[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 200 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 200

  To establish the framework for a health care system that will bring 
about universal access to affordable, quality health care by containing 
   the growth in health care costs through a national health budget, 
   managed competition, and other means, by improving access to and 
 simplifying the administration of health insurance, by deterring and 
 prosecuting health care fraud and abuse, by expanding benefits under 
 the medicare program, by expanding eligibility and increasing payment 
   levels under the medicaid program, and by making health insurance 
                       available to all children.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 5, 1993

Mr. Stark introduced the following bill; which was referred jointly to 
 the Committees on Ways and Means, Energy and Commerce, and Education 
                               and Labor

                            January 26, 1994

       Additional sponsors: Mr. Blackwell, and Mr. Romero-Barcelo

_______________________________________________________________________

                                 A BILL


 
  To establish the framework for a health care system that will bring 
about universal access to affordable, quality health care by containing 
   the growth in health care costs through a national health budget, 
   managed competition, and other means, by improving access to and 
 simplifying the administration of health insurance, by deterring and 
 prosecuting health care fraud and abuse, by expanding benefits under 
 the medicare program, by expanding eligibility and increasing payment 
   levels under the medicaid program, and by making health insurance 
                       available to all children.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care Cost 
Containment and Reform Act of 1993''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. General definitions.
                       TITLE I--COST CONTAINMENT

                   Subtitle A--National Health Budget

Sec. 101. National health expenditure budget.
Sec. 102. Classes of health care services.
Sec. 103. Allocation of health budget by class of service.
Sec. 104. Adjustments for changes in medicare benefits.
Sec. 105. National health expenditures reporting system.
           Subtitle B--State Provider Payment Control Systems

Sec. 121. State provider payment rates.
Sec. 122. General conditions for State provider payment control 
                            systems.
Sec. 123. Control of aggregate expenditures requirement for State 
                            systems.
Sec. 124. Treatment of States failing to control aggregate 
                            expenditures.
Sec. 125. Termination of approval of State system.
  Subtitle C--Maximum Payment Rates for Services Not Subject to State 
 Provider Payment Control Systems or Provided by Staff or Group Model 
                    Health Maintenance Organizations

Sec. 140. Exemption for services subject to approved State provider 
                            payment control systems or provided by 
                            staff or group model health maintenance 
                            organizations.
 Part 1--Establishment and Application of Maximum Payment Rates (Other 
                      Than Under Medicare Program)

Sec. 141. Process.
Sec. 142. Payment methodology; relation to budget allocation.
Sec. 143. General application and enforcement of maximum payment rates.
Sec. 144. Limitation on payment rates under medicaid.
 Part 2--Methodologies for Determining Maximum Rates (Other Than Under 
                           Medicare Program)

Sec. 151. Basis for maximum rates of payment for inpatient hospital 
                            services.
Sec. 152. Basis for maximum payment rate for class of physicians' 
                            services and other professional medical 
                            services.
Sec. 153. Basis for other maximum payment rates for services using 
                            certain medicare payment methodologies.
Sec. 154. Other services.
Sec. 155. Development of prospectively-determined payment 
                            methodologies.
                  Part 3--Medicare Payment Adjustments

Sec. 161. Conforming medicare payment rates to medicare health 
                            expenditure allocations.
Sec. 162. Adjustments to medicare payments for graduate medical 
                            education.
             TITLE II--MANAGED CARE AND MANAGED COMPETITION

                        Subtitle A--Managed Care

Sec. 201. Authorization for managed care systems to pay less than 
                            maximum payment rates.
Sec. 202. Staff and group model health maintenance organizations exempt 
                            from maximum payment rates.
Sec. 203. Repeal of sunset of dual choice requirement.
Sec. 204. Multiple choice of health maintenance organizations.
Sec. 205. Federal assistance for establishment and initial operation of 
                            staff and group model HMOs.
Sec. 206. Preemption of ``any willing provider'' State laws.
Sec. 207. Adjustment in medicare capitation payments to account for 
                            regional variations in application of 
                            secondary payor provisions.
Sec. 208. GAO study of expansion of health maintenance organizations.
                    Subtitle B--Managed Competition

             Part 1--Establishment of National HPPC Program

Sec. 221. Establishment of program; grants to States.
Sec. 222. Establishment of HPPCs; designation of HPPC areas.
Sec. 223. Organization and operation of HPPCs.
Sec. 224. Agreements with employers.
Sec. 225. Agreements with qualified health plans (QHPs).
Sec. 226. Enrolling individuals in qualified health plans through a 
                            HPPC.
Sec. 227. Coordination among HPPCs.
Sec. 228. Definitions.
            Part 2--Requirements for Qualified Health Plans

Sec. 251. Approval process; qualifications.
Sec. 252. Benefit packages.
 Subtitle C--National Patient Outcomes and Enrollee Satisfaction Data 
                           Reporting Program

Sec. 271. National patient outcomes program.
Sec. 272. Enrollee health plan satisfaction.
Sec. 273. Research and demonstration.
   Subtitle D--Study of Universal Health Insurance Coverage and Cost 
                              Containment

Sec. 291. Study.
                    TITLE III--HEALTH SYSTEMS REFORM

                  Subtitle A--Health Insurance Reform

Sec. 301. Excise tax on premiums received on health insurance policies 
                            which do not meet certain requirements.
Sec. 302. Health benefit plan standards.
               ``TITLE XXI--HEALTH BENEFIT PLAN STANDARDS

        ``Sec. 2101. Standards and requirements for health benefit 
                            plans.
        ``Sec. 2102. Establishment of standards.
        ``Sec. 2103. Requirements applicable to all health benefit 
                            plans.
        ``Sec. 2104. Standards applicable only to insured health 
                            benefit plans.
        ``Sec. 2105. Payment of commissions.
        ``Sec. 2106. Insurance requirement for multiple employer 
                            welfare arrangements.
        ``Sec. 2107. Nonapplication in Puerto Rico and the territories.
        ``Sec. 2108. Definitions.
Sec. 303. Assuring continuation of access to college and university 
                            health benefit plans by graduating 
                            students.
               Subtitle B--Administrative Simplification

Sec. 321. Requirement for uniform health claims cards.
Sec. 322. Requirement for entitlement verification system.
Sec. 323. Requirements for uniform claims and electronic claims data 
                            set.
Sec. 324. Electronic medical records and reporting.
Sec. 325. Uniform hospital cost reporting.
Sec. 326. Definitions.
                      Subtitle C--Fraud and Abuse

           Part 1--National Health Care Fraud Control Program

Sec. 341. All-payer fraud and abuse control program.
Sec. 342. Application of Federal health anti-fraud and abuse sanctions 
                            to all fraud and abuse against any health 
                            benefit plan.
Sec. 343. Prohibition against offering inducements to individuals 
                            enrolled under or employed by programs or 
                            plans.
Sec. 344. Intermediate sanctions for medicare health maintenance 
                            organizations.
              Part 2--Ban on Improper Physician Referrals

Sec. 351. Application of medicare ban on self-referrals to all payors.
Sec. 352. Extension of self-referral ban to additional specified 
                            services.
Sec. 353. Changes in exceptions and other provisions relating to 
                            compensation arrangements.
Sec. 354. Effective dates.
                      Subtitle D--Other Provisions

Sec. 361. Malpractice reform.
  TITLE IV--EXPANSIONS OF HEALTH BENEFITS AND OTHER HEALTH INITIATIVES

               Subtitle A--Medicaid Benefit Improvements

Sec. 401. Floor on medicaid payment levels for inpatient hospital 
                            services and physicians' services.
Sec. 402. Medicaid eligibility expansion.
Sec. 403. Full Federal payment for increased costs.
               Subtitle B--Expansion of Medicare Benefits

                      Part 1--Preventive Benefits

Sec. 411. Annual screening mammography.
Sec. 412. Coverage of colorectal screening.
Sec. 413. Coverage of certain immunizations.
Sec. 414. Coverage of well-child care.
Sec. 415. Demonstration projects for coverage of other preventive 
                            services.
                 Part 2--Coverage of Prescription Drugs

Sec. 421. Coverage of outpatient prescription drugs.
Sec. 422. Establishment of Prescription Drug Payment Review Commission.
Sec. 423. Coverage of prescription drugs for qualified medicare 
                            beneficiaries and qualified disabled and 
                            working individuals.
           Part 3--Qualified Medicare Beneficiary Enrollment

Sec. 431. Qualified medicare beneficiary enrollment.
      Subtitle C--Health Insurance Deduction for the Self-Employed

Sec. 441. Deduction for health insurance costs of self-employed 
                            individuals made permanent and increased.
           Subtitle D--Health Insurance Program for Children

Sec. 451. Health insurance for children.
              ``TITLE XXII--HEALTH INSURANCE FOR CHILDREN

        ``Sec. 2200. Establishment of program of health insurance for 
                            children.
                  ``Part A--Eligibility and Enrollment

        ``Sec. 2201. Eligibility.
        ``Sec. 2202. Enrollment periods.
        ``Sec. 2203. Employment-based enrollment.
        ``Sec. 2204. Coverage period.
               ``Part B--Benefits; Payments for Benefits

        ``Sec. 2211. Scope of benefits.
        ``Sec. 2212. Exclusions.
        ``Sec. 2213. Payments for benefits.
                     ``Part C--Premiums; Trust Fund

        ``Sec. 2231. Amount of premiums.
        ``Sec. 2232. Payment of premiums.
        ``Sec. 2233. Children's Health Insurance Trust Fund.
                      ``Part D--General Provisions

        ``Sec. 2251. Incorporation of certain medicare provisions.
        ``Sec. 2252. Incorporation of peer review provisions and fraud 
                            and abuse provisions.

SEC. 2. GENERAL DEFINITIONS.

    (a) In General.--In this Act (except as otherwise provided):
            (1) Applicable commission.--The term ``applicable 
        Commission'' means--
                    (A) with respect to services included in a class of 
                services furnished by a hospital, other institutional 
                provider, or home health provider, the Prospective 
                Payment Assessment Commission,
                    (B) with respect to prescription drugs on or after 
                January 1, 1995, the Prescription Drug Payment Review 
                Commission (established under section 1847 of the 
                Social Security Act, as added by section 422 of this 
                Act), and
                    (C) with respect to health care services not 
                described in subparagraphs (A) and (B), the Physician 
                Payment Review Commission.
            (2) Class of services.--The term ``class'' means, with 
        respect to health care services, a class established under 
        section 102.
            (3) Health care services.--The term ``health care 
        services'' means the items and services described in section 
        102(a)(2) or included in health care services under section 
        102(a)(3), but does not include items and services described in 
        section 102(a)(4).
            (4) Medicare program; medicare beneficiary.--(A) The term 
        ``medicare program'' means the programs established under parts 
        A and B of title XVIII of the Social Security Act.
            (B) The term ``medicare beneficiary'' means an individual 
        entitled to benefits under part A or B, or both, of the 
        medicare program.
            (5) Medicaid program.--The term ``medicaid program'' means 
        any State plan approved under title XIX of the Social Security 
        Act and includes a State program operating under a waiver under 
        section 1115 of such Act.
            (6) National health care expenditure budget.--The term 
        ``national health care expenditure budget'' means such a budget 
        established under section 101.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (8) State.--The term ``State'' means the 50 States and the 
        District of Columbia.
            (9) United states.--The term ``United States'' means the 50 
        States and the District of Columbia.
    (b) Term Used in Titles I and II.--In titles I and II:
            (1) Health maintenance organization.--The term ``health 
        maintenance organization'' means an eligible organization with 
        a contract under section 1876 of the Social Security Act or a 
        qualified health maintenance organization (as defined in 
        section 1310(d) of the Public Health Service Act).
            (2) Staff or group model health maintenance organization.--
        The term ``staff or group model health maintenance 
        organization'' means a health maintenance organization (as 
        defined in paragraph (1)) for which 90 percent of the services 
        of physicians are provided through members of the staff of the 
        organization or through a medical group (or groups).

                       TITLE I--COST CONTAINMENT

                   Subtitle A--National Health Budget

SEC. 101. NATIONAL HEALTH EXPENDITURE BUDGET.

    (a) Establishment.--
            (1) In general.--For each calendar year (beginning with 
        1995), there is established a national health expenditure 
        budget equal to the sum of--
                    (A) the medicare health expenditure budget (under 
                paragraph (2)), and
                    (B) the nonmedicare health expenditure budget 
                (under such paragraph).
            (2) Amount.--Subject to section 104--
                    (A) 1995.--The total amount of the medicare and 
                nonmedicare health expenditure budgets for 1995 is 
                equal to the respective medicare and nonmedicare budget 
                baselines (determined under paragraphs (1) and (2), 
                respectively, of subsection (b) for 1994) multiplied by 
                the applicable adjustment factor (specified under 
                subsection (c)) for 1995.
                    (B) Subsequent years.--The total amount of each 
                such budget for each year after 1995 is equal to the 
                respective budget determined under this paragraph for 
                the previous year multiplied by the applicable 
                adjustment factor (specified under subsection (c)) for 
                the year involved.
            (3) Publication.--The Secretary of Health and Human 
        Services shall publish in the Federal Register and report to 
        the Congress, by not later than April 1 before each year, the 
        amounts of the national health expenditure budget, of the 
        medicare health expenditure budget, and of the nonmedicare 
        health expenditure budget for the year.
    (b) Budget Baselines.--
            (1) Medicare budget baseline.--The Secretary shall compute 
        a medicare budget baseline under this paragraph for 1994 as 
        follows:
                    (A) 1993 actual expenditures.--The Secretary shall 
                determine (on the basis of the best data available) the 
                amount of the aggregate medicare expenditures (as 
                defined in subsection (d)(1)) during 1993.
                    (B) Projection for 1994.--The Secretary shall 
                increase such amount by the Secretary's estimate of the 
                percentage increase in the aggregate medicare 
                expenditures between the midpoint of 1993 and the 
                midpoint of 1994.
            (2) Nonmedicare budget baseline.--The Secretary shall 
        compute a nonmedicare budget baseline under this paragraph for 
        1994 as follows:
                    (A) 1993 actual expenditures.--The Secretary shall 
                determine (on the basis of the best data available) the 
                amount of the aggregate nonmedicare expenditures (as 
                defined in subsection (d)(2)) for health care services 
                during 1993.
                    (B) Projection for 1994.--The Secretary shall 
                increase such amount by the Secretary's estimate of the 
                percentage increase in the aggregate nonmedicare 
                expenditures for such services between the midpoint of 
                1993 and the midpoint of 1994.
    (c) Applicable Adjustment Factor.--The applicable adjustment factor 
under this subsection for each year is 1 plus the sum (expressed as a 
fraction) of--
            (1) the average annual percentage increase in the gross 
        domestic product (in current dollars, as published by the 
        Secretary of Commerce) during the 5-year period ending with the 
        second previous year; plus
            (2)(A) for 1995, 3.5 percentage points,
            (B) for 1996, 2.5 percentage points,
            (C) for 1997, 1.5 percentage points,
            (D) for 1998, 0.5 percentage point, and
            (E) for each year thereafter, 0 percentage points.
    (d) Aggregate Medicare and Nonmedicare Expenditures Defined.--
            (1) Aggregate medicare expenditures.--In this Act, the term 
        ``aggregate medicare expenditures'' means, with respect to 
        health care services or a class of services, expenditures made 
        under the medicare program with respect to the provision of 
        such services or class of services, and also includes receipts 
        of providers with respect to amounts payable as deductibles, 
        coinsurance, or other amounts for which the beneficiary is 
        liable with respect to items and services covered under such 
        program provided to a medicare beneficiary, and including 
        payments made under a contract under section 1833(a)(1) or 
        section 1876 of the Social Security Act (other than the portion 
        of such payments that is attributable to administrative costs).
            (2) Aggregate nonmedicare expenditures.--
                    (A) In general.--Subject to the succeeding 
                provisions of this paragraph, in this Act, the term 
                ``aggregate nonmedicare expenditures'' means, with 
                respect to health care services or a class of services, 
                receipts of providers in the United States with respect 
                to the provision of such services or class of services, 
                excluding aggregate medicare expenditures with respect 
                to such services or class of services.
                    (B) Inclusion of all payors.--Except as provided in 
                paragraph (3), the amount of aggregate nonmedicare 
                expenditures shall be determined without regard to the 
                source of payment and shall include (as specified by 
                the Secretary) direct patient expenditures as well as 
                payments made by third party payors (including 
                Government health programs).
            (3) Exclusions.--In computing aggregate nonmedicare 
        expenditures, there shall be excluded, as specified by the 
        Secretary--
                    (A) nonoperating revenues (such as interest);
                    (B) receipts attributable to personal comfort and 
                convenience items described in section 102(a)(5);
                    (C) direct payments from the Federal Government, 
                from State government, from units of local government 
                for research to the extent unrelated (and not 
                attributable) to the provision of health care services;
                    (D) receipts attributable to the program for the 
                provision of hospital care and medical services by the 
                Department of Veterans' Affairs under chapter 17 of 
                title 38, United States Code;
                    (E) payments made to health care facilities and 
                providers of the Department of Defense and of the 
                Indian Health Service; and
                    (F) such other receipts unrelated to the provision 
                of health care services as the Secretary specifies.

SEC. 102. CLASSES OF HEALTH CARE SERVICES.

    (a) Establishment of Classes.--
            (1) In general.--
                    (A) Specified services.--
                            (i) In general.--Subject to subparagraph 
                        (B)(ii), in the case of items and services 
                        specified in a subparagraph under paragraph 
                        (2), all of the items and services described in 
                        that subparagraph shall be considered to be a 
                        ``separate'' class of health care services.
                            (ii) Overlapping services.--Except as the 
                        Secretary may provide, items and services 
                        specified in a subparagraph of paragraph (2) 
                        shall be considered to be excluded from the 
                        subsequent subparagraphs of that paragraph.
                    (B) Other items and services.--
                            (i) In general.--In the case of items and 
                        services included as health care services under 
                        paragraph (3), the Secretary shall group such 
                        items and services into such class or classes 
                        of health care services as may be appropriate.
                            (ii) Inclusion in classes of specified 
                        health care services.--In carrying out clause 
                        (i), the Secretary may include an item or 
                        service described in paragraph (3) within a 
                        class of services established under 
                        subparagraph (A).
            (2) Specified health care services.--Subject to paragraph 
        (4), the items and services specified in this paragraph are as 
        follows:
                    (A) Inpatient hospital services, other than mental 
                health services.
                    (B) Outpatient hospital services and ambulatory 
                facility services (including renal dialysis facility 
                services), other than mental health services.
                    (C) Diagnostic testing services (including clinical 
                laboratory services and x-ray services).
                    (D) Physicians' services and other professional 
                medical services, other than mental health services.
                    (E) Home health services and hospice care.
                    (F) Rehabilitation services, such as physical 
                therapy, occupational and speech therapy.
                    (G) Durable medical equipment and supplies.
                    (H) Prescription drugs and biologicals and insulin.
                    (I) Nursing facility services, including skilled 
                nursing facility services and intermediate care 
                facility services, other than mental health services.
                    (J) Mental health services.
            (3) Additional items and services.--Subject to paragraph 
        (4), the Secretary shall specify additional items and services 
        (not described in paragraph (2)) for which payment is generally 
        made under a private or public health plan.
            (4) Exclusions.--The following items and services shall not 
        be considered to be health care services and shall not be 
        included in a class of services under paragraph (1):
                    (A) Over-the-counter medications and medical 
                equipment and devices, not provided pursuant to a 
                prescription.
                    (B) Homemaker and home health aide services and 
                personal care services, and other services described in 
                section 1915(c)(4)(B), section 1929(a), or section 
                1930(a) of the Social Security Act.
                    (C) Intermediate care facility and other custodial 
                services for the mentally retarded.
                    (D) Inpatient mental health services of a custodial 
                nature.
            (5) Exclusion of institutional charges for personal comfort 
        and convenience items.--Payments received (and amounts charged) 
        by a facility which are attributable to items (such as private 
        rooms, telephones, and television rentals) provided for the 
        personal comfort and convenience of patients shall not be 
        counted as receipts (nor subject to limitations on amounts that 
        may be charged) for purposes of this title.
    (b) Publication.--
            (1) In general.--The Secretary shall publish--
                    (A) by not later than April 1, 1994, proposed 
                regulations defining the health care services and 
                establishing the classes of services under this 
                section, and
                    (B) by not later than June 1, 1994, final 
                regulations defining the health care services and 
                establishing such classes.
            (2) Items included in regulations.--In such regulations, 
        the Secretary shall define--
                    (A) the class or classes to be established under 
                subsection (a)(1),
                    (B) the services to be included within each class, 
                and
                    (C) the methods and sources of data for computing, 
                for purposes of this title, aggregate medicare and 
                nonmedicare expenditures for services within the class.
            (3) Changes.--
                    (A) No changes authorized.--After the Secretary has 
                established classes of services under paragraph (1)(B), 
                the Secretary may not change such classes (or the 
                services included in such classes), except in the case 
                of services not previously classified. Any such 
                services not previously classified shall be classified 
                within one of the classes previously established.
                    (B) Recommended changes.--If the Secretary 
                determines that a change in the classification 
                established under this section may be appropriate, the 
                Secretary shall submit to the Congress a report 
                proposing such change. The Secretary shall include in 
                the report an explanation of--
                            (i) the rationale for such change, and
                            (ii) the impact of such change on the total 
                        aggregate medicare and non-medicare 
                        expenditures permitted for classes of services 
                        that would be affected by the change.
            (4) Commission reports.--
                    (A) Initial reports.--With respect to the 
                establishment of classes of services under this 
                section, each applicable Commission (as defined in 
                section 2(a)(1))--
                            (i) by not later than March 1, 1994, shall 
                        report its recommendations to the Secretary and 
                        Congress concerning such classes, and
                            (ii) by not later than May 1, 1994, shall 
                        report to the Secretary and the Congress its 
                        comments concerning the classification proposed 
                        by the Secretary under paragraph (1)(A).
                    (B) Periodic reports.--Each applicable Commission 
                shall periodically report to Congress on changes in the 
                system of classification under this section that should 
                be made to promote the more efficient provision of 
                medically appropriate health care services.

SEC. 103. ALLOCATION OF HEALTH BUDGET BY CLASS OF SERVICE.

    (a) Allocation.--
            (1) In general.--The Secretary shall allocate the medicare 
        and nonmedicare health expenditure budgets under section 101 
        for a year among classes of services specified under section 
        102.
            (2) Proportional allocation based on historical projected 
        expenditures.--Subject to section 104--
                    (A) Medicare health expenditure budget.--The 
                percent of the medicare health expenditure budget 
                allocated to each class for a year shall be equal to 
                the quotient (expressed as a percentage) of--
                            (i) the historical projected medicare 
                        expenditures for the class for the year (as 
                        determined under subsection (b)(1)), divided by
                            (ii) the sum of such historical projected 
                        medicare expenditures for all the classes for 
                        the year.
                    (B) Nonmedicare health expenditure budget.--The 
                percent of the nonmedicare health expenditure budget 
                allocated to each class for a year shall be equal to 
                the quotient (expressed as a percentage) of--
                            (i) the historical projected nonmedicare 
                        expenditures for the class for the year (as 
                        determined under subsection (b)(2)), divided by
                            (ii) the sum of such historical projected 
                        nonmedicare expenditures for all the classes 
                        for the year.
            (3) Publication.--
                    (A) In general.--The Secretary shall, in 
                conjunction with the publication of budgets under 
                section 101(a)(3) for a year and by not later than 
                April 1 before the year, publish in the Federal 
                Register and report to the Congress the allocation of 
                the budgets among the classes of services under this 
                subsection.
                    (B) Exception for 1995.--For 1995, the Secretary 
                shall publish and report the allocation of the budgets 
                among the classes of services under this subsection not 
                later than August 1, 1994.
    (b) Historical Projected Expenditures.--
            (1) Medicare.--
                    (A) Determination.--For purposes of subsection 
                (a)--
                            (i) For 1994.--The historical projected 
                        medicare expenditures for a class of services 
                        for 1994 is equal to the portion of the amount 
                        of aggregate medicare expenditures during 1993 
                        (as determined under section 101(b)(1)(A)) 
                        which is attributable to the class of services, 
                        multiplied by the medicare trend factor 
                        (described in subparagraph (B)) for the class 
                        for 1994.
                            (ii) Subsequent years.--The historical 
                        projected medicare expenditures for a class of 
                        services for a year after 1994 is equal to the 
                        amount of the allocation for the class under 
                        subsection (a)(2)(A) (taking into account any 
                        adjustment under section 104) for the preceding 
                        year multiplied by the medicare trend factor 
                        (described in subparagraph (B)) for the class 
                        for the year involved.
                    (B) Medicare trend factor.--In subparagraph (A), 
                subject to section 104(b)(2), the ``medicare trend 
                factor'', for a class of services, is 1 plus the 
                average annual rate of increase in aggregate medicare 
                expenditures for the class of services during the 5-
                year period ending with 1993.
            (2) Nonmedicare.--
                    (A) Determination.--For purposes of subsection 
                (a)--
                            (i) For 1994.--The historical projected 
                        nonmedicare expenditures for a class of 
                        services for 1994 is equal to the portion of 
                        the amount of aggregate nonmedicare 
                        expenditures during 1993 (as determined under 
                        section 101(b)(2)(A)) which is attributable to 
                        the class of services, multiplied by the 
                        nonmedicare trend factor (described in 
                        subparagraph (B)) for the class for 1994.
                            (ii) Subsequent years.--The historical 
                        projected nonmedicare expenditures for a class 
                        of services for a year after 1994 is equal to 
                        the amount of the allocation for the class 
                        under subsection (a)(2)(B) (taking into account 
                        any adjustment under section 104) for the 
                        preceding year multiplied by the medicare trend 
                        factor (described in subparagraph (B)) for the 
                        class for the year involved.
                    (B) Nonmedicare trend factor.--In subparagraph (A), 
                subject to section 104(b)(2), the ``nonmedicare trend 
                factor'', for a class of services, is 1 plus the 
                average annual rate of increase in aggregate 
                nonmedicare expenditures for the class of services 
                during the 5-year period ending with 1993.
            (3) Publication of trend factors.--The Secretary shall 
        publish, by not later than August 1, 1994, the medicare and 
        nonmedicare trend factors for the different classes of 
        services.
    (c) Review and Changes in Allocation.--
            (1) In general.--
                    (A) No administrative authority to change.--Except 
                as specifically provided in section 104 or by law 
                enacted after the enactment of this Act, the Secretary 
                has no authority to change the allocation or trend 
                factors from the allocation and trend factors provided 
                under this section.
                    (B) Recommended changes.--If the Secretary 
                determines that a change in the allocation of a budget 
                among classes is appropriate, the Secretary shall 
                submit to the Congress a report proposing such change. 
                The Secretary shall include in the report an 
                explanation of--
                            (i) the rationale for such change, and
                            (ii) the impact of such change on the total 
                        aggregate medicare and nonmedicare expenditures 
                        permitted for classes of services that would be 
                        affected by the change.
            (2) Commission review.--Each applicable Commission shall 
        annually review and report to Congress, in its report submitted 
        under section 102(b)(4), on the effect of the trend factors 
        used in the allocation of the budgets among classes of 
        services. Such report shall include such recommendations for 
        appropriate adjustments in the trend factors as the applicable 
        Commission considers appropriate to properly take into account 
        at least--
                    (A) changes in health care technology,
                    (B) changes in the patterns and practices relating 
                to health care delivery found to be appropriate,
                    (C) changes in the distribution of health care 
                services, and
                    (D) the special health care needs of underserved 
                rural and inner city populations.

SEC. 104. ADJUSTMENTS FOR CHANGES IN MEDICARE BENEFITS.

    (a) In General.--With respect to a change in coverage under the 
medicare program provided in title IV of this Act that is effective in 
a year and results in an increase in expenditures for a class of 
services under the medicare program--
            (1) the Secretary shall--
                    (A) increase the medicare health expenditure budget 
                under section 101 in the year by the amount (estimated 
                by the Secretary) of such increase in expenditures, and
                    (B) decrease the nonmedicare health expenditure 
                budget under section 101 in the year by such amount; 
                and
            (2) the Secretary shall--
                    (A) increase the amount allocated under section 
                103(a) to the class of services under the medicare 
                health expenditure budget for that year by such amount, 
                and
                    (B) decrease the amount allocated under section 
                103(a) to the class of services under the nonmedicare 
                health expenditure budget for that year by such amount.
    (b) Subsequent Years.--If the Secretary makes a change in a budget 
or allocation in a particular year under subsection (a) with respect to 
a class of services--
            (1) the budgets and allocations for subsequent years shall 
        be computed based upon the changes made in the budget or 
        allocations for the particular year, and
            (2) the Secretary may adjust the medicare trend factor 
        (under section 103(b)(1)(B)) and nonmedicare trends factor 
        (under section 103(b)(2)(B)) applied to such class of services 
        in subsequent years to the extent appropriate to reflect any 
        difference between the trend factor otherwise applicable for 
        the class and the annual rate of increase in aggregate medicare 
        and nonmedicare expenditures for the services affected by the 
        change.

SEC. 105. NATIONAL HEALTH EXPENDITURES REPORTING SYSTEM.

    (a) In General.--The Secretary shall establish a national health 
expenditures reporting system (in this section referred to as the 
``system'') for purposes of--
            (1) establishing the national health expenditures budget,
            (2) allocating the health budgets among classes of 
        services,
            (3) determining maximum payment rates,
            (4) monitoring of State provider payment control systems, 
        and
            (5) otherwise carrying out this title.
    (b) Information Reporting.--
            (1) By provider.--Under the system, providers of health 
        care services shall report (beginning not later than January 1, 
        1995) such information relating to the provision of health care 
        services (including the volume and receipts for such services) 
        in such form and manner (including the use of electronic 
        transmission), by such classification, and at such periodic 
        intervals, as the Secretary shall specify in regulation.
            (2) Use of reporting mechanisms.--To the maximum extent 
        practicable and appropriate, reporting under such system shall 
        be done through reporting mechanisms (such as uniform hospital 
        reports provided under section 325) and using data bases 
        otherwise in use.
            (3) Use of surveys.--The Secretary may, where appropriate, 
        provide for the collection of information under the system 
        through surveys of a sample of health care providers or with 
        respect to a sample of information with respect to such 
        providers.
            (4) Confidentiality.--Information gathered pursuant to the 
        authority provided under this section shall not be disclosed in 
        a manner that identifies individual providers of services.
            (5) Transition.--Before January 1, 1995, for purposes of 
        this title, the Secretary may use such other data collection 
        and estimation techniques as may be appropriate for purposes 
        described in subsection (a).
    (c) Enforcement.--If a provider of health services is required, 
under the system under this section, to report information and refuses, 
after being requested by the Secretary, to provide the information 
required, or deliberately provides information that is false, the 
Secretary may impose a civil money penalty of not to exceed $10,000 for 
each such refusal or provision of false information. The provisions of 
section 1128A of the Social Security Act (other than subsections (a) 
and (b)) shall apply to civil money penalties under the previous 
sentence in the same manner as such provisions apply to a penalty or 
proceeding under section 1128A(a) of such Act.
    (d) Inclusion of Health Maintenance Organizations.--In this 
section, the term ``provider of health care services'' includes health 
maintenance organizations.

           Subtitle B--State Provider Payment Control Systems

SEC. 121. STATE PROVIDER PAYMENT RATES.

    (a) In General.--In the case of a State with a State provider 
payment control system (in this subtitle referred to as a ``State 
system'') approved under this section--
            (1) the payment rates provided under such system shall 
        apply to services covered under the system and furnished in the 
        State, and
            (2) pursuant to section 140(a), maximum payment rates shall 
        not be established or applied to such services under subtitle 
        C.
    (b) Process.--
            (1) Application.--The Secretary may not approve a State 
        system under this section unless the State submits to the 
        Secretary an application in such form and manner as the 
        Secretary may require and containing the information and 
        assurance required under this subtitle, together with any other 
        information and assurance as the Secretary may require.
            (2) Response.--The Secretary shall be deemed to have 
        approved the application of a State under paragraph (1) for a 
        State system unless the Secretary, within 90 days after the 
        date the State submits the application to the Secretary, either 
        denies such application in writing or informs the State in 
        writing with respect to any additional information or 
        assurances needed to make a final determination with respect to 
        the application. After the date the Secretary receives such 
        additional information and assurances, the application shall be 
        deemed to be approved unless the Secretary, within 90 days of 
        such date, denies the application.
            (3) Deemed approval of certain systems.--
                    (A) In general.--In the case of a hospital 
                reimbursement control system approved under section 
                1886(c)(4) of the Social Security Act or described in 
                section 1814(b)(3) of such Act and used for payment of 
                hospital services in the State under the medicare 
                program, the system is deemed to be a State system 
                approved under this section with respect to payment for 
                hospital services.
                    (B) Termination.--Insofar as subparagraph (A) 
                applies to a State system, the continuation of the 
                approval of the system is conditioned upon the system's 
                compliance with the requirements of section 123(a).
            (4) Effect of approval.--The approval of a State system 
        under this section shall be deemed to constitute the approval 
        by the Secretary of a waiver of such requirements relating to 
        the determination of payment amounts under the medicare and 
        medicaid programs as may be necessary to implement such system.
    (c) Conditions for Approval.--
            (1) In general.--The Secretary shall approve the 
        application of a State with respect to a State system only if 
        the Secretary determines that the conditions for approval 
        described in sections 122 and 123 are met.
            (2) Limitation on disapproval.--The Secretary cannot deny 
        the application of a State for a State system on the ground 
        that the methodology used under the system to control payments 
        for inpatient hospital services is based on a payment 
        methodology other than on the basis of a diagnosis-related 
        group.
    (d) Termination of Approval.--The Secretary shall terminate 
approval of a State system in accordance with section 125 if--
            (1) the Secretary determines that the system no longer 
        meets the requirements of section 122(b)(1) (relating to all 
        payors), section 122(b)(3)(B) (relating to limitation on 
        differentials for medicaid services), or section 122(e) 
        (relating to certain requirements for hospitals); or
            (2) the Secretary has reason to believe that the assurances 
        described in any of the following sections are not being (or 
        will not be) met:
                    (A) Section 122(b)(2) (relating to equitable 
                treatment of all payors).
                    (B) Section 122(f) (relating to special 
                requirements for hospital admissions and exclusions).
                    (C) Section 123 (relating to limiting aggregate 
                expenditures).

SEC. 122. GENERAL CONDITIONS FOR STATE PROVIDER PAYMENT CONTROL 
              SYSTEMS.

    (a) Application to Classes of Services.--
            (1) In general.--Subject to paragraph (2), the system 
        applies to--
                    (A) inpatient hospital services (including services 
                of exempt hospitals (as defined in section 151(f)(2)) 
                statewide;
                    (B) inpatient and outpatient hospital services 
                (including services of exempt hospitals (as so defined) 
                statewide;
                    (C) physicians services statewide; or
                    (D) such inpatient and outpatient hospital services 
                and physicians services statewide.
            (2) Additional classes.--The system may apply to services 
        in a class of services in addition to services described in 
        paragraph (1) only if the system applies to all services within 
        such class of services.
    (b) Application to All Payors; Equitable Treatment.--
            (1) Application to all payors.--The system applies to 
        substantially all payors (including the medicare program and 
        the medicaid program in the State) for services to which the 
        system applies.
            (2) Equitable treatment.--The Secretary has been provided 
        satisfactory assurances as to the equitable treatment of all 
        payors (including the medicare and medicaid programs and other 
        Federal and State programs) under the system.
            (3) Payment rate differentials permitted.--
                    (A) In general.--Subject to subparagraph (B), a 
                State may provide for payment rates for services 
                furnished under the medicaid program that are different 
                from the payment rates for services for which payment 
                is made by other payors.
                    (B) Limitation on differentials for services under 
                medicaid.--The ratio of the average rate of payment for 
                services under the medicaid program to such average 
                rate of payment for the same services by health benefit 
                plans (other than the medicare and medicaid programs) 
                may not be less than the ratio of the average of the 
                rates of payment within the class of services for which 
                payment is provided under the medicaid program to such 
                average rate of payment under other health benefit 
                plans (other than the medicare and medicaid programs) 
                during the most recent year before the implementation 
                of the State system, as determined by the Secretary.
            (4) Separate rate negotiations permitted for health 
        maintenance organizations.--A State may provide that a health 
        maintenance organization (as defined in section 2(b)) may 
        negotiate directly with providers of services covered under the 
        system with respect to the organization's rate of payment for 
        such services.
            (5) Minimum payment rates.--Under the State system, the 
        State may provide that the amount of payment for any service 
        within a class of services under the system may not be less 
        than a minimum payment rate established by the State for the 
        services.
    (c) Operation.--The system is operated directly by the State or by 
a State agency or other public authority.
    (d) Reports Required.--Providers of services covered under the 
system must make such reports as the Secretary may require in order to 
monitor assurances provided under section 123 and make determinations 
under section 124.
    (e) Assurances of Continued Access.--The State must provide the 
Secretary with satisfactory assurances that operation of the system 
will not result in any change in hospital admission practices or the 
provision of other services which result in--
            (1) a significant reduction in the proportion of patients 
        (receiving services covered under the system) who have no 
        third-party coverage and who are unable to pay for such 
        services,
            (2) a significant reduction in the proportion of 
        individuals provided services for which payment is (or is 
        likely to be) less than the anticipated charges or costs of 
        such services, or
            (3) the refusal to provide services to individuals who 
        would be expected to require unusually costly or prolonged 
        treatment for reasons other than those related to the 
        appropriateness of the care available from the provider.
    (f) Special Requirements for Hospital Admissions and Exclusions.--
If the system applies to payment for hospital services, the system 
requires hospitals to which the system applies to meet the requirement 
of section 1866(a)(1)(G) of the Social Security Act with respect to the 
medicare program and the system provides for the exclusion of certain 
costs in accordance with section 1862(a)(14) of such Act (except for 
such waivers thereof as the Secretary provides by regulation).

SEC. 123. CONTROL OF AGGREGATE EXPENDITURES REQUIREMENT FOR STATE 
              SYSTEMS.

    (a) Assurances Required.--
            (1) In general.--A State system may not be approved until 
        the Secretary has been provided satisfactory assurances that 
        under the system, during a 3-year period (the first such period 
        beginning with the first month in which this section applies to 
        that system in the State)--
                    (A) the sum of the aggregate medicare and 
                nonmedicare expenditures (as defined in section 101(d)) 
                for the class (or classes) of services covered under 
                the system will not exceed the applicable total limit 
                specified in paragraph (2); and
                    (B) the aggregate medicare expenditures for such 
                class (or classes) under the system will not exceed the 
                applicable medicare limit specified in paragraph (3).
            (2) Applicable total limit.--The applicable total limit 
        specified in this paragraph is the total of the maximum amount 
        of payments that would be payable in the State for the covered 
        class (or classes) of services if the State system were not in 
        effect.
            (3) Applicable medicare limit.--The applicable medicare 
        limit specified in this paragraph is the total of the maximum 
        amount of payments that would be payable in the State for the 
        covered class (or classes) of services under the medicare 
        program if the State system were not in effect.
            (4) Special rule for expenditures for hmos.--In determining 
        aggregate expenditures for purposes of subparagraphs (A) and 
        (B) of paragraph (1), the Secretary shall exclude expenditures 
        for services of staff or group model health maintenance 
        organizations if the State system provides that such 
        organizations may negotiate directly with providers of services 
        covered under the system with respect to the organization's 
        rate of payment for such services and, in determining the 
        applicable limits under paragraphs (2) and (3), the Secretary 
        shall exclude payments for services of such organizations.
    (b) Annual Determination by Secretary.--
            (1) In general.--The Secretary shall annually determine 
        whether a State system met the assurances required under 
        subsection (a) for the most recent 3-year period for which the 
        State system was in effect.
            (2) Aggregation.--The Secretary may not determine under 
        paragraph (1) that--
                    (A) aggregate medicare and nonmedicare expenditures 
                under a State system exceeded the applicable total 
                limit for a 3-year period unless the Secretary 
                determines that, for all classes of services covered 
                under the system, aggregate medicare and nonmedicare 
                expenditures in the State exceeded such limit for all 
                such classes, and
                    (B) aggregate medicare expenditures under a State 
                system exceeded the applicable medicare limit for a 3-
                year period unless the Secretary determines that, for 
                all classes of services covered under the system, 
                aggregate medicare expenditures in the State exceeded 
                the applicable medicare limit for all such classes.
    (c) Use of Medicare Savings.--
            (1) In general.--If the Secretary determines that a State 
        system under this subtitle has resulted in medicare savings 
        over a period of 3 consecutive years, in the 4th year there 
        shall be paid to the State an amount equal to the medicare 
        savings in the first year of such 3-year period. Such payments 
        shall be made from the Federal Hospital Insurance Trust Fund or 
        the Federal Supplementary Medical Insurance Trust Fund in such 
        amounts as reflects the medicare savings attributable to the 
        respective Trust Fund in such first year.
            (2) Definitions.--In this subsection:
                    (A) The term ``medicare spending'' means, with 
                respect to a State in a year, aggregate medicare 
                expenditures incurred under the medicare program in the 
                State in the year.
                    (B) The term ``baseline medicare spending'' means, 
                with respect to a State in a year, the amount of 
                aggregate medicare expenditures that the Secretary 
                estimates would have been incurred under the medicare 
                program in the State in the year if this subtitle did 
                not apply in the State.
                    (C) The term ``medicare savings'' means, with 
                respect to a State in a year, the amount by which the 
                baseline medicare spending for the State in the year 
                exceeds the medicare spending for the State in the 
                year.

SEC. 124. TREATMENT OF STATES FAILING TO CONTROL AGGREGATE EXPENDITURES

    (a) In General.--The Secretary shall terminate the State system (in 
accordance with section 125) or impose a sanction described in 
subsection (b) on a State if the Secretary determines that, with 
respect to a State system under this subtitle for a 3-year period--
            (1) the aggregate medicare and nonmedicare expenditures (as 
        defined in section 101(d)) for the class (or classes) of 
        services covered under the system exceeded the applicable total 
        limit specified in section 123(a)(2); or
            (2) the aggregate medicare expenditures for the class (or 
        classes) of services covered under the system exceeded the 
        applicable medicare limit specified in section 123(a)(3).
    (b) Sanctions.--The sanctions described in this subsection are as 
follows:
            (1) In the case of a determination under subsection (a)(1), 
        a reduction in the aggregate nonmedicare expenditures otherwise 
        applicable for the class (or classes) of services covered under 
        the system for the following year (or for the following 3-year 
        period, if the Secretary determines that a reduction for such 
        period is appropriate in the case of a State) in an amount 
        equal to--
                    (A) the amount by which the aggregate medicare and 
                nonmedicare expenditures for the class (or classes) for 
                the preceding 3-year period exceeded the applicable 
                total limit, less
                    (B) the amount of any reduction under paragraph 
                (2).
            (2) In the case of a determination under subsection (a)(2), 
        a reduction in the aggregate medicare expenditures otherwise 
        applicable for the class (or classes) of services covered under 
        the system for the following year (or for the following 3-year 
        period, if the Secretary determines that a reduction for such 
        period is appropriate in the case of a State) in an amount 
        equal to the amount by which the aggregate medicare 
        expenditures for the class (or classes) for the preceding 3-
        year period exceeded the applicable medicare limit.
    (c) Notice.--The Secretary may not impose any sanction against a 
State under subsection (b) unless the Secretary has provided the State 
with notice of the Secretary's determination under subsection (a) and 
intent to impose the sanction under subsection (b).

SEC. 125. TERMINATION OF APPROVAL OF STATE SYSTEM.

    (a) Process Requirements.--
            (1) Notice.--The Secretary may terminate the approval of a 
        State system under this subtitle only after the expiration of a 
        90-day period beginning on the date the Secretary informs the 
        State of the Secretary's intention to terminate such approval, 
        unless, during such 90-day period, the State requests a hearing 
        with the Secretary.
            (2) Hearing.--If the State requests a hearing during the 
        90-day period described in paragraph (1), the Secretary shall 
        conduct a hearing during which the State may present evidence 
        showing that the Secretary should not terminate the approval of 
        its system. If the Secretary decides to reject such evidence, 
        the Secretary shall terminate the approval of the State's 
        system beginning with the first day of the first month that 
        begins after the Secretary's decision.
            (3) Judicial review prohibited.--There shall be no 
        administrative or judicial review of a decision by the 
        Secretary to terminate the approval of a State system under 
        this subsection.
    (b) Effect of Termination on Payment Rates Applicable to Services 
in State.--
            (1) In general.--If the Secretary terminates the approval 
        of a State system under this section, the maximum payment rates 
        applicable to services within the class (or classes) of 
        services covered under the State system shall be the maximum 
        payment rates otherwise applicable to services within the class 
        (or classes) under subtitle C, subject to the adjustment 
        described in paragraph (2).
            (2) Recapture of excess spending.--
                    (A) Medicare.--The Secretary shall modify the 
                percentage payment adjustment applied under section 161 
                to services within the class (or classes) of services 
                that were covered under a State system for which 
                approval was terminated under this section by such 
                factor as the Secretary determines necessary to 
                decrease the amount of aggregate medicare expenditures 
                that would otherwise be made for services provided in 
                the State by the amount by which aggregate medicare 
                expenditures for such class (or classes) of services 
                exceeded the applicable medicare limit specified in 
                section 123(a)(3) for the preceding year.
                    (B) Nonmedicare.--The Secretary shall reduce the 
                maximum payment rates applicable under part 1 of 
                subtitle C to services within the class (or classes) of 
                services that were covered under a State system for 
                which approval was terminated under this section by 
                such factor as the Secretary determines necessary to 
                decrease the amount of aggregate nonmedicare 
                expenditures that would otherwise be made for services 
                provided in the State by--
                            (i) the amount by which aggregate medicare 
                        and nonmedicare expenditures for such class (or 
                        classes) of services exceeded the applicable 
                        total limit specified in section 123(a)(2) for 
                        the preceding year, less
                            (ii) the amount of any decrease in 
                        aggregate medicare expenditures in the State 
                        provided under subparagraph (A).

  Subtitle C--Maximum Payment Rates for Services Not Subject to State 
 Provider Payment Control Systems or Provided by Staff or Group Model 
                    Health Maintenance Organizations

SEC. 140. EXEMPTION FOR SERVICES SUBJECT TO APPROVED STATE PROVIDER 
              PAYMENT CONTROL SYSTEMS OR PROVIDED BY STAFF OR GROUP 
              MODEL HEALTH MAINTENANCE ORGANIZATIONS.

    (a) Approved State Provider Payment Control Systems.--In the case 
of services furnished in a State and to which the State provider 
payment control system (approved by the Secretary under section 121) 
applies--
            (1) the Secretary shall not propose, establish, or apply 
        maximum payment rates to such services under part 1 of this 
        subtitle, and
            (2) the adjustments on payments rates for such services 
        made under the medicare program under section 161 shall not 
        apply.
    (b) Services Provided by Staff or Group Model Health Maintenance 
Organizations.--
            (1) In general.--Subject to paragraph (2), the maximum 
        payment rates established under part 1 shall not apply to 
        charges or payments for services furnished to individuals who 
        are enrolled in a staff or group model health maintenance 
        organization (as defined in section 2(b)(2)) with respect to 
        health care services covered under the subscriber agreement.
            (2) Continued application to out-of-area coverage and 
        emergency services.--Paragraph (1) shall not apply to services 
        described in section 1876(c)(4)(B) of the Social Security Act.
            (3) Indirect application under medicare program.--Nothing 
        in this subsection shall be construed as affecting the payment 
        of amounts to health maintenance organizations under the 
        medicare program under a risk-sharing contract under section 
        1876 of the Social Security Act. However, adjustments in 
        payment rates under section 161 may affect the computation of 
        the average adjusted per capita cost under such section.

 Part 1--Establishment and Application of Maximum Payment Rates (Other 
                      than Under Medicare Program)

SEC. 141. PROCESS.

    (a) Publication of Rates.--Subject to section 140, the Secretary 
shall cause to have published in the Federal Register--
            (1) not later than April 1 of each year (or not later than 
        September 1, 1994, in the case of rates for 1995), proposed 
        maximum payment rates under this subtitle for the following 
        year for public comment, and
            (2) during the last 15 days of October of each year (or not 
        later than December 1, 1994, in the case of rates for 1995), 
        after such consideration of public comment on the proposed 
        rates, the maximum payment rates under this subtitle for the 
        following year.
    (b) Items Included in Publications.--The Secretary shall include in 
the publications referred to in subsection (a)--
            (1) a description of the payment methodology used in the 
        establishment of maximum payment rates; and
            (2) in the case of a publication under subsection (a)(2), 
        the extent that the rates differ from the applicable 
        Commission's recommendations under subsection (c), an 
        explanation of the Secretary's grounds for not following such 
        recommendations.
    (c) Reports of Commissions.--With respect to the establishment of 
maximum payment rates for services under this subtitle, the applicable 
Commission, not later than June 1 of each year, shall report its 
recommendations to the Secretary and Congress concerning such rates for 
the following year. Each such report may include such other 
recommendations relating to the operation of this subtitle as the 
Commission considers appropriate.
    (d) Payment Rate Defined.--In this subtitle, the term ``payment 
rate'' means, with respect to health care services for which amounts 
are payable under a plan or program, the rate of payment provided for 
under the plan or program and including cost-sharing (including 
deductibles, coinsurance, and extra billing amounts) applicable under 
the plan or program with respect to the services.

SEC. 142. PAYMENT METHODOLOGY; RELATION TO BUDGET ALLOCATION.

    (a) Payment Methodology.--
            (1) In general.--The Secretary shall establish maximum 
        payment rates under this subtitle consistent with the payment 
        rate methodology specified under part 2.
            (2) Treatment of services within a class.--Nothing in this 
        title shall be construed as requiring that maximum payment 
        rates established under this subtitle for different health care 
        services within a class of services be the same or determined 
        under the same methodology.
    (b) Relation to Overall Limit on Expenditures for Classes of 
Services.--
            (1) In general.--The maximum payment rates for a year shall 
        be established under this subtitle in a manner so that, as 
        applied under section 143--
                    (A) the aggregate nonmedicare expenditures for all 
                the services within each class subject to such rates, 
                is equal to
                    (B) the allocation to the class for the year under 
                section 102 with respect to the nonmedicare health 
                expenditure budget (less the amount of the reduction in 
                the allocation provided under paragraph (2)).
            (2) Removal of portion of allocation attributable to state 
        provider payment control systems or staff or group model health 
        maintenance organizations.--For purposes of paragraph (1)(B), 
        the allocation to a class of services for a year shall be 
        reduced by the product of--
                    (A) such allocation, and
                    (B) the proportion of such allocation that the 
                Secretary estimates is attributable to services exempt 
                under section 140 from the establishment or application 
                of maximum payment rates under this part.

SEC. 143. GENERAL APPLICATION AND ENFORCEMENT OF MAXIMUM PAYMENT RATES.

    (a) Limits on Charges.--Subject to section 140--
            (1) In general.--In the case of a provider that provides 
        health care services to an individual for which a maximum 
        payment rate is established under this subtitle--
                    (A) the provider may not charge (i) an amount in 
                excess of such rate or (ii) on a payment basis other 
                than the payment basis established for such services 
                under part 2;
                    (B) the provider may not collect for such services 
                an amount in excess of such rate; and
                    (C) the individual and other entities, including a 
                health benefit plan, are not liable collectively for 
                payment of any amount that exceeds such rate.
            (2) Relation to medicare program.--This subsection shall 
        not apply to services furnished to an individual who is 
        entitled to benefits with respect to such services under the 
        medicare program.
    (b) Enforcement Through Civil Money Penalties.--
            (1) Improper charges.--If a provider imposes a charge in 
        violation of subsection (a)(1)(A), the provider is subject to 
        civil money penalty in an amount not to exceed $100 for each 
        such charge.
            (2) Improper collection.--If a provider collects excess 
        amounts in violation of subsection (a)(1)(B) and does not 
        refund such excess amounts within 30 days of date on which the 
        provider is notified that the provider collected excess amount, 
        the provider is subject to a civil money penalty in an amount 
        equal to three times the amount of such excess which has not 
        been so refunded or, if greater, $500.
            (3) Process.--The provisions of section 1128A of the Social 
        Security Act (other subsections (a) and (b)) shall apply to a 
        civil money penalty under this subsection in the same manner as 
        such provisions apply to a penalty or proceeding under section 
        1128A(a) of such Act.
            (4) Deposit of penalties in anti-fraud and abuse trust 
        fund.--Any civil money penalties collected under this 
        subsection shall be paid into the Anti-Fraud and Abuse Trust 
        Fund established under section 341(b).

SEC. 144. LIMITATION ON PAYMENT RATES UNDER MEDICAID.

    (a) In General.--Subject to subsection (b), notwithstanding any 
other provision of law, payment may not be made under section 
1903(a)(1) of the Social Security Act to a State for amounts expended 
as medical assistance for health care services for which maximum 
payment rates are established under this part, to the extent that the 
rate of payment for such services exceeds the maximum payment rate so 
established.
    (b) Application of Medicaid Payment Floors.--Subsection (a) shall 
not apply to the extent payment rates do not exceed the applicable 
minimum payment rates required to be provided under section 401 or 
under section 1902(a)(13)(G) of the Social Security Act.

 Part 2--Methodologies for Determining Maximum Rates (Other than Under 
                           Medicare Program)

SEC. 151. BASIS FOR MAXIMUM RATES OF PAYMENT FOR INPATIENT HOSPITAL 
              SERVICES.

    (a) In General.--
            (1) In general.--Subject to additions under subsection (d) 
        and to other adjustments under subsection (e), the maximum 
        payment rate established under this subtitle for a service 
        within the class of services consisting of inpatient hospital 
        services that is provided by a hospital (as defined in 
        paragraph (2)) during a year shall be equal to the product of--
                    (A) the standardized amount applicable to the 
                hospital, as established in accordance with subsection 
                (b); and
                    (B) the weighting factor assigned to the service 
                (as determined in accordance with subsection (c)).
            (2) Hospital defined.--In this section, the term 
        ``hospital'' does not include an exempt hospital (as defined in 
        subsection (f)).
    (b) Establishment of Standardized Amounts.--
            (1) In general.--The Secretary shall establish a 
        standardized amount under subsection (a) for hospitals located 
        in a large urban area and for other hospitals for a year by 
        standardizing the hospital's average cost per discharge (based 
        on the hospital's allowed operating receipts, as determined 
        under paragraph (2)) in accordance with paragraph (3). For 
        purposes of the preceding sentence, a hospital is located in a 
        ``large urban area'' if the hospital is treated as being 
        located in a large urban area under section 1886(d) of the 
        Social Security Act for purposes of the medicare program.
            (2) Allowed operating receipts defined.--
                    (A) In general.--For purposes of paragraph (1) and 
                except as provided in subparagraph (B), a hospital's 
                ``allowed operating receipts'' means the total of all 
                receipts of the hospital (without regard to the source) 
                attributable to routine operating costs, ancillary 
                service operating costs, and special care unit 
                operating costs with respect to inpatient hospital 
                services, as determined on an average per admission or 
                per discharge basis (as determined by the Secretary), 
                during 1993, increased by the Secretary's estimate of 
                the percentage increase in such receipts between the 
                midpoint of 1993 and the midpoint of 1994.
                    (B) Exclusions.--In determining a hospital's 
                allowed operating receipts under subparagraph (A), the 
                Secretary shall exclude the following:
                            (i) Receipts attributable to services for 
                        which payment was made to the hospital under 
                        the medicare program.
                            (ii) The value of the costs of services 
                        which are treated as bad debt or charity care 
                        (as defined by the Secretary) for purposes of 
                        the hospital's cost reports.
                            (iii) The value of the costs of services 
                        furnished under the medicaid program which are 
                        in excess of the payment received from such 
                        program by the hospital.
                    (C) Certain outpatient receipts included.--In 
                determining a hospital's allowed operating receipts 
                under subparagraph (A), the Secretary shall include all 
                receipts attributable to services that are provided by 
                the hospital (or by an entity wholly owned or operated 
                by the hospital) to a patient during the 3 days 
                immediately preceding the date of the patient's 
                admission if such services are diagnostic services 
                (including clinical diagnostic laboratory tests) or are 
                other services related to the admission (as defined by 
                the Secretary).
            (3) Process for standardizing amounts.--The Secretary shall 
        standardize the average per discharge amount for each hospital 
        for a year by--
                    (A) adjusting for variations among hospitals by 
                area in the average hospital wage level, using the area 
                wage level applied for hospitals under the medicare 
                program under section 1886(d)(3)(E) of the Social 
                Security Act;
                    (B) adjusting for variations in case mix among 
                hospitals;
                    (C) excluding an estimate of the additional 
                payments to be made for outliers, using the amounts 
                paid to hospitals for outliers under the medicare 
                program under section 1886(d)(5)(A) of such Act (except 
                that the Secretary may apply different amounts if the 
                Secretary finds that such different amounts more 
                accurately reflect outliers for services furnished to 
                individuals who are not medicare beneficiaries);
                    (D) adjusting for variations among hospitals by 
                area in input prices other than wages and wage-related 
                costs;
                    (E) excluding an estimate of indirect medical 
                education costs, using the indirect medical education 
                adjustment applied for hospitals under the medicare 
                program under section 1886(d)(5)(B) of such Act;
                    (F) excluding an estimate of direct graduate 
                medical education costs; and
                    (G) excluding an estimate of capital-related costs.
    (c) Establishment of Diagnosis-Related Groups and Weighting 
Factors.--
            (1) In general.--
                    (A) Diagnosis-related groups.--For purposes of this 
                section, the Secretary shall establish a classification 
                of inpatient hospital discharges by diagnosis-related 
                groups and a methodology for classifying specific 
                hospital discharges within these groups.
                    (B) Weighting factors.--For each diagnosis-related 
                group established under subparagraph (A), the Secretary 
                shall assign an appropriate weighting factor which 
                reflects the relative hospital resources used with 
                respect to discharges classified within that group 
                compared to discharges classified within other groups.
                    (C) Use of medicare groups and factors.--In 
                establishing diagnosis-related groups and assigning 
                weighting factors for such groups under this paragraph, 
                the Secretary shall use the diagnosis-related groups 
                and weighting factors used under the medicare program 
                under section 1886(d)(4) of the Social Security Act, 
                except to the extent that the Secretary must establish 
                diagnosis-related groups in addition to the groups 
                under such program, or adjust such weighting factors, 
                to take into account the application of payment rates 
                under this section to inpatient hospital services 
                furnished to individuals who are not medicare 
                beneficiaries.
            (2) Standard benefit package.--The diagnosis-related groups 
        and the weighting factors assigned to such groups shall be 
        based upon a standard benefit package consisting of the 
        standard inpatient hospital services provided under health 
        benefit plans (other than the medicare program and the medicaid 
        program), as determined by the Secretary on the basis of a 
        survey of such plans.
            (3) Adjustment for variations from standard benefit 
        package.--The Secretary shall establish a table of adjustment 
        factors to adjust the weighting factors to reflect the 
        actuarial differences between the value of the coverage under 
        the standard benefit package described in paragraph (2) and the 
        value of the services provided under health benefit plans that 
        vary from the services provided under the standard benefit 
        package.
    (d) Increases to Maximum Payment Rates.--
            (1) Costs of direct graduate medical education.--In the 
        case of a hospital that has incurred costs for direct graduate 
        medical education during a year, the Secretary shall increase 
        the maximum payment rate otherwise applicable under this 
        section to inpatient services furnished by the hospital, 
        consistent with the methodology used to make payments to 
        hospitals under the medicare program for such costs under 
        section 1886(h) of the Social Security Act.
            (2) Adjustment for indirect medical education.--The 
        Secretary shall increase the maximum payment rate otherwise 
        applicable under this section for a hospital for to take into 
        account indirect costs of medical education incurred by a 
        hospital, in accordance with the methodology used to adjust 
        payments to hospitals under the medicare program for such costs 
        under section 1886(d)(5)(B) of the Social Security Act.
            (3) Adjustment for outliers.--The Secretary shall increase 
        the maximum payment rate otherwise applicable under this 
        section for a hospital--
                    (A) for length of stay outliers for discharges in a 
                diagnosis-related group (as determined by the Secretary 
                in accordance with the criteria used to adjust payments 
                to hospitals under the medicare program for such 
                outliers under section 1886(d)(5)(A)(i) of the Social 
                Security Act); and
                    (B) for cost outliers for any discharges in a 
                diagnosis-related group (as determined by the Secretary 
                in accordance with the criteria used to adjust payments 
                to hospitals under the medicare program for such 
                outliers under section 1886(d)(5)(A)(ii) of the Social 
                Security Act).
            (4) Uncompensated care adjustment.--The Secretary shall 
        increase the maximum payment rate otherwise applicable under 
        this section for a hospital to take into account the costs 
        incurred by a hospital in providing services described in 
        clause (ii) or (iii) of subsection (b)(2)(B).
    (e) Other Adjustments.--
            (1) Needs of certain facilities.--The Secretary may adjust 
        the maximum payment rates otherwise determined under this 
        section in such manner and to such extent as the Secretary 
        considers appropriate to take into account the needs of--
                    (A) regional and national referral centers 
                described in section 1886(d)(5)(C) of the Social 
                Security Act;
                    (B) sole community hospitals described in section 
                1886(d)(5)(D) of such Act; and
                    (C) essential access hospitals designated by the 
                Secretary under section 1820(i)(1) of such Act.
            (2) Payments for transferred patients.--The Secretary shall 
        provide for an adjustment to the maximum payment rates under 
        this section to take into account inpatient hospital services 
        provided to patients transferred to (or from) the hospital, in 
        accordance with the standards used to determine such 
        adjustments under the medicare program.
            (3) Payments for capital.--Payments to hospitals for 
        capital and capital-related costs shall be determined in the 
        same manner as payments for capital and capital-related costs 
        are made under section 1886(g) of the Social Security Act, 
        adjusted to take into account the portion of such costs for 
        which the hospital receives payment from health benefit plans 
        (other than the medicare and medicaid programs).
    (f) Maximum Payment Rates for Exempt Hospitals.--
            (1) Hospital-specific, per admission amount.--In the case 
        of an exempt hospital (as defined in paragraph (2)), the 
        maximum payment rate for inpatient hospital services provided 
        by the hospital shall be determined on a per admission basis, 
        based on the allowable operating receipts of the hospital 
        (determined in the same manner as such receipts are determined 
        for other hospitals under subsection (b)).
            (2) Exempt hospital.--The term ``exempt hospital'' means--
                    (A) a psychiatric hospital (as defined in section 
                1861(f) of the Social Security Act), including a 
                psychiatric unit of a hospital which is a distinct part 
                of the hospital (as defined by the Secretary);
                    (B) a rehabilitation hospital (as defined by the 
                Secretary), including a rehabilitation unit of a 
                hospital which is a distinct part of the hospital (as 
                defined by the Secretary);
                    (C) a hospital whose inpatients are predominantly 
                individuals under 18 years of age;
                    (D) a hospital which has an average inpatient 
                length of stay (as determined by the Secretary) of 
                greater than 25 days; or
                    (E) a hospital that the Secretary has classified, 
                at any time on or before December 31, 1992, for 
                purposes of applying exceptions and adjustments to 
                payment amounts under section 1886(d) of such Act, as a 
                hospital involved extensively in treatment for or 
                research on cancer.

SEC. 152. BASIS FOR MAXIMUM PAYMENT RATE FOR CLASS OF PHYSICIANS' 
              SERVICES AND OTHER PROFESSIONAL MEDICAL SERVICES.

    (a) Use of Relative Value Fee Schedule.--
            (1) In general.--Subject to subsection (b), the maximum 
        payment rates established under this subtitle for a service 
        within the class of services consisting of physicians' services 
        and other professional medical services during a year shall be 
        equal to the product of--
                    (A) the relative value for the service applied 
                under section 1848(b) of the Social Security Act;
                    (B) an applicable conversion factor (determined by 
                the Secretary in an amount consistent with the 
                requirements of section 142(b)); and
                    (C) the geographic adjustment factor applied under 
                section 1848(b) of the Social Security Act.
    (b) New Procedure Codes and Relative Value Units.--In applying 
subsection (a) in the case of services for which relative value units 
have not been established under section 1848 of the Social Security 
Act, the Secretary shall establish relative value units in the same 
manner as if payment for such services were made under the medicare 
program.
    (c) Publication of Definitions, Relative Value Units, and Payment 
Policies.--The Secretary shall provide for publication of such 
definitions, relative value units (established under subsection (b)), 
and payment policies as may be necessary for payors to apply the 
maximum payment rates established under this section.

SEC. 153. BASIS FOR OTHER MAXIMUM PAYMENT RATES FOR SERVICES USING 
              CERTAIN MEDICARE PAYMENT METHODOLOGIES.

    The maximum payment rates established under this subtitle for 
services for any of the following classes of services shall be 
determined using the applicable payment methodologies under the 
medicare program as follows:
            (1) In the case of facility services described in section 
        1832(a)(2)(F) of the Social Security Act furnished in 
        connection with a surgical procedure specified pursuant to 
        section 1833(i)(1)(A) of such Act and furnished to an 
        individual in an ambulatory surgical center described in such 
        section, the methodology described in section 1833(i)(2) of 
        such Act.
            (2) For the class of diagnostic testing services described 
        in section 102(a)(2)(C)--
                    (A) in the case of clinical laboratory services, 
                the methodology described in sections 1833(a)(2)(D) and 
                1833(h) of such Act, and
                    (B) in the case of other diagnostic services, the 
                applicable methodology under part B of title XVIII of 
                such Act.
            (3) In the case of an item of durable medical equipment 
        (described in section 1834(a)(13) of such Act), the methodology 
        described in section 1834(a)(1) of such Act.
            (4) In the case of prosthetic devices and orthotics and 
        prosthetics, the methodology described in section 1834(h)(1)(A) 
        of such Act.
            (5) In the case of psychologists and clinical social 
        workers, the methodologies described in section 1833(a)(1)(L) 
        and 1833(a)(1)(F), respectively.
            (6) For prescription drugs, the methodology described in 
        section 1834(e) of such Act.
            (7) For renal dialysis services, home dialysis supplies and 
        equipment (as defined in section 1881(b)(8) of such Act), and 
        self-care home dialysis support services (as defined in section 
        1881(b)(9) of such Act), the methodology described in section 
        1881(b) of such Act.
            (8) For any other service within a class of services for 
        which the amount of payment made under part B of the medicare 
        program is determined on the basis of reasonable or prevailing 
        charge, the methodology used for payment for such service under 
        such part.

SEC. 154. OTHER SERVICES.

    In the case of services within a class of services for which a 
methodology for establishing maximum payment rates is not otherwise 
provided pursuant to the preceding provisions of this subtitle, the 
Secretary shall establish an appropriate methodology for establishing 
such rates, taking into account the payment methodology or 
methodologies in use under the medicare program or other health benefit 
plans.

SEC. 155. DEVELOPMENT OF PROSPECTIVELY-DETERMINED PAYMENT 
              METHODOLOGIES.

    (a) Development of Prospective Payment Methodologies for All 
Classes of Services.--
            (1) Proposal.--The Secretary shall develop proposals to 
        establish a methodology for each class of services (or services 
        within such a class) for which payment rates are not specified 
        in sections 151 through 153 and are not determined on a 
        prospective basis pursuant to this subtitle under which payment 
        rates for such services shall be determined on a prospectively-
        determined basis.
            (2) Report.--Not later than 3 years after the date of the 
        enactment of this Act, the Secretary shall submit the proposals 
        developed under paragraph (1) to the Committee on Ways and 
        Means and the Committee on Energy and Commerce of the House of 
        Representatives, the Committee on Finance of the Senate.
    (b) Adjustment to Prospective Methodology for Children's 
Hospitals.--If any methodology is implemented to determine the amount 
of payments for the operating costs of inpatient hospital services 
under the medicare program on the basis of prospectively-determined 
rates for hospitals whose inpatients are predominantly individuals 
under 18 years of age, the Secretary shall assure that payments under 
such methodology shall--
            (1) be made on a hospital-specific basis;
            (2) be based on the resource requirements of the population 
        receiving services from such hospitals; and
            (3) be determined by using pediatric-specific inpatient 
        data.

                  Part 3--Medicare Payment Adjustments

SEC. 161. CONFORMING MEDICARE PAYMENT RATES TO MEDICARE HEALTH 
              EXPENDITURE ALLOCATIONS.

    (a) In General.--Notwithstanding any other provision of law 
(including the amendments made by title IV of this Act), but subject to 
section 140(a)(2), the Secretary shall adjust the payment rate or 
allowance (or, in the absence of such a rate, payment amount) otherwise 
applied under the medicare program (and any maximum charge limits or 
payment limits imposed under such program) for any health care service 
in a class of services by the percentage payment adjustment specified 
by the Secretary under subsection (b) for the class for the year 
involved.
    (b) Percentage Payment Adjustment Computed.--Subject to section 
125(b)(2)(A), at the same time as the Secretary establishes maximum 
payment rates under part 1, the Secretary shall compute and publish, 
for each class of services for each year, such percentage payment 
adjustment as the Secretary determines to be necessary to assure that--
            (1) aggregate medicare expenditures for such class of 
        services for the year subject to such adjustment, does not 
        exceed
            (2) the allocation (under section 103(a)(2)(A)) of 
        aggregate medicare expenditures attributable to such class for 
        the year less the product of such allocation and the proportion 
        of such allocation that the Secretary estimates is attributable 
        to services exempt under section 140 from the establishment or 
        application of maximum payment rates under part 1.
    (c) Publications.--In publishing payment rates under the medicare 
program, the Secretary shall take into account any percentage payment 
adjustment applied under this section.

SEC. 162. ADJUSTMENTS TO MEDICARE PAYMENTS FOR GRADUATE MEDICAL 
              EDUCATION.

    (a) Determination of Full-Time-Equivalent Residents During Initial 
Residency Period.--
            (1) Emphasis on primary care.--Paragraph (4)(C)(ii) of 
        section 1886(h) of the Social Security Act (42 U.S.C. 
        1395ww(h)) is amended by striking ``is 1.00,'' and inserting 
        the following: ``is--
                                    ``(I) 1.1, in the case of a 
                                resident who is a primary care resident 
                                (as defined in paragraph (5)(H)),
                                    ``(II) 1.0, in the case of a 
                                resident who is not a primary care 
                                resident and who specializes in 
                                internal medicine or pediatrics,
                                    ``(III) .9, in the case of a 
                                resident who is not described in 
                                subclause (I) or (II) and who is in the 
                                initial 3 years of the residency 
                                period, or
                                    ``(IV) .8, in the case of a 
                                resident not described in subclause 
                                (I), (II), or (III),''.
            (2) Primary care resident defined.--Paragraph (5) of such 
        section is amended--
                    (A) by redesignating subparagraph (H) as 
                subparagraph (I), and
                    (B) by inserting after subparagraph (G) the 
                following new subparagraph:
                    ``(H) Primary care resident.--The term `primary 
                care resident' means (in accordance with criteria 
                established by the Secretary) a resident being trained 
                in a distinct program of family practice medicine, 
                general practice, general internal medicine, or general 
                pediatrics.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to cost reporting periods beginning on or after October 1, 1993.

             TITLE II--MANAGED CARE AND MANAGED COMPETITION

                        Subtitle A--Managed Care

SEC. 201. AUTHORIZATION FOR MANAGED CARE SYSTEMS TO PAY LESS THAN 
              MAXIMUM PAYMENT RATES.

    Nothing in this Act shall be construed as preventing managed care 
systems from negotiating with providers payment rates that are less 
than the maximum payment rates established under title I.

SEC. 202. STAFF AND GROUP MODEL HEALTH MAINTENANCE ORGANIZATIONS EXEMPT 
              FROM MAXIMUM PAYMENT RATES.

    Pursuant to section 140(b), the maximum payment rates established 
under part 1 of subtitle C of title I shall not apply to charges or 
payments for services furnished to individuals who are enrolled in a 
staff or group model health maintenance organization (as defined in 
section 2(b)(2)) with respect to health care services covered under the 
subscriber agreement.

SEC. 203. REPEAL OF SUNSET OF DUAL CHOICE REQUIREMENT.

    Effective upon the enactment of this Act, section 7(b) of the 
Health Maintenance Organization Amendments of 1988 (Public Law 100-517) 
is repealed and the provisions of section 1310 of the Public Health 
Service Act shall be effective as if such section 7(b) had not been 
enacted.

SEC. 204. MULTIPLE CHOICE OF HEALTH MAINTENANCE ORGANIZATIONS.

    (a) In General.--Section 1310(a) of the Public Health Service Act 
(42 U.S.C. 300e-9(a)) is amended by adding at the end the following new 
paragraph:
    ``(3) Nothing in this subsection shall be construed as limiting the 
option of membership to a limited number of organizations.''.
    (b) Distribution of Materials.--Paragraph (1) of such section is 
amended by adding at the end the following new sentence: ``Each such 
health benefit plan shall make available, to each individual eligible 
to enroll with a qualified health maintenance organization under such 
an option, such marketing materials as the organization provides to the 
plan.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect 6 months after the date of the enactment of this Act.

SEC. 205. FEDERAL ASSISTANCE FOR ESTABLISHMENT AND INITIAL OPERATION OF 
              STAFF AND GROUP MODEL HMOS.

    (a) In General.--The Secretary shall provide for grants for the 
establishment and initial operation of staff or group model health 
maintenance organizations.
    (b) Purposes.--Funds provided under this section may be used for 
purposes specified by the Secretary, which shall include--
            (1) surveys of the prospective market for such 
        organizations to determine the feasibility of operating such an 
        organization in the service area,
            (2) activities relating to initial enrollment of 
        individuals,
            (3) working capital during the startup period,
            (4) recruitment of physicians and other health personnel, 
        and
            (5) acquisition of building and equipment.
    (c) Application Process.--No grant may be provided under this 
section unless--
            (1) an application therefore has been submitted (in such 
        form and manner and containing such information, as the 
        Secretary specifies) to and approved by the Secretary, and
            (2) the Secretary determines that sufficient planning for 
        the organization's establishment has been conducted by the 
        applicant and the feasibility of establishing and operating the 
        organization has been established by the applicant.
    (d) Period of Grant.--Grants under this section shall be for a 
period of 1 year but may be renewed for 2 additional periods of 1 year 
each.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated $25,000,000 for each of fiscal years 1994 through 1998 to 
carry out this section.

SEC. 206. PREEMPTION OF STATE LAWS RESTRICTING HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) In General.--
            (1) Preemption.--Except as provided in paragraph (2), any 
        provision of State law that restricts the ability of a health 
        maintenance organization to negotiate reimbursement rates with 
        providers or to contract selectively with one provider or a 
        limited number of providers is hereby preempted and may not be 
        enforced.
            (2) Exception for states with provider payment control 
        systems.--Paragraph (1) shall not apply to a provision of State 
        law that restricts the ability of a health maintenance 
        organization to negotiate reimbursement rates with providers if 
        the State has a State provider payment control system approved 
        under section 121.
    (b) Effective Date.--Subsection (a) shall take effect on January 1, 
1994.

SEC. 207. ADJUSTMENT IN MEDICARE CAPITATION PAYMENTS TO ACCOUNT FOR 
              REGIONAL VARIATIONS IN APPLICATION OF SECONDARY PAYOR 
              PROVISIONS.

    (a) In General.--Section 1876(a)(4) of the Social Security Act (42 
U.S.C. 1395mm(a)(4)) is amended by adding at the end the following new 
sentence: ``In establishing the adjusted average per capita cost for a 
geographic area, the Secretary shall take into account the differences 
between the proportion of individuals in the area with respect to whom 
there is a group health plan that is a primary payor (within the 
meaning of section 1862(b)(2)(A)) compared to the proportion of all 
such individuals with respect to whom there is such a group health 
plan.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to contracts entered into for years beginning with 1995.

SEC. 208. GAO STUDY OF EXPANSION OF HEALTH MAINTENANCE ORGANIZATIONS.

    (a) Study.--The Comptroller General shall conduct a study of 
additional measures that may be taken to encourage the development and 
expansion of health maintenance organizations.
    (b) Report.--By not later than 18 months after the date of the 
enactment of this Act, the Comptroller General shall submit a report to 
Congress on the study conducted under subsection (a) and shall include 
in the report such recommendations as may be appropriate.

                    Subtitle B--Managed Competition

 Part 1--Establishment of National Health Plan Purchasing Cooperative 
                                Program

SEC. 221. ESTABLISHMENT OF PROGRAM; GRANTS TO STATES.

    (a) In General.--The Secretary shall establish a program for the 
establishment and operation of health plan purchasing cooperatives 
(each in this subtitle referred to as a ``HPPC'') in each State in 
accordance with this subtitle.
    (b) Grant Program for HPPCs.--
            (1) In general.--The Secretary may provide assistance, 
        through grants, contracts, and cooperative agreements, with 
        States and with HPPCs for the planning, development, and 
        initial operation of HPPCs under this subtitle.
            (2) Terms.--Assistance under this subsection shall be 
        provided under such terms and conditions as the Secretary may 
        specify consistent with the following:
                    (A) The period of such assistance may not extend 
                for longer than 5 years with respect to any HPPC.
                    (B) The total amount of assistance with respect to 
                any HPPC may not exceed $5,000,000.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated, for the provision of assistance under this 
        subsection, a total of $150,000,000 for the 5-fiscal-year 
        period beginning with fiscal year 1994.

SEC. 222. ESTABLISHMENT OF HPPCS; DESIGNATION OF HPPC AREAS.

    (a) State Requirement.--
            (1) In general.--Each State--
                    (A) shall provide by law for the organization and 
                operation, by not later than January 1, 1996, of 1 or 
                more health plan purchasing cooperatives in accordance 
                with section 223, and
                    (B) may provide (in accordance with subsections (b) 
                and (c)) for the designation of more than 1 HPPC areas 
                in the State.
            (2) Coverage of all geographic areas in a state.--In 
        carrying out this subsection, HPPCs shall be established, and 
        HPPC areas designated, in a State so as to provide for the 
        offerring of qualified health plans in every geographic area of 
        the State.
            (3) Single organization serving multiple hppc areas.--
        Nothing in this subsection shall be construed as preventing--
                    (A) a single corporation from being the HPPC for 
                more than one HPPC area, or
                    (B) a State from coordinating, through a single 
                entity, the activities of one or more HPPCs in the 
                State.
            (4) Federal default.--If a State fails to provide for the 
        organization and continued operation of 1 or more HPPCs or 
        designation of HPPC areas in accordance with this section, the 
        Secretary shall provide for such organization and operation or 
        designation, and, in such case with respect to such a HPPC, any 
        subsequent reference to State law or a Governor in this 
        subtitle shall be deemed a reference to Federal law or the 
        Secretary, respectively.
    (b) HPPC Areas.--
            (1) In general.--Except as may be otherwise provided under 
        this subsection and subsection (c), each State shall be 
        considered a separate HPPC area.
            (2) Alternative, intrastate areas.--HPPC areas within a 
        State may cover less than the entire State so long as--
                    (A) all portions of each metropolitan statistical 
                area in the State are within the same HPPC area, and
                    (B) the number of individuals residing within a 
                HPPC area is not less than 1,000,000.
    (c) Interstate HPPCs.--
            (1) Authorization.--One or more contiguous States may 
        provide--
                    (A) for the designation consistent with paragraph 
                (2) of a HPPC area that includes adjoining portions of 
                the States, and
                    (B) for the organization and operation, in 
                accordance with rules of the Secretary, of a HPPC with 
                respect to such a designated HPPC area.
            (2) Interstate hppc areas.--Any HPPC area designated under 
        paragraph (1)(A)--
                    (A) that includes any part of a metropolitan 
                statistical area shall include all of such area, and
                    (B) shall have a population of not less than 
                1,000,000.

SEC. 223. ORGANIZATION AND OPERATION OF HPPCS.

    (a) In General.--Each HPPC shall be organized and operated 
consistent with the requirements of this subtitle.
    (b) Organization.--Each HPPC shall be a not-for-profit public 
benefit corporation established under State law and governed by a Board 
of Directors appointed by the Governor or other chief executive officer 
of the State.
    (c) General Duties of HPPCs.--
            (1) Making health care plans available to employers.--
                    (A) In general.--Each HPPC shall enter into 
                agreements with qualified health plans under section 
                225 under which coverage under such a QHP is made 
                available with respect to employers which--
                            (i) have employees who reside in the HPPC 
                        area served by the HPPC, and
                            (ii) have entered into an agreement with 
                        the HPPC under section 224.
                    (B) HPPC outreach to small employers.--Beginning 
                not later than 1 year after the date a HPPC is 
                organized, a HPPC shall inventory and inform all small 
                employers (as defined in section 228(c)(2)) in the HPPC 
                area (including employers in rural areas of the HPPC 
                area) of the health benefits available, through 
                enrollment with qualified health plans, through the 
                HPPC for their employees (and family members) who 
                reside in a HPPC area served by the HPPC.
            (2) Option of enrollment for eligible residents.--A HPPC 
        may provide, under such an agreement with a qualified health 
        plan, for coverage under such a plan with respect to 
        individuals who are eligible residents (as defined in section 
        228(a)(4)).
            (3) Construction.--Nothing in this subsection shall be 
        construed as requiring--
                    (A) an employer to enter into an agreement under 
                section 224 with a HPPC, or
                    (B) an employee or other individual to enroll in a 
                QHP offered by a HPPC.
    (d) Scope of Plans Offered.--To the maximum extent practicable, 
each HPPC--
            (1) shall enter into agreements with each QHP which is a 
        qualified health maintenance organization (as defined in 
        section 228(b)(2));
            (2) shall enter into agreements with at least one qualified 
        health plan that is a service benefit plan and at least one 
        qualified health plan that is an indemnity plan for each HPPC 
        area served by the HPPC; and
            (3) may enter into agreements with other qualified health 
        plans (such as preferred provider organizations).

SEC. 224. AGREEMENTS WITH EMPLOYERS.

    (a) In General.--Each agreement under this section, between a HPPC 
and an employer, shall include (as specified by the Secretary) 
provisions consistent with the requirements specified in the succeeding 
subsections of this section.
    (b) Forwarding Information on Eligible Employees.--
            (1) In general.--Under an agreement under this section 
        between an employer and a HPPC, the employer must forward to 
        the appropriate HPPC the name and address (and other 
        identifying information required by the HPPC) of each employee 
        (including part-time and seasonal employees).
            (2) Information on plans.--Under the agreement and 
        consistent with section 226, the HPPC--
                    (A) shall provide to each employee identified under 
                paragraph (1) information on benefits available through 
                QHPs, and
                    (B) upon the request of such an employee, shall 
                enroll the employee (and, at the option of the 
                employee, eligible family members) in such plans.
            (3) Appropriate hppc.--In this subsection, the term 
        ``appropriate HPPC'' means the HPPC for the principal place of 
        business of the employer or (at the option of an employee) the 
        HPPC serving the place of residence of the employee.
    (c) Payroll Deduction Option.--
            (1) In general.--Under an agreement under this section 
        between an employer and a HPPC, if the HPPC indicates to the 
        employer that an eligible employee is enrolled in a QHP through 
        the HPPC--
                    (A) the employer shall pay to the HPPC the amount 
                of any employer contribution towards the premium for 
                enrollment of the employee under the QHP, and
                    (B) if the employee elects to have any employee 
                share of premiums deducted from wages or other 
                compensation paid by the employer, the employer shall 
                provide for the deduction, from the employee's wages or 
                other compensation, of the employee's share of the 
                amount of the premium due and the payment of such 
                deduction to the HPPC.
            (2) Special rules for payment of employee share.--In the 
        case of an employee who is paid wages or other compensation on 
        a monthly or more frequent basis, an employer shall not be 
        required to provide for payment of amounts of the employee's 
        share to a HPPC other than at the same time at which the 
        amounts are deducted from wages or other compensation. In the 
        case of an employee who is paid wages or other compensation 
        less frequently than monthly, an employer may be required to 
        provide for payment of amounts under paragraph (1)(B) to a HPPC 
        on a monthly basis.
    (d) Limited Employer Obligations.--Nothing in this section shall be 
construed as--
            (1) requiring an employer to provide directly for 
        enrollment of eligible employees under a QHP or other health 
        plan,
            (2) requiring the employer to make, or preventing the 
        employer from making, information about such plans available to 
        such employees, or
            (3) requiring the employer to make, or preventing the 
        employer from making, an employer contribution for coverage of 
        such individuals under such a plan.
    (e) Refusal to Enter into Agreement.--A HPPC may refuse to enter 
into an agreement under this section with a small employer if less than 
a percentage (specified by the HPPC, consistent with rules of the 
Secretary) of the otherwise eligible employees of the employer are 
enrolled with a QHP pursuant to such agreement.

SEC. 225. AGREEMENTS WITH QUALIFIED HEALTH PLANS (QHPs).

    (a) Agreements.--
            (1) In general.--Each HPPC for a HPPC area shall enter into 
        an agreement under this section with each qualified health plan 
        that serves residents of the area. Each such agreement under 
        this section between a QHP and a HPPC shall include (as 
        specified by the Secretary) provisions consistent with the 
        requirements of the succeeding subsections of this section. 
        Except as provided in paragraph (2)(A), a HPPC may not refuse 
        to enter into such an agreement with a QHP.
            (2) Termination of agreement.--In accordance with 
        regulations of the Secretary--
                    (A) the HPPC may terminate an agreement under 
                paragraph (1) if the QHP's approval under this subtitle 
                is terminated, and
                    (B) the QHP may terminate such an agreement only 
                upon sufficient notice in order to provide for the 
                orderly enrollment of enrollees under other QHPs.
        The Secretary shall establish a process for the termination of 
        agreements under this paragraph.
    (b) Offer of Enrollment Under Plan.--
            (1) In general.--Under an agreement under this section 
        between a QHP and a HPPC, the HPPC--
                    (A) shall offer, on behalf of the QHP, enrollment 
                in the QHP to eligible employees, and
                    (B) may offer, on behalf of the QHP, enrollment in 
                the QHP to eligible residents.
            (2) Timing of offer.--The offer of enrollment shall be 
        available on a continuous, year-round basis, consistent with 
        section 2104 of the Social Security Act (as added by section 
        202 of this Act).
    (c) Receipt of Gross Premiums.--
            (1) In general.--Under an agreement under this section 
        between a HPPC and a QHP, payment of premiums shall be made, by 
        individuals or employers on their behalf, directly to the HPPC 
        for the benefit of the QHP.
            (2) Timing of payment of premiums.--Premiums shall be 
        payable on a monthly basis (or, at the option of an eligible 
        resident, on a quarterly basis). The HPPC may provide for 
        penalties and grace periods for late payment.
            (3) QHPs retain risk of nonpayment.--Nothing in this 
        subsection shall be construed as placing upon a HPPC any risk 
        associated with failure to make prompt payment of premiums 
        (other than the portion of the premium representing the HPPC 
        overhead amount). Each eligible individual who enrolls with a 
        QHP through the HPPC is liable to the QHP for premiums.
    (d) Collection and Forwarding of Premiums.--
            (1) Premium charged.--Under an agreement under this section 
        between a QHP and a HPPC, the HPPC shall charge, with respect 
        to the enrollment of eligible individuals in the plan through 
        the HPPC, an amount equal to the sum of--
                    (A) the premium rate established by the plan 
                (consistent with section 2104(c) of the Social Security 
                Act) for the type of enrollment, and
                    (B) the HPPC overhead amount (established under 
                subsection (e) for enrollment of individuals through 
                the HPPC).
            (2) Amount forwarded.--Under an agreement under this 
        section between a QHP and a HPPC, the HPPC shall forward to 
        each QHP in which an eligible individual has been enrolled an 
        amount equal to the premium rate established by the plan 
        (consistent with section 2104(c) of the Social Security Act) 
        for the type of enrollment.
            (3) Payments.--Payments shall be made by the HPPC under 
        this subsection to a QHP within a period (specified by the 
        Secretary and not to exceed 7 days) after receipt of the 
        premium from the employer of the eligible individual or the 
        eligible individual, as the case may be.
            (4) Adjustments for differences in nonpayment rates.-- In 
        accordance with rules established by the Secretary, each 
        agreement between a QHP and a HPPC under this section shall 
        provide that, if a HPPC determines that the rates of nonpayment 
        of premiums during grace periods established under subsection 
        (c)(2) vary appreciably among QHPs, the HPPC shall provide for 
        such adjustments in the payments made under this subsection as 
        will place each QHP in the same position as if the rates of 
        nonpayment were the same.
    (e) HPPC Overhead Amount.--
            (1) HPPC budget.--Each HPPC shall establish a budget for 
        each year for each HPPC area in accordance with regulations 
        established by the Secretary.
            (2) HPPC overhead amount.--Based upon the budget, the HPPC 
        shall compute HPPC overhead amounts so that--
                    (A) the amounts vary by type of enrollment based 
                upon factors (specified by the Secretary) reflecting 
                the relative average premium amounts established for 
                the different types of enrollment,
                    (B) subject to subparagraph (C), the total of such 
                amounts are projected to equal the budget established 
                under paragraph (1), and
                    (C) the average overhead amount for a type of 
                enrollment does not exceed 5 percent of the average 
                premium amounts imposed for that type of enrollment.

SEC. 226. ENROLLING INDIVIDUALS IN QUALIFIED HEALTH PLANS THROUGH A 
              HPPC.

    (a) In General.--Each HPPC shall offer in accordance with this 
section eligible employees (and, at the option of the HPPC, eligible 
residents) the opportunity to enroll in a QHP for the HPPC area in 
which the individual resides.
    (b) Enrollment Process.--Each HPPC shall establish an enrollment 
process in accordance with rules established by the Secretary.
    (c) Distribution of Comparative Information.--Each HPPC shall 
distribute, to eligible individuals and participating employers, 
information, in comparative form, on the prices, outcomes, enrollee 
satisfaction, and other information pertaining to the quality of the 
different QHPs for which it is offering enrollment. Each HPPC also 
shall make such information available to other interested persons.
    (d) Period of Coverage.--
            (1) In general.--Except as the Secretary may provide, in 
        the case of an eligible individual who enrolls with a QHP 
        through a HPPC, coverage under the plan shall begin on such 
        date (not later than the first day of the first month that 
        begins at least 15 days after the date of enrollment) as the 
        Secretary shall specify.
            (2) Minimum period of enrollment.--In order to avoid 
        adverse selection, each HPPC may require, consistent with rules 
        of the Secretary, that enrollment with QHPs be for not less 
        than 1 year (with exceptions permitted for such exceptional 
        circumstances as the Secretary may recognize).

SEC. 227. COORDINATION AMONG HPPCS.

    (a) In General.--The Secretary shall establish rules consistent 
with this section for coordination among HPPCs in cases where 
participating employers are located in one HPPC area and their 
employees reside in a different HPPC area (and are eligible for 
enrollment with QHPs located in the other area).
    (b) Coordination Rules.--Under the rules established under 
subsection (a)--
            (1) HPPC for employer.--The HPPC for the principal place of 
        business of an employer shall be responsible--
                    (A) for providing information to the employer's 
                employees on QHPs for areas in which employees reside;
                    (B)(i) for enrolling employees under the QHP 
                selected (even if the QHP selected is not in the same 
                HPPC area as the HPPC) and (ii) if the QHP chosen is 
                not in the same HPPC area as the HPPC, for forwarding 
                the enrollment information to the HPPC for the area in 
                which the QHP selected is located; and
                    (C) in the case of premiums to be paid through 
                payroll deduction, to receive such premiums and forward 
                them to the HPPC for the area in which the QHP selected 
                is located.
            (2) HPPC for employee residence.--The HPPC for the HPPC 
        area in which an employee resides shall be responsible for 
        providing other HPPCs with information concerning QHPs being 
        offered in the HPPC's areas.

SEC. 228. DEFINITIONS.

    (a) Eligibility.--In this title:
            (1) Eligible individual.--The term ``eligible individual'' 
        means, with respect to a HPPC area, an individual who--
                    (A) is an eligible employee (as defined in 
                paragraph (2)),
                    (B) is an eligible resident (as defined in 
                paragraph (4)), or
                    (C) an eligible family member (as defined in 
                paragraph (3)) of an eligible employee or eligible 
                resident.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to a HPPC area, an individual residing in 
        the area who is the employee of a participating employer.
            (3) Eligible family member.--The term ``eligible family 
        member'' means, with respect to an eligible employee or other 
        principal enrollee, an individual who is residing in the United 
        States and--
                    (A) is the spouse of the employee or principal 
                enrollee, or
                    (B) is an unmarried dependent child under 22 years 
                of age, including--
                            (i) an adopted child or recognized natural 
                        child, and
                            (ii) a stepchild or foster child but only 
                        if the child lives with the employee or 
                        principal enrollee in a regular parent-child 
                        relationship,
                or such an unmarried dependent child regardless of age 
                who is incapable of self-support because of mental or 
                physical disability which existed before age 22.
            (4) Eligible resident.--The term ``eligible resident'' 
        means, with respect to a HPPC area, an individual who--
                    (A) is residing in the area, and
                    (B) is not an eligible employee.
            (5) Participating employer.--The term ``participating 
        employer'' means an employer that has an agreement in effect 
        with a HPPC under section 224.
    (b) Abbreviations.--In this title:
            (1) HPPC; health plan purchasing cooperative.--The terms 
        ``health plan purchasing cooperative'' and ``HPPC'' mean a 
        health plan purchasing cooperative established under this part.
            (2) Qualified hmo; qualified health maintenance 
        organization.--The terms ``qualified HMO'' and ``qualified 
        health maintenance organization'' mean a health benefit plan 
        that--
                    (A) is an eligible organization having a contract 
                under section 1876 of the Social Security Act, or
                    (B) is a qualified health maintenance organization 
                (as defined in section 1310(d) of the Public Health 
                Service Act).
            (3) QHP; qualified health plan.--The terms ``qualified 
        health plan'' and ``QHP'' mean a health plan approved by the 
        Secretary under section 251(a).
    (c) Other Terms.--In this title:
            (1) Health benefit plan.--The term ``health benefit plan'' 
        has the meaning given such term in section 2108(3) of the 
        Social Security Act, as added by section 302 of this Act.
            (2) Small employer.--The term ``small employer'' has the 
        meaning given such term in section 2103(d)(2) of the Social 
        Security Act (as added by section 302 of this Act).
            (4) State.--The term ``State'' includes the District of 
        Columbia.
            (5) Type of enrollment.--There are 2 ``types of 
        enrollment'':
                    (A) Coverage only of an individual (referred to in 
                this subtitle as enrollment ``on an individual 
                basis'').
                    (B) Coverage of a family consisting of more than 1 
                individual (referred to in this subtitle as enrollment 
                ``on a family basis'').

            Part 2--Requirements for Qualified Health Plans

SEC. 251. APPROVAL PROCESS; QUALIFICATIONS.

    (a) In General.--The Secretary shall provide a process whereby a 
health benefit plan (as defined in section 228(c)(1)) may be approved 
as a qualified health plan.
    (b) Qualifications.--
            (1) In general.--In order to be approved as a QHP, a plan 
        must--
                    (A) provide, in accordance with section 252, for 
                coverage of the core group of benefits;
                    (B) subject to paragraph (2), be a qualified health 
                maintenance organization (as defined in section 
                228(b)(2));
                    (C) have been certified under section 2101 of the 
                Social Security Act as meeting the standards 
                established under title XXI of such Act (including 
                standards relating to prohibiting discrimination based 
                on health status, to open enrollment, use of community-
                rated premiums, etc.);
                    (D) meet standards established by the Secretary to 
                protect enrollees with respect to potential insolvency; 
                and
                    (E) provide, in accordance with the national 
                patient outcomes data reporting program under subtitle 
                C, for the collection and reporting to the Secretary of 
                certain information regarding its enrollees and 
                provision of services.
            (2) Waiver of qualified hmo requirement.--A HPPC may waive 
        the requirement of paragraph (1)(B) in the case of such plans 
        as it determines will promote access to quality, cost effective 
        health care in the HPPC area. However, any such plan that is 
        not a qualified health maintenance organization must meet the 
        following additional requirements:
                    (A)  Effective grievance procedures.--The plan must 
                provide for effective procedures for hearing and 
                resolving grievances between the plan and individuals 
                enrolled under the plan, which procedures meet 
                standards specified by the Secretary.
                    (B) Restriction on certain physician incentive 
                plans.--
                            (i) In general.--If the plan operates a 
                        physician incentive plan (as defined in clause 
                        (ii)), the incentive plan must meet the 
                        requirements specified in clauses (i) through 
                        (iii) of section 1876(i)(8)(A) of the Social 
                        Security Act (in the same manner as they apply 
                        to eligible organizations under section 1876 of 
                        such Act).
                            (ii) Physician incentive plan defined.--In 
                        this subparagraph, the term ``physician 
                        incentive plan'' means any compensation or 
                        other financial arrangement between a plan and 
                        a physician or physician group that may 
                        directly or indirectly have the effect of 
                        reducing or limiting services provided with 
                        respect to individuals enrolled under the plan.
                    (C) Written policies and procedures respecting 
                advance directives.--The plan must meet the 
                requirements of section 1866(f) of the Social Security 
                Act (relating to maintaining written policies and 
                procedures respecting advance directives), insofar as 
                such requirements would apply to the plan if the plan 
                were an eligible organization.
    (c) Protection Against Provider Claims.--In the case of a failure 
of a QHP to make payments with respect to an individual enrolled under 
the plan through a HPPC, under standards established by the Secretary, 
the individual is not liable to any health care provider or 
practitioner with respect to the provision of health services within 
such package of benefits covered in excess of the amount for which the 
enrollee would have been liable if the plan had made payments in a 
timely manner.

SEC. 252. BENEFIT PACKAGES.

    (a) Requirement of Offering.--The Secretary may not approve a 
qualified health plan unless, subject to subsection (b), the plan--
            (1) offers, as a separate and distinct benefit package, the 
        core benefit package specified pursuant to subsection (c);
            (2) has entered into arrangements with a sufficient number 
        and variety of providers to provide for its enrollees benefits 
        under such core benefit package without imposing cost-sharing 
        in excess of the cost-sharing permitted under such benefit 
        package and (except for an indemnity plan) does not permit 
        providers participating in the plan to charge for services 
        covered under the core benefit package amounts in excess of the 
        cost-sharing permitted under such package; and
            (3) provides, in the case of individuals covered under more 
        than one qualified health plan, for coordination of coverage 
        under such plans in an equitable manner specified by the 
        Secretary.
    (b) Treatment of Additional, Optional Benefits.--A QHP may also 
offer benefits in addition to (and not duplicative of) the core benefit 
package (including reducing cost-sharing below the cost-sharing 
provided for in such package), if such additional benefits--
            (1) are offered, and priced, separately from the core 
        benefit package, and
            (2) are only offered consistent with such standard, 
        incremental benefit packages as the Secretary specifies under 
        subsection (c).
    (c) Specification of Benefit Packages.--
            (1) In general.--The Secretary shall specify the services 
        and cost-sharing to be included in--
                    (A) the core benefit package under this subtitle, 
                and
                    (B) additional incremental benefit packages under 
                this subtitle.
            (2) Core benefit package.--
                    (A) Based on medicare benefits.--Except as provided 
                in subparagraph (B), the services and cost-sharing in 
                the core benefit package shall be the same as the 
                services and cost-sharing provided under the medicare 
                program.
                    (B) Additional benefits.--The core benefit package 
                also shall include the following:
                            (i) No limit on days of coverage of 
                        inpatient hospital services based on a spell of 
                        illness.
                            (ii) An annual limitation on out-of-pocket 
                        costs for cost-sharing (not including premiums 
                        and extra-billing amounts) of $2,500 for 
                        individual enrollment and $3,000 for family 
                        enrollment.
                            (iii) Instead of the deductible for 
                        inpatient hospital services under part A of 
                        title XVIII of the Social Security Act and the 
                        general deductible applicable under part B of 
                        such title (subject to clause (v)), there shall 
                        be imposed an annual deductible of $300 for 
                        each individual (but not to exceed $600 for all 
                        individuals in a family).
                            (iv) Benefits for maternity care, well-
                        child care, and other preventive services 
                        (identified by the Secretary), without the 
                        imposition of deductibles or other cost-
                        sharing.
                            (v) In the case of qualified health 
                        maintenance organizations, cost-sharing for 
                        deductibles and copayments shall be nominal, 
                        consistent with standards for such cost-sharing 
                        permitted of qualified health maintenance 
                        organizations under title XIII of the Public 
                        Health Service Act.
                The Secretary may change, on an annual basis, the 
                dollar amounts specified under this subparagraph based 
                on changes in an appropriate index.
            (4) Changes in core benefit package.--The Secretary, after 
        appropriate advance notice, shall change the core benefit 
        package in order to reflect changes in the benefits under the 
        medicare program which are not reflected in paragraph (3).
            (5) Overriding of state benefit mandates.--Any State 
        requirement relating to the provision or coverage of benefits 
        under health plans shall not apply to the benefits provided by 
        qualified health plans through HPPCs under this subtitle.

 Subtitle C--National Patient Outcomes and Enrollee Satisfaction Data 
                           Reporting Program

SEC. 271. NATIONAL PATIENT OUTCOMES PROGRAM.

    (a) In General.--The Secretary shall establish a national data base 
on patient outcomes (in this section referred to as the ``outcomes data 
base'') in accordance with this section.
    (b) Collection of Uniform Data Base.--In order to collect 
information in the outcomes data base in a uniform format--
            (1) By not later than January 1, 1995, the Secretary shall 
        define and publish the uniform outcomes data that would be 
        collected.
            (2) By not later than July 1, 1995, the Secretary shall 
        establish, by regulation, the reporting requirements for the 
        routine collection of the outcomes data.
            (3) By not later than January 1, 1996, the Secretary shall 
        require all qualified health maintenance organizations, all 
        other health benefit plans, and all health care providers to 
        begin reporting on an annual basis the outcomes data to the 
        Secretary pursuant to the regulations.
    (c) Publication and Distribution of National Outcomes Data Base.--
The Secretary shall publish and distribute an annual report regarding 
patient outcomes, including information on individual providers, based 
on information from the outcomes data base and appropriate utilization 
information available from the QHPs.

SEC. 272. ENROLLEE HEALTH PLAN SATISFACTION.

    (a) In General.--The Secretary shall establish a national data base 
on enrollee satisfaction with health benefit plans (including self-
insured health benefit plans) (in this section referred to as the 
``enrollee data base'') in accordance with this section.
    (b) Collection of Uniform Data Base.--In order to collect 
information in the enrollee data base in a uniform format--
            (1) By not later than July 1, 1995, the Secretary shall 
        define and publish the enrollee satisfaction survey to be used 
        by health benefit plans in collecting data under this section.
            (2) By not later than January 1, 1996, the Secretary shall 
        require all health benefit plans to begin reporting on an 
        annual basis the data to the Secretary pursuant to the 
        regulations.
    (c) Publication and Distribution of Data Base.--The Secretary shall 
publish and distribute an annual report regarding enrollee satisfaction 
with the different health plans based on information from the enrollee 
data base.

SEC. 273. RESEARCH AND DEMONSTRATION.

    (a) In General.--The Secretary shall provide for research and 
demonstration projects concerning--
            (1) new methods for collecting and analyzing outcomes and 
        enrollee satisfaction information under this subtitle, and
            (2) the use of outcomes information systems by qualified 
        health maintenance organizations, health benefits plans, and 
        providers of health care services.
The Secretary may also provide for research and demonstration projects 
concerning the collection and analysis of indicators of system 
performance (such as health status of community served, prevention of 
illness, and capacity of delivery system) with respect to integrated 
health care delivery systems.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated $20,000,000 in each of fiscal years 1994 through 1998 to 
carry out this section.

   Subtitle D--Study of Universal Health Insurance Coverage and Cost 
                              Containment

SEC. 291. STUDY.

    (a) In General.--The Congressional Budget Office shall conduct a 
study on the different options for providing universal health insurance 
coverage in the United States. Such study shall identify the following:
            (1) Options.--The cost of the different coverage options.
            (2) Cost containment.--The effectiveness of the different 
        options in cost containment.
            (3) Revenues required.--The revenue levels required for the 
        different options.
            (4) Financing options.--Options for financing these revenue 
        levels, including--
                    (A) the distributional impact of these revenue 
                options, and
                    (B) with respect to the option of imposing a 
                geographic-area specific limit on the tax-favored 
                status of employer payment for health care for 
                employees, former employees, and dependents, the 
                revenue, administrative, and distributive impact of 
                imposing such limits.
    (b) Assistance of Joint Tax Committee.--The Joint Committee on Tax 
shall provide such assistance to the Congressional Budget Office as may 
be required to conduct the study under this section.
    (c) Report.--The Director of the Congressional Budget Office shall 
submit, by not later than January 1, 1994, a report on the study 
conducted under this section to the Committees on Ways and Means and 
Energy and Commerce of the House of Representatives and the Committee 
on Finance of the Senate.

                    TITLE III--HEALTH SYSTEMS REFORM

                  Subtitle A--Health Insurance Reform

SEC. 301. EXCISE TAX ON PREMIUMS RECEIVED ON HEALTH INSURANCE POLICIES 
              WHICH DO NOT MEET CERTAIN REQUIREMENTS.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to taxes on group health plans) is amended by adding at the 
end thereof the following new section:

``SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS FOR HEALTH 
              INSURANCE.

    ``(a) Imposition of Tax.--
            ``(1) General rule.--There is hereby imposed a tax on any 
        nonqualified health benefit plan.
            ``(2) Nonqualified health benefit plan defined.--For 
        purposes of this section, the term `nonqualified health benefit 
        plan' means any health benefit plan that--
                    ``(A) is not certified under section 2101 of the 
                Social Security Act, or
                    ``(B) the Secretary of Health and Human Services 
                determines is providing coverage in violation of 
                section 2101(a) of such Act.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of tax imposed by subsection 
        (a) shall be equal to--
                    ``(A) in the case of an insured health benefit 
                plan, 50 percent of the gross premiums received by the 
                issuer which are attributable to the period during 
                which the plan is a nonqualified health benefit plan, 
                and
                    ``(B) in the case of a self-insured health benefit 
                plan, 50 percent of the expenditures under such plan 
                during the period that the plan is a nonqualified 
                health benefit plan.
            ``(2) Gross premiums.--For purposes of paragraph (1)(A), 
        gross premiums shall include any consideration received with 
        respect to any insured health benefit plan.
            ``(3) Controlled groups.--For purposes of paragraph (1)--
                    ``(A) Controlled group of corporations.--All 
                corporations which are members of the same controlled 
                group of corporations shall be treated as 1 person. For 
                purposes of the preceding sentence, the term 
                `controlled group of corporations' has the meaning 
                given to such term by section 1563(a), except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and 
                        (e)(3)(C) of section 1563.
                    ``(B) Partnerships, proprietorships, etc., which 
                are under common control.--Under regulations prescribed 
                by the Secretary, all trades or business (whether or 
                not incorporated) which are under common control shall 
                be treated as 1 person. The regulations prescribed 
                under this subparagraph shall be based on principles 
                similar to the principles which apply in the case of 
                subparagraph (A).
    ``(c) Liability for Tax.--
            ``(1) Insured plan.--In the case of an insured health 
        benefit plan, the issuer of the insurance or subscriber 
        contract under which such plan is provided shall be liable for 
        the tax imposed by this section.
            ``(2) Self-insured plan.--In the case of a self-insured 
        plan--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the employer maintaining such plan 
                shall be liable for the tax imposed by this section.
                    ``(B) Multiemployer plans, etc.--In the case of a 
                multiemployer plan or any other plan not maintained by 
                an employer, the plan shall be liable for the tax 
                imposed by this section.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Health benefit plan.--
                    ``(A) In general.--The term `health benefit plan' 
                means any plan or contract under which any medical 
                benefit is provided to any individual.
                    ``(B) Certain plans and contracts not covered.--The 
                term `health benefit plan' does not include any plan or 
                contract--
                            ``(i) which provides for accident only, 
                        dental only, or disability only coverage,
                            ``(ii) which provides coverage as a 
                        supplement to liability insurance, and
                            ``(iii) which provides insurance arising 
                        out of a workers' compensation or similar law, 
                        or automobile medical-payment insurance.
            ``(2) Insured health benefit plan.--The term `insured 
        health benefit plan' means any health benefit plan provided 
        through insurance, and includes a prepaid hospital or medical 
        service plan, the health benefit plan of a health maintenance 
        organization, and a multiple employer welfare arrangement (as 
        defined in section 3(40) of the Employee Retirement Income 
        Security Act of 1974).
            ``(3) Medical benefit.--The term `medical benefit' means 
        any benefit which consists of the providing (through insurance 
        or otherwise) of medical care (as defined in section 213(d)).
            ``(4) Self-insured health benefit plan.--The term `self-
        insured health benefit plan' means any health benefit plan that 
        is not an insured health benefit plan.''
    (b) Nondeductibility of Tax.--Subsection (a) of section 275 of such 
Code (relating to nondeductibility of certain taxes) is amended by 
adding at the end thereof the following new paragraph:
            ``(7) Taxes imposed by section 5000A (failure to satisfy 
        certain standards for health insurance).''
    (c) Clerical Amendments.--
            (1) So much of chapter 47 of such Code as precedes 
        subsection (a) of section 5000 is amended to read as follows:

          ``CHAPTER 47--TAXES RELATING TO HEALTH BENEFIT PLANS

                              ``Sec. 5000. Contributions to 
                                        nonconforming large group 
                                        health plans.
                              ``Sec. 5000A. Failure to satisfy certain 
                                        standards for health insurance.

``SEC. 5000. CONTRIBUTIONS TO NONCONFORMING LARGE GROUP HEALTH PLANS.''

            (2) The table of chapters for subtitle D of such Code is 
        amended by striking the item relating to chapter 47 and 
        inserting the following new item:

                              ``Chapter 47. Taxes relating to health 
                                        benefit plans.''

SEC. 302. HEALTH BENEFIT PLAN STANDARDS.

    The Social Security Act is amended by adding at the end the 
following new title:

               ``TITLE XXI--HEALTH BENEFIT PLAN STANDARDS

``SEC. 2101. STANDARDS AND REQUIREMENTS FOR HEALTH BENEFIT PLANS.

    ``(a) Certification Required.--
            ``(1) In general.--No health benefit plan (as defined in 
        section 2108(3)) may be issued on or after the effective date 
        specified in subsection (d) (and no new contract may be offered 
        under such plan with respect to any individual or group 
        beginning on or after such effective date) unless the plan has 
        been certified--
                    ``(A) by the Secretary (in accordance with such 
                procedures as the Secretary establishes), or
                    ``(B) by a State regulatory program (approved under 
                subsection (b)),
        as meeting the standards established under section 2102 by such 
        effective date.
            ``(2) Plan disapproved.--If the Secretary (or, in the case 
        of a plan certified by a State regulatory program, the State) 
        determines that a health benefit plan does not meet the 
        applicable standards of this title on or after such effective 
        date, no coverage may be provided under the plan to individuals 
        not enrolled as of the date of the determination and the plan 
        may not be continued for plan years beginning after the date of 
        such determination until the Secretary (or program) determines 
        that such plan is in compliance with such standards.
    ``(b) State Approved Programs.--
            ``(1) In general.--If the Secretary determines that a State 
        has in effect an effective regulatory program for the 
        application of the standards established under section 2102 to 
        health benefit plans, the Secretary may approve such program 
        for purposes of certification of health benefit plans under 
        this title.
            ``(2) Annual reports.--As a condition for the continued 
        approval of such a regulatory program, the State shall report 
        to the Secretary annually such information as the Secretary may 
        require with respect to the performance of the program. Such 
        information shall include a list of the health benefit plans 
        certified under the program, the compliance of such plans with 
        the standards established under section 2102, and enforcement 
        actions taken to ensure such compliance.
            ``(3) Periodic secretarial review of state regulatory 
        programs.--The Secretary annually shall review State regulatory 
        programs approved under paragraph (1) to determine if they 
        continue to apply and enforce the standards. If the Secretary 
        initially determines that a State regulatory program no longer 
        is applying and enforcing such standards, the Secretary shall 
        provide the State an opportunity to adopt such a plan of 
        correction that would bring such program into compliance. If 
        the Secretary makes a final determination that the State 
        regulatory program, fails to apply and enforce such standards 
        after such an opportunity, the Secretary shall disapprove such 
        program and reassume responsibility for certification of all 
        health benefit plans in that State.
            ``(4) GAO audits.--The Comptroller General shall conduct 
        periodic reviews on a sample of State regulatory programs 
        approved under paragraph (1) to determine their compliance with 
        the requirements of such paragraph. The Comptroller General 
        shall report to the Secretary and Congress on the findings of 
        such reviews.
    ``(c) Excise Tax Sanctions.--For application of excise tax in the 
case of a nonqualified health benefit plan, see section 5000A of the 
Internal Revenue Code of 1986.
    ``(d) Effective Date.--The effective date specified in this 
subsection is January 1, 1994.

``SEC. 2102. ESTABLISHMENT OF STANDARDS.

    ``(a) Establishment of Standards.--The Secretary shall develop and 
publish, by not later than October 1, 1993, specific standards to 
implement the requirements of this title and to be applied under 
section 5000A of the Internal Revenue Code of 1986.
    ``(b) More Stringent State Standards Permitted.--In the case of 
insured health benefit plans, a State may implement standards that are 
more stringent than the standards established under this section.
    ``(c) Application to ERISA.--The Secretary shall consult with the 
Secretary of Labor concerning the application of the requirements of 
this title to employee welfare benefit plans under title I of the 
Employee Retirement Income Security Act of 1974.

``SEC. 2103. REQUIREMENTS APPLICABLE TO ALL HEALTH BENEFIT PLANS.

    ``(a) No Discrimination Based on Health Status.--
            ``(1) Provision of services.--Except as provided under 
        subsections (b) and (c), a health benefit plan may not deny, 
        limit, or condition the coverage under (or benefits of) the 
        plan based on the health status, claims experience, receipt of 
        health care, medical history, or lack of evidence of 
        insurability, of an individual.
            ``(2) Premium charges within self-insured health benefit 
        plans.--A self-insured health benefit plan may not vary 
        premiums charged based on the health status, claims experience, 
        receipt of health care, medical history, or lack of evidence of 
        insurability, of an individual.
    ``(b) Treatment of Pre-existing Condition Exclusions for All 
Services.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a health benefit plan may exclude coverage 
        with respect to services related to treatment of a pre-existing 
        condition, but the period of such exclusion may not exceed 6 
        months.
            ``(2) Nonapplication to newborns.--The exclusion of 
        coverage permitted under paragraph (1) shall not apply to 
        services furnished to newborns.
            ``(3)  Crediting of previous coverage.--
                    ``(A) In general.--If an individual is in a period 
                of continuous coverage (as defined in subparagraph 
                (B)(i)) with respect to particular services as of the 
                date of initial coverage under a plan, any period of 
                exclusion of coverage with respect to a pre-existing 
                condition for such services or type of services shall 
                be reduced by 1 month for each month in the period of 
                continuous coverage.
                    ``(B) Definitions.--In this paragraph:
                            ``(i) Period of continuous coverage.--The 
                        term `period of continuous coverage' means, 
                        with respect to particular services, the period 
                        beginning on the date an individual is enrolled 
                        under a health benefit plan or program 
                        (including the medicare program, a State plan 
                        under title XIX, continuation coverage under 
                        section 4980B of the Internal Revenue Code of 
                        1986, or a State general medical assistance 
                        program) which provides the same or 
                        substantially similar benefits with respect to 
                        such services and ends on the date the 
                        individual is not so enrolled for a continuous 
                        period of more than 3 months.
                            ``(ii) Pre-existing condition.--The term 
                        `pre-existing condition' means, with respect to 
                        coverage under a plan, a condition which has 
                        been diagnosed or treated during the 3-month 
                        period ending on the day before the first date 
                        of such coverage, except that such term does 
                        not include a condition which was first 
                        diagnosed or treated during a period of 
                        continuous coverage.
                    ``(C) Standards for similar benefits.--The 
                Secretary shall establish such criteria for determining 
                if benefits are substantially similar as may be 
                necessary to carry out this subsection.
    ``(c) Exclusion of Collectively Bargained Health Benefit Plans.--In 
the case of a health benefit plan established or maintained under or 
pursuant to one or more collective bargaining agreements, the plan may 
exclude from coverage individuals who are not covered under the plan or 
pursuant to one of such collective bargaining agreements.
    ``(d) Small Employers Cannot Offer Self-Insured Plans.--
            ``(1) In general.--No health benefit plan of a small 
        employer may be certified under this title unless such plan is 
        an insured health benefit plan.
            ``(2) Small employer defined.--
                    ``(A) In general.--In paragraph (1), the term 
                `small employer' means, with respect to a plan year, an 
                employer that normally employs more than 1 but less 
                than 101 eligible employees on a typical business day 
                during such year.
                    ``(B) Eligible employee.--For purposes of 
                subparagraph (A), the term `eligible employee' means, 
                with respect to an employer, an employee who normally 
                performs on a monthly basis at least 17\1/2\ hours of 
                service per week for that employer. For the purposes of 
                this paragraph, the term `employee' includes a self-
                employed individual.
            ``(3) Controlled groups.--For purposes of paragraph (2)--
                    ``(A) Controlled group of corporations.--All 
                corporations which are members of the same controlled 
                group of corporations shall be treated as 1 person. For 
                purposes of the preceding sentence, the term 
                `controlled group of corporations' has the meaning 
                given to such term by section 1563(a) of the Internal 
                Revenue Code of 1986, except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1) of such 
                        Code, and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and 
                        (e)(3)(C) of section 1563 of such Code.
                    ``(B) Partnerships, proprietorships, etc., which 
                are under common control.--Under regulations prescribed 
                by the Secretary of the Treasury, all trades or 
                business (whether or not incorporated) which are under 
                common control shall be treated as 1 person. The 
                regulations prescribed under this subparagraph shall be 
                based on principles similar to the principles which 
                apply in the case of subparagraph (A).
            ``(4) Exception.--Paragraph (1) shall not apply to a health 
        benefit plan that is exempt from treatment as a multiple 
        employer welfare benefit plan because of section 3(40)(A)(ii) 
        of the Employee Retirement Income Security Act of 1974.

``SEC. 2104. STANDARDS APPLICABLE ONLY TO INSURED HEALTH BENEFIT PLANS.

    ``(a) Open Enrollment.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a carrier that offers an insured health 
        benefit plan to individuals residing (or to groups located) in 
        a State must offer the same plan to any other resident of (or 
        group located in) the State. Such requirement shall apply on a 
        continuous, year-round basis.
            ``(2) Restrictions of enrollment in the case of certain 
        association coverage.--In the case of an insured health benefit 
        plan offered through an association which is composed 
        exclusively of employers (which may include self-employed 
        individuals) and which has been formed for purposes other than 
        obtaining health insurance, the carrier is not required to 
        offer the plan to individuals or employers who are not 
        employees of such employers or self-employed members of the 
        association, or their dependents.
            ``(3) Treatment of health maintenance organizations.--
                    ``(A) Geographic limitations.--A health maintenance 
                organization may deny enrollment with respect to an 
                individual if the individual is residing outside the 
                service area of the organization, but only if such 
                denial is applied uniformly without regard to health 
                status or insurability.
                    ``(B) Size limits.--A health maintenance 
                organization may apply to the Secretary to cease 
                enrolling new employer groups or individuals in its 
                insured health benefit plan (or in a geographic area 
                served by the plan) if--
                            ``(i) it ceases to enroll any new employer 
                        groups or individuals, and
                            ``(ii) it can demonstrate that its 
                        financial or administrative capacity to serve 
                        previously enrolled groups and individuals (and 
                        additional individuals who will be expected to 
                        enroll because of affiliation with such 
                        previously enrolled groups) will be impaired if 
                        it is required to enroll new employer groups or 
                        individuals.
    ``(b) Grounds for Refusal To Issue or Renew.--A carrier may refuse 
to issue or renew or terminate a plan only for--
            ``(1) nonpayment of premiums, and
            ``(2) fraud or misrepresentation.
    ``(c) Use of Community-Rated Premium Rates.--
            ``(1) In general.--Subject to paragraph (2), the premium 
        rate charged for an insured health benefit plan with similar 
        benefits in a community for a type of enrollment (described in 
        paragraph (4)) shall be--
                    ``(A) the same for all enrollments on a group 
                basis, and
                    ``(B) the same for all other enrollments.
            ``(2) Transition.--
                    ``(A) In general.--In the case of an insured health 
                benefit plan that charged different premium rates for 
                similar benefits in a community for a type of 
                enrollment in 1993, notwithstanding paragraph (1) the 
                percentage range (as defined in subparagraph (B)) of 
                premium rates charged--
                            ``(i) in 1994 may not be greater than \2/3\ 
                        of the premium range of premium rates charged 
                        in 1993, and
                            ``(ii) in 1995 may not be greater than \1/
                        3\ of the premium range of premium rates 
                        charged in 1993.
                    ``(B) Premium range defined.--In subparagraph (A), 
                the term `premium range' means, with respect to premium 
                rates under a plan for similar benefits in a community 
                for a type of enrollment, the quotient (expressed as a 
                percentage) of--
                            ``(i) the difference between the highest 
                        premium rate for such coverage and the lowest 
                        premium rate for such coverage, divided by
                            ``(ii) the lowest premium rate for such 
                        coverage.
            ``(3) Specification of community.--For purposes of this 
        subsection, no carrier may use a geographic area that is 
        smaller than a metropolitan statistical area as a community.
            ``(4) Types of enrollment.--For purposes of this 
        subsection, the types of enrollment in a health benefit plan 
        are individual-only coverage and coverage of a family 
        consisting of more than 1 individual.
    ``(d) Minimum Plan Period.--A carrier may not offer to, or issue 
with respect to, an individual or employer an insured health benefit 
plan with a term of less than 12 months.
    ``(e) Notices and Renewal Periods.--
            ``(1) Notice and specification of rates and administrative 
        changes.--
                    ``(A) Notice.--The carrier of an insured health 
                benefit plan shall provide for notice, at least 30 days 
                before the date of expiration of the plan, of the terms 
                for renewal of the plan. Except with respect to rates 
                and administrative changes, the terms of renewal 
                (including benefits) shall be the same as the terms of 
                issuance.
                    ``(B) Renewal rates same as issuance rates.--The 
                carrier may change the terms for such renewal, but the 
                premium rates charged with respect to such renewal 
                shall be the same as that for a new issue.
            ``(2) Period of renewal.--The period of renewal of each 
        insured health benefit plan shall be for a period of not less 
        than 12 months.

``SEC. 2105. PAYMENT OF COMMISSIONS.

    ``A carrier may not vary the remuneration paid a broker for the 
sale or renewal of any health benefit plan based, directly or 
indirectly, on the anticipated or actual claims experience associated 
with the group or individuals to which the plan was sold.

``SEC. 2106. INSURANCE REQUIREMENT FOR MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS.

    ``Each insured health benefit plan that is a multiple employer 
welfare arrangement must be offered by an entity licensed under an 
insurance law of a State.

``SEC. 2107. NONAPPLICATION IN PUERTO RICO AND THE TERRITORIES.

    ``This title shall not apply outside the 50 States or the District 
of Columbia.

``SEC. 2108. DEFINITIONS.

    ``In this title:
            ``(1) Carrier.--The term `carrier' means any person that 
        offers a health benefit plan, whether through insurance or 
        otherwise, including a licensed insurance company, a prepaid 
        hospital or medical service plan, a health maintenance 
        organization, and a multiple employer welfare arrangement.
            ``(2) Group.--The term `group' means 2 or more employees of 
        the same employer who normally perform on a monthly basis at 
        least 17\1/2\ hours of service per week for that employer.
            ``(3) Health benefit plan.--
                    ``(A) In general.--The term `health benefit plan' 
                means any plan or contract under which any medical 
                benefit is provided to any individual.
                    ``(B) Certain plans and contracts not covered.--The 
                term `health benefit plan' does not include any plan or 
                contract--
                            ``(i) which provides for accident only, 
                        dental only, or disability only coverage,
                            ``(ii) which provides coverage as a 
                        supplement to liability insurance, and
                            ``(iii) which provides insurance arising 
                        out of a workers' compensation or similar law, 
                        or automobile medical-payment insurance.
            ``(4) Health maintenance organization.--The term `health 
        maintenance organization' has the meaning given the term 
        `eligible organization' in section 1876(b).
            ``(5) Insured health benefit plan.--The term `insured 
        health benefit plan' means any health benefit plan provided 
        through insurance, and includes a prepaid hospital or medical 
        service plan, the health benefit plan of a health maintenance 
        organization, and a multiple employer welfare arrangement.
            ``(6) Medical benefit.--The term `medical benefit' means 
        any benefit which consists of the providing (through insurance 
        or otherwise) of medical care (as defined in section 213(d) of 
        the Internal Revenue Code of 1986).
            ``(7) Multiple employer welfare arrangement.--The term 
        `multiple employer welfare arrangement' has the meaning given 
        such term in section 3(40) of the Employee Retirement Income 
        Security Act of 1974.
            ``(8) Self-insured health benefit plan.--The term `self-
        insured health benefit plan' means any health benefit plan not 
        provided through insurance.
            ``(9) State.--The term `State' means the 50 States and the 
        District of Columbia.''.

SEC. 303. ASSURING CONTINUATION OF ACCESS TO COLLEGE AND UNIVERSITY 
              HEALTH BENEFIT PLANS BY GRADUATING STUDENTS.

    (a) In General.--No State shall establish or enforce any law or 
regulation that prevents the health benefit plan of a college or 
university from offering eligible individuals continuation of coverage 
under the plan.
    (b) Construction.--Nothing in this section shall be construed--
            (1) as requiring the health benefit plan of a college or 
        university to provide for the continuation coverage described 
        in subsection (a),
            (2) if such continuation coverage is provided, as requiring 
        such continuation coverage to be made available to other 
        individuals or as requiring facilities of the health benefit 
        plan to be made available to any individuals who have not 
        otherwise been associated with the college or university, or
            (3) as preventing such a health benefit plan from imposing 
        premiums for such continuation coverage.
    (c) Definitions.--In this section:
            (1) The term ``college or university'' means an institution 
        of higher education (as defined in section 1201(a) of the 
        Higher Education Act of 1965).
            (2) The term ``eligible individual'' means, with respect to 
        a college or university, an individual who--
                    (A) is enrolled under the health benefit plan of 
                the college or university as a student (or as a 
                dependent of a student), and
                    (B) whose enrollment under the plan would otherwise 
                terminate because of the graduation from the college or 
                university of the individual (or the spouse or parent 
                of the individual).
    (d) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.

               Subtitle B--Administrative Simplification

SEC. 321. REQUIREMENT FOR UNIFORM HEALTH CLAIMS CARDS.

    (a) Uniform Health Claims Cards.--
            (1) Requirement.--Each health benefit plan (as defined in 
        section 326(a)) shall issue a health claims card that meets the 
        requirements of subsection (c) for each individual who is 
        entitled to benefits under the plan and who is residing in the 
        United States. Such card shall be issued to the individual 
        involved or, in the case of an individual enrolled as a 
        dependent of another individual, to that other individual.
            (2) Deadline for application of requirement.--The deadline 
        specified under this paragraph for the requirement under 
        paragraph (1) is 6 months after the date the standards are 
        established under subsection (c).
    (b) Enforcement Through Civil Money Penalties.--
            (1) In general.--In the case of a health benefit plan that 
        fails to issue a health claims card in accordance with 
        subsection (a)(1), the plan is subject to a civil money penalty 
        of not to exceed $100 for each such violation. The provisions 
        of section 1128A of the Social Security Act (other than 
        subsections (a) and (b)) shall apply to a civil money penalty 
        under this subsection in the same manner as such provisions 
        apply to a penalty or proceeding under section 1128A(a) of such 
        Act.
            (2) Effective date.--No penalty may be imposed under 
        paragraph (1) for any failure occurring before the deadline 
        specified in subsection (a)(2).
    (c) Uniform Health Claims Cards.--
            (1) In general.--The Secretary shall establish standards 
        consistent with this subsection respecting the form and 
        information to be contained on uniform health claims cards (for 
        purposes of subsection (a)).
            (2) Electronic.--
                    (A) In general.--Subject to subparagraph (B), the 
                card shall be in a form similar to that of a credit 
                card and shall have, encoded in electronic form--
                            (i) the identity of the individual,
                            (ii) the health benefit plan in which the 
                        individual is enrolled, and
                            (iii) the telephone number or numbers to be 
                        used for the verification electronically of 
                        entitlement to benefits under the plan under 
                        section 322 and for the submission 
                        electronically of claims under the plan under 
                        section 323.
                    (B) Use of electronic read-and-write cards.--The 
                Secretary may provide for cards in an electronic form 
                that permits information on the card to be readily 
                changed. Such information may include information 
                relating to the health coverage status of the 
                individual and the medical history of the individual.
                    (C) Personal identifier.--For purposes of 
                subparagraph (A) and for purposes of claims processing 
                and related purposes under section 323, the Social 
                Security account number of the individual or, in the 
                case of an infant or other individual to whom such a 
                number has not been issued, such a Social Security 
                account number of a parent or guardian or other number 
                as the Secretary shall specify, shall be used as the 
                personal identifier for the individual.
            (3) Additional information.--The card shall include such 
        additional information, in electronic or other form, as the 
        Secretary may require to carry out the purposes of this Act. In 
        addition, the health benefit plan issuing the card may include 
        such additional information on the card as the plan desires, 
        subject to such limitations as the Secretary may provide.
            (4) Deadline.--The Secretary shall first establish the 
        standards for uniform health claims cards under this subsection 
        by not later than 12 months after the date of the enactment of 
        this Act.
    (d) Application to Medicare and Medicaid Programs.--
            (1) Medicare program.--The Secretary shall provide, in 
        regulations promulgated to carry out the medicare program, that 
        identification cards issued under that program are modified to 
        the extent required to conform to the standards established 
        under subsection (c), by not later than the deadline specified 
        in subsection (a)(2).
            (2) State medicaid plans.--As a condition for the approval 
        of a State plan under the medicaid program, effective for 
        calendar quarters beginning on or after the deadline specified 
        in subsection (a)(2), each such plan shall provide, in 
        accordance with regulations of the Secretary, that 
        identification cards issued under the plan are modified to the 
        extent required to conform to the requirements of subsection 
        (c).

SEC. 322. REQUIREMENT FOR ENTITLEMENT VERIFICATION SYSTEM.

    (a) In General.--
            (1) Requirement.--Each health benefit plan shall provide 
        for an electronic system, that is certified by the Secretary as 
        meeting the standards established under subsection (c), for the 
        verification of an individual's entitlement to benefits under 
        such plan.
            (2) Deadline for application of requirement.--The deadline 
        specified under this paragraph for the requirement under 
        paragraph (1) is 6 months after the date the standards are 
        established under subsection (c).
    (b) Enforcement Through Civil Money Penalties.--
            (1) In general.--In the case of a health benefit plan that 
        fails to provide for an electronic verification system that is 
        certified by the Secretary as meeting the standards established 
        under subsection (c), the plan is subject to a civil money 
        penalty of not to exceed $100 for each day in which such 
        failure persists. The provisions of section 1128A of the Social 
        Security Act (other than subsections (a) and (b)) shall apply 
        to a civil money penalty under this subsection in the same 
        manner as such provisions apply to a penalty or proceeding 
        under section 1128A(a) of such Act.
            (2) Effective date.--No penalty may be imposed under 
        paragraph (1) for any failure occurring before the deadline 
        specified in subsection (a)(2).
    (c) Standards for Entitlement Verification Systems.--
            (1) In general.--The Secretary shall establish standards 
        consistent with this subsection respecting the requirements for 
        certification of entitlement verification systems.
            (2) Information available.--Such standards shall require a 
        system to provide information, with respect to individuals, 
        concerning the following:
                    (A) The specific benefits to which the individual 
                is entitled under the plan.
                    (B) Current status of the individual with respect 
                to fulfillment of deductibles, copayments, and out-of-
                pocket limits on cost-sharing.
                    (C) Restrictions on providers who may provide 
                covered services, including utilization controls (such 
                as preadmission certification).
            (3) Coordination of benefit information.--Such standards 
        shall require a system to provide for the transfer among health 
        benefit plans of appropriate information in determining 
        liability in cases in which benefits may be payable under two 
        or more such plans.
            (4) Form of inquiry.--Each verification system shall be 
        capable of accepting inquiries under this subsection from 
        health care providers (and, to the extent provided under 
        paragraph (3), from other health benefit plans) in a variety of 
        electronic and other forms, including--
                    (A) through electronic transmission of information 
                on the uniform health claims card (in a manner similar 
                to that for verification of credit card purchases),
                    (B) through the use of a touch-tone telephone line, 
                and
                    (C) through the use of a computer modem.
        The system shall also provide, for an additional fee, for the 
        acceptance of inquiries in a nonelectronic form.
            (5) Form of response.--Each such system shall be capable of 
        responding to such inquiries under this subsection in a variety 
        of electronic and other forms, including--
                    (A) through modem transmission of information,
                    (B) through computer synthesized voice 
                communication, and
                    (C) through transmission of information to a 
                facsimile (fax) machine.
        The system shall also provide, for an additional fee, for the 
        response to inquiries in a nonelectronic form.
            (6) Limitation on fees.--A health benefit plan may not 
        impose a fee for the acceptance or response to an inquiry under 
        this subsection except where the acceptance or response is in a 
        nonelectronic form.
            (7) Public domain software to providers.--The Secretary 
        shall provide for the development, and shall make available 
        without charge to health service providers and health benefit 
        plans, such computer software as will enable--
                    (A) such providers to make inquiries, and receive 
                responses, electronically respecting the eligibility 
                and benefits of an individual under health benefit 
                plans, and
                    (B) such plans to make inquiries, and receive 
                responses, electronically respecting liability of other 
                plans for the provision or payment of benefits.
            (8) Deadline.--The Secretary shall first establish the 
        standards under this subsection (and shall develop and make 
        available the software under paragraph (7)) by not later than 
        12 months after the date of the enactment of this Act.
    (d) Application to Medicare and Medicaid Programs.--
            (1) Medicare program.--The Secretary shall provide, in 
        regulations promulgated to carry out the medicare program, that 
        there is established an entitlement verification system that 
        meets the standards established under subsection (c), by not 
        later than the deadline specified in subsection (a)(2).
            (2) State medicaid plans.--As a condition for the approval 
        of a State plan under the medicaid program, effective for 
        calendar quarters beginning on or after the deadline specified 
        in subsection (a)(2), each such plan shall provide, in 
        accordance with regulations of the Secretary, that there is 
        established an entitlement verification system that meets the 
        standards established under subsection (c).

SEC. 323. REQUIREMENTS FOR UNIFORM CLAIMS AND ELECTRONIC CLAIMS DATA 
              SET.

    (a) Requirements.--
            (1) Submission of claims.--Each health service provider 
        that furnishes services in the United States for which payment 
        may be made under a health benefit plan shall submit any claim 
        for payment for such services only in a form and manner 
        consistent with standards established under subsection (c).
            (2) Acceptance of claims.--A health benefit plan may not 
        reject a claim for payment under the plan on the basis of the 
        form or manner in which the claim is submitted if the claim is 
        submitted in accordance with the standards established under 
        subsection (c).
            (3) Effective date.--This subsection shall apply to claims 
        for services furnished on or after the date that is 6 months 
        after the date standards are established under subsection (c).
    (b) Enforcement Through Civil Money Penalties.--
            (1) In general.--
                    (A) Providers.--In the case of a health service 
                provider that submits a claim in violation of 
                subsection (a)(1), the provider is subject to a civil 
                money penalty of not to exceed $100 (or, if greater, 
                the amount of the claim) for each such violation.
                    (B) Plans.--In the case of a health benefit plan 
                that rejects a claim in violation of subsection (a)(2), 
                the plan is subject to a civil money penalty of not to 
                exceed $100 (or, if greater, the amount of the claim) 
                for each such violation.
            (2) Process.--The provisions of section 1128A of the Social 
        Security Act (other than subsections (a) and (b)) shall apply 
        to a civil money penalty under paragraph (1) in the same manner 
        as such provisions apply to a penalty or proceeding under 
        section 1128A(a) of such Act.
            (3) Sunset for penalty.--No civil money penalty may be 
        imposed under this subsection for submission (or rejection) of 
        any claim on or after the date that is 36 months after the 
        effective date specified in subsection (a)(3).
    (c) Standards Relating to Uniform Claims and Electronic Claims Data 
Set.--
            (1) Establishment of standards.--The Secretary shall 
        establish standards that--
                    (A) relate to the form and manner of submission of 
                claims for benefits under a health benefit plan, and
                    (B) define the data elements to be contained in a 
                uniform electronic claims data set to be used with 
                respect to such claims.
            (2) Scope of information.--
                    (A) In general.--The standards under this 
                subsection are intended to cover substantially most 
                claims that are filed under health benefit plans. Such 
                information need not include all elements that may 
                potentially be required to be reported under 
                utilization review provisions of plans.
                    (B) Ensuring accountability for claims submitted 
                electronically.--In establishing such standards, the 
                Secretary, in consultation with appropriate agencies, 
                shall include such methods of ensuring provider 
                responsibility and accountability for claims submitted 
                electronically that are designed to control fraud and 
                abuse in the submission of such claims.
                    (C) Components.--In establishing such standards the 
                Secretary shall--
                            (i) with respect to data elements, define 
                        data fields, formats, and medical nomenclature, 
                        and plan benefit and insurance information;
                            (ii) develop a single, uniform coding 
                        system for diagnostic and procedure codes; and
                            (iii) provide for standards for the uniform 
                        electronic transmission of such elements.
            (3) Coordination with standards for electronic medical 
        records.--In establishing standards under this subsection, the 
        Secretary shall assure that--
                    (A) the development of such standards is 
                coordinated with the development of the standards for 
                electronic medical records under section 324, and
                    (B) the coding of data elements under the uniform 
                electronic claims data set and the coding of the same 
                elements in the uniform hospital clinical data set are 
                consistent.
            (4) Use of task forces.--In adopting standards under this 
        subsection--
                    (A) the Secretary shall take into account the 
                recommendations of current task forces, including at 
                least the Workgroup on Electronic Data Interchange, 
                National Uniform Billing Committee, the Uniform Claim 
                Task Force, and the Computer-based Patient Record 
                Institute, and
                    (B) the Secretary shall provide that the electronic 
                transmission standards are consistent, to the extent 
                practicable, with the applicable standards established 
                by the Accredited Standards Committee X-12 of the 
                American National Standards Institute.
            (5) Uniform, unique provider identification codes.--In 
        establishing standards under this subsection--
                    (A) the Secretary shall provide for a unique 
                identifier code for each health service provider that 
                furnishes services for which a claim may be submitted 
                under a health benefit plan, and
                    (B) in the case of a provider that has a unique 
                identifier issued for purposes of the medicare program, 
                the code provided under subparagraph (A) shall be the 
                same as such unique identifier.
            (6) Public domain software to providers.--The Secretary 
        shall provide for the development, and shall make available 
        without charge to health service providers, such computer 
        software as will enable the providers to submit claims and to 
        receive verification of claims status electronically.
            (7) Standards for paper claims.--The standards shall 
        provide for a uniform paper claims form which is consistent 
        with data elements required for the submission of claims 
        electronically.
            (8) Standards for claims for clinical laboratory tests.--
        The standards shall provide that claims for clinical laboratory 
        tests for which benefits are provided under a health benefit 
        plan shall be submitted directly by the person or entity that 
        performed (or supervised the performance of) the tests to the 
        plan in a manner consistent with (and subject to such 
        exceptions as are provided under) the requirement for direct 
        submission of such claims under the medicare program.
            (9) Deadline.--The Secretary shall first provide for the 
        standards for the uniform claims under this subsection (and 
        shall develop and make available the software under paragraph 
        (6)) by not later than 1 year after the date of the enactment 
        of this Act.
    (d) Use Under Medicare and Medicaid Programs.--
            (1) Requirement for providers.--In the case of a health 
        service provider that submits a claim for services furnished 
        under the medicare program or medicaid program in violation of 
        subsection (a)(1), no payment shall be made under such program 
        for such services.
            (2) Requirements of intermediaries and carriers under 
        medicare program.--The Secretary shall provide, in regulations 
        promulgated to carry out title XVIII of the Social Security 
        Act, that the claims process provided under that title is 
        modified to the extent required to conform to the standards 
        established under subsection (c).
            (3) Requirements of state medicaid plans.--As a condition 
        for the approval of State plans under the medicaid program, 
        effective as of the effective date specified in subsection 
        (a)(3), each such plan shall provide, in accordance with 
        regulations of the Secretary, that the claims process provided 
        under the plan is modified to the extent required to conform to 
        the standards established under subsection (c).

SEC. 324. ELECTRONIC MEDICAL RECORDS AND REPORTING.

    (a) Standards for Electronic Medical Records for Hospitals.--
            (1) Promulgation of standards.--
                    (A) In general.--Between July 1, 1994, and January 
                1, 1995, the Secretary shall promulgate standards 
                described in paragraph (2) for hospitals concerning 
                electronic medical records.
                    (B) Revision.--The Secretary may from time to time 
                revise the standards promulgated under this paragraph.
            (2) Contents of standards.--The standards promulgated under 
        paragraph (1) shall include at least the following:
                    (A) A definition of a uniform hospital clinical 
                data set, including a definition of the set of 
                comprehensive data elements, for use by utilization and 
                quality control peer review organizations.
                    (B) Standards for an electronic patient care 
                information system with data obtained at the point of 
                care.
                    (C) A specification of, and manner of presentation 
                of, the individual data elements of the set and system 
                under this paragraph.
                    (D) Standards concerning the transmission of 
                electronic medical data.
                    (E) Standards relating to confidentiality of 
                patient-specific information, which include the 
                physical security of electronic data and the use of 
                keys, passwords, encryption, and other means to ensure 
                the protection of the confidentiality and privacy of 
                electronic data.
            (3) Coordination with standards for uniform electronic 
        claims data set.--In establishing standards under this 
        subsection, the Secretary shall assure that--
                    (A) the development of such standards is 
                coordinated with the development of the standards for 
                the uniform electronic claims data set under section 
                323, and
                    (B) the coding of data elements under the uniform 
                hospital clinical data set and the coding of the same 
                elements under the uniform electronic claims data set 
                are consistent.
            (4) Consultation.--in establishing standards under this 
        subsection, the Secretary shall--
                    (A) consult with the American National Standards 
                Institute, hospitals, health benefit plans, and other 
                interested parties, and
                    (B) take into consideration, in developing 
                standards under paragraph (2)(A), the data set used by 
                the utilization and quality control peer review program 
                under part B of title XI of the Social Security Act.
    (b) Requirement for Application of Electronic Records Standards to 
Hospitals.--
            (1) As condition of medicare participation.--As of January 
        1, 1996, each hospital, as a requirement of each participation 
        agreement under section 1866 of the Social Security Act, shall, 
        in accordance with the standards promulgated under subsection 
        (a)(1)--
                    (A) maintain clinical data included in the uniform 
                hospital clinical data set under subsection (a)(2)(A) 
                in electronic form on all inpatients,
                    (B) upon request of the Secretary or of a 
                utilization and quality control peer review 
                organization (with which the Secretary has entered into 
                a contract under part B of title XI of such Act), 
                transmit electronically data requested from such data 
                set, and
                    (C) upon request of the Secretary, or of a fiscal 
                intermediary or carrier, transmit electronically any 
                data (with respect to a claim) from such data set.
            (2) Application of presentation and transmission standards 
        to electronic transmission to federal agencies.--Effective 
        January 1, 1996, if a hospital is required under a Federal 
        program to transmit a data element that is subject to a 
        standard, promulgated under subsection (a)(1), described in 
        subparagraph (C) or (D) of subsection (a)(2), the head of the 
        Federal agency responsible for such program (if not otherwise 
        authorized) is authorized to require the provider to present 
        and transmit the data element electronically in accordance with 
        such a standard.
    (c) Limitation on Data Requirements Where Standards In Effect.--
            (1) In general.--On or after January 1, 1996, a health 
        benefit plan may not require, for the purpose of utilization 
        review or as a condition of providing benefits or making 
        payments under the plan, that a hospital--
                    (A) provide any data element not in the uniform 
                hospital clinical data set specified under the 
                standards promulgated under subsection (a), or
                    (B) transmit or present any such data element in a 
                manner inconsistent with such standards applicable to 
                such transmission or presentation.
            (2) Compliance.--The Secretary may impose a civil money 
        penalty on any health benefit plan that fails to comply with 
        paragraph (1) in an amount not to exceed $100 for each such 
        failure. The provisions of section 1128A of the Social Security 
        Act (other than the first sentence of subsection (a) and other 
        than subsection (b)) shall apply to a civil money penalty under 
        this paragraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a) of such Act.
            (3) Application to medicare program.--Effective as of 
        January 1, 1996, neither the Secretary, nor any carrier or 
        fiscal intermediary, nor any utilization and quality control 
        peer review organization may require, for the purpose of 
        utilization review or as a condition of providing benefits or 
        making payments under the medicare program, that a hospital--
                    (A) provide any data element not in the uniform 
                hospital clinical data set specified under the 
                standards promulgated under subsection (a), or
                    (B) transmit or present any such data element in a 
                manner inconsistent with such standards applicable to 
                such transmission or presentation.
            (4) Application to medicaid program.--As a condition for 
        the approval of State plans under the medicaid program and in 
        accordance with regulations of the Secretary, effective as of 
        January 1, 1996, each such plan may not require that a 
        hospital, for the purpose of utilization review or as a 
        condition of providing benefits or making payments under the 
        plan--
                    (A) provide any data element not in the uniform 
                hospital clinical data set specified under the 
                standards promulgated under subsection (a), or
                    (B) transmit or present any such data element in a 
                manner inconsistent with such standards applicable to 
                such transmission or presentation.
    (d) Preemption of State Quill Pen Laws.--
            (1) In general.--Any provision of State law that requires 
        medical or health insurance records (including billing 
        information) to be maintained in written, rather than 
        electronic, form shall deemed to be satisfied if the records 
        are maintained in an electronic form that meets standards 
        established by the Secretary under paragraph (2).
            (2) Secretarial authority.--Not later than 1 year after the 
        the date of the enactment of this Act, the Secretary shall 
        issue regulations to carry out paragraph (1). The regulations 
        shall provide for an electronic substitute that is in the form 
        of a unique identifier (assigned to each authorized individual) 
        that serves the functional equivalent of a signature. The 
        regulations may provide for such exceptions to paragraph (1) as 
        the Secretary determines to be necessary to prevent fraud and 
        abuse, to prevent the illegal distribution of controlled 
        substances, and in such other cases as the Secretary deems 
        appropriate.
            (3) Effective date.--Paragraph (1) shall take effect on the 
        first day of the first month that begins more than 30 days 
        after the date the Secretary issues the regulations referred to 
        in paragraph (2).

SEC. 325. UNIFORM HOSPITAL COST REPORTING.

    Each hospital, as a requirement under a participation agreement 
under section 1866(a) of the Social Security Act for each cost 
reporting period beginning during or after fiscal year 1993, shall 
provide for the reporting of information to the Secretary with respect 
to any hospital care provided in a uniform manner consistent with 
standards established by the Secretary to carry out section 4007(c) of 
the Omnibus Budget Reconciliation Act of 1987 and in an electronic form 
consistent with standards established by the Secretary.

SEC. 326. DEFINITIONS.

    (a) Health Benefit Plan.--In this subtitle:
            (1) In general.--The term ``health benefit plan'' means, 
        except as provided in paragraphs (2) through (4), any public or 
        private entity or program that provides for payments for health 
        care services, including--
                    (A) a group health plan (as defined in section 
                5000(b)(1) of the Internal Revenue Code of 1986), and
                    (B) any other health insurance arrangement, 
                including any arrangement consisting of a hospital or 
                medical expense incurred policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization subscriber contract.
            (2) Plans excluded.--Such term does not include--
                    (A) accident-only, credit, or disability income 
                insurance;
                    (B) coverage issued as a supplement to liability 
                insurance;
                    (C) an individual making payment on the 
                individual's own behalf (or on behalf of a relative or 
                other individual) for deductibles, coinsurance, or 
                services not covered under a health benefit plan; and
                    (D) such other plans as the Secretary may 
                determine, because of the limitation of benefits to a 
                single type or kind of health care, such as dental 
                services, or other reasons should not be subject to the 
                requirements of this section.
            (3) Plans included.--Such term includes--
                    (A) worker's compensation or similar insurance, and
                    (B) automobile medical-payment insurance.
            (4) Treatment of direct federal provision of services.--
        Such term does not include a Federal program that provides 
        directly for the provision of health services to beneficiaries.
    (b) Health Service Provider.--In this subtitle, the term ``health 
service provider'' includes a provider of services (as defined in 
section 1861(u) of the Social Security Act), physician, supplier, and 
other person furnishing health care services.

                      Subtitle C--Fraud and Abuse

           Part 1--National Health Care Fraud Control Program

SEC. 341. ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM

    (a) Establishment of Program.--
            (1) Establishment.--Not later than January 1, 1994, the 
        Secretary shall establish in the Office of the Inspector 
        General of the Department of Health and Human Services a 
        program--
                    (A) to coordinate Federal, State, and local law 
                enforcement programs to control fraud and abuse with 
                respect to the delivery of and payment for health care 
                in the United States,
                    (B) to conduct investigations, audits, evaluations, 
                and inspections relating to the delivery of and payment 
                for health care in the United States, and
                    (C) to facilitate the enforcement of the provisions 
                of sections 1128, 1128A, and 1128B of the Social 
                Security Act and other statutes applicable to health 
                care fraud and abuse.
            (2) Coordination with law enforcement agencies.--In 
        carrying out the program established under paragraph (1), the 
        Secretary shall consult with, and arrange for the sharing of 
        data and resources with, the Attorney General and State law 
        enforcement agencies, State medicaid fraud and abuse units, and 
        State agencies responsible for the licensing and certification 
        of health care providers.
            (3) Regulations.--
                    (A) In general.--The Secretary shall by regulation 
                establish standards to carry out the program under 
                paragraph (1).
                    (B) Information standards.--
                            (i) In general.--Such standards shall 
                        include standards relating to the furnishing of 
                        information by health insurers (including self-
                        insured health benefit plans), providers, and 
                        others to enable the Secretary to carry out the 
                        program (including coordination with law 
                        enforcement agencies under paragraph (2)).
                            (ii) Confidentiality.--Such standards shall 
                        include procedures to assure that such 
                        information is provided and utilized in a 
                        manner that protects the confidentiality of the 
                        information and the privacy of individuals 
                        receiving health care services.
                            (iii) Qualified immunity for providing 
                        information.--The provisions of section 1157(a) 
                        of the Social Security Act (relating to 
                        limitation on liability) shall apply to a 
                        person providing information to the Secretary 
                        under the program under this section, with 
                        respect to the Secretary's performance of 
                        duties under the program, in the same manner as 
                        such section applies to information provided to 
                        organizations with a contract under part B of 
                        title XI of such Act, with respect to the 
                        performance of such a contract.
                    (C) Disclosure of ownership information.--
                            (i) In general.--Such standards shall 
                        include standards relating to the disclosure of 
                        ownership information described in clause (ii).
                            (ii) Ownership information described.--The 
                        ownership information described in this clause 
                        includes--
                                    (I) covered items and services 
                                provided by an entity;
                                    (II) the names and unique physician 
                                identification numbers of all 
                                physicians with an ownership or 
                                investment interest in the entity (as 
                                described in section 1877(a)(2)(A) of 
                                the Social Security Act) or whose 
                                immediate relatives have such an 
                                ownership or investment interest; and
                                    (III) the names of all other 
                                individuals with such an ownership or 
                                investment interest in the entity.
                    (D) Integrity of issuance of provider 
                identification codes.--Such standards shall, insofar as 
                they relate to the issuance of unique provider codes 
                (described in section 323(c)(5))--
                            (i) include standards relating to the 
                        information (including ownership information 
                        described in subparagraph (C)(ii) and other 
                        information needed in the administration of the 
                        program) to be required for the issuance of 
                        such codes, and
                            (ii) provide for the issuance of such a 
                        code upon the presentation of such information 
                        as would be sufficient to provide for the 
                        issuance of similar codes under the medicare 
                        program.
            (4) Authorization of appropriations for investigators and 
        other personnel.--
                    (A) In general.--In addition to any other amounts 
                authorized to be appropriated to the Secretary for 
                health care anti-fraud and abuse activities for a 
                fiscal year, there are authorized to be appropriated 
                additional amounts described in subparagraph (B) to 
                enable the Secretary to conduct investigations of 
                allegations of health care fraud and otherwise carry 
                out the program established under paragraph (1) in a 
                fiscal year.
                    (B) Amounts described.--The amounts referred to in 
                subparagraph (A) are as follows:
                            (i) For fiscal year 1995, $300,000,000.
                            (ii) For fiscal year 1996, $350,000,000.
                            (iii) For fiscal year 1997, $400,000,000.
                            (iv) For fiscal year 1998, $450,000,000.
            (5) Ensuring access to documentation.--(A) The Inspector 
        General of the Department of Health and Human Services is 
        authorized to exercise the authority described in paragraphs 
        (4) and (5) of section 6 of the Inspector General Act of 1978 
        (relating to subpoenas and administration of oaths) with 
        respect to the activities under the all-payor fraud and abuse 
        control program established under this subsection to the same 
        extent as such Inspector General may exercise such authorities 
        to perform the functions assigned to such official by such Act.
            (B) Section 1128(b) of the Social Security Act (42 U.S.C. 
        1320a-7(b)) is amended by adding at the end the following new 
        paragraph:
                    ``(15) Failure to supply requested information to 
                the inspector general.--Any individual or entity that 
                fails fully and accurately to provide, upon request of 
                the Inspector General of the Department of Health and 
                Human Services, records, documents, and other 
                information necessary for the purposes of carrying out 
                activities under the all-payor fraud and abuse control 
                program established under section 341 of the Health 
                Care Cost Containment and Reform Act of 1993.''.
    (b) Establishment of Anti-Fraud and Abuse Trust Fund.--
            (1) Establishment.--
                    (A) In general.--There is hereby created on the 
                books of the Treasury of the United States a trust fund 
                to be known as the ``Anti-Fraud and Abuse Trust Fund'' 
                (in this section referred to as the ``Trust Fund''). 
                The Trust Fund shall consist of such gifts and bequests 
                as may be made as provided in subparagraph (B) and such 
                amounts as may be deposited in, or appropriated to, 
                such Trust Fund as provided in this subtitle, section 
                143(b), and title XI of the Social Security Act.
                    (B) Authorization to accept gifts.--The Managing 
                Trustee of 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) Management.--
                    (A) In general.--The Trust Fund shall be managed by 
                the Secretary through a Managing Trustee designated by 
                the Secretary.
                    (B) Investment of funds.--It shall be the duty of 
                the Managing Trustee to invest such portion of the 
                Trust Fund as is not, in the trustee's judgment, 
                required to meet current withdrawals. Such investments 
                may be made only in interest-bearing obligations of the 
                United States or in obligations guaranteed as to both 
                principal and interest by the United States. For such 
                purpose such obligations may be acquired (i) on 
                original issue at the issue price, or (ii) by purchase 
                of outstanding obligations at market price. The 
                purposes for which obligations of the United States may 
                be issued under chapter 31 of title 31, United States 
                Code, are hereby extended to authorize the issuance at 
                par of public-debt obligations for purchase by the 
                Trust Fund. Such obligations issued for purchase by the 
                Trust Fund shall have maturities fixed with due regard 
                for the needs of the Trust Fund and shall bear interest 
                at a rate equal to the average market yield (computed 
                by the Managing Trustee on the basis of market 
                quotations as of the end of the calendar month next 
                preceding the date of such issue) on all marketable 
                interest-bearing obligations of the United States then 
                forming a part of the public debt which are not due or 
                callable until after the expiration of 4 years from the 
                end of such calendar month, except that where such 
                average is not a multiple of \1/8\ of 1 percent, the 
                rate of interest on such obligations shall be the 
                multiple of \1/8\ of 1 percent nearest such market 
                yield. The Managing Trustee may purchase other 
                interest-bearing obligations of the United States or 
                obligations guaranteed as to both principal and 
                interest by the United States, on original issue or at 
                the market price, only where the Trustee determines 
                that the purchase of such other obligations is in the 
                public interest.
                    (C) Any obligations acquired by the Trust Fund 
                (except public-debt obligations issued exclusively to 
                the Trust Fund) may be sold by the Managing Trustee at 
                the market price, and such public-debt obligations may 
                be redeemed at par plus accrued interest.
                    (D) The interest on, and the proceeds from the sale 
                or redemption of, any obligations held in the Trust 
                Fund shall be credited to and form a part of the Trust 
                Fund.
                    (E) The receipts and disbursements of the Secretary 
                in the discharge of the functions of the Secretary 
                shall not be included in the totals of the budget of 
                the United States Government. For purposes of part C of 
                the Balanced Budget and Emergency Deficit Control Act 
                of 1985, the Secretary and the Trust Fund shall be 
                treated in the same manner as the Federal Retirement 
                Thrift Investment Board and the Thrift Savings Fund, 
                respectively. The United States is not liable for any 
                obligation or liability incurred by the Trust Fund.
            (3) Use of funds.--Amounts in the Trust Fund shall be used 
        to assist the Inspector General of the Department of Health and 
        Human Services in carrying out the all-payor fraud and abuse 
        control program established under subsection (a) in the fiscal 
        year involved.

SEC. 342. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO ALL FRAUD AND ABUSE AGAINST ANY HEALTH BENEFIT PLAN.

    (a) Civil Monetary Penalties.--Section 1128A of the Social Security 
Act (42 U.S.C. 1320a-7a) is amended as follows:
            (1) In subsection (a)(1), in the matter before subparagraph 
        (A), by inserting ``or of any health benefit plan,'' after 
        ``subsection (i)(1)),''.
            (2) In subsection (b)(1)(A), by inserting ``or under a 
        health benefit plan'' after ``title XIX''.
            (3) In subsection (f), by amending paragraph (2) to read as 
        follows:
            ``(2) In the case of amounts recovered arising out of claim 
        under a health benefit plan, the portion of amounts recovered 
        as is determined to have been paid out of the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund, and the portion of amounts recovered 
        arising out of a claim under title XIX that is not paid to the 
        State agency under paragraph (1)(A), such amounts (and such 
        portions) shall be paid to the Anti-Fraud and Abuse Trust Fund 
        established under section 341(b) of the Health Care Cost 
        Containment and Reform Act of 1993.''.
            (4) In subsection (i)--
                    (A) in paragraph (2), by inserting ``or under a 
                health benefit plan'' before the period at the end, and
                    (B) in paragraph (5), by inserting ``or under a 
                health benefit plan'' after ``or XX''.
    (b) Crimes.--
            (1) Social security act.--Section 1128B of such Act (42 
        U.S.C. 1320a-7b) is amended as follows:
                    (A) In the heading, by adding at the end the 
                following: ``or health benefit plans''.
                    (B) In subsection (a)(1)--
                            (i) by striking ``title XVIII or'' and 
                        inserting ``title XVIII,'', and
                            (ii) by adding at the end the following: 
                        ``or a health benefit plan (as defined in 
                        section 1128(i)),''.
                    (C) In subsection (a)(5), by striking ``title XVIII 
                or a State health care program'' and inserting ``title 
                XVIII, a State health care program, or a health benefit 
                plan''.
                    (D) In the second sentence of subsection (a)--
                            (i) by inserting after ``title XIX'' the 
                        following: ``or a health benefit plan'', and
                            (ii) by inserting after ``the State'' the 
                        following: ``or the plan''.
                    (E) In subsection (b)(1), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health benefit plan''.
                    (F) In subsection (b)(2), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health benefit plan''.
                    (G) In subsection (b)(3), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                in subparagraphs (A) and (C) and inserting ``title 
                XVIII, a State health care program, or a health benefit 
                plan''.
                    (H) In subsection (d)(2)--
                            (i) by striking ``title XIX,'' and 
                        inserting ``title XIX or under a health benefit 
                        plan,'', and
                            (ii) by striking ``State plan,'' and 
                        inserting ``State plan or the health benefit 
                        plan,''.
            (2) Treble damages for criminal sanctions.--Section 1128B 
        of such Act (42 U.S.C. 1320a-7b) is amended by adding at the 
        end the following new subsection:
    ``(f) In addition to the fines that may be imposed under subsection 
(a), (b), or (c), any individual found to have violated the provisions 
of any of such subsections may be subject to treble damages.''.
            (3) Identification of community service opportunities.--
        Section 1128B of such Act (42 U.S.C. 1320a-7b) is further 
        amended by adding at the end the following new subsection:
    ``(g) The Secretary shall--
            ``(1) identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers.''.
    (d) Health Benefit Plan Defined.--Section 1128 of such Act (42 
U.S.C. 1320a-7) is amended by redesignating subsection (i) as 
subsection (j) and by inserting after subsection (h) the following new 
subsection:
    ``(i) Health Benefit Plan Defined.--For purposes of sections 1128A 
and 1128B, the term `health benefit plan' means a health benefit 
program other than the medicare program, the medicaid program, or a 
State health care program.''.
    (e) Conforming Amendment.--Section 1128(b)(8)(B)(ii) of such Act 
(42 U.S.C. 1320a-7(b)(8)(B)(ii)) is amended by striking ``1128A'' and 
inserting ``1128A (other than a penalty arising from a health benefit 
plan, as defined in subsection (i))''.

SEC. 343. PROHIBITION AGAINST OFFERING INDUCEMENTS TO INDIVIDUALS 
              ENROLLED UNDER OR EMPLOYED BY PROGRAMS OR PLANS.

    (a) Inducements to Individuals Enrolled Under Medicare.--Section 
1128A(a)(1) of the Social Security Act (42 U.S.C. 1320a-7a(a)(1)) is 
amended--
            (1) by striking ``or'' at the end of paragraph (1)(D);
            (2) by striking ``, or'' at the end of paragraph (2) and 
        inserting a semicolon;
            (3) by striking the semicolon at the end of paragraph (3) 
        and inserting ``; or''; and
            (4) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) routinely transfers anything for less than fair 
        market value to (or for the benefit of) an individual entitled 
        to benefits under the medicare program in order to influence 
        the individual to receive from a particular provider, 
        practitioner, or supplier a covered item or service for which 
        payment may be made under such program;''.
    (b) Inducements to Employees.--Section 1128A(a)(1) of such Act (42 
U.S.C. 1320a-7a(a)(1)), as amended by subsection (a), is further 
amended--
            (1) by striking ``or'' at the end of paragraph (3);
            (2) by striking the semicolon at the end of paragraph (4) 
        and inserting ``; or''; and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) pays a bonus, reward, or other incentive to an 
        employee to induce the employee to encourage individuals to 
        seek or obtain covered items or services for which payment may 
        be made under the medicare program, a State health care 
        program, or a health benefit plan where the amount of the 
        incentive is in proportion to the activities of the employee in 
        encouraging individuals to seek or obtain covered items or 
        services;''.

SEC. 344. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for Any Program 
Violations.--
            (1) In general.--Section 1876(i)(1) of the Social Security 
        Act (42 U.S.C. 1395mm(i)(1)) is amended by striking ``the 
        Secretary may terminate'' and all that follows and inserting 
        the following: ``in accordance with procedures established 
        under paragraph (9), the Secretary may at any time terminate 
        any such contract or may impose the intermediate sanctions 
        described in paragraph (6)(B) or (6)(C) (whichever is 
        applicable) on the eligible organization if the Secretary 
        determines that the organization--
                    ``(A) has failed substantially to carry out the 
                contract;
                    ``(B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of this section;
                    ``(C) is operating in a manner that is not in the 
                best interests of the individuals covered under the 
                contract; or
                    ``(D) no longer substantially meets the applicable 
                conditions of subsections (b), (c), (e), and (f).''.
                    (2) Other intermediate sanctions for miscellaneous 
                program violations.--Section 1876(i)(6) of such Act (42 
                U.S.C. 1395mm(i)(6)) is amended by adding at the end 
                the following new subparagraph:
            ``(C) In the case of an eligible organization for which the 
        Secretary makes a determination under paragraph (1) the basis 
        of which is not described in subparagraph (A), the Secretary 
        may apply the following intermediate sanctions:
                    ``(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 
                likelihood of adversely affecting) an individual 
                covered under the organization's contract;
                    ``(ii) civil money penalties of not more than 
                $10,000 for each week beginning after the initiation of 
                procedures by the Secretary under paragraph (9) during 
                which the deficiency that is the basis of a 
                determination 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 deficiency that is the basis for the determination 
                has been corrected and is not likely to recur.''.
            (3) Procedures for imposing sanctions.--Section 1876(i) of 
        such Act (42 U.S.C. 1395mm(i)) is amended by adding at the end 
        the following new paragraph:
    ``(9) The Secretary may terminate a contract with an eligible 
organization under this section or may impose the intermediate 
sanctions described in paragraph (6) on the organization in accordance 
with formal investigation and compliance procedures established by the 
Secretary under which--
            ``(A) the Secretary provides the organization with the 
        opportunity to develop and implement a corrective action plan 
        to correct the deficiencies that were the basis of the 
        Secretary's determination under paragraph (1);
            ``(B) the Secretary shall impose more severe sanctions on 
        organizations that have a history of deficiencies or that have 
        not taken steps to correct deficiencies the Secretary has 
        brought to their attention;
            ``(C) there are no unreasonable or unnecessary delays 
        between the finding of a deficiency and the imposition of 
        sanctions; and
            ``(D) the Secretary provides the organization with 
        reasonable notice and opportunity for hearing (including the 
        right to appeal an initial decision) before imposing any 
        sanction or terminating the contract.''.
            (4) Conforming amendments.--(A) Section 1876(i)(6)(B) of 
        such Act (42 U.S.C. 1395mm(i)(6)(B)) is amended by striking the 
        second sentence.
            (B) Section 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) 
        is further amended by adding at the end the following new 
        subparagraph:
            ``(D) The provisions of section 1128A (other than 
        subsections (a) and (b)) shall apply to a civil money penalty 
        under subparagraph (A) or (B) in the same manner as they apply 
        to a civil money penalty or proceeding under section 
        1128A(a).''.
    (b) Agreements With Peer Review Organizations.--
            (1) Requirement for written agreement.--Section 
        1876(i)(7)(A) of the Social Security Act (42 U.S.C. 
        1395mm(i)(7)(A)) is amended by striking ``an agreement'' and 
        inserting ``a written agreement''.
            (2) Development of model agreement.--Not later than July 1, 
        1993, the Secretary of Health and Human Services shall develop 
        a model of the agreement that an eligible organization with a 
        risk-sharing contract under section 1876 of the Social Security 
        Act must enter into with an entity providing peer review 
        services with respect to services provided by the organization 
        under section 1876(i)(7)(A) of such Act.
            (3) Report by gao.--
                    (A) Study.--The Comptroller General shall conduct a 
                study of the costs incurred by eligible organizations 
                with risk-sharing contracts under section 1876(b) of 
                such Act of complying with the requirement of entering 
                into a written agreement with an entity providing peer 
                review services with respect to services provided by 
                the organization, together with an analysis of how 
                information generated by such entities is used by the 
                Secretary of Health and Human Services to assess the 
                quality of services provided by such eligible 
                organizations.
                    (B) Report to congress.--Not later than July 1, 
                1995, the Comptroller General shall submit a report to 
                the Committee on Ways and Means and the Committee on 
                Energy and Commerce of the House of Representatives and 
                the Committee on Finance of the Senate on the study 
                conducted under subparagraph (A).
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1994.

              Part 2--Ban on Improper Physician Referrals

SEC. 351. APPLICATION OF MEDICARE BAN ON SELF-REFERRALS TO ALL PAYORS.

    Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (1)(A), by striking ``for which 
                payment otherwise may be made under this title'' and 
                inserting ``for which a charge is imposed'', and
                    (B) in paragraph (1)(B), by striking ``under this 
                title'';
            (2) by amending paragraph (1) of subsection (g) to read as 
        follows:
            ``(1) Denial of payment.--No payment may be made under this 
        title, under another Federal health care program, or under a 
        State health care program (as defined in section 1128(h)) for a 
        designated health service for which a claim is presented in 
        violation of subsection (a)(1)(B). No individual, third party 
        payor, or other entity is liable for payment for designated 
        health services for which a claim is presented in violation of 
        such subsection.''; and
            (3) in subsection (g)(3), by striking ``for which payment 
        may not be made under paragraph (1)'' and inserting ``for which 
        such a claim may not be presented under subsection (a)(1)''.

SEC. 352. EXTENSION OF SELF-REFERRAL BAN TO ADDITIONAL SPECIFIED 
              SERVICES.

    (a) In General.--Section 1877 of the Social Security Act is further 
amended--
            (1) by striking ``clinical laboratory services'' and 
        ``clinical laboratory services'' and inserting ``designated 
        health services'' and ``designated health services'', 
        respectively, each place either appears in subsections (a)(1), 
        (b)(2)(A)(ii)(I), (b)(4), (d)(1), (d)(2), and (d)(3), and
            (2) by adding at the end the following new subsection:
    ``(i) Designated Health Services Defined.--In this section, the 
term `designated health services' means--
            ``(1) clinical laboratory services;
            ``(2) physical therapy services;
            ``(3) radiology services, including magnetic resonance 
        imaging, computerized axial tomography scans, and ultrasound 
        services;
            ``(4) radiation therapy services;
            ``(5) the furnishing of durable medical equipment;
            ``(6) the furnishing of parenteral and enteral nutrition 
        equipment and supplies;
            ``(7) the furnishing of outpatient prescription drugs;
            ``(8) ambulance services;
            ``(9) home infusion therapy services;
            ``(10) occupational therapy services; and
            ``(11) inpatient and outpatient hospital services 
        (including services furnished at a psychiatric or 
        rehabilitation hospital).''.
    (b) Conforming Amendments.--Section 1877 of such Act is further 
amended--
            (1) in subsection (d)(2), by striking ``laboratory'' and 
        inserting ``entity'',
            (2) in subsection (g)(1), by striking ``clinical laboratory 
        service'' and inserting ``designated health service'', and
            (3) in subsection (h)(7)(B), by striking ``clinical 
        laboratory service'' and inserting ``designated health 
        service''.

SEC. 353. CHANGES IN EXCEPTIONS AND OTHER PROVISIONS RELATING TO 
              COMPENSATION ARRANGEMENTS.

    (a) Multiple Locations for Group Practices.--Section 
1877(b)(2)(A)(ii)(II) of the Social Security Act is amended by striking 
``centralized provision'' and inserting ``provision of some or all''.
    (b) Treatment of Compensation Arrangements.--
            (1) Rental of office space and equipment.--Paragraph (1) of 
        section 1877(e) of such Act is amended to read as follows:
            ``(1) Rental of office space; rental of equipment.--
                    ``(A) Office space.--Payments made by a lessee to a 
                lessor for the use of premises if--
                            ``(i) the lease is set out in writing, 
                        signed by the parties, and specifies the 
                        premises covered by the lease,
                            ``(ii) the aggregate space rented or leased 
                        is reasonable and necessary for the legitimate 
                        business purposes of the lease or rental,
                            ``(iii) the lease provides for a term of 
                        rental or lease for at least one year,
                            ``(iv) in the case of a lease that is 
                        intended to provide the lessee with access to 
                        the premises for periodic intervals of time, 
                        rather than on a full-time basis, the lease 
                        specifies exactly the schedule of such 
                        intervals, their length, and the rent for such 
                        intervals,
                            ``(v) the rental charges over the term of 
                        the lease are set in advance, are consistent 
                        with fair market value, and are not determined 
                        in a manner that takes into account the volume 
                        or value of any referrals or other business 
                        generated between the parties,
                            ``(vi) the lease would be commercially 
                        reasonable even if no referrals were made 
                        between the parties, and
                            ``(vii) the compensation arrangement meets 
                        such other requirements as the Secretary may 
                        impose by regulation as needed to protect 
                        against program or patient abuse.
                    ``(B) Equipment.--Payments made by a lessee of 
                equipment to the lessor of the equipment for the use of 
                the equipment if--
                            ``(i) the lease is set out in writing, 
                        signed by the parties, and specifies the 
                        equipment covered by the lease,
                            ``(ii) the equipment rented or leased is 
                        reasonable and necessary for the legitimate 
                        business purposes of the lease or rental,
                            ``(iii) the lease provides for a term of 
                        rental or lease of at least one year,
                            ``(iv) in the case of a lease that is 
                        intended to provide the lessee with use of the 
                        equipment for periodic intervals of time, 
                        rather than on a full-time basis, the lease 
                        specifies exactly the schedule of such 
                        intervals, their length, and the rent for such 
                        intervals,
                            ``(v) the rental charges over the term of 
                        the lease are set in advance, are consistent 
                        with fair market value, and are not determined 
                        in a manner that takes into account the volume 
                        or value of any referrals or other business 
                        generated between the parties,
                            ``(vi) the lease would be commercially 
                        reasonable even if no referrals were made 
                        between the parties, and
                            ``(vii) the compensation arrangement meets 
                        such other requirements as the Secretary may 
                        impose by regulation as needed to protect 
                        against program or patient abuse.''.
            (2) Bona fide employment relationships.--Paragraph (2) of 
        such section is amended--
                    (A) by striking ``with hospitals'',
                    (B) by striking ``An arrangement'' and all that 
                follows through ``if'' and inserting ``Any amount paid 
                by an employer to an employee who has a bona fide 
                employment relationship with the employer for 
                employment, or paid by a hospital pursuant to an 
                arrangement with a physician (or immediate family 
                member) for the provision of administrative services, 
                if'',
                    (C) in subparagraphs (A), (B), and (D), by striking 
                ``arrangement'' and inserting ``employment relationship 
                or arrangement'', and
                    (D) in subparagraph (C), by striking ``to the 
                hospital''.
            (3) Additional exceptions.--Such subsection is further 
        amended by adding at the end the following new paragraphs:
            ``(7) Payments to a physician for other items or 
        services.--
                    ``(A) In general.--Payments made by an entity to a 
                physician (or family member) who is not employed by the 
                entity as compensation for services specified in 
                subparagraph (B), if--
                            ``(i) the compensation agreement is set out 
                        in writing and specifies the services to be 
                        provided by the parties, the compensation for 
                        each unit of service provided under the 
                        agreement, and the schedule for the provision 
                        of such services,
                            ``(ii) the compensation paid over the term 
                        of the agreement is consistent with fair market 
                        value and is not determined in a manner that 
                        takes into account the volume or value of any 
                        referrals or other business generated between 
                        the parties,
                            ``(iii) the compensation is provided 
                        pursuant to an agreement which would be 
                        commercially reasonable even if no referrals 
                        were made to the entity, and
                            ``(iv) the compensation arrangement meets 
                        such other requirements as the Secretary may 
                        impose by regulation as needed to protect 
                        against program or patient abuse.
                    ``(B) Specified services.--For purposes of 
                subparagraph (A), the services specified in this 
                subparagraph are any of the following:
                            ``(i) Consultative services that--
                                    ``(I) relate to results that have 
                                been obtained that are outside 
                                established parameters, or are 
                                specifically requested by the referring 
                                physician on a specified patient,
                                    ``(II) are furnished by a physician 
                                other than the referring physician (or 
                                by another physician who is a member of 
                                the same group practice), and
                                    ``(III) for which the physician 
                                furnishes a written report for that 
                                patient.
                            ``(ii) Interpretation of tissue pathology 
                        or Pap smear slides or the provision of other 
                        cytology services.
                            ``(iii) Phlebotomy services for paternity 
                        or toxicology testing where the services are 
                        furnished by a physician other than the 
                        physician referring the individual for such 
                        testing (or by another physician who is a 
                        member of the same group practice).
                            ``(iv) Employment-related health care 
                        services, including a payment by a self-insured 
                        employer for services rendered to employee 
                        applicants, employees, or their families under 
                        the terms of a health benefit plan.
                            ``(v) Services as a clinical consultant to 
                        the entity as required for certification of the 
                        provider under section 353 of the Public Health 
                        Service Act.
                            ``(vi) Services required by local, State, 
                        or Federal licensure, accreditation, or other 
                        health and safety provisions.
                            ``(vii) Services billed in the name of a 
                        group practice provided by a physician under 
                        contract to the group practice for services not 
                        otherwise available directly through a 
                        physician who is a member of the group.
            ``(8) Payments by a physician for items and services.--
        Payments made by a physician--
                    ``(A) to a laboratory in exchange for the provision 
                of clinical laboratory services, or
                    ``(B) to an entity as compensation for other items 
                or services if the items or services are furnished at a 
                price that is consistent with fair market value and are 
                generally available to referrors and non-referrors 
                alike on similar terms and conditions.
            ``(9) Payments for pathology services of a group 
        practice.--Payments made to a group practice for pathology 
        services under an agreement if--
                    ``(A) the agreement is set out in writing and 
                specifies the services to be provided by the parties 
                and the compensation for services provided under the 
                agreement,
                    ``(B) the compensation paid over the term of the 
                agreement is consistent with fair market value and is 
                not determined in a manner that takes into account the 
                volume or value of any referrals or other business 
                generated between the parties,
                    ``(C) the compensation is provided pursuant to an 
                agreement which would be commercially reasonable even 
                if no referrals were made to the entity; and
                    ``(D) the compensation arrangement between the 
                parties meets such other requirements as the Secretary 
                may impose by regulation as needed to protect against 
                program or patient abuse.''.
    (c) Treatment of Group Practices.--
            (1) Use of billing numbers, etc.--Section 1877 of the 
        Social Security Act is amended--
                    (A) in subsection (b)(2)(B), by inserting ``under a 
                billing number assigned to the group practice'' after 
                ``member'',
                    (B) in subsection (h)(4)(B), by inserting ``and 
                under a billing number assigned to the group'' after 
                ``in the name of the group'', and
                    (C) in subsection (h)(4)(C), by striking ``by 
                members of the group''.
            (2) Treatment of clinical laboratory services furnished 
        under arrangements between hospitals and group practices.--
                    (A) In general.--Section 1877(h)(4) of such Act is 
                amended--
                            (i) in subparagraph (B) (as amended by 
                        paragraph (1)(B)), by inserting ``(or are 
                        billed in the name of a hospital for which the 
                        group provides clinical laboratory services 
                        pursuant to an arrangement that meets the 
                        requirements of subparagraph (B))'' after 
                        ``assigned to the group'';
                            (ii) by redesignating subparagraphs (A) 
                        through (D) as clauses (i) through (iv), 
                        respectively;
                            (iii) by inserting ``(A)'' after ``.--''; 
                        and
                            (iv) by adding at the end the following new 
                        subparagraph:
            ``(B) The requirements of this subparagraph, with respect 
        to an arrangement for clinical laboratory services provided by 
        the laboratory of a group and billed in the name of a hospital, 
        are that--
                    ``(i) with respect to services provided to an 
                inpatient of the hospital, the arrangement is pursuant 
                to the provision of inpatient hospital services under 
                section 1861(b)(3);
                    ``(ii) the arrangement began before December 19, 
                1989, and has continued in effect without interruption 
                since such date;
                    ``(iii) the laboratory provides substantially all 
                of the clinical laboratory services to the hospital's 
                patients;
                    ``(iv) the arrangement is pursuant to an agreement 
                that is set out in writing and that specifies the 
                services to be provided by the parties and the 
                compensation for services provided under the agreement;
                    ``(v) the compensation paid over the term of the 
                agreement is consistent with fair market value and the 
                compensation per unit of services is fixed in advance 
                and is not determined in a manner that takes into 
                account the volume or value of any referrals or other 
                business generated between the parties;
                    ``(vi) the compensation is provided pursuant to an 
                agreement which would be commercially reasonable even 
                if no referrals were made to the entity; and
                    ``(vii) the arrangement between the parties meets 
                such other requirements as the Secretary may impose by 
                regulation as needed to protect against program or 
                patient abuse.''.
                    (B) Conforming amendment.--Section 1877(b)(2)(B) of 
                such Act is amended by inserting ``(or by a hospital 
                for which such a group practice provides clinical 
                laboratory services pursuant to an arrangement that 
                meets the requirements of subsection (h)(4)(B))'' after 
                ``by a group practice of which such physician is a 
                member''.
            (3) Treatment of certain faculty practice plans.--The last 
        sentence of section 1877(h)(4)(A) of such Act, as redesignated 
        by paragraph (1)(A), is amended by inserting ``, institution of 
        higher education, or medical school'' after ``hospital''.
    (d) Expanding Rural Provider Exception To Cover Compensation 
Arrangements.--
            (1) In general.--Section 1877(b) of such Act is further 
        amended--
                    (A) by redesignating paragraph (5) as paragraph 
                (7), and
                    (B) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) Rural providers.--In the case of designated services 
        if--
                    ``(A) the entity furnishing the services is in a 
                rural area (as defined in section 1886(d)(2)(D)), and
                    ``(B) substantially all of the services furnished 
                by the entity to individuals entitled to benefits under 
                this title are furnished to such individuals who reside 
                in such a rural area.''.
            (2) Conforming amendments.--Section 1877(d) of such Act is 
        amended--
                    (A) by striking paragraph (2), and
                    (B) by redesignating paragraph (3) as paragraph 
                (2).
    (e) Exemption of Compensation Arrangements Involving Certain Types 
of Remuneration.--Section 1877(h)(1) of such Act is amended--
            (1) by striking subparagraph (B);
            (2) in subparagraph (A), by inserting before the period the 
        following: ``(other than an arrangement involving only 
        remuneration described in subparagraph (B))''; and
            (3) by adding at the end the following new subparagraph:
            ``(B) Remuneration described in this subparagraph is any 
        remuneration consisting of any of the following:
                    ``(i) The forgiveness of amounts owed for 
                inaccurate tests or procedures, mistakenly performed 
                tests or procedures, or the correction of minor billing 
                errors.
                    ``(ii) The provision of items, devices, or supplies 
                of minor value that are used to--
                            ``(I) collect, transport, process, or store 
                        specimens for the entity providing the item, 
                        device, or supply, or
                            ``(II) communicate the results of tests or 
                        procedures for such entity.
                    ``(iii) The furnishing by an entity of laboratory 
                services to a group practice affiliated with the 
                entity, if the entity provides all or substantially all 
                of the clinical laboratory services of the group 
                practice.''.
    (f) Miscellaneous and Technical Corrections.--Section 1877 of such 
Act is amended--
            (1) in the fourth sentence of subsection (f)--
                    (A) by striking ``provided'' and inserting 
                ``furnished'', and
                    (B) by striking ``provides'' and inserting 
                ``furnish'';
            (2) in the fifth sentence of subsection (f)--
                    (A) by striking ``providing'' each place it appears 
                and inserting ``furnishing'',
                    (B) by striking ``with respect to the providers'' 
                and inserting ``with respect to the entities'', and
                    (C) by striking ``diagnostic imaging services of 
                any type'' and inserting ``magnetic resonance imaging, 
                computerized axial tomography scans, and ultrasound 
                services''; and
            (3) in subsection (a)(2)(B), by striking ``subsection 
        (h)(1)(A)'' and inserting ``subsection (h)(1)''.

SEC. 354. EFFECTIVE DATES.

    (a) Expansion of Coverage and Payors.--The amendments made by 
sections 351 and 352 shall apply with respect to a referral by a 
physician for designated health services (as described in section 
1877(i) of the Social Security Act) made on or after the first day of 
the first month beginning 2 years after the date of the enactment of 
this Act.
    (b) Changes in Exceptions, Etc.--The amendments made by section 353 
shall apply to referrals made on or after January 1, 1992.

                      Subtitle D--Other Provisions

SEC. 361. MALPRACTICE REFORM.

    (a) Study by Physician Payment Review Commission.--The Physician 
Payment Review Commission shall conduct a study of--
            (1) the need for tort reforms with respect to medical 
        malpractice liability claims, including the need to establish 
        or impose alternative dispute resolution requirements on such 
        claims; and
            (2) the impact of such reforms on--
                    (A) expenditures for health care services and on 
                access to such services,
                    (B) the quality of health care services, and
                    (C) access of injured patients to the medical 
                malpractice system.
    (b) Report.--Not later than September 30, 1993, the Commission 
shall submit a report to Congress on the study conducted under 
paragraph (1) and shall include in such study such recommendations as 
the Commission considers appropriate.

  TITLE IV--EXPANSIONS OF HEALTH BENEFITS AND OTHER HEALTH INITIATIVES

               Subtitle A--Medicaid Benefit Improvements

SEC. 401. FLOOR ON MEDICAID PAYMENT LEVELS FOR INPATIENT HOSPITAL 
              SERVICES AND PHYSICIANS' SERVICES.

    (a) Inpatient Hospital Services.--
            (1) In general.--(A) A State plan under title XIX of the 
        Social Security Act shall not be considered to meet the 
        requirement of section 1902(a)(13)(A) of such Act (insofar as 
        it requires payments to hospitals for inpatient hospital 
        services that are reasonable and adequate to meet the costs 
        which must be incurred by efficiently and economically operated 
        facilities), as of October 1, 1996, unless the State has 
        submitted to the Secretary of Health and Human Services (in 
        this subsection referred to as the ``Secretary''), by not later 
        than such date, an amendment to such plan that assures that, in 
        the aggregate, the amount of payments for inpatient hospital 
        services provided in subsection (d) hospitals (as defined in 
        section 1886(d)(1)(B) of such Act) under the plan is not less 
        than--
                    (i) in the case of services furnished during fiscal 
                year 1997, 80 percent (or, if greater, the percent 
                specified in subparagraph (B)) of the amount of 
                payments for such services that would be made under 
                title XVIII of such Act (without regard to any 
                deductible imposed under section 1813(a) of such Act or 
                any limitation on the coverage of inpatient hospital 
                services under such title) for such services if covered 
                under such title;
                    (ii) in the case of services furnished during 
                fiscal year 1998, 85 percent (or, if greater, the 
                percent specified in subparagraph (B)) of the amount of 
                payments for such services that would be made under 
                title XVIII of such Act (without regard to any 
                deductible imposed under section 1813(a) of such Act or 
                any limitation on the coverage of inpatient hospital 
                services under such title) for such services if covered 
                under such title; and
                    (iii) in the case of services furnished during any 
                succeeding fiscal year, 90 percent of the amount of 
                payments for such services that would be made under 
                title XVIII of such Act (without regard to any 
                deductible imposed under section 1813(a) of such Act or 
                any limitation on the coverage of inpatient hospital 
                services under such title) for such services if covered 
                under such title.
            (B) The percent specified in this subparagraph is the 
        quotient of--
                    (i) the total payments made under the State plan 
                under title XIX of the Social Security Act in fiscal 
                year 1993 with respect to inpatient hospital services, 
                divided by
                    (ii) the amount of payments for such services that 
                would be made under title XVIII of such Act (without 
                regard to any deductible imposed under section 1813(a) 
                of such Act or any limitation on the coverage of 
                inpatient hospital services under such title) for such 
                services in such fiscal year if covered under such 
                title,
        expressed as a percentage, or, if less, 90 percent.
            (C) In computing amounts under subparagraph (A), the 
        Secretary shall adjust for differences in case mix, volume, the 
        age and disability of the populations covered by the two 
        programs, and other relevant factors identified by the 
        Secretary.
            (2) Review.--The Secretary, by not later than 90 days after 
        the date of submission of a plan amendment under paragraph (1), 
        shall--
                    (A) review each such amendment for compliance with 
                the requirement of section 1902(a)(13)(A) of the Social 
                Security Act; and
                    (B) approve or disapprove each such amendment.
        If the Secretary disapproves such an amendment, the State shall 
        immediately submit a revised amendment which meets such 
        requirement.
            (3) Collection of data.--The Secretary may provide for such 
        collection of data on payment for inpatient hospital services 
        as may be necessary to carry out this subsection.
            (4) Nonwaivability.--The provisions of this subsection may 
        not be waived by the Secretary.
    (b) Physicians' Services.--
            (1) In general.--Section 1902 of the Social Security Act 
        (42 U.S.C. 1396a) is amended--
                    (A) in subsection (a)(13)--
                            (i) by striking ``and'' at the end of 
                        subparagraph (E);
                            (ii) by striking the semicolon at the end 
                        of subparagraph (F) and inserting ``; and''; 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(G) for payment for physicians' services through 
                a methodology under which the amount of payment for 
                such services furnished during a calendar quarter is 
                not less than the amount specified in subsection 
                (z);''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(z)(1) For purposes of subsection (a)(13)(G), the amount 
specified in this subsection is--
            ``(A) for physicians' services furnished during a calendar 
        quarter in fiscal year 1997, 60 percent (or, if greater, the 
        percent specified in paragraph (2)) of the applicable fee 
        schedule amount established under section 1848 for services 
        furnished in such year,
            ``(B) for physicians' services furnished during a calendar 
        quarter in fiscal year 1998, 70 percent (or, if greater, the 
        percent specified in subparagraph (B)) of the applicable fee 
        schedule amount established under section 1848 for services 
        furnished in such year, and
            ``(C) for physicians' services furnished during a calendar 
        quarter in a succeeding fiscal year, 90 percent (or, if 
        greater, the percent specified in subparagraph (B)) of the 
        applicable fee schedule amount established under section 1848 
        for services furnished in such year.
    ``(2) The percent specified in this paragraph is the quotient of--
            ``(A) the total payments made under the State plan under 
        title XIX of the Social Security Act in fiscal year 1993 for 
        physicians' services, divided by
            ``(B) the amount of payments for such services that would 
        be made under title XVIII of such Act (without regard to any 
        deductible or coinsurance) for such services in such fiscal 
        year if covered under such title,
expressed as a percentage, or, if less, 90 percent.''.
            (2) Transmittal of payment information to states.--Section 
        1848(i) of such Act (42 U.S.C. 1395w-4(i)) is amended by adding 
        at the end the following new paragraph:
            ``(4) Transmittal of physician payment information to 
        states.--Not later than August 1 of 1996 (and of each year 
        thereafter), the Secretary shall transmit such information to 
        the States as is necessary to enable the States to carry out 
        the requirements of section 1902(a)(13)(G) of the Social 
        Security Act (as added by section 401(b)(1) of the Health Care 
        Cost Containment and Reform Act of 1993).''.
            (3) Relation to payments for obstetrical and pediatric 
        services.--Section 1926 of such Act (42 U.S.C. 1396r-7) is 
        amended by adding at the end the following new subsection:
    ``(e) Payment rates established under this section with respect to 
services shall in no case be less than the minimum payment amounts 
specified under section 1902(z) with respect to such services. The fact 
that payment amounts with respect to such services are consistent with 
the payment rates required under such section shall not be the basis 
for a determination that the payment amounts comply with the 
requirements of this section.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to payments under title XIX of the Social Security 
        Act for calendar quarters beginning on or after October 1, 
        1997.

SEC. 402. MEDICAID ELIGIBILITY EXPANSION.

    (a) In General.--
            (1) Benefits for low-income individuals.--Section 
        1902(a)(10)(A)(i) of the Social Security Act (42 U.S.C. 
        1396a(a)(10)(A)(i)) is amended--
                    (A) by striking ``or'' at the end of subclause 
                (VI);
                    (B) by striking the semicolon at the end of 
                subclause (VII) and inserting ``, or''; and
                    (C) by adding at the end the following new 
                subclause:
                                    ``(VIII) who are described in 
                                subsection (aa)(1);''.
            (2) Individuals described.--
                    (A) In general.--Section 1902 of such Act (42 
                U.S.C. 1396a), as amended by section 401(b), is amended 
                by adding at the end the following new subsection:
    ``(aa)(1) Individuals described in this paragraph are--
            ``(A) for quarters beginning on or after October 1, 1996, 
        women during pregnancy (and during the 60-day period beginning 
        on the last day of the pregnancy) or individuals who have not 
        attained 6 years of age;
            ``(B) for quarters beginning on or after October 1, 1997, 
        individuals not described in subparagraph (A) who have not 
        attained 11 years of age;
            ``(C) for quarters beginning on or after October 1, 1998, 
        individuals not described in subparagraph (A) or (B) who have 
        not attained 19 years of age; and
            ``(D) for quarters beginning on or after October 1, 1999, 
        individuals not described in a preceding subparagraph who have 
        not attained 65 years of age,
who are not described in any of subclauses (I) through (VII) of 
subsection (a)(10)(A)(i) and whose family income does not exceed the 
income level described in paragraph (2) for a family of the size of the 
family.
    ``(2)(A) The income level described in this paragraph is the 
percent provided under subparagraph (B) of the official poverty line 
(as defined by the Office of Management and Budget, and revised 
annually in accordance with section 673(2) of the Omnibus Budget 
Reconciliation Act of 1981) applicable to a family of the size 
involved.
    ``(B) The percentage provided in this subparagraph is--
            ``(i) for individuals described in subparagraph (A), (B), 
        or (C) of paragraph (1), 200 percent; and
            ``(ii) with respect to any other individual, for purposes 
        of determining eligibility for medical assistance on or after--
                    ``(I) October 1, 1999, is 50 percent,
                    ``(II) October 1, 2000, is 100 percent,
                    ``(III) October 1, 2001, is 150 percent, and
                    ``(IV) October 1, 2002, is 200 percent.
    ``(3) Notwithstanding subsection (a)(17), for individuals who are 
eligible for medical assistance because of subsection 
(a)(10)(A)(i)(VIII)--
            ``(A) no resource standard shall be applied;
            ``(B) the income standard to be applied is the appropriate 
        income standard established under paragraph (2); and
            ``(C) family income shall be determined in accordance with 
        the methodology that is not more restrictive than the 
        methodology employed under the State plan under part A or E of 
        title IV (except to the extent such methodology is inconsistent 
        with clause (D) of subsection (a)(17)), and costs incurred for 
        medical care or for any other type of remedial care shall not 
        be taken into account.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require or permit 
such treatment for other individuals.
    ``(4)(A) In the case of any State which is providing medical 
assistance to its residents under a waiver granted under section 1115, 
the Secretary shall require the State to provide medical assistance for 
individuals described in paragraph (1) in the same manner as the State 
would be required to provide such assistance for such individuals if 
the State had in effect a plan approved under this title.
    ``(B) In the case of a State which is not one of the 50 States or 
the District of Columbia, the State need not meet the requirement of 
subsection (a)(10)(A)(i)(VIII) and, for purposes of paragraph (2)(A), 
the State may substitute for the percentages provided under such 
paragraph any percentages that are less than such percentages.
    ``(5) The Secretary may not require that an individual apply for 
eligibility under subclauses (I) through (VII) of subsection 
(a)(10)(A)(i) as a condition of being determined to be eligible for 
medical assistance under this title as an individual described in 
paragraph (1).''.
                    (B) Conforming amendment.--Section 1905(a) of such 
                Act (42 U.S.C. 1396d(a)) is amended--
                            (i) by striking ``or'' at the end of clause 
                        (ix),
                            (ii) by adding ``or'' at the end of clause 
                        (x), and
                            (iii) by inserting after clause (x) the 
                        following new clause:
                            ``(xi) individuals described in section 
                        1902(aa)(1),''.
    (b) Restrictions on Benefits Provided.--Section 1902(a)(10) of such 
Act (42 U.S.C. 1396a(a)(10)) is amended in the matter following 
subparagraph (F)--
            (1) by striking ``; and (XI) the making'' and inserting ``, 
        (XI) the making'';
            (2) by striking ``and (XI) the medical'' and inserting 
        ``(XII) the medical''; and
            (3) by striking the semicolon at the end and inserting the 
        following: `` and (XIII) the medical assistance required to be 
        made available to an individual described in subsection (aa)(1) 
        shall not include nursing facility services, home and 
        community-based services (as defined in section 
        1915(d)(5)(C)(i)), services in an intermediate care facility 
        for the mentally retarded, and community supported living 
        arrangements services;''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to quarters beginning on or after October 1, 1996, without 
regard to whether or not regulations to carry out such amendments have 
been promulgated by such date.

SEC. 403. FULL FEDERAL PAYMENT FOR INCREASED COSTS.

    Section 1903 of the Social Security Act (42 U.S.C. 1396b) is 
amended by adding at the end the following new subsection:
    ``(w)(1) Notwithstanding subsection (a), with respect to new 
mandated expenditures (as defined in paragraph (2)) in a quarter, 
instead of the amounts otherwise paid to a State under subsection (a) 
for a quarter with respect to such expenditures, there shall be paid to 
the State an amount equal to 100 percent of the amount of such 
expenditures.
    ``(2) In this subsection, the term `new mandated expenditures' 
means the sum of the following expenditures under the State plan during 
a quarter:
            ``(A) The amount by which (i) the minimum amount of 
        expenditures for medical assistance for inpatient hospital 
        services (consistent with section 401(a) of the Health Care 
        Cost Containment and Reform Act of 1993), exceeds (ii) the 
        amount of expenditures for such assistance which the Secretary 
        determines would have been payable under the plan (as such plan 
        was in effect as of the date of the enactment of this 
        subsection).
            ``(B) The amount by which (i) the minimum amount of 
        expenditures under the plan for medical assistance for 
        physicians' services (consistent with section 1902(a)(13)(G)) 
        for the quarter, exceeds (ii) the amount of expenditures under 
        the plan for such assistance which the Secretary determines 
        would have been payable under the plan (as such plan was in 
        effect as of the date of the enactment of this subsection) for 
        the quarter.
            ``(C) The amount of expenditures for medical assistance 
        attributable to individuals with respect to whom the State plan 
        would not be required to provide such assistance but for the 
        amendments made by section 402.
            ``(D) The amount of expenses reasonably attributable to the 
        expenditures described in subparagraphs (A) through (C).''.

               Subtitle B--Expansion of Medicare Benefits

                      Part 1--Preventive Benefits

SEC. 411. ANNUAL SCREENING MAMMOGRAPHY.

    (a) Annual Screening Mammography for Women Over Age 64.--Section 
1834(c)(2)(A) of the Social Security Act (42 U.S.C. 1395m(b)(2)(A)) is 
amended--
            (1) in clause (iv), by striking ``but under 65 years of 
        age,''; and
            (2) by striking clause (v).
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to screening mammography performed on or after January 1, 1995.

SEC. 412. COVERAGE OF COLORECTAL SCREENING.

    (a) In General.--Section 1834 of the Social Security Act (42 U.S.C. 
1395m) is amended by inserting after subsection (c) the following new 
subsection:
    ``(d) Frequency and Payment Limits for Screening Fecal-Occult Blood 
Tests and Screening Flexible Sigmoidoscopies.--
            ``(1) Screening fecal-occult blood tests.--
                    ``(A) Payment limit.--In establishing fee schedules 
                under section 1833(h) with respect to screening fecal-
                occult blood tests provided for the purpose of early 
                detection of colon cancer, except as provided by the 
                Secretary under paragraph (3)(A), the payment amount 
                established for tests performed--
                            ``(i) in 1995 shall not exceed $5; and
                            ``(ii) in a subsequent year, shall not 
                        exceed the limit on the payment amount 
                        established under this subsection for such 
                        tests for the preceding year, adjusted by the 
                        applicable adjustment under section 1833(h) for 
                        tests performed in such year.
                    ``(B) Frequency limit.--Subject to revision by the 
                Secretary under paragraph (3)(B), no payment may be 
                made under this part for a screening fecal-occult blood 
                test provided to an individual for the purpose of early 
                detection of colon cancer--
                            ``(i) if the individual is under 50 years 
                        of age; or
                            ``(ii) if the test is performed within 11 
                        months after a previous screening fecal-occult 
                        blood test.
            ``(2) Screening flexible sigmoidoscopies.--
                    ``(A) Payment amount.--The Secretary shall 
                establish a payment amount under section 1848 with 
                respect to screening flexible sigmoidoscopies provided 
                for the purpose of early detection of colon cancer that 
                is consistent with payment amounts under such section 
                for similar or related services, except that such 
                payment amount shall be established without regard to 
                subsection (a)(2)(A) of such section.
                    ``(B) Frequency limit.--Subject to revision by the 
                Secretary under paragraph (3)(B), no payment may be 
                made under this part for a screening flexible 
                sigmoidoscopy provided to an individual for the purpose 
                of early detection of colon cancer--
                            ``(i) if the individual is under 50 years 
                        of age; or
                            ``(ii) if the procedure is performed within 
                        59 months after a previous screening flexible 
                        sigmoidoscopy.
            ``(3) Reductions in payment limit and revision of 
        frequency.--
                    ``(A) Reductions in payment limit.--The Secretary 
                shall review from time to time the appropriateness of 
                the amount of the payment limit established for 
                screening fecal-occult blood tests under paragraph 
                (1)(A). The Secretary may, with respect to tests 
                performed in a year after 1997, reduce the amount of 
                such limit as it applies nationally or in any area to 
                the amount that the Secretary estimates is required to 
                assure that such tests of an appropriate quality are 
                readily and conveniently available during the year.
                    ``(B) Revision of frequency.--
                            ``(i) Review.--The Secretary, in 
                        consultation with the Director of the National 
                        Cancer Institute, shall review periodically the 
                        appropriate frequency for performing screening 
                        fecal-occult blood tests and screening flexible 
                        sigmoidoscopies based on age and such other 
                        factors as the Secretary believes to be 
                        pertinent.
                            ``(ii) Revision of frequency.--The 
                        Secretary, taking into consideration the review 
                        made under clause (i), may revise from time to 
                        time the frequency with which such tests and 
                        procedures may be paid for under this 
                        subsection, but no such revision shall apply to 
                        tests or procedures performed before January 1, 
                        1998.
            ``(4) Limiting charges of nonparticipating physicians.--
                    ``(A) In general.--In the case of a screening 
                flexible sigmoidoscopy provided to an individual for 
                the purpose of early detection of colon cancer for 
                which payment may be made under this part, if a 
                nonparticipating physician provides the procedure to an 
                individual enrolled under this part, the physician may 
                not charge the individual more than the limiting charge 
                (as defined in section 1848(g)(2)).
                    ``(B) Enforcement.--If a physician or supplier 
                knowing and willfully imposes a charge in violation of 
                subparagraph (A), the Secretary may apply sanctions 
                against such physician or supplier in accordance with 
                section 1842(j)(2).''.
    (b) Conforming Amendments.--(1) Paragraphs (1)(D) and (2)(D) of 
section 1833(a) of such Act (42 U.S.C. 1395l(a)) are each amended by 
striking ``subsection (h)(1),'' and inserting ``subsection (h)(1) or 
section 1834(d)(1),''.
    (2) Section 1833(h)(1)(A) of such Act (42 U.S.C. 1395l(h)(1)(A)) is 
amended by striking ``The Secretary'' and inserting ``Subject to 
paragraphs (1) and (3)(A) of section 1834(d), the Secretary''.
    (3) Clauses (i) and (ii) of section 1848(a)(2)(A) of such Act (42 
U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ``a service'' and 
inserting ``a service (other than a screening flexible sigmoidoscopy 
provided to an individual for the purpose of early detection of colon 
cancer)''.
    (4) Section 1862(a) of such Act (42 U.S.C. 1395y(a)) is amended--
            (A) in paragraph (1)--
                    (i) in subparagraph (E), by striking ``and'' at the 
                end,
                    (ii) in subparagraph (F), by striking the semicolon 
                at the end and inserting ``, and'', and
                    (iii) by adding at the end the following new 
                subparagraph:
                    ``(G) in the case of screening fecal-occult blood 
                tests and screening flexible sigmoidoscopies provided 
                for the purpose of early detection of colon cancer, 
                which are performed more frequently than is covered 
                under section 1834(d);''; and
            (B) in paragraph (7), by striking ``paragraph (1)(B) or 
        under paragraph (1)(F)'' and inserting ``subparagraphs (B), 
        (F), or (G) of paragraph (1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to screening fecal-occult blood tests and screening flexible 
sigmoidoscopies performed on or after January 1, 1995.

SEC. 413. COVERAGE OF CERTAIN IMMUNIZATIONS.

    (a) In General.--Section 1861(s)(10) of the Social Security Act (42 
U.S.C. 1395x(s)(10)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``, subject to section 4071(b) of 
                the Omnibus Budget Reconciliation Act of 1987,'', and
                    (B) by striking ``; and'' and inserting a comma;
            (2) in subparagraph (B), by striking the semicolon at the 
        end and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(C) tetanus-diphtheria booster and its 
                administration;''.
    (b) Limitation on Frequency.--Section 1862(a)(1) of such Act (42 
U.S.C. 1395y(a)(1)), as amended by section 412(b)(4)(A), is amended--
            (1) in subparagraph (F), by striking ``and'' at the end;
            (2) in subparagraph (G), by striking the semicolon at the 
        end and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(H) in the case of an influenza vaccine, which is 
                administered within the 11 months after a previous 
                influenza vaccine, and, in the case of a tetanus-
                diphtheria booster, which is administered within the 
                119 months after a previous tetanus-diphtheria 
                booster;''.
    (c) Conforming Amendment.--Section 1862(a)(7) of such Act (42 
U.S.C. 1395y(a)(7)), as amended by section 412(b)(4)(B), is amended by 
striking ``or (G)'' and inserting ``(G), or (H)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to influenza vaccines and tetanus-diphtheria boosters 
administered on or after January 1, 1995.

SEC. 414. COVERAGE OF WELL-CHILD CARE.

    (a) In General.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (O);
            (2) by striking the semicolon at the end of subparagraph 
        (P) and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(Q) well-child services (as defined in subsection 
        (ll)(1)) provided to an individual entitled to benefits under 
        this title who is under 7 years of age;''.
    (b) Services Defined.--Section 1861 of such Act (42 U.S.C. 1395x) 
is amended--
            (1) by redesignating the subsection (jj) as subsection 
        (kk); and
            (2) by inserting after subsection (kk) (as so redesignated) 
        the following new subsection:

                         ``Well-Child Services

    ``(ll)(1) The term `well-child services' means well-child care, 
including routine office visits, routine immunizations (including the 
vaccine itself), routine laboratory tests, and preventive dental care, 
provided in accordance with the periodicity schedule established with 
respect to the services under paragraph (2).
    ``(2) The Secretary, in consultation with the American Academy of 
Pediatrics, the Advisory Committee on Immunization Practices, and other 
entities considered appropriate by the Secretary, shall establish a 
schedule of periodicity which reflects the appropriate frequency with 
which the services referred to in paragraph (1) should be provided to 
healthy children.''.
    (c) Conforming Amendments.--(1) Section 1862(a)(1) of such Act (42 
U.S.C. 1395y(a)(1)), as amended by sections 412(b)(4)(A) and 413(b), is 
amended--
            (A) in subparagraph (G), by striking ``and'' at the end;
            (B) in subparagraph (H), by striking the semicolon at the 
        end and inserting ``, and''; and
            (C) by adding at the end the following new subparagraph:
            ``(I) in the case of well-child services, which are 
        provided more frequently than is provided under the schedule of 
        periodicity established by the Secretary under section 
        1861(ll)(2) for such services;''.
    (2) Section 1862(a)(7) of such Act (42 U.S.C. 1395y(a)(7)), as 
amended by sections 412(b)(4)(B) and 413(c), is amended by striking 
``or (H)'' and inserting ``(H), or (I)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to well-child services provided on or after January 1, 1995.

SEC. 415. DEMONSTRATION PROJECTS FOR COVERAGE OF OTHER PREVENTIVE 
              SERVICES.

    (a) Establishment.--The Secretary shall establish and provide for a 
series of ongoing demonstration projects under which the Secretary 
shall provide for coverage of the preventive services described in 
subsection (c) under the medicare program in order to determine--
            (1) the feasibility and desirability of expanding coverage 
        of medical and other health services under the medicare program 
        to include coverage of such services for all individuals 
        enrolled under part B of title XVIII of the Social Security 
        Act; and
            (2) appropriate methods for the delivery of those services 
        to medicare beneficiaries.
    (b) Sites for Project.--The Secretary shall provide for the conduct 
of the demonstration projects established under subsection (a) at the 
sites at which the Secretary conducts the demonstration program 
established under section 9314 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 and at such other sites as the Secretary 
considers appropriate.
    (c) Services Covered Under Projects.--The Secretary shall cover the 
following services under the series of demonstration projects 
established under subsection (a):
            (1) Glaucoma screening.
            (2) Cholesterol screening and cholesterol-reducing drug 
        therapies.
            (3) Screening and treatment for osteoporosis, including 
        tests for bone-marrow density and hormone replacement therapy.
            (4) Screening services for pregnant women, including ultra-
        sound and clamydial testing and maternal serum alfa-protein.
            (5) One-time comprehensive assessment for individuals 
        beginning at age 65 or 75.
            (6) Prostate-specific antigen (PSA) testing.
            (7) Other services considered appropriate by the Secretary.
    (d) Reports to Congress.--Not later than October 1, 1996, and every 
2 years thereafter, the Secretary shall submit a report to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
and the Committee on Energy and Commerce of the House of 
Representatives describing findings made under the demonstration 
projects conducted pursuant to subsection (a) during the preceding 2-
year period and the Secretary's plans for the demonstration projects 
during the succeeding 2-year period.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated from the Federal Supplementary Medical Insurance Trust 
Fund for expenses incurred in carrying out the series of demonstration 
projects established under subsection (a) the following amounts:
            (1) $4,000,000 for fiscal year 1995.
            (2) $4,000,000 for fiscal year 1996.
            (3) $5,000,000 for fiscal year 1997.
            (4) $5,000,000 for fiscal year 1998.
            (5) $6,000,000 for fiscal year 1999.

                 Part 2--Coverage of Prescription Drugs

SEC. 421. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

    (a) Description of Covered Outpatient Drugs.--Section 1861 of the 
Social Security Act (42 U.S.C. 1395x) is amended--
            (1) in subsection (s)(2), by amending subparagraph (J) to 
        read as follows:
            ``(J) covered outpatient drugs (as defined in subsection 
        (t)); and''; and
            (2) in subsection (t)--
                    (A) by inserting ``and paragraph (2)'' after 
                ``subsection (m)(5)'',
                    (B) by striking ``(t)'' and inserting ``(t)(1)'', 
                and
                    (C) by adding at the end the following new 
                paragraphs:
    ``(2) Subject to paragraph (3), the term `covered outpatient drug' 
means--
            ``(A) a drug which may be dispensed only upon prescription 
        and--
                    ``(i) which is approved for safety and 
                effectiveness as a prescription drug under section 505 
                or 507 of the Federal Food, Drug, and Cosmetic Act or 
                which is approved under section 505(j) of such Act;
                    ``(ii)(I) which was commercially used or sold in 
                the United States before the date of the enactment of 
                the Drug Amendments of 1962 or which is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) which has not 
                been the subject of a final determination by the 
                Secretary that it is a `new drug' (within the meaning 
                of section 201(p) of the Federal Food, Drug, and 
                Cosmetic Act) or an action brought by the Secretary 
                under section 301, 302(a), or 304(a) of such Act to 
                enforce section 502(f) or 505(a) of such Act; or
                    ``(iii)(I) which is described in section 107(c)(3) 
                of the Drug Amendments of 1962 and for which the 
                Secretary has determined there is a compelling 
                justification for its medical need, or is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) for which the 
                Secretary has not issued a notice of an opportunity for 
                a hearing under section 505(e) of the Federal Food, 
                Drug, and Cosmetic Act on a proposed order of the 
                Secretary to withdraw approval of an application for 
                such drug under such section because the Secretary has 
                determined that the drug is less than effective for all 
                conditions of use prescribed, recommended, or suggested 
                in its labeling;
            ``(B) a biological product which--
                    ``(i) may only be dispensed upon prescription,
                    ``(ii) is licensed under section 351 of the Public 
                Health Service Act, and
                    ``(iii) is produced at an establishment licensed 
                under such section to produce such product; and
            ``(C) insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act.
    ``(3)(A) The term `covered outpatient drug' does not include any 
drug, biological product, or insulin provided as, as part of, or as 
incident to, any of the following (and for which payment may be 
included under this title):
            ``(i) Inpatient hospital services (described in subsection 
        (b)(2)).
            ``(ii) Extended care services (described in subsection 
        (h)(5)).
            ``(iii) Physicians' services under subparagraph (A) or (B) 
        of subsection (s)(2).
            ``(iv) Dialysis supplies under subsection (s)(2)(F).
            ``(v) Antigens under subsection (s)(2)(G).
            ``(vi) Blood clotting factors for hemophiliacs under 
        subsection (s)(2)(I).
            ``(vii) Services of a physician assistant, nurse 
        practitioner, or clinical nurse specialist under subsection 
        (s)(2)(K).
            ``(viii) Pneumococcal, hepatitis B, or influenza vaccines 
        under subsection (s)(10).
            ``(ix) Rural health clinic services (under subsection 
        (aa)(1)).
            ``(x) Comprehensive outpatient rehabilitation facility 
        services (under subsection (cc)(1)).
            ``(xi) Hospice care (as defined in subsection (dd)(1)).
            ``(xii) Certified nurse-midwife service (as defined in 
        subsection (gg)(1)).
            ``(xiii) Inpatient or outpatient rural primary care 
        hospital services (as defined in subsection (mm)).
            ``(xiv) A covered surgical procedure in an ambulatory 
        surgical center (under section 1832(a)(2)(F)(i)).
    ``(B) The term `covered outpatient drug' does not include any drug 
that is intravenously administered in a home setting.''.
    (b) Deductible and Payment Amounts.--(1) Section 1833(a)(1) of such 
Act (42 U.S.C. 1395l(a)(1)) is amended--
            (A) by striking ``1834(h)(1), (M)'' and inserting 
        ``1834(h)(1), (N)'';
            (B) by striking ``(r)(2)) and (N)'' and inserting 
        ``(r)(2)), (O)''; and
            (C) by striking the semicolon at the end and inserting the 
        following ``, and (P) with respect to expenses incurred for 
        covered outpatient drugs, the amounts paid shall be the amounts 
        determined under section 1834(d)(2);''.
    (2) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2)) is 
amended by inserting ``(other than covered outpatient drugs)'' after 
``(2) in the case of services''.
    (3) Section 1833(b) of such Act (42 U.S.C. 1395l(b)) is amended--
            (A) in clause (1), by inserting ``or for covered outpatient 
        drugs'' after ``1861(s)(10)(A)'', and
            (B) in clause (2), by inserting ``or with respect to 
        covered outpatient drugs'' after ``home health services''.
    (4) Section 1834 of the Social Security Act (42 U.S.C. 1395m), as 
amended by section 412(a), is amended by inserting after subsection (d) 
the following new subsection:
    ``(e) Payment for Covered Outpatient Drugs.--
            ``(1) Deductible.--
                    ``(A) Application.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), payment shall be made 
                        under paragraph (2) only with respect to 
                        expenses incurred by an individual for covered 
                        outpatient drugs during a calendar year on or 
                        after such date in the year as the Secretary 
                        determines that the individual has incurred 
                        expenses in the year for covered outpatient 
                        drugs (during a period in which the individual 
                        is entitled to benefits under this part) equal 
                        to the amount of the prescription drug 
                        deductible specified in subparagraph (C) for 
                        that year.
                            ``(ii) Deductible not applied to 1st year 
                        immunosuppressives.--The prescription drug 
                        deductible established under this paragraph 
                        shall not apply to drugs described in section 
                        1861(t)(2)(A) used in immunosuppressive therapy 
                        and furnished, to an individual who receives an 
                        organ transplant for which payment is made 
                        under this title, within 1 year after the date 
                        of the transplant.
                    ``(B) Response to application.--If the system 
                described in section 1842(o)(4) has not been 
                established and an individual applies to the Secretary 
                to establish that the individual has met the 
                requirement of subparagraph (A), the Secretary shall 
                promptly notify the individual (and, if the application 
                was submitted by or through a participating pharmacy, 
                the pharmacy) as to the date (if any) as of which the 
                individual has met such requirement.
                    ``(C) Prescription drug deductible amount.--The 
                prescription drug deductible specified in this 
                subparagraph for--
                            ``(i) 1997 is $850,
                            ``(ii) 1998 is $900,
                            ``(iii) 1999 is $950, and
                            ``(iv) any succeeding year, is the amount 
                        specified for the previous year, increased by 
                        the percentage increase in the allocation for 
                        the class of services consisting of 
                        prescription drugs for such year (attributable 
                        to the medicare program) over such allocation 
                        for the previous year, as determined in 
                        accordance with subtitle A of title I of the 
                        Health Care Cost Containment and Reform Act of 
                        1993.
            ``(2) Payment amount.--
                    ``(A) In general.--Subject to the prescription drug 
                deductible established under paragraph (1)(A) and 
                except as provided in subparagraph (B), the amounts 
                payable under this part with respect to a covered 
                outpatient drug is equal to 80 percent of the lesser 
                of--
                            ``(i) the actual charge for the drug, or
                            ``(ii) the applicable payment limit 
                        established under paragraph (3).
                    ``(B) Treatment of certain cost-based prepaid 
                organizations.--In applying subparagraph (A) in the 
                case of an organization under a reasonable cost 
                reimbursement contract under section 1876 and in the 
                case of an organization receiving payment under section 
                1833(a)(1)(A) and providing coverage of covered 
                outpatient drugs, the Secretary shall provide for an 
                appropriate adjustment in the payment amounts otherwise 
                made to reflect the aggregate increase in payments that 
                would otherwise be made with respect to enrollees in 
                such an organization if payments were made other than 
                under such clause or such a contract on an individual-
                by-individual basis.
            ``(3) Payment limits.--
                    ``(A) Payment limit for non-multiple source drugs 
                and multiple-source drugs with restrictive 
                prescriptions.--In the case of a drug that either is 
                not a multiple source drug (as defined in paragraph 
                (9)(A)) or is a multiple source drug and has a 
                restrictive prescription (as defined in paragraph 
                (9)(B)), the payment limit for the drug under this 
                paragraph for a payment calculation period is equal to 
                the lesser of--
                            ``(i) the 90th percentile of the actual 
                        charges (computed on a statewide basis, 
                        carrier-wide basis, or other appropriate 
                        geographic area basis, as specified by the 
                        Secretary) for the drug for the second previous 
                        payment calculation period, adjusted (as the 
                        Secretary determines to be appropriate) to 
                        reflect the number of tablets (or other dosage 
                        units) dispensed; or
                            ``(ii) the amount of the administrative 
                        allowance (established under paragraph (4)) 
                        plus the product of--
                                    ``(I) the number of tablets (or 
                                other dosage units) dispensed, and
                                    ``(II) the per tablet or unit 
                                average wholesale price for such drug 
                                (as determined under subparagraph (C) 
                                for the period for purposes of this 
                                subparagraph).
                    ``(B) Payment limit for multiple source drugs 
                without restrictive prescriptions.--In the case of a 
                drug that is a multiple source drug but does not have a 
                restrictive prescription, the payment limit for the 
                drug under this paragraph for a payment calculation 
                period is equal to the amount of the administrative 
                allowance (established under paragraph (4)) plus the 
                product of--
                            ``(i) the number of tablets (or other 
                        dosage units) dispensed, and
                            ``(ii) the unweighted median of the per 
                        tablet or unit average wholesale prices 
                        (determined under subparagraph (C) for purposes 
                        of this subparagraph) for such drug for the 
                        period.
                    ``(C) Determination of unit price.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the Secretary shall determine, with 
                        respect to the dispensing of a covered 
                        outpatient drug in a payment calculation period 
                        (beginning on or after January 1, 1997), the 
                        per tablet or unit average wholesale price for 
                        the drug.
                            ``(ii) Basis for determinations.--
                                    ``(I) Determination for non-
                                multiple-source drugs.--For purposes of 
                                subparagraph (A), such determination 
                                shall be based on a biannual survey 
                                conducted by the Secretary of a 
                                representative sample of direct 
                                sellers, wholesalers, or pharmacies (as 
                                appropriate) of wholesale (or 
                                comparable direct) prices (excluding 
                                discounts to pharmacies); except that 
                                if, because of low volume of sales for 
                                the drug or other appropriate reasons 
                                or in the case of covered outpatient 
                                drugs during 1997, the Secretary 
                                determines that such a survey is not 
                                appropriate with respect to a specific 
                                drug, such determination shall be based 
                                on published average wholesale (or 
                                comparable direct) prices for the drug.
                                    ``(II) Determination for multiple-
                                source drugs.--For purposes of 
                                subparagraph (B), the Secretary may 
                                base the determination under this 
                                subparagraph on the published average 
                                wholesale (or comparable direct) prices 
                                for the drug or on a biannual survey 
                                conducted by the Secretary of a 
                                representative sample of direct 
                                sellers, wholesalers, or pharmacists 
                                (as appropriate) of wholesale (or 
                                comparable direct) prices (excluding 
                                discounts to pharmacies).
                                    ``(III) Compliance with survey 
                                required.--If a wholesaler or direct 
                                seller of a covered outpatient drug 
                                refuses, after being requested by the 
                                Secretary, to provide the information 
                                required in a survey under this clause, 
                                or deliberately provides information 
                                that is false, the Secretary may impose 
                                a civil money penalty of not to exceed 
                                $10,000 for each such refusal or 
                                provision of false information. The 
                                provisions of section 1128A (other than 
                                subsections (a) and (b)) shall apply to 
                                civil money penalties under the 
                                previous sentence in the same manner as 
                                such provisions apply to a penalty or 
                                proceeding under section 1128A(a). 
                                Information gathered pursuant to the 
                                survey shall not be disclosed except as 
                                the Secretary determines to be 
                                necessary to carry out the purposes of 
                                this part.
                            ``(iii) Quantity and timing.--Such 
                        determination shall be based on the price or 
                        prices for purchases in reasonable quantities 
                        and shall be made for a payment calculation 
                        period based on prices for the first day of the 
                        first month of the previous payment calculation 
                        period.
                            ``(iv) Geographic basis.--The Secretary 
                        shall make such determination, and calculate 
                        the payment limits under this paragraph, on a 
                        national basis; except that the Secretary may 
                        make such determination, and calculate such 
                        payment limits, on a regional basis to take 
                        account of limitations on the availability of 
                        drug products and variations among regions in 
                        the average wholesale prices for a drug 
                        product.
            ``(4) Administrative allowance for purposes of payment 
        limits.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), for drugs dispensed in--
                            ``(i) 1997, the administrative allowance 
                        under this paragraph is--
                                    ``(I) $5.00 for drugs dispensed by 
                                a participating pharmacy, or
                                    ``(II) $3.00 for drugs dispensed by 
                                another pharmacy; or
                            ``(ii) a subsequent year, the 
                        administrative allowance under this paragraph 
                        is the administrative allowance under this 
                        paragraph for the preceding year increased by 
                        the percentage increase (if any) in the 
                        implicit price deflator for gross national 
                        product (as published by the Department of 
                        Commerce in its `Survey of Current Business') 
                        over the 12-month period ending with August of 
                        such preceding year.
                Any allowance determined under the clause (ii) which is 
                not a multiple of 1 cent shall be rounded to the 
                nearest multiple of 1 cent.
                    ``(B) Adjustment in allowance for mail service 
                pharmacies.--The Secretary may, by regulation and after 
                consultation with pharmacists, elderly groups, and 
                private insurers, reduce the administrative allowances 
                established under subparagraph (A) for any drug 
                dispensed by a mail service pharmacy (as defined by the 
                Secretary) based on differences between such pharmacies 
                and other pharmacies with respect to operating costs 
                and other economies.
            ``(5) Assuring appropriate prescribing and dispensing 
        practices.--
                    ``(A) In general.--The Secretary shall establish a 
                program to identify (and to educate physicians and 
                pharmacists concerning)--
                            ``(i) instances or patterns of unnecessary 
                        or inappropriate prescribing or dispensing 
                        practices for covered outpatient drugs;
                            ``(ii) instances or patterns of substandard 
                        care with respect to such drugs; and
                            ``(iii) potential adverse reactions.
                    ``(B) Standards.--In carrying out the program under 
                subparagraph (A), the Secretary shall establish for 
                each covered outpatient drug standards for the 
                prescribing of the drug which are based on accepted 
                medical practice. In establishing such standards, the 
                Secretary shall incorporate standards from such current 
                authoritative compendia as the Secretary may select; 
                except that the Secretary may modify such a standard by 
                regulation on the basis of scientific and medical 
                information that such standard is not consistent with 
                the safe and effective use of the drug.
                    ``(C) Prohibition of formulary.--Nothing in this 
                title (other than section 1862(c)) shall be construed 
                as authorizing the Secretary to exclude from coverage 
                or to deny payment--
                            ``(i) for any specific covered outpatient 
                        drug, or specific class of covered outpatient 
                        drug; or
                            ``(ii) for any specific use of such a drug 
                        for a specific indication unless such exclusion 
                        is pursuant to section 1862(a)(1) based on a 
                        finding by the Secretary that such use is not 
                        safe or is not effective.
            ``(6) Treatment of certain prepaid organizations.--
                    ``(A) General rule counting prepaid plan expenses 
                towards the prescription drug deductible.--Except as 
                provided in subparagraph (B), expenses incurred by (or 
                on behalf of) a medicare beneficiary for covered 
                outpatient drugs shall be counted (consistent with 
                subparagraph (C)) toward the prescription drug 
                deductible established under paragraph (1) whether or 
                not, at the time the expenses were incurred, the 
                beneficiary was enrolled in a plan under section 
                1833(a)(1)(A) or under section 1876.
                    ``(B) Treatment of drug buy-out plan expenses.--In 
                the case of a medicare beneficiary enrolled in a month 
                in a drug buy-out plan (as defined in subparagraph 
                (D))--
                            ``(i) expenses incurred by the beneficiary 
                        for covered outpatient drugs reimbursed under 
                        the plan shall not be counted towards the 
                        prescription drug deductible, but
                            ``(ii) if the individual disenrolls from 
                        the plan during the year, the beneficiary is 
                        deemed to have incurred, for each month of such 
                        enrollment, expenses for covered outpatient 
                        drugs in an amount equal to the actuarial value 
                        (with respect to such month) of the deductible 
                        for covered outpatient drugs (as computed by 
                        the Secretary for purposes of section 
                        1876(e)(1)) applicable on the average to 
                        individuals in the United States.
                    ``(C) Treatment of expenses for covered outpatient 
                drugs incurred while enrolled in a prepaid plan other 
                than a drug buy-out plan.--The Secretary may not enter 
                into a contract with an organization under section 
                1876, or provide for payment under section 
                1833(a)(1)(A) with respect to an organization which 
                provides reimbursement for covered outpatient drugs, 
                with respect to a plan that is not a drug buy-out plan, 
                unless the organization provides assurances, 
                satisfactory to the Secretary, that--
                            ``(i) the organization will maintain and 
                        make available, for its enrollees and in 
                        coordination with the appropriate carriers 
                        under this part, an accounting of expenses 
                        incurred by (or on behalf of) enrollees under 
                        the plan for covered outpatient drugs; and
                            ``(ii) the organization will take into 
                        account, in any deductibles established under 
                        the plan in a year with respect to covered 
                        outpatient drugs under this part, the amounts 
                        of expenses for covered outpatient drugs 
                        incurred in the year by (or on behalf of) the 
                        beneficiary and otherwise counted towards the 
                        prescription drug deductible in the year.
                    ``(D) Drug buy-out plan defined.--In this 
                paragraph, the term `drug buy-out plan' means a plan 
                under section 1833(a)(1)(A) or offered by an 
                organization under section 1876 and with respect to 
                which--
                            ``(i) the amount of any deductible under 
                        the plan with respect to covered outpatient 
                        drugs under this title,
                is less than 50 percent of--
                            ``(ii) the prescription drug deductible 
                        specified in paragraph (1)(C).
                    ``(E) Medicare beneficiary defined.--In this 
                subsection, the term `medicare beneficiary' means, with 
                respect to a month, an individual covered for benefits 
                under this part for the month.
                    ``(F) Treatment of plan charges.--In the case of 
                covered outpatient drugs furnished by an eligible 
                organization under section 1876(b) or an organization 
                described in section 1833(a)(1)(A) which does not 
                impose charges on covered outpatient drugs dispensed to 
                its members, for purposes of this subsection the actual 
                charges of the organization shall be the organization's 
                standard charges to members, and other individuals, not 
                entitled to benefits with respect to such drugs.
            ``(7) Physician guide.--
                    ``(A) In general.--The Secretary shall develop, and 
                update annually, an information guide for physicians 
                concerning the comparative average wholesale prices of 
                at least 500 of the most commonly prescribed covered 
                outpatient drugs. Such guide shall, to the extent 
                practicable, group covered outpatient drugs (including 
                multiple source drugs) in a manner useful to physicians 
                by therapeutic category or with respect to the 
                conditions for which they are prescribed. Such guide 
                shall specify the average wholesale prices on the basis 
                of the amount of the drug required for a typical daily 
                therapeutic regimen.
                    ``(B) Mailing guide.--The Secretary shall provide 
                for mailing, in January of each year (beginning with 
                1997), a copy of the guide developed and updated under 
                subparagraph (A)--
                            ``(i) to each hospital with an agreement in 
                        effect under section 1866;
                            ``(ii) to each physician (as defined in 
                        section 1861(r)(1)) who routinely provides 
                        services under this part; and
                            ``(iii) to Social Security offices, senior 
                        citizen centers, and other appropriate places.
            ``(8) Reports on utilization and effects on prices.--
                    ``(A) Compilation of information.--The Secretary 
                shall compile information on--
                            ``(i) manufacturers' prices for covered 
                        outpatient drugs, and on charges of pharmacists 
                        for covered outpatient drugs, and
                            ``(ii) the use of covered outpatient drugs 
                        by individuals entitled to benefits under this 
                        part.
                The information compiled under clause (i) shall include 
                a comparison of the increases in prices and charges for 
                covered outpatient drugs during each 6-month period 
                (beginning with January 1997) with the semiannual 
                average increase in such prices and charges during the 
                5 years beginning with 1992.
                    ``(B) Reports.--The Secretary shall submit to the 
                Committees on Ways and Means and Energy and Commerce of 
                the House of Representatives and the Committee on 
                Finance of the Senate a report, in May and November of 
                1998 and 1999 and in May of each succeeding year, 
                providing the information compiled under subparagraph 
                (A). For each such report submitted after 1999, the 
                report shall include an explanation of the extent to 
                which the increases in outlays for covered outpatient 
                drugs under this part are due to the factors described 
                in subparagraphs (A)(i) and (A)(ii).
            ``(9) Definitions.--In this subsection:
                    ``(A) Multiple source drug.--
                            ``(i) In general.--The term `multiple 
                        source drug' means, with respect to a payment 
                        calculation period, a covered outpatient drug 
                        for which there are 2 or more drug products 
                        which--
                                    ``(I) are rated as therapeutically 
                                equivalent (under the Food and Drug 
                                Administration's most recent 
                                publication of `Approved Drug Products 
                                with Therapeutic Equivalence 
                                Evaluations');
                                    ``(II) except as provided in clause 
                                (ii), are pharmaceutically equivalent 
                                and bioequivalent, as defined in clause 
                                (iii) and as determined by the Food and 
                                Drug Administration; and
                                    ``(III) are sold or marketed during 
                                the period.
                            ``(ii) Exception.--Subclause (II) of clause 
                        (i) shall not apply if the Food and Drug 
                        Administration changes by regulation (after an 
                        opportunity for public comment of 90 days) the 
                        requirement that, for purposes of the 
                        publication described in clause (i)(I), in 
                        order for drug products to be rated as 
                        therapeutically equivalent, they must be 
                        pharmaceutically equivalent and bioequivalent, 
                        as defined in clause (iii).
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph:
                                    ``(I) Pharmaceutically 
                                equivalent.--Drug products are 
                                pharmaceutically equivalent if the 
                                products contain identical amounts of 
                                the same active drug ingredient in the 
                                same dosage form and meet compendial or 
                                other applicable standards of strength, 
                                quality, purity, and identity.
                                    ``(II) Bioequivalent.--Drugs are 
                                bioequivalent if they do not present a 
                                known or potential bioequivalence 
                                problem or, if they do present such a 
                                problem, are shown to meet an 
                                appropriate standard of bioequivalence.
                                    ``(III) Sold or marketed.--A drug 
                                is considered to be sold or marketed 
                                during a period if it is listed in the 
                                publications referred to in clause 
                                (i)(I), unless the Secretary determines 
                                that such sale or marketing is not 
                                actually taking place.
                    ``(B) Restrictive prescription.--A drug has a 
                `restrictive prescription' only if--
                            ``(i) in the case of a written 
                        prescription, the prescription for the drug 
                        indicates, in the handwriting of the physician 
                        or other person prescribing the drug and with 
                        an appropriate phrase (such as `brand medically 
                        necessary') recognized by the Secretary, that 
                        the particular drug must be dispensed; or
                            ``(ii) in the case of a prescription issued 
                        by telephone--
                                    ``(I) the physician or other person 
                                prescribing the drug (through use of 
                                such an appropriate phrase) states that 
                                the particular drug must be dispensed, 
                                and
                                    ``(II) the physician or other 
                                person submits to the pharmacy 
                                involved, within 30 days after the date 
                                of the telephone prescription, a 
                                written confirmation which is in the 
                                handwriting of the physician or other 
                                person prescribing the drug and which 
                                indicates with such appropriate phrase 
                                that the particular drug was required 
                                to have been dispensed.
                    ``(C) Payment calculation period.--The term 
                `payment calculation period' means the 6-month period 
                beginning with January of each year and the 6-month 
                period beginning with July of each year.''.
    (c) Participating Pharmacies; Civil Money Penalties.--
            (1) Participating pharmacies.--Section 1842 of such Act (42 
        U.S.C. 1395t) is amended--
                    (A) in subsection (h)(1), by inserting before the 
                period at the end of the second sentence the following: 
                ``, except that, with respect to a supplier of covered 
                outpatient drugs, the term `participating supplier' 
                means a participating pharmacy (as defined in 
                subsection (o)(1))'';
                    (B) in subsection (h)(4), is amended by adding at 
                the end the following: ``In publishing directories 
                under this paragraph, the Secretary shall provide for 
                separate directories (wherever appropriate) for 
                participating pharmacies.''; and
                    (C) by inserting after subsection (n) the following 
                new subsection:
    ``(o)(1) For purposes of this section, the term `participating 
pharmacy' means, with respect to covered outpatient drugs dispensed on 
or after January 1, 1997, an entity which is authorized under a State 
law to dispense covered outpatient drugs and which has entered into an 
agreement with the Secretary, providing at least the following:
            ``(A) The entity agrees to accept payment under this part 
        on an assignment-related basis for all covered outpatient drugs 
        dispensed to an individual entitled to benefits under this part 
        (in this subsection referred to as a `medicare beneficiary') 
        during a year after--
                    ``(i) the Secretary has notified the entity, 
                through the electronic system described in paragraph 
                (4); or
                    ``(ii) in the absence of such a system, the entity 
                is otherwise notified that the Secretary has 
                determined,
        that the individual has met the prescription drug deductible 
        with respect to such drugs under section 1834(e)(1) for the 
        year.
            ``(B) The entity agrees--
                    ``(i) not to refuse to dispense covered outpatient 
                drugs stocked by the entity to any medicare 
                beneficiary; and
                    ``(ii) not to charge medicare beneficiaries 
                (regardless of whether or not the beneficiaries are 
                enrolled under a prepaid health plan or with eligible 
                organization under section 1876) more for such drugs 
                than the amount it charges to the general public (as 
                determined by the Secretary in regulations).
            ``(C) The entity agrees to keep patient records (including 
        records on expenses) for all covered outpatient drugs dispensed 
        to all medicare beneficiaries.
            ``(D) The entity agrees to submit information (in a manner 
        specified by the Secretary to be necessary to administer this 
        title) on all purchases of covered outpatient drugs dispensed 
        to medicare beneficiaries.
            ``(E) The entity agrees--
                    ``(i) to offer to counsel, or to offer to provide 
                information (consistent with State law respecting the 
                provision of such information) to, each medicare 
                beneficiary on the appropriate use of a drug to be 
                dispensed and whether there are potential interactions 
                between the drug and other drugs dispensed to the 
                beneficiary; and
                    ``(ii) to advise the beneficiary on the 
                availability (consistent with State laws respecting 
                substitution of drugs) of therapeutically equivalent 
                covered outpatient drugs.
            ``(F) The entity agrees to provide the information 
        requested by the Secretary in surveys under section 
        1834(e)(3)(C)(ii).
Nothing in this paragraph shall be construed as requiring a pharmacy 
operated by an eligible organization (described in section 1876(b)) or 
an organization described in section 1833(a)(1)(A) for the exclusive 
benefit of its members to dispense covered outpatient drugs to 
individuals who are not members of the organization.
    ``(2) The Secretary shall provide to each participating pharmacy--
            ``(A) a distinctive emblem (suitable for display to the 
        public) indicating that the pharmacy is a participating 
        pharmacy; and
            ``(B) upon request, such electronic equipment and technical 
        assistance (other than the costs of obtaining, maintaining, or 
        expanding telephone service) as the Secretary determines may be 
        necessary for the pharmacy to submit claims using the 
        electronic system established under paragraph (4).
    ``(3) The Secretary shall provide for periodic audits of 
participating pharmacies to assure--
            ``(A) compliance with the requirements for participation 
        under this title; and
            ``(B) the accuracy of information submitted by the 
        pharmacies under this title.
    ``(4) The Secretary shall establish, by not later than January 1, 
1997, a point-of-sale electronic system for use by carriers and 
participating pharmacies in the submission of information respecting 
covered outpatient drugs dispensed to medicare beneficiaries under this 
part.
    ``(5) Notwithstanding subsection (b)(3)(B), payment for covered 
outpatient drugs may be made on the basis of an assignment described in 
clause (ii) of that subsection only to a participating pharmacy.''.
            (2) Civil money penalties for violation of participation 
        agreement, for excessive charges for nonparticipating 
        pharmacies and for failure to provide survey information.--
        Section 1128A(a) of such Act (42 U.S.C. 1320a-7a(a)), as 
        amended by subsections (a) and (b) of section 243, is amended--
                    (A) by striking ``or'' at the end of paragraph (1);
                    (B) in paragraph (2)(C), by inserting ``or to be a 
                participating pharmacy under section 1842(o)'' after 
                ``1842(h)(1)'';
                    (C) by striking ``or'' at the end of paragraph (4);
                    (D) by adding ``or'' at the end of paragraph (5); 
                and
                    (E) by inserting after paragraph (5) the following 
                new paragraph:
            ``(6) in the case of a participating or nonparticipating 
        pharmacy (as defined for purposes of part B of title XVIII)--
                    ``(A) presents or causes to be presented to any 
                person a request for payment for covered outpatient 
                drugs dispensed to an individual entitled to benefits 
                under part B of title XVIII and for which the amount 
                charged by the pharmacy is greater than the amount the 
                pharmacy charges the general public (as determined by 
                the Secretary in regulations), or
                    ``(B) fails to provide the information requested by 
                the Secretary in a survey under section 
                1834(e)(3)(C)(ii);''.
    (d) Limitation on Length of Prescription.--Section 1862(c) of such 
Act (42 U.S.C. 1395y(c)) is amended--
            (1) by redesignating subparagraphs (A) through (D) of 
        paragraph (1) as clauses (i) through (iv);
            (2) in paragraph (2)(A), by striking ``paragraph (1)'' and 
        inserting ``subparagraph (A)'';
            (3) by redesignating subparagraphs (A) and (B) of paragraph 
        (2) as clauses (i) and (ii);
            (4) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B);
            (5) by inserting ``(1)'' after ``(c)''; and
            (6) by adding at the end the following new paragraph:
    ``(2) No payment may be made under part B for any expense incurred 
for a covered outpatient drug if the drug is dispensed in a quantity 
exceeding a supply of 30 days or such longer period of time (not to 
exceed 90 days, except in exceptional circumstances) as the Secretary 
may authorize.''.
    (e) Use of Carriers, Fiscal Intermediaries, and Other Entities in 
Administration.--
            (1) Authorizing use of other entities in electronic claims 
        system.--Section 1842(f) of such Act (42 U.S.C. 1395u(f)) is 
        amended--
                    (A) by striking ``and'' at the end of paragraph 
                (1);
                    (B) by striking the period at the end of paragraph 
                (2) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(3) with respect to implementation and operation (and 
        related functions) of the electronic system established under 
        subsection (o)(4), a voluntary association, corporation, 
        partnership, or other nongovernmental organization, which the 
        Secretary determines to be qualified to conduct such 
        activities.''.
            (2) Additional functions of carriers.--Section 1842(b)(3) 
        of such Act (42 U.S.C. 1395u(b)(3)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (H);
                    (B) by adding ``and'' at the end of subparagraph 
                (L);
                    (C) by redesignating subparagraph (L) as 
                subparagraph (I); and
                    (D) by inserting after subparagraph (I) (as so 
                redesignated) the following new subparagraphs:
            ``(J) if it makes determinations or payments with respect 
        to covered outpatient drugs, will--
                    ``(i) receive information transmitted under the 
                electronic system established under subsection (o)(4), 
                and
                    ``(ii) respond to requests by participating 
                pharmacies (and individuals entitled to benefits under 
                this part) as to whether or not such an individual has 
                met the prescription drug deductible established under 
                section 1834(e)(1)(A) for a year; and
            ``(K) will enter into such contracts with organizations 
        described in subsection (f)(3) as the Secretary determines may 
        be necessary to implement and operate (and for related 
        functions with respect to) the electronic system established 
        under subsection (o)(4) for covered outpatient drugs under this 
        part;''.
            (3) Special contract provisions for electronic claims 
        system.--
                    (A) Payment on other than a cost basis.--Section 
                1842(c)(1)(A) of such Act (42 U.S.C. 1395u(c)(1)(A)) is 
                amended--
                            (i) by inserting ``(i)'' after 
                        ``(c)(1)(A)'';
                            (ii) in the first sentence, by inserting 
                        ``, except as provided in clause (ii),'' after 
                        ``under this part, and''; and
                            (iii) by adding at the end the following 
                        new clause:
    ``(ii) To the extent that a contract under this section provides 
for implementation and operation (and related functions) of the 
electronic system established under subsection (o)(4) for covered 
outpatient drugs, the Secretary may provide for payment for such 
activities based on any method of payment determined by the Secretary 
to be appropriate.''.
                    (B) Application of different performance 
                standards.--The Secretary of Health and Human Services, 
                before entering into contracts under section 1842 of 
                the Social Security Act with respect to the 
                implementation and operation (and related functions) of 
                the electronic system for covered outpatient drugs, 
                shall establish standards with respect to performance 
                with respect to such activities. The provisions of 
                section 1153(e)(2) and paragraphs (1) and (2) of 
                section 1153(h) of such Act shall apply to such 
                activities in the same manner as they apply to 
                contracts with peer review organizations, instead of 
                the requirements of the last 2 sentences of section 
                1842(b)(2) of such Act.
                    (C) Use of regional carriers.--Section 
                1842(b)(2)(A) of such Act (42 U.S.C. 1395u(b)(2)(A)) is 
                amended by adding at the end the following new 
                sentence: ``With respect to activities relating to 
                implementation and operation (and related functions) of 
                the electronic system established under subsection 
                (o)(4), the Secretary may enter into contracts with 
                carriers under this section to perform such activities 
                on a regional basis.''.
            (4) Delay in application of coordinated benefits with 
        medigap.--The provisions of subparagraph (B) of section 
        1842(h)(3) of the Social Security Act shall not apply to 
        covered outpatient drugs (other than drugs described in section 
        1861(s)(2)(J) of such Act as of the date of the enactment of 
        this Act) dispensed before January 1, 1999.
            (5) Batch prompt processing of claims.--Section 1842(c) (42 
        U.S.C. 1395u(c)) is amended--
                    (A) in paragraphs (2)(A) and (3)(A), by striking 
                ``Each'' and inserting ``Except as provided in 
                paragraph (3), each'';
                    (B) by adding at the end the following new 
                paragraph:
    ``(4)(A) Each contract under this section which provides for the 
disbursement of funds, as described in subsection (a)(1)(B), with 
respect to claims for payment for covered outpatient drugs shall 
provide for a payment cycle under which each carrier will, on a monthly 
basis, make a payment with respect to all claims which were received 
and approved for payment in the period since the most recent date on 
which such a payment was made with respect to the participating 
pharmacy or individual submitting the claim.
    ``(B) If payment is not issued, mailed, or otherwise transmitted 
within 5 days of when such a payment is required to be made under 
subparagraph (A), interest shall be paid at the rate used for purposes 
of section 3902(a) of title 31, United States Code (relating to 
interest penalties for failure to make prompt payments) for the period 
beginning on the day after such 5-day period and ending on the date on 
which payment is made.''.
    (f) Modification of HMO/CMP Contracts.--
            (1) Separate actuarial determination for covered outpatient 
        drug benefit.--Section 1876(e)(1) of such Act (42 U.S.C. 
        1395mm(e)(1)) is amended by adding at the end thereof the 
        following new sentence: ``The preceding sentence shall be 
        applied separately with respect to covered outpatient drugs.''.
            (2) Additional optional benefits.--Section 1876(g)(3)(A) of 
        such Act (42 U.S.C. 1395mm(g)(3)(A)) is amended by striking 
        ``rate'' and inserting ``rates''.
    (g) Conforming Amendments.--
            (1) The first sentence of section 1866(a)(2)(A) (42 U.S.C. 
        1395cc(a)(2)(A)) is amended--
                    (A) by inserting ``1834(e),'' after ``1833(b),''; 
                and
                    (B) by inserting ``and in the case of covered 
                outpatient drugs, applicable coinsurance percent 
                (specified in section 1834(e)(2)(C)) of the lesser of 
                the actual charges for the drugs or the payment limit 
                (established under section 1834(e)(3))'' after 
                ``established by the Secretary''.
            (2) Section 1903(i)(5) (42 U.S.C. 1396b(i)(5)) is amended 
        by striking ``section 1862(c)'' and inserting ``section 
        1862(c)(1)''.
    (h) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        items dispensed on or after July 1, 1997.
            (2) Carriers.--The amendments made by subsection (e) shall 
        take effect on the date of the enactment of this Act; except 
        that the amendments made by subsection (e)(5) shall take effect 
        on January 1, 1998, but shall not be construed as requiring 
        payment before February 1, 1998.
            (3) HMO/CMP enrollments.--The amendment made by subsection 
        (f) shall apply to enrollments effected on or after January 1, 
        1997.

SEC. 422. ESTABLISHMENT OF PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION.

    Part B of title XVIII of the Social Security Act is amended by 
inserting after section 1846 the following new section:

             ``prescription drug payment review commission

    ``Sec. 1847. (a)(1) The Director of the Congressional Office of 
Technology Assessment (in this section referred to as the `Director' 
and the `Office', respectively) shall provide for the appointment of a 
Prescription Drug Payment Review Commission (in this section referred 
to as the `Commission'), to be composed of individuals with expertise 
in the provision and financing of covered outpatient drugs appointed by 
the Director (without regard to the provisions of title 5, United 
States Code, governing appointments in the competitive service).
    ``(2) The Commission shall consist of 11 individuals. Members of 
the Commission shall first be appointed by no later than January 1, 
1996, for a term of 3 years, except that the Director may provide 
initially for such shorter terms as will insure that (on a continuing 
basis) the terms of no more than 4 members expire in any one year.
    ``(3) The membership of the Commission shall include recognized 
experts in the fields of health care economics, medicine, pharmacology, 
pharmacy, and prescription drug reimbursement, as well as at least one 
individual who is a medicare beneficiary.
    ``(b)(1) The Commission shall submit to Congress an annual report 
no later than May 1 of each year, beginning with 1997, concerning 
methods of determining payment for covered outpatient drugs under this 
part.
    ``(2) Such report, in 1998 and thereafter, shall include, with 
respect to the previous year, information on--
            ``(A) increases in manufacturers' prices for covered 
        outpatient drugs and in charges of pharmacists for covered 
        outpatient drugs,
            ``(B) the level of utilization of covered outpatient drugs 
        by medicare beneficiaries, and
            ``(C) administrative costs relating to covered outpatient 
        drugs.
    ``(3) The report submitted in 1998 shall include the Commissions's 
recommendations regarding the feasibility and desirability of 
establishing coverage rules for covered outpatient drugs under which 
the Secretary may exclude from coverage or deny payment--
            ``(A) for specific covered outpatient drugs, or a specific 
        class of covered outpatient drug; or
            ``(B) for the specific use of such a drug for a specific 
        indication (in addition to exclusions pursuant to section 
        1862(a)(1) based on a finding by the Secretary that such use is 
        not safe or is not effective).
    ``(c) Section 1845(c)(1) shall apply to the Commission in the same 
manner as it applies to the Physician Payment Review Commission.
    ``(d) There are authorized to be appropriated such sums as may be 
necessary to carry out the provisions of this section. Such sums shall 
be payable from the Federal Supplementary Medical Insurance Trust 
Fund.''.

SEC. 423. COVERAGE OF PRESCRIPTION DRUGS FOR QUALIFIED MEDICARE 
              BENEFICIARIES AND QUALIFIED DISABLED AND WORKING 
              INDIVIDUALS.

    (a) In General.--Section 1902(a)(10)(E) of the Social Security Act 
(42 U.S.C. 1396a(a)(10)(E)) is amended--
            (1) by striking the semicolon at the end of clause (i) and 
        inserting a comma;
            (2) by striking ``; and'' at the end of clause (ii) and 
        inserting a comma;
            (3) by striking the semicolon at the end of clause (iii) 
        and inserting ``, and''; and
            (4) by adding at the end the following new clause:
                    ``(iv) for making available prescribed drugs for 
                qualified medicare beneficiaries described in section 
                1905(p)(1), qualified disabled and working individuals 
                described in section 1905(s), and individuals described 
                in clause (iii);''.
    (b) Full Federal Payment for Increased Costs.--Section 1903(w)(2) 
of such Act, as added by section 403, is amended--
            (1) in subparagraph (D), by striking ``(C)'' and inserting 
        ``(D)'';
            (2) by redesignating subparagraph (D) as subparagraph (E); 
        and
            (3) by inserting after subparagraph (C) the following new 
        subparagraph:
            ``(D) The amount of expenditures for medical assistance 
        attributable to individuals with respect to whom the State plan 
        would not be required to provide such assistance but for the 
        amendments made by section 423(a) of the Health Care Cost 
        Containment and Reform Act of 1993.''.
    (c) Conforming Amendment.--Section 1902(a)(10) of such Act (42 
U.S.C. 1396a(a)(10)) is amended in clause (VIII) of the matter 
following subparagraph (E) by striking ``1905(p)(3),'' and inserting 
``1905(p)(3) and for prescribed drugs,''.
    (d) Effective Date.--The amendments made by this section shall 
apply to calendar quarters beginning on or after January 1, 1996, 
without regard to whether or not regulations to implement such 
amendments are promulgated by such date.

           Part 3--Qualified Medicare Beneficiary Enrollment

SEC. 431. QUALIFIED MEDICARE BENEFICIARY ENROLLMENT.

    (a) Enrollment.--The Secretary of Health and Human Services shall 
establish and implement a method for obtaining information from newly 
eligible medicare beneficiaries that may be used (beginning with fiscal 
year 1997) to determine whether such beneficiaries may be eligible for 
medical assistance for medicare cost-sharing under State medicaid plans 
as qualified medicare beneficiaries, and for transmitting such 
information to the State in which such a beneficiary resides. If, under 
such method, the Secretary determines that an individual is eligible 
for medical assistance for such cost-sharing under the medicaid plan of 
a State, the Secretary shall enroll the individual in such plan for 
quarters beginning after the date on which the Secretary makes such 
determination.
    (b) Explanations in Annual Notice of Benefits.--
            (1) In general.--Section 1804 of the Social Security Act 
        (42 U.S.C. 1395b-2) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (2);
                    (B) by striking the period at the end of paragraph 
                (3) and inserting ``, and''; and
                    (C) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) a general description in clear language of the 
        availability of and the requirements for obtaining medical 
        assistance for medicare cost-sharing under State plans approved 
        under title XIX.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to annual notices under section 1804 of the Social 
        Security Act for years beginning with 1996.

      Subtitle C--Health Insurance Deduction for the Self-Employed

SEC. 441. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS MADE PERMANENT AND INCREASED.

    (a) Deduction Made Permanent.--
            (1) In general.--Subsection (l) of section 162 of the 
        Internal Revenue Code of 1986 (relating to special rules for 
        health insurance costs of self-employed individuals) is amended 
        by striking paragraph (6).
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after June 30, 1992.
    (b) Increase in Deduction.--
            (1) In general.--Paragraph (1) of section 162(l) of such 
        Code is amended by striking ``25 percent of''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 1993.

           Subtitle D--Health Insurance Program for Children

SEC. 451. HEALTH INSURANCE FOR CHILDREN.

    (a) In General.--The Social Security Act, as amended by section 
302, is amended by adding at the end the following new title:

              ``TITLE XXII--HEALTH INSURANCE FOR CHILDREN

``SEC. 2200. ESTABLISHMENT OF PROGRAM OF HEALTH INSURANCE FOR CHILDREN.

    ``There is hereby established a program of health insurance for 
children under 19 years of age.

                  ``Part A--Eligibility and Enrollment

``SEC. 2201. ELIGIBILITY.

    ``(a) In General.--Every eligible child (as defined in subsection 
(b)) is eligible to enroll for benefits under this title.
    ``(b) Eligible Child Defined.--In this title, the term `eligible 
child' means, for a month, an individual who--
            ``(1) is under 19 years of age as of the last day of the 
        month;
            ``(2) is a resident of the United States; and
            ``(3) is a citizen or national of the United States, an 
        alien lawfully admitted for permanent residence, or an alien 
        otherwise permanently residing in the United States under color 
        of law.

``SEC. 2202. ENROLLMENT PERIODS.

    ``(a) In General.--An eligible individual may enroll in the program 
under this title only in such manner and form as may be prescribed by 
regulations, and only during an enrollment period prescribed in or 
under this section.
    ``(b) General Enrollment Period.--There shall be a general 
enrollment period during the month of September of each year (beginning 
with 1995).
    ``(c) Initial Special Enrollment Periods.--
            ``(1) Birth.--With respect to each eligible individual who 
        becomes an eligible individual by reason of birth during a 
        month after the end of first general enrollment period, there 
        shall be a special enrollment period during the 30-day period 
        beginning on the date of the birth.
            ``(2) Obtaining lawful resident status.--With respect to 
        each eligible individual who does not meet the requirements of 
        paragraphs (2) and (3) of section 2201(a) at the time of birth 
        and who becomes an eligible individual during a month after the 
        end of the first general enrollment period, there shall be a 
        special enrollment period during the 30-day period beginning on 
        the first date on which the individual is an eligible 
        individual.
    ``(d) Continuation Special Enrollment Periods.--In the case of an 
eligible individual--
            ``(1) who at the time the individual first becomes an 
        eligible individual (or, if later, the first month of the first 
        general enrollment period) is enrolled in a group health plan 
        (including continuation coverage under such a plan), and
            ``(2) whose coverage under such a plan (including 
        continuation coverage under such a plan) is terminated due to a 
        qualifying event (within the meaning of section 4980B(f)(3) of 
        the Internal Revenue Code of 1986) or due to expiration of the 
        period of continuation coverage,
there shall be a special enrollment period during the 3-month period 
beginning 1 month before the effective date of termination of coverage 
under such a plan.

``SEC. 2203. EMPLOYMENT-BASED ENROLLMENT.

    ``(a) In General.--Subject to subsection (d), the Secretary shall 
permit the sponsor of a group health plan to elect to offer coverage to 
eligible children under a group health plan through enrollment under 
this title in accordance with this section. Except as specifically 
provided in this section, the terms and period of the coverage effected 
pursuant to such election shall be the same as the terms and period of 
coverage that would be provided if the individual were enrolled under 
this title not pursuant to such election.
    ``(b) Conditions for Election.--An election is available under this 
section with respect to a group health plan only if the sponsor 
provides assurances, satisfactory to the Secretary, that the following 
conditions are met:
            ``(1) Offer to all eligible children.--The offer of 
        coverage under the election must be made (at such times, 
        including at the time of initial employment, and in such manner 
        as the Secretary determines to be consistent with the 
        provisions of this title) to every eligible child for every 
        individual to whom health benefits are made available under the 
        plan.
            ``(2) Payment towards premium.--
                    ``(A) In general.--Under the election, the plan 
                shall provide for payment of the premiums imposed under 
                this title and may not collect from any such child or 
                the parent or guardian of such a child more than 20 
                percent of the amount of such premiums paid by the plan 
                with respect to such a child.
                    ``(B) Treatment of continuation coverage.--
                Subparagraph (A) shall not apply to children of those 
                individuals who are eligible for benefits under the 
                group health plan only on the basis of continuation 
                coverage (such as that described in section 4980B of 
                the Internal Revenue Code of 1986).
            ``(3) No mandated enrollment.--The plan may not require an 
        individual, as a condition for the receipt of benefits under 
        the group health plan, to accept the offer of enrollment under 
        the election.
    ``(c) Termination of Election.--If the Secretary determines that a 
group health plan has failed to meet the conditions described in 
subsection (b), the Secretary, after notice and opportunity for 
correction, shall terminate the election and shall provide individuals 
enrolled under the election the opportunity to enroll directly as 
individuals under this title.
    ``(d) Limitation.--In the case of a sponsor of a group health plan 
that offers coverage (other than under the election under this section) 
for some or all classes of eligible children as of any date, the 
election under this section shall not be available during the 2-year 
period following such date.

``SEC. 2204. COVERAGE PERIOD.

    ``(a) In General.--No payments may be made under this title with 
respect to the expenses of an eligible child unless such expenses were 
incurred by such child during a period which, with respect to the 
individual, is a coverage period provided under this section.
    ``(b) Enrollment During General Enrollment Period.--In the case of 
an eligible child who enrolls under this title during a general 
enrollment period in a year, the period during which the individual is 
entitled to benefits under the program under this title shall begin on 
January 1 of the following year.
    ``(c) Enrollment During Special Enrollment Periods.--
            ``(1) Birth.--In the case of an eligible child who enrolls 
        under this title during a special enrollment period described 
        in section 2202(c)(1), the period during which the individual 
        is entitled to benefits under the program under this title 
        shall begin as of the date of birth.
            ``(2) Obtaining lawful resident status.--In the case of an 
        eligible child who enrolls under this title during a special 
        enrollment period described in section 2202(c)(2), the period 
        during which the individual is entitled to benefits under the 
        program under this title shall begin as of the first day of the 
        month in which the individual enrolls.
            ``(3) Continuation of coverage.--In the case of an eligible 
        child who enrolls under this title during a special enrollment 
        period described in section 2202(d), the period during which 
        the individual is entitled to benefits under the program under 
        this title shall begin as of the first day of the month in 
        which the individual enrolls (or, if later, the first day of 
        the month in which coverage under the group health plan, 
        including continuation coverage under such a plan, terminates).
    ``(d) Termination of Enrollment.--
            ``(1) Initial minimum 1-year period.--Except as provided in 
        paragraph (5), an individual's coverage period shall continue 
        until terminated under paragraph (2), (3), or (4), and 
        termination under such paragraph may not occur before the end 
        of the 12-month period beginning with the first month in which 
        the coverage period begins.
            ``(2) Termination.--
                    ``(A) Individual notice.--With respect to coverage 
                after the minimum coverage period required under 
                paragraph (1), an individual may terminate coverage 
                under this title by the filing of notice that the 
                individual no longer wishes to participate in the 
                program under this title. The termination of coverage 
                under this subparagraph shall take effect at the close 
                of the month following the month in which the notice is 
                filed.
                    ``(B) Failure to pay premiums.--The Secretary shall 
                terminate coverage under this title in the case of an 
                individual for nonpayment of premiums, but such 
                termination shall not be effective for coverage before 
                the end of the minimum coverage required under 
                paragraph (1). The Secretary may provide by regulation 
                for a grace period before coverage is terminated under 
                this subparagraph.
            ``(3) Age.--An individual's coverage period shall in no 
        case continue beyond the end of the month in which the 
        individual attains 19 years of age or in which the individual 
        dies.
            ``(4) Medicare coverage.--An individual's coverage period 
        shall be terminated in the month in which the individual 
        becomes entitled to benefits under part A of title XVIII.
            ``(5) Coverage under group health plan.--The 12-month 
        minimum enrollment period under paragraph (1) shall not apply 
        in the case of an eligible child if it is demonstrated (to the 
        satisfaction of the Secretary) that at the time of termination 
        of enrollment under this title the child will be covered under 
        a group health plan.

               ``Part B--Benefits; Payments for Benefits

``SEC. 2211. SCOPE OF BENEFITS.

    ``(a) In General.--Except as provided in the succeeding provisions 
of this section, the benefits provided to an individual by the program 
established by this title shall consist of the same benefits that are 
available under title XVIII (including benefits for well-child services 
under section 1861(ll)) to individuals entitled to benefits under part 
A of that title and enrolled under part B of that title.
    ``(b) Newborn and Well-Baby Care; Waiver of Cost-Sharing for Well-
Child Services and of Deductible for Covered Outpatient Services.--
            ``(1) In general.--In addition to the benefits described in 
        subsection (a), the benefits under this title shall include 
        entitlement to have payment made (in the same manner as for 
        physicians' services under part B of title XVIII) for newborn 
        and well-baby care, including normal newborn care and 
        pediatrician services for high-risk deliveries, without the 
        application of deductibles, coinsurance, or copayments, subject 
        to the periodicity schedule established with respect to the 
        services under paragraph (2).
            ``(2) Periodicity schedule.--The Secretary, in consultation 
        with the American Academy of Pediatrics, shall establish a 
        schedule of periodicity which reflects the general, appropriate 
        frequency with which services described in paragraph (1) should 
        be provided to healthy newborns and babies.
    ``(c) Waiver of Cost-Sharing for Well-Child Services.--For purposes 
of this title, payment shall be made under this title for well-child 
services (as defined in section 1861(ll)) without regard to any 
deductible or coinsurance.
    ``(d) Special Rule for Deductible for Covered Outpatient Drugs.--
For purposes of this title, payment shall be made under this title for 
covered outpatient drugs without regard to the deductible specified 
under section 1834(e)(1).

``SEC. 2212. EXCLUSIONS.

    ``(a) In General.--Except as provided in subsections (b) and (c), 
section 1862 shall apply to expenses incurred for items and services 
provided under this title the same manner as such section applies to 
items and services provided under title XVIII.
    ``(b) Benefits Exception.--In applying section 1862(a) with respect 
to services described in section 2211(b)(1) (relating to newborn and 
well-baby care), payment shall not be denied under paragraph (1), (7), 
or (12) of such section 1862(a) if the services are provided in 
accordance with the periodicity schedule described in section 
2211(b)(2).

``SEC. 2213. PAYMENTS FOR BENEFITS.

    ``(a) In General.--Except as otherwise provided in this section--
            ``(1) payment of benefits under this title with respect to 
        benefits shall be made in the same amounts and on the same 
        basis as payment may be made with respect to such benefits 
        under title XVIII, and
            ``(2) the provisions of sections 1814, 1833, 1842, 1848, 
        and 1886 shall apply to payment of benefits under this title in 
        the same manner as they apply to benefits under title XVIII.
    ``(b) No Cost-Sharing for Certain Services.--No deductibles, 
coinsurance, copayments, or other cost-sharing shall be imposed with 
respect to newborn and well-baby care described in section 2211(b)(1) 
and no deductible shall be imposed with respect to covered outpatient 
drugs.
    ``(c) Establishment of New DRGs and Weights.--In making payment 
under this title with respect to inpatient hospital services, the 
Secretary shall make such adjustments in the diagnosis-related groups 
and weighting factors with respect to discharges within such groups, 
otherwise established under section 1886(d)(4) as may be necessary to 
reflect the types of discharges occurring under this title which are 
not occurring under title XVIII.
    ``(d) Conditions of and Limitations on Payments.--The provisions of 
sections 1814 and 1835 shall apply to payment for services under this 
title in the same manner as they apply to payment for services under 
parts A and B, respectively, of title XVIII.
    ``(e) Use of Trust Fund.--In carrying out this section, any 
reference in title XVIII to a trust fund shall be treated as a 
reference to the Children's Health Insurance Trust Fund established 
under section 2233.

                     ``Part C--Premiums; Trust Fund

``SEC. 2231. AMOUNT OF PREMIUMS.

    ``(a) Premium Classes.--There are 2 monthly premium rate classes 
under this section as follows:
            ``(1) Single child monthly premium rate.--A premium rate 
        for a single eligible child in a family (in this section 
        referred to as the `single child monthly premium rate'), which 
        shall be the rate paid under section 2232 with respect to a 
        child who has no other eligible children in the same family.
            ``(2) Family monthly premium rate.--A premium rate for two 
        or more eligible children in a family (in this section referred 
        to as the `family monthly premium rate'), which shall be the 
        rate paid under section 2232 with respect to all eligible 
        children in the same family.
            ``(3) Family.--The Secretary shall specify, in regulations, 
        those children who shall be considered to be in the same family 
        for purposes of this section.
    ``(b) Monthly Premium Rates.--
            ``(1) 1996 and 1997.--Subject to subsection (c), the single 
        child monthly premium rate and the family monthly premium rate, 
        for months in 1996 and 1997, are determined as follows:

      

------------------------------------------------------------------------
                                     The single child      The family   
           For months in             monthly premium    monthly premium 
                                           rate               rate      
------------------------------------------------------------------------
1996..............................         $156               $299      
1997..............................         $167               $321      
------------------------------------------------------------------------

            ``(2) After 1997.--Subject to subsection (d), for months in 
        years after 1997, the single child monthly premium rate and the 
        family monthly premium rate are equal to such respective rates 
        established under this subsection for the previous year 
        multiplied by the applicable adjustment factor (specified under 
        section 101(c) of the Health Care Cost Containment and Reform 
        Act of 1993) for the year involved.
    ``(c) Geographic Area Adjustment.--
            ``(1) Formula.--The Secretary shall compute, for each 
        geographic locality, the ratio of the average per capita costs 
        of coverage under this title in locality to the national 
        average per capita costs.
            ``(2) Adjustment.--The premium rates otherwise established 
        under this section and applied to a geographic locality shall 
        be multiplied by such ratio and by such factor as the Secretary 
        determines to be necessary so that, if all eligible children 
        were enrolled in the program under this title for all months in 
        the year and paid premiums based on the rates specified in 
        subsection (c) as adjusted under this subsection, the total 
        amount of such premiums would equal the total amount of 
        payments that would be made under this title in the year.
            ``(3) Selection of geographic localities.--For purposes of 
        this subsection, the Secretary shall use contiguous geographic 
        localities that are not smaller than metropolitan statistical 
        areas.
    ``(d) Publication of Rates.--The Secretary shall during July of 
each year (beginning in 1996) publish the applicable premiums under 
this section for months in the succeeding year for the different 
localities used under subsection (c).

``SEC. 2232. PAYMENT OF PREMIUMS.

    ``(a) In General.--Subject to subsection (c), premiums under this 
title shall be paid at the rates specified under section 2231 to the 
Secretary at such times, and in such manner, as the Secretary shall 
prescribe by regulations.
    ``(b) Interest for Late Payment.--In the case premiums are not paid 
on a timely basis, the Secretary may impose a reasonable late charge 
and interest at a rate (estimated by the Secretary) not to exceed 125 
percent of the average market yield described in the third sentence of 
section 1817(c).
    ``(c) Suspension of Premiums.--Payment of premiums under this 
section shall be suspended for any month for which the eligible 
individual establishes that the individual--
            ``(1) is entitled to medical assistance under a State plan 
        approved under title XIX, or
            ``(2) is entitled to benefits under a group health plan (as 
        defined in section 5000(b)(1) of the Internal Revenue Code of 
        1986), including benefits under continuation coverage.
    ``(d) Deposit into Trust Fund.--Premiums collected under this 
section shall be deposited in the Children's Health Insurance Trust 
Fund.

``SEC. 2233. CHILDREN'S HEALTH INSURANCE TRUST FUND.

    ``(a) Establishment.--(1) There is hereby created on the books of 
the Treasury of the United States a trust fund to be known as the 
`Children's Health Insurance Trust Fund' (in this section referred to 
as the `Trust Fund'). The Trust Fund shall consist of such gifts and 
bequests as may be made as provided in section 201(i)(1) and amounts 
appropriated under paragraph (2).
    ``(2) There are authorized to be appropriated for each fiscal year 
out of any moneys in the Treasury not otherwise appropriated to the 
Trust Fund a Government contribution equal to the amount of 
expenditures made under this title in the fiscal year, reduced by the 
amount of the premiums deposited in the Trust Fund under section 
2232(d).
    ``(b) Incorporation of Provisions.--
            ``(1) In general.--Subject to paragraph (2), the provisions 
        of subsections (b) through (j) of section 1817 shall apply to 
        the Trust Fund in the same manner as they apply to the Federal 
        Hospital Insurance Trust Fund.
            ``(2) Exceptions.--In applying paragraph (1)--
                    ``(A) the Board of Trustees and Managing Trustee of 
                the Trust Fund shall be composed of the members of the 
                Board of Trustees and the Managing Trustee, 
                respectively, of the Federal Hospital Insurance Trust 
                Fund; and
                    ``(B) any reference in section 1817 to the Federal 
                Hospital Insurance Trust Fund or to title XVIII (or 
                part A thereof) is deemed a reference to the Trust Fund 
                under this section and this title, respectively.

                      ``Part D--General Provisions

``SEC. 2251. INCORPORATION OF CERTAIN MEDICARE PROVISIONS.

    ``(a) Use of Carriers and Intermediaries.--The Secretary shall 
provide for the administration of this title through the use of fiscal 
intermediaries and carriers in the same manner as title XVIII is 
carried out through the use of such fiscal intermediaries and carriers.
    ``(b) Definitions.--Except as otherwise provided in this title, the 
definitions contained in section 1861 shall apply for purposes of this 
title in the same manner as they apply for purposes of title XVIII.
    ``(c) Certification, Provider Qualification, Etc.--The provisions 
of sections 1863 through 1875, sections 1878 through 1880, section 
1883, section 1885, and sections 1887 through 1892 shall apply to this 
title in the same manner as they apply to title XVIII.
    ``(d) Health Maintenance Organizations and Competitive Medical 
Plans.--
            ``(1) In general.--Except as provided in this subsection, 
        section 1876 shall apply to individuals entitled to benefits 
        under this title in the same manner as such section applies to 
        individuals entitled to benefits under part A, and enrolled 
        under part B, of title XVIII.
            ``(2) Application.--In applying section 1876 under this 
        subsection--
                    ``(A) the provisions of such section relating only 
                to individuals enrolled under part B of title XVIII 
                shall not apply;
                    ``(B) any reference to a Trust Fund established 
                under title XVIII and to benefits under such title is 
                deemed a reference to the Children's Health Insurance 
                Trust Fund and to benefits under this title;
                    ``(C) the adjusted average per capita cost and the 
                adjusted community rate shall be determined on the 
                basis of benefits under this title; and
                    ``(D) subsection (f) shall not apply.

``SEC. 2252. INCORPORATION OF PEER REVIEW PROVISIONS AND FRAUD AND 
              ABUSE PROVISIONS.

    ``The provisions of sections 1121 through 1126, sections 1128 
through 1128B, section 1134, section 1138, and part B of title XI shall 
apply to this title in the same manner as they apply to title XVIII.''.
    (b) Conforming Amendments.--
            (1) Section 201(g)(1)(A) of the Social Security Act (42 
        U.S.C. 401(g)(1)(A)) is amended by striking ``and the Federal 
        Supplementary Medical Insurance Trust Fund'' and inserting ``, 
        Federal Supplementary Medical Insurance Trust Fund, and the 
        Children's Health Insurance Trust Fund''.
            (2) Section 201(i)(1) of such Act (42 U.S.C. 401(i)(1)) is 
        amended by striking ``and the Federal Supplementary Medical 
        Insurance Trust Fund'' and inserting ``, Federal Supplementary 
        Medical Insurance Trust Fund, and the Children's Health 
        Insurance Trust Fund''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, except that no 
benefits shall be available under title XXII of the Social Security Act 
for items or services furnished before January 1, 1996.

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