113
Subtitle A, Part 1
(2) by adding at the end the following new para-
graph:
‘‘(4) Nothing in this subsection shall be construed to
require the provision of information regarding assisted sui-
cide, euthanasia, or mercy killing.’’.
(e) 
CONFORMING
AMENDMENT.—Section
1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended by
inserting before the semicolon at the end the following: ‘‘and
in the case of hospitals to accept as payment in full for
inpatient hospital services that are emergency services (as
defined in section 1853(b)(4)) that are covered under this
title and are furnished to any individual enrolled under
part C with a MedicarePlus organization which does not
have a contract establishing payment amounts for services
furnished to members of the organization the amounts that
would be made as a payment in full under this title if the
individuals were not so enrolled’’.
SEC. 15003. DUPLICATION AND COORDINATION OF MEDI-
CARE-RELATED PRODUCTS.
(a) TREATMENT
OF CERTAIN HEALTH INSURANCE
POLICIES AS NONDUPLICATIVE.—
(1) IN GENERAL.—Effective as if included in the
enactment of section 4354 of the Omnibus Budget
Reconciliation Act of 1990, section 1882(d)(3)(A) (42
U.S.C. 1395ss(d)(3)(A)) is amended—
114
Subtitle A, Part 1
(A) by amending clause (i) to read as fol-
lows:
‘‘(i) It is unlawful for a person to sell or issue to an
individual entitled to benefits under part A or enrolled
under part B of this title or electing a MedicarePlus prod-
uct under section 1805—
‘‘(I) a health insurance policy (other than a
medicare supplemental policy) with knowledge that
the policy duplicates health benefits to which the indi-
vidual is otherwise entitled under this title or title
XIX,
‘‘(II) in the case of an individual not electing a
MedicarePlus product, a medicare supplemental pol-
icy with knowledge that the individual is entitled to
benefits under another medicare supplemental policy,
or
‘‘(III) in the case of an individual electing a
MedicarePlus product, a medicare supplemental pol-
icy with knowledge that the policy duplicates health
benefits to which the individual is otherwise entitled
under this title or under another medicare supple-
mental policy.’’;
(B) in clause (iii), by striking ‘‘clause (i)’’
and inserting ‘‘clause (i)(II)’’; and
115
Subtitle A, Part 1
(C) by adding at the end the following new
clauses:
‘‘(iv) For purposes of this subparagraph a health in-
surance policy shall be considered to ‘duplicate’ benefits
under this title only when, under its terms, the policy pro-
vides specific reimbursement for identical items and serv-
ices to the extent paid for under this title, and a health
insurance policy providing for benefits which are payable
to or on behalf of an individual without regard to other
health benefit coverage of such individual is not considered
to ‘duplicate’ any health benefits under this title.
‘‘(v) For purposes of this subparagraph, a health in-
surance policy (or a rider to an insurance contract which
is not a health insurance policy), including a policy (such
as a long-term care insurance contract described in section
7702B(b) of the Internal Revenue Code of 1986, as added
by the Contract with America Tax Relief Act of 1995 (H.R.
1215)) providing benefits for long-term care, nursing home
care, home health care, or community-based care, that co-
ordinates against or excludes items and services available
or paid for under this title and (for policies sold or issued
after January 1, 1996) that discloses such coordination or
exclusion in the policy’s outline of coverage, is not consid-
ered to ‘duplicate’ health benefits under this title. For pur-
poses of this clause, the terms ‘coordinates’ and ‘coordina-
116
Subtitle A, Part 1
tion’ mean, with respect to a policy in relation to health
benefits under this title, that the policy under its terms is
secondary to, or excludes from payment, items and services
to the extent available or paid for under this title.
‘‘(vi) Notwithstanding any other provision of law, no
criminal or civil penalty may be imposed at any time
under this subparagraph and no legal action may be
brought or continued at any time in any Federal or State
court if the penalty or action is based on an act or omission
that occurred after November 5, 1991, and before the date
of the enactment of this clause, and relates to the sale, issu-
ance, or renewal of any health insurance policy during such
period, if such policy meets the requirements of clause (iv)
or (v).
‘‘(vii) A State may not impose, with respect to the sale
or issuance of a policy (or rider) that meets the require-
ments of this title pursuant to clause (iv) or (v) to an indi-
vidual entitled to benefits under part A or enrolled under
part B or enrolled under a MedicarePlus product under
part C, any requirement based on the premise that such
a policy or rider duplicates health benefits to which the in-
dividual is otherwise entitled under this title.’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—
117
Subtitle A, Part 1
(A) in subparagraph (B), by inserting ‘‘(in-
cluding 
any 
MedicarePlus 
product)’’ 
after
‘‘health insurance policies’’;
(B) in subparagraph (C)—
(i) by striking ‘‘with respect to (i)’’
and inserting ‘‘with respect to’’, and
(ii) by striking ‘‘, (ii) the sale’’ and all
that follows up to the period at the end; and
(C) by striking subparagraph (D).
(3) MEDICAREPLUS PRODUCTS NOT TREATED AS
MEDICARE
SUPPLEMENTARY
POLICIES.—Section
1882(g) (42 U.S.C. 1395ss(g)) is amended by insert-
ing ‘‘a MedicarePlus product or’’ after ‘‘and does not
include’’
(4) REPORT
ON
DUPLICATION
AND
COORDINA-
TION OF HEALTH INSURANCE POLICIES THAT ARE NOT
MEDICARE SUPPLEMENTAL POLICIES.—Not later than
3 years after the date of the enactment of this Act, the
Secretary of Health and Human Services shall pre-
pare and submit to Congress a report on the advis-
ability and feasibility of restricting the sale to medi-
care beneficiaries of health insurance policies that du-
plicate (within the meaning of section 1882(d)(3)(A)
of the Social Security Act) other health insurance
policies that such a beneficiary may have. In prepar-
118
Subtitle A, Part 1
ing such report, the Secretary shall seek the advice of
the National Association of Insurance Commissioners
and shall take into account the standards established
under section 1807 of the Social Security Act for the
electronic coordination of benefits.
(b) ADDITIONAL RULES RELATING TO INDIVIDUALS
ENROLLED IN MEDICAREPLUS PRODUCTS.—Section 1882
(42 U.S.C. 1395ss) is further amended by adding at the
end the following new subsection:
‘‘(u)(1) Notwithstanding the previous provisions of
this section, the following provisions shall not apply to a
health insurance policy (other than a medicare supple-
mental policy) provided to an individual who has elected
the MedicarePlus option under section 1805:
‘‘(A) Subsections (o)(1), (o)(2), (p)(1)(A)(i),
(p)(2), (p)(3), (p)(8), and (p)(9) (insofar as they re-
late to limitations on benefits or groups of benefits
that may be offered).
‘‘(B) Subsection (r) (relating to loss-ratios).
‘‘(2)(A) It is unlawful for a person to sell or issue a
policy described in subparagraph (B) to an individual with
knowledge that the individual has in effect under section
1805 an election of a high deductible/medisave product.
‘‘(B) A policy described in this subparagraph is a
health insurance policy that provides for coverage of ex-
119
Subtitle A, Part 1
penses that are otherwise required to be counted toward
meeting the annual deductible amount provided under the
high deductible/medisave product.’’.
SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI-
CARE HMO PROGRAM.
(a) TRANSITION FROM CURRENT CONTRACTS.—
(1) LIMITATION ON NEW CONTRACTS.—
(A) NO
NEW
RISK-SHARING
CONTRACTS
AFTER
NEW
STANDARDS
ESTABLISHED.—The
Secretary of Health and Human Services (in
this section referred to as the ‘‘Secretary’’) shall
not enter into any risk-sharing contract under
section 1876 of the Social Security Act with an
eligible organization for any contract year begin-
ning on or after the date standards for
MedicarePlus organizations and products are
first established under section 1856(a) of such
Act with respect to MedicarePlus organizations
that are insurer or health maintenance organiza-
tions unless such a contract had been in effect
under section 1876 of such Act for the organiza-
tion for the previous contract year.
(B) NO NEW COST REIMBURSEMENT CON-
TRACTS.—The Secretary shall not enter into any
cost reimbursement contract under section 1876
120
Subtitle A, Part 1
of the Social Security Act beginning for any con-
tract year beginning on or after the date of the
enactment of this Act.
(2) TERMINATION OF CURRENT CONTRACTS.—
(A) RISK-SHARING
CONTRACTS.—Notwith-
standing any other provision of law, the Sec-
retary shall not extend or continue any risk-
sharing contract with an eligible organization
under section 1876 of the Social Security Act
(for which a contract was entered into consistent
with paragraph (1)(A)) for any contract year be-
ginning on or after 1 year after the date stand-
ards described in paragraph (1)(A) are estab-
lished.
(B) COST REIMBURSEMENT CONTRACTS.—
The Secretary shall not extend or continue any
reasonable cost reimbursement contract with an
eligible organization under section 1876 of the
Social Security Act for any contract year begin-
ning on or after January 1, 1998.
(b) CONFORMING PAYMENT RATES.—
(1) RISK-SHARING
CONTRACTS.—Notwithstand-
ing any other provision of law, the Secretary shall
provide that payment amounts under risk-sharing
contracts under section 1876(a) of the Social Security
121
Subtitle A, Part 1
Act for months in a year (beginning with January
1996) shall be computed—
(A) with respect to individuals both entitled
to benefits under both parts A and B of title
XVIII of such Act, by substituting payment rates
under section 1855(a) of such Act for the pay-
ment rates otherwise established under section
1876(a) of such Act, and
(B) with respect to individuals only entitled
to benefits under part B of such title, by sub-
stituting an appropriate proportion of such rates
(reflecting the relative proportion of payments
under such title attributable to such part) for the
payment rates otherwise established under sec-
tion 1876(a) of such Act.
For purposes of carrying out this paragraph for pay-
ment for months in 1996, the Secretary shall com-
pute, announce, and apply the payment rates under
section 1855(a) of such Act (notwithstanding any
deadlines specified in such section) in as timely a
manner as possible and may (to the extent necessary)
provide for retroactive adjustment in payments made
not in accordance with such rates.
(2) COST
CONTRACTS.—Notwithstanding any
other provision of law, the Secretary shall provide
122
Subtitle A, Part 2
that payment amounts under cost reimbursement con-
tracts under section 1876(a) of the Social Security
Act shall take into account adjustments in payment
amounts made in parts A and B of title XVIII of
such Act pursuant to the amendments made by this
title.
(c) ELIMINATION OF 50:50 RULE.—
(1) IN
GENERAL.—Section 1876 (42 U.S.C.
1395mm) is amended by striking subsection (f).
(2) CONFORMING
AMENDMENTS.—Section 1876
is further amended—
(A) in subsection (c)(3)(A)(i), by striking
‘‘would result in failure to meet the requirements
of subsection (f) or’’, and
(B) in subsection (i)(1)(C), by striking ‘‘(e),
and (f)’’ and inserting ‘‘and (e)’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to contract years beginning
on or after January 1, 1996.
PART 2—SPECIAL RULES FOR MEDICAREPLUS
MEDICAL SAVINGS ACCOUNTS
SEC. 15011. MEDICAREPLUS MSA’S.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 of the Internal Revenue Code of 1986 (relating to amounts
specifically excluded from gross income) is amended by re-
123
Subtitle A, Part 2
designating section 137 as section 138 and by inserting
after section 136 the following new section:
‘‘SEC. 137. MEDICAREPLUS MSA’S.
‘‘(a) EXCLUSION.—Gross income shall not include any
payment to the MedicarePlus MSA of an individual by the
Secretary of Health and Human Services under section
1855(f)(1)(B) of the Social Security Act.
‘‘(b) MEDICAREPLUS MSA.—For purposes of this sec-
tion—
‘‘(1) 
MEDICAREPLUS
MSA.—The 
term
‘MedicarePlus MSA’ means a trust created or orga-
nized in the United States exclusively for the purpose
of paying the qualified medical expenses of the ac-
count holder, but only if the written governing instru-
ment creating the trust meets the following require-
ments:
‘‘(A) Except in the case of a trustee-to-trust-
ee transfer described in subsection (d)(4), no con-
tribution will be accepted unless it is made by
the Secretary of Health and Human Services
under section 1855(f)(1)(B) of the Social Secu-
rity Act.
‘‘(B) The trustee is a bank (as defined in
section 408(n)), an insurance company (as de-
fined in section 816), or another person who
124
Subtitle A, Part 2
demonstrates to the satisfaction of the Secretary
that the manner in which such person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(D) The assets of the trust will not be com-
mingled with other property except in a common
trust fund or common investment fund.
‘‘(E) The interest of an individual in the
balance in his account is nonforfeitable.
‘‘(F) Trustee-to-trustee transfers described
in subsection (d)(4) may be made to and from
the trust.
‘‘(2) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
medical expenses’ means, with respect to an ac-
count holder, amounts paid by such holder—
‘‘(i) for medical care (as defined in sec-
tion 213(d)) for the account holder, but only
to the extent such amounts are not com-
pensated for by insurance or otherwise, or
‘‘(ii) for long-term care insurance for
the account holder.
125
Subtitle A, Part 2
‘‘(B) HEALTH INSURANCE MAY NOT BE PUR-
CHASED FROM ACCOUNT.—Subparagraph (A)(i)
shall not apply to any payment for insurance.
‘‘(3) ACCOUNT
HOLDER.—The term ‘account
holder’ means the individual on whose behalf the
MedicarePlus MSA is maintained.
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar
to the rules of subsections (g) and (h) of section 408
shall apply for purposes of this section.
‘‘(c) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—A MedicarePlus MSA is ex-
empt from taxation under this subtitle unless such
MSA has ceased to be a MedicarePlus MSA by reason
of paragraph (2). Notwithstanding the preceding sen-
tence, any such MSA is subject to the taxes imposed
by section 511 (relating to imposition of tax on unre-
lated business income of charitable, etc. organiza-
tions).
‘‘(2) ACCOUNT
ASSETS
TREATED
AS
DISTRIB-
UTED IN THE CASE OF PROHIBITED TRANSACTIONS
OR
ACCOUNT
PLEDGED
AS
SECURITY
FOR
LOAN.—
Rules similar to the rules of paragraphs (2) and (4)
of section 408(e) shall apply to MedicarePlus MSA’s,
and any amount treated as distributed under such
126
Subtitle A, Part 2
rules shall be treated as not used to pay qualified
medical expenses.
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
NOT
USED
FOR
QUALIFIED MEDICAL EXPENSES.—No amount shall be
included in the gross income of the account holder by
reason of a payment or distribution from a
MedicarePlus MSA which is used exclusively to pay
the qualified medical expenses of the account holder.
Any amount paid or distributed from a MedicarePlus
MSA which is not so used shall be included in the
gross income of such holder.
‘‘(2) PENALTY
FOR
DISTRIBUTIONS
NOT
USED
FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM BAL-
ANCE NOT MAINTAINED.—
‘‘(A) IN
GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is 
a 
payment 
or 
distribution 
from 
a
MedicarePlus MSA which is not used exclusively
to pay the qualified medical expenses of the ac-
count holder shall be increased by 50 percent of
the excess (if any) of—
‘‘(i) the amount of such payment or
distribution, over
‘‘(ii) the excess (if any) of—
127
Subtitle A, Part 2
‘‘(I) the fair market value of the
assets in the MedicarePlus MSA as of
the close of the calendar year preceding
the calendar year in which the taxable
year begins, over
‘‘(II) an amount equal to 60 per-
cent of the deductible under the high
deductible/medisave product covering
the account holder as of January 1 of
the calendar year in which the taxable
year begins.
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if the payment or distribution is
made on or after the date the account holder—
‘‘(i) becomes disabled within the mean-
ing of section 72(m)(7), or
‘‘(ii) dies.
‘‘(C) SPECIAL RULES.—For purposes of sub-
paragraph (A)—
‘‘(i) all MedicarePlus MSA’s of the ac-
count holder shall be treated as 1 account,
‘‘(ii) all payments and distributions
not used exclusively to pay the qualified
medical expenses of the account holder dur-
128
Subtitle A, Part 2
ing any taxable year shall be treated as 1
distribution, and
‘‘(iii) any distribution of property
shall be taken into account at its fair mar-
ket value on the date of the distribution.
‘‘(3) WITHDRAWAL
OF
ERRONEOUS
CONTRIBU-
TIONS.—Paragraphs (1) and (2) shall not apply to
any payment or distribution from a MedicarePlus
MSA to the Secretary of Health and Human Services
of an erroneous contribution to such MSA and of the
net income attributable to such contribution.
‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—Para-
graphs (1) and (2) shall not apply to any trustee-to-
trustee transfer from a MedicarePlus MSA of an ac-
count holder to another MedicarePlus MSA of such
account holder.
‘‘(5) COORDINATION
WITH
MEDICAL
EXPENSE
DEDUCTION.—For purposes of section 213, any pay-
ment or distribution out of a MedicarePlus MSA for
qualified medical expenses shall not be treated as an
expense paid for medical care.
‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF AC-
COUNT HOLDER.—
‘‘(1) TREATMENT IF DESIGNATED BENEFICIARY
IS SPOUSE.—
129
Subtitle A, Part 2
‘‘(A) IN GENERAL.—In the case of an ac-
count holder’s interest in a MedicarePlus MSA
which is payable to (or for the benefit of) such
holder’s spouse upon the death of such holder,
such MedicarePlus MSA shall be treated as a
MedicarePlus MSA of such spouse as of the date
of such death.
‘‘(B) SPECIAL RULES IF SPOUSE NOT MEDI-
CARE ELIGIBLE.—If, as of the date of such death,
such spouse is not entitled to benefits under title
XVIII of the Social Security Act, then after the
date of such death—
‘‘(i) the Secretary of Health and
Human Services may not make any pay-
ments to such MedicarePlus MSA, other
than payments attributable to periods before
such date,
‘‘(ii) in applying subsection (b)(2)
with respect to such MedicarePlus MSA, ref-
erences to the account holder shall be treated
as including references to any dependent (as
defined in section 152) of such spouse and
any subsequent spouse of such spouse, and
130
Subtitle A, Part 2
‘‘(iii) in lieu of applying subsection
(d)(2), the rules of section 220(f)(2) shall
apply.
‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY
IS NOT SPOUSE.—In the case of an account holder’s
interest in a MedicarePlus MSA which is payable to
(or for the benefit of) any person other than such
holder’s spouse upon the death of such holder—
‘‘(A) such account shall cease to be a
MedicarePlus MSA as of the date of death, and
‘‘(B) an amount equal to the fair market
value of the assets in such account on such date
shall be includible—
‘‘(i) if such person is not the estate of
such holder, in such person’s gross income
for the taxable year which includes such
date, or
‘‘(ii) if such person is the estate of such
holder, in such holder’s gross income for last
taxable year of such holder.
‘‘(f) REPORTS.—
‘‘(1) 
IN
GENERAL.—The 
trustee 
of 
a
MedicarePlus MSA shall make such reports regarding
such account to the Secretary and to the account hold-
er with respect to—
131
Subtitle A, Part 2
‘‘(A) the fair market value of the assets in
such MedicarePlus MSA as of the close of each
calendar year, and
‘‘(B) contributions, distributions, and other
matters,
as the Secretary may require by regulations.
‘‘(2) TIME AND MANNER OF REPORTS.—The re-
ports required by this subsection—
‘‘(A) shall be filed at such time and in such
manner as the Secretary prescribes in such regu-
lations, and
‘‘(B) shall be furnished to the account hold-
er—
‘‘(i) not later than January 31 of the
calendar year following the calendar year to
which such reports relate, and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.’’
(b) EXCLUSION OF MEDICAREPLUS MSA’S FROM ES-
TATE TAX.—Part IV of subchapter A of chapter 11 of such
Code is amended by adding at the end the following new
section:
‘‘SEC. 2057. MEDICAREPLUS MSA’S.
‘‘For purposes of the tax imposed by section 2001, the
value of the taxable estate shall be determined by deducting
132
Subtitle A, Part 2
from the value of the gross estate an amount equal to the
value of any MedicarePlus MSA (as defined in section
137(b)) included in the gross estate.’’
(c) TAX ON PROHIBITED TRANSACTIONS.—
(1) Section 4975 of such Code (relating to tax on
prohibited transactions) is amended by adding at the
end of subsection (c) the following new paragraph:
‘‘(4) 
SPECIAL
RULE
FOR
MEDICAREPLUS
MSA’S.—An 
individual 
for 
whose 
benefit 
a
MedicarePlus MSA (within the meaning of section
137(b)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect to
such transaction, the account ceases to be a
MedicarePlus MSA by reason of the application of
section 137(c)(2) to such account.’’
(2) Paragraph (1) of section 4975(e) of such
Code is amended to read as follows:
‘‘(1) PLAN.—For purposes of this section, the
term ‘plan’ means—
‘‘(A) a trust described in section 401(a)
which forms a part of a plan, or a plan de-
scribed in section 403(a), which trust or plan is
exempt from tax under section 501(a),
133
Subtitle A, Part 2
‘‘(B) an individual retirement account de-
scribed in section 408(a),
‘‘(C) an individual retirement annuity de-
scribed in section 408(b),
‘‘(D) a medical savings account described in
section 220(d),
‘‘(E) a MedicarePlus MSA described in sec-
tion 137(b), or
‘‘(F) a trust, plan, account, or annuity
which, at any time, has been determined by the
Secretary to be described in any preceding sub-
paragraph of this paragraph.’’
(d) 
FAILURE
TO
PROVIDE
REPORTS
ON
MEDICAREPLUS MSA’S.—
(1) Subsection (a) of section 6693 of such Code
(relating to failure to provide reports on individual
retirement accounts or annuities) is amended to read
as follows:
‘‘(a) REPORTS.—
‘‘(1) IN GENERAL.—If a person required to file
a report under a provision referred to in paragraph
(2) fails to file such report at the time and in the
manner required by such provision, such person shall
pay a penalty of $50 for each failure unless it is
shown that such failure is due to reasonable cause.
134
Subtitle A, Part 2
‘‘(2) PROVISIONS.—The provisions referred to in
this paragraph are—
‘‘(A) subsections (i) and (l) of section 408
(relating to individual retirement plans),
‘‘(B) section 220(h) (relating to medical
savings accounts), and
‘‘(C) 
section 
137(f) 
(relating 
to
MedicarePlus MSA’s).’’
(2) The section heading for section 6693 of such
Code is amended to read as follows:
‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE-
TIREMENT PLANS AND CERTAIN OTHER TAX-
FAVORED ACCOUNTS; PENALTIES RELATING
TO 
DESIGNATED 
NONDEDUCTIBLE 
CON-
TRIBUTIONS.’’
(e) CLERICAL AMENDMENTS.—
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following:
‘‘Sec. 137. MedicarePlus MSA’s.
‘‘Sec. 138. Cross references to other Acts.’’
(2) The table of sections for part 1 of subchapter
B of chapter 68 of such Code is amended by striking
135
Subtitle A, Part 2
the item relating to section 6693 and inserting the
following new item:
‘‘Sec. 6693. Failure to file reports on individual retirement plans
and certain other tax-favored accounts; penalties re-
lating to designated nondeductible contributions.’’
(3) The table of sections for part IV of sub-
chapter A of chapter 11 of such Code is amended by
adding at the end the following new item:
‘‘Sec. 2057. MedicarePlus MSA’s.’’
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1996.
SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS IN-
COME.
(a) IN GENERAL.—Section 105 of the Internal Revenue
Code of 1986 (relating to amounts received under accident
and health plans) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY
ACT.—Gross income does not include any rebate received
under section 1852(e)(1)(A) of the Social Security Act dur-
ing the taxable year.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to amounts received after the date
of the enactment of this Act.
136
Subtitle A, Part 3
PART 3—SPECIAL ANTITRUST RULE FOR
PROVIDER SERVICE NETWORKS
SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON
TO PROVIDER SERVICE NETWORKS.
(a) RULE OF REASON STANDARD.—In any action
under the antitrust laws, or under any State law similar
to the antitrust laws—
(1) the conduct of a provider service network in
negotiating, making, or performing a contract (in-
cluding the establishment and modification of a fee
schedule and the development of a panel of physi-
cians), to the extent such contract is for the purpose
of providing health care services to individuals under
the terms of a MedicarePlus PSO product, and
(2) the conduct of any member of such network
for the purpose of providing such health care services
under such contract to such extent,
shall not be deemed illegal per se. Such conduct shall be
judged on the basis of its reasonableness, taking into ac-
count all relevant factors affecting competition, including
the effects on competition in properly defined markets.
(b) DEFINITIONS.—For purposes of subsection (a):
(1) ANTITRUST
LAWS.—The term ‘‘antitrust
laws’’ has the meaning given it in subsection (a) of
the first section of the Clayton Act (15 U.S.C. 12), ex-
cept that such term includes section 5 of the Federal
137
Subtitle A, Part 3
Trade Commission Act (15 U.S.C. 45) to the extent
that such section 5 applies to unfair methods of com-
petition.
(2) HEALTH CARE PROVIDER.—The term ‘‘health
care provider’’ means any individual or entity that
is engaged in the delivery of health care services in
a State and that is required by State law or regula-
tion to be licensed or certified by the State to engage
in the delivery of such services in the State.
(3) HEALTH CARE SERVICE.—The term ‘‘health
care service’’ means any service for which payment
may be made under a MedicarePlus PSO product in-
cluding services related to the delivery or administra-
tion of such service.
(4) 
MEDICAREPLUS
PROGRAM.—The 
term
‘‘MedicarePlus program’’ means the program under
part C of title XVIII of the Social Security Act.
(5) MEDICAREPLUS
PSO
PRODUCT.—The term
‘‘MedicarePlus PSO product’’ means a MedicarePlus
product offered by a provider-sponsored organization
under part C of title XVIII of the Social Security Act.
(6) PROVIDER
SERVICE
NETWORK.—The term
‘‘provider service network’’ means an organization
that—
138
Subtitle A, Part 3
(A) is organized by, operated by, and com-
posed of members who are health care providers
and for purposes that include providing health
care services,
(B) is funded in part by capital contribu-
tions made by the members of such organization,
(C) with respect to each contract made by
such organization for the purpose of providing a
type of health care service to individuals under
the terms of a MedicarePlus PSO product—
(i) requires all members of such orga-
nization who engage in providing such type
of health care service to agree to provide
health care services of such type under such
contract,
(ii) receives the compensation paid for
the health care services of such type pro-
vided under such contract by such members,
and
(iii) provides for the distribution of
such compensation,
(D) has established, consistent with the re-
quirements of the MedicarePlus program for pro-
vider-sponsored organizations, a program to re-
view, pursuant to written guidelines, the quality,
139
Subtitle A, Part 3
efficiency, and appropriateness of treatment
methods and setting of services for all health care
providers and all patients participating in such
product, along with internal procedures to cor-
rect identified deficiencies relating to such meth-
ods and such services,
(E) has established, consistent with the re-
quirements of the MedicarePlus program for pro-
vider-sponsored organizations, a program to
monitor and control utilization of health care
services provided under such product, for the
purpose of improving efficient, appropriate care
and eliminating the provision of unnecessary
health care services,
(F) has established a management program
to coordinate the delivery of health care services
for all health care providers and all patients
participating in such product, for the purpose of
achieving efficiencies and enhancing the quality
of health care services provided, and
(G) has established, consistent with the re-
quirements of the MedicarePlus program for pro-
vider-sponsored organizations, a grievance and
appeal process for such organization designed to
140
Subtitle A, Part 4
review and promptly resolve beneficiary or pa-
tient grievances and complaints.
Such term may include a provider-sponsored organi-
zation.
(7) PROVIDER-SPONSORED ORGANIZATION.—The
term ‘‘provider-sponsored organization’’ means a
MedicarePlus organization under the MedicarePlus
program that is a provider-sponsored organization
(as defined in section ll of the Social Security
Act).
(8) STATE.—The term ‘‘State’’ has the meaning
given it in section 4G(2) of the Clayton Act (15
U.S.C. 15g(2)).
(c) ISSUANCE OF GUIDELINES.—Not later than 120
days after the date of the enactment of this Act, the Attorney
General and the Federal Trade Commission shall issue
jointly guidelines specifying the enforcement policies and
analytical principles that will be applied by the Depart-
ment of Justice and the Commission with respect to the op-
eration of subsection (a).
PART 4—COMMISSIONS
SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.
(a) IN GENERAL.—Title XVIII, as amended by section
15001(a), is amended by inserting after section 1805 the
following new section:
141
Subtitle A, Part 4
‘‘MEDICARE PAYMENT REVIEW COMMISSION
‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby es-
tablished the Medicare Payment Review Commission (in
this section referred to as the ‘Commission’).
‘‘(b) DUTIES.—
‘‘(1) GENERAL
DUTIES
AND
REPORTS.—The
Commission shall review, and make recommendations
to Congress concerning, payment policies under this
title. By not later than June 1 of each year, the Com-
mission shall submit a report to Congress containing
an examination of issues affecting the medicare pro-
gram, including the implications of changes in health
care delivery in the United States and in the market
for health care services on the medicare program. The
Commission may submit to Congress from time to
time such other reports as the Commission deems ap-
propriate. The Secretary shall respond to rec-
ommendations of the Commission in notices of rule-
making proceedings under this title.
‘‘(2) 
SPECIFIC
DUTIES
RELATING
TO
MEDICAREPLUS PROGRAM.—Specifically, the Commis-
sion shall review, with respect to the MedicarePlus
program under part C—
‘‘(A) the appropriateness of the methodology
for making payment to plans under such pro-
142
Subtitle A, Part 4
gram, including the making of differential pay-
ments and the distribution of differential up-
dates among different payment areas,
‘‘(B) the appropriateness of the mechanisms
used to adjust payments for risk and the need to
adjust such mechanisms to take into account
health status of beneficiaries,
‘‘(C) the implications of risk selection both
among MedicarePlus organizations and between
the 
MedicarePlus 
option 
and 
the 
non-
MedicarePlus option,
‘‘(D) in relation to payment under part C,
the development and implementation of mecha-
nisms to assure the quality of care for those en-
rolled with MedicarePlus organizations,
‘‘(E) the impact of the MedicarePlus pro-
gram on access to care for medicare beneficiaries,
and
‘‘(F) other major issues in implementation
and further development of the MedicarePlus
program.
‘‘(3) SPECIFIC
DUTIES
RELATING
TO
THE
FAILSAFE
BUDGET
MECHANISM.—Specifically, the
Commission shall review, with respect to the failsafe
budget mechanism described in section 1895—
143
Subtitle A, Part 4
‘‘(A) the appropriateness of the expenditure
projections by the Secretary under section
1895(c) for each medicare sector;
‘‘(B) the appropriateness of the growth fac-
tors for each sector and the ability to take into
account substitution across sectors;
‘‘(C) the appropriateness of the mechanisms
for 
implementing 
reductions 
in 
payment
amounts for different sectors, including any ad-
justments to reflect changes in volume or inten-
sity resulting for any payment reductions;
‘‘(D) the impact of the mechanism on pro-
vider participation in parts A and B and in the
MedicarePlus program; and
‘‘(E) the appropriateness of the medicare
benefit budget (under section 1895(c)(2)(C) of the
Social Security Act), particularly for fiscal years
after fiscal year 2002.
‘‘(4) SPECIFIC DUTIES RELATING TO THE FEE-
FOR-SERVICE SYSTEM.—Specifically, the Commission
shall review payment policies under parts A and B,
including—
‘‘(A) the factors affecting expenditures for
services in different sectors, including the process
for updating hospital, physician, and other fees;
144
Subtitle A, Part 4
‘‘(B) payment methodologies; and
‘‘(C) the impact of payment policies on ac-
cess and quality of care for Medicare bene-
ficiaries.
‘‘(5) SPECIFIC
DUTIES
RELATING
TO
INTER-
ACTION OF PAYMENT POLICIES WITH HEALTH CARE
DELIVERY GENERALLY.—Specifically the Commission
shall review the effect of payment policies under this
title on the delivery of health care services under this
title and assess the implications of changes in the
health services market on the Medicare Program.
‘‘(c) MEMBERSHIP.—
‘‘(1) NUMBER AND APPOINTMENT.—The Commis-
sion shall be composed of 15 members appointed by
Comptroller General.
‘‘(2) QUALIFICATIONS.—The membership of the
Commission shall include individuals with national
recognition for their expertise in health finance and
economics, actuarial science, health facility manage-
ment, health plans and integrated delivery systems,
reimbursement of health facilities, physicians, and
other providers of services, and other related fields,
who provide a mix of different professionals, broad ge-
ographic representation, and a balance between urban
and rural representatives, including physicians and
145
Subtitle A, Part 4
other health professionals, employers, third party
payors, individuals skilled in the conduct and inter-
pretation of biomedical, health services, and health ec-
onomics research and expertise in outcomes and effec-
tiveness research and technology assessment. Such
membership shall also include representatives of con-
sumers and the elderly.
‘‘(3) CONSIDERATIONS
IN
INITIAL
APPOINT-
MENT.—To the extent possible, in first appointing
members to the Commission shall consider appointing
individuals who (as of the date of the enactment of
this section) were serving on the Prospective Payment
Assessment Commission or the Physician Payment
Review Commission.
‘‘(4) TERMS.—
‘‘(A) IN GENERAL.—The terms of members
of the Commission shall be for 3 years except
that the Comptroller General shall designate
staggered terms for the members first appointed.
‘‘(B) VACANCIES.—Any member appointed
to fill a vacancy occurring before the expiration
of the term for which the member’s predecessor
was appointed shall be appointed only for the re-
mainder of that term. A member may serve after
the expiration of that member’s term until a suc-
146
Subtitle A, Part 4
cessor has taken office. A vacancy in the Com-
mission shall be filled in the manner in which
the original appointment was made.
‘‘(5) COMPENSATION.—While serving on the busi-
ness of the Commission (including traveltime), a
member of the Commission shall be entitled to com-
pensation at the per diem equivalent of the rate pro-
vided for level IV of the Executive Schedule under sec-
tion 5315 of title 5, United States Code; and while so
serving away from home and member’s regular place
of business, a member may be allowed travel expenses,
as authorized by the Chairman of the Commission.
Physicians serving as personnel of the Commission
may be provided a physician comparability allow-
ance by the Commission in the same manner as Gov-
ernment physicians may be provided such an allow-
ance by an agency under section 5948 of title 5,
United States Code, and for such purpose subsection
(i) of such section shall apply to the Commission in
the same manner as it applies to the Tennessee Valley
Authority. For purposes of pay (other than pay of
members of the Commission) and employment bene-
fits, rights, and privileges, all personnel of the Com-
mission shall be treated as if they were employees of
the United States Senate.
147
Subtitle A, Part 4
‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp-
troller General shall designate a member of the Com-
mission, at the time of appointment of the member,
as Chairman and a member as Vice Chairman for
that term of appointment.
‘‘(7) MEETINGS.—The Commission shall meet at
the call of the Chairman.
‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT-
ANTS.—Subject to such review as the Comptroller General
deems necessary to assure the efficient administration of the
Commission, the Commission may—
‘‘(1) employ and fix the compensation of an Ex-
ecutive Director (subject to the approval of the Comp-
troller General) and such other personnel as may be
necessary to carry out its duties (without regard to
the provisions of title 5, United States Code, govern-
ing appointments in the competitive service);
‘‘(2) seek such assistance and support as may be
required in the performance of its duties from appro-
priate Federal departments and agencies;
‘‘(3) enter into contracts or make other arrange-
ments, as may be necessary for the conduct of the
work of the Commission (without regard to section
3709 of the Revised Statutes (41 U.S.C. 5));
148
Subtitle A, Part 4
‘‘(4) make advance, progress, and other pay-
ments which relate to the work of the Commission;
‘‘(5) provide transportation and subsistence for
persons serving without compensation; and
‘‘(6) prescribe such rules and regulations as it
deems necessary with respect to the internal organiza-
tion and operation of the Commission.
‘‘(e) POWERS.—
‘‘(1) OBTAINING OFFICIAL DATA.—The Commis-
sion may secure directly from any department or
agency of the United States information necessary to
enable it to carry out this section. Upon request of the
Chairman, the head of that department or agency
shall furnish that information to the Commission on
an agreed upon schedule.
‘‘(2) DATA COLLECTION.—In order to carry out
its functions, the Commission shall collect and assess
information—
‘‘(A) utilize existing information, both pub-
lished and unpublished, where possible, collected
and assessed either by its own staff or under
other arrangements made in accordance with
this section,
149
Subtitle A, Part 4
‘‘(B) carry out, or award grants or con-
tracts for, original research and experimentation,
where existing information is inadequate, and
‘‘(C) adopt procedures allowing any inter-
ested party to submit information for the Com-
mission’s use in making reports and rec-
ommendations.
‘‘(3) ACCESS
OF
GAO
TO
INFORMATION.—The
Comptroller General shall have unrestricted access to
all deliberations, records, and data of the Commis-
sion, immediately upon request.
‘‘(4) PERIODIC AUDIT.—The Commission shall be
subject to periodic audit by the General Accounting
Office.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) 
REQUEST
FOR
APPROPRIATIONS.—The
Commission shall submit requests for appropriations
in the same manner as the Comptroller General sub-
mits requests for appropriations, but amounts appro-
priated for the Commission shall be separate from
amounts appropriated for the Comptroller General.
‘‘(2) AUTHORIZATION.—There are authorized to
be appropriated such sums as may be necessary to
carry out the provisions of this section. 60 percent of
such appropriation shall be payable from the Federal
150
Subtitle A, Part 4
Hospital Insurance Trust Fund, and 40 percent of
such appropriation shall be payable from the Federal
Supplementary Medical Insurance Trust Fund.’’.
(b) ABOLITION OF PROPAC AND PPRC.—
(1) PROPAC.—
(A) IN
GENERAL.—Section 1886(e) (42
U.S.C. 1395ww(e)) is amended—
(i) by striking paragraphs (2) and (6);
and
(ii) in paragraph (3), by striking ‘‘(A)
The Commission’’ and all that follows
through ‘‘(B)’’.
(B) 
CONFORMING
AMENDMENT.—Section
1862 (42 U.S.C. 1395y) is amended by striking
‘‘Prospective Payment Assessment Commission’’
each place it appears in subsection (a)(1)(D)
and subsection (i) and inserting ‘‘Medicare Pay-
ment Review Commission’’.
(2) PPRC.—
(A) IN GENERAL.—Title XVIII is amended
by striking section 1845 (42 U.S.C. 1395w–1).
(B) CONFORMING AMENDMENTS.—
(i) Section 1834(b)(2) (42 U.S.C.
1395m(b)(2)) is amended by striking ‘‘Phy-
sician Payment Review Commission’’ and
151
Subtitle A, Part 4
inserting ‘‘Medicare Payment Review Com-
mission’’.
(ii) 
Section 
1842(b) 
(42 
U.S.C.
1395u(b)) is amended by striking ‘‘Physi-
cian Payment Review Commission’’ each
place it appears in paragraphs (9)(D) and
(14)(C)(i) and inserting ‘‘Medicare Pay-
ment Review Commission’’.
(iii) Section 1848 (42 U.S.C. 1395w–
4) is amended by striking ‘‘Physician Pay-
ment Review Commission’’ and inserting
‘‘Medicare Payment Review Commission’’
each 
place 
it 
appears 
in 
paragraph
(2)(A)(ii), (2)(B)(iii), and (5) of subsection
(c), subsection (d)(2)(F), paragraphs (1)(B),
(3), and (4)(A) of subsection (f), and para-
graphs (6)(C) and (7)(C) of subsection (g).
(c) EFFECTIVE DATE; TRANSITION.—
(1) IN GENERAL.—The Comptroller General shall
first provide for appointment of members to the Medi-
care Payment Review Commission (in this subsection
referred to as ‘‘MPRC’’) by not later than March 31,
1996.
(2) TRANSITION.—Effective on a date (not later
than 30 days after the date a majority of members of
152
Subtitle A, Part 4
the MPRC have first been appointed, the Prospective
Payment Assessment Commission (in this subsection
referred to as ‘‘ProPAC’’) and the Physician Payment
Review Commission (in this subsection referred to as
‘‘PPRC’’), and amendments made by subsection (b),
are terminated. The Comptroller General, to the max-
imum extent feasible, shall provide for the transfer to
the MPRC of assets and staff of ProPAC and PPRC,
without any loss of benefits or seniority by virtue of
such transfers. Fund balances available to the
ProPAC or PPRC for any period shall be available
to the MPRC for such period for like purposes.
(3) 
CONTINUING
RESPONSIBILITY
FOR
RE-
PORTS.—The MPRC shall be responsible for the prep-
aration and submission of reports required by law to
be submitted (and which have not been submitted by
the date of establishment of the MPRC) by the
ProPAC and PPRC, and, for this purpose, any ref-
erence in law to either such Commission is deemed,
after the appointment of the MPRC to refer to the
MPRC.
153
Subtitle A, Part 4
SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY
BOOM GENERATION ON THE MEDICARE PRO-
GRAM.
(a) ESTABLISHMENT.—There is established a commis-
sion to be known as the Commission on the Effect of the
Baby Boom Generation on the Medicare Program (in this
section referred to as the ‘‘Commission’’).
(b) DUTIES.—
(1) IN GENERAL.—The Commission shall—
(A) examine the financial impact on the
medicare program of the significant increase in
the number of medicare eligible individuals
which will occur beginning approximately dur-
ing 2010 and lasting for approximately 25
years, and
(B) make specific recommendations to the
Congress respecting a comprehensive approach to
preserve the medicare program for the period
during which such individuals are eligible for
medicare.
(2) CONSIDERATIONS IN MAKING RECOMMENDA-
TIONS.—In making its recommendations, the Com-
mission shall consider the following:
(A) The amount and sources of Federal
funds to finance the medicare program, includ-
154
Subtitle A, Part 4
ing the potential use of innovative financing
methods.
(B) The most efficient and effective manner
of administering the program, including the ap-
propriateness of continuing the application of
the failsafe budget mechanism under section
1895 of the Social Security Act for fiscal years
after fiscal year 2002 and the appropriate long-
term growth rates for contributions electing cov-
erage under MedicarePlus under part C of title
XVIII of such Act.
(C) Methods used by other nations to re-
spond to comparable demographic patterns in
eligibility for health care benefits for elderly and
disabled individuals.
(D) Modifying age-based eligibility to cor-
respond to changes in age-based eligibility under
the OASDI program.
(E) Trends in employment-related health
care for retirees, including the use of medical
savings accounts and similar financing devices.
(c) MEMBERSHIP.—
(1) APPOINTMENT.—The Commission shall be
composed of 15 members appointed as follows:
(A) The President shall appoint 3 members.
155
Subtitle A, Part 4
(B) The Majority Leader of the Senate shall
appoint, after consultation with the minority
leader of the Senate, 6 members, of whom not
more than 4 may be of the same political party.
(C) The Speaker of the House of Represent-
atives shall appoint, after consultation with the
minority leader of the House of Representatives,
6 members, of whom not more than 4 may be of
the same political party.
(2) CHAIRMAN AND VICE CHAIRMAN.—The Com-
mission shall elect a Chairman and Vice Chairman
from among its members.
(3) VACANCIES.—Any vacancy in the member-
ship of the Commission shall be filled in the manner
in which the original appointment was made and
shall not affect the power of the remaining members
to execute the duties of the Commission.
(4) QUORUM.—A quorum shall consist of 8 mem-
bers of the Commission, except that 4 members may
conduct a hearing under subsection (e).
(5) MEETINGS.—The Commission shall meet at
the call of its Chairman or a majority of its members.
(6) COMPENSATION AND REIMBURSEMENT OF EX-
PENSES.—Members of the Commission are not enti-
tled to receive compensation for service on the Com-
156
Subtitle A, Part 4
mission. Members may be reimbursed for travel, sub-
sistence, and other necessary expenses incurred in car-
rying out the duties of the Commission.
(d) STAFF AND CONSULTANTS.—
(1) STAFF.—The Commission may appoint and
determine the compensation of such staff as may be
necessary to carry out the duties of the Commission.
Such appointments and compensation may be made
without regard to the provisions of title 5, United
States Code, that govern appointments in the com-
petitive services, and the provisions of chapter 51 and
subchapter III of chapter 53 of such title that relate
to classifications and the General Schedule pay rates.
(2) CONSULTANTS.—The Commission may pro-
cure such temporary and intermittent services of con-
sultants under section 3109(b) of title 5, United
States Code, as the Commission determines to be nec-
essary to carry out the duties of the Commission.
(e) POWERS.—
(1) HEARINGS AND OTHER ACTIVITIES.—For the
purpose of carrying out its duties, the Commission
may hold such hearings and undertake such other ac-
tivities as the Commission determines to be necessary
to carry out its duties.
157
Subtitle A, Part 4
(2) STUDIES BY GAO.—Upon the request of the
Commission, the Comptroller General shall conduct
such studies or investigations as the Commission de-
termines to be necessary to carry out its duties.
(3) COST ESTIMATES BY CONGRESSIONAL BUDG-
ET OFFICE.—
(A) Upon the request of the Commission, the
Director of the Congressional Budget Office shall
provide to the Commission such cost estimates as
the Commission determines to be necessary to
carry out its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the office
of the Director of such additional staff as may
be necessary for the Director to comply with re-
quests by the Commission under subparagraph
(A).
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon the
request of the Commission, the head of any Federal
agency is authorized to detail, without reimburse-
ment, any of the personnel of such agency to the Com-
mission to assist the Commission in carrying out its
duties. Any such detail shall not interrupt or other-
158
Subtitle A, Part 4
wise affect the civil service status or privileges of the
Federal employee.
(5) TECHNICAL ASSISTANCE.—Upon the request
of the Commission, the head of a Federal agency shall
provide such technical assistance to the Commission
as the Commission determines to be necessary to
carry out its duties.
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a com-
mission of Congress as described in section 3215 of
title 39, United States Code.
(7) OBTAINING INFORMATION.—The Commission
may secure directly from any Federal agency infor-
mation necessary to enable it to carry out its duties,
if the information may be disclosed under section 552
of title 5, United States Code. Upon request of the
Chairman of the Commission, the head of such agency
shall furnish such information to the Commission.
(8) ADMINISTRATIVE SUPPORT SERVICES.—Upon
the request of the Commission, the Administrator of
General Services shall provide to the Commission on
a reimbursable basis such administrative support
services as the Commission may request.
159
Subtitle A, Part 4
(9) ACCEPTANCE OF DONATIONS.—The Commis-
sion may accept, use, and dispose of gifts or dona-
tions of services or property.
(10) PRINTING.—For purposes of costs relating
to printing and binding, including the cost of person-
nel detailed from the Government Printing Office, the
Commission shall be deemed to be a committee of the
Congress.
(f) REPORT.—Not later than May 1, 1997, the Com-
mission shall submit to Congress a report containing its
findings and recommendations regarding how to protect
and preserve the medicare program in a financially solvent
manner until 2030 (or, if later, throughout the period of
projected solvency of the Federal Old-Age and Survivors In-
surance Trust Fund). The report shall include detailed rec-
ommendations for appropriate legislative initiatives re-
specting how to accomplish this objective.
(g) TERMINATION.—The Commission shall terminate
60 days after the date of submission of the report required
in subsection (f).
(h) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated $1,500,000 to carry out this
section. Amounts appropriated to carry out this section
shall remain available until expended.
160
Subtitle A, Part 5
SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR
OF HCFA.
(a) IN GENERAL.—Section 1117 (42 U.S.C. 1317) is
amended by striking ‘‘President by and with the advice and
consent of the Senate’’ and inserting ‘‘Secretary of Health
and Human Services’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of the enactment
of this Act and shall apply to Administrators appointed
on or after the date of the enactment of this Act.
PART 5—TREATMENT OF HOSPITALS WHICH PAR-
TICIPATE IN PROVIDER-SPONSORED ORGANI-
ZATIONS
SEC. 15041. TREATMENT OF HOSPITALS WHICH PARTICI-
PATE IN PROVIDER-SPONSORED ORGANIZA-
TIONS.
(a) IN GENERAL.—Section 501 of the Internal Revenue
Code of 1986 (relating to exemption from tax on corpora-
tions, certain trusts, etc.) is amended by redesignating sub-
section (n) as subsection (o) and by inserting after sub-
section (m) the following new subsection:
‘‘(n) TREATMENT OF HOSPITALS PARTICIPATING IN
PROVIDER-SPONSORED ORGANIZATIONS.—An organization
shall not fail to be treated as organized and operated exclu-
sively for a charitable purpose for purposes of subsection
(c)(3) solely because a hospital which is owned and operated
161
Subtitle B
by such organization participates in a provider-sponsored
organization (as defined in section 1854(a)(1) of the Social
Security Act), whether or not the provider-sponsored orga-
nization is exempt from tax. For purposes of subsection
(c)(3), any person with a material financial interest in
such a provider-sponsored organization shall be treated as
a private shareholder or individual with respect to the hos-
pital.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of the enactment
of this Act.
Subtitle B—Preventing Fraud and
Abuse
SEC. 15101. INCREASING AWARENESS OF FRAUD AND
ABUSE.
(a) BENEFICIARY OUTREACH EFFORTS.—The Sec-
retary of Health and Human Services (acting through the
Administrator of the Health Care Financing Administra-
tion and the Inspector General of the Department of Health
and Human Services) shall make ongoing efforts (through
public service announcements, publications, and other ap-
propriate methods) to alert individuals entitled to benefits
under the medicare program of the existence of fraud and
abuse committed against the program and the costs to the
program of such fraud and abuse, and of the existence of
162
Subtitle B
the toll-free telephone line operated by the Secretary to re-
ceive information on fraud and abuse committed against
the program.
(b) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—The Secretary
shall provide an explanation of benefits under the medicare
program with respect to each item or service for which pay-
ment may be made under the program which is furnished
to an individual, without regard to whether or not a deduct-
ible or coinsurance may be imposed against the individual
with respect to the item or service.
(c) PROVIDER OUTREACH EFFORTS; PUBLICATION OF
FRAUD ALERTS.—
(1) SPECIAL FRAUD ALERTS.—
(A) IN GENERAL.—
(i) REQUEST
FOR
SPECIAL
FRAUD
ALERTS.—Any person may present, at any
time, a request to the Secretary to issue and
publish a special fraud alert.
(ii) 
SPECIAL
FRAUD
ALERT
DE-
FINED.—In this section, a ‘‘special fraud
alert’’ is a notice which informs the public
of practices which the Secretary considers to
be suspect or of particular concern under
the medicare program or a State health care
163
Subtitle B
program (as defined in section 1128(h) of
the Social Security Act).
(B) ISSUANCE AND PUBLICATION OF SPE-
CIAL FRAUD ALERTS.—
(i) INVESTIGATION.—Upon receipt of a
request for a special fraud alert under sub-
paragraph (A), the Secretary shall inves-
tigate the subject matter of the request to de-
termine whether a special fraud alert should
be issued. If appropriate, the Secretary (in
consultation with the Attorney General)
shall issue a special fraud alert in response
to the request. All special fraud alerts issued
pursuant to this subparagraph shall be pub-
lished in the Federal Register.
(ii) CRITERIA FOR ISSUANCE.—In de-
termining whether to issue a special fraud
alert upon a request under subparagraph
(A), the Secretary may consider—
(I) whether and to what extent the
practices that would be identified in
the special fraud alert may result in
any of the consequences described in
15214(b); and
164
Subtitle B
(II) the extent and frequency of
the conduct that would be identified in
the special fraud alert.
(2) PUBLICATION OF ALL HCFA FRAUD ALERTS
IN FEDERAL REGISTER.—Each notice issued by the
Health Care Financing Administration which in-
forms the public of practices which the Secretary con-
siders to be suspect or of particular concern under the
medicare program or a State health care program (as
defined in section 1128(h) of the Social Security Act)
shall be published in the Federal Register, without re-
gard to whether or not the notice is issued by a re-
gional office of the Health Care Financing Adminis-
tration.
SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.
(a) PROGRAM TO COLLECT INFORMATION ON FRAUD
AND ABUSE.—
(1) ESTABLISHMENT
OF
PROGRAM.—Not later
than 3 months after the date of the enactment of this
Act, the Secretary of Health and Human Services
(hereinafter in this subtitle referred to as the ‘‘Sec-
retary’’) shall establish a program under which the
Secretary shall encourage individuals to report to the
Secretary information on individuals and entities
who are engaging or who have engaged in acts or
165
Subtitle B
omissions which constitute grounds for the imposition
of a sanction under section 1128, section 1128A, or
section 1128B of the Social Security Act, or who have
otherwise engaged in fraud and abuse against the
medicare program for which there is a sanction pro-
vided under law. The program shall discourage provi-
sion of, and not consider, information which is frivo-
lous or otherwise not relevant or material to the im-
position of such a sanction.
(2) PAYMENT
OF
PORTION
OF
AMOUNTS
COL-
LECTED.—If an individual reports information to the
Secretary under the program established under para-
graph (1) which serves as the basis for the collection
by the Secretary or the Attorney General of any
amount of at least $100 (other than any amount paid
as a penalty under section 1128B of the Social Secu-
rity Act), the Secretary may pay a portion of the
amount collected to the individual (under procedures
similar to those applicable under section 7623 of the
Internal Revenue Code of 1986 to payments to indi-
viduals providing information on violations of such
Code).
(b) PROGRAM TO COLLECT INFORMATION ON PROGRAM
EFFICIENCY.—
166
Subtitle B
(1) ESTABLISHMENT
OF
PROGRAM.—Not later
than 3 months after the date of the enactment of this
Act, the Secretary shall establish a program under
which the Secretary shall encourage individuals to
submit to the Secretary suggestions on methods to im-
prove the efficiency of the medicare program.
(2) PAYMENT
OF
PORTION
OF
PROGRAM
SAV-
INGS.—If an individual submits a suggestion to the
Secretary under the program established under para-
graph (1) which is adopted by the Secretary and
which results in savings to the program, the Secretary
may make a payment to the individual of such
amount as the Secretary considers appropriate.
SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE
HEALTH MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR
ANY PROGRAM VIOLATIONS.—
(1) IN GENERAL.—Section 1876(i)(1) (42 U.S.C.
1395mm(i)(1)) is amended by striking ‘‘the Secretary
may terminate’’ and all that follows and inserting the
following: ‘‘in accordance with procedures established
under paragraph (9), the Secretary may at any time
terminate any such contract or may impose the inter-
mediate sanctions described in paragraph (6)(B) or
(6)(C) (whichever is applicable) on the eligible orga-
167
Subtitle B
nization if the Secretary determines that the organi-
zation—
‘‘(A) has failed substantially to carry out the
contract;
‘‘(B) is carrying out the contract in a manner
inconsistent with the efficient and effective adminis-
tration of this section;
‘‘(C) is operating in a manner that is not in the
best interests of the individuals covered under the con-
tract; or
‘‘(D) no longer substantially meets the applicable
conditions of subsections (b), (c), and (e).’’.
(2) OTHER INTERMEDIATE SANCTIONS FOR MIS-
CELLANEOUS
PROGRAM
VIOLATIONS.—Section
1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by
adding at the end the following new subparagraph:
‘‘(C) In the case of an eligible organization for which
the Secretary makes a determination under paragraph (1)
the basis of which is not described in subparagraph (A),
the Secretary may apply the following intermediate sanc-
tions:
‘‘(i) civil money penalties of not more than
$25,000 for each determination under paragraph (1)
if the deficiency that is the basis of the determination
has directly adversely affected (or has the substantial
168
Subtitle B
likelihood of adversely affecting) an individual cov-
ered under the organization’s contract;
‘‘(ii) civil money penalties of not more than
$10,000 for each week beginning after the initiation
of procedures by the Secretary under paragraph (9)
during which the deficiency that is the basis of a de-
termination under paragraph (1) exists; and
‘‘(iii) suspension of enrollment of individuals
under this section after the date the Secretary notifies
the organization of a determination under paragraph
(1) and until the Secretary is satisfied that the defi-
ciency that is the basis for the determination has been
corrected and is not likely to recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—
Section 1876(i) (42 U.S.C. 1395mm(i)) is amended
by adding at the end the following new paragraph:
‘‘(9) The Secretary may terminate a contract with an
eligible organization under this section or may impose the
intermediate sanctions described in paragraph (6) on the
organization in accordance with formal investigation and
compliance procedures established by the Secretary under
which—
‘‘(A) the Secretary provides the organization
with the opportunity to develop and implement a cor-
rective action plan to correct the deficiencies that
169
Subtitle B
were the basis of the Secretary’s determination under
paragraph (1);
‘‘(B) the Secretary shall impose more severe
sanctions on organizations that have a history of defi-
ciencies or that have not taken steps to correct defi-
ciencies the Secretary has brought to their attention;
‘‘(C) there are no unreasonable or unnecessary
delays between the finding of a deficiency and the im-
position of sanctions; and
‘‘(D) the Secretary provides the organization
with reasonable notice and opportunity for hearing
(including the right to appeal an initial decision) be-
fore imposing any sanction or terminating the con-
tract.’’.
(4) CONFORMING
AMENDMENTS.—(A) Section
1876(i)(6)(B) 
(42 
U.S.C. 
1395mm(i)(6)(B)) 
is
amended by striking the second sentence.
(B) 
Section 
1876(i)(6) 
(42 
U.S.C.
1395mm(i)(6)) is further amended by adding at the
end the following new subparagraph:
‘‘(D) The provisions of section 1128A (other than sub-
sections (a) and (b)) shall apply to a civil money penalty
under subparagraph (A) or (B) in the same manner as they
apply to a civil money penalty or proceeding under section
1128A(a).’’.
170
Subtitle B
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to contract years beginning
on or after January 1, 1996.
SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.
Title XI (42 U.S.C. 1301 et seq.) is amended by insert-
ing after section 1128B the following new section:
‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS
‘‘SEC. 1129. (a) ESTABLISHMENT OF VOLUNTARY DIS-
CLOSURE PROGRAM.—Not later than 3 months after the
date of the enactment of this section, the Secretary shall
establish a program to encourage individuals and entities
to voluntarily disclose to the Secretary information on acts
or omissions of the individual or entity which constitute
grounds for the imposition of a sanction described in section
1128, 1128A, or 1128B.
‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If an in-
dividual or entity voluntarily discloses information with re-
spect to an act or omission to the Secretary under sub-
section (a), the following rules shall apply:
‘‘(1) The Secretary may waive, reduce, or other-
wise mitigate any sanction which would otherwise be
applicable to the individual or entity under section
1128, 1128A, or 1128B as a result of the act or omis-
sion involved.
‘‘(2) No qui tam action may be brought pursu-
ant to chapter 37 of title 31, United States Code,
171
Subtitle B
against the individual or entity with respect to the
act or omission involved.’’.
SEC. 15105. REVISIONS TO CURRENT SANCTIONS.
(a) DOUBLING
THE AMOUNT
OF CIVIL MONETARY
PENALTIES.—The maximum amount of civil monetary
penalties specified in section 1128A of the Social Security
Act or under title XVIII of such Act (as in effect on the
day before the date of the enactment of this Act) shall, effec-
tive for violations occurring after the date of the enactment
of this Act, be double the amount otherwise provided as of
such date.
(b) ESTABLISHMENT OF MINIMUM PERIOD OF EXCLU-
SION FOR CERTAIN INDIVIDUALS AND ENTITIES SUBJECT
TO
PERMISSIVE
EXCLUSION.—Section 1128(c)(3) (42
U.S.C. 1320a–7(c)(3)) is amended by adding at the end the
following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraph (1), (2), or (3) of subsection (b),
the period of the exclusion shall be 3 years, unless the Sec-
retary determines in accordance with regulations that a
shorter period is appropriate because of mitigating cir-
cumstances or that a longer period is appropriate because
of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or
entity under subsection (b)(4) or (b)(5), the period of the
172
Subtitle B
exclusion shall not be less than the period during which the
individual’s or entity’s license to provide health care is re-
voked, suspended, or surrendered, or the individual or the
entity is excluded or suspended from a Federal or State
health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to acts or omissions occur-
ring on or after January 1, 1996.
SEC. 15106. DIRECT SPENDING FOR ANTI-FRAUD ACTIVI-
TIES UNDER MEDICARE.
(a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO-
GRAM.—Title XVIII is amended by adding at the end the
following new section:
‘‘MEDICARE INTEGRITY PROGRAM
‘‘SEC. 1893. (a) ESTABLISHMENT
OF PROGRAM.—
There is hereby established the Medicare Integrity Program
(hereafter in this section referred to as the ‘Program’) under
which the Secretary shall promote the integrity of the medi-
care program by entering into contracts in accordance with
this section with eligible private entities to carry out the
activities described in subsection (b).
‘‘(b) ACTIVITIES DESCRIBED.—The activities described
in this subsection are as follows:
173
Subtitle B
‘‘(1) Review of activities of providers of services
or other individuals and entities furnishing items and
services for which payment may be made under this
title (including skilled nursing facilities and home
health agencies), including medical and utilization
review and fraud review (employing similar stand-
ards, processes, and technologies used by private
health plans, including equipment and software tech-
nologies which surpass the capability of the equip-
ment and technologies used in the review of claims
under this title as of the date of the enactment of this
section).
‘‘(2) Audit of cost reports.
‘‘(3) Determinations as to whether payment
should not be, or should not have been, made under
this title by reason of section 1862(b), and recovery
of payments that should not have been made.
‘‘(4) Education of providers of services, bene-
ficiaries, and other persons with respect to payment
integrity and benefit quality assurance issues.
‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible
to enter into a contract under the Program to carry out
any of the activities described in subsection (b) if—
‘‘(1) the entity has demonstrated capability to
carry out such activities;
174
Subtitle B
‘‘(2) in carrying out such activities, the entity
agrees to cooperate with the Inspector General of the
Department of Health and Human Services, the At-
torney General of the United States, and other law
enforcement agencies, as appropriate, in the inves-
tigation and deterrence of fraud and abuse in relation
to this title and in other cases arising out of such ac-
tivities;
‘‘(3) the entity’s financial holdings, interests, or
relationships will not interfere with its ability to per-
form the functions to be required by the contract in
an effective and impartial manner; and
‘‘(4) the entity meets such other requirements as
the Secretary may impose.
‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—The
Secretary shall enter into contracts under the Program in
accordance with such procedures as the Secretary may by
regulation establish, except that such procedures shall in-
clude the following:
‘‘(1) The Secretary shall determine the appro-
priate number of separate contracts which are nec-
essary to carry out the Program and the appropriate
times at which the Secretary shall enter into such
contracts.
175
Subtitle B
‘‘(2) The provisions of section 1153(e)(1) shall
apply to contracts and contracting authority under
this section, except that competitive procedures must
be used when entering into new contracts under this
section, or at any other time considered appropriate
by the Secretary.
‘‘(3) A contract under this section may be re-
newed without regard to any provision of law requir-
ing competition if the contractor has met or exceeded
the performance requirements established in the cur-
rent contract.
‘‘(e) LIMITATION
ON CONTRACTOR LIABILITY.—The
Secretary shall by regulation provide for the limitation of
a contractor’s liability for actions taken to carry out a con-
tract under the Program, and such regulation shall, to the
extent the Secretary finds appropriate, employ the same or
comparable standards and other substantive and procedural
provisions as are contained in section 1157.
‘‘(f) TRANSFER
OF AMOUNTS
TO MEDICARE ANTI-
FRAUD AND ABUSE TRUST FUND.—For each fiscal year,
the Secretary shall transfer from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary Medi-
cal Insurance Trust Fund to the Medicare Anti-Fraud and
Abuse Trust Fund under subsection (g) such amounts as
are necessary to carry out the activities described in sub-
176
Subtitle B
section (b). Such transfer shall be in an allocation as rea-
sonably reflects the proportion of such expenditures associ-
ated with part A and part B.
‘‘(g) MEDICARE ANTI-FRAUD
AND ABUSE TRUST
FUND.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN GENERAL.—There is hereby estab-
lished in the Treasury of the United States the
Anti-Fraud and Abuse Trust Fund (hereafter in
this subsection referred to as the ‘Trust Fund’).
The Trust Fund shall consist of such gifts and
bequests as may be made as provided in sub-
paragraph (B) and such amounts as may be de-
posited in the Trust Fund as provided in sub-
section (f), paragraph (3), and title XI.
‘‘(B) AUTHORIZATION
TO
ACCEPT
GIFTS
AND BEQUESTS.—The Trust Fund is authorized
to accept on behalf of the United States money
gifts and bequests made unconditionally to the
Trust Fund, for the benefit of the Trust Fund or
any activity financed through the Trust Fund.
‘‘(2) INVESTMENT.—
‘‘(A) IN
GENERAL.—The Secretary of the
Treasury shall invest such amounts of the Fund
as such Secretary determines are not required to
177
Subtitle B
meet current withdrawals from the Fund in gov-
ernment account serial securities.
‘‘(B) USE
OF
INCOME.—Any interest de-
rived from investments under subparagraph (A)
shall be credited to the Fund.
‘‘(3) AMOUNTS DEPOSITED INTO TRUST FUND.—
In addition to amounts transferred under subsection
(f), there shall be deposited in the Trust Fund—
‘‘(A) that portion of amounts recovered in
relation to section 1128A arising out of a claim
under title XVIII as remains after application of
subsection (f)(2) (relating to repayment of the
Federal Hospital Insurance Trust Fund or the
Federal Supplementary Medical Insurance Trust
Fund) of that section, as may be applicable,
‘‘(B) fines imposed under section 1128B
arising out of a claim under this title, and
‘‘(C) penalties and damages imposed (other
than funds awarded to a relator or for restitu-
tion) under sections 3729 through 3732 of title
31, United States Code (pertaining to false
claims) in cases involving claims relating to pro-
grams under title XVIII, XIX, or XXI.
‘‘(4) DIRECT
APPROPRIATION
OF
FUNDS
TO
CARRY OUT PROGRAM.—
178
Subtitle B
‘‘(A) IN GENERAL.—There are appropriated
from the Trust Fund for each fiscal year such
amounts as are necessary to carry out the Medi-
care Integrity Program under this section, sub-
ject to subparagraph (B).
‘‘(B) AMOUNTS
SPECIFIED.—The amount
appropriated under subparagraph (A) for a fis-
cal year is as follows:
‘‘(i) For fiscal year 1996, such amount
shall be not less than $430,000,000 and not
more than $440,000,000.
‘‘(ii) For fiscal year 1997, such
amount shall be not less than $490,000,000
and not more than $500,000,000.
‘‘(iii) For fiscal year 1998, such
amount shall be not less than $550,000,000
and not more than $560,000,000.
‘‘(iv) For fiscal year 1999, such
amount shall be not less than $620,000,000
and not more than $630,000,000.
‘‘(v) For fiscal year 2000, such amount
shall be not less than $670,000,000 and not
more than $680,000,000.
179
Subtitle B
‘‘(vi) For fiscal year 2001, such
amount shall be not less than $690,000,000
and not more than $700,000,000.
‘‘(vii) For fiscal year 2002, such
amount shall be not less than $710,000,000
and not more than $720,000,000.
‘‘(5) ANNUAL REPORT.—The Secretary shall sub-
mit an annual report to Congress on the amount of
revenue which is generated and disbursed by the
Trust Fund in each fiscal year.’’.
(b) ELIMINATION OF FI AND CARRIER RESPONSIBIL-
ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO-
GRAM.—
(1) 
RESPONSIBILITIES
OF
FISCAL
INTERMEDIARIES UNDER PART A.—Section 1816 (42
U.S.C. 1395h) is amended by adding at the end the
following new subsection:
‘‘(l) No agency or organization may carry out (or re-
ceive payment for carrying out) any activity pursuant to
an agreement under this section to the extent that the activ-
ity is carried out pursuant to a contract under the Medicare
Integrity Program under section 1893.’’.
(2) RESPONSIBILITIES
OF
CARRIERS
UNDER
PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is
180
Subtitle B
amended by adding at the end the following new
paragraph:
‘‘(6) No carrier may carry out (or receive payment for
carrying out) any activity pursuant to a contract under
this subsection to the extent that the activity is carried out
pursuant to a contract under the Medicare Integrity Pro-
gram under section 1893.’’.
(c) CONFORMING AMENDMENT.—Section 1128A(f)(3)
(42 U.S.C. 1320a–7a(f)(3)) is amended by striking ‘‘as mis-
cellaneous receipts of the Treasury of the United States’’
and inserting ‘‘in the Anti-Fraud and Abuse Trust Fund
established under section 1893(g)’’.
(d) DIRECT SPENDING FOR MEDICARE-RELATED AC-
TIVITIES OF INSPECTOR GENERAL.—Section 1893, as added
by subsection (a), is amended by adding at the end the fol-
lowing new subsection:
‘‘(h) DIRECT SPENDING FOR MEDICARE-RELATED AC-
TIVITIES OF INSPECTOR GENERAL.—
‘‘(1) IN GENERAL.—There are appropriated from
the Federal Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance Trust
Fund to the Inspector General of the Department of
Health and Human Services for each fiscal year such
amounts as are necessary to enable the Inspector Gen-
eral to carry out activities relating to the medicare
181
Subtitle B
program (as described in paragraph (2)), subject to
paragraph (3).
‘‘(2) ACTIVITIES DESCRIBED.—The activities de-
scribed in this paragraph are as follows:
‘‘(A) Prosecuting medicare-related matters
through criminal, civil, and administrative pro-
ceedings.
‘‘(B) Conducting investigations relating to
the medicare program.
‘‘(C) Performing financial and performance
audits of programs and operations relating to
the medicare program.
‘‘(D) Performing inspections and other eval-
uations relating to the medicare program.
‘‘(E) Conducting provider and consumer
education activities regarding the requirements
of this title.
‘‘(3) AMOUNTS SPECIFIED.—The amount appro-
priated under paragraph (1) for a fiscal year is as
follows:
‘‘(A) For fiscal year 1996, such amount
shall be $130,000,000.
‘‘(B) For fiscal year 1997, such amount
shall be $181,000,000.
182
Subtitle B
‘‘(C) For fiscal year 1998, such amount
shall be $204,000,000.
‘‘(D) For each subsequent fiscal year, the
amount appropriated for the previous fiscal
year, increased by the percentage increase in ag-
gregate expenditures under this title for the fiscal
year involved over the previous fiscal year.
‘‘(4) ALLOCATION OF PAYMENTS AMONG TRUST
FUNDS.—The appropriations made under paragraph
(1) shall be in an allocation as reasonably reflects the
proportion of such expenditures associated with part
A and part B.’’.
SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR
AUTHORIZATION FOR CERTAIN ITEMS OF DU-
RABLE MEDICAL EQUIPMENT.
(a) IN GENERAL.—Section 1834(a)(15) (42 U.S.C.
1395m(a)(15)), as amended by section 135(b) of the Social
Security Act Amendments of 1994, is amended by adding
at the end the following new subparagraphs:
‘‘(D) APPLICATION BY CARRIERS.—A car-
rier may develop (and periodically update) a list
of items under subparagraph (A) and a list of
suppliers under subparagraph (B) in the same
manner as the Secretary may develop (and peri-
odically update) such lists.
183
Subtitle B
‘‘(E) WAIVER
OF
PUBLICATION
REQUIRE-
MENT.—A carrier may make an advance deter-
mination under subparagraph (C) with respect
to an item or supplier on a list developed by the
Secretary or the carrier without regard to wheth-
er or not the Secretary has promulgated a regu-
lation with respect to the list, except that the
carrier may not make such an advance deter-
mination with respect to an item or supplier on
a list until the expiration of the 30-day period
beginning on the date the Secretary or the car-
rier places the item or supplier on the list.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect as if included in the enactment
of the Social Security Act Amendments of 1994.
SEC. 15108. ESTABLISHMENT OF HEALTH CARE ANTI-FRAUD
TASK FORCE.
(a) IN GENERAL.—Not later than 120 days after the
date of the enactment of this Act, the Attorney General shall
establish (in consultation with the Advisory Group de-
scribed in subsection (c)) within the Department of Justice
a task force (similar to the Organized Crime Drug Enforce-
ment Task Force) to be known as the ‘‘Health Care Anti-
Fraud Task Force’’ (hereafter in this section referred to as
the ‘‘Task Force’’) to prosecute health care fraud offenses.
184
Subtitle B
Nothing in this section may be construed as affecting the
powers of the Attorney General or any other individual.
(b) OPERATIONS OF TASK FORCE.—The Attorney Gen-
eral shall establish and operate the Task Force in a manner
such that—
(1) at least one fully staffed operational segment
of the Task Force (including at least one Federal rep-
resentative engaged in Task Force activities on a full-
time basis) shall operate in each judicial district of
the United States; and
(2) the Task Force maintains separate account-
ing of its finances, personnel, case load, and resolu-
tion of claims and actions.
(c) ADVISORY GROUP DESCRIBED.—The Advisory
Group described in this subsection is a group consisting of
the following individuals (or their designees):
(1) The Secretary of Health and Human Serv-
ices.
(2) The Secretary of the Treasury.
(3) The Secretary of Veterans’ Affairs.
(4) The Chair of the Board of Governors of the
United States Postal Service.
185
Subtitle B
SEC. 15109. STUDY OF ADEQUACY OF PRIVATE QUALITY AS-
SURANCE PROGRAMS.
(a) IN GENERAL.—The Administrator of the Health
Care Financing Administration (acting through the Direc-
tor of the Office of Research and Development) shall enter
into an agreement with a private entity to conduct a study
during the 5-year period beginning on the date of the enact-
ment of this Act of the adequacy of the quality assurance
programs 
and 
consumer 
protections 
used 
by 
the
MedicarePlus program under part C of title XVIII of the
Social Security Act (as inserted by section 15002(a)), and
shall include in the study an analysis of the effectiveness
of such programs in protecting plan enrollees against the
risk of insufficient provision of benefits which may result
from utilization controls.
(b) REPORT.—Not later than 6 months after the con-
clusion of the 5-year period described in subsection (a), the
Administrator shall submit a report to Congress on the
study conducted under subsection (a).
SEC. 15110. PENALTY FOR FALSE CERTIFICATION FOR
HOME HEALTH SERVICES.
(a) IN
GENERAL.—Section 1128A(b) (42 U.S.C.
1320a–7a(b)) is amended by adding at the end the following
new paragraph:
‘‘(3)(A) Any physician who executes a document de-
scribed in subparagraph (B) with respect to an individual
186
Subtitle C, Part 1
knowing that all of the requirements referred to in such sub-
paragraph are not met with respect to the individual shall
be subject to a civil monetary penalty of not more than the
greater of—
‘‘(i) $5,000, or
‘‘(ii) three times the amount of the payments
under title XVIII for home health services which are
made pursuant to such certification.
‘‘(B) A document described in this subparagraph is
any document that certifies, for purposes of title XVIII, that
an 
individual 
meets 
the 
requirements 
of 
section
1814(a)(2)(C) or 1835(a)(2)(A) in the case of home health
services furnished to the individual.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to certifications made on or after
the date of the enactment of this Act.
Subtitle C—Regulatory Relief
PART 1—PHYSICIAN OWNERSHIP REFERRAL
REFORM
SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM-
PENSATION ARRANGEMENTS.
(a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.
1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that
follows through ‘‘equity,’’ and inserting the following: ‘‘is
187
Subtitle C, Part 1
(except as provided in subsection (c)) an ownership or in-
vestment interest in the entity through equity,’’.
(b) CONFORMING AMENDMENTS.—Section 1877 (42
U.S.C. 1395nn) is amended as follows:
(1) In subsection (b)—
(A) in the heading, by striking ‘‘TO BOTH
OWNERSHIP AND COMPENSATION ARRANGEMENT
PROHIBITIONS’’ and inserting ‘‘WHERE FINAN-
CIAL RELATIONSHIP EXISTS’’; and
(B) by redesignating paragraph (4) as
paragraph (7).
(2) In subsection (c)—
(A) by amending the heading to read as fol-
lows: ‘‘EXCEPTION FOR OWNERSHIP OR INVEST-
MENT INTEREST IN PUBLICLY TRADED SECURI-
TIES AND MUTUAL FUNDS’’; and
(B) in the matter preceding paragraph (1),
by striking ‘‘subsection (a)(2)(A)’’ and inserting
‘‘subsection (a)(2)’’.
(3) In subsection (d)—
(A) by striking the matter preceding para-
graph (1);
(B) in paragraph (3), by striking ‘‘para-
graph (1)’’ and inserting ‘‘paragraph (4)’’; and
188
Subtitle C, Part 1
(C) by redesignating paragraphs (1), (2),
and (3) as paragraphs (4), (5), and (6), and by
transferring and inserting such paragraphs after
paragraph (3) of subsection (b).
(4) By striking subsection (e).
(5) In subsection (f)(2)—
(A) in the matter preceding paragraph (1),
by striking ‘‘ownership, investment, and com-
pensation’’ and inserting ‘‘ownership and invest-
ment’’;
(B) in paragraph (2), by striking ‘‘sub-
section (a)(2)(A)’’ and all that follows through
‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub-
section (a)(2),’’; and
(C) in paragraph (2), by striking ‘‘or who
have such a compensation relationship with the
entity’’.
(6) In subsection (h)—
(A) by striking paragraphs (1), (2), and
(3);
(B) in paragraph (4)(A), by striking
clauses (iv) and (vi);
(C) in paragraph (4)(B), by striking
‘‘RULES.—’’ and all that follows through ‘‘(ii)
189
Subtitle C, Part 1
FACULTY’’ and inserting ‘‘RULES FOR FACULTY’’;
and
(D) by adding at the end of paragraph (4)
the following new subparagraph:
‘‘(C) MEMBER OF A GROUP.—A physician
is a ‘member’ of a group if the physician is an
owner or a bona fide employee, or both, of the
group.’’.
SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES
SUBJECT TO PROHIBITION.
(a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.
1395nn(h)(6)) is amended by striking subparagraphs (B)
through (K) and inserting the following:
‘‘(B) Parenteral and enteral nutrients,
equipment, and supplies.
‘‘(C) Magnetic resonance imaging and com-
puterized tomography services.
‘‘(D) Outpatient physical or occupational
therapy services.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2))
is amended in the matter preceding subparagraph (A)
by striking ‘‘services’’ and all that follows through
‘‘supplies)—’’ and inserting ‘‘services—’’.
190
Subtitle C, Part 1
(2) 
Section 
1877(h)(5)(C) 
(42 
U.S.C.
1395nn(h)(5)(C)) is amended—
(A) by striking ‘‘, a request by a radiologist
for diagnostic radiology services, and a request
by a radiation oncologist for radiation therapy,’’
and inserting ‘‘and a request by a radiologist for
magnetic resonance imaging or for computerized
tomography’’, and
(B) by striking ‘‘radiologist, or radiation
oncologist’’ and inserting ‘‘or radiologist’’.
SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMULGA-
TION OF REGULATIONS.
(a) IN GENERAL.—Section 13562(b) of OBRA–1993
(42 U.S.C. 1395nn note) is amended—
(1) in paragraph (1), by striking ‘‘paragraph
(2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and
(2) by adding at the end the following new para-
graph:
‘‘(3) PROMULGATION
OF
REGULATIONS.—Not-
withstanding paragraphs (1) and (2), the amend-
ments made by this section shall not apply to any re-
ferrals made before the effective date of final regula-
tions promulgated by the Secretary of Health and
Human Services to carry out such amendments.’’.
191
Subtitle C, Part 1
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall take effect as if included in the enactment
of OBRA–1993.
SEC. 15204. EXCEPTIONS TO PROHIBITION.
(a) REVISIONS TO EXCEPTION FOR IN-OFFICE ANCIL-
LARY SERVICES.—
(1) REPEAL
OF
SITE-OF-SERVICE
REQUIRE-
MENT.—Section 1877 (42 U.S.C. 1395nn) is amend-
ed—
(A) by amending subparagraph (A) of sub-
section (b)(2) to read as follows:
‘‘(A) that are furnished personally by the
referring physician, personally by a physician
who is a member of the same group practice as
the referring physician, or personally by individ-
uals who are under the general supervision of the
physician or of another physician in the group
practice, and’’, and
(B) by adding at the end of subsection (h)
the following new paragraph:
‘‘(7) GENERAL SUPERVISION.—An individual is
considered to be under the ‘general supervision’ of a
physician if the physician (or group practice of which
the physician is a member) is legally responsible for
the services performed by the individual and for en-
192
Subtitle C, Part 1
suring that the individual meets licensure and certifi-
cation requirements, if any, applicable under other
provisions of law, regardless of whether or not the
physician is physically present when the individual
furnishes an item or service.’’.
(2) CLARIFICATION OF TREATMENT OF PHYSI-
CIAN
OWNERS
OF
GROUP
PRACTICE.—Section
1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is amend-
ed by striking ‘‘physician or such group practice’’
and inserting ‘‘physician, such group practice, or the
physician owners of such group practice’’.
(3) 
CONFORMING
AMENDMENT.—Section
1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by
amending the heading to read as follows: ‘‘ANCILLARY
SERVICES
FURNISHED
PERSONALLY
OR
THROUGH
GROUP PRACTICE.—’’.
(b) CLARIFICATION
OF EXCEPTION
FOR SERVICES
FURNISHED IN A RURAL AREA.—Paragraph (5) of section
1877(b) (42 U.S.C. 1395nn(b)), as transferred by section
15201(b)(3)(C), is amended by striking ‘‘substantially all’’
and inserting ‘‘not less than 75 percent’’.
(c) REVISION OF EXCEPTION FOR CERTAIN MANAGED
CARE ARRANGEMENTS.—Section 1877(b)(3) (42 U.S.C.
1395nn(b)(3)) is amended—
193
Subtitle C, Part 1
(1) in the heading by inserting ‘‘MANAGED CARE
ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;
(2) in the matter preceding subparagraph (A),
by striking ‘‘organization—’’ and inserting ‘‘organi-
zation, directly or through contractual arrangements
with other entities, to individuals enrolled with the
organization—’’;
(3) in subparagraph (A), by inserting ‘‘or part
C’’ after ‘‘section 1876’’;
(4) by striking ‘‘or’’ at the end of subparagraph
(C);
(5) by striking the period at the end of subpara-
graph (D) and inserting a comma; and
(6) by adding at the end the following new sub-
paragraphs:
‘‘(E) with a contract with a State to pro-
vide services under the State plan under title
XIX (in accordance with section 1903(m)) or a
State MediGrant plan under title XXI; or
‘‘(F) which is a MedicarePlus organization
under part C or which provides or arranges for
the provision of health care items or services
pursuant to a written agreement between the or-
ganization and an individual or entity if the
written agreement places the individual or entity
194
Subtitle C, Part 1
at substantial financial risk for the cost or utili-
zation of the items or services which the individ-
ual or entity is obligated to provide, whether
through a withhold, capitation, incentive pool,
per diem payment, or any other similar risk ar-
rangement which places the individual or entity
at substantial financial risk.’’.
(d) NEW EXCEPTION FOR SHARED FACILITY SERV-
ICES.—
(1) IN GENERAL.—Section 1877(b) (42 U.S.C.
1395nn(b)), as amended by section 15201(b)(3)(C), is
amended—
(A) 
by 
redesignating 
paragraphs 
(4)
through (7) as paragraphs (5) through (8); and
(B) by inserting after paragraph (3) the fol-
lowing new paragraph:
‘‘(4) SHARED FACILITY SERVICES.—In the case
of a designated health service consisting of a shared
facility service of a shared facility—
‘‘(A) that is furnished—
‘‘(i) personally by the referring physi-
cian who is a shared facility physician or
personally by an individual directly em-
ployed or under the general supervision of
such a physician,
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Subtitle C, Part 1
‘‘(ii) by a shared facility in a building
in which the referring physician furnishes
substantially all of the services of the physi-
cian that are unrelated to the furnishing of
shared facility services, and
‘‘(iii) to a patient of a shared facility
physician; and
‘‘(B) that is billed by the referring physi-
cian or a group practice of which the physician
is a member.’’.
(2) DEFINITIONS.—Section 1877(h) (42 U.S.C.
1395nn(h)), as amended by section 15201(b)(6), is
amended by inserting before paragraph (4) the follow-
ing new paragraph:
‘‘(1) 
SHARED
FACILITY
RELATED
DEFINI-
TIONS.—
‘‘(A) 
SHARED
FACILITY
SERVICE.—The
term ‘shared facility service’ means, with respect
to a shared facility, a designated health service
furnished by the facility to patients of shared fa-
cility physicians.
‘‘(B) SHARED FACILITY.—The term ‘shared
facility’ means an entity that furnishes shared
facility services under a shared facility arrange-
ment.
196
Subtitle C, Part 1
‘‘(C) SHARED
FACILITY
PHYSICIAN.—The
term ‘shared facility physician’ means, with re-
spect to a shared facility, a physician (or a
group practice of which the physician is a mem-
ber) who has a financial relationship under a
shared facility arrangement with the facility.
‘‘(D) SHARED
FACILITY
ARRANGEMENT.—
The term ‘shared facility arrangement’ means,
with respect to the provision of shared facility
services in a building, a financial arrange-
ment—
‘‘(i) which is only between physicians
who are providing services (unrelated to
shared facility services) in the same build-
ing,
‘‘(ii) in which the overhead expenses of
the facility are shared, in accordance with
methods previously determined by the phy-
sicians in the arrangement, among the phy-
sicians in the arrangement, and
‘‘(iii) which, in the case of a corpora-
tion, is wholly owned and controlled by
shared facility physicians.’’.
(e) NEW EXCEPTION FOR SERVICES FURNISHED IN
COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—Sec-
197
Subtitle C, Part 1
tion 1877(b) (42 U.S.C. 1395nn(b)), as amended by section
15201(b)(3)(C) and subsection (d)(1), is amended—
(1) by redesignating paragraphs (5) through (8)
as paragraphs (6) through (9); and
(2) by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—In
the case of a designated health service furnished in
any area with respect to which the Secretary deter-
mines that individuals residing in the area do not
have reasonable access to such a designated health
service for which subsection (a)(1) does not apply.’’.
(f) NEW EXCEPTION FOR SERVICES FURNISHED IN
AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42
U.S.C. 1395nn(b)), as amended by section 15201(b)(3)(C),
subsection (d)(1), and subsection (e)(1), is amended—
(1) by redesignating paragraphs (6) through (9)
as paragraphs (7) through (10); and
(2) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) SERVICES
FURNISHED
IN
AMBULATORY
SURGICAL
CENTERS.—In the case of a designated
health service furnished in an ambulatory surgical
center described in section 1832(a)(2)(F)(i).’’.
198
Subtitle C, Part 1
(g) NEW EXCEPTION FOR SERVICES FURNISHED IN
RENAL DIALYSIS FACILITIES.—Section 1877(b) (42 U.S.C.
1395nn(b)), as amended by section 15201(b)(3)(C), sub-
section (d)(1), subsection (e)(1), and subsection (f), is
amended—
(1) by redesignating paragraphs (7) through (10)
as paragraphs (8) through (11); and
(2) by inserting after paragraph (6) the follow-
ing new paragraph:
‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS
FACILITIES.—In the case of a designated health serv-
ice furnished in a renal dialysis facility under section
1881.’’.
(h) NEW EXCEPTION FOR SERVICES FURNISHED IN A
HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 15201(b)(3)(C), subsection (d)(1), sub-
section (e)(1), subsection (f), and subsection (g), is amend-
ed—
(1) by redesignating paragraphs (8) through (11)
as paragraphs (9) through (12); and
(2) by inserting after paragraph (7) the follow-
ing new paragraph:
‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO-
GRAM.—In the case of a designated health service fur-
199
Subtitle C, Part 1
nished 
by 
a 
hospice 
program 
under 
section
1861(dd)(2).’’.
(i) NEW EXCEPTION FOR SERVICES FURNISHED IN A
COMPREHENSIVE OUTPATIENT REHABILITATION FACIL-
ITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as amended
by section 15201(b)(3)(C), subsection (d)(1), subsection
(e)(1), subsection (f), subsection (g), and subsection (h), is
amended—
(1) by redesignating paragraphs (9) through (12)
as paragraphs (10) through (13); and
(2) by inserting after paragraph (8) the follow-
ing new paragraph:
‘‘(9) SERVICES FURNISHED IN A COMPREHEN-
SIVE OUTPATIENT REHABILITATION FACILITY.—In the
case of a designated health service furnished in a com-
prehensive outpatient rehabilitation facility (as de-
fined in section 1861(cc)(2)).’’.
(i) 
DEFINITION
OF
REFERRAL.—Section
1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amended—
(1) by striking ‘‘an item or service’’ and insert-
ing ‘‘a designated health service’’, and
(2) by striking ‘‘the item or service’’ and insert-
ing ‘‘the designated health service’’.
SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.
Section 1877 (42 U.S.C. 1395nn) is amended—
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Subtitle C, Part 2
(1) by striking subsection (f); and
(2) by striking subsection (g)(5).
SEC. 15206. PREEMPTION OF STATE LAW.
Section 1877 (42 U.S.C. 1395nn) is amended by add-
ing at the end the following new subsection:
‘‘(i) PREEMPTION OF STATE LAW.—This section pre-
empts State law to the extent State law is inconsistent with
this section.’’.
SEC. 15207. EFFECTIVE DATE.
Except as provided in section 15203(b), the amend-
ments made by this part shall apply to referrals made on
or after August 14, 1995, regardless of whether or not regu-
lations are promulgated to carry out such amendments.
PART 2—OTHER MEDICARE REGULATORY RELIEF
SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV-
ERAGE DATA BANK.
(a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–14)
is repealed.
(b) CONFORMING AMENDMENTS.—
(1) MEDICARE.—Section 1862(b)(5) (42 U.S.C.
1395y(b)(5)) is amended—
(A) in subparagraph (B), by striking
‘‘under—’’ and all that follows through the end
and inserting ‘‘subparagraph (A) for purposes of
carrying out this subsection.’’, and
201
Subtitle C, Part 2
(B) in subparagraph (C)(i), by striking
‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara-
graph (B)’’.
(2) MEDICAID.—Section 1902(a)(25)(A)(i) (42
U.S.C. 1396a(a)(25)(A)(i)) is amended by striking
‘‘including the use of’’ and all that follows through
‘‘any additional measures’’.
(3) ERISA.—Section 101(f) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1021(f)) is repealed.
(4) DATA MATCHES.—Section 552a(a)(8)(B) of
title 5, United States Code, is amended—
(A) by adding ‘‘; or’’ at the end of clause
(v),
(B) by striking ‘‘or’’ at the end of clause
(vi), and
(C) by striking clause (vii).
SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE-
QUIRED FOR IMPOSITION OF SANCTIONS.
(a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE-
QUIRED
FOR
IMPOSITION
OF
CIVIL
MONETARY
PEN-
ALTIES.—
(1) IN GENERAL.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)) is amended—
202
Subtitle C, Part 2
(A) in paragraphs (1) and (2), by inserting
‘‘knowingly’’ before ‘‘presents’’ each place it ap-
pears; and
(B) in paragraph (3), by striking ‘‘gives’’
and inserting ‘‘knowingly gives or causes to be
given’’.
(2) 
DEFINITION
OF
STANDARD.—Section
1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by
adding at the end the following new paragraph:
‘‘(6) The term ‘should know’ means that a per-
son, with respect to information—
‘‘(A) acts in deliberate ignorance of the
truth or falsity of the information; or
‘‘(B) acts in reckless disregard of the truth
or falsity of the information,
and no proof of specific intent to defraud is re-
quired.’’.
(b) CLARIFICATION OF EFFECT AND APPLICATION OF
SAFE HARBOR EXCEPTIONS.—For purposes of section
1128B(b)(3) of the Social Security Act, the specification of
any payment practice in regulations promulgated pursuant
to section 14(a) of the Medicare and Medicaid Program and
Patient Protection Act of 1987 is—
(1) solely for the purpose of adding additional
exceptions to the types of conduct which are not sub-
203
Subtitle C, Part 2
ject to an anti-kickback penalty under such section
and not for the purpose of limiting the scope of such
exceptions; and
(2) for the purpose of prescribing criteria for
qualifying for such an exception notwithstanding the
intent of the party involved.
(c) LIMITING IMPOSITION OF ANTI-KICKBACK PEN-
ALTIES TO ACTIONS WITH SIGNIFICANT PURPOSE TO IN-
DUCE
REFERRALS.—Section 1128B(b)(2) (42 U.S.C.
1320a–7b(b)(2)) is amended in the matter preceding sub-
paragraph (A) by striking ‘‘to induce’’ and inserting ‘‘for
the significant purpose of inducing’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to acts or omissions occurring on or
after January 1, 1996.
SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK
PENALTIES FOR MANAGED CARE ARRANGE-
MENTS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.
1320a–7b(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D);
(2) by striking the period at the end of subpara-
graph (E) and inserting ‘‘; and’’; and
204
Subtitle C, Part 2
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) any remuneration between an organization
and an individual or entity providing services pursu-
ant to a written agreement between the organization
and the individual or entity if the organization is a
MedicarePlus organization under part C of title
XVIII or if the written agreement places the individ-
ual or entity at substantial financial risk for the cost
or utilization of the items or services which the indi-
vidual or entity is obligated to provide, whether
through a withhold, capitation, incentive pool, per
diem payment, or any other similar risk arrangement
which places the individual or entity at substantial
financial risk.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to acts or omissions occurring on
or after January 1, 1996.
SEC. 15214. SOLICITATION AND PUBLICATION OF MODI-
FICATIONS TO EXISTING SAFE HARBORS AND
NEW SAFE HARBORS.
(a) IN GENERAL.—
(1) SOLICITATIONS.—Not later than January 1,
1996, and not less than annually thereafter, the Sec-
retary of Health and Human Services shall publish
205
Subtitle C, Part 2
a notice in the Federal Register soliciting proposals,
which will be accepted during a 60-day period, for—
(A) modifications to existing safe harbors
issued pursuant to section 14(a) of the Medicare
and Medicaid Patient and Program Protection
Act of 1987;
(B) additional safe harbors specifying pay-
ment practices that shall not be treated as a
criminal offense under section 1128B(b) of the
Social Security Act and shall not serve as the
basis for an exclusion under section 1128(b)(7) of
such Act; and
(C) special fraud alerts to be issued pursu-
ant to section 15101(c).
(2) PUBLICATION OF PROPOSED MODIFICATIONS
AND
PROPOSED
ADDITIONAL
SAFE
HARBORS.—Not
later than 120 days after receiving the proposals de-
scribed in subparagraphs (A) and (B) of paragraph
(1), the Secretary, after considering such proposals in
consultation with the Attorney General, shall publish
in the Federal Register proposed modifications to ex-
isting safe harbors and proposed additional safe har-
bors, if appropriate, with a 60-day comment period.
After considering any public comments received dur-
ing this period, the Secretary shall issue final rules
206
Subtitle C, Part 2
modifying the existing safe harbors and establishing
new safe harbors, as appropriate.
(3) REPORT.—The Inspector General shall, in an
annual report to Congress or as part of the year-end
semiannual report required by section 5 of the Inspec-
tor General Act of 1978, describe the proposals re-
ceived under subparagraphs (A) and (B) of para-
graph (1) and explain which proposals were included
in the publication described in paragraph (2), which
proposals were not included in that publication, and
the reasons for the rejection of the proposals that were
not included.
(b) CRITERIA
FOR MODIFYING
AND ESTABLISHING
SAFE HARBORS.—In modifying and establishing safe har-
bors under subsection (a)(2), the Secretary may consider
the extent to which providing a safe harbor for the specified
payment practice may result in any of the following:
(1) An increase or decrease in access to health
care services.
(2) An increase or decrease in the quality of
health care services.
(3) An increase or decrease in patient freedom of
choice among health care providers.
(4) An increase or decrease in competition
among health care providers.
207
Subtitle C, Part 2
(5) An increase or decrease in the cost to health
care programs of the Federal Government.
(6) An increase or decrease in the potential
overutilization of health care services.
(7) Any other factors the Secretary deems appro-
priate in the interest of preventing fraud and abuse
in health care programs of the Federal Government.
SEC. 15215. ISSUANCE OF ADVISORY OPINIONS UNDER
TITLE XI.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),
as amended by section 15104(a), is amended by inserting
after section 1129 the following new section:
‘‘ADVISORY OPINIONS
‘‘SEC. 1130. (a) ISSUANCE OF ADVISORY OPINIONS.—
The Secretary shall issue written advisory opinions as pro-
vided in this section.
‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—
The Secretary shall issue advisory opinions as to the follow-
ing matters:
‘‘(1) What constitutes prohibited remuneration
within the meaning of section 1128B(b).
‘‘(2) Whether an arrangement or proposed ar-
rangement satisfies the criteria set forth in section
1128B(b)(3) for activities which do not result in pro-
hibited remuneration.
208
Subtitle C, Part 2
‘‘(3) Whether an arrangement or proposed ar-
rangement satisfies the criteria which the Secretary
has established, or shall establish by regulation for ac-
tivities which do not result in prohibited remunera-
tion.
‘‘(4) What constitutes an inducement to reduce
or limit services to individuals entitled to benefits
under title XVIII or title XIX or title XXI within the
meaning of section 1128B(b).
‘‘(5) Whether any activity or proposed activity
constitutes grounds for the imposition of a sanction
under section 1128, 1128A, or 1128B.
‘‘(c) MATTERS NOT SUBJECT
TO ADVISORY OPIN-
IONS.—Such advisory opinions shall not address the follow-
ing matters:
‘‘(1) Whether the fair market value shall be, or
was paid or received for any goods, services or prop-
erty.
‘‘(2) Whether an individual is a bona fide em-
ployee within the requirements of section 3121(d)(2)
of the Internal Revenue Code of 1986.
‘‘(d) EFFECT OF ADVISORY OPINIONS.—
‘‘(1) BINDING AS TO SECRETARY AND PARTIES
INVOLVED.—Each advisory opinion issued by the Sec-
209
Subtitle C, Part 2
retary shall be binding as to the Secretary and the
party or parties requesting the opinion.
‘‘(2) FAILURE TO SEEK OPINION.—The failure of
a party to seek an advisory opinion may not be in-
troduced into evidence to prove that the party in-
tended to violate the provisions of sections 1128,
1128A, or 1128B.
‘‘(e) REGULATIONS.—
‘‘(1) IN
GENERAL.—Not later than 180 days
after the date of the enactment of this section, the Sec-
retary shall issue regulations to carry out this section.
Such regulations shall provide for—
‘‘(A) the procedure to be followed by a party
applying for an advisory opinion;
‘‘(B) the procedure to be followed by the
Secretary in responding to a request for an advi-
sory opinion;
‘‘(C) the interval in which the Secretary
shall respond;
‘‘(D) the reasonable fee to be charged to the
party requesting an advisory opinion; and
‘‘(E) the manner in which advisory opin-
ions will be made available to the public.
‘‘(2) SPECIFIC
CONTENTS.—Under the regula-
tions promulgated pursuant to paragraph (1)—
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Subtitle C, Part 2
‘‘(A) the Secretary shall be required to re-
spond to a party requesting an advisory opinion
by not later than 30 days after the request is re-
ceived; and
‘‘(B) the fee charged to the party requesting
an advisory opinion shall be equal to the costs
incurred by the Secretary in responding to the
request.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to requests for advisory opinions
made on or after January 1, 1996.
SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND
CLAIMS PROCESSING REQUIREMENTS FOR
PHYSICIANS’ SERVICES.
Except as may be specifically provided by Congress,
the Secretary of Health and Human Services may not im-
plement any change in the requirements imposed on the
billing and processing of claims for payment for physicians’
services under part B of the medicare program unless the
Secretary notifies the individuals furnishing such services
of the change not later than 120 days before the effective
date of the change.
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Subtitle C, Part 3
PART 3—PROMOTING PHYSICIAN SELF-POLICING
SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CER-
TAIN ACTIVITIES OF MEDICAL SELF-REGU-
LATORY ENTITIES.
(a) EXEMPTION DESCRIBED.—An activity relating to
the provision of health care services shall be exempt from
the antitrust laws, and any State law similar to the anti-
trust laws, if the activity is within the safe harbor described
in subsection (b).
(b) SAFE HARBOR FOR ACTIVITIES OF MEDICAL SELF-
REGULATORY ENTITIES.—
(1) IN GENERAL.—Subject to paragraph (2), any
activity of a medical self-regulatory entity relating to
standard setting or standard enforcement activities
that are designed to promote the quality of health care
services provided to patients.
(2) EXCEPTION.—No activity of a medical self-
regulatory entity may be deemed to fall under the safe
harbor established under paragraph (1) if the activ-
ity—
(A) is conducted for purposes of financial
gain, or
(B) interferes with the provision of health
care services by any health care provider who is
not a member of the specific profession which is
212
Subtitle C, Part 3
subject to the authority of the medical self-regu-
latory entity.
(c) DEFINITIONS.—For purposes of this section:
(1) ANTITRUST
LAWS.—The term ‘‘antitrust
laws’’ has the meaning given it in subsection (a) of
the first section of the Clayton Act (15 U.S.C. 12(a)),
except that such term includes section 5 of the Federal
Trade Commission Act (15 U.S.C. 45) to the extent
such section applies to unfair methods of competition.
(2) HEALTH BENEFIT PLAN.—The term ‘‘health
benefit plan’’ means—
(A) a hospital or medical expense incurred
policy or certificate,
(B) a hospital or medical service plan con-
tract,
(C) a health maintenance subscriber con-
tract,
(D) a multiple employer welfare arrange-
ment or employee benefit plan (as defined under
the Employee Retirement Income Security Act of
1974), or
(E) a MedicarePlus product (offered under
part C of title XVIII of the Social Security Act),
that provides benefits with respect to health care serv-
ices.
213
Subtitle C, Part 3
(3) HEALTH CARE SERVICE.—The term ‘‘health
care service’’ means any service for which payment
may be made under a health benefit plan including
services related to the delivery or administration of
such service.
(4) MEDICAL
SELF-REGULATORY
ENTITY.—The
term ‘‘medical self-regulatory entity’’ means a medi-
cal society or association, a specialty board, a recog-
nized accrediting agency, or a hospital medical staff,
and includes the members, officers, employees, consult-
ants, and volunteers or committees of such an entity.
(5) HEALTH CARE PROVIDER.—The term ‘‘health
care provider’’ means any individual or entity that
is engaged in the delivery of health care services in
a State and that is required by State law or regula-
tion to be licensed or certified by the State to engage
in the delivery of such services in the State.
(6) STANDARD SETTING OR STANDARD ENFORCE-
MENT
ACTIVITIES.—The term ‘‘standard setting or
standard enforcement activities’’ means—
(A) accreditation of health care practition-
ers, health care providers, medical education in-
stitutions, or medical education programs,
(B) technology assessment and risk manage-
ment activities,
214
Subtitle D, Part 1
(C) the development and implementation of
practice guidelines or practice parameters, or
(D) official peer review proceedings under-
taken by a hospital medical staff (or committee
thereof) or a medical society or association for
purposes of evaluating the professional conduct
or quality of health care provided by a medical
professional.
Subtitle D—Medical Liability
Reform
PART 1—GENERAL PROVISIONS
SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This subtitle shall apply with re-
spect to any health care liability action brought in any
State or Federal court, except that this subtitle shall not
apply to an action for damages arising from a vaccine-re-
lated injury or death to the extent that title XXI of the Pub-
lic Health Service Act applies to the action.
(b) PREEMPTION.—This subtitle shall preempt any
State law to the extent such law is inconsistent with the
limitations contained in this subtitle. This subtitle shall not
preempt any State law that provides for defenses or places
limitations on a person’s liability in addition to those con-
215
Subtitle D, Part 1
tained in this subtitle or otherwise imposes greater restric-
tions than those provided in this subtitle.
(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE OF
LAW OR VENUE.—Nothing in subsection (b) shall be con-
strued to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer venue
or to apply the law of a foreign nation or to dismiss
a claim of a foreign nation or of a citizen of a foreign
nation on the ground of inconvenient forum.
(d) AMOUNT IN CONTROVERSY.—In an action to which
this subtitle applies and which is brought under section
1332 of title 28, United States Code, the amount of non-
economic damages or punitive damages, and attorneys’ fees
or costs, shall not be included in determining whether the
matter in controversy exceeds the sum or value of $50,000.
216
Subtitle D, Part 1
(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of title
28, United States Code.
SEC. 15302. DEFINITIONS.
As used in this subtitle:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYSTEM;
ADR.—The term ‘‘alternative dispute resolution sys-
tem’’ or ‘‘ADR’’ means a system established under
Federal or State law that provides for the resolution
of health care liability claims in a manner other than
through health care liability actions.
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
brought. If such action is brought through or on behalf
of an estate, the term includes the claimant’s dece-
dent. If such action is brought through or on behalf
of a minor or incompetent, the term includes the
claimant’s legal guardian.
217
Subtitle D, Part 1
(4) CLEAR
AND
CONVINCING
EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that measure
or degree of proof that will produce in the mind of
the trier of fact a firm belief or conviction as to the
truth of the allegations sought to be established, except
that such measure or degree of proof is more than that
required under preponderance of the evidence but less
than that required for proof beyond a reasonable
doubt.
(5) COLLATERAL SOURCE PAYMENTS.—The term
‘‘collateral source payments’’ means any amount paid
or reasonably likely to be paid in the future to or on
behalf of a claimant, or any service, product, or other
benefit provided or reasonably likely to be provided in
the future to or on behalf of a claimant, as a result
of an injury or wrongful death, pursuant to—
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
(C) any contract or agreement of any
group, organization, partnership, or corporation
to provide, pay for, or reimburse the cost of med-
218
Subtitle D, Part 1
ical, hospital, dental, or income disability bene-
fits; and
(D) any other publicly or privately funded
program.
(6) ECONOMIC LOSS.—The term ‘‘economic loss’’
means any pecuniary loss resulting from harm (in-
cluding the loss of earnings, medical expense loss, re-
placement services loss, loss due to death, and burial
costs), to the extent recovery for such loss is allowed
under applicable State law.
(7) HARM.—The term ‘‘harm’’ means any legally
cognizable wrong or injury for which punitive dam-
ages may be imposed.
(8) HEALTH CARE LIABILITY ACTION.—The term
‘‘health care liability action’’ means a civil action
brought in a State or Federal court against a health
care provider, an entity which is obligated to provide
or pay for health benefits under any health plan (in-
cluding any person or entity acting under a contract
or arrangement to provide or administer any health
benefit), or the manufacturer, distributor, supplier,
marketer, promoter, or seller of a medical product, in
which the claimant alleges a claim (including third
party claims, cross claims, counter claims, or dis-
tribution claims) based upon the provision of (or the
219
Subtitle D, Part 1
failure to provide or pay for) health care services or
the use of a medical product, regardless of the theory
of liability on which the claim is based or the number
of plaintiffs, or defendants or causes of action.
(9) HEALTH CARE LIABILITY CLAIM.—The term
‘‘health care liability claim’’ means a claim in which
the claimant alleges that injury was caused by the
provision of (or the failure to provide) health care
services.
(10) 
HEALTH
CARE
PROVIDER.—The 
term
‘‘health care provider’’ means any individual, organi-
zation, or institution that is engaged in the delivery
of health care services in a State and that is required
by the laws or regulations of the State to be licensed
or certified by the State to engage in the delivery of
such services in the State.
(11) NONECONOMIC DAMAGES.—The term ‘‘non-
economic damages’’ means damages paid to an indi-
vidual for pain and suffering, inconvenience, emo-
tional distress, mental anguish, loss of consortium, in-
jury 
to 
reputation, 
humiliation, 
and 
other
nonpecuniary losses.
(12) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
220
Subtitle D, Part 1
partnership, society, joint stock company, or any
other entity, including any governmental entity.
(13) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damages awarded against any per-
son not to compensate for actual injury suffered, but
to punish or deter such person or others from engag-
ing in similar behavior in the future.
(14) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the Com-
monwealth of Puerto Rico, the Virgin Islands, Guam,
American Samoa, the Northern Mariana Islands, the
Trust Territories of the Pacific Islands, and any other
territory or possession of the United States.
SEC. 15303. EFFECTIVE DATE.
This subtitle will apply to any health care liability
action brought in a Federal or State court and to any
health care liability claim subject to an alternative dispute
resolution system, that is initiated on or after the date of
enactment of this subtitle, except that any health care liabil-
ity claim or action arising from an injury occurring prior
to the date of enactment of this subtitle shall be governed
by the applicable statute of limitations provisions in effect
at the time the injury occurred.
221
Subtitle D, Part 2
PART 2—UNIFORM STANDARDS FOR HEALTH
CARE LIABILITY ACTIONS
SEC. 15311. STATUTE OF LIMITATIONS.
A health care liability action may not be brought after
the expiration of the 2-year period that begins on the date
on which the alleged injury that is the subject of the action
was discovered or should reasonably have been discovered,
but in no case after the expiration of the 5-year period that
begins on the date the alleged injury occurred.
SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.
(a) TREATMENT OF NONECONOMIC DAMAGES.—
(1) LIMITATION ON NONECONOMIC DAMAGES.—
The total amount of noneconomic damages that may
be awarded to a claimant for losses resulting from the
injury which is the subject of a health care liability
action may not exceed $250,000, regardless of the
number of parties against whom the action is brought
or the number of actions brought with respect to the
injury.
(2) JOINT
AND
SEVERAL
LIABILITY.—In any
health care liability action brought in State or Fed-
eral court, a defendant shall be liable only for the
amount of noneconomic damages attributable to such
defendant in direct proportion to such defendant’s
share of fault or responsibility for the claimant’s ac-
tual damages, as determined by the trier of fact. In
222
Subtitle D, Part 2
all such cases, the liability of a defendant for non-
economic damages shall be several and not joint.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) GENERAL RULE.—Punitive damages may, to
the extent permitted by applicable State law, be
awarded in any health care liability action for harm
in any Federal or State court against a defendant if
the claimant establishes by clear and convincing evi-
dence that the harm suffered was result of conduct—
(A) specifically intended to cause harm, or
(B) conduct manifesting a conscious, fla-
grant indifference to the rights or safety of oth-
ers.
(2) PROPORTIONAL
AWARDS.—The amount of
punitive damages that may be awarded in any health
care liability action subject to this subtitle shall not
exceed 3 times the amount of damages awarded to the
claimant for economic loss, or $250,000, whichever is
greater. This section shall be applied by the court and
shall not be disclosed to the jury.
(c) APPLICABILITY.—This section shall apply to any
health care liability action brought in any Federal or State
court on any theory where punitive damages are sought.
This section does not create a cause of action for punitive
damages. This section does not preempt or supersede any
223
Subtitle D, Part 2
State or Federal law to the extent that such law would fur-
ther limit the award of punitive damages.
(d) BIFURCATION.—At the request of any party, the
trier of fact shall consider in a separate proceeding whether
punitive damages are to be awarded and the amount of such
award. If a separate proceeding is requested, evidence rel-
evant only to the claim of punitive damages, as determined
by applicable State law, shall be inadmissible in any pro-
ceeding to determine whether actual damages are to be
awarded.
(e) DRUGS AND DEVICES.—
(1)(A) Punitive damages shall not be awarded
against a manufacturer or product seller of a drug
(as defined in section 201(g)(1) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or
medical device (as defined in section 201(h) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321(h)) which caused the claimant’s harm where—
(i) such drug or device was subject to pre-
market approval by the Food and Drug Admin-
istration with respect to the safety of the formu-
lation or performance of the aspect of such drug
or device which caused the claimant’s harm or
the adequacy of the packaging or labeling of such
224
Subtitle D, Part 2
drug or device, and such drug was approved by
the Food and Drug Administration; or
(ii) the drug is generally recognized as safe
and effective pursuant to conditions established
by the Food and Drug Administration and ap-
plicable regulations, including packaging and la-
beling regulations.
(B) Subparagraph (A) shall not apply in any
case in which the defendant, before or after premarket
approval of a drug or device—
(i) intentionally and wrongfully withheld
from or misrepresented to the Food and Drug
Administration information concerning such
drug or device required to be submitted under the
Federal Food, Drug, and Cosmetic Act (21
U.S.C. 301 et seq.) or section 351 of the Public
Health Service Act (42 U.S.C. 262) that is mate-
rial and relevant to the harm suffered by the
claimant, or
(ii) made an illegal payment to an official
or employee of the Food and Drug Administra-
tion for the purpose of securing or maintaining
approval of such drug or device.
(2) PACKAGING.—In a health care liability ac-
tion for harm which is alleged to relate to the ade-
225
Subtitle D, Part 2
quacy of the packaging (or labeling relating to such
packaging) of a drug which is required to have tam-
per-resistant packaging under regulations of the Sec-
retary of Health and Human Services (including la-
beling regulations related to such packaging), the
manufacturer of the drug shall not be held liable for
punitive damages unless the drug is found by the
court by clear and convincing evidence to be substan-
tially out of compliance with such regulations.
(f) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL RULE.—In any health care liabil-
ity action in which the damages awarded for future
economic and noneconomic loss exceeds $50,000, a
person shall not be required to pay such damages in
a single, lump-sum payment, but shall be permitted
to make such payments periodically based on when
the damages are found likely to occur, as such pay-
ments are determined by the court.
(2) FINALITY OF JUDGMENT.—The judgment of
the court awarding periodic payments under this sub-
section may not, in the absence of fraud, be reopened
at any time to contest, amend, or modify the schedule
or amount of the payments.
226
Subtitle D, Part 2
(3) LUMP-SUM SETTLEMENTS.—This subsection
shall not be construed to preclude a settlement provid-
ing for a single, lump-sum payment.
(g) TREATMENT
OF
COLLATERAL
SOURCE
PAY-
MENTS.—
(1) INTRODUCTION
INTO
EVIDENCE.—In any
health care liability action, any defendant may intro-
duce evidence of collateral source payments. If any
defendant elects to introduce such evidence, the claim-
ant may introduce evidence of any amount paid or
contributed or reasonably likely to be paid or contrib-
uted in the future by or on behalf of the claimant to
secure the right to such collateral source payments.
(2) NO SUBROGATION.—No provider of collateral
source payments shall recover any amount against the
claimant or receive any lien or credit against the
claimant’s recovery or be equitably or legally sub-
rogated the right of the claimant in a health care li-
ability action. This subsection shall apply to an ac-
tion that is settled as well as an action that is re-
solved by a fact finder.
SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.
Any ADR used to resolve a health care liability action
or claim shall contain provisions relating to statute of limi-
tations, non-economic damages, joint and several liability,
227
Subtitle E, Part 1
punitive damages, collateral source rule, and periodic pay-
ments which are identical to the provisions relating to such
matters in this subtitle.
Subtitle E—Teaching Hospitals and
Graduate Medical Education
PART 1—TEACHING HOSPITAL AND GRADUATE
MEDICAL EDUCATION TRUST FUND
SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO
TEACHING HOSPITALS.
The Social Security Act (42 U.S.C. 300 et seq.) is
amended by adding after title XXI the following title:
‘‘TITLE XXII—TEACHING HOSPITAL AND
GRADUATE MEDICAL EDUCATION TRUST FUND
‘‘PART A—ESTABLISHMENT OF FUND
‘‘SEC. 2201. ESTABLISHMENT OF FUND.
‘‘(a) IN GENERAL.—There is established in the Treas-
ury of the United States a fund to be known as the Teaching
Hospital and Graduate Medical Education Trust Fund (in
this title referred to as the ‘Fund’), consisting of amounts
appropriated to the Fund in subsection (d) and subsection
(e)(3), amounts transferred to the Fund under section
1886(j), and such gifts and bequests as may be deposited
in the Fund pursuant to subsection (f). Amounts in the
Fund are available until expended.
228
Subtitle E, Part 1
‘‘(b) EXPENDITURES FROM FUND.—Amounts in the
Fund are available to the Secretary for making payments
under section 2211.
‘‘(c) ACCOUNTS IN FUND.—There are established with-
in the Fund the following accounts:
‘‘(1) The Indirect-Costs Medical Education Ac-
count.
‘‘(2) The Medicare Direct-Costs Medical Edu-
cation Account.
‘‘(3) The General Direct-Costs Medical Edu-
cation Account.
‘‘(d) GENERAL TRANSFERS TO FUND.—
‘‘(1) IN GENERAL.—For fiscal year 1997 and
each subsequent fiscal year, there are appropriated to
the Fund (effective on the applicable date under para-
graph (2)), out of any money in the Treasury not oth-
erwise appropriated, the following amounts (as appli-
cable to the fiscal year involved):
‘‘(A) For fiscal year 1997, $400,000,000.
‘‘(B) For fiscal year 1998, $600,000,000.
‘‘(C) For fiscal year 1999, $2,000,000,000.
‘‘(D) For fiscal year 2000, $3,000,000,000.
‘‘(E) For fiscal year 2001, $4,000,000,000.
‘‘(F) For fiscal year 2002, $5,800,000,000.
229
Subtitle E, Part 1
‘‘(G) For fiscal year 2003 and each subse-
quent fiscal year, the greater of the amount ap-
propriated for the preceding fiscal year or an
amount equal to the product of—
‘‘(i) the amount appropriated for the
preceding fiscal year; and
‘‘(ii) 1 plus the percentage increase in
the nominal gross domestic product for the
one-year period ending upon July 1 of such
preceding fiscal year.
‘‘(2) EFFECTIVE DATE FOR ANNUAL APPROPRIA-
TION.—For purposes of paragraph (1) (and for pur-
poses of section 2221(a)(1), and subsections (b)(1)(A)
and (c)(1)(A) of section 2231)), the applicable date
for a fiscal year is the first day of the fiscal year, ex-
clusive of Saturdays, Sundays, and Federal holidays.
‘‘(3) ALLOCATION AMONG CERTAIN ACCOUNTS.—
Of the amount appropriated in paragraph (1) for a
fiscal year—
‘‘(A) there shall be allocated to the Indirect-
Costs Medical Education Account the percentage
determined under paragraph (4)(B); and
‘‘(B) there shall be allocated to the General
Direct-Costs Medical Education Account the per-
centage determined under paragraph (4)(C).
230
Subtitle E, Part 1
‘‘(4) DETERMINATION
OF
PERCENTAGES.—The
Secretary of Health and Human Services, acting
through the Administrator of the Health Care Financ-
ing Administration, shall determine the following:
‘‘(A) The total amount of payments that
were made under subsections (d)(5)(B) and (h)
of section 1886 for fiscal year 1994.
‘‘(B) The percentage of such total that was
constituted 
by 
payments 
under 
subsection
(d)(5)(B) of such section.
‘‘(C) The percentage of such total that was
constituted by payments under subsection (h) of
such section.
‘‘(e) INVESTMENT.—
‘‘(1) IN GENERAL.—The Secretary of the Treas-
ury shall invest such amounts of the Fund as such
Secretary determines are not required to meet current
withdrawals from the Fund. Such investments may be
made only in interest-bearing obligations of the
United States. For such purpose, such obligations
may be acquired on original issue at the issue price,
or by purchase of outstanding obligations at the mar-
ket price.
231
Subtitle E, Part 1
‘‘(2) SALE OF OBLIGATIONS.—Any obligation ac-
quired by the Fund may be sold by the Secretary of
the Treasury at the market price.
‘‘(3) AVAILABILITY OF INCOME.—Any interest de-
rived from obligations acquired by the Fund, and
proceeds from any sale or redemption of such obliga-
tions, are hereby appropriated to the Fund.
‘‘(f) ACCEPTANCE
OF GIFTS
AND BEQUESTS.—The
Fund may accept on behalf of the United States money gifts
and bequests made unconditionally to the Fund for the ben-
efit of the Fund or any activity financed through the Fund.
‘‘PART B—PAYMENTS TO TEACHING HOSPITALS
‘‘Subpart 1—Requirement of Payments
‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.
‘‘(a) IN GENERAL.—Subject to subsection (d), in the
case of each teaching hospital that in accordance with sub-
section (b) submits to the Secretary a payment document
for fiscal year 1997 or any subsequent fiscal year, the Sec-
retary shall make payments for the year to the teaching
hospital for the costs of operating approved medical resi-
dency training programs. Such payments shall be made
from the Fund, and the total of the payments to the hospital
for the fiscal year shall equal the sum of the following:
232
Subtitle E, Part 1
‘‘(1) An amount determined under section 2221
(relating to the indirect costs of graduate medical
education).
‘‘(2) An amount determined under section 2231
(relating to the direct costs of graduate medical edu-
cation).
‘‘(b) PAYMENT DOCUMENT.—For purposes of sub-
section (a), a payment document is a document containing
such information as may be necessary for the Secretary to
make payments under such subsection to a teaching hospital
for a fiscal year. The document is submitted in accordance
with this subsection if the document is submitted not later
than the date specified by the Secretary, and the document
is in such form and is made in such manner as the Sec-
retary may require. The Secretary may require that infor-
mation under this subsection be submitted to the Secretary
in periodic reports.
‘‘(c) ADMINISTRATOR OF PROGRAMS.—This part, and
the subsequent parts of this title, shall be carried out by
the Secretary acting through the Administrator of the
Health Care Financing Administration.
‘‘(d) SPECIAL RULES.—
‘‘(1) AUTHORITY REGARDING PAYMENTS TO CON-
SORTIA
OF
PROVIDERS.—In the case of payments
233
Subtitle E, Part 1
under subsection (a) that are determined under sec-
tion 2231:
‘‘(A) The requirement under such subsection
to make the payments to teaching hospitals is
subject to the authority of the Secretary under
section 2233(a) to make payments to qualifying
consortia.
‘‘(B) If the Secretary authorizes such a con-
sortium for purposes of section 2233(a), sub-
sections (a) and (b) of this section apply to the
consortium to the same extent and in the same
manner as the subsections apply to teaching hos-
pitals.
‘‘(2) CERTAIN
HOSPITALS.—Paragraph (1) of
subsection (a) is subject to sections 2222 and 2223 of
subpart 2. Paragraph (2) of subsection (a) is subject
to sections 2232 through 2234 of subpart 3.
‘‘(e) APPROVED MEDICAL RESIDENCY TRAINING PRO-
GRAM.—For purposes of this title, the term ‘approved medi-
cal residency training program’ has the meaning given such
term in section 1886(h)(5)(A).
234
Subtitle E, Part 1
‘‘Subpart 2—Amount Relating to Indirect Costs of
Graduate Medical Education
‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN-
DIRECT COSTS.
‘‘(a) 
IN
GENERAL.—For 
purposes 
of 
section
2211(a)(1), the amount determined under this section for
a teaching hospital for a fiscal year is the product of—
‘‘(1) the amount in the Indirect-Costs Medical
Education Account on the applicable date under sec-
tion 2201(d) (once the appropriation under such sec-
tion is made); and
‘‘(2) the percentage determined for the hospital
under subsection (b).
‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(2), the percentage determined under this sub-
section for a teaching hospital is the mean average of
the respective percentages determined under para-
graph (3) for each fiscal year of the applicable period
(as defined in paragraph (2)), adjusted by the Sec-
retary (upward or downward, as the case may be) on
a pro rata basis to the extent necessary to ensure that
the sum of the percentages determined under this
paragraph for all teaching hospitals is equal to 100
235
Subtitle E, Part 1
percent. The preceding sentence is subject to sections
2222 and 2223.
‘‘(2) APPLICABLE PERIOD REGARDING RELEVANT
DATA; FISCAL YEARS 1992 THROUGH 1994.—For pur-
poses of this part, the term ‘applicable period’ means
the period beginning on the first day of fiscal year
1992 and continuing through the end of fiscal year
1994.
‘‘(3) RESPECTIVE DETERMINATIONS FOR FISCAL
YEARS
OF
APPLICABLE
PERIOD.—For purposes of
paragraph (1), the percentage determined under this
paragraph for a teaching hospital for a fiscal year of
the applicable period is the percentage constituted by
the ratio of—
‘‘(A) the total amount of payments received
by the hospital under section 1886(d)(5)(B) for
discharges occurring during the fiscal year in-
volved; to
‘‘(B) the sum of the respective amounts de-
termined under subparagraph (A) for the fiscal
year for all teaching hospitals.
‘‘(c) AVAILABILITY OF DATA.—If a teaching hospital
received the payments specified in subsection (b)(3)(A) dur-
ing the applicable period but a complete set of the relevant
data is not available to the Secretary for purposes of deter-
236
Subtitle E, Part 1
mining an amount under such subsection for the fiscal year
involved, the Secretary shall for purposes of such subsection
make an estimate on the basis of such data as are available
to the Secretary for the applicable period.
‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING
DETERMINATION 
OF 
HOSPITAL-SPECIFIC
PERCENTAGE.
‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995
AND 1996.—
‘‘(1) IN GENERAL.—In the case of a teaching hos-
pital whose first payments under 1886(d)(5)(B) were
for discharges occurring in fiscal year 1995 or in fis-
cal year 1996 (referred to in this subsection individ-
ually as a ‘first payment year’), the percentage deter-
mined under paragraph (2) for the hospital is deemed
to be the percentage applicable under section 2221(b)
to the hospital, except that the percentage under para-
graph (2) shall be adjusted in accordance with section
2221(b)(1) to the extent determined by the Secretary
to be necessary with respect to a sum that equals 100
percent.
‘‘(2) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage determined
under this paragraph for a teaching hospital is the
percentage constituted by the ratio of the amount de-
237
Subtitle E, Part 1
termined under subparagraph (A) to the amount de-
termined under subparagraph (B), as follows:
‘‘(A)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the total
amount of payments received by the hospital
under section 1886(d)(5)(B) for discharges occur-
ring during fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996, the amount determined
under this subparagraph is an amount equal to
an estimate by the Secretary of the total amount
of payments that would have been paid to the
hospital under section 1886(d)(5)(B) for dis-
charges occurring during fiscal year 1995 if such
section, as in effect for fiscal year 1996, had ap-
plied to the hospital for discharges occurring
during fiscal year 1995.
‘‘(B)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the aggregate
total of the payments received by teaching hos-
pitals under section 1886(d)(5)(B) for discharges
occurring during fiscal year 1995.
238
Subtitle E, Part 1
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996—
‘‘(I) the Secretary shall make an esti-
mate in accordance with subparagraph
(A)(ii) for all teaching hospitals; and
‘‘(II) the amount determined under
this subparagraph is the sum of the esti-
mates 
made 
by 
the 
Secretary 
under
subclause (I).
‘‘(b) NEW TEACHING HOSPITALS.—
‘‘(1) IN GENERAL.—In the case of a teaching hos-
pital that did not receive payments under section
1886(d)(5)(B) for any of the fiscal years 1992 through
1996, the percentage determined under paragraph (3)
for the hospital is deemed to be the percentage appli-
cable under section 2221(b) to the hospital, except
that the percentage under paragraph (3) shall be ad-
justed in accordance with section 2221(b)(1) to the ex-
tent determined by the Secretary to be necessary with
respect to a sum that equals 100 percent. This sub-
section does not apply to a teaching hospital described
in the preceding sentence if the hospital is in a State
for which a demonstration project under section
1814(b)(3) is in effect.
239
Subtitle E, Part 1
‘‘(2) DESIGNATED
FISCAL
YEAR
REGARDING
DATA.—The determination under paragraph (3) of a
percentage for a teaching hospital described in para-
graph (1) shall be made for the most recent fiscal year
for which the Secretary has sufficient data to make
the determination (referred to in this subsection as the
‘designated fiscal year’).
‘‘(3) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage determined
under this paragraph for the teaching hospital in-
volved is the percentage constituted by the ratio of the
amount determined under subparagraph (A) to the
amount determined under subparagraph (B), as fol-
lows:
‘‘(A) The amount determined under this
subparagraph is an amount equal to an estimate
by the Secretary of the total amount of payments
that would have been paid to the hospital under
section 1886(d)(5)(B) for the designated fiscal
year if such section, as in effect for the first fis-
cal year for which payments pursuant to this
subsection are to be made to the hospital, had
applied to the hospital for the designated fiscal
year.
240
Subtitle E, Part 1
‘‘(B) The Secretary shall make an estimate
in accordance with subparagraph (A) for all
teaching hospitals. The amount determined
under this subparagraph is the sum of the esti-
mates made by the Secretary under the preceding
sentence.
‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of
two or more teaching hospitals that have each received pay-
ments pursuant to section 2221 for one or more fiscal years
and that undergo a consolidation or merger, the percentage
applicable to the resulting teaching hospital for purposes
of section 2221(b) is the sum of the respective percentages
that would have applied pursuant to such section if the hos-
pitals had not undergone the consolidation or merger.
‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE-
GARDING TEACHING HOSPITALS IN CERTAIN
STATES.
‘‘(a) IN GENERAL.—In the case of a teaching hospital
in a State for which a demonstration project under section
1814(b)(3) is in effect, this section applies in lieu of section
2221. For purposes of section 2211(a)(1), the amount deter-
mined for a teaching hospital for a fiscal year is the product
of—
‘‘(1) the amount in the Indirect-Costs Medical
Education Account for the fiscal year pursuant to the
241
Subtitle E, Part 1
allocation under section 2201(d)(3)(A) for the year;
and
‘‘(2) the percentage determined under subsection
(b) for the hospital.
‘‘(b) DETERMINATION OF PERCENTAGE.—For purposes
of subsection (a)(2):
‘‘(1) The Secretary shall make an estimate of the
total amount of payments that would have been re-
ceived under section 1886(d)(5)(B) by the hospital in-
volved with respect to each of the fiscal years of the
applicable period if such section (as in effect for such
fiscal years) had applied to the hospital for such
years.
‘‘(2) The percentage determined under this sub-
section for the hospital for a fiscal year is a mean av-
erage percentage determined for the hospital in ac-
cordance with the methodology of section 2221(b)(1),
except that the estimate made by the Secretary under
paragraph (1) of this subsection for a fiscal year of
the applicable period is deemed to be the amount that
applies for purposes of section 2221(b)(3)(A) for such
year.
‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN
AMOUNTS.—In the case of a teaching hospital in a State
for which a demonstration project under section 1814(b)(3)
242
Subtitle E, Part 1
is in effect, this section does not provide any payment to
the hospital from amounts transferred to the Fund under
section 1886(j).
‘‘(d) ADJUSTMENT REGARDING PAYMENTS TO OTHER
HOSPITALS.—In the case of a fiscal year for which pay-
ments pursuant to subsection (a) are made to one or more
teaching hospitals, the following applies:
‘‘(1) The Secretary shall determine a percentage
equal to the sum of the respective percentages deter-
mined for the hospitals under subsection (b).
‘‘(2) The Secretary shall determine an amount
equal to the product of—
‘‘(A) the percentage determined under para-
graph (1); and
‘‘(B) the amount in the Indirect-Costs Medi-
cal Education Account for the fiscal year pursu-
ant to the transfer under section 1886(j)(1).
‘‘(3) The Secretary shall, for each hospital (other
than hospitals described in subsection (a)), make pay-
ments to the hospital whose sum is equal to the prod-
uct of—
‘‘(A) the amount determined under para-
graph (2); and
‘‘(B) the percentage that applies to the hos-
pital for purposes of section 2221(b), except that
243
Subtitle E, Part 1
such percentage shall be adjusted in accordance
with the methodology of section 2221(b)(1) to the
extent determined by the Secretary to be nec-
essary with respect to a sum that equals 100 per-
cent.
‘‘Subpart 3—Amount Relating to Direct Costs of Graduate
Medical Education
‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI-
RECT COSTS.
‘‘(a) 
IN
GENERAL.—For 
purposes 
of 
section
2211(a)(2), the amount determined under this section for
a teaching hospital for a fiscal year is the sum of—
‘‘(1) the amount determined under subsection (b)
(relating to the General Direct-Costs Medical Edu-
cation Account); and
‘‘(2) the amount determined under subsection (c)
(relating to the Medicare Direct-Costs Medical Edu-
cation Account).
‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(1), the amount determined under this subsection
for a teaching hospital for a fiscal year is the product
of—
‘‘(A) the amount in the General Direct-
Costs Medical Education Account on the applica-
244
Subtitle E, Part 1
ble date under section 2201(d) (once the appro-
priation under such section is made); and
‘‘(B) the percentage determined for the hos-
pital under paragraph (2).
‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(B), the percentage determined under
this paragraph for a teaching hospital is the
mean average of the respective percentages deter-
mined under subparagraph (B) for each fiscal
year of the applicable period (as defined in sec-
tion 2221(b)(2)), adjusted by the Secretary (up-
ward or downward, as the case may be) on a pro
rata basis to the extent necessary to ensure that
the sum of the percentages determined under this
subparagraph for all teaching hospitals is equal
to 100 percent. The preceding sentence is subject
to sections 2232 through 2234.
‘‘(B) RESPECTIVE
DETERMINATIONS
FOR
FISCAL
YEARS
OF
APPLICABLE
PERIOD.—For
purposes of subparagraph (A), the percentage de-
termined under this subparagraph for a teaching
hospital for a fiscal year of the applicable period
is the percentage constituted by the ratio of—
245
Subtitle E, Part 1
‘‘(i) the total amount of payments re-
ceived by the hospital under section 1886(h)
for cost reporting periods beginning during
the fiscal year involved; to
‘‘(ii) the sum of the respective amounts
determined under clause (i) for the fiscal
year for all teaching hospitals.
‘‘(3) AVAILABILITY OF DATA.—If a teaching hos-
pital received the payments specified in paragraph
(2)(B)(i) during the applicable period but a complete
set of the relevant data is not available to the Sec-
retary for purposes of determining an amount under
such paragraph for the fiscal year involved, the Sec-
retary shall for purposes of such paragraph make an
estimate on the basis of such data as are available to
the Secretary for the applicable period.
‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(2), the amount determined under this subsection
for a teaching hospital for a fiscal year is the product
of—
‘‘(A) the amount in the Medicare Direct-
Costs Medical Education Account on the applica-
ble date under section 2201(d) (once the appro-
priation under such section is made); and
246
Subtitle E, Part 1
‘‘(B) the percentage determined for the hos-
pital under paragraph (2).
‘‘(2) 
HOSPITAL-SPECIFIC
PERCENTAGE.—For
purposes of paragraph (1)(B), the percentage deter-
mined under this subsection for a teaching hospital
for a fiscal year is the percentage constituted by the
ratio of—
‘‘(A) the estimate made by the Secretary for
the hospital for the fiscal year under section
1886(j)(2)(B); to
‘‘(B) the sum of the respective estimates re-
ferred to in subparagraph (A) for all teaching
hospitals.
‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING DE-
TERMINATION OF HOSPITAL-SPECIFIC PER-
CENTAGE.
‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995
AND 1996.—
‘‘(1) IN GENERAL.—In the case of a teaching hos-
pital whose first payments under 1886(h) were for
cost reporting period beginning in fiscal year 1995 or
in fiscal year 1996 (referred to in this subsection in-
dividually as a ‘first payment year’), the percentage
determined under paragraph (2) for the hospital is
deemed to be the percentage applicable under section
247
Subtitle E, Part 1
2231(b)(2) to the hospital, except that the percentage
under paragraph (2) shall be adjusted in accordance
with section 2231(b)(2)(A) to the extent determined
by the Secretary to be necessary with respect to a sum
that equals 100 percent.
‘‘(2) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage determined
under this paragraph for a teaching hospital is the
percentage constituted by the ratio of the amount de-
termined under subparagraph (A) to the amount de-
termined under subparagraph (B), as follows:
‘‘(A)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the total
amount of payments received by the hospital
under section 1886(h) for cost reporting periods
beginning in fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996, the amount determined
under this subparagraph is an amount equal to
an estimate by the Secretary of the total amount
of payments that would have been paid to the
hospital under section 1886(h) for cost reporting
periods beginning in fiscal year 1995 if such sec-
248
Subtitle E, Part 1
tion, as in effect for fiscal year 1996, had ap-
plied to the hospital for fiscal year 1995.
‘‘(B)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the aggregate
total of the payments received by teaching hos-
pitals under section 1886(h) for cost reporting
periods beginning in fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996—
‘‘(I) the Secretary shall make an esti-
mate in accordance with subparagraph
(A)(ii) for all teaching hospitals; and
‘‘(II) the amount determined under
this subparagraph is the sum of the esti-
mates 
made 
by 
the 
Secretary 
under
subclause (I).
‘‘(b) NEW TEACHING HOSPITALS.—
‘‘(1) IN GENERAL.—In the case of a teaching hos-
pital that did not receive payments under section
1886(h) for any of the fiscal years 1992 through 1996,
the percentage determined under paragraph (3) for
the hospital is deemed to be the percentage applicable
under section 2231(b)(2) to the hospital, except that
the percentage under paragraph (3) shall be adjusted
249
Subtitle E, Part 1
in accordance with section 2231(b)(2)(A) to the extent
determined by the Secretary to be necessary with re-
spect to a sum that equals 100 percent. This sub-
section does not apply to a teaching hospital described
in the preceding sentence if the hospital is in a State
for which a demonstration project under section
1814(b)(3) is in effect.
‘‘(2) DESIGNATED
FISCAL
YEAR
REGARDING
DATA.—The determination under paragraph (3) of a
percentage for a teaching hospital described in para-
graph (1) shall be made for the most recent fiscal year
for which the Secretary has sufficient data to make
the determination (referred to in this subsection as the
‘designated fiscal year’).
‘‘(3) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage determined
under this paragraph for the teaching hospital in-
volved is the percentage constituted by the ratio of the
amount determined under subparagraph (A) to the
amount determined under subparagraph (B), as fol-
lows:
‘‘(A) The amount determined under this
subparagraph is an amount equal to an estimate
by the Secretary of the total amount of payments
that would have been paid to the hospital under
250
Subtitle E, Part 1
section 1886(h) for the designated fiscal year if
such section, as in effect for the first fiscal year
for which payments pursuant to this subsection
are to be made to the hospital, had applied to the
hospital for cost reporting periods beginning in
the designated fiscal year.
‘‘(B) The Secretary shall make an estimate
in accordance with subparagraph (A) for all
teaching hospitals. The amount determined
under this subparagraph is the sum of the esti-
mates made by the Secretary under the preceding
sentence.
‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of
two or more teaching hospitals that have each received pay-
ments pursuant to section 2231 for one or more fiscal years
and that undergo a consolidation or merger, the percentage
applicable to the resulting teaching hospital for purposes
of section 2231(b) is the sum of the respective percentages
that would have applied pursuant to such section if the hos-
pitals had not undergone the consolidation or merger.
‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO
CONSORTIA OF PROVIDERS.
‘‘(a) IN GENERAL.—In lieu of making payments to
teaching hospitals pursuant to section 2231, the Secretary
251
Subtitle E, Part 1
may make payments under this section to consortia that
meet the requirements of subsection (b).
‘‘(b) QUALIFYING CONSORTIUM.—For purposes of sub-
section (a), a consortium meets the requirements of this sub-
section if the consortium is in compliance with the follow-
ing:
‘‘(1) The consortium consists of an approved
medical residency training program, a teaching hos-
pital, and one or more of the following entities:
‘‘(A) Schools of medicine or osteopathic
medicine.
‘‘(B) Other teaching hospitals (or the ap-
proved medical residency training programs of
the hospitals).
‘‘(C) Community health centers (under sec-
tion 330 of the Public Health Service Act), mi-
grant health centers (under section 329 of such
Act), or facilities described in section 340 of such
Act.
‘‘(D) Medical group practices.
‘‘(E) Managed care entities.
‘‘(F) Entities furnishing outpatient services.
‘‘(G) Such other entities as the Secretary
determines to be appropriate.
252
Subtitle E, Part 1
‘‘(2) The members of the consortium have agreed
to participate in the programs of graduate medical
education that are operated by the teaching hospitals
in the consortium.
‘‘(3) With respect to the receipt by the consor-
tium of payments made pursuant to this section, the
members of the consortium have agreed on a method
for allocating the payments among the members.
‘‘(4) The consortium meets such additional re-
quirements as the Secretary may establish.
‘‘(c) PAYMENTS FROM ACCOUNTS.—
‘‘(1) IN GENERAL.—Subject to subsection (d), the
total of payments to a qualifying consortium for a
fiscal year pursuant to subsection (a) shall be the sum
of—
‘‘(A) the aggregate amount determined for
the teaching hospitals of the consortium pursu-
ant to paragraph (1) of section 2231(a); and
‘‘(B) an amount determined in accordance
with the methodology that applies pursuant to
paragraph (2) of such section, except that the es-
timate used for purposes of subsection (c)(2)(A)
of such section shall be the estimate made for the
consortium under section 1886(j)(2)(C)(ii).
253
Subtitle E, Part 1
‘‘(d) LIMITATION ON AGGREGATE TOTAL OF PAYMENTS
TO CONSORTIA.—The aggregate total of the amounts paid
under subsection (c)(2) to qualifying consortia for a fiscal
year may not exceed the sum of—
‘‘(1) the aggregate total of the amounts that
would have been paid under section 2231(c) for the
fiscal year to the teaching hospitals of the consortia
if the hospitals had not been participants in the con-
sortia; and
‘‘(2) an amount equal to 1 percent of the amount
that applies under paragraph (1)(A) of such section
for the fiscal year (relating to the Medicare Direct-
Costs Medical Education Account).
‘‘(e) DEFINITION.—For purposes of this title, the term
‘qualifying consortium’ means a consortium that meets the
requirements of subsection (b).
‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE-
GARDING TEACHING HOSPITALS IN CERTAIN
STATES.
‘‘(a) IN GENERAL.—In the case of a teaching hospital
in a State for which a demonstration project under section
1814(b)(3) is in effect, this section applies in lieu of section
2231. For purposes of section 2211(a)(2), the amount deter-
mined for a teaching hospital for a fiscal year is the product
of—
254
Subtitle E, Part 1
‘‘(1) the amount in the General Direct-Costs
Medical Education Account on the applicable date
under section 2201(d) (once the appropriation under
such section is made); and
‘‘(2) the percentage determined under subsection
(b) for the hospital.
‘‘(b) DETERMINATION OF PERCENTAGE.—For purposes
of subsection (a)(2):
‘‘(1) The Secretary shall make an estimate of the
total amount of payments that would have been re-
ceived under section 1886(h) by the hospital involved
with respect to each of the fiscal years of the applica-
ble period if such section (as in effect for such fiscal
years) had applied to the hospital for such years.
‘‘(2) The percentage determined under this sub-
section for the hospital for a fiscal year is a mean av-
erage percentage determined for the hospital in ac-
cordance 
with 
the 
methodology 
of 
section
2231(b)(2)(A), except that the estimate made by the
Secretary under paragraph (1) of this subsection for
a fiscal year of the applicable period is deemed to be
the amount that applies for purposes of section
2231(b)(2)(B)(i) for such year.
‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN
AMOUNTS.—In the case of a teaching hospital in a State
255
Subtitle E, Part 1
for which a demonstration project under section 1814(b)(3)
is in effect, this section does not provide any payment to
the hospital from amounts transferred to the Fund under
section 1886(j).
‘‘Subpart 4—General Provisions
‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.
‘‘(a) COLLECTION OF DATA ON ACCURACY OF ESTI-
MATES.—The Secretary shall collect data on whether the es-
timates made by the Secretary under section 1886(j) for a
fiscal year were substantially accurate.
‘‘(b) ADJUSTMENTS.—If the Secretary determines
under subsection (a) that an estimate for a fiscal year was
not substantially accurate, the Secretary shall, for the first
fiscal year beginning after the Secretary makes the deter-
mination—
‘‘(1) make adjustments accordingly in transfers
to the Fund under section 1886(j); and
‘‘(2) make adjustments accordingly in the
amount of payments to teaching hospitals pursuant to
2231(c) (or, as applicable, to qualifying consortia
pursuant to section 2233(c)(2)).’’.
256
Subtitle E, Part 2
PART 2—AMENDMENTS TO MEDICARE PROGRAM
SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND
GRADUATE 
MEDICAL 
EDUCATION 
TRUST
FUND.
Section 1886 (42 U.S.C. 1395ww) is amended—
(1) in subsection (d)(5)(B), in the matter preced-
ing clause (i), by striking ‘‘The Secretary shall pro-
vide’’ and inserting the following: ‘‘For discharges oc-
curring on or before September 30, 1996, the Sec-
retary shall provide’’;
(2) in subsection (h)—
(A) in paragraph (1), in the first sentence,
by striking ‘‘the Secretary shall provide’’ and in-
serting ‘‘the Secretary shall, subject to paragraph
(6), provide’’; and
(B) by adding at the end the following
paragraph:
‘‘(6) LIMITATION.—
‘‘(A) IN GENERAL.—The authority to make
payments under this subsection applies only
with respect to cost reporting periods ending on
or before September 30, 1996, except as provided
in subparagraph (B).
‘‘(B) RULE REGARDING PORTION OF LAST
COST REPORTING PERIOD.—In the case of a cost
reporting period that extends beyond September
257
Subtitle E, Part 2
30, 1996, payments under this subsection shall
be made with respect to such portion of the pe-
riod as has lapsed as of such date.
‘‘(C) RULE OF CONSTRUCTION.—This para-
graph may not be construed as authorizing any
payment under section 1861(v) with respect to
graduate medical education.’’; and
(3) by adding at the end the following subsection:
‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND GRAD-
UATE MEDICAL EDUCATION TRUST FUND.—
‘‘(1) 
INDIRECT
COSTS
OF
MEDICAL
EDU-
CATION.—
‘‘(A) IN GENERAL.—From the Federal Hos-
pital Insurance Trust Fund, the Secretary shall,
for fiscal year 1997 and each subsequent fiscal
year, transfer to the Indirect-Costs Medical Edu-
cation Account (under section 2201) an amount
determined by the Secretary in accordance with
subparagraph (B).
‘‘(B) DETERMINATION
OF
AMOUNTS.—The
Secretary shall make an estimate for the fiscal
year involved of the nationwide total of the
amounts that would have been paid under sub-
section (d)(5)(B) to hospitals during the fiscal
year if such payments had not been terminated
258
Subtitle E, Part 2
for discharges occurring after September 30,
1996. For purposes of subparagraph (A), the
amount determined under this subparagraph for
the fiscal year is the estimate made by the Sec-
retary under the preceding sentence.
‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—
‘‘(A) IN GENERAL.—From the Federal Hos-
pital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund,
the Secretary shall, for fiscal year 1997 and each
subsequent fiscal year, transfer to the Medicare
Direct-Costs Medical Education Account (under
section 2201) the sum of—
‘‘(i) an amount determined by the Sec-
retary in accordance with subparagraph
(B); and
‘‘(ii) as applicable, an amount deter-
mined by the Secretary in accordance with
subparagraph (C)(ii).
‘‘(B) DETERMINATION
OF
AMOUNTS.—For
each hospital (other than a hospital that is a
member of a qualifying consortium referred to in
subparagraph (C)), the Secretary shall make an
estimate for the fiscal year involved of the
amount that would have been paid under sub-
259
Subtitle E, Part 2
section (h) to the hospital during the fiscal year
if such payments had not been terminated for
cost reporting periods ending on or before Sep-
tember 30, 1996. For purposes of subparagraph
(A)(i), the amount determined under this sub-
paragraph for the fiscal year is the sum of all
estimates made by the Secretary under the pre-
ceding sentence.
‘‘(C) ESTIMATES
REGARDING
QUALIFYING
CONSORTIA.—If the Secretary elects to authorize
one or more qualifying consortia for purposes of
section 2233(a), the Secretary shall carry out the
following:
‘‘(i) The Secretary shall establish a
methodology for making payments to quali-
fying consortia with respect to the reason-
able direct costs of such consortia in carry-
ing out programs of graduate medical edu-
cation. The methodology shall be the meth-
odology established in subsection (h), modi-
fied to the extent necessary to take into ac-
count the participation in such programs of
entities other than hospitals.
‘‘(ii) For each qualifying consortium,
the Secretary shall make an estimate for the
260
Subtitle E, Part 2
fiscal year involved of the amount that
would have been paid to the consortium
during the fiscal year if, using the meth-
odology under clause (i), payments had been
made to the consortium for the fiscal year
as reimbursements with respect to cost re-
porting periods. For purposes of subpara-
graph (A)(ii), the amount determined under
this clause for the fiscal year is the sum of
all estimates made by the Secretary under
the preceding sentence.
‘‘(D) ALLOCATION
BETWEEN
FUNDS.—In
providing for a transfer under subparagraph (A)
for a fiscal year, the Secretary shall provide for
an allocation of the amounts involved between
part A and part B (and the trust funds estab-
lished under the respective parts) as reasonably
reflects the proportion of direct graduate medical
education costs of hospitals associated with the
provision of services under each respective part.
‘‘(3) 
APPLICABILITY
OF
CERTAIN
AMEND-
MENTS.—Amendments made to subsection (d)(5)(B)
and subsection (h) that are effective on or after Octo-
ber 1, 1996, apply only for purposes of estimates
under paragraphs (1) and (2) and for purposes of de-
261
Subtitle E, Part 2
termining the amount of payments under 2211. Such
amendments do not require any adjustment to
amounts paid under subsection (d)(5)(B) or (h) with
respect to fiscal year 1996 or any prior fiscal year.
‘‘(4) RELATIONSHIP
TO
CERTAIN
DEMONSTRA-
TION PROJECTS.—In the case of a State for which a
demonstration project under section 1814(b)(3) is in
effect, the Secretary, in making determinations of the
rates of increase under such section, shall include all
amounts transferred under this subsection. Such
amounts shall be so included to the same extent and
in the same manner as amounts determined under
subsections (d)(5)(B) and (h) were included in such
determination under the provisions of this title in ef-
fect on September 30, 1996.’’.
SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD-
ING GRADUATE MEDICAL EDUCATION.
(a) INDIRECT COSTS OF MEDICAL EDUCATION; APPLI-
CABLE PERCENTAGE.—
(1) MODIFICATION REGARDING 5.6 PERCENT.—
Section 
1886(d)(5)(B)(ii) 
(42 
U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(A) by striking ‘‘on or after October 1,
1988,’’ and inserting ‘‘on or after October 1,
1999,’’; and
262
Subtitle E, Part 2
(B) by striking ‘‘1.89’’ and inserting
‘‘1.38’’.
(2) SPECIAL
RULE
REGARDING
FISCAL
YEARS
1996 THROUGH 1998; MODIFICATION REGARDING 6 PER-
CENT.—Section 1886(d)(5)(B)(ii), as amended by
paragraph (1), is amended by adding at the end the
following: ‘‘In the case of discharges occurring on or
after October 1, 1995, and before October 1, 1999, the
preceding sentence applies to the same extent and in
the same manner as the sentence applies to discharges
occurring on or after October 1, 1999, except that the
term ‘1.38’ is deemed to be ‘1.48’.’’.
(3) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION OF STANDARDIZED AMOUNTS.—Section
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended by striking ‘‘1985’’ and inserting the follow-
ing: ‘‘1985, but (for discharges occurring after Sep-
tember 30, 1995) not taking into account any reduc-
tions in such costs resulting from the amendments
made by section 15412(a) of the Medicare Preserva-
tion Act of 1995’’.
(b) DIRECT COSTS OF MEDICAL EDUCATION.—
(1) LIMITATION
ON
NUMBER
OF
FULL-TIME-
EQUIVALENT
RESIDENTS.—Section 1886(h)(4) (42
263
Subtitle E, Part 2
U.S.C. 1395ww(h)(4)) is amended by adding at the
end the following new subparagraph:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESI-
DENTS FOR CERTAIN FISCAL YEARS.—Such rules
shall provide that for purposes of a cost report-
ing period beginning on or after October 1, 1995,
and on or before September 30, 2002, the number
of 
full-time-equivalent 
residents 
determined
under this paragraph with respect to an ap-
proved medical residency training program may
not exceed the number of full-time-equivalent
residents with respect to the program as of Au-
gust 1, 1995 (except that this subparagraph does
not apply to any nonphysician teaching pro-
gram that is approved for purposes of section
1861(b)(6) and that, under paragraph (5)(A), is
an approved medical residency training pro-
gram).’’.
(2) EXCLUSION
OF
RESIDENTS
AFTER
INITIAL
RESIDENCY
PERIOD.—Section 
1886(h)(4)(C) 
(42
U.S.C. 1395ww(h)(4)(C)) is amended to read as fol-
lows:
‘‘(C) 
WEIGHTING
FACTORS
FOR
RESI-
DENTS.—Effective for cost reporting periods be-
ginning on or after October 1, 1997, such rules
264
Subtitle E, Part 2
shall provide that, in the calculation of the num-
ber of full-time-equivalent residents in an ap-
proved residency program, the weighting factor
for a resident who is in the initial residency pe-
riod (as defined in paragraph (5)(F)) is 1.0 and
the weighting factor for a resident who has com-
pleted such period is 0.0. (In the case of cost re-
porting periods beginning before October 1, 1997,
the weighting factors that apply in such calcula-
tion are the weighting factors that were applica-
ble under this subparagraph on the day before
the date of the enactment of the Medicare Preser-
vation Act of 1995.)’’.
(3) REDUCTIONS IN PAYMENTS FOR ALIEN RESI-
DENTS.—Section 
1886(h)(4) 
(42 
U.S.C.
1395ww(h)(4)), as amended by paragraph (1), is
amended by adding at the end the following new sub-
paragraph:
‘‘(G) SPECIAL
RULES
FOR
ALIEN
RESI-
DENTS.—In the case of individuals who are not
citizens or nationals of the United States and
who are not citizens of Canada, in the calcula-
tion of the number of full-time-equivalent resi-
dents in an approved medical residency pro-
gram, the following rules shall apply with re-
265
Subtitle E, Part 2
spect to such individuals who are residents in
the program:
‘‘(i) For a cost reporting period begin-
ning during fiscal year 1996, for each such
individual the Secretary shall apply a
weighting factor of .75.
‘‘(ii) For a cost reporting period begin-
ning during fiscal year 1997, for each such
individual the Secretary shall apply a
weighting factor of .50.
‘‘(iii) For a cost reporting period be-
ginning during fiscal year 1998, for each
such individual the Secretary shall apply a
weighting factor of .25.
‘‘(iv) For a cost reporting period be-
ginning during fiscal year 1999 or any sub-
sequent fiscal year, such individuals shall be
excluded from the calculation of the number
of full-time-equivalent residents in an ap-
proved medical residency program under
this paragraph.’’.
(4) EFFECTIVE DATE.—Except as provided oth-
erwise in this subsection (or in the amendments made
by this subsection), the amendments made by this sub-
266
Subtitle E, Part 3
section apply to hospital cost reporting periods begin-
ning on or after October 1, 1995.
PART 3—REFORM OF FEDERAL POLICIES RE-
GARDING TEACHING HOSPITALS AND GRAD-
UATE MEDICAL EDUCATION
SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR REC-
OMMENDING POLICIES.
Title XXII of the Social Security Act, as added by sec-
tion 15401, is amended by adding at the end the following
part:
‘‘PART C—OTHER MATTERS
‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING OF
TEACHING HOSPITALS AND GRADUATE MEDI-
CAL EDUCATION.
‘‘(a) ESTABLISHMENT.—The Chair of the Medicare
Payment Review Commission under section 1806 shall es-
tablish a temporary advisory panel to be known as the Ad-
visory Panel on Financing for Teaching Hospitals and
Graduate Medical Education (in this section referred to as
the ‘Panel’).
‘‘(b) DUTIES.—The Panel shall develop recommenda-
tions on whether and to what extent Federal policies regard-
ing teaching hospitals and graduate medical education
should be reformed, including recommendations regarding
the following:
267
Subtitle E, Part 3
‘‘(1) The financing of graduate medical edu-
cation, including consideration of alternative broad-
based sources of funding for such education.
‘‘(2) The financing of teaching hospitals, includ-
ing consideration of the difficulties encountered by
such hospitals as competition among health care enti-
ties increases. Matters considered under this para-
graph shall include consideration of the effects on
teaching hospitals of the method of financing used for
the MedicarePlus program under part C of title
XVIII.
‘‘(3) The methodology for making payments for
graduate medical education, and the selection of enti-
ties to receive the payments. Matters considered under
this paragraph shall include the following:
‘‘(A) The methodology under part B for
making payments from the Fund, including the
use of data from the fiscal years 1992 through
1994, and including the methodology that ap-
plies with respect to consolidations and mergers
of participants in the program under such part
and with respect to the inclusion of additional
participants in the program.
268
Subtitle E, Part 3
‘‘(B) Issues regarding children’s hospitals,
and approved medical residency training pro-
grams in pediatrics.
‘‘(C) Whether and to what extent payments
are being made (or should be made) for graduate
training in the various nonphysician health pro-
fessions.
‘‘(4) Federal policies regarding international
medical graduates.
‘‘(5) The dependence of schools of medicine on
service-generated income.
‘‘(6) The effects of the amendments made by sec-
tion 15412 of the Medicare Preservation Act of 1995,
including adverse effects on teaching hospitals that re-
sult from modifications in policies regarding inter-
national medical graduates.
‘‘(7) Whether and to what extent the needs of the
United States regarding the supply of physicians will
change during the 10-year beginning on October 1,
1995, and whether and to what extent any such
changes will have significant financial effects on
teaching hospitals.
‘‘(8) The appropriate number and mix of resi-
dents.
269
Subtitle E, Part 3
‘‘(c) COMPOSITION.—Not later than three months after
being designated as the initial chairman of the Medicare
Payment Review Commission, the chairman of the Commis-
sion shall appoint to the Panel 19 individuals who are not
members of the Commission, who are not officers or employ-
ees of the United States, and who possess expertise on mat-
ters on which the Panel is to make recommendations under
subsection (b). Such individuals shall include the following:
‘‘(1) Deans from allopathic and osteopathic
schools of medicine.
‘‘(2) Chief executive officers (or equivalent ad-
ministrative heads) from academic health centers, in-
tegrated health care systems, and approved medical
residency training programs.
‘‘(3) Chairs of departments or divisions from
allopathic and osteopathic schools of medicine, schools
of dentistry, and approved medical residency training
programs in oral surgery.
‘‘(4) Individuals with leadership experience from
each of the fields of advanced practice nursing, physi-
cian assistants, and podiatric medicine.
‘‘(5) Individuals with substantial experience in
the study of issues regarding the composition of the
health care workforce of the United States.
270
Subtitle E, Part 3
‘‘(6) Individuals with expertise on the financing
of health care.
‘‘(7) Representatives from health insurance orga-
nizations and health plan organizations.
‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE PAY-
MENT REVIEW COMMISSION.—From amounts appropriated
under subsection (n), the Medicare Review Payment Com-
mission shall provide for the Panel such staff and adminis-
trative support (including quarters for the Panel) as may
be necessary for the Panel to carry out the duties under
subsection (b).
‘‘(e) CHAIR.—The Panel shall designate a member of
the Panel to serve as the Chair of the Panel.
‘‘(f) MEETINGS.—The Panel shall meet at the call of
the Chair or a majority of the members, except that the first
meeting of the Panel shall be held not later than three
months after the date on which appointments under sub-
section (c) are completed.
‘‘(g) TERMS.—The term of a member of the Panel is
the duration of the Panel.
‘‘(h) VACANCIES.—
‘‘(1) IN GENERAL.—A vacancy in the member-
ship of the Panel does not affect the power of the re-
maining members to carry out the duties under sub-
section (b). A vacancy in the membership of the Panel
271
Subtitle E, Part 3
shall be filled in the manner in which the original
appointment was made.
‘‘(2) INCOMPLETE TERM.—If a member of the
Panel does not serve the full term applicable to the
member, the individual appointed to fill the resulting
vacancy shall be appointed for the remainder of the
term of the predecessor of the individual.
‘‘(i) 
COMPENSATION; 
REIMBURSEMENT
OF
EX-
PENSES.—
‘‘(1) COMPENSATION.—Members of the Panel
shall receive compensation for each day (including
traveltime) engaged in carrying out the duties of the
Committee. Such compensation may not be in an
amount in excess of the daily equivalent of the annual
maximum rate of basic pay payable under the Gen-
eral Schedule (under title 5, United States Code) for
positions above GS–15.
‘‘(2) REIMBURSEMENT.—Members of the Panel
may, in accordance with chapter 57 of title 5, United
States Code, be reimbursed for travel, subsistence, and
other necessary expenses incurred in carrying out the
duties of the Panel.
‘‘(j) CONSULTANTS.—The Panel may procure such
temporary and intermittent services of consultants under
section 3109(b) of title 5, United States Code, as the Panel
272
Subtitle E, Part 3
may determine to be useful in carrying out the duties under
subsection (b). The Panel may not procure services under
this subsection at any rate in excess of the daily equivalent
of the maximum annual rate of basic pay payable under
the General Schedule for positions above GS–15. Consult-
ants under this subsection may, in accordance with chapter
57 of title 5, United States Code, be reimbursed for travel,
subsistence, and other necessary expenses incurred for ac-
tivities carried out on behalf of the Panel pursuant to sub-
section (b).
‘‘(k) POWERS.—
‘‘(1) IN GENERAL.—For the purpose of carrying
out the duties of the Panel under subsection (b), the
Panel may hold such hearings, sit and act at such
times and places, take such testimony, and receive
such evidence as the Panel considers appropriate.
‘‘(2) OBTAINING OFFICIAL INFORMATION.—Upon
the request of the Panel, the heads of Federal agencies
shall furnish directly to the Panel information nec-
essary for the Panel to carry out the duties under sub-
section (b).±
‘‘(3) USE OF MAILS.—The Panel may use the
United States mails in the same manner and under
the same conditions as Federal agencies.
‘‘(l) REPORTS.—
273
Subtitle E, Part 3
‘‘(1) FIRST INTERIM REPORT.—Not later than
one year after the date of the enactment of the Medi-
care Preservation Act of 1995, the Panel shall submit
to the Congress a report providing the recommenda-
tions of the Panel regarding the matters specified in
paragraphs (1) through (4) of subsection (b).
‘‘(2) SECOND INTERIM REPORT.—Not later than
2 years after the date of enactment specified in para-
graph (1), the Panel shall submit to the Congress a
report providing the recommendations of the Panel
regarding the matters specified in paragraphs (5) and
(6) of subsection (b).
‘‘(3) FINAL
REPORT.—Not later than 3 years
after the date of enactment specified in paragraph
(1), the Panel shall submit to the Congress a final re-
port providing the recommendations of the Panel
under subsection (b).
‘‘(m) DURATION.—The Panel terminates upon the ex-
piration of the 180-day period beginning on the date on
which the final report under subsection (l)(3) is submitted
to the Congress.
‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), for
the purpose of carrying out this section, there are au-
274
Subtitle E, Part 3
thorized to be appropriated such sums as may be nec-
essary for each of the fiscal years 1996 through 2000.
‘‘(2) LIMITATION.—The authorization of appro-
priations established in paragraph (1) is effective
only with respect to appropriations made from alloca-
tions under section 302(b) of the Congressional Budg-
et Act of 1974—
‘‘(A) for the Subcommittee on Labor, Health
and Human Services, and Education, Committee
on Appropriations of the House of Representa-
tives, in the case of any bill, resolution, or
amendment considered in the House; and
‘‘(B) for the Subcommittee on Labor, Health
and Human Services, and Education, Committee
on Appropriations of the Senate, in the case of
any bill, resolution, or amendment considered in
the Senate.’’.
275
Subtitle F, Part 1
Subtitle F—Provisions Relating to
Medicare Part A
PART 1—HOSPITALS
Subpart A—General Provisions Relating to Hospitals
SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS
HOSPITALS.
Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended by striking subclauses
(XI), (XII), and (XIII) and inserting the following:
‘‘(XI) for fiscal year 1996, the market basket per-
centage increase minus 2.5 percentage points for hos-
pitals in all areas,
‘‘(XII) for each of the fiscal years 1997 through
2002, the market basket percentage increase minus 2.0
percentage points for hospitals in all areas, and
‘‘(XIII) for fiscal year 2003 and each subsequent
fiscal year, the market basket percentage increase for
hospitals in all areas.’’.
SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE
PAYMENT ADJUSTMENTS.
(a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (ii), by striking ‘‘The amount’’ and
inserting ‘‘Subject to clause (ix), the amount’’; and
276
Subtitle F, Part 1
(2) by adding at the end the following new
clause:
‘‘(ix) In the case of discharges occurring on or after
October 1, 1995, the additional payment amount otherwise
determined under clause (ii) shall be reduced as follows:
‘‘(I) For discharges occurring on or after October
1, 1995, and on or before September 30, 1996, by 20
percent.
‘‘(II) For discharges occurring on or after Octo-
ber 1, 1996, and on or before September 30, 1997, by
25 percent.
‘‘(III) For discharges occurring on or after Octo-
ber 1, 1997, by 30 percent.’’.
(b) CONFORMING AMENDMENT RELATING TO DETER-
MINATION
OF
STANDARDIZED
AMOUNTS.—Section
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is
amended by striking the period at the end and inserting
the following: ‘‘, and the Secretary shall not take into ac-
count any reductions in the amount of such additional pay-
ments resulting from the amendments made by section
15502(a) of the Medicare Preservation Act of 1995.’’.
SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR
INPATIENT HOSPITAL SERVICES.
(a) REDUCTION IN PAYMENTS FOR PPS HOSPITALS.—
277
Subtitle F, Part 1
(1) CONTINUATION OF CURRENT REDUCTIONS.—
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))
is amended in the second sentence—
(A) by striking ‘‘through 1995’’ and insert-
ing ‘‘through 2002’’; and
(B) by inserting after ‘‘10 percent reduc-
tion’’ the following: ‘‘(or a 15 percent reduction
in the case of payments during fiscal years 1996
through 2002)’’.
(2) REDUCTION IN BASE PAYMENT RATES.—Sec-
tion 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is
amended by adding at the end the following new sen-
tence: ‘‘In addition to the reduction described in the
preceding sentence, for discharges occurring after Sep-
tember 30, 1995, the Secretary shall reduce by 7.47
percent the unadjusted standard Federal capital pay-
ment rate (as described in 42 CFR 412.308(c), as in
effect on the date of the enactment of the Medicare
Preservation Act of 1995) and shall reduce by 8.27
percent the unadjusted hospital-specific rate (as de-
scribed in 42 CFR 412.328(e)(1), as in effect on such
date of enactment).’’.
(b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT HOS-
PITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is amend-
ed by adding at the end the following new paragraph:
278
Subtitle F, Part 1
‘‘(4)(A) Except as provided in subparagraph (B), in
determining the amount of the payments that may be made
under this title with respect to all the capital-related costs
of inpatient hospital services furnished during fiscal years
1996 through 2002 of a hospital which is not a subsection
(d) hospital or a subsection (d) Puerto Rico hospital, the
Secretary shall reduce the amounts of such payments other-
wise determined under this title by 15 percent.
‘‘(B) Subparagraph (A) shall not apply to payments
with respect to the capital-related costs of any hospital that
is a sole community hospital (as defined in subsection
(d)(5)(D)(iii) or a rural primary care hospital (as defined
in section 1861(mm)(1)).’’.
(c) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL-
RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.
1395ww(g)(1)) is amended—
(1) by redesignating subparagraph (C) as sub-
paragraph (D), and
(2) by inserting after subparagraph (B) the fol-
lowing:
‘‘(C)(i) For discharges occurring after September 30,
1995, such system shall provide for an adjustment in an
amount equal to the amount determined under clause (iv)
for capital-related tax costs for each hospital that is eligible
for such adjustment.
279
Subtitle F, Part 1
‘‘(ii) Subject to clause (iii), a hospital is eligible for
an adjustment under this subparagraph, with respect to dis-
charges occurring in a fiscal year, if the hospital—
‘‘(I) is a hospital that may otherwise receive
payments under this subsection,
‘‘(II) is not a public hospital, and
‘‘(III) incurs capital-related tax costs for the fis-
cal year.
‘‘(iii)(I) In the case of a hospital that first incurs cap-
ital-related tax costs in a fiscal year after fiscal year 1992
because of a change from nonproprietary to proprietary sta-
tus or because the hospital commenced operation after such
fiscal year, the first fiscal year for which the hospital shall
be eligible for such adjustment is the second full fiscal year
following the fiscal year in which the hospital first incurs
such costs.
‘‘(II) In the case of a hospital that first incurs capital-
related tax costs in a fiscal year after fiscal year 1992 be-
cause of a change in State or local tax laws, the first fiscal
year for which the hospital shall be eligible for such adjust-
ment is the fourth full fiscal year following the fiscal year
in which the hospital first incurs such costs.
‘‘(iv) The per discharge adjustment under this clause
shall be equal to the hospital-specific capital-related tax
costs per discharge of a hospital for fiscal year 1992 (or,
280
Subtitle F, Part 1
in the case of a hospital that first incurs capital-related
tax costs for a fiscal year after fiscal year 1992, for the
first full fiscal year for which such costs are incurred), up-
dated to the fiscal year to which the adjustment applies.
Such per discharge adjustment shall be added to the Federal
capital rate, after such rate has been adjusted as described
in 42 CFR 412.312 (as in effect on the date of the enactment
of the Medicare Preservation Act of 1995), and before such
rate is multiplied by the applicable Federal rate percentage.
‘‘(v) For purposes of this subparagraph, capital-related
tax costs include—
‘‘(I) the costs of taxes on land and depreciable
assets owned by a hospital (or related organization)
and used for patient care,
‘‘(II) payments in lieu of such taxes (made by
hospitals that are exempt from taxation), and
‘‘(III) the costs of taxes paid by a hospital (or
related organization) as lessee of land, buildings, or
fixed equipment from a lessor that is unrelated to the
hospital (or related organization) under the terms of
a lease that requires the lessee to pay all expenses (in-
cluding mortgage, interest, and amortization) and
leaves the lessor with an amount free of all claims
(sometimes referred to as a ‘net net net’ or ‘triple net’
lease).
281
Subtitle F, Part 1
In determining the adjustment required under clause (i),
the Secretary shall not take into account any capital-related
tax costs of a hospital to the extent that such costs are based
on tax rates and assessments that exceed those for similar
commercial properties.
‘‘(vi) The system shall provide that the Federal capital
rate for any fiscal year after September 30, 1995, shall be
reduced by a percentage sufficient to ensure that the adjust-
ments required to be paid under clause (i) for a fiscal year
neither increase nor decrease the total amount that would
have been paid under this system but for the payment of
such adjustments for such fiscal year.’’.
(d) REVISION OF EXCEPTIONS PROCESS UNDER PRO-
SPECTIVE PAYMENT SYSTEM FOR CERTAIN PROJECTS.—
(1) IN GENERAL.—Section 1886(g)(1) (42 U.S.C.
1395ww(g)(1)), as amended by subsection (c), is
amended—
(A) by redesignating subparagraph (D) as
subparagraph (E), and
(B) by inserting after subparagraph (C) the
following:
‘‘(D) The exceptions under the system provided by the
Secretary under subparagraph (B)(iii) shall include the
provision of exception payments under the special excep-
tions process provided under 42 CFR 412.348(g) (as in ef-
282
Subtitle F, Part 1
fect on September 1, 1995), except that the Secretary shall
revise such process as follows:
‘‘(i) A hospital with at least 100 beds which is
located in an urban area shall be eligible under such
process without regard to its disproportionate patient
percentage under subsection (d)(5)(F) or whether it
qualifies for additional payment amounts under such
subsection.
‘‘(ii) The minimum payment level for qualifying
hospitals shall be 85 percent.
‘‘(iii) A hospital shall be considered to meet the
requirement that it completes the project involved no
later than the end of the hospital’s last cost reporting
period beginning after October 1, 2001, if—
‘‘(I) the hospital has obtained a certificate
of need for the project approved by the State or
a local planning authority, and
‘‘(II) by September 1, 1995, the hospital has
expended on the project at least $750,000 or 10
percent of the estimated cost of the project.
‘‘(iv) The amount of the exception payment made
shall not be reduced by any offsetting amounts.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1886(g)(1)(B)(iii) (42 U.S.C. 1395ww(g)(1)(B)(iii))
is amended by striking ‘‘may provide’’ and inserting
283
Subtitle F, Part 1
‘‘shall provide (in accordance with subparagraph
(D))’’.
SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT
MEDICAL EDUCATION.
For provisions modifying medicare payment policies
regarding graduate medical education, see part 2 of subtitle
E.
SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.
(a) 
UPDATES.—Section 
1886(b)(3)(B)(ii)(V) 
(42
U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended by striking
‘‘through 1997’’ and inserting ‘‘through 2002’’.
(b) REBASING FOR CERTAIN LONG-TERM CARE HOS-
PITALS.—
(1) IN GENERAL.—Section 1886(b)(3) (42 U.S.C.
1395ww(b)(3)) is amended—
(A) in subparagraph (A), by striking ‘‘and
(E)’’ and inserting ‘‘(E), and (F)’’;
(B) in subparagraph (B)(ii), by striking
‘‘(A) and (E)’’ and inserting ‘‘(A), (E), and
(F)’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(F)(i) In the case of a qualified long-term care hos-
pital (as defined in clause (ii)), the term ‘target amount’
means—
284
Subtitle F, Part 1
‘‘(I) with respect to the first 12-month cost re-
porting period in which this subparagraph is applied
to the hospital, the allowable operating costs of inpa-
tient hospital services (as defined in subsection (a)(4))
recognized under this title for the hospital for the 12-
month cost reporting period beginning during fiscal
year 1991; or
‘‘(II) with respect to a later cost reporting pe-
riod, the target amount for the preceding cost report-
ing period, increase by the applicable percentage in-
crease under subparagraph (B)(ii) for that later cost
reporting period.
‘‘(ii) In clause (i), a ‘qualified long-term care hospital’
means, with respect to a cost reporting period, a hospital
described in clause (iv) of subsection (d)(1)(B) during fiscal
year 1995 for which the hospital’s allowable operating costs
of inpatient hospital services recognized under this title for
each of the two most recent previous 12-month cost report-
ing periods exceeded the hospital’s target amount deter-
mined under this paragraph for such cost reporting periods,
if the hospital—
‘‘(I) has a disproportionate patient percentage
during such cost reporting period (as determined by
the Secretary under subsection (d)(5)(F)(vi) as if the
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hospital were a subsection (d) hospital) of at least 25
percent, or
‘‘(II) is located in a State for which no payment
is made under the State plan under title XIX for
days of inpatient hospital services furnished to any
individual in excess of the limit on the number of
days of such services furnished to the individual for
which payment may be made under this title.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to discharges occurring
during cost reporting periods beginning on or after
October 1, 1995.
(c) TREATMENT OF CERTAIN LONG-TERM CARE HOS-
PITALS LOCATED WITHIN OTHER HOSPITALS.—
(1) IN
GENERAL.—Section 1886(d)(1)(B) (42
U.S.C. 1395ww(d)(1)(B)) is amended in the matter
following clause (v) by striking the period and insert-
ing the following: ‘‘, or a hospital classified by the
Secretary as a long-term care hospital on or before
September 30, 1995, and located in the same building
as, or on the same campus as, another hospital.’’.
(2) STUDY BY REVIEW COMMISSION.—Not later
than 12 months after the date a majority of the mem-
bers of the Medicare Payment Review Commission are
first appointed, the Commission shall submit a report
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Subtitle F, Part 1
to Congress containing recommendations for appro-
priate revisions in the treatment of long-term care
hospitals located in the same building as or on the
same campus as another hospital for purposes of sec-
tion 1886 of the Social Security Act.
(3) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to discharges occurring on
or after October 1, 1995.
(d) STUDY OF PROSPECTIVE PAYMENT SYSTEM FOR
REHABILITATION HOSPITALS AND UNITS.—
(1) IN GENERAL.—After consultation with the
Prospective Payment Assessment Commission, provid-
ers of rehabilitation services, and other appropriate
parties, the Secretary of Health and Human Services
shall submit to Congress, by not later than June 1,
1996, a report on the advisability and feasibility of
providing for payment based on a prospective pay-
ment system for inpatient services of rehabilitation
hospitals and units under the medicare program.
(2) ITEMS INCLUDED.—The report shall include
the following:
(A) The available and preferred systems of
classifying rehabilitation patients relative to du-
ration and intensity of inpatient services, in-
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Subtitle F, Part 1
cluding the use of functional-related groups
(FRGs).
(B) The means of calculating medicare pro-
gram payments to reflect such patient require-
ments.
(C) Other appropriate adjustments which
should be made, such as for geographic vari-
ations in wages and other costs and outliers.
(D) A timetable under which such a system
might be introduced.
(E) Whether such a system should be ap-
plied to other types of providers of inpatient re-
habilitation services.
SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR
ENROLLEES’ BAD DEBTS.
(a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.
1395x(v)(1)) is amended by adding at the end the following
new subparagraph:
‘‘(T)(i) In determining such reasonable costs for hos-
pitals, the amount of bad debts otherwise treated as allow-
able costs which are attributable to the deductibles and coin-
surance amounts under this title shall be reduced by—
‘‘(I) 75 percent for cost reporting periods begin-
ning during fiscal year 1996,
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Subtitle F, Part 1
‘‘(II) 60 percent for cost reporting periods begin-
ning during fiscal year 1997, and
‘‘(III) 50 percent for subsequent cost reporting
periods.
‘‘(ii) Clause (i) shall not apply with respect to bad
debt of a hospital described in section 1886(d)(1)(B)(iv) if
the debt is attributable to uncollectable deductible and coin-
surance payments owed by individuals enrolled in a State
plan under title XIX or under the MediGrant program
under title XXI.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to hospital cost reporting periods
beginning on or after October 1, 1995.
SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS-
THROUGH.
Effective as if included in the enactment of OBRA–
1989, section 6011(d) of such Act (as amended by section
13505 of OBRA–1993) is amended by striking ‘‘and shall
expire September 30, 1994’’.
SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION
OF CHRISTIAN SCIENCE PROVIDERS.
(a) 
HOSPITALS.—Section 
1861(e) 
(42 
U.S.C.
1395x(e)) is amended in the sixth sentence by inserting
after ‘‘Massachusetts,’’ the following: ‘‘or by the Commission
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Subtitle F, Part 1
for Accreditation of Christian Science Nursing Organiza-
tions/Facilities, Inc.,’’.
(b) 
SKILLED
NURSING
FACILITIES.—Section
1861(y)(1) is amended by inserting after ‘‘Massachusetts,’’
the following: ‘‘or by the Commission for Accreditation of
Christian Science Nursing Organizations/Facilities, Inc.,’’.
Subpart B—Provisions Relating to Rural Hospitals
SEC. 15511. SOLE COMMUNITY HOSPITALS.
(a) UPDATE.—Section 1886(b)(3)(B)(iv) (42 U.S.C.
1395ww(b)(3)(B)(iv)) is amended—
(1) in subclause (III), by striking ‘‘and’’ at the
end; and
(2) by striking subclause (IV) and inserting the
following:
‘‘(IV) for each of the fiscal years 1996 through
2000, the market basket percentage increase minus 1
percentage points, and
‘‘(V) for fiscal year 2001 and each subsequent
fiscal year, the applicable percentage increase under
clause (i).’’.
(b) STUDY OF IMPACT OF SOLE COMMUNITY HOSPITAL
DESIGNATIONS.—
(1) STUDY.—The Medicare Payment Review
Commission shall conduct a study of the impact of
the designation of hospitals as sole community hos-
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Subtitle F, Part 1
pitals under the medicare program on the delivery of
health care services to individuals in rural areas, and
shall include in the study an analysis of the charac-
teristics of the hospitals designated as such sole com-
munity hospitals under the program.
(2) REPORT.—Not later than 12 months after the
date a majority of the members of the Commission are
first appointed, the Commission shall submit to Con-
gress a report on the study conducted under para-
graph (1).
SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND
RPC HOSPITALS.
Paragraphs (1)(A)(i) and (2)(A)(i) of section 1820(i)
(42 U.S.C. 1395i–4(i)) are each amended by striking the
semicolon at the end and inserting the following: ‘‘, or in
a State which the Secretary finds would receive a grant
under such subsection during a fiscal year if funds were
appropriated for grants under such subsection for the fiscal
year;’’.
SEC. 15513. ESTABLISHMENT OF RURAL EMERGENCY AC-
CESS CARE HOSPITALS.
(a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x) is
amended by adding at the end the following new subsection:
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Subtitle F, Part 1
‘‘Rural Emergency Access Care Hospital; Rural
Emergency Access Care Hospital Services
‘‘(oo)(1) The term ‘rural emergency access care hos-
pital’ means, for a fiscal year, a facility with respect to
which the Secretary finds the following:
‘‘(A) The facility is located in a rural area (as
defined in section 1886(d)(2)(D)).
‘‘(B) The facility was a hospital under this title
at any time during the 5-year period that ends on the
date of the enactment of this subsection.
‘‘(C) The facility is in danger of closing due to
low inpatient utilization rates and operating losses,
and the closure of the facility would limit the access
to emergency services of individuals residing in the
facility’s service area.
‘‘(D) The facility has entered into (or plans to
enter into) an agreement with a hospital with a par-
ticipation agreement in effect under section 1866(a),
and under such agreement the hospital shall accept
patients transferred to the hospital from the facility
and receive data from and transmit data to the facil-
ity.
‘‘(E) There is a practitioner who is qualified to
provide advanced cardiac life support services (as de-
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Subtitle F, Part 1
termined by the State in which the facility is located)
on-site at the facility on a 24-hour basis.
‘‘(F) A physician is available on-call to provide
emergency medical services on a 24-hour basis.
‘‘(G) The facility meets such staffing require-
ments as would apply under section 1861(e) to a hos-
pital located in a rural area, except that—
‘‘(i) the facility need not meet hospital
standards relating to the number of hours during
a day, or days during a week, in which the facil-
ity must be open, except insofar as the facility
is required to provide emergency care on a 24-
hour basis under subparagraphs (E) and (F);
and
‘‘(ii) the facility may provide any services
otherwise required to be provided by a full-time,
on-site dietitian, pharmacist, laboratory techni-
cian, medical technologist, or radiological tech-
nologist on a part-time, off-site basis.
‘‘(H) The facility meets the requirements appli-
cable to clinics and facilities under subparagraphs
(C) through (J) of paragraph (2) of section 1861(aa)
and of clauses (ii) and (iv) of the second sentence of
such paragraph (or, in the case of the requirements
of subparagraph (E), (F), or (J) of such paragraph,