Sec. 103. Certain exchanges of life insurance contracts for long-term care in-
surance contracts not taxable.
Sec. 104. Exclusion from gross income for amounts withdrawn from certain re-
tirement plans for long-term care insurance.
Sec. 105. Credit for taxpayers with certain persons requiring custodial care in
their households.
TITLE II—SOCIAL SECURITY BENEFITS
Sec. 201. Increases in monthly exempt amount for purposes of the social secu-
rity earnings limit.
Sec. 202. Revocation by members of the clergy of exemption from social secu-
rity coverage.
TITLE III—INDEPENDENT COMMISSION ON MEDICARE
Sec. 301. Establishment of Commission.
Sec. 302. Duties of the Commission.
Sec. 303. Expedited congressional consideration of recommendations.
Sec. 304. No termination of Commission.
Sec. 305. Establishment of annual limits on outlays.
Sec. 306. Enforcement of limits through sequestration.
TITLE IV—HEALTH CARE FRAUD PREVENTION
Subtitle A—All-Payer Fraud and Abuse Control Program
Sec. 401. All-payer fraud and abuse control program.
Sec. 402. Application of certain Federal health anti-fraud and abuse sanctions
to fraud and abuse against any health plan.
Sec. 403. Health care fraud and abuse guidance.
Sec. 404. Reporting of fraudulent actions under medicare.
Subtitle B—Revisions to Current Sanctions for Fraud and Abuse
Sec. 411. Mandatory exclusion from participation in medicare and State health
care programs.
Sec. 412. Establishment of minimum period of exclusion for certain individuals
and entities subject to permissive exclusion from medicare and
State health care programs.
Sec. 413. Permissive exclusion of individuals with ownership or control interest
in sanctioned entities.
Sec. 414. Sanctions against practitioners and persons for failure to comply with
statutory obligations.
Sec. 415. Intermediate sanctions for medicare health maintenance organiza-
tions.
Sec. 416. Effective date.
Subtitle C—Administrative and Miscellaneous Provisions
Sec. 421. Establishment of the health care fraud and abuse data collection pro-
gram.
Subtitle D—Civil Monetary Penalties
Sec. 431. Civil monetary penalties.
Subtitle E—Amendments to Criminal Law
Sec. 441. Health care fraud.
Sec. 442. Forfeitures for Federal health care offenses.
Sec. 443. Injunctive relief relating to Federal health care offenses.
Sec. 444. Grand jury disclosure.
Sec. 445. False statements.
Sec. 446. Voluntary disclosure program.
Sec. 447. Obstruction of criminal investigations of Federal health care offenses.
Sec. 448. Theft or embezzlement.
Sec. 449. Laundering of monetary instruments.
Subtitle F—Payments for State Health Care Fraud Control Units
Sec. 451. Establishment of State fraud units.
Sec. 452. Requirements for State fraud units.
Sec. 453. Scope and purpose.
Sec. 454. Payments to States.
TITLE I—LONG-TERM CARE
SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) GENERAL RULE.—Chapter 79 of the Internal
Revenue Code of 1986 (relating to definitions) is amended
by inserting after section 7702A the following new section:
‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR-
ANCE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) a long-term care insurance contract shall
be treated as an accident and health insurance con-
tract,
‘‘(2) amounts (other than policyholder divi-
dends, as defined in section 808, or premium re-
funds) received under a long-term care insurance
contract shall be treated as amounts received for
personal injuries and sickness and shall be treated
as reimbursement for expenses actually incurred for
medical care (as defined in section 213(d)),
‘‘(3) any plan of an employer providing cov-
erage under a long-term care insurance contract
shall be treated as an accident and health plan with
respect to such coverage,
‘‘(4) except as provided in subsection (d)(3),
amounts paid for a long-term care insurance con-
tract providing the benefits described in subsection
(b)(2)(A) shall be treated as payments made for in-
surance for purposes of section 213(d)(1)(D), and
‘‘(5) a long-term care insurance contract shall
be treated as a guaranteed renewable contract sub-
ject to the rules of section 816(e).
‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
For purposes of this title—
‘‘(1) IN GENERAL.—The term ‘long-term care
insurance contract’ means any insurance contract
if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
fied long-term care services,
‘‘(B) such contract does not pay or reim-
burse expenses incurred for services or items to
the extent that such expenses are reimbursable
under title XVIII of the Social Security Act or
would be so reimbursable but for the applica-
tion of a deductible or coinsurance amount,
‘‘(C) such contract is guaranteed renew-
able,
‘‘(D) such contract does not provide for a
cash surrender value or other money that can
be—
‘‘(i) paid, assigned, or pledged as col-
lateral for a loan, or
‘‘(ii) borrowed,
other than as provided in subparagraph (E) or
paragraph (2)(C), and
‘‘(E) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be de-
scribed in subparagraph (A) or (B) of para-
graph (1) by reason of payments being made on
a per diem or other periodic basis without re-
gard to the expenses incurred during the period
to which the payments relate.
‘‘(B) SPECIAL RULES RELATING TO MEDI-
CARE.—
‘‘(i) Paragraph (1)(B) shall not apply
to expenses which are reimbursable under
title XVIII of the Social Security Act only
as a secondary payor.
‘‘(ii) No provision of law shall be con-
strued or applied so as to prohibit the of-
fering of a long-term care insurance con-
tract on the basis that the contract coordi-
nates its benefits with those provided
under such title.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(E) shall not apply to any refund on the
death of the insured, or on a complete surren-
der or cancellation of the contract, which can-
not exceed the aggregate premiums paid under
the contract. Any refund on a complete surren-
der or cancellation of the contract shall be in-
cludible in gross income to the extent that any
deduction or exclusion was allowable with re-
spect to the premiums.
‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, curing, treating, mitigating, and
rehabilitative services, and maintenance or personal
care services, which—
‘‘(A) are required by a chronically ill indi-
vidual, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i) being unable to perform (without
substantial assistance from another indi-
vidual) at least 2 activities of daily living
for a period of at least 90 days due to a
loss of functional capacity or to cognitive
impairment, or
‘‘(ii) having a level of disability simi-
lar (as determined by the Secretary in con-
sultation with the Secretary of Health and
Human Services) to the level of disability
described in clause (i).
Such term shall not include any individual oth-
erwise meeting the requirements of the preced-
ing sentence unless within the preceding 12-
month period a licensed health care practitioner
has certified that such individual meets such re-
quirements.
‘‘(B) ACTIVITIES OF DAILY LIVING.—For
purposes of subparagraph (A), each of the fol-
lowing is an activity of daily living:
‘‘(i) Eating.
‘‘(ii) Toileting.
‘‘(iii) Transferring.
‘‘(iv) Bathing.
‘‘(v) Dressing.
‘‘(vi) Continence.
Nothing in this section shall be construed to re-
quire a contract to take into account all of the
preceding activities of daily living.
‘‘(3) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is the provision of needed assistance with any of the
disabilities as a result of which the individual is a
chronically ill individual (including the protection
from threats to health and safety due to severe cog-
nitive impairment).
‘‘(4) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r)(1) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
or not qualified) provided by a rider on a life insurance
contract—
‘‘(1) IN GENERAL.—This section shall apply as
if the portion of the contract providing such cov-
erage is a separate contract.
‘‘(2) 
APPLICATION
OF
7702.—Section
7702(c)(2) (relating to the guideline premium limi-
tation) shall be applied by increasing the guideline
premium limitation with respect to a life insurance
contract, as of any date—
‘‘(A) by the sum of any charges (but not
premium payments) against the life insurance
contract’s cash surrender value (within the
meaning of section 7702(f)(2)(A)) for such cov-
erage made to that date under the contract, less
‘‘(B) any such charges the imposition of
which reduces the premiums paid for the con-
tract 
(within 
the 
meaning 
of 
section
7702(f)(1)).
‘‘(3) APPLICATION OF SECTION 213.—No deduc-
tion shall be allowed under section 213(a) for
charges against the life insurance contract’s cash
surrender value described in paragraph (2), unless
such charges are includible in income as a result of
the application of section 72(e)(10) and the rider is
a long-term care insurance contract under sub-
section (b).
‘‘(4) PORTION DEFINED.—For purposes of this
subsection, the term ‘portion’ means only the terms
and benefits under a life insurance contract that are
in addition to the terms and benefits under the con-
tract without regard to the coverage under a long-
term care insurance contract.’’
(b) RESERVE
METHOD.—Clause (iii) of section
807(d)(3)(A) of such Code is amended by inserting
‘‘(other than a long-term care insurance contract, as de-
fined in section 7702B(b))’’ after ‘‘insurance contract’’.
(c) LONG-TERM CARE INSURANCE NOT PERMITTED
UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR-
RANGEMENTS.—
(1) CAFETERIA PLANS.—Section 125(f) of such
Code is amended by adding at the end the following
new sentence: ‘‘Such term shall not include any
long-term care insurance contract (as defined in sec-
tion 7702B(b)).’’
(2) FLEXIBLE
SPENDING
ARRANGEMENTS.—
The text of section 106 of such Code (relating to
contributions by employer to accident and health
plans) is amended to read as follows:
‘‘(a) GENERAL RULE.—Except as provided in sub-
section (b), gross income of an employee does not include
employer-provided coverage under an accident or health
plan.
‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS
PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE-
MENTS.—
‘‘(1) IN GENERAL.—Effective on and after Jan-
uary 1, 1996, gross income of an employee shall in-
clude employer-provided coverage for qualified long-
term care services (as defined in section 7702B(c))
to the extent that such coverage is provided through
a flexible spending or similar arrangement.
‘‘(2) FLEXIBLE
SPENDING
ARRANGEMENT.—
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides
employees with coverage under which—
‘‘(A) specified incurred expenses may be
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions), and
‘‘(B) the maximum amount of reimburse-
ment which is reasonably available to a partici-
pant for such coverage is less than 500 percent
of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be determined on
the basis of the underlying coverage.’’
(d) CONTINUATION COVERAGE EXCISE TAX NOT TO
APPLY.—Subsection (f) of section 4980B of such Code is
amended by adding at the end the following new para-
graph:
‘‘(9) CONTINUATION OF LONG-TERM CARE COV-
ERAGE NOT REQUIRED.—A group health plan shall
not be treated as failing to meet the requirements of
this subsection solely by reason of failing to provide
coverage under any long-term care insurance con-
tract (as defined in section 7702B(b)).’’
(e) AMOUNTS PAID TO RELATIVES TREATED AS NOT
PAID FOR MEDICAL CARE.—Section 213(d) of such Code
is amended by adding at the end the following new para-
graph:
‘‘(10) CERTAIN
PAYMENTS
TO
RELATIVES
TREATED AS NOT PAID FOR MEDICAL CARE.—An
amount paid for a qualified long-term care service
(as defined in section 7702B(c)) provided to an indi-
vidual shall be treated as not paid for medical care
if such service is provided—
‘‘(A) by a relative (directly or through a
partnership, corporation, or other entity) unless
the relative is a licensed professional with re-
spect to such services, or
‘‘(B) by a corporation or partnership which
is related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’
means an individual bearing a relationship to the in-
dividual which is described in any of paragraphs (1)
through (8) of section 152(a). This paragraph shall
not apply for purposes of section 105(b) with respect
to reimbursements through insurance.’’
(f) CLERICAL AMENDMENT.—The table of sections
for chapter 79 of such Code is amended by inserting after
the item relating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of long-term care insurance.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued after De-
cember 31, 1996.
(2) CONTINUATION OF EXISTING POLICIES.—In
the case of any contract issued before January 1,
1997, which met the long-term care insurance re-
quirements of the State in which the contract was
issued at the time the contract was issued—
(A) such contract shall be treated for pur-
poses of the Internal Revenue Code of 1986 as
a long-term care insurance contract (as defined
in section 7702B(b) of such Code), and
(B) services provided under, or reimbursed
by, such contract shall be treated for such pur-
poses as qualified long-term care services (as
defined in section 7702B(c) of such Code).
(3) EXCHANGES
OF
EXISTING
POLICIES.—If,
after the date of enactment of this Act and before
January 1, 1997, a contract providing for long-term
care insurance coverage is exchanged solely for a
long-term care insurance contract (as defined in sec-
tion 7702B(b) of such Code), no gain or loss shall
be recognized on the exchange. If, in addition to a
long-term care insurance contract, money or other
property is received in the exchange, then any gain
shall be recognized to the extent of the sum of the
money and the fair market value of the other prop-
erty received. For purposes of this paragraph, the
cancellation of a contract providing for long-term
care insurance coverage and reinvestment of the can-
cellation proceeds in a long-term care insurance con-
tract within 60 days thereafter shall be treated as
an exchange.
(4) ISSUANCE
OF
CERTAIN
RIDERS
PER-
MITTED.—For purposes of applying sections 101(f),
7702, and 7702A of the Internal Revenue Code of
1986 to any contract—
(A) the issuance of a rider which is treated
as a long-term care insurance contract under
section 7702B, and
(B) the addition of any provision required
to conform any other long-term care rider to be
so treated,
shall not be treated as a modification or material
change of such contract.
SEC. 102. QUALIFIED LONG-TERM CARE SERVICES TREAT-
ED AS MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) of the Internal Revenue Code of 1986 (defining
medical care) is amended by striking ‘‘or’’ at the end of
subparagraph (B), by redesignating subparagraph (C) as
subparagraph (D), and by inserting after subparagraph
(B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in section 7702B(c)), or’’.
(b) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) of
such Code (as redesignated by subsection (a)) is
amended by striking ‘‘subparagraphs (A) and (B)’’
and inserting ‘‘subparagraphs (A), (B), and (C)’’.
(2)(A) Paragraph (1) of section 213(d) of such
Code is amended by adding at the end the following
new flush sentence:
‘‘In the case of a long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-
term care premiums (as defined in paragraph (11))
shall be taken into account under subparagraph
(D).’’
(B) Subsection (d) of section 213 of such Code
is amended by adding at the end the following new
paragraph:
‘‘(11) 
ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any long-term care insurance con-
tract (as defined in section 7702B(b)) covering
an individual, to the extent such amount does
not exceed the limitation determined under the
following table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................
$200
More than 40 but not more than 50 .........
375
More than 50 but not more than 60 .........
750
More than 60 but not more than 70 .........
2,000
More than 70 .............................................
2,500.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1996, each dollar amount contained
in subparagraph (A) shall be increased by
the medical care cost adjustment of such
amount for such calendar year. If any in-
crease determined under the preceding sen-
tence is not a multiple of $10, such in-
crease shall be rounded to the nearest mul-
tiple of $10.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1995.
The Secretary shall, in consultation with
the Secretary of Health and Human Serv-
ices, prescribe an adjustment which the
Secretary determines is more appropriate
for purposes of this paragraph than the
adjustment described in the preceding sen-
tence, and the adjustment so prescribed
shall apply in lieu of the adjustment de-
scribed in the preceding sentence.’’
(3) Paragraph (6) of section 213(d) of such
Code is amended—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ in sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(4) Paragraph (7) of section 213(d) of such
Code is amended by striking ‘‘subparagraphs (A)
and (B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 103. CERTAIN EXCHANGES OF LIFE INSURANCE CON-
TRACTS FOR LONG-TERM CARE INSURANCE
CONTRACTS NOT TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035 of
the Internal Revenue Code of 1986 (relating to certain
exchanges of insurance contracts) is amended by striking
the period at the end of paragraph (3) and inserting ‘‘;
or’’, and by adding at the end the following new para-
graph:
‘‘(4) a contract of life insurance or an endow-
ment or annuity contract for a long-term care insur-
ance contract (as defined in section 7702B(b)).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 104. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
WITHDRAWN FROM CERTAIN RETIREMENT
PLANS FOR LONG-TERM CARE INSURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT
PLANS FOR LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount which would
(but for this section) be includible in the gross income of
an individual for the taxable year by reason of eligible dis-
tributions during the taxable year shall be reduced (but
not below zero) by the aggregate premiums paid by such
individual during such taxable year for any long-term care
insurance contract (as defined in section 7702B(b)) for
coverage of such individual or the spouse of such individ-
ual.
‘‘(b) ELIGIBLE DISTRIBUTION.—For purposes of this
section, the term ‘eligible distribution’ means any distribu-
tion or payment to an individual from—
‘‘(1) an individual retirement plan of such indi-
vidual,
‘‘(2) amounts attributable to employer contribu-
tions made pursuant to elective deferrals described
in subparagraph (A) or (C) of section 402(g)(3) or
section 501(c)(18)(D)(iii), or
‘‘(3) amounts deferred under section 457(a).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) of such Code is
amended by striking ‘‘or’’ at the end of subclause
(III), by striking ‘‘and’’ at the end of subclause (IV)
and inserting ‘‘or’’, and by inserting after subclause
(IV) the following new subclause:
‘‘(V) the date distributions for
premiums for a long-term care insur-
ance contract (as defined in section
7702B(b)) for coverage of such indi-
vidual or the spouse of such individual
are made, and’’.
(2) Section 403(b)(11) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph (A),
by striking the period at the end of subparagraph
(B) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (B) the following new subparagraph:
‘‘(C) for the payment of premiums for a
long-term care insurance contract (as defined in
section 7702B(b)) for coverage of the employee
or the spouse of the employee.’’
(3) Subparagraph (A) of section 457(d)(1) of
such Code is amended by striking ‘‘or’’ at the end
of clause (ii), by striking ‘‘and’’ at the end of clause
(iii) and inserting ‘‘or’’, and by inserting after clause
(iii) the following new clause:
‘‘(iv) the date distributions for pre-
miums for a long-term care insurance con-
tract (as defined in section 7702B(b)) for
coverage of such individual or the spouse
of such individual are made, and’’.
(4) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 137. Distributions from certain retirement plans for long-
term care insurance.
‘‘Sec. 138. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1996.
SEC. 105. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after section 25A the follow-
ing new section:
‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who maintains a household which includes as a
member one or more qualified persons, there shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $1,000 for each
such person.
‘‘(b) QUALIFIED PERSON.—For purposes of this sec-
tion, the term ‘qualified person’ means any individual—
‘‘(1) who is a father or mother of the taxpayer,
his spouse, or his former spouse or who is an ances-
tor of such a father or mother,
‘‘(2) who is physically or mentally incapable of
caring for himself,
‘‘(3) who has as his principal place of abode for
more than half of the taxable year the home of the
taxpayer, and
‘‘(4) whose name and TIN are included on the
taxpayer’s return for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother
shall be treated as a father or mother.
‘‘(c) SPECIAL RULES.—For purposes of this section,
rules similar to the rules of paragraphs (1), (2), (3), and
(4) of section 21(e) shall apply.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
of such Code is amended by inserting after the item relat-
ing to section 25A the following new item:
‘‘Sec. 25B. Credit for taxpayers with certain persons requiring
custodial care in their households.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
TITLE II—SOCIAL SECURITY
BENEFITS
SEC. 201. INCREASES IN MONTHLY EXEMPT AMOUNT FOR
PURPOSES OF THE SOCIAL SECURITY EARN-
INGS LIMIT.
(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR
INDIVIDUALS
WHO
HAVE
ATTAINED
RETIREMENT
AGE.—Section 203(f)(8)(D) of the Social Security Act (42
U.S.C. 403(f)(8)(D)) is amended to read as follows:
‘‘(D) Notwithstanding any other provision of
this subsection, the exempt amount which is applica-
ble to an individual who has attained retirement age
(as defined in section 216(l)) before the close of the
taxable year involved shall be—
‘‘(i) for each month of any taxable year
ending 
after 
1996 
and 
before 
1998,
$1,466.662⁄3,
‘‘(ii) for each month of any taxable year
ending after 1997 and before 1999, $1,875.00,
‘‘(iii) for each month of any taxable year
ending 
after 
1998 
and 
before 
2000,
$2,333.331⁄3,
‘‘(iv) for each month of any taxable year
ending 
after 
1999 
and 
before 
2001,
$2,791.662⁄3,
‘‘(v) for each month of any taxable year
ending after 2000 and before 2002, $3,250.00,
‘‘(vi) for each month of any taxable year
ending 
after 
2001 
and 
before 
2003,
$3,708.331⁄3, and
‘‘(vii) for each month of any taxable year
ending 
after 
2002 
and 
before 
2004,
$4,166.662⁄3.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 203(f)(8)(B)(ii) of such Act (42
U.S.C. 403(f)(8)(B)(ii)) is amended—
(A) by striking ‘‘the taxable year ending
after 1993 and before 1995’’ and inserting ‘‘the
taxable year ending after 2002 and before 2004
(with respect to individuals described in sub-
paragraph (D)) or the taxable year ending after
1993 and before 1995 (with respect to other in-
dividuals)’’; and
(B) in subclause (II), by striking ‘‘for
1992’’ and inserting ‘‘for 2001 (with respect to
individuals described in subparagraph (D)) or
1992 (with respect to other individuals)’’.
(2) The second sentence of section 223(d)(4)(A)
of such Act (42 U.S.C. 423(d)(4)(A)) is amended by
striking ‘‘the exempt amount under section 203(f)(8)
which is applicable to individuals described in sub-
paragraph (D) thereof’’ and inserting the following:
‘‘an amount equal to the exempt amount which
would be applicable under section 203(f)(8), to indi-
viduals described in subparagraph (D) thereof, if
section 201 of the Senior Citizens Bill of Rights Act
of 1996 had not been enacted’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxable years end-
ing after 1996.
SEC. 202. REVOCATION BY MEMBERS OF THE CLERGY OF
EXEMPTION FROM SOCIAL SECURITY COV-
ERAGE.
(a) 
IN
GENERAL.—Notwithstanding 
section
1402(e)(4) of the Internal Revenue Code of 1986, any ex-
emption which has been received under section 1402(e)(1)
of such Code by a duly ordained, commissioned, or li-
censed minister of a church, a member of a religious order,
or a Christian Science practitioner, and which is effective
for the taxable year in which this Act is enacted, may be
revoked by filing an application therefor (in such form and
manner, and with such official, as may be prescribed in
regulations made under chapter 2 of such Code), if such
application is filed no later than the due date of the Fed-
eral income tax return (including any extension thereof)
for the applicant’s second taxable year beginning after De-
cember 31, 1996. Any such revocation shall be effective
(for purposes of chapter 2 of the Internal Revenue Code
of 1986 and title II of the Social Security Act), as speci-
fied in the application, either with respect to the appli-
cant’s first taxable year beginning after December 31,
1996, or with respect to the applicant’s second taxable
year beginning after such date, and for all succeeding tax-
able years; and the applicant for any such revocation may
not thereafter again file application for an exemption
under such section 1402(e)(1). If the application is filed
after the due date of the applicant’s Federal income tax
return for a taxable year and is effective with respect to
that taxable year, it shall include or be accompanied by
payment in full of an amount equal to the total of the
taxes that would have been imposed by section 1401 of
the Internal Revenue Code of 1986 with respect to all of
the applicant’s income derived in that taxable year which
would have constituted net earnings from self-employment
for purposes of chapter 2 of such Code (notwithstanding
section 1402 (c)(4) or (c)(5) of such Code) except for the
exemption under section 1402(e)(1) of such Code.
(b) EFFECTIVE DATE.—Subsection (a) shall apply
with respect to service performed (to the extent specified
in such subsection) in taxable years beginning after De-
cember 31, 1996, and with respect to monthly insurance
benefits payable under title II of the Social Security Act
on the basis of the wages and self-employment income of
any individual for months in or after the calendar year
in which such individual’s application for revocation (as
described in such subsection) is effective (and lump-sum
death payments payable under such title on the basis of
such wages and self-employment income in the case of
deaths occurring in or after such calendar year).
TITLE III—INDEPENDENT
COMMISSION ON MEDICARE
SEC. 301. ESTABLISHMENT OF COMMISSION.
(a) IN GENERAL.—There is established a commission
to be known as the Independent Commission on Medicare
(in this title referred to as the ‘‘Commission’’).
(b) MEMBERSHIP.—
(1) COMPOSITION.—The Commission shall be
composed of 7 members appointed by the President,
by and with the advice and consent of the Senate.
(2) CHAIR.—The President shall designate one
of the members to chair the Commission.
(3) QUALIFICATIONS.—The membership of the
Commission shall consist of individuals with national
recognition for expertise in fields related to health
care.
(c) TERMS.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), each member of the Commission
shall be appointed for a term of 9 years.
(2) TERMS OF INITIAL APPOINTMENT.—As des-
ignated by the President at the time of appointment,
of the members first appointed—
(A) 3 shall be appointed for a term of 3
years; and
(B) 3 shall be appointed for a term of 6
years.
(3) VACANCIES.—Any member appointed to fill
a vacancy occurring before the expiration of the
term for which the member’s predecessor was ap-
pointed shall be appointed only for the remainder of
that term. A vacancy in the Commission shall be
filled in the manner in which the original appoint-
ment was made.
(4) EXCLUSIVE
EMPLOYMENT.—During the
term of appointment, members shall serve as em-
ployees of the Federal Government and shall hold no
other employment.
(5) COMPENSATION
OF
BOARD
MEMBERS.—
Each member of the Commission (other than the
chair) shall receive an annual salary at the annual
rate payable from time to time for level IV of the
Executive Schedule. The chair of the Commission,
during the period of service as chair, shall receive an
annual salary at the annual rate payable from time
to time for level III of the Executive Schedule.
(6) REMOVAL.—A member of the Commission
may be removed by the President only for neglect of
duty or malfeasance in office.
(d) MEETINGS.—Each meeting of the Commission
shall be open to the public, except that the Commission
may meet in executive session to address matters relating
to personnel and other internal matters of the Commission
unrelated to the duties specified in section 302.
(e) STAFF.—
(1) IN GENERAL.—The Commission shall ap-
point a Director, who shall be paid at a rate the
Commission considers appropriate. The Director
may appoint and fix the pay of such additional per-
sonnel as the Director (with the approval of the
Chair of the Commission) considers appropriate,
without regard to provisions of title 5, United States
Code, governing appointments in the competitive
service.
(2) EXPERTS AND CONSULTANTS.—The Com-
mission may procure temporary and intermittent
services under section 3109(b) of title 5, United
States Code.
(3) STAFF OF FEDERAL AGENCIES.—Upon re-
quest of the Director, the head of any Federal de-
partment or agency may detail, on a reimbursable
basis, any of the personnel of that department or
agency to the Commission to assist it in carrying out
its duties under this title.
(f) POWERS.—
(1) HEARINGS AND SESSIONS.—The Commis-
sion may, for the purpose of carrying out its duties
under this title, hold hearings, sit and act at times
and places, take testimony, and receive evidence as
the Commission considers appropriate. The Commis-
sion may administer oaths or affirmations to wit-
nesses appearing before it.
(2) POWERS OF MEMBERS AND AGENTS.—Any
member or agent of the Commission may, if author-
ized by the Commission, take any action which the
Commission is authorized to take by this section.
(3) OBTAINING OFFICIAL DATA.—The Commis-
sion may secure directly from any department or
agency of the United States information necessary
to enable it to carry out this title. Upon request of
the Chair of the Commission, the head of that de-
partment or agency shall furnish that information to
the Commission.
(4) GIFTS, BEQUESTS, AND
DEVISES.—The
Commission may accept, use, and dispose of gifts,
bequests, or devises of services or property, both real
and personal, for the purpose of aiding or facilitat-
ing the work of the Commission. Gifts, bequests, or
devises of money and proceeds from sales of other
property received as gifts, bequests, or devises shall
be deposited in the Treasury and shall be available
for disbursement upon order of the Chair of the
Commission.
(5) MAILS.—The Commission may use the
United States mails in the same manner and under
the same conditions as other departments and agen-
cies of the United States.
(6) ADMINISTRATIVE
SUPPORT
SERVICES.—
Upon the request of the Commission, the Adminis-
trator of General Services shall provide to the Com-
mission, on a reimbursable basis, the administrative
support services necessary for the Commission to
carry out its duties under this title.
SEC. 302. DUTIES OF THE COMMISSION.
(a) IN GENERAL.—The Commission shall—
(1) transmit to Congress and the President
during December of each year (beginning with 1996)
a report on the aspects of the Medicare program
specified in subsection (b); and
(2) transmit to Congress during July of each
year (beginning with 1997) a report containing spe-
cific recommendations on the matters specified in
subsection (c).
(b) ASPECTS OF MEDICARE.—
(1) IN GENERAL.—The report transmitted pur-
suant to subsection (a)(1) during December of a
year shall include information on the following:
(A) The total outlays made under the med-
icare program for each of the 10 most recently
completed fiscal years.
(B) Projections of the outlays under such
program for the fiscal year beginning on Octo-
ber 1 of the next calendar year and each of the
4 succeeding fiscal years, on an aggregate and
a per capita basis.
(C) Projections of the actuarial value of
the package of benefits provided to medicare
beneficiaries for each of the fiscal years speci-
fied in subparagraph (B), on an aggregate and
a per capita basis.
(D) A comparison of each of the projec-
tions made under subparagraph (B) for a fiscal
year with the projections made for the year
under subparagraph (C).
(E) The health status of medicare bene-
ficiaries, the access of beneficiaries to health
services covered under the medicare program,
and the utilization of such services by bene-
ficiaries.
(F) Methods to improve the methodologies
used to determine the payments made under
the medicare program to or on behalf of medi-
care beneficiaries (including the use of risk ad-
justment in the determination of the amount of
such payments) and methods to encourage effi-
ciency and cost-effectiveness in the delivery of
health care services.
(G) Such other matters as the Commission
determines to be appropriate.
(2) ACTUARIAL
VALUE
DEFINED.—For pur-
poses of projecting the actuarial value of the pack-
age of benefits provided to medicare beneficiaries
under paragraph (1)(C), the Commission shall deter-
mine actuarial value by measuring the costs of re-
sources used to provide health care services covered
under the medicare program and adjusting such
costs to take into account—
(A) inflation in the costs of health care
services and all costs generally;
(B) demographic changes in the population
of beneficiaries, including population growth,
age distribution, health status, and access to
care;
(C) changes in the mix and intensity of
services provided to beneficiaries and the sites
at which services are furnished;
(D) scientific and technological advances;
(E) the quality of care provided, including
the effect on quality of the overutilization of
services and other factors;
(F) other factors affecting the demand of
beneficiaries for services; and
(G) such other factors as the Commission
considers appropriate.
(c) RECOMMENDATIONS
ON
CONTROLLING
OUT-
LAYS.—The report transmitted to Congress pursuant to
subsection (a)(2) during July of a year shall include spe-
cific recommendations on changes in the medicare pro-
gram, including changes in eligibility, benefits (including
the mode of delivery of such benefits), cost-sharing, or
payments made to or on behalf of beneficiaries, sufficient
to ensure that total outlays for the program for the fiscal
year beginning on the following October 1 do not exceed
the limit established for that fiscal year under section 305,
except that such recommendations may not include
changes relating to the payment of payroll taxes for fi-
nancing the program.
SEC. 303. EXPEDITED CONGRESSIONAL CONSIDERATION
OF RECOMMENDATIONS.
(a) IN GENERAL.—The recommendations submitted
by the Commission under section 302(c) for a fiscal year
shall take effect if a joint resolution (described in sub-
section (b)) approving such recommendations is enacted,
in accordance with the provisions of subsection (c), before
the first day of the fiscal year.
(b) JOINT RESOLUTION OF APPROVAL.—A joint res-
olution described in this paragraph means only a joint res-
olution which is introduced within the 10-day period be-
ginning on the date on which the Commission submits rec-
ommendations under section 302(c) and—
(1) which does not have a preamble;
(2) the matter after the resolving clause of
which is as follows: ‘‘That Congress approves the
recommendations of the Independent Commission on
Medicare concerning methods to control outlays
under the medicare program for fiscal year
llll, as submitted by the Commission on
lllllll.’’, the first blank space being filled
in with the appropriate fiscal year and the second
blank space being filled in with the appropriate date;
and
(3) the title of which is as follows: ‘‘Joint reso-
lution approving recommendations of the Independ-
ent Commission on Medicare concerning methods to
control outlays under the medicare program for fis-
cal year llll, as submitted by the Commission
on lllllll.’’, the first blank space being
filled in with the appropriate fiscal year and the sec-
ond blank space being filled in with the appropriate
date.
(c) PROCEDURES FOR CONSIDERATION OF RESOLU-
TION OF APPROVAL.—Subject to subsection (d), the provi-
sions of section 2908 (other than subsection (a)) of the
Defense Base Closure and Realignment Act of 1990 shall
apply to the consideration of a joint resolution described
in subsection (b) in the same manner as such provisions
apply to a joint resolution described in section 2908(a)
of such Act.
(d) SPECIAL RULES.—For purposes of applying sub-
section (c) with respect to such provisions—
(1) any reference to the Committee on Armed
Services of the House of Representatives shall be
deemed a reference to an appropriate committee of
the House of Representatives (specified by the
Speaker of the House of Representatives at the time
of submission of recommendations under subsection
(c)) and any reference to the Committee on Armed
Services of the Senate shall be deemed a reference
to an appropriate committee of the Senate (specified
by the majority leader of the Senate at the time of
submission of recommendations by the Commission
under section 302(c)); and
(2) any reference to the date on which the
President transmits a report shall be deemed a ref-
erence to the date on which the Commission submits
recommendations under section 302(c).
SEC. 304. NO TERMINATION OF COMMISSION.
Section 14(a)(2)(B) of the Federal Advisory Commit-
tee Act (5 U.S.C. App.; relating to the termination of advi-
sory committees) shall not apply to the Commission.
SEC. 305. ESTABLISHMENT OF ANNUAL LIMITS ON OUT-
LAYS.
Not later than April 15 of each year (beginning with
1997), Congress shall in the concurrent resolution on the
budget for the fiscal year beginning on the following Octo-
ber 1 establish a limit on total outlays to be made under
the medicare program for the fiscal year.
SEC. 306. ENFORCEMENT OF LIMITS THROUGH SEQUES-
TRATION.
(a) IN GENERAL.—Part C of the Balanced Budget
and Emergency Deficit Control Act of 1985 (2 U.S.C. 900
et seq.) is amended by inserting after section 252 the fol-
lowing new section:
‘‘SEC. 252A. SEQUESTRATION WITH RESPECT TO MEDICARE.
‘‘(a) SEQUESTRATION.—If, with respect to a fiscal
year (beginning with fiscal year 1998), Congress has not
enacted a joint resolution under section 303(b) of the Sen-
ior Citizens Bill of Rights Act of 1996 before the first
day of the fiscal year, there shall be a sequestration to
eliminate any budgetary excess in the medicare program
as described in subsection (b).
‘‘(b) ELIMINATING A BUDGETARY EXCESS.—
‘‘(1) IN GENERAL.—Outlays under the medicare
program shall be reduced during a fiscal year as
provided by paragraph (2), as necessary to eliminate
any amount by which estimated outlays under the
program in the year exceed the limit for such out-
lays established for the year by Congress pursuant
to section 305 of the Senior Citizens Bill of Rights
Act of 1996.
‘‘(2) REDUCTIONS
DESCRIBED.—In carrying
out paragraph (1), the President shall—
‘‘(A) reduce payments made under the
medicare program by a uniform percentage suf-
ficient to reduce 50 percent of the amount de-
scribed in paragraph (1); and
‘‘(B) 
increase 
premiums, 
deductibles,
copayments, and coinsurance required to be
paid under the program by a uniform percent-
age sufficient to reduce 50 percent of the
amount described in paragraph (1).
‘‘(c) PART-YEAR APPROPRIATIONS AND OMB ESTI-
MATES.—Paragraphs (4) and (7) of section 251(a) shall
apply to sequestration of amounts under this section in
the same manner as those paragraphs apply to discre-
tionary appropriations and sequestrations under that sec-
tion.
‘‘(d) COORDINATION
WITH
OTHER
SEQUESTRA-
TION.—
‘‘(1) IN
GENERAL.—Reductions under sub-
section (b) for a fiscal year shall supersede any re-
duction otherwise made under section 252 or 253.
‘‘(2) REPORTS.—On the dates specified in sec-
tion 254(a), OMB and CBO shall issue preview, up-
date, and final reports on medicare sequestration
under this section. Such reports shall specify—
‘‘(A) the estimated amount described in
subsection (b)(1) for the fiscal year;
‘‘(B) the estimated uniform percentage de-
scribed in subsection (b)(2)(A) of the fiscal
year; and
‘‘(C) the estimated uniform percentage de-
scribed in subsection (b)(2)(B) of the fiscal
year.
‘‘(3) RULES
FOR
APPLICATION
OF
REDUC-
TIONS.—The provisions of section 256(d) shall apply
to reductions under this section.’’.
(b) CLERICAL AMENDMENT.—The table of contents
for part C of the Balanced Budget and Emergency Deficit
Control Act of 1985 (2 U.S.C. 900 et seq.) is amended
by inserting after the item relating to section 252 the fol-
lowing:
‘‘Sec. 252A. Sequestration with respect to medicare.’’.
TITLE IV—HEALTH CARE FRAUD
PREVENTION
Subtitle A—All-Payer Fraud and
Abuse Control Program
SEC. 401. ALL-PAYER FRAUD AND ABUSE CONTROL PRO-
GRAM.
(a) ESTABLISHMENT OF PROGRAM.—
(1) IN GENERAL.—Not later than January 1,
1997, the Secretary of Health and Human Services
(in this title referred to as the ‘‘Secretary’’), acting
through the Office of the Inspector General of the
Department of Health and Human Services, and the
Attorney General shall establish a program—
(A) to coordinate Federal, State, and local
law enforcement programs to control fraud and
abuse with respect to the delivery of and pay-
ment for health care in the United States,
(B) to conduct investigations, audits, eval-
uations, and inspections relating to the delivery
of and payment for health care in the United
States,
(C) to facilitate the enforcement of the
provisions of sections 1128, 1128A, and 1128B
of the Social Security Act and other statutes
applicable to health care fraud and abuse, and
(D) to provide for the modification and es-
tablishment of safe harbors and to issue inter-
pretative rulings and special fraud alerts pursu-
ant to section 403.
(2) COORDINATION WITH HEALTH PLANS.—In
carrying out the program established under para-
graph (1), the Secretary and the Attorney General
shall consult with, and arrange for the sharing of
data with representatives of health plans.
(3) REGULATIONS.—
(A) IN GENERAL.—The Secretary and the
Attorney General shall by regulation establish
standards to carry out the program under para-
graph (1).
(B) INFORMATION STANDARDS.—
(i) IN
GENERAL.—Such standards
shall include standards relating to the fur-
nishing of information by health plans,
providers, and others to enable the Sec-
retary and the Attorney General to carry
out the program (including coordination
with health plans under paragraph (2)).
(ii) CONFIDENTIALITY.—Such stand-
ards shall include procedures to assure
that such information is provided and uti-
lized in a manner that appropriately pro-
tects the confidentiality of the information
and the privacy of individuals receiving
health care services and items.
(iii) QUALIFIED IMMUNITY FOR PRO-
VIDING INFORMATION.—The provisions of
section 1157(a) of the Social Security Act
(relating to limitation on liability) shall
apply to a person providing information to
the Secretary or the Attorney General in
conjunction with their performance of du-
ties under this section.
(C) DISCLOSURE
OF
OWNERSHIP
INFOR-
MATION.—
(i) IN
GENERAL.—Such standards
shall include standards relating to the dis-
closure of ownership information described
in clause (ii) by any entity providing health
care services and items.
(ii) OWNERSHIP
INFORMATION
DE-
SCRIBED.—The ownership information de-
scribed in this clause includes—
(I) a description of such items
and services provided by such entity;
(II) the names and unique physi-
cian identification numbers of all phy-
sicians with a financial relationship
(as defined in section 1877(a)(2) of
the Social Security Act) with such en-
tity;
(III) the names of all other indi-
viduals with such an ownership or in-
vestment interest in such entity; and
(IV) any other ownership and re-
lated information required to be dis-
closed by such entity under section
1124 or section 1124A of the Social
Security Act, except that the Sec-
retary 
shall 
establish 
procedures
under which the information required
to be submitted under this subclause
will be reduced with respect to health
care provider entities that the Sec-
retary determines will be unduly bur-
dened if such entities are required to
comply fully with this subclause.
(4) AUTHORIZATION OF APPROPRIATIONS FOR
INVESTIGATORS AND OTHER PERSONNEL.—In addi-
tion to any other amounts authorized to be appro-
priated to the Secretary, the Attorney General, the
Director of the Federal Bureau of Investigation, and
the Inspectors General of the Departments of De-
fense, Labor, and Veterans Affairs and of the Office
of Personnel Management, for health care anti-fraud
and abuse activities for a fiscal year, there are au-
thorized to be appropriated additional amounts,
from the Health Care Fraud and Abuse Account de-
scribed in subsection (b) of this section, as may be
necessary to enable the Secretary, the Attorney Gen-
eral, and such Inspectors General to conduct inves-
tigations and audits of allegations of health care
fraud and abuse and otherwise carry out the pro-
gram established under paragraph (1) in a fiscal
year.
(5) ENSURING ACCESS TO DOCUMENTATION.—
The Inspector General of the Department of Health
and Human Services is authorized to exercise the
authority described in paragraphs (4) and (5) of sec-
tion 6 of the Inspector General Act of 1978 (relating
to subpoenas and administration of oaths) with re-
spect to the activities under the all-payer fraud and
abuse control program established under this sub-
section to the same extent as such Inspector General
may exercise such authorities to perform the func-
tions assigned by such Act.
(6) AUTHORITY
OF
INSPECTOR
GENERAL.—
Nothing in this Act shall be construed to diminish
the authority of any Inspector General, including
such authority as provided in the Inspector General
Act of 1978.
(7) HEALTH PLAN DEFINED.—For the purposes
of this subsection, the term ‘‘health plan’’ shall have
the meaning given such term in section 1128(i) of
the Social Security Act.
(b) HEALTH CARE FRAUD AND ABUSE CONTROL AC-
COUNT.—
(1) ESTABLISHMENT.—
(A) IN GENERAL.—There is hereby estab-
lished an account to be known as the ‘‘Health
Care Fraud and Abuse Control Account’’ (in
this section referred to as the ‘‘Anti-Fraud Ac-
count’’). The Anti-Fraud Account shall consist
of—
(i) such gifts and bequests as may be
made as provided in subparagraph (B);
(ii) such amounts as may be deposited
in the Anti-Fraud Account as provided in
subsection (a)(4), sections 441(b) and
442(b), and title XI of the Social Security
Act; and
(iii) such amounts as are transferred
to the Anti-Fraud Account under subpara-
graph (C).
(B) AUTHORIZATION TO ACCEPT GIFTS.—
The Anti-Fraud Account is authorized to accept
on behalf of the United States money gifts and
bequests made unconditionally to the Anti-
Fraud Account, for the benefit of the Anti-
Fraud Account or any activity financed through
the Anti-Fraud Account.
(C) TRANSFER
OF
AMOUNTS.—The Sec-
retary of the Treasury shall transfer to the
Anti-Fraud Account an amount equal to the
sum of the following:
(i) Criminal fines imposed in cases in-
volving a Federal health care offense (as
defined in section 982(a)(6)(B) of title 18,
United States Code).
(ii) Administrative penalties and as-
sessments imposed under titles XI, XVIII,
and XIX of the Social Security Act (except
as otherwise provided by law).
(iii) Amounts resulting from the for-
feiture of property by reason of a Federal
health care offense.
(iv) Penalties and damages imposed
under the False Claims Act (31 U.S.C.
3729 et seq.), in cases involving claims re-
lated to the provision of health care items
and services (other than funds awarded to
a relator or for restitution).
(2) USE OF FUNDS.—
(A) IN GENERAL.—Amounts in the Anti-
Fraud Account shall be available to carry out
the health care fraud and abuse control pro-
gram established under subsection (a) (includ-
ing the administration of the program), and
may be used to cover costs incurred in operat-
ing the program, including costs (including
equipment, salaries and benefits, and travel and
training) of—
(i) prosecuting health care matters
(through criminal, civil, and administrative
proceedings);
(ii) investigations;
(iii) financial and performance audits
of health care programs and operations;
(iv) inspections and other evaluations;
and
(v) provider and consumer education
regarding compliance with the provisions of
this title.
(B) FUNDS USED TO SUPPLEMENT AGEN-
CY APPROPRIATIONS.—It is intended that dis-
bursements made from the Anti-Fraud Account
to any Federal agency be used to increase and
not supplant the recipient agency’s appro-
priated operating budget.
(3) ANNUAL REPORT.—The Secretary and the
Attorney General shall submit jointly an annual re-
port to Congress on the amount of revenue which is
generated and disbursed by the Anti-Fraud Account
in each fiscal year.
(4) USE OF FUNDS BY INSPECTOR GENERAL.—
(A) REIMBURSEMENTS
FOR
INVESTIGA-
TIONS.—The Inspector General is authorized to
receive and retain for current use reimburse-
ment for the costs of conducting investigations,
when such restitution is ordered by a court, vol-
untarily agreed to by the payer, or otherwise.
(B) CREDITING.—Funds received by the
Inspector General or the Inspectors General of
the Departments of Defense, Labor, and Veter-
ans Affairs and of the Office of Personnel Man-
agement, as reimbursement for costs of con-
ducting investigations shall be deposited to the
credit of the appropriation from which initially
paid, or to appropriations for similar purposes
currently available at the time of deposit, and
shall remain available for obligation for 1 year
from the date of their deposit.
SEC. 402. APPLICATION OF CERTAIN FEDERAL HEALTH
ANTI-FRAUD 
AND 
ABUSE 
SANCTIONS 
TO
FRAUD AND ABUSE AGAINST ANY HEALTH
PLAN.
(a) CRIMES.—
(1) SOCIAL SECURITY ACT.—Section 1128B of
the Social Security Act (42 U.S.C. 1320a–7b) is
amended as follows:
(A) In the heading, by adding at the end
the following: ‘‘OR HEALTH PLANS’’.
(B) In subsection (a)(1)—
(i) by striking ‘‘title XVIII or’’ and
inserting ‘‘title XVIII,’’, and
(ii) by adding at the end the follow-
ing: ‘‘or a health plan (as defined in sec-
tion 1128(i)),’’.
(C) In subsection (a)(5), by striking ‘‘title
XVIII or a State health care program’’ and in-
serting ‘‘title XVIII, a State health care pro-
gram, or a health plan’’.
(D) In the second sentence of subsection
(a)—
(i) by inserting after ‘‘title XIX’’ the
following: ‘‘or a health plan’’, and
(ii) by inserting after ‘‘the State’’ the
following: ‘‘or the plan’’.
(2) IDENTIFICATION OF COMMUNITY SERVICE
OPPORTUNITIES.—Section 1128B of such Act (42
U.S.C. 1320a–7b) is further amended by adding at
the end the following new subsection:
‘‘(f) The Secretary may—
‘‘(1) in consultation with State and local health
care officials, identify opportunities for the satisfac-
tion of community service obligations that a court
may impose upon the conviction of an offense under
this section, and
‘‘(2) make information concerning such oppor-
tunities available to Federal and State law enforce-
ment officers and State and local health care offi-
cials.’’.
(b) HEALTH PLAN DEFINED.—Section 1128 of the
Social Security Act (42 U.S.C. 1320a–7) is amended by
redesignating subsection (i) as subsection (j) and by in-
serting after subsection (h) the following new subsection:
‘‘(i) HEALTH PLAN DEFINED.—For purposes of sec-
tions 1128A and 1128B, the term ‘health plan’ means a
plan that provides health benefits, whether through di-
rectly, through insurance, or otherwise, and includes a pol-
icy of health insurance, a contract of a service benefit or-
ganization, or a membership agreement with a health
maintenance organization or other prepaid health plan,
and also includes an employee welfare benefit plan or a
multiple employer welfare plan (as such terms are defined
in section 3 of the Employee Retirement Income Security
Act of 1974).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
SEC. 403. HEALTH CARE FRAUD AND ABUSE GUIDANCE.
(a) SOLICITATION AND PUBLICATION OF MODIFICA-
TIONS TO EXISTING SAFE HARBORS AND NEW SAFE
HARBORS.—
(1) IN GENERAL.—
(A) SOLICITATION
OF
PROPOSALS
FOR
SAFE
HARBORS.—Not later than January 1,
1997, and not less than annually thereafter, the
Secretary shall publish a notice in the Federal
Register soliciting proposals, which will be ac-
cepted during a 60-day period, for—
(i) modifications to existing safe har-
bors issued pursuant to section 14(a) of
the Medicare and Medicaid Patient and
Program Protection Act of 1987 (42
U.S.C. 1320a–7b note);
(ii) additional safe harbors specifying
payment practices that shall not be treated
as a criminal offense under section
1128B(b) of the Social Security Act the
(42 U.S.C. 1320a–7b(b)) and shall not
serve as the basis for an exclusion under
section 1128(b)(7) of such Act (42 U.S.C.
1320a–7(b)(7));
(iii) interpretive rulings to be issued
pursuant to subsection (b); and
(iv) special fraud alerts to be issued
pursuant to subsection (c).
(B) PUBLICATION
OF
PROPOSED
MODI-
FICATIONS AND PROPOSED ADDITIONAL SAFE
HARBORS.—After considering the proposals de-
scribed in clauses (i) and (ii) of subparagraph
(A), the Secretary, in consultation with the At-
torney General, shall publish in the Federal
Register proposed modifications to existing safe
harbors and proposed additional safe harbors, if
appropriate, with a 60-day comment period.
After considering any public comments received
during this period, the Secretary shall issue
final rules modifying the existing safe harbors
and establishing new safe harbors, as appro-
priate.
(C) REPORT.—The Inspector General of
the Department of Health and Human Services
(hereafter in this section referred to as the ‘‘In-
spector General’’) shall, in an annual report to
Congress or as part of the year-end semiannual
report required by section 5 of the Inspector
General Act of 1978 (5 U.S.C. App.), describe
the proposals received under clauses (i) and (ii)
of subparagraph (A) and explain which propos-
als were included in the publication described in
subparagraph (B), which proposals were not in-
cluded in that publication, and the reasons for
the rejection of the proposals that were not in-
cluded.
(2) CRITERIA FOR MODIFYING AND ESTABLISH-
ING SAFE HARBORS.—In modifying and establishing
safe harbors under paragraph (1)(B), the Secretary
may consider the extent to which providing a safe
harbor for the specified payment practice may result
in any of the following:
(A) An increase or decrease in access to
health care services.
(B) An increase or decrease in the quality
of health care services.
(C) An increase or decrease in patient free-
dom of choice among health care providers.
(D) An increase or decrease in competition
among health care providers.
(E) An increase or decrease in the ability
of health care facilities to provide services in
medically underserved areas or to medically un-
derserved populations.
(F) An increase or decrease in the cost to
Government health care programs.
(G) An increase or decrease in the poten-
tial overutilization of health care services.
(H) The existence or nonexistence of any
potential financial benefit to a health care pro-
fessional or provider which may vary based on
their decisions of—
(i) whether to order a health care
item or service; or
(ii) whether to arrange for a referral
of health care items or services to a par-
ticular practitioner or provider.
(I) Any other factors the Secretary deems
appropriate in the interest of preventing fraud
and abuse in Government health care programs.
(b) INTERPRETIVE RULINGS.—
(1) IN GENERAL.—
(A) REQUEST
FOR
INTERPRETIVE
RUL-
ING.—Any person may present, at any time, a
request to the Inspector General for a state-
ment of the Inspector General’s current inter-
pretation of the meaning of a specific aspect of
the application of sections 1128A and 1128B of
the Social Security Act (hereafter in this sec-
tion referred to as an ‘‘interpretive ruling’’).
(B) ISSUANCE AND EFFECT OF INTERPRE-
TIVE RULING.—
(i) IN GENERAL.—If appropriate, the
Inspector General shall in consultation
with the Attorney General, issue an inter-
pretive ruling in response to a request de-
scribed in subparagraph (A). Interpretive
rulings shall not have the force of law and
shall be treated as an interpretive rule
within the meaning of section 553(b) of
title 5, United States Code. All interpretive
rulings issued pursuant to this provision
shall be published in the Federal Register
or otherwise made available for public in-
spection.
(ii) REASONS FOR DENIAL.—If the In-
spector General does not issue an interpre-
tive ruling in response to a request de-
scribed in subparagraph (A), the Inspector
General shall notify the requesting party of
such decision and shall identify the reasons
for such decision.
(2) CRITERIA FOR INTERPRETIVE RULINGS.—
(A) IN GENERAL.—In determining whether
to issue an interpretive ruling under paragraph
(1)(B), the Inspector General may consider—
(i) whether and to what extent the re-
quest identifies an ambiguity within the
language of the statute, the existing safe
harbors, or previous interpretive rulings;
and
(ii) whether the subject of the re-
quested interpretive ruling can be ade-
quately addressed by interpretation of the
language of the statute, the existing safe
harbor rules, or previous interpretive rul-
ings, or whether the request would require
a substantive ruling not authorized under
this subsection.
(B) NO RULINGS ON FACTUAL ISSUES.—
The Inspector General shall not give an inter-
pretive ruling on any factual issue, including
the intent of the parties or the fair market
value of particular leased space or equipment.
(c) SPECIAL FRAUD ALERTS.—
(1) IN GENERAL.—
(A) 
REQUEST
FOR
SPECIAL
FRAUD
ALERTS.—Any person may present, at any
time, a request to the Inspector General for a
notice which informs the public of practices
which the Inspector General considers to be
suspect or of particular concern under section
1128B(b) of the Social Security Act (42 U.S.C.
1320a–7b(b)) (hereafter in this subsection re-
ferred to as a ‘‘special fraud alert’’).
(B) ISSUANCE AND PUBLICATION OF SPE-
CIAL FRAUD ALERTS.—Upon receipt of a re-
quest described in subparagraph (A), the In-
spector General shall investigate the subject
matter of the request to determine whether a
special fraud alert should be issued. If appro-
priate, the Inspector General shall in consulta-
tion with the Attorney General, issue a special
fraud alert in response to the request. All spe-
cial fraud alerts issued pursuant to this sub-
paragraph shall be published in the Federal
Register.
(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—
In determining whether to issue a special fraud alert
upon a request described in paragraph (1), the In-
spector General may consider—
(A) whether and to what extent the prac-
tices that would be identified in the special
fraud alert may result in any of the con-
sequences described in subsection (a)(2); and
(B) the volume and frequency of the con-
duct that would be identified in the special
fraud alert.
SEC. 404. REPORTING OF FRAUDULENT ACTIONS UNDER
MEDICARE.
Not later than 1 year after the date of the enactment
of this Act, the Secretary shall establish a program
through which individuals entitled to benefits under the
medicare program may report to the Secretary on a con-
fidential basis (at the individual’s request) instances of
suspected fraudulent actions arising under the program by
providers of items and services under the program.
Subtitle B—Revisions to Current
Sanctions for Fraud and Abuse
SEC. 411. MANDATORY EXCLUSION FROM PARTICIPATION
IN MEDICARE AND STATE HEALTH CARE PRO-
GRAMS.
(a) INDIVIDUAL CONVICTED OF FELONY RELATING
TO FRAUD.—
(1) IN GENERAL.—Section 1128(a) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)) is amend-
ed by adding at the end the following new para-
graph:
‘‘(3) 
FELONY
CONVICTION
RELATING
TO
FRAUD.—Any individual or entity that has been con-
victed after the date of the enactment of the Senior
Citizens Bill of Rights Act of 1996, under Federal
or State law, in connection with the delivery of a
health care item or service or with respect to any act
or omission in a program (other than those specifi-
cally described in paragraph (1)) operated by or fi-
nanced in whole or in part by any Federal, State, or
local government agency, of a criminal offense con-
sisting of a felony relating to fraud, theft, embezzle-
ment, breach of fiduciary responsibility, or other fi-
nancial misconduct.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))
is amended—
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
(b) INDIVIDUAL CONVICTED OF FELONY RELATING
TO CONTROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)), as amend-
ed by subsection (a), is amended by adding at the
end the following new paragraph:
‘‘(4) FELONY CONVICTION RELATING TO CON-
TROLLED
SUBSTANCE.—Any individual or entity
that has been convicted after the date of the enact-
ment of the Senior Citizens Bill of Rights Act of
1996, under Federal or State law, of a criminal of-
fense consisting of a felony relating to the unlawful
manufacture, distribution, prescription, or dispens-
ing of a controlled substance.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))
is amended—
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
SEC. 412. ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND
ENTITIES SUBJECT TO PERMISSIVE EXCLU-
SION FROM MEDICARE AND STATE HEALTH
CARE PROGRAMS.
Section 1128(c)(3) of the Social Security Act (42
U.S.C. 1320a–7(c)(3)) is amended by adding at the end
the following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraph (1), (2), or (3) of subsection (b),
the period of the exclusion shall be 3 years, unless the
Secretary determines in accordance with published regula-
tions that a shorter period is appropriate because of miti-
gating circumstances or that a longer period is appro-
priate because of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or
entity under subsection (b)(4) or (b)(5), the period of the
exclusion shall not be less than the period during which
the individual’s or entity’s license to provide health care
is revoked, suspended, or surrendered, or the individual
or the entity is excluded or suspended from a Federal or
State health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
SEC. 413. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP 
OR 
CONTROL 
INTEREST 
IN
SANCTIONED ENTITIES.
Section 1128(b) of the Social Security Act (42 U.S.C.
1320a–7(b)) is amended by adding at the end the follow-
ing new paragraph:
‘‘(15) INDIVIDUALS
CONTROLLING
A
SANC-
TIONED ENTITY.—Any individual who has a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer,
director, agent, or managing employee (as defined in
section 1126(b)) of, an entity—
‘‘(A) that has been convicted of any of-
fense described in subsection (a) or in para-
graph (1), (2), or (3) of this subsection;
‘‘(B) against which a civil monetary pen-
alty has been assessed under section 1128A; or
‘‘(C) that has been excluded from partici-
pation under a program under title XVIII or
under a State health care program.’’.
SEC. 414. SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATU-
TORY OBLIGATIONS.
(a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI-
TIONERS AND PERSONS FAILING TO MEET STATUTORY
OBLIGATIONS.—
(1) IN GENERAL.—The second sentence of sec-
tion 1156(b)(1) of the Social Security Act (42
U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may
prescribe)’’ and inserting ‘‘may prescribe, except
that such period may not be less than 1 year)’’.
(2) 
CONFORMING
AMENDMENT.—Section
1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is
amended by striking ‘‘shall remain’’ and inserting
‘‘shall (subject to the minimum period specified in
the second sentence of paragraph (1)) remain’’.
(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI-
TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)
of the Social Security Act (42 U.S.C. 1320c–5(b)(1)) is
amended—
(1) in the second sentence, by striking ‘‘and de-
termines’’ and all that follows through ‘‘such obliga-
tions,’’; and
(2) by striking the third sentence.
SEC. 415. INTERMEDIATE SANCTIONS FOR MEDICARE
HEALTH MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR
ANY PROGRAM VIOLATIONS.—
(1) IN
GENERAL.—Section 1876(i)(1) of the
Social Security Act (42 U.S.C. 1395mm(i)(1)) is
amended by striking ‘‘the Secretary may terminate’’
and all that follows and inserting the following: ‘‘in
accordance with procedures established under para-
graph (9), the Secretary may at any time terminate
any such contract or may impose the intermediate
sanctions described in paragraph (6)(B) or (6)(C)
(whichever is applicable) on the eligible organization
if the Secretary determines that the organization—
‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner inconsistent with the efficient and effective
administration of this section; or
‘‘(C) no longer substantially meets the ap-
plicable conditions of subsections (b), (c), (e),
and (f).’’.
(2) OTHER
INTERMEDIATE
SANCTIONS
FOR
MISCELLANEOUS
PROGRAM
VIOLATIONS.—Section
1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is
amended by adding at the end the following new
subparagraph:
‘‘(C) In the case of an eligible organization for which
the Secretary makes a determination under paragraph (1)
the basis of which is not described in subparagraph (A),
the Secretary may apply the following intermediate sanc-
tions:
‘‘(i) Civil money penalties of not more than
$25,000 for each determination under paragraph (1)
if the deficiency that is the basis of the determina-
tion has directly adversely affected (or has the sub-
stantial likelihood of adversely affecting) an individ-
ual covered under the organization’s contract.
‘‘(ii) Civil money penalties of not more than
$10,000 for each week beginning after the initiation
of procedures by the Secretary under paragraph (9)
during which the deficiency that is the basis of a de-
termination under paragraph (1) exists.
‘‘(iii) Suspension of enrollment of individuals
under this section after the date the Secretary noti-
fies the organization of a determination under para-
graph (1) and until the Secretary is satisfied that
the deficiency that is the basis for the determination
has been corrected and is not likely to recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—
Section 1876(i) of such Act (42 U.S.C. 1395mm(i))
is amended by adding at the end the following new
paragraph:
‘‘(9) The Secretary may terminate a contract with an
eligible organization under this section or may impose the
intermediate sanctions described in paragraph (6) on the
organization in accordance with formal investigation and
compliance procedures established by the Secretary under
which—
‘‘(A) the Secretary provides the organization
with the opportunity to develop and implement a
corrective action plan to correct the deficiencies that
were the basis of the Secretary’s determination
under paragraph (1);
‘‘(B) in deciding whether to impose sanctions,
the Secretary considers aggravating factors such as
whether an entity has a history of deficiencies or has
not taken action to correct deficiencies the Secretary
has brought to their attention;
‘‘(C) there are no unreasonable or unnecessary
delays between the finding of a deficiency and the
imposition of sanctions; and
‘‘(D) the Secretary provides the organization
with reasonable notice and opportunity for hearing
(including the right to appeal an initial decision) be-
fore imposing any sanction or terminating the con-
tract.’’.
(4) 
CONFORMING
AMENDMENTS.—Section
1876(i)(6)(B) 
of 
such 
Act 
(42 
U.S.C.
1395mm(i)(6)(B)) is amended by striking the sec-
ond sentence.
(b) AGREEMENTS WITH PEER REVIEW ORGANIZA-
TIONS.—
(1) REQUIREMENT
FOR
WRITTEN
AGREE-
MENT.—Section 1876(i)(7)(A) of the Social Security
Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by
striking ‘‘an agreement’’ and inserting ‘‘a written
agreement’’.
(2) DEVELOPMENT OF MODEL AGREEMENT.—
Not later than July 1, 1996, the Secretary shall de-
velop a model of the agreement that an eligible orga-
nization with a risk-sharing contract under section
1876 of the Social Security Act must enter into with
an entity providing peer review services with respect
to services provided by the organization under sec-
tion 1876(i)(7)(A) of such Act.
(3) REPORT BY GAO.—
(A) STUDY.—The Comptroller General of
the United States shall conduct a study of the
costs incurred by eligible organizations with
risk-sharing contracts under section 1876(b) of
such Act of complying with the requirement of
entering into a written agreement with an en-
tity providing peer review services with respect
to services provided by the organization, to-
gether with an analysis of how information gen-
erated by such entities is used by the Secretary
to assess the quality of services provided by
such eligible organizations.
(B) REPORT
TO
CONGRESS.—Not later
than July 1, 1999, the Comptroller General
shall submit a report to the Committee on
Ways and Means and the Committee on Energy
and Commerce of the House of Representatives
and the Committee on Finance and the Special
Committee on Aging of the Senate on the study
conducted under subparagraph (A).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to contract years be-
ginning on or after January 1, 1997.
SEC. 416. EFFECTIVE DATE.
The amendments made by this part shall take effect
January 1, 1997.
Subtitle C—Administrative and
Miscellaneous Provisions
SEC. 421. ESTABLISHMENT OF THE HEALTH CARE FRAUD
AND ABUSE DATA COLLECTION PROGRAM.
(a) GENERAL PURPOSE.—Not later than January 1,
1997, the Secretary shall establish a national health care
fraud and abuse data collection program for the reporting
of final adverse actions (not including settlements in which
no findings of liability have been made) against health
care providers, suppliers, or practitioners as required by
subsection (b), with access as set forth in subsection (c).
(b) REPORTING OF INFORMATION.—
(1) IN
GENERAL.—Each government agency
and health plan shall report any final adverse action
(not including settlements in which no findings of li-
ability have been made) taken against a health care
provider, supplier, or practitioner.
(2) INFORMATION TO BE REPORTED.—The in-
formation to be reported under paragraph (1) in-
cludes:
(A) The name of any health care provider,
supplier, or practitioner who is the subject of a
final adverse action.
(B) The name (if known) of any health
care entity with which a health care provider,
supplier, or practitioner is affiliated or associ-
ated.
(C) The nature of the final adverse action.
(D) A description of the acts or omissions
and injuries upon which the final adverse action
was based, and such other information as the
Secretary determines by regulation is required
for appropriate interpretation of information re-
ported under this section.
(3) CONFIDENTIALITY.—In determining what
information is required, the Secretary shall include
procedures to assure that the privacy of individuals
receiving health care services is appropriately pro-
tected.
(4) TIMING AND FORM OF REPORTING.—The
information required to be reported under this sub-
section shall be reported regularly (but not less often
than monthly) and in such form and manner as the
Secretary prescribes. Such information shall first be
required to be reported on a date specified by the
Secretary.
(5) TO WHOM REPORTED.—The information re-
quired to be reported under this subsection shall be
reported to the Secretary.
(c) DISCLOSURE
AND CORRECTION
OF INFORMA-
TION.—
(1) DISCLOSURE.—With respect to the informa-
tion about final adverse actions (not including settle-
ments in which no findings of liability have been
made) reported to the Secretary under this section
respecting a health care provider, supplier, or practi-
tioner, the Secretary shall, by regulation, provide
for—
(A) disclosure of the information, upon re-
quest, to the health care provider, supplier, or
licensed practitioner, and
(B) procedures in the case of disputed ac-
curacy of the information.
(2) CORRECTIONS.—Each Government agency
and health plan shall report corrections of informa-
tion already reported about any final adverse action
taken against a health care provider, supplier, or
practitioner, in such form and manner that the Sec-
retary prescribes by regulation.
(d) ACCESS TO REPORTED INFORMATION.—
(1) AVAILABILITY.—The information in this
database shall be available to Federal and State gov-
ernment agencies and health plans pursuant to pro-
cedures that the Secretary shall provide by regula-
tion.
(2) FEES
FOR
DISCLOSURE.—The Secretary
may establish or approve reasonable fees for the dis-
closure of information in this database. The amount
of such a fee may not exceed the costs of processing
the requests for disclosure and of providing such in-
formation. Such fees shall be available to the Sec-
retary or, in the Secretary’s discretion to the agency
designated under this section to cover such costs.
(e) PROTECTION FROM LIABILITY
FOR REPORT-
ING.—No person or entity, including the agency des-
ignated by the Secretary in subsection (b)(5) shall be held
liable in any civil action with respect to any report made
as required by this section, without knowledge of the fal-
sity of the information contained in the report.
(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section:
(1) The term ‘‘final adverse action’’ includes:
(A) Civil judgments against a health care
provider in Federal or State court related to the
delivery of a health care item or service.
(B) Federal or State criminal convictions
related to the delivery of a health care item or
service.
(C) Actions by Federal or State agencies
responsible for the licensing and certification of
health care providers, suppliers, and licensed
health care practitioners, including—
(i) formal or official actions, such as
revocation or suspension of a license (and
the length of any such suspension), rep-
rimand, censure or probation,
(ii) any other loss of license of the
provider, supplier, or practitioner, by oper-
ation of law, or
(iii) any other negative action or find-
ing by such Federal or State agency that
is publicly available information.
(D) Exclusion from participation in Fed-
eral or State health care programs.
(E) Any other adjudicated actions or deci-
sions that the Secretary shall establish by regu-
lation.
(2) The terms ‘‘licensed health care practi-
tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’
mean, with respect to a State, an individual who is
licensed or otherwise authorized by the State to pro-
vide health care services (or any individual who,
without authority holds himself or herself out to be
so licensed or authorized).
(3) The term ‘‘health care provider’’ means a
provider of services as defined in section 1861(u) of
the Social Security Act, and any entity, including a
health maintenance organization, group medical
practice, or any other entity listed by the Secretary
in regulation, that provides health care services.
(4) The term ‘‘supplier’’ means a supplier of
health care items and services described in section
1819 (a) and (b), and section 1861 of the Social Se-
curity Act.
(5) The term ‘‘Government agency’’ shall in-
clude:
(A) The Department of Justice.
(B) The Department of Health and
Human Services.
(C) Any other Federal agency that either
administers or provides payment for the deliv-
ery of health care services, including, but not
limited to the Department of Defense and the
Veterans’ Administration.
(D) State law enforcement agencies.
(E) State medicaid fraud and abuse units.
(F) Federal or State agencies responsible
for the licensing and certification of health care
providers and licensed health care practitioners.
(6) The term ‘‘health plan’’ has the meaning
given to such term by section 1128(i) of the Social
Security Act.
(7) For purposes of paragraph (2), the exist-
ence of a conviction shall be determined under para-
graph (4) of section 1128(j) of the Social Security
Act.
(g) CONFORMING AMENDMENT.—Section 1921(d) of
the Social Security Act is amended by inserting ‘‘and sec-
tion 421 of the Senior Citizens Bill of Rights Act of 1996’’
after ‘‘section 422 of the Health Care Quality Improve-
ment Act of 1986’’.
Subtitle D—Civil Monetary
Penalties
SEC. 431. CIVIL MONETARY PENALTIES.
(a) GENERAL CIVIL MONETARY PENALTIES.—Sec-
tion 1128A of the Social Security Act (42 U.S.C. 1320a–
7a) is amended as follows:
(1) In subsection (a)(1), by inserting ‘‘or of any
health plan (as defined in section 1128(i)),’’ after
‘‘subsection (i)(1)),’’.
(2) In subsection (f)—
(A) by redesignating paragraph (3) as
paragraph (4); and
(B) by inserting after paragraph (2) the
following new paragraphs:
‘‘(3) With respect to amounts recovered arising
out of a claim under a health plan, the portion of
such amounts as is determined to have been paid by
the plan shall be repaid to the plan, and the portion
of such amounts attributable to the amounts recov-
ered under this section by reason of the amendments
made by title IV of the Senior Citizens Bill of Rights
Act of 1996 (as estimated by the Secretary) shall be
deposited into the Health Care Fraud and Abuse
Control Account established under section 101(b) of
such Act.’’.
(3) In subsection (i)—
(A) in paragraph (2), by inserting ‘‘or
under a health plan’’ before the period at the
end, and
(B) in paragraph (5), by inserting ‘‘or
under a health plan’’ after ‘‘or XX’’.
(b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP
OR CONTROL INTEREST IN PARTICIPATING ENTITY.—
Section 1128A(a) of the Social Security Act (42 U.S.C.
1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(1)(D);
(2) by striking ‘‘, or’’ at the end of paragraph
(2) and inserting a semicolon;
(3) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(4) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) in the case of a person who is not an orga-
nization, agency, or other entity, is excluded from
participating in a program under title XVIII or a
State health care program in accordance with this
subsection or under section 1128 and who, at the
time of a violation of this subsection, retains a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer,
director, agent, or managing employee (as defined in
section 1126(b)) of, an entity that is participating in
a program under title XVIII or a State health care
program;’’.
(c) MODIFICATIONS
OF AMOUNTS
OF PENALTIES
AND ASSESSMENTS.—Section 1128A(a) of the Social Se-
curity Act (42 U.S.C. 1320a–7a(a)), as amended by sub-
section (b), is amended in the matter following paragraph
(4)—
(1) 
by 
striking 
‘‘$2,000’’ 
and 
inserting
‘‘$10,000’’;
(2) by inserting ‘‘; in cases under paragraph
(4), $10,000 for each day the prohibited relationship
occurs’’ after ‘‘false or misleading information was
given’’; and
(3) by striking ‘‘twice the amount’’ and insert-
ing ‘‘3 times the amount’’.
(d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR-
RECT CODING
OR MEDICALLY UNNECESSARY SERV-
ICES.—Section 1128A(a)(1) of the Social Security Act (42
U.S.C. 1320a–7a(a)(1)) is amended—
(1) in subparagraph (A) by striking ‘‘claimed,’’
and inserting the following: ‘‘claimed, including any
person who repeatedly presents or causes to be pre-
sented a claim for an item or service that is based
on a code that the person knows or should know will
result in a greater payment to the person than the
code the person knows or should know is applicable
to the item or service actually provided,’’;
(2) in subparagraph (C), by striking ‘‘or’’ at
the end;
(3) in subparagraph (D), by striking ‘‘; or’’ and
inserting ‘‘, or’’; and
(4) by inserting after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) is for a medical or other item or serv-
ice that a person repeatedly knows or should
know is not medically necessary; or’’.
(e) PERMITTING SECRETARY TO IMPOSE CIVIL MON-
ETARY PENALTY.—Section 1128A(b) of the Social Secu-
rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding
the following new paragraph:
‘‘(3) Any person (including any organization,
agency, or other entity, but excluding a beneficiary
as defined in subsection (i)(5)) who the Secretary
determines has violated section 1128B(b) of this
title shall be subject to a civil monetary penalty of
not more than $10,000 for each such violation. In
addition, such person shall be subject to an assess-
ment of not more than twice the total amount of the
remuneration offered, paid, solicited, or received in
violation of section 1128B(b). The total amount of
remuneration subject to an assessment shall be cal-
culated without regard to whether some portion
thereof also may have been intended to serve a pur-
pose 
other 
than 
one 
proscribed 
by 
section
1128B(b).’’.
(f) SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI-
GATIONS.—Section 1156(b)(3) of the Social Security Act
(42 U.S.C. 1320c–5(b)(3)) is amended by striking ‘‘the
actual or estimated cost’’ and inserting the following: ‘‘up
to $10,000 for each instance’’.
(g) PROCEDURAL PROVISIONS.—Section 1876(i)(6)
of such Act (42 U.S.C. 1395mm(i)(6)) is further amended
by adding at the end the following new subparagraph:
‘‘(D) The provisions of section 1128A (other than
subsections (a) and (b)) shall apply to a civil money pen-
alty under subparagraph (A) or (B) in the same manner
as they apply to a civil money penalty or proceeding under
section 1128A(a).’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall take effect January 1, 1997.
(i) PROHIBITION AGAINST OFFERING INDUCEMENTS
TO
INDIVIDUALS
ENROLLED
UNDER
PROGRAMS
OR
PLANS.—
(1) 
OFFER
OF
REMUNERATION.—Section
1128A(a) of the Social Security Act (42 U.S.C.
1320a–7a(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (1)(D);
(B) by striking ‘‘, or’’ at the end of para-
graph (2) and inserting a semicolon;
(C) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(D) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) offers to or transfers remuneration to any
individual eligible for benefits under title XVIII of
this Act, or under a State health care program (as
defined in section 1128(h)) that such person knows
or should know is likely to influence such individual
to order or receive from a particular provider, practi-
tioner, or supplier any item or service for which pay-
ment may be made, in whole or in part, under title
XVIII, or a State health care program;’’.
(2) 
REMUNERATION
DEFINED.—Section
1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is
amended by adding the following new paragraph:
‘‘(6) The term ‘remuneration’ includes the waiv-
er of coinsurance and deductible amounts (or any
part thereof), and transfers of items or services for
free or for other than fair market value. The term
‘remuneration’ does not include—
‘‘(A) the waiver of coinsurance and deduct-
ible amounts by a person, if—
‘‘(i) the waiver is not offered as part
of any advertisement or solicitation;
‘‘(ii) the person does not routinely
waive coinsurance or deductible amounts;
and
‘‘(iii) the person—
‘‘(I) waives the coinsurance and
deductible amounts after determining
in good faith that the individual is in
financial need;
‘‘(II) fails to collect coinsurance
or deductible amounts after making
reasonable collection efforts; or
‘‘(III) provides for any permis-
sible waiver as specified in section
1128B(b)(3) or in regulations issued
by the Secretary;
‘‘(B) differentials in coinsurance and de-
ductible amounts as part of a benefit plan de-
sign as long as the differentials have been dis-
closed in writing to all third party payors to
whom claims are presented and as long as the
differentials meet the standards as defined in
regulations promulgated by the Secretary; or
‘‘(C) incentives given to individuals to pro-
mote the delivery of preventive care as deter-
mined by the Secretary in regulations.’’.
Subtitle E—Amendments to
Criminal Law
SEC. 441. HEALTH CARE FRAUD.
(a) IN GENERAL.—
(1) FINES AND IMPRISONMENT FOR HEALTH
CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,
United States Code, is amended by adding at the
end the following new section:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever knowingly executes, or attempts to exe-
cute, a scheme or artifice—
‘‘(1) to defraud any health plan or other per-
son, in connection with the delivery of or payment
for health care benefits, items, or services; or
‘‘(2) to obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the
money or property owned by, or under the custody
or control of, any health plan, or person in connec-
tion with the delivery of or payment for health care
benefits, items, or services;
shall be fined under this title or imprisoned not more than
10 years, or both. If the violation results in serious bodily
injury (as defined in section 1365(g)(3) of this title), such
person shall be imprisoned for any term of years.
‘‘(b) For purposes of this section, the term ‘health
plan’ has the same meaning given such term in section
1128(i) of the Social Security Act.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of chapter 63 of title 18,
United States Code, is amended by adding at the
end the following:
‘‘1347. Health care fraud.’’.
(b) CRIMINAL FINES DEPOSITED IN THE HEALTH
CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec-
retary of the Treasury shall deposit into the Health Care
Fraud and Abuse Control Account established under sec-
tion 401(b) an amount equal to the criminal fines imposed