health care shall be fined under this title or imprisoned
not more than 5 years, or both.
‘‘(b) DEFINITION.—In this section, the term ‘health
care provider’ means—
‘‘(1) a physician, nurse, dentist, therapist, phar-
macist, or other professional provider of health care;
and
‘‘(2) a hospital, health maintenance organiza-
tion, pharmacy, laboratory, clinic, or other health
care facility or a provider of medical services, medi-
cal devices, medical equipment, or other medical sup-
plies.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 63 of title 18, United States
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Code, is amended by adding at the end the following new
item:
‘‘1347. Health care fraud.’’.
SEC. 2302. BROADENING APPLICATION OF MAIL FRAUD
STATUTE.
Section 1341 of title 18, United States Code, is
amended—
(1) by inserting ‘‘or deposits or causes to be de-
posited any matter or thing whatever to be sent or
delivered by any private or commercial interstate
carrier,’’ after ‘‘Postal Service,’’; and
(2) by inserting ‘‘or such carrier’’ after ‘‘causes
to be delivered by mail’’.
SEC. 2303. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated for the pur-
poses of carrying out the purposes of this part and the
amendments made by this part—
(1) such sums as may be necessary for the Fed-
eral Bureau of Investigation to hire, equip, and train
no fewer than 225 special agents and support staff
to investigate health-care fraud cases;
(2) such sums as may be necessary to hire,
equip, and train no fewer than 50 assistant United
States Attorneys and support staff to prosecute
health-care fraud cases; and
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(3) such sums as may be necessary to hire,
equip, and train no fewer than 25 investigators in
the Office of Inspector General, Department of
Health and Human Services, to be devoted exclu-
sively to health-care fraud cases.
SEC. 2304. REWARDS FOR INFORMATION LEADING TO
PROSECUTION AND CONVICTION.
Section 3059 of title 18, United States Code, is
amended by adding at the end the following new sub-
section:
‘‘(c)(1) In special circumstances and in the Attorney
General’s sole discretion, the Attorney General may make
a payment of up to $10,000 to a person who furnishes
information unknown to the Government relating to a pos-
sible prosecution under section 1101.
‘‘(2) A person is not eligible for a payment under
paragraph (1) if—
‘‘(A) the person is a current or former officer
or employee of a Federal or State government agen-
cy or instrumentality who furnishes information dis-
covered or gathered in the course of government em-
ployment;
‘‘(B) the person knowingly participated in the
offense;
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‘‘(C) the information furnished by the person
consists of allegations or transactions that have been
disclosed to the public—
‘‘(i) in a criminal, civil, or administrative
proceeding;
‘‘(ii) in a congressional, administrative or
General Accounting Office report, hearing,
audit, or investigation; or
‘‘(iii) by the news media, unless the person
is the original source of the information; or
‘‘(D) when, in the judgment of the Attorney
General, it appears that a person whose illegal ac-
tivities are being prosecuted or investigated could
benefit from the award.
‘‘(3) For the purposes of paragraph (2)(C)(iii), the
term ‘original source’ means a person who has direct and
independent knowledge of the information that is fur-
nished and has voluntarily provided the information to the
Government prior to disclosure by the news media.
‘‘(4) Neither the failure of the Attorney General to
authorize a payment under paragraph (1) nor the amount
authorized shall be subject to judicial review.’’.
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PART 
2—COORDINATION 
OF 
HEALTH
CARE ANTI-FRAUD AND ABUSE ACTIVI-
TIES
SEC. 2311. ESTABLISHMENT OF ALL-PAYER ANTI-FRAUD
AND ABUSE PROGRAM.
(a) IN GENERAL.—Not later than January 1, 1995,
the Secretary shall establish in the Office of the Inspector
General of the Department of Health and Human Services
a program—
(1) to coordinate Federal, State, and local law
enforcement programs to control fraud and abuse
with respect to the delivery of and payment for
health care in the United States,
(2) to conduct investigations, audits, evalua-
tions, and inspections relating to the delivery of and
payment for health care in the United States, and
(3) to facilitate the enforcement of the provi-
sions of sections 1128, 1128A, and 1128B of the
Social Security Act and other statutes applicable to
health care fraud and abuse.
(b) COORDINATION
WITH
LAW
ENFORCEMENT
AGENCIES.—In carrying out the program established
under subsection (a), the Secretary shall consult with, and
arrange for the sharing of data and resources with the
Attorney General, State law enforcement agencies, State
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medicaid fraud and abuse units, and State agencies re-
sponsible for the licensing and certification of health care
providers.
(c) COORDINATION WITH THIRD PARTY INSUR-
ERS.—In carrying out the program established under sub-
section (a), the Secretary shall consult with, and arrange
for the sharing of data with representatives of private
sponsors of health benefit plans and other providers of
health insurance.
(d) REGULATIONS.—
(1) IN GENERAL.—The Secretary shall by regu-
lation establish standards to carry out the program
under subsection (a).
(2) INFORMATION STANDARDS.—
(A) IN
GENERAL.—Such standards shall
include standards relating to the furnishing of
information by health insurers (including self-
insured health benefit plans), providers, and
others to enable the Secretary to carry out the
program (including coordination with law en-
forcement agencies under subsection (b) and
third party insurers under subsection (c)).
(B) CONFIDENTIALITY.—Such standards
shall include procedures to assure that such in-
formation is provided and utilized in a manner
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that protects the confidentiality of the informa-
tion and the privacy of individuals receiving
health care services.
(C) QUALIFIED IMMUNITY FOR PROVIDING
INFORMATION.—The 
provisions 
of 
section
1157(a) of the Social Security Act (relating to
limitation on liability) shall apply to a person
providing information to the Secretary under
the program under this section, with respect to
the Secretary’s performance of duties under the
program, in the same manner as such section
applies to information provided to organizations
with a contract under part B of title XI of such
Act, with respect to the performance of such a
contract.
(e) ENSURING ACCESS TO DOCUMENTATION.—
(1) IN
GENERAL.—The Inspector General of
the Department of Health and Human Services is
authorized to exercise the authority described in
paragraphs (4) and (5) of section 6 of the Inspector
General Act of 1978 (relating to subpoenas and ad-
ministration of oaths) with respect to the activities
under the all-payor fraud and abuse control program
established under this section to the same extent as
such Inspector General may exercise such authorities
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to perform the functions assigned to such official by
such Act.
(2) FAILURE TO COMPLY AS GROUNDS FOR EX-
CLUSION
FROM
MEDICARE
AND
MEDICAID
PRO-
GRAMS.—Section 1128(b) of the Social Security Act
(42 U.S.C. 1320a–7(b)) is amended by adding at
the end the following new paragraph:
‘‘(15) FAILURE
TO
SUPPLY
REQUESTED
INFORMATION TO THE INSPECTOR GENERAL.—
Any individual or entity that fails fully and ac-
curately to provide, upon request of the Inspec-
tor General of the Department of Health and
Human Services, records, documents, and other
information necessary for the purposes of carry-
ing out activities under the all-payor fraud and
abuse control program established under section
2311 of the Affordable Health Care Now Act of
1993.’’.
SEC. 2312. AUTHORIZATION OF ADDITIONAL APPROPRIA-
TIONS FOR INVESTIGATORS AND OTHER PER-
SONNEL.
(a) IN GENERAL.—In addition to any other amounts
authorized to be appropriated to the Secretary of Health
and Human Services for health care anti-fraud and abuse
activities for a fiscal year, there are authorized to be ap-
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propriated additional amounts described in subsection (b)
to enable the Secretary to conduct investigations of allega-
tions of health care fraud and otherwise carry out the pro-
gram established under section 2311 in a fiscal year.
(b) AMOUNTS DESCRIBED.—The amounts referred to
in subsection (a) are as follows:
(1) For fiscal year 1995, $100,000,000.
(2) For each of the fiscal years 1996 through
1998, such sums as may be necessary to assist the
Secretary in carrying out the program established
under section 2311 for such a fiscal year.
SEC. 2313. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE
TRUST FUND.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—There is hereby created on
the books of the Treasury of the United States a
trust fund to be known as the ‘‘Anti-Fraud and
Abuse Trust Fund’’ (in this section referred to as
the ‘‘Trust Fund’’). The Trust Fund shall consist of
such gifts and bequests as may be made as provided
in paragraph (2) and such amounts as may be de-
posited in, or appropriated to, such Trust Fund as
provided in this subtitle and section 1128A(f)(3) of
the Social Security Act.
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(2) AUTHORIZATION TO ACCEPT GIFTS.—The
Managing Trustee of the Trust Fund is authorized
to accept on behalf of the United States money gifts
and bequests made unconditionally to the Trust
Fund, for the benefit of the Trust Fund, or any ac-
tivity financed through the Trust Fund.
(b) MANAGEMENT.—
(1) IN GENERAL.—The Trust Fund shall be
managed by the Secretary through a Managing
Trustee designated by the Secretary.
(2) INVESTMENT OF FUNDS.—It shall be the
duty of the Managing Trustee to invest such portion
of the Trust Fund as is not, in the trustee’s judg-
ment, required to meet current withdrawals. Such
investments may be made only in interest-bearing
obligations of the United States or in obligations
guaranteed as to both principal and interest by the
United States. For such purpose such obligations
may be acquired on original issue at the issue price,
or by purchase of outstanding obligations at market
price. The purposes for which obligations of the
United States may be issued under chapter 31 of
title 31, United States Code, are hereby extended to
authorize the issuance at par of public-debt obliga-
tions for purchase by the Trust Fund. Such obliga-
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tions issued for purchase by the Trust Fund shall
have maturities fixed with due regard for the needs
of the Trust Fund and shall bear interest at a rate
equal to the average market yield (computed by the
Managing Trustee on the basis of market quotations
as of the end of the calendar month next preceding
the date of such issue) on all marketable interest-
bearing obligations of the United States then form-
ing a part of the public debt which are not due or
callable until after the expiration of 4 years from the
end of such calendar month, except that where such
average is not a multiple of 1⁄8 of 1 percent, the rate
of interest on such obligations shall be the multiple
of 1⁄8 of 1 percent nearest such market yield. The
Managing Trustee may purchase other interest-bear-
ing obligations of the United States or obligations
guaranteed as to both principal and interest by the
United States, on original issue or at the market
price, only where the Trustee determines that the
purchase of such other obligations is in the public
interest.
(3) Any obligations acquired by the Trust Fund
(except public-debt obligations issued exclusively to
the Trust Fund) may be sold by the Managing
Trustee at the market price, and such public-debt
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obligations may be redeemed at par plus accrued in-
terest.
(4) The interest on, and the proceeds from the
sale or redemption of, any obligations held in the
Trust Fund shall be credited to and form a part of
the Trust Fund.
(5) The receipts and disbursements of the Sec-
retary in the discharge of the functions of the Sec-
retary shall not be included in the totals of the
budget of the United States Government. For pur-
poses of part C of the Balanced Budget and Emer-
gency Deficit Control Act of 1985, the Secretary and
the Trust Fund shall be treated in the same manner
as the Federal Retirement Thrift Investment Board
and the Thrift Savings Fund, respectively. The
United States is not liable for any obligation or li-
ability incurred by the Trust Fund.
(c) USE OF FUNDS.—Amounts in the Trust Fund
shall be used to assist the Inspector General of the De-
partment of Health and Human Services in carrying out
the all-payor fraud and abuse control program established
under section 2311(a) in the fiscal year involved.
(d) DEPOSIT
OF FEDERAL HEALTH ANTI-FRAUD
AND ABUSE PENALTIES INTO TRUST FUND.—Section
1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–
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individual must be permitted to enroll in any medi-
care supplemental policy offered by such issuer or
affiliate that provides benefits comparable to or less
than the benefits provided in the policy being can-
celed or nonrenewed. An individual whose coverage
is canceled or nonrenewed under this subparagraph
shall, as part of the notice of termination or
nonrenewal, be notified of the right to enroll in other
medicare supplemental policies offered by the issuer
or its affiliates.
‘‘(iii) For purposes of this subparagraph, the
term ‘affiliate’ shall have the meaning given such
term by the 1991 NAIC Model Regulation.’’.
(d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of
the Social Security Act (42 U.S.C. 1395ss(t)(2)) is
amended—
(1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;
(2) by redesignating subparagraphs (A), (B),
(C), and (D) as clauses (i), (ii), (iii), and (iv), re-
spectively;
(3) in clause (iv), as so redesignated—
(A) by striking ‘‘paragraph (1)(E)(i)’’ and
inserting ‘‘paragraph (1)(B)(v)(I), and
(B) by striking ‘‘paragraph (1)(E)(ii)’’ and
inserting ‘‘paragraph (1)(B)(v)(II)’’;