ability and Accountability Act of 1996 (Public Law 104–
191), is amended by adding at the end the following:
‘‘Subtitle L—Parity For Treatment
Of Mental Illness
‘‘SEC. 9901. PARITY FOR TREATMENT OF MENTAL ILLNESS.
‘‘(a) IMPOSITION OF TAX.—
‘‘(1) HEALTH INSURANCE COVERAGE.—
‘‘(A) IN
GENERAL.—In the case of any
health insurance coverage offered by a health
insurance issuer that fails to meet the standard
under subsection (c) at any time during a cal-
endar year, there is hereby imposed a tax equal
to 25 percent of the premiums received under
such plan during the calendar year.
‘‘(B) LIABILITY FOR TAX.—The tax im-
posed under subparagraph (A) shall be paid by
the health insurance issuer.
‘‘(2) GROUP HEALTH PLAN.—
‘‘(A) IN GENERAL.—In the case of a group
health plan that fails to meet the standard
under subsection (c) at any time during a cal-
endar year, there is hereby imposed a tax equal
to 25 percent of the health coverage expendi-
tures for such calendar year under such plan.
‘‘(B) LIABILITY FOR TAX.—The tax im-
posed under subparagraph (A) shall be paid by
the group health plan.
‘‘(C) 
HEALTH
COVERAGE
EXPENDI-
TURES.—For purposes of this paragraph, the
health coverage expenditures of any group
health plan for any calendar year are the aggre-
gate expenditures for such year for health cov-
erage provided under such plan.
‘‘(b) LIMITATION ON IMPOSITION OF TAX.—
‘‘(1) FAILURE
NOT
DISCOVERED
EXERCISING
REASONABLE DILIGENCE.—No tax shall be imposed
under this section on any failure to meet the stand-
ard under subsection (c) for which it is established
to the satisfaction of the Secretary that none of the
persons liable for the tax knew, or exercising reason-
able diligence would have known, that such failure
existed.
‘‘(2) CERTAIN FAILURES CORRECTED WITHIN
30 DAYS.—No tax shall be imposed under subsection
(a) on any failure to meet the standard under sub-
section (c) if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30–day period beginning on the first date any
person liable for the tax knew, or exercising
reasonable diligence would have known, that
such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure to meet the standard under subsection (c)
that is due to reasonable cause and not to willful ne-
glect, the Secretary may waive part or all of the tax
imposed by this section to the extent that the pay-
ment of such tax would be excessive relative to the
failure involved.
‘‘(c) STANDARD FOR PARITY FOR TREATMENT OF
MENTAL ILLNESS.—
‘‘(1) IN GENERAL.—A health insurance issuer
with respect to health insurance coverage that it of-
fers or a group health plan may not impose limita-
tions or financial requirements on the coverage of
benefits provided with respect to mental illness if
similar limitations or requirements are not imposed
on coverage for benefits with respect to other condi-
tions.
‘‘(2) RULE
OF
CONSTRUCTION.—Nothing in
paragraph (1) shall be construed as prohibiting a
health insurance issuer with respect to health insur-
ance coverage that it offers or a group health plan
from requiring preadmission screening prior to the
authorization of services covered under the plan or
from applying other limitations that restrict cov-
erage for mental illness to those services that are
medically necessary.
‘‘(d) DEFINITIONS.—For purposes of this section:
‘‘(1) MENTAL ILLNESS.—The term ‘mental ill-
ness’ means any of the specific psychiatric conditions
described in the American Psychiatric Association’s
‘‘Diagnostic and Statistical Manual—Mental Dis-
orders.’’
‘‘(2) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
given such term by section 9805(b)(1).
‘‘(3) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term by section 9805(b)(2).
‘‘(4) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning given such term by
section 5000(b)(1).’’.
(b) CLERICAL AMENDMENT.—The table of subtitles
of such Code is amended by adding at the end the follow-
ing new item:
‘‘Subtitle L. Parity for treatment of mental illness.’’
SEC. 102. EFFECTIVE DATE.
The amendment made by section 101 applies—
(1) with respect to health insurance coverage,
to a contract, policy, or certificate initiated or re-
newed after December 31, 1997; and
(2) with respect to group health plans, to plan
years beginning after December 31, 1997.
TITLE II—MEDICARE MENTAL
HEALTH IMPROVEMENT
SEC. 201. REFERENCES IN TITLE.
Whenever in this title an amendment is expressed in
terms of an amendment to or repeal of a section or other
provision, the reference shall be considered to be made to
that section or other provision of the Social Security Act.
SEC. 202. INPATIENT PSYCHIATRIC HOSPITAL SERVICES.
(a) SERVICES
COVERED.—Section 1812(a) (42
U.S.C. 1395d(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(3);
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘; and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(5) inpatient hospital services furnished pri-
marily for the diagnosis or treatment of mental ill-
ness or substance abuse for up to 60 days during a
year.’’.
(b) LIMITATION ON COVERAGE.—Section 1812(b)(3)
(42 U.S.C. 1395d(b)) is amended to read as follows:
‘‘(3) inpatient hospital services furnished pri-
marily for the diagnosis or treatment of mental ill-
ness or substance abuse that are furnished to the in-
dividual during a year after such services have been
furnished to the individual for a total of 60 days
during the year.’’.
(c) 
CONFORMING
AMENDMENTS.—(1) 
Section
1812(a)(1) (42 U.S.C. 1395d(a)(1)) is amended by insert-
ing ‘‘(other than services described in paragraph (5))’’
after ‘‘inpatient hospital services’’ the first place it ap-
pears.
(2) Section 1812(b)(1) (42 U.S.C. 1395d(b)(1)) is
amended by inserting ‘‘(other than services described in
paragraph (3))’’ after ‘‘inpatient hospital services’’ the
first place it appears.
(3) Section 1812 (42 U.S.C. 1395d) is amended by
striking subsection (c).
(4) Section 1814(a) (42 U.S.C. 1395f(a)) is amend-
ed—
(A) in paragraph (2), by striking subparagraph
(A);
(B) in paragraph (3), by striking ‘‘(other than
inpatient psychiatric hospital services)’’; and
(C) by striking paragraph (4).
(5) Section 1861 (42 U.S.C. 1395x) is amended by
striking subsection (c).
(d) EFFECTIVE DATE; TRANSITION.—The amend-
ments made by this section shall take effect January 1,
1996, except that—
(1) an individual who at any time prior to such
date has been furnished inpatient psychiatric hos-
pital services (as defined for purposes of title XVIII
of the Social Security Act as of the date of the en-
actment of this Act) for 190 consecutive days is not
entitled to any services under section 1812(a)(5) (as
added by subsection (a)(3)); and
(2) in the case of an individual who is not de-
scribed in paragraph (1) and is receiving inpatient
psychiatric hospital services (as defined for purposes
of title XVIII of the Social Security Act as of the
date of the enactment of this Act) on December 31,
1995, for which payment may be made under section
1812 of such Act, the number of days of services for
which the individual is entitled under section
1812(a)(5) (and the number of days applicable
under section 1812(b)(3)) shall be equal to the
greater of 60 or the difference between 190 days
and the number of days of such inpatient psychiatric
hospital services furnished to the individual prior to
January 1, 1996.
SEC. 203. INTENSIVE RESIDENTIAL SERVICES.
(a) COVERAGE UNDER PART A.—Section 1812(a)
(42 U.S.C. 1395d(a)), as amended by section 202(a), is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(4);
(2) by striking the period at the end of para-
graph (5) and inserting ‘‘; and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(6) intensive residential services (as described
in section 1861(qq)) furnished to an individual for
up to 120 days during any calendar year, except
that such services may be furnished to the individual
for additional days during the year if necessary for
the individual to complete a course of treatment to
the extent that the number of days of inpatient hos-
pital services described in paragraph (5) that may be
furnished to the individual during the year (as re-
duced under such paragraph) is not less than 15.’’.
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C.
1395x), as amended by section 146(a) of the Social Secu-
rity Act Amendments of 1994, is amended by adding at
the end the following new subsection:
‘‘Intensive Residential Services
‘‘(mm)(1) Subject to paragraph (2), the term ‘inten-
sive residential services’ means inpatient services provided
in any of the following facilities:
‘‘(A) Residential detoxification centers.
‘‘(B) Crisis residential programs or mental ill-
ness residential treatment programs.
‘‘(C) Therapeutic family or group treatment
homes.
‘‘(D) Residential centers for substance abuse
treatment.
‘‘(2) No service may be treated as an intensive resi-
dential service under paragraph (1) unless the facility at
which the service is provided—
‘‘(A) is legally authorized to provide such serv-
ice under the law of the State (or under a State reg-
ulatory mechanism provided by State law) in which
the facility is located or is certified to provide such
service by an appropriate accreditation entity ap-
proved by the State in consultation with the Sec-
retary; and
‘‘(B) meets such other requirements as the Sec-
retary may impose to assure the quality of the inten-
sive residential services provided.
‘‘(3) No service may be treated as an intensive resi-
dential service under paragraph (1) unless the service is
furnished in accordance with standards established by the
Secretary for the management of such services.’’.
(3) REDUCTION IN DAYS OF COVERAGE FOR IN-
PATIENT SERVICES.—Section 1812(a)(5) and section
1812(b)(3), as amended by section 202, are each
amended by striking the period at the end and in-
serting the following: ‘‘, reduced by a number of
days determined by the Secretary so that the actuar-
ial value of providing such number of days of serv-
ices under this paragraph to the individual is equal
to the actuarial value of the days of inpatient resi-
dential services furnished to the individual under
paragraph (6) during the year after such services
have been furnished to the individual for 120 days
during the year (rounded to the nearest day).’’.
(4) AMOUNT OF PAYMENT.—Section 1814 (42
U.S.C. 1395f) is amended—
(A) in subsection (b) in the matter preced-
ing paragraph (1), by inserting ‘‘other than in-
tensive residential services,’’ after ‘‘hospice
care,’’; and
(B) by adding at the end the following new
subsection:
‘‘Payment for Intensive Residential Services
‘‘(m) The amount of payment under this part for in-
tensive residential services under section 1812(a)(6) shall
be equal to—
‘‘(1) the lesser of—
‘‘(A) the reasonable cost of such services,
as determined under section 1861(v), or
‘‘(B) the customary charges with respect to
such services,
less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A):
‘‘(2) if such services are furnished by a public
provider of services or by another provider which
demonstrates to the satisfaction of the Secretary
that a significant portion of its patients are low-in-
come (and requests that payment be made under
this clause), free of charge or at nominal charges to
the public, the amount determined in accordance
with subsection (b)(2); and
‘‘(3) if (and for so long as) the conditions de-
scribed in subsection (b)(3) are met, the amounts
determined under the reimbursement system de-
scribed in such section.’’.
SEC. 204. LOWERING COINSURANCE FOR CERTAIN OUT-
PATIENT MENTAL HEALTH AND SUBSTANCE
ABUSE SERVICES.
(a) IN
GENERAL.—Section 1833(c) (42 U.S.C.
1395l(c)) is amended by striking ‘‘mental, psychoneurotic,
and personality disorders’’ and all that follows through
‘‘are incurred’’ and inserting the following: ‘‘mental illness
or substance abuse of an individual who, at the time such
expenses are incurred, is over 18 years of age, is not an
inpatient of a hospital, and has received 5 or more sessions
of such treatment during the calendar year,’’.
(b) REQUIRING SERVICES TO BE FURNISHED IN AC-
CORDANCE WITH MANAGEMENT STANDARDS.—Section
1862(a) (42 U.S.C. 1395y(a)), as amended by section
156(a)(2)(D) of the Social Security Act Amendments of
1994, is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14);
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (15) the fol-
lowing new paragraph:
‘‘(16) in the case of any items or services fur-
nished under part B for the treatment of mental ill-
ness or emotional disturbance (including substance
abuse), if the services are not furnished in accord-
ance with standards established by the Secretary for
the management of such services.’’.
SEC. 205. INTENSIVE COMMUNITY-BASED SERVICES.
(a) COVERAGE.—
(1) IN GENERAL.—Section 1832(a)(2)(J) (42
U.S.C. 1395k(a)(2)(J)) is amended to read as fol-
lows:
‘‘(J) intensive community-based services
(as described in section 1861(ff))—
‘‘(i) for an unlimited number of days
during any calendar year, in the case of
services described in section 1861(ff)(2)(E)
that are furnished to an individual who is
a seriously mentally ill adult, a seriously
emotionally disturbed child, or an adult or
child with serious substance abuse disorder
(as determined in accordance with criteria
established by the Secretary),
‘‘(ii) in the case of services described
in section 1861(ff)(2)(C), for up to 180
days during any calendar year, except that
such services may be furnished to the indi-
vidual for a number of additional days dur-
ing the year equal to the difference be-
tween the total number of days of intensive
residential services which the individual
may receive during the year under part A
(as determined under section 1812(a)(6))
and the number of days of such services
which the individual has received during
the year, or
‘‘(iii) in the case of any other such
services, for up to 90 days during any cal-
endar year, except that such services may
be furnished to the individual for the num-
ber of additional days during the year de-
scribed in clause (ii).’’.
(2) REDUCTION IN NUMBER OF DAYS OF IN-
TENSIVE
RESIDENTIAL
SERVICES.—Section
1812(a)(6) (42 U.S.C. 1395d(a)(6)), as added by
section 203(a), is amended—
(A) by inserting ‘‘(A)’’ before ‘‘such serv-
ices’’; and
(B) by striking the period at the end and
inserting the following: ‘‘, and (B) reduced by
a number of days determined by the Secretary
so that the actuarial value of providing such
number of days of services under this para-
graph to the individual is equal to the actuarial
value of the days of intensive community-based
services furnished to the individual under sec-
tion 1832(a)(2)(J) during the year after such
services have been furnished to the individual
for 90 days (or, in the case of services described
in section 1832(a)(2)(J)(ii), for 180 days) dur-
ing the year (rounded to the nearest day).’’.
(b) SERVICES DESCRIBED.—Section 1861(ff)(2) (42
U.S.C. 1395x(ff)(2)) is amended—
(1) in the matter preceding subparagraph (A),
by striking ‘‘are—’’ and inserting ‘‘are as follows:’’;
(2) in subparagraph (C)—
(A) by inserting ‘‘behavioral aide services,’’
after ‘‘nurses’’, and
(B) by adding at the end the following:
‘‘(to the extent authorized under State law)’’;
(3) by adding ‘‘and’’ at the end of subpara-
graph (G);
(4) in subparagraph (H), by striking ‘‘, and’’
and inserting a period;
(5) by redesignating subparagraphs (A) through
(H) as clauses (i) through (viii) and moving such
subparagraphs 2 ems to the right;
(6) by inserting before clause (i) (as so redesig-
nated) the following:
‘‘(A) Partial hospitalization services con-
sisting of—’’;
(7) by inserting after clause (viii) (as so redes-
ignated) the following new subparagraphs:
‘‘(B) Psychiatric rehabilitation services.
‘‘(C) Day treatment services for substance
abuse treatment for individuals of any age and for
other mental health services for individuals under 19
years of age.
‘‘(D) In-home services.
‘‘(E) Case management services, including col-
lateral services designated as such case management
services by the Secretary.
‘‘(F) Ambulatory detoxification services.’’; and
(8) in subparagraph (I)—
(A) by striking ‘‘such’’ and inserting
‘‘Such’’, and
(B) by redesignating such subparagraph as
subparagraph (G).
(c) PERMITTING NON-PHYSICIAN PROVIDERS TO SU-
PERVISE INDIVIDUAL PROGRAM OF TREATMENT.—Sec-
tion 1861(ff)(1) (42 U.S.C. 1395x(ff)(1)) is amended by
inserting after ‘‘supervision of a physician’’ the following:
‘‘(or, to the extent permitted under the law of the State
in which the services are furnished, a non-physician men-
tal health or substance abuse treatment professional)’’.
(d) REQUIRING SERVICES TO MEET MANAGEMENT
STANDARDS.—Section 
1861(ff)(1) 
(42 
U.S.C.
1395x(ff)(1)) is amended by striking the period at the end
and inserting the following: ‘‘, but does not include any
item or service that is not furnished in accordance with
standards established by the Secretary for the manage-
ment of such services.’’.
(e) PROGRAMS ELIGIBLE TO PROVIDE SERVICES.—
Section 1861(ff)(3) (42 U.S.C. 1395x(ff)(3)) is amended
to read as follows:
‘‘(3) A program described in this paragraph is a pro-
gram (whether facility-based or freestanding) which is fur-
nished by an entity—
‘‘(A) legally authorized to furnish such a pro-
gram under State law (or the State regulatory mech-
anism provided by State law) or certified to furnish
such a program by an appropriate accreditation en-