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(and for which payment may be made under a
MediGrant plan as part of payment for the following
and not as direct reimbursement for the drug):
‘‘(A) Inpatient hospital services.
‘‘(B) Hospice services.
‘‘(C) Dental services, except that drugs for
which the MediGrant plan authorizes direct re-
imbursement to the dispensing dentist are cov-
ered outpatient drugs.
‘‘(D) Physicians’ services.
‘‘(E) Outpatient hospital services.
‘‘(F) Nursing facility services and services
provided by an intermediate care facility for the
mentally retarded.
‘‘(G) Other laboratory and x-ray services.
‘‘(H) Renal dialysis services.
Such term also does not include any such drug or
product for which a National Drug Code number is
not required by the Food and Drug Administration or
a drug or biological used for a medical indication
which is not a medically accepted indication. Any
drug, biological product, or insulin excluded from the
definition of such term as a result of this paragraph
shall be treated as a covered outpatient drug for pur-
poses of determining the best price (as defined in sub-
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section (c)(1)(C)) for such drug, biological product, or
insulin.
‘‘(4) MANUFACTURER.—The term ‘manufacturer’
means, with respect to a covered outpatient drug, the
entity holding legal title to or possession of the Na-
tional Drug Code number for such drug.
‘‘(5) MEDICALLY
ACCEPTED
INDICATION.—The
term ‘medically accepted indication’ means any use
for a covered outpatient drug which is approved
under the Federal Food, Drug, and Cosmetic Act, or
the use of which is supported by one or more citations
included or approved for inclusion in any of the fol-
lowing compendia:
‘‘(A) American Hospital Formulary Service
Drug Information.
‘‘(B) United States Pharmacopeia-Drug In-
formation.
‘‘(C) American Medical Association Drug
Evaluations.
‘‘(D) The DRUGDEX Information System.
‘‘(E) The peer-reviewed medical literature.
‘‘(6) MULTIPLE SOURCE DRUG; INNOVATOR MUL-
TIPLE
SOURCE
DRUG; 
NONINNOVATOR
MULTIPLE
SOURCE DRUG; SINGLE SOURCE DRUG.—
‘‘(A) DEFINED.—
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‘‘(i) MULTIPLE
SOURCE
DRUG.—The
term ‘multiple source drug’ means, with re-
spect to a rebate period, a covered out-
patient drug (not including any drug de-
scribed in paragraph (2)(D)) for which
there are 2 or more drug products which—
‘‘(I) are rated as therapeutically
equivalent (under the Food and Drug
Administration’s most recent publica-
tion of ‘Approved Drug Products with
Therapeutic Equivalence Evaluations’),
‘‘(II) except as provided in sub-
paragraph (B), are pharmaceutically
equivalent and bioequivalent, as de-
fined in subparagraph (C) and as de-
termined by the Food and Drug Ad-
ministration, and
‘‘(III) are sold or marketed in the
State during the period.
‘‘(ii) INNOVATOR
MULTIPLE
SOURCE
DRUG.—The 
term 
‘innovator 
multiple
source drug’ means a multiple source drug
that was originally marketed under an
original new drug application or product
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licensing application approved by the Food
and Drug Administration.
‘‘(iii) 
NONINNOVATOR
MULTIPLE
SOURCE
DRUG.—The term ‘noninnovator
multiple source drug’ means a multiple
source drug that is not an innovator mul-
tiple source drug.
‘‘(iv) SINGLE
SOURCE
DRUG.—The
term ‘single source drug’ means a covered
outpatient drug which is produced or dis-
tributed under an original new drug appli-
cation approved by the Food and Drug Ad-
ministration, including a drug product
marketed by any cross-licensed producers or
distributors operating under the new drug
application or product licensing applica-
tion.
‘‘(B) EXCEPTION.—Subparagraph (A)(i)(II)
shall not apply if the Food and Drug Adminis-
tration changes by regulation the requirement
that, for purposes of the publication described in
subparagraph (A)(i)(I), in order for drug prod-
ucts to be rated as therapeutically equivalent,
they must be pharmaceutically equivalent and
bioequivalent, as defined in subparagraph (C).
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‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) drug products are pharmaceuti-
cally equivalent if the products contain
identical amounts of the same active drug
ingredient in the same dosage form and
meet compendial or other applicable stand-
ards of strength, quality, purity, and iden-
tity,
‘‘(ii) drugs are bioequivalent if they do
not 
present 
a 
known 
or 
potential
bioequivalence problem, or, if they do
present such a problem, they are shown to
meet 
an 
appropriate 
standard 
of
bioequivalence, and
‘‘(iii) a drug product is considered to
be sold or marketed in a State if it appears
in a published national listing of average
wholesale prices selected by the Secretary, if
the listed product is generally available to
the public through retail pharmacies in that
State.
‘‘(7) REBATE PERIOD.—The term ‘rebate period’
means, with respect to an agreement under subsection
(a), a calendar quarter or other period specified by
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the Secretary with respect to the payment of rebates
under such agreement.’’.
SEC. 7002. TERMINATION OF CURRENT PROGRAM AND
TRANSITION.
(a) TERMINATION OF CURRENT PROGRAM; LIMITATION
ON MEDICAID PAYMENTS IN FISCAL YEAR 1996.—
(1) REPEAL OF TITLE.—Title XIX of the Social
Security Act is repealed effective October 1, 1996, ex-
cept that the repeal of section 1928 of such Act is ef-
fective on the date of the enactment of this Act and
the succeeding two sections of such title shall be effec-
tive during fiscal year 1996 in the same manner and
to the same extent as such sections were effective dur-
ing fiscal year 1995.
(2) LIMITATION ON OBLIGATION AUTHORITY.—
Notwithstanding any other provision of such title—
(A) POST-ENACTMENT, PRE-MEDIGRANT.—
Subject to subparagraph (B), the Secretary of
Health and Human Services (in this section re-
ferred to as the ‘‘Secretary’’) may enter into obli-
gations under such title with any State (as de-
fined for purposes of such title) for expenses in-
curred after the date of the enactment of this Act
and during fiscal year 1996, but not in excess of
the obligation allotment for that State for fiscal
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year 1996 under section 2121(a)(4) of the Social
Security Act (as added by section 7001).
(B) NONE
AFTER
MEDIGRANT.—The Sec-
retary is not authorized to enter into any obliga-
tion with any State under title XIX of such Act
for expenses incurred on or after the earlier of—
(i) October 1, 1996, or
(ii) the first day of the first quarter on
which the State MediGrant plan under title
XXI of such Act (as added by section 7001)
is first effective.
(C) AGREEMENT.—A State’s submission of
claims for payment under section 1903 of such
Act after the date of the enactment of this Act
with respect to which the limitation described in
subparagraph (A) applies is deemed to constitute
the State’s acceptance of the obligation limita-
tion under such subparagraph (including the for-
mula for computing the amount of such obliga-
tion limitation).
(D) EFFECT ON MEDICAL ASSISTANCE.—Ef-
fective on the date of the enactment of this sec-
tion—
(i) except as provided in this para-
graph, the Federal Government has no obli-
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gation to provide payment with respect to
items and services provided under title XIX
of the Social Security Act, and
(ii) such title and title XXI of such Act
shall not be construed as providing for an
entitlement, under Federal law in relation
to the Federal Government, in an individ-
ual or person (including any provider) at
the time of provision or receipt of services.
(3) REQUIREMENT FOR TIMELY SUBMITTAL OF
CLAIMS.—No payment shall be made to a State under
title XIX of such Act with respect to an obligation in-
curred before the date of the enactment of this Act,
unless the State has submitted to the Secretary, by
not later than June 30, 1996, a claim for Federal fi-
nancial participation for expenses paid by the State
with respect to such obligations. Nothing in para-
graph (2) shall be construed as affecting the obliga-
tion of the Federal Government to pay claims de-
scribed in the previous sentence.
(b) MEDICAID-TO-MEDIGRANT
TRANSITION
PROVI-
SIONS.—
(1) Notwithstanding any provision of law, in the
case where payment has been made under section
1903(a) of the Social Security Act to a State before
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October 1, 1995, and for which a disallowance has not
been taken as of such date (or, if so taken, has not
been completed, including judicial review, by such
date), the Secretary of Health and Human Services
shall discontinue the disallowance proceeding and, if
such disallowance has been taken as of the date of the
enactment of this Act, any payment reductions ef-
fected shall be rescinded and the payments returned
to the State.
(2) The repeal under subsection (a)(1) of section
1928 of the Social Security Act shall not affect the
distribution of vaccines purchased and delivered to
the States before the date of the enactment of this Act.
No vaccine may be purchased after such date by the
Federal Government or any State under any contract
under section 1928(d) of the Social Security Act.
(3) No judicial or administrative decision ren-
dered regarding requirements imposed under title
XIX of the Social Security Act with respect to a State
shall have any application to the MediGrant plan of
the State title under XXI of such Act. A State may,
pursuant to the previous sentence, seek the abrogation
or modification of any such decision after the date of
termination of the State plan under title XIX of such
Act.
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(4) No cause of action under title XIX of the So-
cial Security Act which seeks to require a State to es-
tablish or maintain minimum payment rates under
such title or claim which seeks reimbursement for any
period before the date of the enactment of this Act
based on the alleged failure of the State to comply
with such title and which has not become final as of
such date shall be brought or continued.
(5) Section 6408(a)(3) of the Omnibus Budget
Reconciliation Act of 1989 (as amended by section
13642 of the Omnibus Budget Reconciliation Act of
1993) and section 2 of Public Law 102–276 (as
amended by section 13644 of the Omnibus Budget
Reconciliation Act of 1993) are each amended by
striking ‘‘December 31, 1995’’ and inserting ‘‘October
1, 1996’’.
(c) ANTI-FRAUD PROVISIONS.—Section 1128(h)(1) of
the Social Security Act (42 U.S.C. 1320a–7(h)(1)) is
amended by inserting ‘‘or a MediGrant plan under title
XXI’’ after ‘‘title XIX’’.
(d) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) SECRETARIAL SUBMISSION OF LEGISLATIVE
PROPOSAL.—Not later than 90 days after the date of
the enactment of this Act, the Secretary of Health and
Human Services, in consultation, as appropriate,
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with heads of other Federal agencies and the States
(as defined in section 1101(a)(8) of the Social Secu-
rity Act for purposes of title XIX of such Act), shall
submit to the appropriate committees of Congress a
legislative proposal providing for such technical and
conforming amendments in the law as are required by
the provisions of, and amendments made by, this title.
(2) TRANSITIONAL RULE.—Any reference in any
provision of law to title XIX of the Social Security
Act or any provision thereof shall be deemed to be a
reference to such title or provision as in effect on the
day before the date of the enactment of this Act.
SEC. 
7003. 
MEDICARE/MEDIGRANT 
INTEGRATION 
DEM-
ONSTRATION PROJECT.
(a) DESCRIPTION OF PROJECTS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the
‘‘Secretary’’) shall conduct demonstration projects
under this section to demonstrate the manner in
which States may use funds from the medicare pro-
gram under title XVIII of the Social Security Act
and the MediGrant program under title XXI of such
Act (in this section referred to as the ‘‘medicare and
MediGrant programs’’) for the purpose of providing a
more cost-effective full continuum of care for deliver-
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ing services to meet the needs of chronically-ill elderly
and disabled beneficiaries who are eligible for items
and services under such programs, through integrated
systems of care, with an emphasis on case manage-
ment, prevention, and interventions designed to avoid
institutionalization whenever possible. The Secretary
shall use funds from the amounts appropriated for the
medicare and MediGrant programs to make the pay-
ments required under subsection (d)(1).
(2) OPTION TO PARTICIPATE.—A State may not
require an individual eligible to receive items and
services under the medicare and MediGrant programs
to participate in a demonstration project under this
section.
(b) ESTABLISHMENT.—The Secretary shall make pay-
ments in accordance with subsection (d) for the conduct of
demonstration projects that provide for integrated systems
of care in accordance with subsection (a). Not more than
10 demonstration projects shall be conducted under this sec-
tion.
(c) APPLICATIONS.—Each State, or a coalition of
States, desiring to conduct a demonstration project under
this section shall prepare and submit to the Secretary an
application at such time, in such manner, and containing
such information as the Secretary may require, including
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an explanation of a plan for evaluating the project. The
Secretary shall approve or deny an application not later
than 90 days after the receipt of such application.
(d) PAYMENTS.—
(1) IN GENERAL.—For each calendar quarter oc-
curring during a demonstration project conducted
under this section, the Secretary shall pay to each en-
tity designated under paragraph (3) an amount equal
to the Federal capitated payment rate determined
under paragraph (2).
(2) FEDERAL CAPITATED PAYMENT RATE.—The
Secretary shall determine the Federal capitated pay-
ment rate for purposes of this section based on the an-
ticipated Federal quarterly cost of providing care to
chronically-ill elderly and disabled beneficiaries who
are eligible for items and services under the medicare
and MediGrant programs and who have elected to
participate in a demonstration project under this sec-
tion.
(3) DESIGNATION OF ENTITY.—
(A) IN GENERAL.—Each State, or coalition
of States, shall designate entities to directly re-
ceive the payments described in paragraph (1).
(B) REQUIREMENT.—A State, or a coalition
of States, may not designate an entity under
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subparagraph (A) unless such entity meets the
quality, solvency, and coverage standards appli-
cable to providers of items and services under the
medicare and MediGrant programs.
(4) STATE PAYMENTS.—Each State conducting,
or in the case of a coalition of States, participating
in a demonstration project under this section shall
pay to the entities designated under paragraph (3) an
amount equal to the product of (A) 100 percent minus
the applicable Federal medical assistance percentage
(as defined in section 2122(e) of the Social Security
Act) for the State, and (B) the expenditures under the
project attributable to the MediGrant program for
items and services provided to chronically-ill elderly
and disabled beneficiaries who have elected to partici-
pate in the demonstration.
(5) 
BUDGET
NEUTRALITY.—The 
aggregate
amount of Federal payments to entities designated by
a State, or coalition of States, under paragraph (3)
for a fiscal year shall not exceed the aggregate amount
of such payments that would otherwise have been
made under the medicare and MediGrant programs
for such fiscal year for items and services provided to
beneficiaries under such programs but for the election
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Subtitle A—MedicarePlus Program
‘‘PART C—MEDICAREPLUS PROGRAM
CHAPTER 1—MEDICAREPLUS PROGRAM
Sec. 8001. Establishment of MedicarePlus program.
‘‘PART C—MEDICAREPLUS PROGRAM
‘‘Sec. 1851. Eligibility, election, and enrollment.
‘‘Sec. 1852. Benefits and beneficiary protections.
‘‘Sec. 1853. Organizational and financial requirements for MedicarePlus or-
ganizations; provider-sponsored organizations.
‘‘Sec. 1854. Payments to MedicarePlus organizations.
‘‘Sec. 1855. Premiums and rebates.
‘‘Sec. 1856. Establishment of standards; certification of organizations and
plans.
‘‘Sec. 1857. Contracts with MedicarePlus organizations.
‘‘Sec. 1858. Standards for MedicarePlus and medicare information trans-
actions and data elements.
‘‘Sec. 1859. Definitions; miscellaneous provisions.
Sec. 8002. Duplication and coordination of medicare-related plans.
Sec. 8003. Transitional rules for current medicare HMO program.
CHAPTER 2—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS
ACCOUNTS
Sec. 8011. MedicarePlus MSA.
Sec. 8012. Certain rebates excluded from gross income.
CHAPTER 3—MEDICARE PAYMENT REVIEW COMMISSION
Sec. 8021. Medicare Payment Review Commission.
CHAPTER 4—TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-
SPONSORED ORGANIZATIONS
Sec. 8031. Treatment of hospitals which participate in provider-sponsored organi-
zations.
Subtitle B—Health Care Fraud and Abuse Prevention
CHAPTER 1—FRAUD AND ABUSE CONTROL PROGRAM
Sec. 8101. Fraud and abuse control program.
Sec. 8102. Medicare integrity program.
Sec. 8103. Beneficiary incentive programs.
Sec. 8104. Application of certain health anti-fraud and abuse sanctions to fraud
and abuse against Federal health care programs.
Sec. 8105. Guidance regarding application of health care fraud and abuse sanc-
tions.
CHAPTER 2—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE
Sec. 8111. Mandatory exclusion from participation in medicare and State health
care programs.
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Sec. 8112. Establishment of minimum period of exclusion for certain individuals
and entities subject to permissive exclusion from medicare and
State health care programs.
Sec. 8113. Permissive exclusion of individuals with ownership or control interest
in sanctioned entities.
Sec. 8114. Sanctions against practitioners and persons for failure to comply with
statutory obligations.
Sec. 8115. Intermediate sanctions for medicare health maintenance organizations.
Sec. 8116. Additional exception to anti-kickback penalties for discounting and
managed care arrangements.
Sec. 8117. Penalties for the fraudulent conversion of assets in order to obtain
State health care program benefits.
Sec. 8118. Effective date.
CHAPTER 3—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS
Sec. 8121. Establishment of the health care fraud and abuse data collection pro-
gram.
CHAPTER 4—CIVIL MONETARY PENALTIES
Sec. 8131. Social Security Act civil monetary penalties.
Sec. 8132. Clarification of level of intent required for imposition of sanctions.
Sec. 8133. Penalty for false certification for home health services.
CHAPTER 5—AMENDMENTS TO CRIMINAL LAW
Sec. 8141. Health care fraud.
Sec. 8142. Forfeitures for Federal health care offenses.
Sec. 8143. Injunctive relief relating to Federal health care offenses.
Sec. 8144. False Statements.
Sec. 8145. Obstruction of criminal investigations of Federal health care offenses.
Sec. 8146. Theft or embezzlement.
Sec. 8147. Laundering of monetary instruments.
Sec. 8148. Authorized investigative demand procedures.
CHAPTER 6—STATE HEALTH CARE FRAUD CONTROL UNITS
Sec. 8151. State health care fraud control units.
Subtitle C—Regulatory Relief
Sec. 8201. Repeal of physician ownership referral prohibitions based on com-
pensation arrangements.
Sec. 8202. Revision of designated health services subject to ownership referral pro-
hibition.
Sec. 8203. Delay in implementation of 1993 ownership referral changes until pro-
mulgation of regulations.
Sec. 8204. Exceptions to ownership referral prohibitions.
Sec. 8205. Effective date.
Subtitle D—Modification in Payment Policies Regarding Graduate Medical
Education
Sec. 8301. Indirect medical education payments.
Sec. 8302. Direct graduate medical education.
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Subtitle E—Provisions Relating to Part A
CHAPTER 1—GENERAL PROVISIONS RELATING TO PART A
Sec. 8401. PPS hospital payment update.
Sec. 8402. PPS-exempt hospital payments.
Sec. 8403. Reductions in disproportionate share payment adjustments.
Sec. 8404. Capital payments for PPS hospitals.
Sec. 8405. Reduction in payments to hospitals for enrollees’ bad debts.
Sec. 8406. Increase in update for certain hospitals with a high proportion of
medicare patients.
CHAPTER 2—PAYMENTS TO SKILLED NURSING FACILITIES
SUBCHAPTER A—PROSPECTIVE PAYMENT SYSTEM
Sec. 8410. Prospective payment system for skilled nursing facilities.
SUBCHAPTER B—INTERIM PAYMENT SYSTEM
Sec. 8411. Payments for routine service costs.
Sec. 8412. Cost-effective management of covered non-routine services.
Sec. 8413. Payments for routine service costs.
Sec. 8414. Reductions in payment for capital-related costs.
Sec. 8415. Treatment of items and services paid for under part B.
Sec. 8416. Medical review process.
Sec. 8417. Report by medicare payment review commission.
Sec. 8418. Effective date.
CHAPTER 3—OTHER PROVISIONS RELATING TO PART A
Sec. 8421. Payments for hospice services.
Sec. 8422. Permanent extension of hemophilia pass-through.
Subtitle F—Provisions Relating to Part B
CHAPTER 1—PAYMENT REFORMS
Sec. 8501. Payments for physicians’ services.
Sec. 8502. Elimination of formula-driven overpayments for certain outpatient
hospital services.
Sec. 8503. Extension of reductions in payments for costs of hospital outpatient
services.
Sec. 8504. Reduction in updates to payment amounts for clinical diagnostic lab-
oratory tests.
Sec. 8505. Payments for durable medical equipment.
Sec. 8506. Updates for ambulatory surgical services.
Sec. 8507. Payments for ambulance services.
Sec. 8508. Ensuring payment for physician and nurse for jointly furnished anes-
thesia services.
CHAPTER 2—PART B PREMIUM
Sec. 8511. Promoting solvency of part a trust fund through part b premium.
Sec. 8512. Income-related reduction in medicare subsidy.
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Subtitle G—Provisions Relating to Parts A and B
CHAPTER 1—PAYMENTS FOR HOME HEALTH SERVICES
Sec. 8601. Payment for home health services.
Sec. 8602. Maintaining savings resulting from temporary freeze on payment in-
creases for home health services.
Sec. 8603. Extension of waiver of presumption of lack of knowledge of exclusion
from coverage for home health agencies.
Sec. 8604. Extension of period of home health agency certification.
PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS
Sec. 8611. Extension and expansion of existing requirements.
Sec. 8612. Improvements in recovery of payments.
CHAPTER 3—OTHER ITEMS AND SERVICES UNDER PARTS A AND B
Sec. 8621. Medicare coverage of certain anti-cancer drug treatments.
Sec. 8622. Administrative provisions.
CHAPTER 4—FAILSAFE
Sec. 8631. Failsafe budget mechanism.
Subtitle H—Rural Areas
Sec. 8701. Medicare-dependent, small, rural hospital payment extension.
Sec. 8702. Medicare rural hospital flexibility program.
Sec. 8703. Establishment of rural emergency access care hospitals.
Sec. 8704. Classification of rural referral centers.
Sec. 8705. Floor on area wage index.
Sec. 8706. Additional payments for physicians’ services furnished in shortage
areas.
Sec. 8707. Payments to physician assistants and nurse practitioners for services
furnished in outpatient or home settings.
Sec. 8708. Expanding access to nurse aide training in underserved areas.
Subtitle A—MedicarePlus Program
CHAPTER 1—MEDICAREPLUS PROGRAM
SEC. 8001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.
(a) IN GENERAL.—Title XVIII is amended by redesig-
nating part C as part D and by inserting after part B
the following new part:
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‘‘PART C—MEDICAREPLUS PROGRAM
‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT
‘‘SEC. 1851. (a) CHOICE
OF MEDICARE BENEFITS
THROUGH MEDICAREPLUS PLANS.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, every MedicarePlus eligible individual
(as defined in paragraph (3)) is entitled to elect to re-
ceive benefits under this title—
‘‘(A) through the Medicare fee-for-service
program under parts A and B, or
‘‘(B) through enrollment in a MedicarePlus
plan under this part.
‘‘(2) TYPES OF MEDICAREPLUS PLANS THAT MAY
BE AVAILABLE.—A MedicarePlus plan may be any of
the following types of plans of health insurance:
‘‘(A) COORDINATED CARE PLANS.—Private
coordinated care plans which provide health care
services, including health maintenance organiza-
tion plans and preferred provider organization
plans.
‘‘(B) COMBINATION OF HIGH DEDUCTIBLE
PLAN AND CONTRIBUTIONS TO HIGH DEDUCTIBLE
MEDICARE MSA.—A high deductible plan, as de-
fined in section 1859(b)(2), and a contribution
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into a High Deductible MedicarePlus medical
savings account (MSA).
‘‘(C) PLANS OFFERED BY PROVIDER-SPON-
SORED ORGANIZATION.—A MedicarePlus plan of-
fered by a provider-sponsored organization, as
defined in section 1853(i).
‘‘(D) UNION, TAFT-HARTLEY, AND ASSOCIA-
TION PLANS.—A MedicarePlus organization plan
offered by a MedicarePlus organization that is a
union sponsor, Taft-Hartley sponsor, or qualified
association sponsor, as defined in section
1859(a).
‘‘(E) FEE-FOR-SERVICE PLANS.—Plans that
reimburse hospitals, physicians, and other pro-
viders on the basis of a privately determined fee
schedule or other basis.
‘‘(F) OTHER
HEALTH
CARE
PLANS.—Any
other private plan for the delivery of health care
items and services that is not described in a pre-
vious subparagraph.
‘‘(3) MEDICAREPLUS ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—In this title, subject to
subparagraph (B), the term ‘MedicarePlus eligi-
ble individual’ means an individual who is enti-
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tled to benefits under part A and enrolled under
part B.
‘‘(B) SPECIAL RULE FOR END-STAGE RENAL
DISEASE.—Such term shall not include an indi-
vidual medically determined to have end-stage
renal disease, except that an individual who de-
velops end-stage renal disease while enrolled in a
MedicarePlus plan may continue to be enrolled
in that plan.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE REQUIREMENT.—
‘‘(A) IN GENERAL.—Except as the Secretary
may otherwise provide, an individual is eligible
to elect a MedicarePlus plan offered by a
MedicarePlus organization only if the organiza-
tion serves the geographic area in which the in-
dividual resides under the plan.
‘‘(B) CONTINUATION OF ENROLLMENT PER-
MITTED.—Pursuant to rules specified by the Sec-
retary, the Secretary shall provide that an indi-
vidual may continue enrollment in a plan, not-
withstanding that the individual no longer re-
sides in the service area of the plan, so long as
the plan provides benefits for providers located
in the area in which the individual resides.
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‘‘(2) AFFILIATION REQUIREMENTS FOR CERTAIN
PLANS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), an individual is eligible to elect a
MedicarePlus plan offered by—
‘‘(i) a union sponsor only if (I) the in-
dividual is a member of the sponsor and af-
filiated with the sponsor through an em-
ployment relationship with any employer or
is the spouse of such a member, and (II) the
individual elected under this section a
MedicarePlus plan offered by the sponsor
during the first enrollment period in which
the individual was eligible to make such
election with respect to such sponsor;
‘‘(ii) a Taft-Hartley sponsor only if (I)
the individual is entitled to obtain benefits
through such plans under the terms of an
applicable collective bargaining agreement,
and (II) the individual elected under this
section a MedicarePlus plan offered by the
sponsor during the first enrollment period
in which the individual was eligible to
make such election with respect to such
sponsor; and
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HR 2491 EAS
‘‘(iii) a qualified association sponsor
only if the individual is a member of the as-
sociation (or is a spouse of such a member).
‘‘(B) LIMITATION ON ENROLLMENT.—Sub-
ject to subparagraph (C)—
‘‘(i) a union sponsor may not enroll an
individual under this part unless the indi-
vidual 
is 
described 
in 
subparagraph
(A)(i)(I),
‘‘(ii) a Taft-Hartley sponsor may not
enroll an individual under this part unless
the individual is described in subparagraph
(A)(ii)(I), and
‘‘(iii) a qualified association sponsor
may not enroll an individual under this
part unless the individual is described in
subparagraph (A)(iii).
‘‘(C) LIMITATION ON TERMINATION OF COV-
ERAGE.—A qualified association sponsor offering
a MedicarePlus plan to an individual may not
terminate coverage of the individual on the basis
that the individual is no longer a member of the
association except pursuant to a change of elec-
tion during an open election period occurring on
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or after the date of the termination of member-
ship.
‘‘(3) SPECIAL RULES FOR UNION, TAFT-HARTLEY,
AND QUALIFIED ASSOCIATION SPONSORS.—
‘‘(A) UNIONS.—Subject to subparagraph
(D), a union sponsor (as defined in section
1859(a)(5)) shall limit eligibility of enrollees
under this part for MedicarePlus plans it offers
to individuals who are members of the sponsor
and affiliated with the sponsor through an em-
ployment relationship with any employer or are
the spouses of such members.
‘‘(B) TAFT-HARTLEY SPONSORS.—Subject to
subparagraph (D), a MedicarePlus organization
that is a Taft-Hartley sponsor (as defined in sec-
tion 1859(a)(4)) shall limit eligibility of enroll-
ees under this part for MedicarePlus plans it of-
fers to individuals who are entitled to obtain
benefits through such plans under the terms of
an applicable collective bargaining agreement.
‘‘(C) QUALIFIED ASSOCIATION SPONSORS.—
‘‘(i) IN GENERAL.—Subject to subpara-
graph (D), a MedicarePlus organization
that is a qualified association sponsor (as
defined in section 1859(a)(3)) shall limit
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eligibility of individuals under this part for
plans it offers to individuals who are mem-
bers of the association (or who are spouses
of such individuals).
‘‘(ii) LIMITATION ON TERMINATION OF
COVERAGE.—Such a qualifying association
sponsor offering a MedicarePlus plan to an
individual may not terminate coverage of
the individual on the basis that the individ-
ual is no longer a member of the association
except pursuant to a change of election dur-
ing an open election period occurring on or
after the date of the termination of member-
ship.
‘‘(D) LIMITATION.—Rules of eligibility to
carry out the previous subparagraphs of this
paragraph shall not have the effect of denying
eligibility to individuals on the basis of health
status, claims experience, receipt of health care,
medical history, or lack of evidence of insurabil-
ity.
‘‘(E) 
NO
REELECTION
AFTER
DISENROLLMENT FOR CERTAIN PLANS.—An indi-
vidual is not eligible to elect a MedicarePlus
plan offered by a MedicarePlus organization that
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is a union sponsor or a Taft-Hartley sponsor if
the 
individual 
previously 
had 
elected 
a
MedicarePlus plan offered by the organization
and had subsequently discontinued election of
such a plan offered by the organization.
‘‘(4) SPECIAL RULE FOR CERTAIN INDIVIDUALS
COVERED UNDER FEHBP.—An individual who is en-
rolled in a health benefit plan under chapter 89 of
title 5, United States Code, is not eligible to enroll in
a high deductible plan until such time as the Director
of the Office of Management and Budget certifies to
the Secretary that the Office of Personnel Manage-
ment has adopted policies which will ensure that the
enrollment of such individuals in such plans will not
result in increased expenditures for the Federal Gov-
ernment for health benefit plans under such chapter.
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall establish
a process through which elections described in sub-
section (a) are made and changed, including the form
and manner in which such elections are made and
changed. Such elections shall be made or changed only
during coverage election periods specified under sub-
section (e) and shall become effective as provided in
subsection (f).
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‘‘(2) EXPEDITED
IMPLEMENTATION.—The Sec-
retary shall establish the process of electing coverage
under this section during the transition period (as de-
fined in subsection (e)(1)(B)) in such an expedited
manner as will permit such an election for
MedicarePlus plans in an area as soon as such plans
become available in that area.
‘‘(3) COORDINATION
THROUGH
MEDICAREPLUS
ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a
MedicarePlus plan offered by a MedicarePlus or-
ganization to make such election through the fil-
ing of an appropriate election form with the or-
ganization.
‘‘(B) DISENROLLMENT.—Such process shall
permit an individual, who has elected a
MedicarePlus plan offered by a MedicarePlus or-
ganization and who wishes to terminate such
election, to terminate such election through the
filing of an appropriate election form with the
organization.
‘‘(4) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
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‘‘(i) IN
GENERAL.—Subject to clause
(ii), an individual who fails to make an
election during an initial election period
under subsection (e)(1) is deemed to have
chosen the Medicare fee-for-service program
option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary shall establish
procedures under which individuals who are
enrolled with a MedicarePlus organization
at the time of the initial election period and
who fail to elect to receive coverage other
than through the organization are deemed
to have elected the MedicarePlus plan of-
fered by the organization (or, if the organi-
zation offers more than one such plan, the
MedicarePlus plan offered by the organiza-
tion with the lowest net monthly premium).
‘‘(B) CONTINUING PERIODS.—An individual
who has made (or is deemed to have made) an
election under this section is considered to have
continued to make such election until such time
as—
‘‘(i) the individual changes the election
under this section, or
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‘‘(ii) a MedicarePlus plan is discon-
tinued, if the individual had elected such
plan at the time of the discontinuation.
‘‘(d) PROVIDING
INFORMATION
TO
PROMOTE
IN-
FORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to broadly dissemi-
nate information to medicare beneficiaries (and pro-
spective medicare beneficiaries) on the coverage op-
tions provided under this section in order to promote
an active, informed selection among such options.
‘‘(2) PROVISION OF NOTICE.—
‘‘(A) OPEN SEASON NOTIFICATION.—At least
15 days before the beginning of each annual, co-
ordinated election period, the Secretary shall
mail to each MedicarePlus eligible individual re-
siding in an area the following:
‘‘(i) GENERAL ELECTION INFORMATION
AND INFORMATION ABOUT MEDICARE FEE-
FOR-SERVICE PROGRAM.—The general infor-
mation regarding election, benefits coverage,
and procedures described in paragraph (3).
‘‘(ii) LIST OF PLANS AND COMPARISON
OF PLAN OPTIONS.—A list identifying the
MedicarePlus plans that are (or will be)
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available to residents of the area (and their
service areas) and information, described in
paragraph (4) and in comparative form,
concerning such plans.
‘‘(iii) MEDICAREPLUS MONTHLY CAPI-
TATION RATE.—The amount of the monthly
MedicarePlus capitation rate for the area.
‘‘(iv) ADDITIONAL INFORMATION.—Any
other information that the Secretary deter-
mines will assist the individual in making
the election under this section.
The mailing of such information shall be coordi-
nated with the mailing of any annual notice
under section 1804.
‘‘(B) 
NOTIFICATION
TO
NEWLY
MEDICAREPLUS ELIGIBLE INDIVIDUALS.—To the
extent practicable, the Secretary shall, not later
than 2 months before the beginning of the initial
MedicarePlus enrollment period for an individ-
ual described in subsection (e)(1)(A), mail to the
individual the information described in subpara-
graph (A).
‘‘(C) FORM.—The information disseminated
under this paragraph shall be written and
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formatted in the most easily understandable
manner possible.
‘‘(D) PERIODIC
UPDATING.—The informa-
tion described in subparagraph (A) shall be up-
dated on at least an annual basis to reflect
changes in the availability of MedicarePlus
plans and the benefits and monthly premiums
(and net monthly premiums) for such plans.
‘‘(3) GENERAL ELECTION INFORMATION AND IN-
FORMATION ABOUT MEDICARE FEE-FOR-SERVICE PRO-
GRAM.—General information under this paragraph,
with respect to coverage under this part during a
year, shall include the following:
‘‘(A) BENEFITS.—A general description of
the benefits covered (and not covered) under the
medicare fee-for-service program under parts A
and B, including—
‘‘(i) covered items and services, and
‘‘(ii) beneficiary cost sharing, such as
deductibles, coinsurance, and copayment
amounts, and the beneficiary liability for
balance billing.
‘‘(B) PART B PREMIUM.—The part B pre-
mium rates that will be charged for part B cov-
erage.
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‘‘(C) ELECTION PROCEDURES.—Information
and instructions on how to exercise election op-
tions under this section.
‘‘(D) PROCEDURAL
RIGHTS.—The general
description of procedural rights (including griev-
ance procedures) of beneficiaries under the medi-
care 
fee-for-service 
program 
and 
the
MedicarePlus program.
‘‘(E) RIGHT OF ORGANIZATION TO TERMI-
NATE
CONTRACT.—The 
right 
of 
each
MedicarePlus organization by law to terminate
or refuse to renew its contract and the effect the
termination or nonrenewal of its contract may
have 
on 
individuals 
enrolled 
with 
the
MedicarePlus plan under this part.
‘‘(F) USE OF 911 EMERGENCY NUMBER.—A
statement that the use of the 911 emergency tele-
phone number is appropriate in emergency situ-
ations and an explanation of what constitutes an
emergency situation.
‘‘(4) INFORMATION COMPARING PLAN OPTIONS.—
Information under this paragraph, with respect to a
MedicarePlus plan for a year, shall include the fol-
lowing:
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‘‘(A) 
BENEFITS.—The 
benefits 
covered
under the plan, including covered items and
services beyond those provided under the medi-
care fee-for-service program, any reductions in
beneficiary cost sharing, and any maximum lim-
itations on out-of-pocket losses.
‘‘(B) PREMIUMS.—The monthly premium
(and net monthly premium, including any re-
bate) for the plan.
‘‘(C) QUALITY.—(i) To the extent available,
quality indicators for the benefits under the plan
(in comparison with quality indicators under
the Medicare fee-for-service program under parts
A and B in the area involved), including—
‘‘(I) disenrollment rates for medicare
enrollees electing to receive benefits through
the plan for the previous 2 years (excluding
disenrollment due to death or moving out-
side the plan’s service area),
‘‘(II) information on medicare enrollee
satisfaction and health outcomes, and
‘‘(III) whether the plan is out of com-
pliance with any requirements of this part
(as determined by the Secretary).
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‘‘(D) 
SUPPLEMENTAL
COVERAGE
OP-
TIONS.—Whether the organization offering the
plan offers optional supplemental coverage.
‘‘(5) MAINTAINING A TOLL-FREE NUMBER.—The
Secretary shall maintain a toll-free number for in-
quiries regarding MedicarePlus options and the oper-
ation of part C in all areas in which MedicarePlus
plans are offered.
‘‘(6) USE OF NONFEDERAL ENTITIES.—The Sec-
retary shall, to the maximum extent feasible, enter
into contracts with appropriate non-Federal entities
to carry out activities under this subsection.
‘‘(7) 
PROVISION
OF
INFORMATION.—A
MedicarePlus organization shall provide the Secretary
with such information on the organization and each
MedicarePlus plan it offers as may be required for the
preparation of the information referred to in para-
graph (2)(A).
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE
ELECTION.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who first becomes entitled to benefits
under part A and enrolled under part B after
the beginning of the transition period (as defined
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in subparagraph (B)), the individual shall make
the election under this section during a period
(of a duration and beginning at a time specified
by the Secretary) at the first time the individual
both is entitled to benefits under part A and en-
rolled under part B. Such period shall be speci-
fied in a manner so that, in the case of an indi-
vidual who elects a MedicarePlus plan during
the period, coverage under the plan becomes effec-
tive as of the first date on which the individual
may receive such coverage.
‘‘(B) TRANSITION
PERIOD
DEFINED.—In
this subsection, the term ‘transition period’
means, with respect to an individual in an area,
the period beginning on the first day of the first
month in which a MedicarePlus plan is first
made available to individuals in the area and
ending with the month preceding the beginning
of the first annual, coordinated election period
under paragraph (3).
‘‘(2) DURING TRANSITION PERIOD.—Subject to
paragraph (6)—
‘‘(A) CONTINUOUS OPEN ENROLLMENT INTO
A MEDICAREPLUS OPTION.—During the transi-
tion period, a MedicarePlus eligible individual
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who has elected the Medicare fee-for-service pro-
gram option described in subsection (a)(1)(A)
may change such election to a MedicarePlus op-
tion described in subsection (a)(1)(B) at any
time.
‘‘(B) OPEN DISENROLLMENT BEFORE END
OF TRANSITION PERIOD.—
‘‘(i) IN GENERAL.—During the transi-
tion period, an individual who has elected
a MedicarePlus option described in sub-
section (a)(1)(B) for a MedicarePlus plan
may change such election to another
MedicarePlus plan or to the Medicare fee-
for-service program option described in sub-
section (a)(1)(A).
‘‘(ii) 
SPECIAL
RULE.—During 
the
transition period, an individual who has
elected a high deductible plan may not
change such election to a MedicarePlus plan
that is not a high deductible plan unless the
individual has had such election in effect
for 12 consecutive months.
‘‘(3) ANNUAL, 
COORDINATED
ELECTION
PE-
RIOD.—
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‘‘(A) IN GENERAL.—Subject to paragraph
(5), each individual who is eligible to make an
election under this section may change such elec-
tion during an annual, coordinated election pe-
riod.
‘‘(B) ANNUAL, COORDINATED ELECTION PE-
RIOD.—For purposes of this section, the term
‘annual, coordinated election period’ means, with
respect to a calendar year (beginning with
1998), the month of October before such year.
‘‘(C) MEDICAREPLUS HEALTH FAIR DURING
OCTOBER, 1996.—In the month of October, 1996,
the Secretary shall provide for a nationally co-
ordinated educational and publicity campaign to
inform MedicarePlus eligible individuals about
such plans and the election process provided
under this section (including the annual, coordi-
nated election periods that occur in subsequent
years).
‘‘(4) SPECIAL 90-DAY DISENROLLMENT OPTION.—
‘‘(A) IN GENERAL.—In the case of the first
time an individual elects any MedicarePlus plan
(other than a high deductible plan) offered by a
particular MedicarePlus organization under this
section, the individual may change such election
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through the filing of an appropriate notice dur-
ing the 90-day period beginning on the first day
on which the individual’s coverage under the
MedicarePlus plan under such option becomes ef-
fective.
‘‘(B) LIMITATION.—Subparagraph (A)—
‘‘(i) shall only apply once for an indi-
vidual with respect to any particular orga-
nization, and
‘‘(ii) may not apply more than twice
for any individual in a calendar year.
‘‘(C) EFFECT
OF
DISCONTINUATION
OF
ELECTION.—An individual who discontinues an
election under subparagraph (A) may, during
the period specified by the Secretary, make a
new election under this subsection (a) (or, in the
absence of such an election, is deemed at the time
of such discontinuation to have elected the Medi-
care fee-for-service program option described in
subsection (a)(1)(A)).
‘‘(5) SPECIAL ELECTION PERIODS.—An individ-
ual may discontinue an election of a MedicarePlus
plan offered by a MedicarePlus organization other
than during an annual, coordinated election period
and make a new election under this section if—
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‘‘(A) the organization’s or plan’s certifi-
cation under part C has been terminated or the
organization has terminated or otherwise discon-
tinued providing the plan;
‘‘(B) the individual is no longer eligible to
elect the plan because of a change in the individ-
ual’s place of residence or other change in cir-
cumstances (specified by the Secretary, but not
including termination of membership in a quali-
fied association in the case of a plan offered by
a qualified association sponsor or termination of
the individual’s enrollment on the basis described
in clause (i) or (ii) section 1851(g)(3)(B));
‘‘(C) the individual demonstrates (in ac-
cordance with guidelines established by the Sec-
retary) that—
‘‘(i) the organization offering the plan
substantially violated a material provision
of the organization’s contract under part C
in relation to the individual and the plan;
or
‘‘(ii) the organization (or an agent or
other entity acting on the organization’s be-
half) materially misrepresented the plan’s
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provisions in marketing the plan to the in-
dividual; or
‘‘(D) the individual meets such other condi-
tions as the Secretary may provide.
‘‘(6) SPECIAL
RULE
FOR
HIGH
DEDUCTIBLE
PLANS.—Notwithstanding the previous provisions of
this subsection, an individual may elect a high de-
ductible plan only during an annual, coordinated
election period described in paragraph (3)(B) or dur-
ing the month of October, 1996.
‘‘(f) EFFECTIVENESS OF ELECTIONS.—
‘‘(1) DURING INITIAL COVERAGE ELECTION PE-
RIOD.—An election of coverage made during the ini-
tial 
coverage 
election 
period 
under 
subsection
(e)(1)(A) shall take effect upon the date the individual
becomes entitled to benefits under part A and enrolled
under part B, except as the Secretary may provide
(consistent with section 1838) in order to prevent ret-
roactive coverage.
‘‘(2) 
DURING
TRANSITION; 
90-DAY
DISENROLLMENT
OPTION.—An election of coverage
made under subsection (e)(2) and an election to dis-
continue a MedicarePlus option under subsection
(e)(4) at any time shall take effect with the first cal-
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endar month following the date on which the election
is made.
‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD
AND HIGH DEDUCTIBLE PLAN ELECTION.—An election
of coverage made during an annual, coordinated elec-
tion period (as defined in subsection (e)(3)(B)) in a
year or for a high deductible plan shall take effect as
of the first day of the following year.
‘‘(4) OTHER PERIODS.—An election of coverage
made during any other period under subsection (e)(5)
shall take effect in such manner as the Secretary pro-
vides in a manner consistent (to the extent prac-
ticable) with protecting continuity of health benefit
coverage.
‘‘(g) GUARANTEED ISSUE AND RENEWAL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, a MedicarePlus organization shall provide
that at any time during which elections are accepted
under this section with respect to a MedicarePlus
plan offered by the organization, the organization will
accept without restrictions individuals who are eligi-
ble to make such election.
‘‘(2) PRIORITY.—If the Secretary determines that
a MedicarePlus organization, in relation to a
MedicarePlus plan it offers, has a capacity limit and
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the number of MedicarePlus eligible individuals who
elect the plan under this section exceeds the capacity
limit, the organization may limit the election of indi-
viduals of the plan under this section but only if pri-
ority in election is provided—
‘‘(A) first to such individuals as have elect-
ed the plan at the time of the determination, and
‘‘(B) then to other such individuals in such
a manner that does not discriminate among the
individuals (who seek to elect the plan) on a
basis described in section 1852(b).
The preceding sentence shall not apply if it would re-
sult in the enrollment of enrollees substantially
nonrepresentative, as determined in accordance with
regulations of the Secretary, of the medicare popu-
lation in the service area of the plan.
‘‘(3) LIMITATION
ON
TERMINATION
OF
ELEC-
TION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a MedicarePlus organization may not
for any reason terminate the election of any in-
dividual under this section for a MedicarePlus
plan it offers.
‘‘(B) BASIS
FOR
TERMINATION
OF
ELEC-
TION.—A MedicarePlus organization may termi-
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nate an individual’s election under this section
with respect to a MedicarePlus plan it offers if—
‘‘(i) any net monthly premiums re-
quired with respect to such plan are not
paid on a timely basis (consistent with
standards under section 1856 that provide
for a grace period for late payment of net
monthly premiums),
‘‘(ii) the individual has engaged in
disruptive behavior (as specified in such
standards), or
‘‘(iii) the plan is terminated with re-
spect to all individuals under this part.
Any individual whose election is so terminated is
deemed to have elected the Medicare fee-for-serv-
ice program option described in subsection
(a)(1)(A).
‘‘(C) LIMITATION ON TERMINATION OF COV-
ERAGE.—A qualified association sponsor offering
a MedicarePlus plan to an individual may not
terminate coverage of the individual on the basis
that the individual is no longer a member of the
association except pursuant to a change of elec-
tion during an open election period occurring on
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or after the date of the termination of member-
ship.
‘‘(D) ORGANIZATION OBLIGATION WITH RE-
SPECT
TO
ELECTION
FORMS.—Pursuant to a
contract under section 1857, each MedicarePlus
organization receiving an election form under
subsection (c)(3) shall transmit to the Secretary
(at such time and in such manner as the Sec-
retary may specify) a copy of such form or such
other information respecting the election as the
Secretary may specify.
‘‘(h) APPROVAL OF MARKETING MATERIALS.—
‘‘(1) SUBMISSION.—No marketing materials may
be distributed by a MedicarePlus organization to (or
for the use of) MedicarePlus eligible individuals un-
less—
‘‘(A) at least 45 days before the date of dis-
tribution the organization has submitted the ma-
terial to the Secretary for review, and
‘‘(B) the Secretary has not disapproved the
distribution of such material.
‘‘(2) REVIEW.—The standards established under
section 1856 shall include guidelines for the review of
all such material submitted and under such guide-
lines the Secretary shall disapprove such material if
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the material is materially inaccurate or misleading
or otherwise makes a material misrepresentation.
‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—
In the case of material that is submitted under para-
graph (1)(A) to the Secretary or a regional office of
the Department of Health and Human Services and
the Secretary or the office has not disapproved the
distribution of marketing materials under paragraph
(1)(B) with respect to a MedicarePlus plan in an
area, the Secretary is deemed not to have disapproved
such distribution in all other areas covered by the
plan and organization.
‘‘(4) PROHIBITION
OF
CERTAIN
MARKETING
PRACTICES.—Each MedicarePlus organization shall
conform to fair marketing standards in relation to
MedicarePlus plans offered under this part, included
in the standards established under section 1856. Such
standards shall include a prohibition against an or-
ganization (or agent of such an organization) com-
pleting any portion of any election form used to carry
out elections under this section on behalf of any indi-
vidual.
‘‘(i) EFFECT OF ELECTION OF MEDICAREPLUS PLAN
OPTION.—Subject to section 1852(a)(5)—
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‘‘(1) payments under a contract with a
MedicarePlus organization under section 1854(a)
with respect to an individual electing a MedicarePlus
plan offered by the organization shall be instead of
the amounts which (in the absence of the contract)
would otherwise be payable under parts A and B for
items and services furnished to the individual, and
‘‘(2) subject to subsections (e) and (f) of section
1854, only the MedicarePlus organization shall be en-
titled to receive payments from the Secretary under
this title for services furnished to the individual.
‘‘(j) ADMINISTRATION.—
‘‘(1) IN GENERAL.—This part and section 1876
shall be administered through an operating division
(A) that is established or identified by the Secretary
and is in the Department of Health and Human
Services, (B) that is separate from the Health Care
Financing Administration, and (C) the primary
function of which is the administration of this part
and such section. The director of such division shall
be of equal pay and rank to that of the individual re-
sponsible for overall administration of parts A and B.
‘‘(2) TRANSFER
AUTHORITY.—The Secretary
shall transfer such personnel, administrative support
systems, assets, records, funds, and other resources in
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the Health Care Financing Administration to the op-
erating division referred to in paragraph (1) as are
used in the administration of section 1876 and as
may be required to implement the provisions of this
part promptly and efficiently.
‘‘BENEFITS AND BENEFICIARY PROTECTIONS
‘‘SEC. 1852. (a) BASIC BENEFITS.—
‘‘(1) IN GENERAL.—Except as provided in sec-
tion 1859(b)(2) for high deductible plans, each
MedicarePlus plan shall provide to members enrolled
under this part, through providers and other persons
that meet the applicable requirements of this title and
part A of title XI—
‘‘(A) those items and services for which ben-
efits are available under parts A and B to indi-
viduals residing in the area served by the plan,
and
‘‘(B) additional health services as the Sec-
retary may approve.
The Secretary shall approve any such additional
health care services which the plan proposes to offer
to such members, unless the Secretary determines that
including such additional services will substantially
discourage enrollment by MedicarePlus eligible indi-
viduals with the plan.
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‘‘(2) 
SATISFACTION
OF
REQUIREMENT.—A
MedicarePlus plan (other than a high deductible
plan) offered by a MedicarePlus organization satisfies
paragraph (1)(A) with respect to benefits for items
and services if the following requirements are met:
‘‘(A) FEE FOR SERVICE PROVIDERS.—In the
case of benefits furnished through a provider that
does not have a contract with the organization,
the plan provides for at least the dollar amount
of payment for such items and services as would
otherwise be provided under parts A and B.
‘‘(B) PARTICIPATING
PROVIDERS.—In the
case of benefits furnished through a provider that
has such a contract, the individual’s liability for
payment for such items and services does not ex-
ceed (after taking into account any deductible,
which does not exceed any deductible under parts
A and B) the lesser of the following:
‘‘(i) INDIVIDUAL’S
LIABILITY
UNDER
MEDICARE
FEE-FOR-SERVICE
PROGRAM.—
The amount of the liability that the indi-
vidual would have had (based on the pro-
vider being a participating provider) if the
individual had not elected coverage under a
MedicarePlus plan.
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‘‘(ii) MEDICARE
COINSURANCE
AP-
PLIED TO PLAN PAYMENT RATES.—The ap-
plicable coinsurance or copayment rate
(that would have applied under the Medi-
care fee-for-service program option described
in section 1851(a)(1)(A)) of the payment
rate provided under the contract.
‘‘(3) SUPPLEMENTAL
OPTIONAL
BENEFITS.—
Each MedicarePlus organization may offer under a
MedicarePlus plan optional supplemental benefits to
each individual enrolled in the plan under this part
for an additional premium amount. If the supple-
mental benefits are offered only to individuals en-
rolled in the sponsor’s plan under this part, the addi-
tional premium amount shall be the same for all en-
rolled individuals in the MedicarePlus payment area.
Such benefits may be marketed and sold by the
MedicarePlus organization outside of the enrollment
process described in section 1851(c).
‘‘(4) ORGANIZATION
AS
SECONDARY
PAYER.—
Notwithstanding any other provision of law, a
MedicarePlus organization may (in the case of the
provision of items and services to an individual
under a MedicarePlus plan under circumstances in
which payment under this title is made secondary
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pursuant to section 1862(b)(2)) charge or authorize
the provider of such services to charge, in accordance
with the charges allowed under such a law, plan, or
policy—
‘‘(A) the insurance carrier, employer, or
other entity which under such law, plan, or pol-
icy is to pay for the provision of such services,
or
‘‘(B) such individual to the extent that the
individual has been paid under such law, plan,
or policy for such services.
‘‘(5) NATIONAL COVERAGE DETERMINATIONS.—If
there is a national coverage determination made in
the period beginning on the date of an announcement
under section 1854(b) and ending on the date of the
next announcement under such section and the Sec-
retary projects that the determination will result in
a significant change in the costs to a MedicarePlus
organization of providing the benefits that are the
subject of such national coverage determination and
that such change in costs was not incorporated in the
determination of the annual MedicarePlus capitation
rate under section 1854 included in the announce-
ment made at the beginning of such period—
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‘‘(A) such determination shall not apply to
contracts under this part until the first contract
year that begins after the end of such period, and
‘‘(B) if such coverage determination pro-
vides for coverage of additional benefits or cov-
erage under additional circumstances, section
1851(i) shall not apply to payment for such ad-
ditional benefits or benefits provided under such
additional circumstances until the first contract
year that begins after the end of such period,
unless otherwise required by law.
‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi-
zation may not deny, limit, or condition the coverage or
provision of benefits under this part based on the health
status, claims experience, receipt of health care, medical his-
tory, or lack of evidence of insurability, of an individual.
A MedicarePlus organization shall notify each enrollee
under this part of provisions of this subsection at the time
of the individual’s enrollment.
‘‘(c) DETAILED DESCRIPTION OF PLAN PROVISIONS.—
A MedicarePlus organization shall disclose, in clear, accu-
rate, and standardized form to each enrollee with a
MedicarePlus plan offered by the organization under this
part at the time of enrollment and at least annually there-
after, the following information regarding such plan:
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‘‘(1) SERVICE AREA.—The plan’s service area.
‘‘(2) BENEFITS.—Benefits under the plan offered,
including 
information 
described 
in 
section
1851(d)(3)(A) and exclusions from coverage and, if it
is a high deductible plan, a comparison of benefits
under such a plan with benefits under other
MedicarePlus plans.
‘‘(3) ACCESS.—The number, mix, and distribu-
tion of participating providers.
‘‘(4) OUT-OF-AREA
COVERAGE.— Out-of-area
coverage provided by the plan.
‘‘(5) EMERGENCY COVERAGE.—Coverage of emer-
gency services and urgently needed care.
‘‘(6) OPTIONAL
SUPPLEMENTAL
COVERAGE.—
Optional supplemental coverage available from the or-
ganization offering the plan, including—
‘‘(A) supplemental items and services cov-
ered, and
‘‘(B) the premium price for the optional
supplemental benefits.
‘‘(7) PRIOR AUTHORIZATION RULES.—Rules re-
garding prior authorization or other review require-
ments that could result in nonpayment.
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‘‘(8) PLAN
GRIEVANCE
PROCEDURES.— Any
plan-specific appeal or grievance rights and proce-
dures.
‘‘(9) QUALITY ASSURANCE PROGRAM.—A descrip-
tion of the organization’s quality assurance program
under subsection (e).
‘‘(d) ACCESS TO SERVICES.—
‘‘(1) IN GENERAL.—A MedicarePlus organization
offering a MedicarePlus plan may restrict the provid-
ers from whom the benefits under the plan are pro-
vided so long as—
‘‘(A) the organization makes such benefits
available and accessible to each individual elect-
ing the plan within the plan service area with
reasonable promptness and in a manner which
assures continuity in the provision of benefits;
‘‘(B) when medically necessary the organi-
zation makes such benefits available and acces-
sible 24 hours a day and 7 days a week;
‘‘(C) the plan provides for reimbursement
with respect to services which are covered under
subparagraphs (A) and (B) and which are pro-
vided to such an individual other than through
the organization, if—
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‘‘(i) the services were medically nec-
essary and immediately required because of
an unforeseen illness, injury, or condition,
and
‘‘(ii) it was not reasonable given the
circumstances to obtain the services through
the organization;
‘‘(D) the organization provides access to ap-
propriate providers, including credentialed spe-
cialists, for medically necessary treatment and
services, and
‘‘(E) coverage is provided for emergency
services (as defined in paragraph (3)) without
regard to prior authorization or the emergency
care provider’s contractual relationship with the
organization.
‘‘(2) PROTECTION OF ENROLLEES FOR CERTAIN
EMERGENCY SERVICES.—
‘‘(A) PARTICIPATING
PROVIDERS.—In the
case of emergency services described in subpara-
graph (C) which are furnished by a participat-
ing physician or provider of services to an indi-
vidual enrolled with a MedicarePlus organiza-
tion under this section, the applicable participa-
tion agreement is deemed to provide that the
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physician or provider of services will accept as
payment in full from the organization for such
emergency services described in subparagraph
(C) the amount that would be payable to the
physician or provider of services under part B
and from the individual under such part, if the
individual were not enrolled with such an orga-
nization under this part.
‘‘(B) NONPARTICIPATING
PROVIDERS.—In
the case of emergency services described in sub-
paragraph (C) which are furnished by a
nonparticipating physician, the limitations on
actual charges for such services otherwise appli-
cable under part B (to services furnished by in-
dividuals not enrolled with a MedicarePlus orga-
nization under this section) shall apply in the
same manner as such limitations apply to serv-
ices furnished to individuals not enrolled with
such an organization.
‘‘(C) EMERGENCY SERVICES DESCRIBED.—
The emergency services described in this sub-
paragraph are emergency services which are fur-
nished to an enrollee of a MedicarePlus organi-
zation under this part by a physician or pro-
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vider of services that is not under a contract
with the organization.
‘‘(D) EXCEPTION FOR UNRESTRICTED FEE-
FOR-SERVICE PLANS.—The previous provisions of
this paragraph shall not apply in the case of a
MedicarePlus organization in relation to a
MedicarePlus unrestricted fee-for-service plan (as
defined in section 1859(b)(3)).
‘‘(3) DEFINITION OF EMERGENCY SERVICES.—In
this subsection, the term ‘emergency services’ means,
with respect to an individual enrolled with an orga-
nization, covered inpatient and outpatient services
that—
‘‘(A) are furnished by an appropriate
source other than the organization,
‘‘(B) are needed immediately because of an
injury or sudden illness, and
‘‘(C) are needed because the time required to
reach the organization’s providers or suppliers
would have meant risk of serious damage to the
patient’s health.
‘‘(e) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation must have arrangements, established in accord-
ance with regulations of the Secretary, for an ongoing
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quality assurance program for health care services it
provides to individuals enrolled with MedicarePlus
plans of the organization.
‘‘(2) ELEMENTS OF PROGRAM.—The quality as-
surance program shall—
‘‘(A) stress health outcomes;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on cur-
rent standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process fol-
lowed in the provision of such health care serv-
ices;
‘‘(D) monitor and evaluate high volume and
high risk services and the care of acute and
chronic conditions;
‘‘(E) evaluate the continuity and coordina-
tion of care that enrollees receive;
‘‘(F) have mechanisms to detect both under-
utilization and overutilization of services;
‘‘(G) after identifying areas for improve-
ment, establish or alter practice parameters;
‘‘(H) take action to improve quality and as-
sesses the effectiveness of such action through sys-
tematic follow-up;
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‘‘(I) make available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage options
(in such form and on such quality and outcomes
measures as the Secretary determines to be ap-
propriate); and
‘‘(J) be evaluated on an ongoing basis as to
its effectiveness.
‘‘(3) EXTERNAL
REVIEW.—Each MedicarePlus
organization shall, for each MedicarePlus plan it op-
erates, have an agreement with an independent qual-
ity review and improvement organization approved
by the Secretary.
‘‘(4) EXCEPTION FOR UNRESTRICTED FEE-FOR-
SERVICE PLANS.—Paragraphs (1) and (3) and sub-
section (h)(2) (relating to maintaining medical
records) shall not apply in the case of a MedicarePlus
organization in relation to a MedicarePlus unre-
stricted fee-for-service plan.
‘‘(5) TREATMENT OF ACCREDITATION.—The Sec-
retary shall provide that a MedicarePlus organization
is deemed to meet the requirements of paragraphs (1)
through (3) of this subsection and subsection (h) (re-
lating to confidentiality and accuracy of medical
records) if the organization is accredited (and peri-
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odically reaccredited) by a private organization under
a process that the Secretary has determined assures
that the organization meets standards that are no less
stringent than the standards established under section
1856 to carry out this subsection and such subsection.
‘‘(f) COVERAGE DETERMINATIONS.—
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
MedicarePlus organization shall make determinations
regarding authorization requests for nonemergency
care on a timely basis, depending on the urgency of
the situation.
‘‘(2) APPEALS.—
‘‘(A) IN GENERAL.—Appeals from a deter-
mination of an organization denying coverage
shall be decided within 30 days of the date of re-
ceipt of medical information, but not later than
60 days after the date of the decision.
‘‘(B) PHYSICIAN DECISION ON CERTAIN AP-
PEALS.—Appeal decisions relating to a deter-
mination to deny coverage based on a lack of
medical necessity shall be made only by a physi-
cian.
‘‘(C) EMERGENCY
CASES.—Appeals from
such a determination involving a life-threatening
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or emergency situation shall be decided on an ex-
pedited asis.
‘‘(g) GRIEVANCES AND APPEALS.—
‘‘(1) 
GRIEVANCE
MECHANISM.—Each
MedicarePlus organization must provide meaningful
procedures for hearing and resolving grievances be-
tween the organization (including any entity or indi-
vidual through which the organization provides health
care services) and enrollees with MedicarePlus plans
of the organization under this part.
‘‘(2) 
APPEALS.—An 
enrollee 
with 
a
MedicarePlus plan of a MedicarePlus organization
under this part who is dissatisfied by reason of the
enrollee’s failure to receive any health service to which
the enrollee believes the enrollee is entitled and at no
greater charge than the enrollee believes the enrollee is
required to pay is entitled, if the amount in con-
troversy is $100 or more, to a hearing before the Sec-
retary to the same extent as is provided in section
205(b), and in any such hearing the Secretary shall
make the organization a party. If the amount in con-
troversy is $1,000 or more, the individual or organi-
zation shall, upon notifying the other party, be enti-
tled to judicial review of the Secretary’s final decision
as provided in section 205(g), and both the individual
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and the organization shall be entitled to be parties to
that judicial review. In applying sections 205(b) and
205(g) as provided in this subparagraph, and in ap-
plying section 205(l) thereto, any reference therein to
the Commissioner of Social Security or the Social Se-
curity Administration shall be considered a reference
to the Secretary or the Department of Health and
Human Services, respectively.
‘‘(3) INDEPENDENT
REVIEW
OF
CERTAIN
COV-
ERAGE DENIALS.—The Secretary shall contract with
an independent, outside entity to review and resolve
appeals of denials of coverage related to urgent or
emergency services with respect to MedicarePlus
plans.
‘‘(4) 
COORDINATION
WITH
SECRETARY
OF
LABOR.—The Secretary shall consult with the Sec-
retary of Labor so as to ensure that the requirements
of this subsection, as they apply in the case of griev-
ances referred to in paragraph (1) to which section
503 of the Employee Retirement Income Security Act
of 1974 applies, are applied in a manner consistent
with the requirements of such section 503, so long as
such requirements provide at least as much protection
for beneficiaries as would apply if this paragraph did
not apply.
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‘‘(h) CONFIDENTIALITY AND ACCURACY OF ENROLLEE
RECORDS.—Each MedicarePlus organization shall establish
procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information, and
‘‘(2) to maintain accurate and timely medical
records for enrollees.
‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each
MedicarePlus organization shall meet the requirement of
section 1866(f) (relating to maintaining written policies
and procedures respecting advance directives).
‘‘(j) RULES REGARDING PHYSICIAN PARTICIPATION.—
‘‘(1) PROCEDURES.—Each MedicarePlus organi-
zation shall establish reasonable procedures relating to
the participation (under an agreement etween a phy-
sician and the organization) of physicians under
MedicarePlus plans offered by the organization under
this part. Such procedures shall include—
‘‘(A) providing notice of the rules regarding
participation,
‘‘(B) providing written notice of participa-
tion decisions that are adverse to physicians,
and
‘‘(C) providing a process within the organi-
zation for appealing adverse decisions, including
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the presentation of information and views of the
physician regarding such decision.
‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A
MedicarePlus organization shall consult with physi-
cians who have entered into participation agreements
with the organization regarding the organization’s
medical policy, quality, and medical management
procedures.
‘‘(3) LIMITATIONS
ON
PHYSICIAN
INCENTIVE
PLANS.—
‘‘(A) IN GENERAL.—No MedicarePlus orga-
nization may operate any physician incentive
plan (as defined in subparagraph (B)) unless the
following requirements are met:
‘‘(i) No specific payment is made di-
rectly or indirectly under the plan to a phy-
sician or physician group as an inducement
to reduce or limit medically necessary serv-
ices provided with respect to a specific indi-
vidual enrolled with the organization.
‘‘(ii) If the plan places a physician or
physician group at substantial financial
risk (as determined by the Secretary) for
services not provided by the physician or
physician group, the organization—
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‘‘(I) provides stop-loss protection
for the physician or group that is ade-
quate and appropriate, based on stand-
ards developed by the Secretary that
take into account the number of physi-
cians placed at such substantial finan-
cial risk in the group or under the
plan and the number of individuals
enrolled with the organization who re-
ceive services from the physician or the
physician group, and
‘‘(II) conducts periodic surveys of
both individuals enrolled and individ-
uals previously enrolled with the orga-
nization to determine the degree of ac-
cess of such individuals to services pro-
vided by the organization and satisfac-
tion with the quality of such services.
‘‘(iii) The organization provides the
Secretary with descriptive information re-
garding the plan, sufficient to permit the
Secretary to determine whether the plan is
in compliance with the requirements of this
subparagraph.
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‘‘(B) PHYSICIAN
INCENTIVE
PLAN
DE-
FINED.—In this paragraph, the term ‘physician
incentive plan’ means any compensation ar-
rangement between a MedicarePlus organization
and a physician or physician group that may
directly or indirectly have the effect of reducing
or limiting services provided with respect to in-
dividuals enrolled with the organization under
this part.
‘‘(4) LIMITATION
ON
PROVIDER
INDEMNIFICA-
TION.—A MedicarePlus organization may not provide
(directly or indirectly) for a provider (or group of
providers) to indemnify the organization against any
liability resulting from a civil action brought by or
on behalf of an enrollee under this part for any dam-
age caused to an enrollee with a MedicarePlus plan
of the organization by the organization’s denial of
medically necessary care.
‘‘(5) EXCEPTION FOR UNRESTRICTED FEE-FOR-
SERVICE PLANS.—The previous provisions of this sub-
section shall not apply in the case of a MedicarePlus
organization in relation to a MedicarePlus unre-
stricted fee-for-service plan.
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‘‘ORGANIZATIONAL
AND
FINANCIAL
REQUIREMENTS
FOR
MEDICAREPLUS
ORGANIZATIONS; 
PROVIDER-SPON-
SORED ORGANIZATIONS
‘‘SEC. 1853. (a) ORGANIZED AND LICENSED UNDER
STATE LAW.—
‘‘(1) IN GENERAL.—A MedicarePlus organization
shall be organized and licensed under State law as a
risk-bearing entity eligible to offer health insurance or
health benefits coverage in each State in which it of-
fers a MedicarePlus plan.
‘‘(2) EXCEPTION FOR CERTAIN UNION SPONSORS
AND TAFT-HARTLEY SPONSORS.—Paragraph (1) shall
not apply to a MedicarePlus organization that is a
union sponsor or Taft-Hartley sponsor.
‘‘(3) EXCEPTION FOR QUALIFIED ASSOCIATIONS
SPONSOR.—Paragraph (1) shall not apply to a
MedicarePlus organization that is a qualified associa-
tion sponsor.
‘‘(4) SPECIAL RULES FOR PROVIDER-SPONSORED
ORGANIZATIONS.—
‘‘(A) IN
GENERAL.—A provider-sponsored
organization that seeks to offer a MedicarePlus
plan in a State may apply for a waiver of the
requirement of paragraph (1) for that organiza-
tion operating in that State.
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‘‘(B) STANDARD.—The Secretary shall act
on such an application within 60 days after the
date it is filed and shall grant such a waiver for
an organization with respect to a State if the
Secretary determines that—
‘‘(i) the State has failed to complete ac-
tion on a licensing application of the orga-
nization within 90 days of the date of the
State’s receipt of the completed application;
or
‘‘(ii) the State denied such a licensing
application and—
‘‘(I) the State’s licensing stand-
ards or review process imposes any re-
quirements, procedures, or other stand-
ards to such organizations that are not
generally applicable to any other enti-
ties engaged in substantially similar
business,
‘‘(II) such standards or review
process applies solvency standards for
the organization and the State is not
approved under subsection (e)(2)(B), or
‘‘(III) the State has used solvency
standards to deny or discriminate
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against such an organization that has
been provided a certificate of solvency
under subsection (e)(2).
No period before the date of the enactment of this
section shall be included in determining the 90-
day period described in clause (i).
‘‘(C) TREATMENT OF WAIVER.—In the case
of a waiver granted under this paragraph for a
provider-sponsored organization—
‘‘(i) the waiver shall be effective for a
36-month period, except it may be renewed
based on a subsequent application filed dur-
ing the last 6 months of such period,
‘‘(ii) the waiver is conditioned upon
the pendency of the licensure application
during the period the waiver is in effect,
and
‘‘(iii) any provisions of State law
which relate to the licensing of the organiza-
tion and which prohibit the organization
from providing coverage pursuant to a con-
tract under this part shall be superseded.
Nothing in this subparagraph shall be construed
as limiting the number of times such a waiver
may be renewed.
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‘‘(D) 
CONSTRUCTION.—Nothing 
in 
this
paragraph shall be construed as affecting the op-
eration of section 514 of the Employee Retire-
ment Income Security Act of 1974.
‘‘(5) EXCEPTION IF REQUIRED TO OFFER MORE
THAN
MEDICAREPLUS
PLANS.—Paragraph (1) shall
not apply to a MedicarePlus organization in a State
if the State requires the organization, as a condition
of licensure, to offer any product or plan other than
a MedicarePlus plan.
‘‘(6) EXCEPTION IN CASES OF UNREASONABLE
BARRIERS TO MARKET ENTRY.—
‘‘(A) IN GENERAL.—A MedicarePlus organi-
zation that seeks to offer a MedicarePlus plan in
a State may apply for a waiver of the require-
ment of paragraph (1) for that organization op-
erating in that State.
‘‘(B) STANDARD.—The Secretary shall act
on such an application within 60 days after the
date it is filed and shall grant such a waiver for
an organization with respect to a State if the
Secretary determines that—
‘‘(i) the State (I) denied such a licens-
ing application or (II) unreasonably de-
layed in acting upon the application, and
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‘‘(ii) the State’s licensing standards or
review process imposes unreasonable bar-
riers to market entry, including through the
imposition of any requirements, procedures,
or other standards to such organizations
that are not generally applicable to any
other entities engaged in substantially simi-
lar business.
‘‘(C) APPLICATION
OF
CERTAIN
RULES.—
The provisions of subparagraphs (C) and (D) of
paragraph (4) shall apply to this paragraph in
the same manner as they apply under such
paragraph, except that for this purpose any ref-
erence in paragraph (4)(C)(i) to 36-month pe-
riod is deemed a reference to a 24-month period.
‘‘(b) PREPAID PAYMENT.—A MedicarePlus organiza-
tion shall be compensated (except for deductibles, coinsur-
ance, and copayments) for the provision of health care serv-
ices to enrolled members by a payment which is paid on
a periodic basis without regard to the date the health care
services are provided and which is fixed without regard to
the frequency, extent, or kind of health care service actually
provided to a member.
‘‘(c) ASSUMPTION OF FULL FINANCIAL RISK.—The
MedicarePlus organization shall assume full financial risk
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on a prospective basis for the provision of the health care
services (except, at the election of the organization, hospice
care) for which benefits are required to be provided under
section 1852(a)(1), except that the organization—
‘‘(1) may obtain insurance or make other ar-
rangements for the cost of providing to any enrolled
member such services the aggregate value of which ex-
ceeds $5,000 in any year,
‘‘(2) may obtain insurance or make other ar-
rangements for the cost of such services provided to its
enrolled members other than through the organization
because medical necessity required their provision be-
fore they could be secured through the organization,
‘‘(3) may obtain insurance or make other ar-
rangements for not more than 90 percent of the
amount by which its costs for any of its fiscal years
exceed 115 percent of its income for such fiscal year,
and
‘‘(4) may make arrangements with physicians or
other health professionals, health care institutions, or
any combination of such individuals or institutions
to assume all or part of the financial risk on a pro-
spective basis for the provision of basic health services
by the physicians or other health professionals or
through the institutions.
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In the case of a MedicarePlus organization that is a union
sponsor, Taft-Hartley sponsor, or a qualified association
sponsor, this subsection shall not apply with respect to
MedicarePlus plans offered by such organization and issued
by an organization to which subsection (b)(1) applies or
by a provider-sponsored organization (as defined in section
1854(a)).
‘‘(d) PROVISION AGAINST RISK OF INSOLVENCY.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation shall meet standards under section 1856 relat-
ing to the financial solvency and capital adequacy of
the organization and including provision to prevent
enrollees from being held liable to any person or en-
tity for the plan sponsor’s debts in the event of the
plan sponsor’s insolvency. Such standards shall take
into account the nature and type of MedicarePlus
plans offered by the organization.
‘‘(2) TREATMENT OF PROVIDER-SPONSORED OR-
GANIZATIONS.—
‘‘(A) IN GENERAL.—In the case of an entity
that is a provider-sponsored organization that is
operating—
‘‘(i) in a State approved under sub-
paragraph (B), the organization shall meet
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the standards described in paragraph (1)
through licensure by the State, or
‘‘(ii) in a State that is not so ap-
proved, the organization shall meet the
standards 
described 
in 
paragraph 
(1)
through application and certification licen-
sure by the Secretary.
‘‘(B) APPROVED STATES.—
‘‘(i) APPLICATION PROCESS.—For pur-
poses of subparagraph (A), the Secretary
shall establish a process under which a
State may apply to the Secretary for a de-
termination that the State is applying to
provider-sponsored organizations, through
its process for licensing provider-sponsored
organizations, solvency standards that are
identical with the solvency standards estab-
lished under section 1856(c) for such orga-
nizations.
‘‘(ii) DETERMINATION.—The Secretary
shall approve such a State if the Secretary
determines that the State is so applying
such standards. If the Secretary denies such
an approval, the State may reapply for
such a determination.
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‘‘(iii) PUBLICATION.—The Secretary
shall publish a list of States that are ap-
proved under this subparagraph.
‘‘(3) TREATMENT OF UNION AND TAFT-HARTLEY
SPONSORS.—An entity that is a union sponsor or a
Taft-Hartley sponsor is deemed to meet the require-
ment of paragraph (1).
‘‘(4) TREATMENT OF CERTAIN QUALIFIED ASSO-
CIATION SPONSORS.—An entity that is a qualified as-
sociation sponsor is deemed to meet the requirement
of paragraph (1) with respect to MedicarePlus plans
offered by such association and issued by an organi-
zation to which subsection (b)(1) applies or by a pro-
vider-sponsored organization.
‘‘(e) 
PROVIDER-SPONSORED
ORGANIZATION
DE-
FINED.—
‘‘(1) IN GENERAL.—In this part, the term ‘pro-
vider-sponsored organization’ means a public or pri-
vate entity—
‘‘(A) that is established or organized by a
health care provider, or group of affiliated health
care providers,
‘‘(B) that provides a substantial proportion
(as defined by the Secretary) of the health care
items and services under the contract under this
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part directly through the provider or affiliated
group of providers, and
‘‘(C) with respect to which those affiliated
providers that share, directly or indirectly, sub-
stantial financial risk with respect to the provi-
sion of such items and services have at least a
majority financial interest in the entity.
‘‘(2) SUBSTANTIAL
PROPORTION.—In defining
what is a ‘substantial proportion’ for purposes of
paragraph (1)(A), the Secretary—
‘‘(A) shall take into account the need for
such an organization to assume responsibility for
a substantial proportion of services in order to
assure financial stability and the practical dif-
ficulties in such an organization integrating a
very wide range of service providers; and
‘‘(B) may vary such proportion based upon
relevant differences among organizations, such as
their location in an urban or rural area.
‘‘(3) AFFILIATION.—For purposes of this sub-
section, a provider is ‘affiliated’ with another pro-
vider if, through contract, ownership, or otherwise—
‘‘(A) one provider, directly or indirectly,
controls, is controlled by, or is under common
control with the other,
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‘‘(B) both providers are part of a controlled
group of corporations under section 1563 of the
Internal Revenue Code of 1986, or
‘‘(C) both providers are part of an affiliated
service group under section 414 of such Code.
‘‘(4) CONTROL.—For purposes of paragraph (3),
control is presumed to exist if one party, directly or
indirectly, owns, controls, or holds the power to vote,
or proxies for, not less than 51 percent of the voting
rights or governance rights of another.
‘‘(5) HEALTH
CARE
PROVIDER
DEFINED.—In
this subsection and subsection (f), the term ‘health
care provider’ means—
‘‘(A) any individual who is engaged in the
delivery of health care services in a State and
who is required by State law or regulation to be
licensed or certified by the State to engage in the
delivery of such services in the State, and
‘‘(B) any entity that is engaged in the de-
livery of health care services in a State and that,
if it is required by State law or regulation to be
licensed or certified by the State to engage in the
delivery of such services in the State, is so li-
censed.
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‘‘(6) REGULATIONS.—The Secretary shall issue
regulations to carry out this subsection.
‘‘(f) ORGANIZATIONS TREATED
AS MEDICAREPLUS
ORGANIZATIONS DURING TRANSITION.—Any of the follow-
ing organizations shall be considered to qualify as a
MedicarePlus organization for contract years beginning be-
fore January 1, 1998:
‘‘(1) HEALTH MAINTENANCE ORGANIZATIONS.—
An organization that is organized under the laws of
any State and that is a qualified health maintenance
organization (as defined in section 1310(d) of the
Public Health Service Act), an organization recog-
nized under State law as a health maintenance orga-
nization, or a similar organization regulated under
State law for solvency in the same manner and to the
same extent as such a health maintenance organiza-
tion.
‘‘(2) LICENSED
INSURERS.—An organization
that is organized under the laws of any State and—
‘‘(A) is licensed by a State agency as an in-
surer for the offering of health benefit coverage,
or
‘‘(B) is licensed by a State agency as a
service benefit plan,
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but only for individuals residing in an area in which
the organization is licensed to offer health insurance
coverage.
‘‘(3) CURRENT RISK-CONTRACTORS.—An organi-
zation that is an eligible organization (as defined in
section 1876(b)) and that has a risk-sharing contract
in effect under section 1876 as of the date of the en-
actment of this section.
‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1854. (a) PAYMENTS TO ORGANIZATIONS.—
‘‘(1) MONTHLY PAYMENTS.—
‘‘(A) IN GENERAL.—Under a contract under
section 1857 and subject to subsections (e) and
(f), the Secretary shall make monthly payments
under 
this 
section 
in 
advance 
to 
each
MedicarePlus organization, with respect to cov-
erage of an individual under this part in a
MedicarePlus payment area for a month, in an
amount equal to 1⁄12 of the annual MedicarePlus
capitation rate (as calculated under subsection
(c)) with respect to that individual for that area,
adjusted for such risk factors as age, disability
status, gender, institutional status, and such
other factors as the Secretary determines to be
appropriate, so as to ensure actuarial equiva-
lence. The Secretary may add to, modify, or sub-
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stitute for such factors, if such changes will im-
prove the determination of actuarial equivalence.
‘‘(B) SPECIAL RULE FOR END-STAGE RENAL
DISEASE.—The Secretary shall establish a sepa-
rate rate of payment to a MedicarePlus organi-
zation with respect to any individual determined
to have end-stage renal disease and enrolled in
a MedicarePlus plan of the organization. Such
rate of payment shall be actuarially equivalent
to 
rates 
paid 
to 
other 
enrollees 
in 
the
MedicarePlus payment area (or such other area
as specified by the Secretary).
‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF EN-
ROLLEES.—
‘‘(A) IN
GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL RULE FOR CERTAIN ENROLL-
EES.—
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‘‘(i) IN
GENERAL.—Subject to clause
(ii), the Secretary may make retroactive ad-
justments under subparagraph (A) to take
into account individuals enrolled during the
period beginning on the date on which the
individual enrolls with a MedicarePlus or-
ganization under a plan operated, spon-
sored, or contributed to by the individual’s
employer or former employer (or the em-
ployer or former employer of the individ-
ual’s spouse) and ending on the date on
which the individual is enrolled in the orga-
nization under this part, except that for
purposes of making such retroactive adjust-
ments under this subparagraph, such period
may not exceed 90 days.
‘‘(ii) EXCEPTION.—No adjustment may
be made under clause (i) with respect to
any individual who does not certify that the
organization provided the individual with
the disclosure statement described in section
1852(c) at the time the individual enrolled
with the organization.
‘‘(b) ANNUAL ANNOUNCEMENT OF PAYMENT RATES.—
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‘‘(1) ANNUAL
ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
ties) not later than August 1 before the calendar year
concerned—
‘‘(A) the annual MedicarePlus capitation
rate for each MedicarePlus payment area for the
year, and
‘‘(B) the risk and other factors to be used in
adjusting such rates under subsection (a)(1)(A)
for payments for months in that year.
‘‘(2) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (2) for a year, the Sec-
retary shall provide for notice to MedicarePlus orga-
nizations of proposed changes to be made in the meth-
odology from the methodology and assumptions used
in the previous announcement and shall provide such
organizations an opportunity to comment on such
proposed changes.
‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (1) for a year,
the Secretary shall include an explanation of the as-
sumptions and changes in methodology used in the
announcement 
in 
sufficient 
detail 
so 
that
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MedicarePlus organizations can compute monthly ad-
justed MedicarePlus capitation rates for individuals
in each MedicarePlus payment area which is in whole
or in part within the service area of such an organi-
zation.
‘‘(c) CALCULATION OF ANNUAL MEDICAREPLUS CAPI-
TATION RATES.—
‘‘(1) IN GENERAL.—For purposes of this part,
the annual MedicarePlus capitation rate, for a
MedicarePlus payment area for a contract year con-
sisting of a calendar year, is equal to the greatest of
the following:
‘‘(A) BLENDED
CAPITATION
RATE.—The
sum of—
‘‘(i) area-specific percentage for the
year (as specified under paragraph (2) for
the year) of the annual area-specific
MedicarePlus capitation rate for the year
for the MedicarePlus payment area, as de-
termined under paragraph (3), and
‘‘(ii) national percentage (as specified
under paragraph (2) for the year) of the
input-price-adjusted 
annual 
national
MedicarePlus capitation rate for the year,
as determined under paragraph (4),
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multiplied by a budget neutrality adjustment
factor determined under paragraph (5).
‘‘(B) MINIMUM AMOUNT.—
‘‘(i) For 1996, $300.
‘‘(ii) For 1997, $350.
‘‘(iii) For a succeeding year, is the
minimum amount specified in this sub-
paragraph for the preceding year increased
by national average per capita growth per-
centage, specified under paragraph (6) for
that succeeding year.
‘‘(C) MINIMUM
INCREASE
OF
PERCENT
OVER PREVIOUS YEAR’S RATE.—
‘‘(i) For 1996, 102 percent of the an-
nual per capita rate of payment for 1995
determined under section 1876(a)(1)(C) for
the MedicarePlus payment area.
‘‘(ii) For a subsequent year, 102 per-
cent of the annual MedicarePlus capitation
rate under this subsection for the area for
the previous year.
‘‘(2) AREA-SPECIFIC
AND
NATIONAL
PERCENT-
AGES.—For purposes of paragraph (1)(A)—
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‘‘(A) for 1996 and 1997, the ‘area-specific
percentage’ is 90 percent and the ‘national per-
centage’ is 10 percent,
‘‘(B) for 1998, the ‘area-specific percentage’
is 85 percent and the ‘national percentage’ is 15
percent,
‘‘(C) for 1999, the ‘area-specific percentage’
is 80 percent and the ‘national percentage’ is 20
percent,
‘‘(D) for 2000, the ‘area-specific percentage’
is 75 percent and the ‘national percentage’ is 25
percent, and
‘‘(E) for a year after 2000, the ‘area-specific
percentage’ is 70 percent and the ‘national per-
centage’ is 30 percent.
‘‘(3) ANNUAL
AREA-SPECIFIC
MEDICAREPLUS
CAPITATION
RATE.—For purposes of paragraph
(1)(A), the annual area-specific MedicarePlus capita-
tion rate for a MedicarePlus payment area—
‘‘(A) for 1996 is the annual per capita rate
of payment for 1995 determined under section
1876(a)(1)(C) for the MedicarePlus payment
area, increased by the national average per cap-
ita growth percentage for 1996 (as defined in
paragraph (6)); or
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‘‘(B) for a subsequent year is the annual
area-specific MedicarePlus capitation rate for
the previous year determined under this para-
graph for the MedicarePlus payment area, in-
creased by the national average per capita
growth percentage for such subsequent year.
‘‘(4) INPUT-PRICE-ADJUSTED ANNUAL NATIONAL
MEDICAREPLUS CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), the input-price-adjusted annual
national MedicarePlus capitation rate for a
MedicarePlus payment area for a year is equal
to the sum, for all the types of medicare services
(as classified by the Secretary), of the plan (for
each such type) of—
‘‘(i) the national standardized annual
MedicarePlus capitation rate (determined
under subparagraph (B)) for the year,
‘‘(ii) the proportion of such rate for the
year which is attributable to such type of
services, and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area com-
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pared to the national average input price of
such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or up-
dating) national payment rates for specific areas
and localities.
‘‘(B) NATIONAL
STANDARDIZED
ANNUAL
MEDICAREPLUS CAPITATION RATE.—In subpara-
graph (A)(i), the ‘national standardized annual
MedicarePlus capitation rate’ for a year is equal
to—
‘‘(i) the sum (for all MedicarePlus pay-
ment areas) of the product of (I) the annual
area-specific MedicarePlus capitation rate
for that year for the area under paragraph
(3), and (II) the average number of medi-
care beneficiaries residing in that area in
the year; divided by
‘‘(ii) the total average number of medi-
care beneficiaries residing in all the
MedicarePlus payment areas for that year.
‘‘(C) SPECIAL RULES FOR 1996.—In apply-
ing this paragraph for 1996—
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‘‘(i) medicare services shall be divided
into 2 types of services: part A services and
part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii) for such types of services
shall be—
‘‘(I) for part A services, the ratio
(expressed as a percentage) of the aver-
age annual per capita rate of payment
for the area for part A for 1995 to the
total average annual per capita rate of
payment for the area for parts A and
B for 1995, and
‘‘(II) for part B services, 100 per-
cent minus the ratio described in
subclause (I);
‘‘(iii) for the part A services, 70 per-
cent of payments attributable to such serv-
ices shall be adjusted by the index used
under section 1886(d)(3)(E) to adjust pay-
ment rates for relative hospital wage levels
for hospitals located in the payment area
involved;
‘‘(iv) for part B services—
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‘‘(e) RELATION OF PREMIUMS AND COST-SHARING TO
BENEFITS.—In no case may the portion of a MedicarePlus
organization’s monthly premium and the actuarial value
of its deductibles, coinsurance, and copayments charged for
(to the extent attributable to the required benefits described
in section 1852(a)(1) and not counting any amount attrib-
utable to balance billing) to individuals who are enrolled
under this part with the organization exceed the actuarial
value of the coinsurance and deductibles that would be ap-
plicable on the average to individuals enrolled under this
part with the organization (or, if the Secretary finds that
adequate data are not available to determine that actuarial
value, the actuarial value of the coinsurance and deductibles
applicable on the average to individuals in the area, in the
State, or in the United States, eligible to enroll under this
part with the organization, or other appropriate data) and
entitled to benefits under part A and enrolled under part
B if they were not members of a MedicarePlus organization.
‘‘(f) REQUIREMENT FOR ADDITIONAL BENEFITS, RE-
BATES, OR BOTH.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN GENERAL.—Each MedicarePlus or-
ganization (in relation to a MedicarePlus plan
it offers) shall provide that if there is an excess
amount (as defined in subparagraph (B)) for the