‘‘(A) IN GENERAL.—For purposes of this
section, the Secretary shall define appropriate
classes of enrollees, consistent with paragraph
(5), based on age, gender, welfare status, insti-
tutionalization, and such other factors as the
Secretary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such
classes, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) RESEARCH.—The Secretary shall
conduct such research as may be necessary to
provide for greater accuracy in the adjustment
of capitation rates under this subsection. Such
research may include research into the addition
or modification of classes under subparagraph
(A). The Secretary shall submit to Congress a
report on such research by not later than Janu-
ary 1, 1997.
‘‘(5) DIVISION OF MEDICARE POPULATION.—In
carrying out paragraph (4) and this section, the Sec-
retary shall recognize the following separate popu-
lation groups:
‘‘(A) AGED.—Individuals 65 years of age
or older who are not described in subparagraph
(C).
‘‘(B) 
DISABLED.—Disabled 
individuals
who are under 65 years of age and not de-
scribed in subparagraph (C).
‘‘(C) INDIVIDUALS
WITH
END
STAGE
RENAL
DISEASE.—Individuals who are deter-
mined to have end stage renal disease.
‘‘(c) PER CAPITA GROWTH RATES.—
‘‘(1) FOR 1996.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraph (B), the
per capita growth rates for 1996, for a payment
area assigned to a service utilization cohort
under subsection (d), shall be the following:
‘‘(i) LOWEST
SERVICE
UTILIZATION
COHORT.—For areas assigned to the low-
est service utilization cohort, 9.0 percent
plus the additional percent provided under
subparagraph (B)(ii).
‘‘(ii) LOWER
SERVICE
UTILIZATION
COHORT.—For areas assigned to the lower
service utilization cohort, 8.0 percent.
‘‘(iii) MEDIAN SERVICE UTILIZATION
COHORT.—For areas assigned to the me-
dian service utilization cohort, 5.1 percent.
‘‘(iv) HIGHER
SERVICE
UTILIZATION
COHORT.—For areas assigned to the high-
er service utilization cohort, 4.7 percent.
‘‘(v) HIGHEST SERVICE UTILIZATION
COHORT.—For areas assigned to the high-
est service utilization cohort, 4.0 percent.
‘‘(B) BUDGET
NEUTRAL
ADJUSTMENT.—
In order to assure that the total capitation pay-
ments under this section during 1996 are the
same as the amount such payments would have
been if the per capita growth rate for all such
areas for 1996 were equal to the national aver-
age per capita growth rate, specified in para-
graph (3) for 1996, the Secretary shall adjust
the per capita growth rates for payment areas
as follows:
‘‘(i) INCREASE
UP
TO
FLOOR
FOR
LOWEST SERVICE UTILIZATION COHORT.—
First, such additional percent increase as
may be necessary to assure that the annual
MedicarePlus capitation rate for each pay-
ment area is at least 12 times $300 for
1996.
‘‘(ii) RESIDUAL INCREASE TO LOWEST
SERVICE UTILIZATION COHORT.—Next, for
payment areas assigned to the lowest serv-
ice utilization cohort, such additional per-
cent increase as will assure that the total
capitation payments under this section
during 1996 are the same as the amount
such payments would have been if the per
capita growth rate for all such areas for
1996 were equal to the national average
per capita growth rate. The increase under
this clause may apply to a payment area
described in clause (i) and shall be applied
after the increase provided under such
clause.
‘‘(2) FOR SUBSEQUENT YEARS.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraphs (B) and
(C), the Secretary shall compute a per capita
growth rate for each year after 1996, for each
payment area as assigned to a service utiliza-
tion cohort under subsection (d), consistent
with the following rules:
‘‘(i) MEDIAN
SERVICE
UTILIZATION
COHORT SET AT NATIONAL AVERAGE PER
CAPITA
GROWTH
RATE.—The per capita
growth rate for areas assigned to the me-
dian service utilization cohort for the year
shall be the national average per capita
growth rate for the year (as specified
under paragraph (3)), subject to subpara-
graph (C).
‘‘(ii) HIGHEST SERVICE UTILIZATION
COHORT
SET
AT 75 PERCENT
OF
NA-
TIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—The per capita growth rate for
areas assigned to the highest service utili-
zation cohort for the year shall be 75 per-
cent of the national average per capita
growth rate for the year.
‘‘(iii) LOWEST SERVICE UTILIZATION
COHORT SET AT 187.5 PERCENT OF NA-
TIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—The per capita growth rate for
areas assigned to the lowest service utiliza-
tion cohort for the year shall be 187.5 per-
cent of the national average per capita
growth rate for the year, subject to sub-
paragraph (C).
‘‘(iv) LOWER
SERVICE
UTILIZATION
COHORT
SET
AT
150
PERCENT
OF
NA-
TIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—
‘‘(I) IN
GENERAL.—Subject to
subclause (II), the per capita growth
rate for areas assigned to the lower
service utilization cohort for the year
shall be 150 percent of the national
average per capita growth rate for the
year.
‘‘(II) ADJUSTMENT.—If the Sec-
retary has established under clause
(v) the per capita growth rate for
areas assigned to the higher service
utilization cohort for the year at 75
percent of the national average per
capita growth rate, the Secretary may
provide for a reduced per capita
growth rate under subclause (I) to the
extent necessary to comply with sub-
paragraph (B).
‘‘(v) HIGHER
SERVICE
UTILIZATION
COHORT.—The per capita growth rate for
areas assigned to the higher service utiliza-
tion cohort for the year shall be such per-
cent (not less than 75 percent) of the na-
tional average per capita growth rate, as
the Secretary may determine consistent
with subparagraph (B).
‘‘(B) AVERAGE PER CAPITA GROWTH RATE
AT
NATIONAL
AVERAGE
TO
ASSURE
BUDGET
NEUTRALITY.—The Secretary shall compute per
capita growth rates for a year under subpara-
graph (A) (before the application of subpara-
graph (C)) in a manner so that the weighted
average per capita growth rate for all areas for
the year (weighted to reflect the number of
medicare beneficiaries in each area) is equal to
the national average per capita growth rate
under paragraph (3) for the year.
‘‘(C) FINAL
ADJUSTMENT
OF
GROWTH
RATES.—After computing per capita growth
rates under the previous provisions of this para-
graph for a year, the Secretary shall—
‘‘(i) reduce the per capita growth rate
for areas assigned to the median service
utilization cohort by the ratio of .1 to 5.3;
‘‘(ii) if the year is 1997, increase per
capita growth rates for payment areas to
extent necessary to assure that the annual
MedicarePlus capitation rate for each pay-
ment area for such year is at least 12
times $320; and
‘‘(iii) adjust (consistent with clause
(ii)) the per capita growth rate for areas
assigned to the lowest service utilization
cohort by such proportion as the Secretary
determines will result in no net increase in
outlays resulting from the application of
this subparagraph for the year involved.’’;
and
‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH
RATES.—In this subsection, the ‘national average
per capita growth rate’ for—
‘‘(A) 1996 is 5.3 percent,
‘‘(B) 1997 is 3.8 percent,
‘‘(C) 1998 is 4.6 percent,
‘‘(D) 1999 is 4.3 percent,
‘‘(E) 2000 is 3.8 percent,
‘‘(F) 2001 is 5.5 percent,
‘‘(G) 2002 is 5.6 percent, and
‘‘(H) each subsequent year is 5.0 percent.
‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE
UTILIZATION COHORTS.—
‘‘(1) IN GENERAL.—For purposes of determin-
ing per capita growth rates under subsection (c) for
areas for a year, the Secretary shall assign each pay-
ment area to a service utilization cohort (based on
the service utilization index value for that area de-
termined under paragraph (2)) as follows:
‘‘(A) LOWEST
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of less than .80 shall be assigned to the
lowest service utilization cohort.
‘‘(B) LOWER
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least .80 but less than .90 shall be
assigned to the lower service utilization cohort.
‘‘(C) MEDIAN
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least .90 but less than 1.10 shall be
assigned to the median service utilization co-
hort.
‘‘(D) HIGHER
SERVICE
UTILIZATION
CO-
HORT.—Areas with a service utilization index
value of at least 1.10 but less than 1.20 shall
be assigned to the higher service utilization co-
hort.
‘‘(E) HIGHEST SERVICE UTILIZATION CO-
HORT.—Areas with a service utilization index
value of at least 1.20 shall be assigned to the
highest service utilization cohort.
‘‘(2) DETERMINATION OF SERVICE UTILIZATION
INDEX VALUES.—In order to determine the per cap-
ita growth rate for a payment area for each year
(beginning with 1996), the Secretary shall determine
for such area and year a service utilization index
value, which is equal to—
‘‘(A) the annual MedicarePlus capitation
rate under this section for the area for the year
in which the determination is made (or, in the
case of 1996, the average annual per capita
rate 
of 
payment 
(described 
in 
section
1876(a)(1)(C)) for the area for 1995); divided
by
‘‘(B) the input-price-adjusted annual na-
tional MedicarePlus capitation rate (as deter-
mined under paragraph (3)) for that area for
the year in which the determination is made.
‘‘(3) DETERMINATION
OF
INPUT-PRICE-AD-
JUSTED RATES.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the ‘input-price-adjusted annual na-
tional MedicarePlus capitation rate’ for a pay-
ment area for a year is equal to the sum, for
all the types of medicare services (as classified
by the Secretary), of the product (for each such
type) of—
‘‘(i) 
the 
national 
standardized
MedicarePlus capitation rate (determined
under subparagraph (B)) for the year,
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) 
NATIONAL
STANDARDIZED
MEDICAREPLUS
CAPITATION
RATE.—In this
paragraph, 
the 
‘national 
standardized
MedicarePlus capitation rate’ for a year is
equal to—
‘‘(i) the sum (for all payment areas)
of 
the 
product 
of 
(I) 
the 
annual
MedicarePlus capitation rate for that year
for the area under subsection (b)(2), and
(II) the average number of medicare bene-
ficiaries residing in that area in the year;
divided by
‘‘(ii) the total average number of med-
icare beneficiaries residing in all the pay-
ment areas for that year.
‘‘(C) SPECIAL RULES FOR 1996.—In apply-
ing this paragraph for 1996—
‘‘(i) medicare services shall be divided
into 2 types of services: part A services
and part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii) for such types of services
shall be—
‘‘(I) for part A services, the ratio
(expressed as a percentage) of the av-
erage annual per capita rate of pay-
ment 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
percent 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—
‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment area, and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 70
percent shall be adjusted by the index
described in clause (iii);
‘‘(v) the index values shall be com-
puted based only on the beneficiary popu-
lation described in subsection (b)(5)(A).
The Secretary may continue to apply the rules
described in this subparagraph (or similar
rules) for 1997.
‘‘(e) PAYMENT PROCESS.—
‘‘(1) IN GENERAL.—Subject to subsection (f),
the Secretary shall make monthly payments under
this section in advance and in accordance with the
rate determined under subsection (a) to the plan for
each individual enrolled with a MedicarePlus organi-
zation under this part.
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
take into account individuals enrolled dur-
ing the period beginning on the date on
which 
the 
individual 
enrolls 
with 
a
MedicarePlus organization under a product
operated, sponsored, or contributed to by
the individual’s employer or former em-
ployer (or the employer or former employer
of the individual’s spouse) and ending on
the date on which the individual is enrolled
in the organization under this part, except
that for purposes of making such retro-
active adjustments under this subpara-
graph, such period may not exceed 90
days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the disclosure statement described in
section 1853(a) at the time the individual
enrolled with the organization.
‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING
HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—
‘‘(1) IN GENERAL.—In the case of an individual
who has elected a high deductible/medisave product,
notwithstanding the preceding provisions of this sec-
tion—
‘‘(A) the amount of the payment to the
MedicarePlus organization offering the high de-
ductible/medisave product shall not exceed the
premium for the product, and
‘‘(B) subject to paragraph (2), the dif-
ference between the amount of payment that
would otherwise be made and the amount of
payment to such organization shall be made di-
rectly into a MedicarePlus MSA established
(and, if applicable, designated) by the individual
under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE-
QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
the case of an individual who has elected coverage
under a high deductible/medisave product, no pay-
ment shall be made under paragraph (1)(B) on be-
half of an individual for a month unless the individ-
ual—
‘‘(A) has established before the beginning
of the month (or by such other deadline as the
Secretary may specify) a MedicarePlus MSA
(as defined in section 137(b) of the Internal
Revenue Code of 1986), and
‘‘(B) if the individual has established more
than one MedicarePlus MSA, has designated
one of such accounts as the individual’s
MedicarePlus MSA for purposes of this part.
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT CONTRIBUTION.—In the case of an indi-
vidual electing a high deductible/medisave product
effective beginning with a month in a year, the
amount of the contribution to the MedicarePlus
MSA on behalf of the individual for that month and
all successive months in the year shall be deposited
during that first month. In the case of a termination
of such an election as of a month before the end of
a year, the Secretary shall provide for a procedure
for the recovery of deposits attributable to the re-
maining months in the year.
‘‘(g) PAYMENTS FROM TRUST FUND.—The payment
to a MedicarePlus organization under this section for indi-
viduals enrolled under this part with the organization, and
payments to a MedicarePlus MSA under subsection
(f)(1)(B), shall be made from the Federal Hospital Insur-
ance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund in such proportion as the Secretary
determines reflects the relative weight that benefits under
part A and under part B represents of the actuarial value
of the total benefits under this title.
‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
pital (as defined in section 1886(d)(1)(B)) as of the effec-
tive date of the individual’s—
‘‘(1) election under this part of a MedicarePlus
product offered by a MedicarePlus organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicarePlus prod-
uct or Non-MedicarePlus option (as the case
may be) elected before the election with such
organization,
‘‘(B) the elected organization shall not be
financially responsible for payment for such
services until the date after the date of the indi-
vidual’s discharge, and
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the
organization under this part; or
‘‘(2) termination of election with respect to a
MedicarePlus organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the individual’s
discharge,
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicarePlus organization,
and
‘‘(C) the terminated organization shall not
receive any payment with respect to the individ-
ual under this part during the period the indi-
vidual is not enrolled.
‘‘ESTABLISHMENT OF STANDARDS FOR MEDICARE-PLUS
ORGANIZATIONS AND PRODUCTS
‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO STATE-
REGULATED ORGANIZATIONS AND PRODUCTS.—
‘‘(1) RECOMMENDATIONS OF NAIC.—The Sec-
retary shall request the National Association of In-
surance Commissioners to develop and submit to the
Secretary, not later than 12 months after the date
of the enactment of the Medicare Preservation Act
of 1995, proposed standards consistent with the re-
quirements of this part for MedicarePlus organiza-
tions (other than union sponsors, Taft-Hartley spon-
sors, and provider-sponsored organizations) and
MedicarePlus products offered by such organiza-
tions, except that such proposed standards may re-
late to MedicarePlus organizations that are qualified
associations only with respect to MedicarePlus prod-
ucts offered by them and only if such products are
issued by organizations to which section 1851(b)(1)
applies.
‘‘(2) REVIEW.—If the Association submits such
standards on a timely basis, the Secretary shall re-
view such standards to determine if the standards
meet the requirements of the part. The Secretary
shall complete the review of the standards not later
than 90 days after the date of their submission. The
Secretary shall promulgate such proposed standards
to apply to organizations and products described in
paragraph (1) except to the extent that the Sec-
retary modifies such proposed standards because
they do not meet such requirements.
‘‘(3) FAILURE TO SUBMIT.—If the Association
does not submit such standards on a timely basis,
the Secretary shall promulgate such standards by
not later than the date the Secretary would other-
wise have been required to promulgate standards
under paragraph (2).
‘‘(4) USE OF INTERIM RULES.—For the period
in which this part is in effect and standards are
being developed and established under the preceding
provisions of this subsection, the Secretary shall pro-
vide by not later than June 1, 1996, for the applica-
tion of such interim standards (without regard to
any requirements for notice and public comment) as
may be appropriate to provide for the expedited im-
plementation of this part. Such interim standards
shall not apply after the date standards are estab-
lished under the preceding provisions of this sub-
section.
‘‘(b) UNION AND TAFT-HARTLEY SPONSORS, QUALI-
FIED ASSOCIATIONS, AND PRODUCTS.—
‘‘(1) IN GENERAL.—The Secretary shall develop
and promulgate by regulation standards consistent
with the requirements of this part for union and
Taft-Hartley sponsors, for qualified associations,
and for MedicarePlus products offered by such orga-
nizations (other than MedicarePlus products offered
by qualified associations that are issued by organiza-
tions to which section 1851(b)(1) applies).
‘‘(2) CONSULTATION WITH LABOR.—The Sec-
retary shall consult with the Secretary of Labor with
respect to such standards for such sponsors and
products.
‘‘(3) TIMING.—Standards under this subsection
shall be promulgated at or about the time standards
are promulgated under subsection (a).
‘‘(c) ESTABLISHMENT
OF STANDARDS
FOR PRO-
VIDER-SPONSORED ORGANIZATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish, on an expedited basis and using a negotiated
rulemaking process under subchapter 3 of chapter 5
of title 5, United States Code, standards that enti-
ties must meet to qualify as provider-sponsored or-
ganizations under this part.
‘‘(2) PUBLICATION
OF
NOTICE.—In carrying
out the rulemaking process under this subsection,
the Secretary, after consultation with the National
Association of Insurance Commissioners, the Amer-
ican Academy of Actuaries, organizations represent-
ative of medicare beneficiaries, and other interested
parties, shall publish the notice provided for under
section 564(a) of title 5, United States Code, by not
later than 45 days after the date of the enactment
of Medicare Preservation Act of 1995.
‘‘(3) TARGET
DATE
FOR
PUBLICATION
OF
RULE.—As part of the notice under paragraph (2),
and for purposes of this subsection, the ‘target date
for publication’ (referred to in section 564(a)(5) of
such title) shall be September 1, 1996.
‘‘(4) ABBREVIATED
PERIOD
FOR
SUBMISSION
OF COMMENTS.—In applying section 564(c) of such
title under this subsection, ‘15 days’ shall be sub-
stituted for ‘30 days’.
‘‘(5) APPOINTMENT
OF
NEGOTIATED
RULE-
MAKING COMMITTEE AND FACILITATOR.—The Sec-
retary shall provide for—
‘‘(A) the appointment of a negotiated rule-
making committee under section 565(a) of such
title by not later than 30 days after the end of
the comment period provided for under section
564(c) of such title (as shortened under para-
graph (4)), and
‘‘(B) the nomination of a facilitator under
section 566(c) of such title by not later than 10
days after the date of appointment of the com-
mittee.
‘‘(6) PRELIMINARY COMMITTEE REPORT.—The
negotiated rulemaking committee appointed under
paragraph (5) shall report to the Secretary, by not
later than June 1, 1996, regarding the committee’s
progress on achieving a concensus with regard to the
rulemaking proceeding and whether such consensus
is likely to occur before one month before the target
date for publication of the rule. If the committee re-
ports that the committee has failed to make signifi-
cant progress towards such consensus or is unlikely
to reach such consensus by the target date, the Sec-
retary may terminate such process and provide for
the publication of a rule under this subsection
through such other methods as the Secretary may
provide.
‘‘(7) FINAL COMMITTEE REPORT.—If the com-
mittee is not terminated under paragraph (6), the
rulemaking committee shall submit a report contain-
ing a proposed rule by not later than one month be-
fore the target publication date.
‘‘(8) INTERIM, FINAL EFFECT.—The Secretary
shall publish a rule under this subsection in the Fed-
eral Register by not later than the target publication
date. Such rule shall be effective and final imme-
diately on an interim basis, but is subject to change
and revision after public notice and opportunity for
a period (of not less than 60 days) for public com-
ment. In connection with such rule, the Secretary
shall specify the process for the timely review and
approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such
rules and consistent with this subsection.
‘‘(9) PUBLICATION
OF
RULE
AFTER
PUBLIC
COMMENT.—The Secretary shall provide for consid-
eration of such comments and republication of such
rule by not later than 1 year after the target publi-
cation date.
‘‘(10) PROCESS
FOR
APPROVAL
OF
APPLICA-
TIONS FOR CERTIFICATION.—
‘‘(A) IN
GENERAL.—The Secretary shall
establish a process for the receipt and approval
of applications of entities for certification as
provider-sponsored organizations under this
part. Under such process, the Secretary shall
act upon a complete application submitted with-
in 60 days after the date it is received.
‘‘(B) CIRCULATION OF PROPOSED APPLI-
CATION FORM.—By March 1, 1996, the Sec-
retary, after consultation with the negotiated
rulemaking committee, shall circulate a pro-
posed application form that could be used by
entities considering becoming certified as a pro-
vider-sponsored organization under this part.
‘‘(d) COORDINATION AMONG FINAL STANDARDS.—In
establishing standards (other than on an interim basis)
under the previous provisions of this section, the Secretary
shall seek to provide for consistency (as appropriate)
across the different types of MedicarePlus organizations,
in order to promote equitable treatment of different types
of organizations and consistent protection for individuals
who elect products offered by the different types of
MedicarePlus organizations.
‘‘(e) USE OF CURRENT STANDARDS FOR INTERIM
STANDARDS.—To the extent practicable and consistent
with the requirements of this part, standards established
on an interim basis to carry out requirements of this part
may be based on currently applicable standards, such as
the rules established under section 1876 (as in effect as
of the date of the enactment of this section) to carry out
analogous provisions of such section or standards estab-
lished or developed for application in the private health
insurance market.
100
‘‘(f) APPLICATION OF NEW STANDARDS TO ENTITIES
WITH A CONTRACT.—In the case of a MedicarePlus orga-
nization with a contract in effect under this part at the
time standards applicable to the organization under this
section are changed, the organization may elect not to
have such changes apply to the organization until the end
of the current contract year (or, if there is less than 6
months remaining in the contract year, until 1 year after
the end of the current contract year).
‘‘(g) RELATION TO STATE LAWS.—The standards es-
tablished under this section shall supersede any State law
or regulation with respect to MedicarePlus products which
are offered by MedicarePlus organizations and are issued
by organizations to which section 1851(b)(1) applies, to
the extent such law or regulation is inconsistent with such
standards.
‘‘MEDICARE-PLUS CERTIFICATION
‘‘SEC. 1857. (a) STATE CERTIFICATION PROCESS
FOR STATE-REGULATED ORGANIZATIONS.—
‘‘(1) APPROVAL OF STATE PROCESS.—The Sec-
retary shall approve a MedicarePlus certification and
enforcement program established by a State for ap-
plying the standards established under section 1856
to MedicarePlus organizations (other than union
sponsors, Taft-Hartley sponsors, and provider-spon-
sored organizations) and MedicarePlus products of-
101
fered by such organizations if the Secretary deter-
mines that the program effectively provides for the
application and enforcement of such standards in
the State with respect to such organizations and
products. Such program shall provide for certifi-
cation of compliance of MedicarePlus organizations
and products with the applicable requirements of
this part not less often than once every 3 years.
‘‘(2) EFFECT OF CERTIFICATION UNDER STATE
PROCESS.—A 
MedicarePlus 
organization 
and
MedicarePlus product offered by such an organiza-
tion that is certified under such program is consid-
ered to have been certified under this subsection
with respect to the offering of the product to individ-
uals residing in the State.
‘‘(3) USER FEES.—The State may impose user
fees on organizations seeking certification under this
subsection in such amounts as the State deems suffi-
cient to finance the costs of such certification. Noth-
ing in this paragraph shall be construed as restrict-
ing a State’s authority to impose premium taxes,
other taxes, or other levies.
‘‘(4) REVIEW.—The Secretary periodically shall
review State programs approved under paragraph
(1) to determine if they continue to provide for cer-
102
tification and enforcement described in such para-
graph. If the Secretary finds that a State program
no longer so provides, before making a final deter-
mination, the Secretary shall provide the State an
opportunity to adopt such a plan of correction as
would permit the State program to meet the require-
ments of paragraph (1). If the Secretary makes a
final determination that the State program, after
such an opportunity, fails to meet such require-
ments, the provisions of subsection (b) shall apply to
MedicarePlus organizations and products in the
State.
‘‘(5) EFFECT OF NO STATE PROGRAM.—Begin-
ning on the date standards are established under
section 1856, in the case of organizations and prod-
ucts in States in which a certification program has
not been approved and in operation under paragraph
(1), the Secretary shall establish a process for the
certification of MedicarePlus organizations (other
than union sponsors, Taft-Hartley sponsors, and
provider-sponsored organizations) and products of
such organizations as meeting such standards.
‘‘(6) PUBLICATION
OF
LIST
OF
APPROVED
STATE
PROGRAMS.—The Secretary shall publish
(and periodically update) a list of those State pro-
103
grams which are approved for purposes of this sub-
section.
‘‘(b) FEDERAL CERTIFICATION PROCESS FOR UNION
SPONSORS, TAFT-HARTLEY SPONSORS, AND PROVIDER-
SPONSORED ORGANIZATIONS.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a process for the certification of union spon-
sors, Taft-Hartley sponsors, and provider-sponsored
organizations and MedicarePlus products offered by
such sponsors and organizations as meeting the ap-
plicable standards established under section 1856.
‘‘(2) 
INVOLVEMENT
OF
SECRETARY
OF
LABOR.—Such process shall be established and oper-
ated in cooperation with the Secretary of Labor with
respect to union sponsors and Taft-Hartley spon-
sors.
‘‘(3) USE OF STATE LICENSING AND PRIVATE
ACCREDITATION PROCESSES.—
‘‘(A) IN
GENERAL.—The process under
this subsection shall, to the maximum extent
practicable, provide that MedicarePlus organi-
zations and products that are licensed or cer-
tified through a qualified private accreditation
process that the Secretary finds applies stand-
ards that are no less stringent than the require-
104
ments of this part are deemed to meet the cor-
responding requirements of this part for such
an organization or product.
‘‘(B) PERIODIC ACCREDITATION.—The use
of an accreditation under subparagraph (A)
shall be valid only for such period as the Sec-
retary specifies.
‘‘(4) USER FEES.—The Secretary may impose
user fees on entities seeking certification under this
subsection in such amounts as the Secretary deems
sufficient to finance the costs of such certification.
‘‘(c) CERTIFICATION OF PROVIDER-SPONSORED OR-
GANIZATIONS BY STATES.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process under which a State may propose to
provide for certification of entities as meeting the re-
quirements of this part to be provider-sponsored or-
ganizations.
‘‘(2) CONDITIONS
FOR
APPROVAL.—The Sec-
retary may not approve a State program for certifi-
cation under paragraph (1) unless the Secretary de-
termines that the certification program applies
standards and requirements that are identical to the
standards and requirements of this part and the ap-
plicable provisions for enforcement of such standards
105
and requirements do not result in a lower level or
quality of enforcement than that which is otherwise
applicable under this title.
‘‘(d) NOTICE TO ENROLLEES IN CASE OF DECERTI-
FICATION.—If a MedicarePlus organization or product is
decertified under this section, the organization shall notify
each enrollee with the organization and product under this
part of such decertification.
‘‘(e) QUALIFIED ASSOCIATIONS.—In the case of
MedicarePlus products offered by a MedicarePlus organi-
zation that is a qualified association (as defined in section
1854(c)(4)(C)) and issued by an organization to which
section 1851(b)(1) applies or by a provider-sponsored or-
ganization (as defined in section 1854(a)), nothing in this
section shall be construed as limiting the authority of
States to regulate such products.
‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1858. (a) IN GENERAL.—The Secretary shall
not permit the election under section 1805 of a
MedicarePlus product offered by a MedicarePlus organiza-
tion under this part, and no payment shall be made under
section 1856 to an organization, unless the Secretary has
entered into a contract under this section with an organi-
zation with respect to the offering of such product. Such
a contract with an organization may cover more than one
MedicarePlus product. Such contract shall provide that
106
the organization agrees to comply with the applicable re-
quirements and standards of this part and the terms and
conditions of payment as provided for in this part.
‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (1)
and (2), the Secretary may not enter into a contract
under this section with a MedicarePlus organization
(other than a union sponsor or Taft-Hartley spon-
sor) unless the organization has at least 5,000 indi-
viduals (or 1,500 individuals in the case of an orga-
nization that is a provider-sponsored organization)
who are receiving health benefits through the organi-
zation, except that the standards under section 1856
may permit the organization to have a lesser number
of beneficiaries (but not less than 500 in the case
of an organization that is a provider-sponsored orga-
nization) if the organization primarily serves individ-
uals residing outside of urbanized areas.
‘‘(2) EXCEPTION
FOR
HIGH
DEDUCTIBLE/
MEDISAVE PRODUCT.—Paragraph (1) shall not apply
with respect to a contract that relates only to a high
deductible/medisave product.
‘‘(3) ALLOWING
TRANSITION.—The Secretary
may waive the requirement of paragraph (1) during
107
the first 3 contract years with respect to an organi-
zation.
‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—
‘‘(1) PERIOD.—Each contract under this sec-
tion shall be for a term of at least one year, as de-
termined by the Secretary, and may be made auto-
matically renewable from term to term in the ab-
sence of notice by either party of intention to termi-
nate at the end of the current term.
‘‘(2) TERMINATION
AUTHORITY.—In accord-
ance with procedures established under subsection
(h), the Secretary may at any time terminate any
such contract or may impose the intermediate sanc-
tions described in an applicable paragraph of sub-
section (g) on the MedicarePlus organization if the
Secretary determines that the organization—
‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner inconsistent with the efficient and effective
administration of this part;
‘‘(C) is operating in a manner that is not
in the best interests of the individuals covered
under the contract; or
108
‘‘(D) no longer substantially meets the ap-
plicable conditions of this part.
‘‘(3) EFFECTIVE
DATE
OF
CONTRACTS.—The
effective date of any contract executed pursuant to
this section shall be specified in the contract, except
that in no case shall a contract under this section
which provides for coverage under a high deductible/
medisave account be effective before January 1997
with respect to such coverage.
‘‘(4) PREVIOUS TERMINATIONS.—The Secretary
may not enter into a contract with a MedicarePlus
organization if a previous contract with that organi-
zation under this section was terminated at the re-
quest of the organization within the preceding five-
year period, except in circumstances which warrant
special consideration, as determined by the Sec-
retary.
‘‘(5) NO CONTRACTING AUTHORITY.—The au-
thority vested in the Secretary by this part may be
performed without regard to such provisions of law
or regulations relating to the making, performance,
amendment, or modification of contracts of the
United States as the Secretary may determine to be
inconsistent with the furtherance of the purpose of
this title.