[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1533 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                S. 1533

 To improve access to health insurance and contain health care costs, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

            October 7 (legislative day, September 27), 1993

   Mr. Lott introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To improve access to health insurance and contain health care costs, 
                        and for other purposes.

    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 ``Affordable Health 
Care Now Act of 1993''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

 Subtitle A--Increased Availability and Continuity of Health Coverage 
                    for Employees and Their Families

Part 1--Required Coverage Options for Eligible Employees, Spouses, and 
                               Dependents

Sec. 1001. Requiring employers to offer option of coverage for eligible 
                            individuals.
Sec. 1002. Compliance with applicable requirements through multiple 
                            employer health arrangements.
Sec. 1003. Coverage option under State Medical Health Allowance 
                            Program.
Part 2--Preexisting Conditions and Continuity of Coverage; Renewability

Sec. 1011. Limitation on pre-existing condition clauses.
Sec. 1012. Assurance of continuity of coverage through previous 
                            satisfaction of pre-existing condition 
                            requirement.
Sec. 1013. Requirements relating to renewability generally.
           Part 3--Enforcement; Effective Dates; Definitions

Sec. 1021. Enforcement.
Sec. 1022. Effective dates.
Sec. 1023. Definitions and special rules.
 Subtitle B--Reform of Health Insurance Marketplace for Small Business

Sec. 1101. Requirement for insurers to offer MedAccess plans.
Sec. 1102. MedAccess plan defined.
Sec. 1103. Establishment of other MedAccess standards.
Sec. 1104. Limits on premiums and miscellaneous consumer protections.
Sec. 1105. Limitation on annual premium increases.
Sec. 1106. Establishment of reinsurance or allocation of risk 
                            mechanisms for high risk individuals in 
                            marketplace for small business.
Sec. 1107. Definitions.
Sec. 1108. Office of Private Health Care Coverage; annual reports on 
                            evaluation of health care coverage reform.
Sec. 1109. Research and demonstration projects; development of a health 
                            risk pooling model.
                         Subtitle C--Preemption

                   Part 1--Scope of State Regulation

Sec. 1201. Prohibition of State benefit mandates for group health 
                            plans.
Sec. 1202. Prohibition of provisions prohibiting employer groups from 
                            purchasing health insurance.
Sec. 1203. Restrictions on managed care.
Sec. 1204. Definitions.
         Part 2--Multiple Employer Health Benefits Protections

Sec. 1211. Limited exemption under preemption rules for multiple 
                            employer plans providing health benefits 
                            subject to certain Federal standards.
                ``Part 7--Multiple Employer Health Plans

        ``Sec. 701. Definitions.
        ``Sec. 702. Exempted multiple employer plans providing benefits 
                            in the form of medical care relieved of 
                            certain restrictions on preemption of State 
                            law and treated as employee welfare benefit 
                            plans.
        ``Sec. 703. Exemption procedure.
        ``Sec. 704. Eligibility requirements.
        ``Sec. 705. Additional requirements applicable to exempted 
                            arrangements.
        ``Sec. 706. Disclosure to participating employers by 
                            arrangements providing medical care.
        ``Sec. 707. Maintenance of reserves.
        ``Sec. 708. Corrective actions.
        ``Sec. 709. Expiration, suspension, or revocation of exemption.
        ``Sec. 710. Review of actions of the Secretary.
Sec. 1212. Clarification of scope of preemption rules.
Sec. 1213. Clarification of treatment of single employer arrangements.
Sec. 1214. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 1215. Employee leasing healthcare arrangements.
Sec. 1216. Enforcement provisions relating to multiple employer welfare 
                            arrangements and employee leasing 
                            healthcare arrangements.
Sec. 1217. Filing requirements for health benefit multiple employer 
                            welfare arrangements.
Sec. 1218. Cooperation between Federal and State authorities.
Sec. 1219. Effective date; transitional rules.
Part 3--Encouragement of Multiple Employer Arrangements Providing Basic 
                            Health Benefits

Sec. 1221. Eliminating commonality of interest or geographic location 
                            requirement for tax exempt trust status.
   Part 4--Simplifying Filing of Reports for Employers Covered Under 
                 Insured Multiple Employer Health Plans

Sec. 1231. Single annual filing for all employers covered under an 
                            insured multiple employer health plan.
          Part 5--Compliance With Coverage Option Requirements

Sec. 1241. Compliance with coverage requirements through multiple 
                            employer health arrangements.
                 Subtitle D--Health Deduction Fairness

Sec. 1301. Permanent extension and increase in health insurance tax 
                            deduction for self-employed individuals.
Sec. 1302. Deduction of health insurance premiums for certain 
                            previously uninsured individuals.
        Subtitle E--Improved Access to Community Health Services

   Part 1--Increased Authorization for Community and Migrant Health 
                                Centers

Sec. 1401. Grant program to promote primary health care services for 
                            underserved populations.
   Part 2--Grants for Projects for Coordinating Delivery of Services

Sec. 1411. Projects for coordinating delivery of outpatient primary 
                            health services.
          Subtitle F--Improved Access to Rural Health Services

 Part 1--Establishment of Rural Emergency Access Care Hospitals Under 
                                Medicare

Sec. 1501. Rural emergency access care hospitals described.
Sec. 1502. Coverage of and payment for services.
Sec. 1503. Effective date.
            Part 2--Rural Medical Emergencies Air Transport

Sec. 1511. Grants to States regarding aircraft for transporting rural 
                            victims of medical emergencies.
             Part 3--Emergency Medical Services Amendments

Sec. 1521. Establishment of Office of Emergency Medical Services.
Sec. 1522. State offices of emergency medical services.
Sec. 1523. Programs for rural areas.
Sec. 1524. Funding.
Sec. 1525. Conforming amendments.
Sec. 1526. Effective date.
  Subtitle G--State Flexibility in the Medicaid Program: The Medical 
                        Health Allowance Program

Sec. 1601. Establishment of program.
Sec. 1602. Optional use of program to offer coverage to some or all 
                            State residents.
                Subtitle H--Medicaid Program Flexibility

Sec. 1701. Modification of Federal requirements to allow States more 
                            flexibility in contracting for coordinated 
                            care services under medicaid.
Sec. 1702. Period of certain waivers.
     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

Sec. 2001. Federal reform of medical malpractice liability actions.
Sec. 2002. Definitions.
Sec. 2003. Effective date.
        Part 2--Medical Malpractice and Product Liability Reform

Sec. 2011. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 2012. Calculation and payment of damages.
Sec. 2013. Treatment of attorney's fees and other costs.
Sec. 2014. Joint and several liability.
Sec. 2015. Statute of limitations.
Sec. 2016. Uniform standard for determining negligence.
Sec. 2017. Special provision for certain obstetric services.
 Part 3--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 2031. Basic requirements.
Sec. 2032. Certification of State systems; applicability of alternative 
                            Federal system.
Sec. 2033. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
   Part 4--Other Provisions Relating to Medical Malpractice Liability

Sec. 2041. Permitting State professional societies to participate in 
                            disciplinary activities.
Sec. 2042. Study of incentives to encourage voluntary service by 
                            physicians.
Sec. 2043. Requirements for risk management programs.
Sec. 2044. Grants for medical safety promotion.
                Subtitle B--Administrative Cost Savings

              Part 1--Standardization of Claims Processing

Sec. 2101. Adoption of data elements, uniform claims, and uniform 
                            electronic transmission standards.
Sec. 2102. Application of standards.
Sec. 2103. Periodic review and revision of standards.
Sec. 2104. Health benefit plan defined.
               Part 2--Electronic Medical Data Standards

Sec. 2111. Medical data standards for hospitals and other providers.
Sec. 2112. Application of electronic data standards to certain 
                            hospitals.
Sec. 2113. Electronic transmission to Federal agencies.
Sec. 2114. Limitation on data requirements where standards in effect.
Sec. 2115. Advisory commission.
 Part 3--Development and Distribution of Comparative Value Information

Sec. 2121. State comparative value information programs for health care 
                            purchasing.
Sec. 2122. Federal implementation.
Sec. 2123. Comparative value information concerning Federal programs.
Sec. 2124. Development of model systems.
      Part 4--Additional Standards and Requirements; Research and 
                             Demonstrations

Sec. 2131. Standards relating to use of medicare and medicaid 
                            magnetized health benefit cards; secondary 
                            payor data bank.
Sec. 2132. Preemption of State quill pen laws.
Sec. 2133. Use of standard identification numbers.
Sec. 2134. Coordination of benefit standards.
Sec. 2135. Research and demonstrations.
  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

Sec. 2201. Individuals allowed deduction from gross income for cost of 
                            catastrophic health plan.
Sec. 2202. Medical savings accounts.
                         Subtitle D--Anti-Fraud

           Part 1--Criminal Prosecution of Health Care Fraud

Sec. 2301. Penalties for health care fraud.
Sec. 2302. Broadening application of mail fraud statute.
Sec. 2303. Authorization of appropriations.
Sec. 2304. Rewards for information leading to prosecution and 
                            conviction.
  Part 2--Coordination of Health Care Anti-fraud and Abuse Activities

Sec. 2311. Establishment of all-payer anti-fraud and abuse program.
Sec. 2312. Authorization of additional appropriations for investigators 
                            and other personnel.
Sec. 2313. Establishment of anti-fraud and abuse trust fund.
Sec. 2314. Application of Federal health anti-fraud and abuse sanctions 
                            to all fraud and abuse against any health 
                            benefit plan.
   Subtitle E--Medicare Payment Changes; Part B Premium Tax for High-
                           Income Individuals

                    Part 1--Medicare Payment Changes

Sec. 2401. Elimination of membership limitation for medicare hmos.
Sec. 2402. Expansion and revision of medicare select policies.
Sec. 2403. Improved efficiency through consolidation of administration 
                            of parts A and B.
         Part 2--Part B Premium Tax for High-Income Individuals

Sec. 2411. Increase in medicare part B premium for individuals with 
                            high income.
              Subtitle F--Removing Anti-Trust Impediments

Sec. 2501. Establishment of limited exemption program for health care 
                            joint ventures.
Sec. 2502. Issuance of health care certificates of public advantage.
Sec. 2503. Interagency Advisory Committee on Competition, Antitrust 
                            Policy, and Health Care.
Sec. 2504. Definitions.
    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   Part 1--Application of the Clayton Act to Medical Self-regulatory 
                                Entities

Sec. 2601. Antitrust exemption for medical self-regulatory entities.
Sec. 2602. Definitions.
                Part 2--Consultation by Federal Agencies

Sec. 2611. Consultation with medical self-regulatory entities 
                            respecting medical professional guidelines 
                            and standards.
     Subtitle H--Prefunding Government Health Benefits for Certain 
                               Annuitants

Sec. 2701. Requirement that certain agencies prefund government health 
                            benefits contributions for their 
                            annuitants.
                  Subtitle I--Miscellaneous Provisions

Sec. 2801. Increase in minimum age required in order to be eligible for 
                            an immediate civil service annuity.
                       TITLE III--LONG-TERM CARE

         Subtitle A--Tax Treatment of Long-term Care Insurance

Sec. 3001. Treatment of long-term care insurance or plans.
Sec. 3002. Exclusion for benefits provided under long-term care 
                            insurance; inclusion of employer-provided 
                            coverage.
Sec. 3003. Qualified long-term services treated as medical care.
Sec. 3004. Certain exchanges of life insurance contracts for long-term 
                            care insurance contracts not taxable.
Sec. 3005. Exclusion from gross income for amounts withdrawn from 
                            individual retirement plans or 401(k) plans 
                            for long-term care insurance.
Sec. 3006. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 3007. Effective date.
    Subtitle B--Protection of Assets under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

Sec. 3101. Protection of assets through use of qualified long-term care 
                            insurance.
                          Subtitle C--Studies

Sec. 3201. Feasibility of encouraging health care providers to donate 
                            services to homebound patients.
Sec. 3202. Feasibility of tax credit for heads of households who care 
                            for elderly family members in their homes.
Sec. 3203. Case management of current long-term care benefits.
      Subtitle D--Volunteer Service Credit Demonstration Projects

Sec. 3301. Amendment to the Older Americans Act of 1965.

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

 Subtitle A--Increased Availability and Continuity of Health Coverage 
                    for Employees and Their Families

PART 1--REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES, SPOUSES, AND 
                               DEPENDENTS

SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF COVERAGE FOR ELIGIBLE 
              INDIVIDUALS.

    (a) In General.--Each employer shall make available with respect to 
each eligible employee a group health plan under which--
            (1) coverage of each eligible individual with respect to 
        such an eligible employee may be elected on an annual basis for 
        each plan year,
            (2) subject to subsection (d), coverage is provided for at 
        least the required coverage specified in subsection (c), and
            (3) each eligible employee electing such coverage may elect 
        to have any premiums owed by the employee collected through 
        payroll deduction.
An employer is not required under this subsection to make any 
contribution to the cost of coverage under such a plan.
    (b) Special Rules.--
            (1) Exclusion of new employers and certain small 
        employers.--Subsection (a) shall not apply to any employer for 
        any plan year if, as of the beginning of such plan year--
                    (A) such employer (including any predecessor 
                thereof) has been an employer for less than 2 years,
                    (B) such employer has no more than 2 eligible 
                employees, or
                    (C) no more than 2 eligible employees are not 
                covered under any group health plan.
            (2) Exclusion of family members.--Under such procedures as 
        the Secretary may prescribe, any relative of an employer may 
        be, at the election of the employer, excluded from 
        consideration as an eligible employee for purposes of applying 
        the requirements of subsection (a). In the case of an employer 
        that is not an individual, an employee who is a relative of a 
        key employee (as defined in section 416(i)(1) of the Internal 
        Revenue Code of 1986) of the employer may, at the election of 
        the key employee, be considered a relative excludible under 
        this paragraph.
            (3) Optional application of waiting period.--A group health 
        plan shall not be treated as failing to meet the requirements 
        of subsection (a) solely because a period of service by an 
        eligible employee of not more than 60 days is required under 
        the plan for coverage under the plan of eligible individuals 
        with respect to such employee.
    (c) Required Coverage.--
            (1) In general.--Except as provided in paragraph (2), the 
        required coverage specified in this subsection is standard 
        coverage (consistent with section 1102(c)).
            (2) Special treatment of small employers not contributing 
        to employee coverage.--In the case of a small employer (as 
        defined in section 1107(9)) that has not contributed during the 
        previous plan year to the cost of coverage for any eligible 
        employee under any group health plan, the required coverage 
        specified in this subsection for the plan year (with respect to 
        each eligible employee) is--
                    (A) coverage under a MedAccess standard plan,
                    (B) coverage under a MedAccess catastrophic plan, 
                and
                    (C) coverage under a MedAccess medisave plan,
        as such terms are defined in section 1102(a)(2).
            (3) Construction.--Nothing in this section shall be 
        construed as limiting the group health plans, or types of 
        coverage under such a plan, that an employer may offer to an 
        employee.
    (d) 5-Year Transition for Existing Group Health Plans.--
            (1) In general.--The requirement of subsection (a)(2), and 
        section 1002(c)(2), shall not apply to a group health plan for 
        a plan year if--
                    (A) the group health plan is in effect in the plan 
                year in which September 1, 1993, occurs, and
                    (B) the employer makes (or offers to make), in such 
                plan year and the plan year involved, a contribution to 
                the plan on behalf of each employee who is eligible to 
                participate in the plan.
            (2) Sunset.--Paragraph (1) shall only apply to a group 
        health plan for each of the 5 plan years beginning with the 
        first plan year to which the requirement of subsection (a) 
        applies.

SEC. 1002. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    For provision easing compliance with applicable requirements 
through multiemployer plans and through other multiple employer health 
arrangements, see section 1241.

SEC. 1003. COVERAGE OPTION UNDER STATE MEDICAL HEALTH ALLOWANCE 
              PROGRAM.

    For a provision permitting a State medical health allowance program 
under the medicaid program or other State program to offer health 
insurance coverage to residents of the State without regard to income, 
see the amendment made by section 1602.

PART 2--PREEXISTING CONDITIONS AND CONTINUITY OF COVERAGE; RENEWABILITY

SEC. 1011. LIMITATION ON PREEXISTING CONDITION CLAUSES.

    A group health plan may not impose (and an insurer may not require 
an employer under a group health plan to impose through a waiting 
period for coverage under a plan or similar requirement) a limitation 
or exclusion of benefits relating to treatment of a condition based on 
the fact that the condition preexisted the effective date of the plan 
with respect to an individual if--
            (1) the condition relates to a condition that was not 
        diagnosed or treated within 3 months before the date of 
        coverage under the plan;
            (2) the limitation or exclusion extends over more than 6 
        months after the date of coverage under the plan;
            (3) the limitation or exclusion applies to an individual 
        who, as of the date of birth, was covered under the plan; or
            (4) the limitation or exclusion relates to pregnancy.
In the case of an individual who is eligible for coverage under a plan 
but for a waiting period imposed by the employer, in applying 
paragraphs (1) and (2), the individual shall be treated as having been 
covered under the plan as of the earliest date of the beginning of the 
waiting period.

SEC. 1012. ASSURANCE OF CONTINUITY OF COVERAGE THROUGH PREVIOUS 
              SATISFACTION OF PREEXISTING CONDITION REQUIREMENT.

    (a) In General.--Each group health plan shall waive any period 
applicable to a preexisting condition for similar benefits with respect 
to an individual to the extent that the individual, prior to the date 
of such individual's enrollment in such plan, was covered for the 
condition under any other health plan that was in effect before such 
date.
    (b) Continuous Coverage Required.--
            (1) In general.--Subsection (a) shall no longer apply if 
        there is a continuous period of more than 60 days (or, in the 
        case of an individual described in paragraph (3), 6 months) on 
        which the individual was not covered under a group health plan.
            (2) Treatment of waiting periods.--In applying paragraph 
        (1), any waiting period imposed by an employer before an 
        employee is eligible to be covered under a plan shall be 
        treated as a period in which the employee was covered under a 
        group health plan.
            (3) Job termination.--An individual is described in this 
        paragraph if the individual loses coverage under a group health 
        plan due to termination of employment.
            (4) Exclusion of cash-only and dread disease plans.--In 
        this subsection, the term ``group health plan'' does not 
        include any group health plan which is offered primarily to 
        provide--
                    (A) coverage for a specified disease or illness, or
                    (B) a hospital or fixed indemnity policy, unless 
                the Secretary determines that such a plan provides 
                sufficiently comprehensive coverage of a benefit so 
                that it should be treated as a group health plan under 
                this subsection.

SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY GENERALLY.

    (a) Multiemployer Plans and Exempted Multiple Employer Health 
Plans.--A multiemployer plan and an exempted multiple employer health 
plan may not cancel coverage or deny renewal of coverage under such a 
plan with respect to an employer other than--
            (1) for nonpayment of contributions,
            (2) for fraud or other misrepresentation by the employer,
            (3) for noncompliance with plan provisions,
            (4) for misuse of a provider network provision, or
            (5) because the plan is ceasing to provide any coverage in 
        a geographic area.
    (b) Insurers.--
            (1) In general.--An insurer may not cancel a health 
        insurance plan or deny renewal of coverage under such a plan 
        other than--
                    (A) for nonpayment of premiums,
                    (B) for fraud or other misrepresentation by the 
                insured,
                    (C) for noncompliance with plan provisions,
                    (D) for misuse of a provider network provision, or
                    (E) because the insurer is ceasing to provide any 
                health insurance plan in a State, or, in the case of a 
                health maintenance organization, in a geographic area.
            (2) Limitation on market reentry.--If an insurer terminates 
        the offering of health insurance plans in an area, the insurer 
        may not offer such a health insurance plan to any employer in 
        the area until 5 years after the date of the termination.

           PART 3--ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

SEC. 1021. ENFORCEMENT.

    (a) Enforcement by Department of Labor for Employers and Group 
Health Plans.--
            (1) In general.--For purposes of part 5 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974, 
        the provisions of parts 1 and 2 of this subtitle shall be 
        deemed to be provisions of title I of such Act irrespective of 
        exclusions under section 4(b) of such Act.
            (2) Regulatory authority.--With respect to the regulatory 
        authority of the Secretary of Labor under this subtitle 
        pursuant to subsection (a), section 505 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
        apply.
    (b) Enforcement by Excise Tax for Insurers.--
            (1) In general.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans) is amended by 
        adding at the end thereof the following new section:

``SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH HEALTH INSURANCE 
              STANDARDS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of an insurer to comply with the requirements 
        applicable to the insurer under part 2 of subtitle A of title I 
        of the Affordable Health Care Now Act of 1993.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by an insurer in a State if the Secretary of Health and 
        Human Services determines that the State has in effect a 
        regulatory enforcement mechanism that provides adequate 
        sanctions with respect to such a failure by such an insurer.
    ``(b) Amount of Tax.--
            ``(1)  In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each individual to which 
        such failure relates. A rule similar to the rule of section 
        4980B(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for an insurer with respect to a health 
        insurance plan shall not exceed 25 percent of the amounts 
        received under the plan for coverage during the period such 
        failure persists.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the insurer.
    ``(d) Exceptions.--
            ``(1) Corrections within 30 days.--No tax shall be imposed 
        by subsection (a) by reason of any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected within the 30-day 
                period beginning on the earliest date the insurer knew, 
                or exercising reasonable diligence would have known, 
                that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that payment of such tax would be 
        excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance plan' and `insurer' have the respective meanings given such 
terms in section 1023 of the Affordable Health Care Now Act of 1993.''
            (2) Clerical amendment.--The table of sections for chapter 
        43 of such Code is amended by adding at the end thereof the 
        following new items:

                              ``Sec. 4980C. Failure of insurer to 
                                        comply with health insurance 
                                        standards.''

SEC. 1022. EFFECTIVE DATES.

    (a) Part 1.--The requirements of part 1 shall apply to plans years 
beginning after December 31, 1996.
    (b) Part 2.--The requirements of part 2 with respect to--
            (1) group health plans and employers shall apply to plans 
        years beginning after December 31, 1996, and
            (2) insurers shall take effect on January 1, 1997.

SEC. 1023. DEFINITIONS AND SPECIAL RULES.

    (a) In General.--For purposes of this subtitle:
            (1) Dependent.--The term ``dependent'' means, with respect 
        to any individual, any person who is--
                    (A) the spouse or surviving spouse of the 
                individual, or
                    (B) under regulations of the Secretary, a child 
                (including an adopted child) of such individual and--
                            (i) under 19 years of age, or
                            (ii) under 25 years of age and a full-time 
                        student.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            (3) Eligible individual.--The term ``eligible individual'' 
        means, with respect to an eligible employee, such employee, and 
        any dependent of such employee.
            (4) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (5) Exempted multiple employer health plan.--The term 
        ``exempted multiple employer health plan'' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of an exemption under part 7 of subtitle 
        B of title I of the Employee Retirement Income Security Act of 
        1974 (as added by part 2 of subtitle C of this title).
            (6) Group health plan; plan.--(A) The term ``group health 
        plan'' means an employee welfare benefit plan providing medical 
        care (as defined in section 213(d) of the Internal Revenue Code 
        of 1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance plan under section 1107(4)(B).
            (B) The term ``plan'' means, unless used with a modifying 
        term or the context specifically indicates otherwise, a group 
        health plan (including any such plan which is a multiemployer 
        plan), an exempted multiple employer health plan, or an insured 
        multiple employer health plan.
            (7) Health insurance plan.--The term ``health insurance 
        plan'' has the meaning given such term in section 1107(4).
            (8) Insured multiple employer health plan.--The term 
        ``insured multiple employer health plan'' has the meaning given 
        such term in section 701(11) of Employee Retirement Income 
        Security Act of 1974 (as added by section 1211 of this title).
            (9) Insurer.--The term ``insurer'' has the meaning given 
        such term in section 1107(6).
    (b) Special Rules.--
            (1) General rule.--Except as otherwise provided in this 
        subtitle, for definitions of terms used in this subtitle, see 
        section 3 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1002).
            (2) Secretary.--Except with respect to references 
        specifically to the Secretary of Labor, the term ``Secretary'' 
        means the Secretary of Health and Human Services.

 Subtitle B--Reform of Health Insurance Marketplace for Small Business

SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER MEDACCESS PLANS.

    (a) Requirement.--
            (1) In general.--Each insurer (as defined in section 
        1107(6)) that makes available any health insurance plan (as 
        defined in section 1107(4)) to a small employer (as defined in 
        section 1107(9)) in a State shall make available to each small 
        employer in the State--
                    (A) a MedAccess standard plan (as defined in 
                section 1102(a)(2)),
                    (B) a MedAccess catastrophic plan (as defined in 
                section 1102(a)(2)), and
                    (C) a MedAccess medisave plan (as defined in 
                section 1102(a)(2)).
            (2) Special rule for health maintenance organizations.--The 
        requirements of paragraphs (1)(B) and (1)(C) shall not apply 
        with respect to a health insurance plan that--
                    (A) is a Federally qualified health maintenance 
                organization (as defined in section 1301(a) of the 
                Public Health Service Act), or
                    (B) is not such an organization but is recognized 
                under State law as a health maintenance organization or 
                managed care organization or a similar organization 
                regulated under State law for solvency.
            (3) Exception if state provides for guaranteed availability 
        (rather than guaranteed issue).--Paragraph (1) shall not apply 
        to an insurer in a State if the State is providing--
                    (A) access to each small employer in the State to a 
                MedAccess standard plan, to a MedAccess catastrophic 
                plan, and to a MedAccess medisave plan, and
                    (B) a risk allocation mechanism described in 
                subsection (c).
    (b) Guaranteed Issue of MedAccess Plans.--Subject to subsection 
(c)--
            (1) In general.--Subject to paragraph (2), each insurer 
        that offers a MedAccess plan to a small employer in a State--
                    (A) must accept every small employer in the State 
                that applies for coverage under the plan; and
                    (B) must accept for enrollment under the plan every 
                eligible individual (as defined in paragraph (4)) who 
                applies for enrollment on a timely basis (consistent 
                with paragraph (3)) and may not place any restriction 
                on the eligibility of an individual to enroll so long 
                as such individual is an eligible individual.
            (2) Special rules for health maintenance organizations.--In 
        the case of a plan offered by a health maintenance 
        organization, the plan may--
                    (A) limit the employers that may apply for coverage 
                to those with eligible individuals residing in the 
                service area of the plan;
                    (B) limit the individuals who may be enrolled under 
                the plan to those who reside in the service area of the 
                plan; and
                    (C) within the service area of the plan, deny 
                coverage to such employers if the plan demonstrates 
                that--
                            (i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees, 
                        and
                            (ii) it is applying this subparagraph 
                        uniformly to all employers without regard to 
                        the health status, claims experience, or 
                        duration of coverage of those employers and 
                        their employees.
        In this paragraph, the term ``health maintenance organization'' 
        includes an organization recognized under State law as a health 
        maintenance organization or managed care organization or a 
        similar organization regulated under State law for solvency.
            (3) Clarification of timely enrollment.--
                    (A) General initial enrollment requirement.--Except 
                as provided in this paragraph, a MedAccess plan may 
                consider enrollment of an eligible individual not to be 
                timely if the eligible employee or dependent fails to 
                enroll in the plan during an initial enrollment period, 
                if such period is at least 30 days long.
                    (B) Enrollment due to loss of previous employer 
                coverage.--Enrollment in a MedAccess plan is considered 
                to be timely in the case of an eligible individual 
                who--
                            (i) was covered under another health 
                        insurance plan or group health plan at the time 
                        of the individual's initial enrollment period,
                            (ii) stated at the time of the initial 
                        enrollment period that coverage under a health 
                        insurance plan or a group health plan was the 
                        reason for declining enrollment,
                            (iii) lost coverage under another health 
                        insurance plan or group health plan (as a 
                        result of the termination of the other plan's 
                        coverage, termination or reduction of 
                        employment, or other reason), and
                            (iv) requests enrollment within 30 days 
                        after termination of such coverage.
                    (C) Requirement applies during open enrollment 
                periods.--Each MedAccess plan shall provide for at 
                least one period (of not less than 30 days) each year 
                during which enrollment under the plan shall be 
                considered to be timely.
                    (D) Exception for court orders.--Enrollment of a 
                spouse or minor child of an employee shall be 
                considered to be timely if--
                            (i) a court has ordered that coverage be 
                        provided for the spouse or child under a 
                        covered employee's group health plan, and
                            (ii) a request for enrollment is made 
                        within 30 days after the date the court issues 
                        the order.
                    (E) Enrollment of spouses and dependents.--
                            (i) In general.--Enrollment of the spouse 
                        (including a child of the spouse) and any 
                        dependent child of an eligible employee shall 
                        be considered to be timely if a request for 
                        enrollment is made either--
                                    (I) within 30 days of the date of 
                                the marriage or of the date of the 
                                birth or adoption of a child, if family 
                                coverage is available as of such date, 
                                or
                                    (II) within 30 days of the date 
                                family coverage is first made 
                                available.
                            (ii) Coverage.--If a plan makes family 
                        coverage available and enrollment is made under 
                        the plan on a timely basis under clause (i)(I), 
                        the coverage shall become effective not later 
                        than the first day of the first month beginning 
                        after the date of the marriage or the date of 
                        birth or adoption of the child (as the case may 
                        be).
            (4) Definitions.--In this subsection, the terms ``eligible 
        individual'' and ``group health plan'' have the meanings given 
        such terms in section 1023(a).
    (c) State Option of Guaranteed Availability Through Allocation of 
Risk (Rather Than Through Guaranteed Issue).--The requirements of 
subsection (b) shall not apply in a State if the State has provided (in 
accordance with standards established under this subtitle) a mechanism 
under which--
            (1) each insurer offering a health insurance plan to a 
        small employer in the State must participate in a program for 
        assigning high-risk small employer groups (or individuals 
        within such a group) among some or all such insurers, and
            (2) the insurers to which such high-risk small employer 
        groups or individuals are so assigned comply with the 
        requirements of subsection (b).

SEC. 1102. MEDACCESS PLAN DEFINED.

    (a) MedAccess Plan Defined.--In this subtitle:
            (1) In general.--The term ``MedAccess plan'' means a health 
        insurance plan (whether a managed-care plan, indemnity plan, or 
        other plan) that meets the following requirements:
                    (A) The plan--
                            (i) is designed to provide standard 
                        coverage (consistent with subsection (c)) with 
                        substantial cost-sharing,
                            (ii) is designed to provide only 
                        catastrophic coverage (consistent with 
                        subsection (d)), or
                            (iii) is designed to provide medisave 
                        coverage (consistent with subsection (e)).
                    (B) The plan includes only essential and medically 
                necessary services, including medical, surgical, 
                hospital, and preventive services; except that no 
                specific procedure or treatment, or classes thereof, is 
                required to be covered in such a plan, by this Act or 
                through regulations.
                    (C) The plan meets the applicable requirements of 
                section 1101(b) (relating to guaranteed issue).
                    (D) The plan meets the consumer protection 
                standards established under section 1103(a)(1)(B).
            (2) MedAccess standard, catastrophic, and medisave plans.--
        The terms ``MedAccess standard plan'', ``MedAccess catastrophic 
        plan'', ``MedAccess medisave plan'' mean a MedAccess plan that 
        provides for at least standard coverage (referred to in 
        paragraph (1)(A)(i)), for only catastrophic coverage (referred 
        to in paragraph (1)(A)(ii)), or medisave coverage (referred to 
        in paragraph (1)(A)(iii)), respectively.
    (b) Set of Rules of Actuarial Equivalence.--
            (1) Initial determination.--The NAIC is requested to submit 
        to the Secretary, within 6 months after the date of the 
        enactment of this Act, a set of rules which the NAIC determines 
        is sufficient for determining, in the case of any health 
        insurance plan and for purposes of this section, the actuarial 
        value of the coverage offered by the plan.
            (2) Certification.--If the Secretary determines that the 
        NAIC has submitted a set of rules that comply with the 
        requirements of paragraph (1), the Secretary shall certify such 
        set of rules for use under this subtitle. If the Secretary 
        determines that such a set of rules has not been submitted or 
        does not comply with such requirements, the Secretary shall 
        promptly establish a set of rules that meets such requirements.
    (c) Standard Coverage.--
            (1) In general.--For purposes of this Act, a health 
        insurance plan is considered to provide standard coverage 
        consistent with this subsection if the benefits are determined, 
        in accordance with the set of actuarial equivalence rules 
        certified under subsection (b), to have a value that is within 
        5 percentage points of the target actuarial value for standard 
        coverage established under paragraph (2).
            (2) Initial determination of target actuarial value for 
        standard coverage.--
                    (A) Initial determination.--The NAIC is requested 
                to submit to the Secretary, within 6 months after the 
                date of the enactment of this Act, a target actuarial 
                value for standard coverage equal to the average 
                actuarial value of a representative range of the 
                different types of health benefits provisions (which 
                include cost-sharing) typically offered as standard 
                coverage in the small employer health coverage market. 
                In determining the actuarial value, the plan benefits 
                considered should be sufficient to cover only essential 
                and medically necessary services, including medical, 
                surgical, hospital, and preventive services. However, 
                no specific procedure or treatment, or classes thereof, 
                is required to be considered in such determination by 
                this Act or through regulations. The determination of 
                such value shall be based on a representative 
                distribution of the population of eligible employees 
                offered such coverage and a single set of standardized 
                utilization and cost factors.
                    (B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for standard coverage that comply with the requirements 
                of subparagraph (A), the Secretary shall certify such 
                value for use under this subtitle. If the Secretary 
                determines that such a value has not been submitted or 
                does not comply with such requirements, the Secretary 
                shall promptly determine such a target actuarial value 
                that meets such requirements.
    (d) Catastrophic Coverage.--
            (1) In general.--For purposes of subsection (a)(1)(B), a 
        health insurance plan is considered to provide catastrophic 
        coverage consistent with this subsection if--
                    (A) benefits are available under the plan for a 
                year only to the extent that expenses for covered 
                services in a year exceed a deductible amount that is 
                consistent with the requirement for a catastrophic 
                health plan under section 220(c)(2)(A) of the Internal 
                Revenue Code of 1986, as added by section 2202, and
                    (B) the benefits are determined, in accordance with 
                the set of actuarial equivalence rules certified under 
                subsection (b), to have a value that is within 5 
                percentage points of the target actuarial value for 
                catastrophic coverage established under paragraph (2).
            (2) Initial determination of target actuarial value for 
        catastrophic coverage.--
                    (A) Initial determination.--The NAIC is requested 
                to submit to the Secretary, within 6 months after the 
                date of the enactment of this Act, a target actuarial 
                value for catastrophic coverage equal to the actuarial 
                value that would have been computed under subsection 
                (c)(2)(A) if a deductible that represents the midpoint 
                of the range of deductibles permitted consistent with 
                subsections (b)(2) and (c)(2)(A) of section 220 of the 
                Internal Revenue Code of 1986 were used in place of any 
                deductible that otherwise would be applicable.
                    (B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for catastrophic coverage that comply with the 
                requirements of subparagraph (A), the Secretary shall 
                certify such value for use under this subtitle. If the 
                Secretary determines that such a value has not been 
                submitted or does not comply with such requirements, 
                the Secretary shall promptly determine such a target 
                actuarial value that meets such requirements.
    (e) Medisave Coverage.--
            (1) In general.--For purposes of subsection (a)(1)(C), a 
        health insurance plan is considered to provide medisave 
        coverage consistent with this subsection if such plan consists 
        of--
                    (A) a catastrophic health plan (within the meaning 
                of section 220(c)(2) of the Internal Revenue Code of 
                1986, as inserted by section 2202 of this Act), and
                    (B) a medical savings account described in section 
                220(d)(1)(B) of such Code.
    (f) Subsequent Revisions.--
            (1) NAIC.--The NAIC may submit from time to time to the 
        Secretary revisions of the set of rules of actuarial 
        equivalence and target actuarial values previously established 
        or determined under this section if the NAIC determines such 
        revision necessary to take into account changes in the relevant 
        types of health benefits provisions, in deductible levels for 
        catastrophic coverage, or in demographic conditions which form 
        the basis for such set of rules or values. The provisions of 
        subsection (b)(2) shall apply to such a revision in the same 
        manner as they apply to the initial determination of the set of 
        rules.
            (2) Secretary.--The Secretary may by regulation revise such 
        set or rules and values from time to time if the Secretary 
        determines such revision necessary to take into account changes 
        described in paragraph (1).

SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STANDARDS.

    (a) Establishment of General Standards.--
            (1) Role of naic.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, model regulations that specify standards with respect 
        to each of the following:
                    (A)(i) The requirement, under section 1101(a), that 
                insurers make available MedAccess plans.
                    (ii) The requirements of guaranteed availability of 
                MedAccess plans to small employers under section 
                1101(b).
                    (B)(i) The requirements of section 1104 (relating 
                to limits on premiums and miscellaneous consumer 
                protections).
                    (ii) The requirement of section 1105 (relating to 
                limitation on annual premium increases).
        If the NAIC develops recommended regulations specifying such 
        standards within such period, the Secretary shall review the 
        standards. Such review shall be completed within 60 days after 
        the date the regulations are developed. Unless the Secretary 
        determines within such period that the standards do not meet 
        the requirements, such standards shall serve as the standards 
        under this section, with such amendments as the Secretary deems 
        necessary.
            (2) Contingency.--If the NAIC does not develop such model 
        regulations within such period or the Secretary determines that 
        such regulations do not specify standards that meet the 
        requirements described in paragraph (1), the Secretary shall 
        specify, within 15 months after the date of the enactment of 
        this Act, standards to carry out those requirements.
            (3) Effective date.--The MedAccess standards and consumer 
        protection standards (as defined in paragraph (5)) shall apply 
        to MedAccess plans and health insurance plans in a State on or 
        after the respective date the standards are implemented in the 
        State under subsections (b) and (c).
            (4) Nonpreemption of state law.--A State may implement 
        standards for health insurance plans made available to small 
        employers that are more stringent than the requirements under 
        this part; except that a State may not implement standards that 
        prevent the offering by an insurer of at least one MedAccess 
        standard plan, one MedAccess catastrophic plan, and one 
        MedAccess medical plan.
            (5) Definitions.--In this section:
                    (A) Consumer protection standards.--The term 
                ``consumer protection standards'' means the standards 
                established under paragraph (1)(B).
                    (B) MedAccess standards.--The term ``MedAccess 
                standards'' means the standards established under 
                paragraph (1)(A) (relating to the requirements of 
                section 1101), and includes the consumer protection 
                standards insofar as they relate to MedAccess plans.
    (b) Application of Standards Through States.--
            (1) Application of medaccess standards.--
                    (A) In general.--Each State shall submit to the 
                Secretary, by the deadline specified in subparagraph 
                (B), a report on steps the State is taking to implement 
                and enforce the consumer protection standards with 
                respect to insurers, and MedAccess plans offered, not 
                later than such deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date the 
                        MedAccess standards are established under 
                        subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the NAIC, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for insurers and 
                                MedAccess plans offered to meet the 
                                MedAccess standards established under 
                                subsection (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1994 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1996. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of such session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (2) Federal role.--If the Secretary determines that a State 
        has failed to submit a report by the deadline specified under 
        paragraph (1) or finds that the State has not implemented and 
        provided adequate enforcement of the MedAccess standards under 
        such paragraph, the Secretary shall notify the State and 
        provide the State a period of 60 days in which to submit such 
        report or to implement and enforce such standards under such 
        paragraph. If, after such 60-day period, the Secretary finds 
        that such a failure has not been corrected, the Secretary shall 
        provide for such mechanism for the implementation and 
        enforcement of such standards in the State as the Secretary 
        determines to be appropriate. Such implementation and 
        enforcement shall take effect with respect to insurers, and 
        MedAccess plans offered or renewed, on or after 3 months after 
        the date of the Secretary's finding under the previous 
        sentence, and until the date the Secretary finds that such a 
        failure has been corrected. In exercising authority under this 
        subparagraph, the Secretary shall determine whether the use of 
        a risk-allocation mechanism, described in section 1101(c), 
        would be more consistent with the small employer group health 
        coverage market in the State than the guaranteed availability 
        provisions of section 1101(b).
            (2) Application of consumer protection standards.--
                    (A) In general.--Each State shall submit to the 
                Secretary, by the deadline specified in subparagraph 
                (B), a report on steps the State is taking to implement 
                and enforce the MedAccess standards with respect to 
                insurers, and health insurance plans (other than 
                MedAccess plans) offered, not later than such deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date the 
                        consumer protection standards are established 
                        under subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the NAIC, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for insurers and health 
                                insurance plans offered to meet the 
                                consumer protection standards 
                                established under subsection (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1994 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1996. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of such session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (2) Federal role.--If the Secretary determines that a State 
        has failed to submit a report by the deadline specified under 
        paragraph (1) or finds that the State has not implemented and 
        provided adequate enforcement of the consumer protection 
        standards under such paragraph, the Secretary shall notify the 
        State and provide the State a period of 60 days in which to 
        submit such report or to implement and enforce such standards 
        under such paragraph. If, after such 60-day period, the 
        Secretary finds that such a failure has not been corrected, the 
        Secretary shall provide for such mechanism for the 
        implementation and enforcement of such standards in the State 
        as the Secretary determines to be appropriate. Such 
        implementation and enforcement shall take effect with respect 
        to insurers, and health insurance plans (other than MedAccess 
        plans) offered or renewed, on or after 3 months after the date 
        of the Secretary's finding under the previous sentence, and 
        until the date the Secretary finds that such a failure has been 
        corrected.

SEC. 1104. LIMITS ON PREMIUMS AND MISCELLANEOUS CONSUMER PROTECTIONS.

    (a) Limits on Premiums.--
            (1) Limit on variation of index rates between classes of 
        business.--
                    (A) In general.--As a standard under section 
                1103(a)(1)(B)(i), the index rate for a rating period 
                for any class of business of an insurer may not exceed 
                by more than 20 percent the index rate for any other 
                class of business.
                    (B) Exception.--The limitation of subparagraph (A) 
                shall not apply to a class of business if--
                            (i) the class is one for which the insurer 
                        does not reject, and never has rejected, small 
                        employers included within the definition of 
                        employers eligible for the class of business or 
                        otherwise eligible employees and dependents who 
                        enroll on a timely basis, based upon their 
                        claim experience or health status,
                            (ii) the insurer does not involuntarily 
                        transfer, and never has involuntarily 
                        transferred, a health insurance plan into or 
                        out of the class of business, and
                            (iii) the class of business is currently 
                        available for purchase.
            (2) Limit on variation of premium rates within a class of 
        business.--For a class of business of an insurer, as a standard 
        under section 1103(a)(1)(B)(i), the highest premium rates 
        charged during a rating period to small employers with similar 
        demographic and other similar objective characteristics (and 
        not relating to claims experience, health status, industry, 
        occupation, or duration of coverage since issue) for the same 
        or similar coverage, or the highest rates which could be 
        charged to such employers under the rating system for that 
        class of business, shall not exceed an amount that is 1.5 times 
        the base premium rate for the class of business for a rating 
        period (or portion thereof) that occurs in the first 3 years in 
        which this section is in effect, and 1.35 times the base 
        premium rate thereafter.
            (3) Objective basis for differences in premiums for 
        standard and catastrophic medaccess plans.--The difference 
        between the index rates for MedAccess catastrophic plans and 
        the index rates for MedAccess standard plans shall be 
        reasonable and shall reflect the difference in plan design and 
        shall not take into account differences due to the nature of 
        the groups assumed to select particular health plans.
            (4) Limit on transfer of employers among classes of 
        business.--As a standard under section 1103(a)(1)(B)(i), an 
        insurer may not involuntarily transfer a small employer into or 
        out of a class of business. An insurer may not offer to 
        transfer a small employer into or out of a class of business 
        unless such offer is made to transfer all small employers in 
        the class of business without regard to demographic 
        characteristics, claim experience, health status, industry, 
        occupation, or duration since issue.
            (5) Definitions.--In this subsection:
                    (A) Base premium rate.--The term ``base premium 
                rate'' means, for each class of business for each 
                rating period, the lowest premium rate charged or which 
                could have been charged under a rating system for that 
                class of business by the insurer to small employers 
                with similar demographic characteristics and other 
                similar objective characteristics (not relating to 
                claims experience, health status, industry, occupation, 
                or duration of coverage since issue) for health 
                insurance plans with the same or similar coverage.
                    (B) Class of business.--The term ``class of 
                business'' means, with respect to an insurer, all (or a 
                distinct group of) small employers as shown on the 
                records of the insurer.
                    (C) Rules for establishing classes of business.--
                For purposes of subparagraph (B)--
                            (i) an insurer may establish, subject to 
                        clause (ii), a distinct group of small 
                        employers on the basis that the applicable 
                        health insurance plans either--
                                    (I) are marketed and sold through 
                                individuals and organizations which are 
                                not participating in the marketing or 
                                sale of other distinct groups of small 
                                employers for the insurer,
                                    (II) have been acquired from 
                                another insurer as a distinct group, or
                                    (III) are provided through an 
                                association that has a membership of 
                                not less than 100 small employers and 
                                that has been formed for purposes other 
                                than obtaining health coverage;
                            (ii) an insurer may not establish more than 
                        2 groupings under each class of business based 
                        on the insurer's use of managed-care techniques 
                        if the techniques are expected to produce 
                        substantial variation in health care costs; and
                            (iii) notwithstanding clauses (i) and (ii), 
                        a State commissioner of insurance, upon 
                        application and if authorized under State law, 
                        may approve additional distinct groups upon a 
                        finding that such approval would enhance the 
                        efficiency and fairness of the small employer 
                        marketplace.
                    (D) Index rate.--The term ``index rate'' means, 
                with respect to a class of business, the arithmetic 
                average of the applicable base premium rate and the 
                corresponding highest premium rate for the class.
                    (E) Demographic characteristics.--Except as 
                otherwise permitted under the standard under section 
                1103(b)(1)(B)(i), the term ``demographic 
                characteristics'' means age, gender, geographic area, 
                family composition, and group size.
    (b) Full Disclosure of Rating Practices.--At the time an insurer 
offers a health insurance plan to a small employer, the insurer shall 
fully disclose to the employer rating practices for health insurance 
plans, including rating practices for different populations and benefit 
designs.
    (c) Actuarial Certification.--Each insurer that offers a health 
insurance plan to a small employer in a State shall file annually with 
the State commissioner of insurance a written statement by a member of 
the American Academy of Actuaries (or other individual acceptable to 
the commissioner) that, based upon an examination by the individual 
which includes a review of the appropriate records and of the actuarial 
assumptions of the insurer and methods used by the insurer in 
establishing premium rates for applicable health insurance plans--
            (1) the insurer is in compliance with the applicable 
        provisions of this section, and
            (2) the rating methods are actuarially sound.
Each such insurer shall retain a copy of such statement for examination 
at its principal place of business.
    (d) Registration and Reporting.--Each insurer that issues any 
health insurance plan to a small employer in a State shall be 
registered or licensed with the State commissioner of insurance and 
shall comply with any reporting requirements of the commissioner 
relating to such a plan.

SEC. 1105. LIMITATION ON ANNUAL PREMIUM INCREASES.

    An insurer may not provide for an increase in the premium charged a 
small employer for a health insurance plan in a percentage that exceeds 
the percentage change in the premium charged under the plan for a newly 
covered small employer within the same class of business rate plus 15 
percentage points.

SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCATION OF RISK 
              MECHANISMS FOR HIGH RISK INDIVIDUALS IN MARKETPLACE FOR 
              SMALL BUSINESS.

    (a) Establishment of Standards.--
            (1) Role of naic.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, models for reinsurance or allocation of risk 
        mechanisms (each in this section referred to as a ``reinsurance 
        or allocation of risk mechanism'') for health insurance plans 
        made available to small employers and for whom an insurer is at 
        risk of incurring high costs under the plan. If the NAIC 
        develops such models within such period, the Secretary shall 
        review such models to determine if they provide for an 
        effective reinsurance or allocation of risk mechanism. Such 
        review shall be completed within 30 days after the date the 
        models are developed. Unless the Secretary determines within 
        such period that such a model is not an effective reinsurance 
        or allocation of risk mechanism, such remaining models shall 
        serve as the models under this section, with such amendments as 
        the Secretary deems necessary.
            (2) Contingency.--If the NAIC does not develop such models 
        within such period or the Secretary determines that all such 
        models do not provide for an effective reinsurance or 
        allocation of risk mechanism, the Secretary shall specify, 
        within 15 months after the date of the enactment of this Act, 
        models to carry out this section.
    (b) Implementation of Reinsurance or Allocation of Risk 
Mechanisms.--
            (1) By states.--Each State shall establish and maintain one 
        or more reinsurance or allocation of risk mechanisms that are 
        consistent with a model established under subsection (a) by not 
        later than the deadline specified in section 1103(b)(1)(B). A 
        State may establish and maintain such a mechanism jointly with 
        one or more other States.
            (2) Federal role.--
                    (A) In general.--If the Secretary determines that a 
                State has failed to establish or maintain a reinsurance 
                or allocation of risk mechanism in accordance with 
                paragraph (1), the Secretary shall establish and 
                maintain such a reinsurance or allocation of risk 
                mechanism meeting the requirements of this paragraph.
                    (B) Reinsurance mechanism.--Unless the Secretary 
                determines under subparagraph (C) that an allocation of 
                risk mechanism is the appropriate mechanism to use in a 
                State under this paragraph, the Secretary shall 
                establish and maintain for use under this section for 
                each State an appropriate reinsurance mechanism.
                    (C) Allocation of risk mechanism.--If the Secretary 
                determines that, due to the nature of the health 
                coverage market in the State (including a relatively 
                small number of health insurance plans offered or a 
                relatively small number of uninsurable small 
                employers), an allocation of risk mechanism would be a 
                better mechanism than a reinsurance mechanism, the 
                Secretary shall establish and maintain for use under 
                this section for a State an allocation of risk 
                mechanism under which uninsurable small employers would 
                be equitably assigned among insurers offering health 
                insurance plans to small employers.
                    (D) Financing deficit for reinsurance mechanisms.--
                            (i) In general.--Chapter 43 of the Internal 
                        Revenue Code of 1986 (relating to qualified 
                        pension plans, etc.) is amended by adding at 
                        the end thereof the following new section:

``SEC. 4980D. ADDITIONAL TAX TO FUND REINSURANCE IN STATES UNDER 
              FEDERAL REINSURANCE.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
providing of any health insurance plan which covers any employee in a 
Federal reinsurance State.
    ``(b) Amount of Tax.--
            ``(1) In general.--The tax imposed by subsection (a) shall 
        be equal to the applicable percentage of the amount received by 
        the insurer for providing such plan in such Federal reinsurance 
        State.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means, with respect to 
        any State for any period, the lowest percentage estimated by 
        the Secretary as generating sufficient revenues to carry out 
        section 1106(b)(2) of the Affordable Health Care Now Act of 
        1993 in such State for such period.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the insurer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Insurer.--The term `insurer' has the meaning given 
        such term in section 1107(6) of the Affordable Health Care Now 
        Act of 1993.
            ``(2) Federal reinsurance state.--The term `Federal 
        reinsurance State' means any State with respect to which a 
        determination is in effect under section 1106(b)(2) of the 
        Affordable Health Care Now Act of 1993 and for which the 
        Secretary of Health and Human Services has established and is 
        maintaining a reinsurance mechanism under subparagraph (B) of 
        such section for the State.''
                            (ii) Clerical amendment.--The table of 
                        sections for chapter 43 of such Code is amended 
                        by adding at the end thereof the following new 
                        item:

                              ``Sec. 4980D. Additional tax to fund 
                                        reinsurance in States under 
                                        Federal reinsurance.''
    (c) Construction.--Nothing in this section shall be construed to 
prohibit reinsurance or allocation of risk arrangements relating to 
health insurance plans, whether on a State or multi-State basis, not 
required under this section.

SEC. 1107. DEFINITIONS.

    Except as otherwise specifically provided, for purposes of this 
subtitle:
            (1) Dependent child.--The term ``dependent child'' means a 
        child (including an adopted child) who is under 19 years of age 
        or who is a full-time student and under 25 years of age.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            (3) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (4) Health insurance plan.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance plan'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer.
                    (B) Exception.--Such term does not include any of 
                the following--
                            (i) coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof,
                            (ii) medicare supplemental health 
                        insurance,
                            (iii) coverage issued as a supplement to 
                        liability insurance,
                            (iv) worker's compensation or similar 
                        insurance, or
                            (v) automobile medical-payment insurance,
                or any combination thereof.
            (5) Health maintenance organization.--The term ``health 
        maintenance organization'' includes, as defined in standards 
        established under section 1103, a health insurance plan that 
        meets specified standards and that offers to provide health 
        services on a prepaid, at-risk basis primarily through a 
        defined set of providers.
            (6) Insurer.--The term ``insurer'' means a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        and a health maintenance organization offering such a plan to 
        an employer, and includes a similar organization regulated 
        under State law for solvency.
            (7) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (8) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (9) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 51 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual. For 
        purposes of determining if an employer is a small employer, 
        rules similar to the rules of subsection (b) and (c) of section 
        414 of the Internal Revenue Code of 1986 shall apply.
            (10) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        and American Samoa.
            (11) State commissioner of insurance.--The term ``State 
        commissioner of insurance'' includes a State superintendent of 
        insurance.

SEC. 1108. OFFICE OF PRIVATE HEALTH CARE COVERAGE; ANNUAL REPORTS ON 
              EVALUATION OF HEALTH CARE COVERAGE REFORM.

    (a) In General.--In order to carry out the responsibilities of the 
Secretary under this subtitle, the Secretary shall establish an Office 
of Private Health Care Coverage, to be headed by a Director (in this 
section and section 1109 referred to as the ``Director'') appointed by 
the Secretary.
    (b) Annual Report.--
            (1) In general.--The Director shall submit to Congress an 
        annual report on the implementation of this subtitle.
            (2) Information to be included.--Each annual report shall 
        include information concerning at least the following:
                    (A) Implementation and enforcement of the 
                applicable MedAccess standards and consumer protection 
                standards under this subtitle by the States and by the 
                Secretary.
                    (B) An evaluation of the impact of the reforms 
                under this subtitle on the availability of affordable 
                health coverage for small employers that purchase group 
                health coverage and for their employees, and, in 
                particular, the impact of--
                            (i) guaranteed availability of health 
                        coverage,
                            (ii) limitations of restrictions from 
                        coverage of preexisting conditions,
                            (iii) requirement for continuity of 
                        coverage,
                            (iv) risk-management mechanisms for health 
                        coverage,
                            (v) limits on premium variations,
                            (vi) limits on annual premium increases, 
                        and
                            (vii) preemption of State benefit mandates.
                In performing such evaluation, the Secretary shall seek 
                to discount the effect of the insurance cycle on health 
                insurance premiums.
                    (C) An assessment of the implications of the 
                reforms on adverse selection among health insurance 
                plans and the distribution of risk among health 
                insurance plans.
    (c) Advisory Committee.--The Secretary shall provide for 
appointment of an advisory committee to advise the Director concerning 
activities of the Office under this subtitle. Membership on the 
committee shall consist of 17 individuals and shall include individuals 
from the general public, small and large business, labor, insurance and 
other group health plans, and health care providers, and shall include 
individuals who are experts in the fields of the actuarial science, 
health economics, and health services research. The Secretary may 
include, as additional, ex officio members of the committee, such 
representatives of government agencies as the Secretary deems 
appropriate. The chairperson of the committee shall not be a health 
care provider or receive any direct or indirect compensation from an 
insurer, health insurance plan, or a health care provider.

SEC. 1109. RESEARCH AND DEMONSTRATION PROJECTS; DEVELOPMENT OF A HEALTH 
              RISK POOLING MODEL.

    (a) Research and Demonstrations.--The Director is authorized, 
directly, by contract, and through grants and cooperative agreements 
within the Department of Health and Human Services and outside the 
Department--
            (1) to conduct research on the impact of this subtitle on 
        the availability of affordable health coverage for employees 
        and dependents in the small employers group health care 
        coverage market and other topics described in section 1108(b), 
        and
            (2) to conduct demonstration projects relating to such 
        topics.
    (b) Development of Methods of Measuring Relative Health Risk.--
            (1) In general.--The Director shall develop methods for 
        measuring, in terms of the expected costs of providing benefits 
        under health insurance plans and, in particular, MedAccess 
        plans, the relative health risks of eligible individuals.
            (2) Methodology.--The methods--
                    (A) shall rely on diagnosis or other health-related 
                information that is predictive of individual health 
                care needs,
                    (B) may rely upon information routinely collected 
                in the process of making payments under group health 
                plans, and
                    (C) may provide for such random, sample audits of 
                records as may be necessary to verify the accuracy of 
                measurements.
    (c) Development of a Health Risk Pooling Model.--
            (1) In general.--The Director shall develop a model, based 
        on the methods of measuring risks under subsection (b), for 
        equitably distributing health risks among insurers in the small 
        employer health care coverage market.
            (2) Redistribution of risk.--Under such model, insurers 
        with below average health risks would be required to contribute 
        to a common fund for payment to insurers with above average 
        health risks, each in relation to the degree of their favorable 
        or adverse risk selection.
            (3) Incentives.--Such model shall include incentives to 
        encourage continuous coverage of eligible individuals and small 
        employers.
    (d) Consultation.--The methods and model under this section shall 
be developed in consultation with the NAIC and the advisory committee 
established under section 1108(c).
    (e) Report.--By not later than January 1, 1995, the Director shall 
submit to Congress a report on the methods and model developed under 
this section (as well as on research and demonstration projects 
conducted under subsection (a)). The Director shall include in the 
report such recommendations respecting the application of the model to 
insurers (and, in particular, to MedAccess plans) under this subtitle 
as the Director deems appropriate.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $5,000,000 in each of fiscal 
years 1994 through 1998.

                         Subtitle C--Preemption

                   PART 1--SCOPE OF STATE REGULATION

SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP HEALTH 
              PLANS.

    In the case of a group health plan, no provision of State or local 
law shall apply that requires the coverage of one or more specific 
benefits, services, or categories of health care, or services of any 
class or type of provider of health care.

SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM 
              PURCHASING HEALTH INSURANCE.

    No provision of State or local law shall apply that prohibits 2 or 
more employers from obtaining coverage under an insured multiple 
employer health plan.

SEC. 1203. RESTRICTIONS ON MANAGED CARE.

    (a) Preemption of State Law Provisions.--Subject to subsection (c), 
the following provisions of State law are preempted and may not be 
enforced:
            (1) Restrictions on reimbursement rates or selective 
        contracting.--Any law that restricts the ability of a group 
        health plan to negotiate reimbursement rates with providers or 
        to contract selectively with one provider or a limited number 
        of providers.
            (2) Restrictions on differential financial incentives.--Any 
        law that limits the financial incentives that a group health 
        plan may require a beneficiary to pay when a non-plan provider 
        is used on a non-emergency basis.
            (3) Restrictions on utilization review methods.--Any law 
        that--
                    (A) prohibits utilization review of any or all 
                treatments and conditions,
                    (B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                reviewed,
                    (C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    (D) requires payments to providers for the expenses 
                of responding to utilization review requests, or
                    (E) imposes liability for delays in performing such 
                review.
        Nothing in subparagraph (B) shall be construed as prohibiting a 
        State from (i) requiring a licensed physician or other health 
        care professional be available at some time in the review or 
        appeal process, or (ii) requiring that any decision in an 
        appeal from such a review be made by a licensed physician.
    (b) GAO Study.--
            (1) In general.--The Comptroller General shall conduct a 
        study of the benefits and cost effectiveness of the use of 
        managed care in the delivery of health services.
            (2) Report.--By not later than 4 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        a report to Congress on the study conducted under paragraph (1) 
        and shall include in the report such recommendations (including 
        whether the provisions of subsection (a) should be extended) as 
        may be appropriate.
    (c) Sunset.--Unless otherwise provided, subsection (a) shall not 
apply 5 years after the date of the enactment of this Act.

SEC. 1204. DEFINITIONS.

    For purposes of this part, the terms ``dependent'', ``employee'', 
``employer'', ``group health plan'', ``health insurance plan'', 
``insured multiple employer health plan'', and ``State'' have the 
meanings given such terms in section 1023(a).

         PART 2--MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

SEC. 1211. LIMITED EXEMPTION UNDER PREEMPTION RULES FOR MULTIPLE 
              EMPLOYER PLANS PROVIDING HEALTH BENEFITS SUBJECT TO 
              CERTAIN FEDERAL STANDARDS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following new part:

                ``Part 7--Multiple Employer Health Plans

``SEC. 701. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization, licensed 
        to engage in the business of insurance by a State.
            ``(2) Participating employer.--The term `participating 
        employer' means, in connection with a multiple employer welfare 
        arrangement, any employer if any of its employees, or any of 
        the dependents of its employees, are or were covered under such 
        arrangement in connection with the employment of the employees.
            ``(3) Excess/stop loss coverage.--The term `excess/stop 
        loss coverage' means, in connection with a multiple employer 
        welfare arrangement, a contract under which an insurer provides 
        for payment with respect to claims under the arrangement, 
        relating to participants or beneficiaries individually or 
        otherwise, in excess of an amount or amounts specified in such 
        contract.
            ``(4) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation.
            ``(5) Sponsor.--The term `sponsor' means, in connection 
        with a multiple employer welfare arrangement, the association 
        or other entity which establishes or maintains the arrangement.
            ``(6) State location of covered individuals.--
                    ``(A) In general.--A multiple employer welfare 
                arrangement shall be treated as covering individuals 
                located in a State only if the minimum required number 
                of individuals who are covered under the arrangement 
                are located in such State, except that if the minimum 
                required number of individuals are not located in any 
                State, such arrangement shall be treated as covering 
                individuals in any State in which any covered 
                individual is located.
                    ``(B) Minimum required number.--For purposes of 
                subparagraph (A), the minimum required number is the 
                greater of--
                            ``(i) 5 percent of the total number of 
                        individuals described in subparagraph (A), or
                            ``(ii) 50.
                    ``(C) Location of individuals in state.--For 
                purposes of subparagraph (A), an individual shall be 
                treated as located in a State if such individual is 
                employed in such State or the address of such 
                individual last known by the arrangement is located in 
                such State.
            ``(7) State insurance commissioner.--The term `State 
        insurance commissioner' means the insurance commissioner (or 
        similar official) of a State.
            ``(8) Domicile state.--The term `domicile State' means, in 
        connection with a multiple employer welfare arrangement, the 
        State in which, according to the application for an exemption 
        under this part, most individuals to be covered under the 
        arrangement are located, except that, in any case in which 
        information contained in the latest annual report of the 
        arrangement filed under this part indicates that most 
        individuals covered under the arrangement are located in a 
        different State, such term means such different State.
            ``(9) Fully insured arrangement.--A multiple employer 
        welfare arrangement shall be treated as fully insured only if 
        one or more insurers, health maintenance organizations, similar 
        organizations regulated under State law for solvency, or any 
        combination thereof are liable under one or more insurance 
        policies or contracts for all benefits under the arrangement 
        (irrespective of any recourse they may have against other 
        parties).
            ``(10) Multiple employer health plan.--The term `multiple 
        employer health plan' means a multiple employer welfare 
        arrangement treated as an employee welfare benefit plan by 
        reason of an exemption under this part.
            ``(11) Insured multiple employer health plan.--The term 
        `insured multiple employer health plan' means a fully insured 
        multiple employer welfare arrangement under which benefits 
        consist solely of medical care described in section 607(1) 
        (disregarding such incidental benefits as the Secretary shall 
        specify by regulations).
            ``(12) Prepaid health care arrangement.--The term `prepaid 
        health care arrangement' means a nonprofit entity which--
                    ``(A) offers benefits consisting of medical care 
                described in section 607(1) on a prepaid basis, and
                    ``(B) is established and controlled by a group 
                medical practice or similar group, by a hospital, or by 
                such a practice (or group) and a hospital.

``SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PROVIDING BENEFITS IN THE 
              FORM OF MEDICAL CARE RELIEVED OF CERTAIN RESTRICTIONS ON 
              PREEMPTION OF STATE LAW AND TREATED AS EMPLOYEE WELFARE 
              BENEFIT PLANS.

    ``(a) In General.--Subject to subsection (b), a multiple employer 
welfare arrangement which is not fully insured and with respect to 
which there is in effect an exemption granted by the Secretary under 
this part (or with respect to which there is pending a complete 
application for such an exemption and the Secretary determines that 
provisional protection under this part is appropriate)--
            ``(1) shall be treated for purposes of subtitle A and the 
        preceding parts of this subtitle as an employee welfare benefit 
        plan, irrespective of whether such arrangement is an employee 
        welfare benefit plan, and
            ``(2) shall be exempt from section 514(b)(6)(A)(ii).
    ``(b) Benefits Must Consist of Medical Care.--Subsection (a) shall 
apply to a multiple employer welfare arrangement only if the benefits 
provided thereunder consist solely of medical care described in section 
607(1) (disregarding such incidental benefits as the Secretary shall 
specify by regulation).
    ``(c) Restriction on Commencement of New Arrangements.--A multiple 
employer welfare arrangement providing benefits which consist of 
medical care described in section 607(1) which has not commenced 
operations as of January 1, 1994, may commence operations only if an 
exemption granted to the arrangement under this part is in effect (or 
there is pending with respect to the arrangement a complete application 
for such an exemption and the Secretary determines that provisional 
protection under this part is appropriate).

``SEC. 703. EXEMPTION PROCEDURE.

    ``(a) In General.--The Secretary shall grant an exemption described 
in section 702(a) to a multiple employer welfare arrangement if--
            ``(1) an application for such exemption with respect to 
        such arrangement, identified individually or by class, has been 
        duly filed in complete form with the Secretary in accordance 
        with this part,
            ``(2) such application demonstrates compliance with the 
        requirements of section 704 with respect to such arrangement, 
        and
            ``(3) the Secretary finds that such exemption is--
                    ``(A) administratively feasible,
                    ``(B) not adverse to the interests of the 
                individuals covered under the arrangement, and
                    ``(C) protective of the rights and benefits of the 
                individuals covered under the arrangement.
    ``(b) Notice and Hearing.--Before granting an exemption under this 
section, the Secretary shall publish notice in the Federal Register of 
the pendency of the exemption, shall require that adequate notice be 
given to interested persons, including the State insurance commissioner 
of each State in which covered individuals under the arrangement are, 
or are expected to be, located, and shall afford interested persons 
opportunity to present views. The Secretary may not grant an exemption 
under this section unless the Secretary affords an opportunity for a 
hearing and makes a determination on the record with respect to the 
findings required under subsection (a)(3). The Secretary shall, to the 
maximum extent practicable, make a final determination with respect to 
any application filed under this section in the case of a newly 
established arrangement within 90 days after the date which the 
Secretary determines is the date on which such application is filed in 
complete form.

``SEC. 704. ELIGIBILITY REQUIREMENTS.

    ``(a) Application for Exemption.--
            ``(1) In general.--An exemption may be granted by the 
        Secretary under this part only on the basis of an application 
        filed with the Secretary in such form and manner as shall be 
        prescribed in regulations of the Secretary. Any such 
        application shall be signed by the operating committee and the 
        sponsor of the arrangement.
            ``(2) Filing fee.--The arrangement shall pay to the 
        Secretary at the time of filing an application under this 
        section a filing fee in the amount of $5,000, which shall be 
        available, to the extent provided in appropriation Acts, to the 
        Secretary for the sole purpose of administering the exemption 
        procedures under this part.
            ``(3) Information included.--An application filed under 
        this section shall include, in a manner and form prescribed in 
        regulations of the Secretary, at least the following 
        information:
                    ``(A) Identifying information.--The names and 
                addresses of--
                            ``(i) the sponsor, and
                            ``(ii) the members of the operating 
                        committee of the arrangement.
                    ``(B) States in which arrangement intends to do 
                business.--The States in which individuals covered 
                under the arrangement are to be located and the number 
                of such individuals expected to be located in each such 
                State.
                    ``(C) Bonding requirements.--Evidence provided by 
                the operating committee that the bonding requirements 
                of section 412 will be met as of the date of the 
                application.
                    ``(D) Plan documents.--A copy of the documents 
                governing the arrangement (including any bylaws and 
                trust agreements), the summary plan description, and 
                other material describing the benefits and coverage 
                that will be provided to individuals covered under the 
                arrangement.
                    ``(E) Agreements with service providers.--A copy of 
                any agreements between the arrangement and contract 
                administrators and other service providers.
                    ``(F) Funding report.--A report setting forth 
                information determined as of a date within the 120-day 
                period ending with the date of the application, 
                including the following:
                            ``(i) Reserves.--A statement, certified by 
                        the operating committee of the arrangement, and 
                        a statement of actuarial opinion, signed by a 
                        qualified actuary, that all applicable 
                        requirements of section 707 are or will be met 
                        in accordance with regulations which the 
                        Secretary shall prescribe.
                            ``(ii) Adequacy of contribution rates.--A 
                        statement of actuarial opinion, signed by a 
                        qualified actuary, which sets forth a 
                        description of the extent to which contribution 
                        rates are adequate to provide for the payment 
                        of all obligations and the maintenance of 
                        required reserves under the arrangement for the 
                        12-month period beginning with such date within 
                        such 120-day period, taking into account the 
                        expected coverage and experience of the 
                        arrangement. If the contribution rates are not 
                        fully adequate, the statement of actuarial 
                        opinion shall indicate the extent to which the 
                        rates are inadequate and the changes needed to 
                        ensure adequacy.
                            ``(iii) Current and projected value of 
                        assets and liabilities.--A statement of 
                        actuarial opinion signed by a qualified 
                        actuary, which sets forth the current value of 
                        the assets and liabilities accumulated under 
                        the arrangement and a projection of the assets, 
                        liabilities, income, and expenses of the 
                        arrangement for the 12-month period referred to 
                        in clause (ii). The income statement shall 
                        identify separately the arrangement's 
                        administrative expenses and claims.
                            ``(iv) Costs of coverage to be charged and 
                        other expenses.--A statement of the costs of 
                        coverage to be charged, including an 
                        itemization of amounts for administration, 
                        reserves, and other expenses associated with 
                        the operation of the arrangement.
                            ``(v) Other information.--Any other 
                        information which may be prescribed in 
                        regulations of the Secretary as necessary to 
                        carry out the purposes of this part.
    ``(b) Other Requirements.--A complete application for an exemption 
under this part shall include information which the Secretary 
determines to be complete and accurate and sufficient to demonstrate 
that the following requirements are met with respect to the 
arrangement:
            ``(1) Sponsor.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the sponsor is, and has been 
                (together with its immediate predecessor, if any) for a 
                continuous period of not less than 3 years before the 
                date of the application, organized and maintained in 
                good faith, with a constitution and bylaws specifically 
                stating its purpose, as a trade association, an 
                industry association, a professional association, or a 
                chamber of commerce or other business group, for 
                substantial purposes other than that of obtaining or 
                providing medical care described in section 607(1), and 
                the applicant demonstrates to the satisfaction of the 
                Secretary that the sponsor is established as a 
                permanent entity which receives the active support of 
                its members.
                    ``(B) Special rule for prepaid health care 
                arrangements.--In the case of an arrangement that is a 
                prepaid health care arrangement (as defined in section 
                701(12)), the sponsor is the operating committee of the 
                arrangement.
            ``(2) Operating committee.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the arrangement is operated, pursuant 
                to a trust agreement, by an operating committee which 
                has complete fiscal control over the arrangement and 
                which is responsible for all operations of the 
                arrangement, and the operating committee has in effect 
                rules of operation and financial controls, based on a 
                3-year plan of operation, adequate to carry out the 
                terms of the arrangement and to meet all requirements 
                of this title applicable to the arrangement. The 
                members of the committee are individuals selected from 
                individuals who are the owners, officers, directors, or 
                employees of the participating employers or who are 
                partners in the participating employers and actively 
                participate in the business. No such member is an 
                owner, officer, director, or employee of, or partner 
                in, a contract administrator or other service provider 
                to the arrangement, except that officers or employees 
                of a sponsor which is a service provider (other than a 
                contract administrator) to the arrangement may be 
                members of the committee if they constitute not more 
                than 25 percent of the membership of the committee and 
                they do not provide services to the arrangement other 
                than on behalf of the sponsor. The committee has sole 
                authority to approve applications for participation in 
                the arrangement and to contract with a service provider 
                to administer the day-to-day affairs of the 
                arrangement.
                    ``(B) Special rule for prepaid health care 
                arrangements.--In the case of an arrangement that is a 
                prepaid health care arrangement (as defined in section 
                701(12)), the operating committee is the board of the 
                entity that is the arrangement.
            ``(3) Contents of governing instruments.--The instruments 
        governing the arrangement include a written instrument, meeting 
        the requirements of an instrument required under section 
        1212(a)(1), which--
                    ``(A) provides that the committee serves as the 
                named fiduciary required for plans under section 
                1212(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A)),
                    ``(B) provides that the sponsor is to serve as plan 
                sponsor (referred to in section 3(16)(B)),
                    ``(C) incorporates the requirements of section 707, 
                and
                    ``(D) provides that, effective upon the granting of 
                an exemption under this part--
                            ``(i) all participating employers must be 
                        members or affiliated members of the sponsor, 
                        except that, in the case of a sponsor which is 
                        a professional association or other individual-
                        based association, if at least one of the 
                        officers, directors, or employees of an 
                        employer, or at least one of the individuals 
                        who are partners in an employer and who 
                        actively participates in the business, is a 
                        member or affiliated member of the sponsor, 
                        participating employers may also include such 
                        employer, and
                            ``(ii) all individuals thereafter 
                        commencing coverage under the arrangement must 
                        be--
                                    ``(I) active or retired owners, 
                                officers, directors, or employees of, 
                                or partners in, participating 
                                employers, or
                                    ``(II) the beneficiaries of 
                                individuals described in subclause (I).
            ``(4) Contribution rates.--The contribution rates referred 
        to in subsection (a)(3)(F)(ii) are adequate.
            ``(5) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(c) Treatment of Party Seeking Exemption Where Party is Subject 
to Disqualification.--
            ``(1) In general.--In the case of any application for an 
        exemption under this part with respect to a multiple employer 
        welfare arrangement, if the Secretary determines that the 
        sponsor of the arrangement or any other person associated with 
        the arrangement is subject to disqualification under paragraph 
        (2), the Secretary may deny the exemption with respect to such 
        arrangement.
            ``(2) Disqualification.--A person is subject to 
        disqualification under this paragraph if such person--
                    ``(A) has intentionally made a material 
                misstatement in the application for exemption;
                    ``(B) has obtained or attempted to obtain an 
                exemption under this part through misrepresentation or 
                fraud;
                    ``(C) has misappropriated or converted to such 
                person's own use, or improperly withheld, money held 
                under a plan or any multiple employer welfare 
                arrangement;
                    ``(D) is prohibited (or would be prohibited if the 
                arrangement were a plan) from serving in any capacity 
                in connection with the arrangement under section 411,
                    ``(E) has failed to appear without reasonable cause 
                or excuse in response to a subpoena, examination, 
                warrant, or any other order lawfully issued by the 
                Secretary compelling such response,
                    ``(F) has previously been subject to a 
                determination under this part resulting in the denial, 
                suspension, or revocation of an exemption under this 
                part on similar grounds, or
                    ``(G) has otherwise violated any provision of this 
                title with respect to a matter which the Secretary 
                determines of sufficient consequence to merit 
                disqualification for purposes of this part.
    ``(d) Franchise Networks.--In the case of a multiple employer 
welfare arrangement established and maintained by a franchisor for a 
franchise network consisting of its franchisees, such franchisor shall 
be treated as the sponsor referred to in the preceding provisions of 
this section, such network shall be treated as an association referred 
to in such provisions, and each franchisee shall be treated as a member 
(of the association and the sponsor) referred to in such provisions, if 
all participating employers are such franchisees and the requirements 
of subsection (b)(1) with respect to a sponsor are met with respect to 
the network.
    ``(e) Certain Collectively Bargained Arrangements.--In applying the 
preceding provisions of this section in the case of a multiple employer 
welfare arrangement which would be described in section 3(40)(A)(i) but 
for the failure to meet any requirement of section 3(40)(C)--
            ``(1) paragraphs (1) and (2) of subsection (b) and 
        subparagraphs (A), (B), and (D) of paragraph (3) of subsection 
        (b) shall be disregarded, and
            ``(2) the joint board of trustees shall be considered the 
        operating committee of the arrangement.
    ``(f) Certain Arrangements Not Meeting Single Employer 
Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a multiple employer welfare arrangement 
        are employees of a single employer (within the meaning of 
        clauses (i) and (ii) of section 3(40)(B)), if all other 
        employees covered under the arrangement are employed by 
        employers who are related to such single employer, subsection 
        (b)(3)(D) shall be disregarded.
            ``(2) Related employers.--For purposes of paragraph (1), 
        employers are `related' if there is among all such employers a 
        common ownership interest or a substantial commonality of 
        business operations based on common suppliers or customers.

``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO EXEMPTED 
              ARRANGEMENTS.

    ``(a) Notice of Material Changes.--In the case of any multiple 
employer welfare arrangement with respect to which there is in effect 
an exemption granted under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the exemption shall be filed in such form and manner as 
shall be prescribed in regulations of the Secretary. The Secretary may 
require by regulation prior notice of material changes with respect to 
specified matters which might serve as the basis for suspension or 
revocation of the exemption.
    ``(b) Reporting Requirements.--Under regulations of the Secretary, 
the requirements of sections 102, 103, and 104 shall apply with respect 
to any multiple employer welfare arrangement with respect to which 
there is or has been in effect an exemption granted under this part in 
the same manner and to the same extent as such requirements apply to 
employee welfare benefit plans, irrespective of whether such exemption 
continues in effect. The annual report required under section 103 for 
any plan year in the case of any such multiple employer welfare 
arrangement shall also include information described in section 
704(a)(3)(F) with respect to the plan year and, notwithstanding section 
104(a)(1)(A), shall be filed not later than 90 days after the close of 
the plan year.
    ``(c) Engagement of Qualified Actuary.--The operating committee of 
each multiple employer welfare arrangement with respect to which there 
is or has been in effect an exemption granted under this part shall 
engage, on behalf of all covered individuals, a qualified actuary who 
shall be responsible for the preparation of the materials comprising 
information necessary to be submitted by a qualified actuary under this 
part. The qualified actuary shall utilize such assumptions and 
techniques as are necessary to enable such actuary to form an opinion 
as to whether the contents of the matters reported under this part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the arrangement and to reasonable expectations, 
        and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the arrangement.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.
    ``(d) Filing Notice of Exemption With States.--An exemption granted 
to a multiple employer welfare arrangement under this part shall not be 
effective unless written notice of such exemption is filed with the 
State insurance commissioner of each State in which at least 5 percent 
of the individuals covered under the arrangement are located. For 
purposes of this paragraph, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed. The Secretary may by 
regulation provide in specified cases for the application of the 
preceding sentence with lesser percentages in lieu of such 5 percent 
amount.

``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY ARRANGEMENTS 
              PROVIDING MEDICAL CARE.

    ``(a) In General.--A multiple employer welfare arrangement 
providing benefits consisting of medical care described in section 
607(1) shall issue to each participating employer--
            ``(1) a document equivalent to the summary plan description 
        required of plans under part 1,
            ``(2) information describing the contribution rates 
        applicable to participating employers, and
            ``(3) a statement indicating--
                    ``(A) whether or not the arrangement is fully 
                insured,
                    ``(B) whether or not there is in effect with 
                respect to the arrangement an exemption granted under 
                this part and, if there is in effect such an exemption, 
                that the arrangement is (or is treated as) an employee 
                welfare benefit plan under this title, and
                    ``(C) that the arrangement is not a licensed 
                insurer under the laws of any State.
    ``(b) Time for Disclosure.--Such information shall be issued to 
employers within such reasonable period of time before becoming 
participating employers as may be prescribed in regulations of the 
Secretary.

``SEC. 707. MAINTENANCE OF RESERVES.

    ``(a) In General.--Each multiple employer welfare arrangement with 
respect to which there is or has been in effect an exemption granted 
under this part and which is not fully insured shall establish and 
maintain reserves, consisting of--
            ``(1) a reserve for unearned contributions,
            ``(2) a reserve for payment of claims reported and not yet 
        paid and claims incurred but not yet reported, and for expected 
        administrative costs with respect to such claims, and
            ``(3) a reserve, in an amount recommended by the qualified 
        actuary, for any other obligations of the arrangement.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2) shall not be less than an 
amount equal to 25 percent of expected incurred claims and expenses for 
the plan year.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any multiple employer 
welfare arrangement, the qualified actuary shall include a margin for 
error and other fluctuations taking into account the specific 
circumstances of such arrangement.
    ``(d) Additional Requirements.--The Secretary may provide such 
additional requirements relating to reserves and excess/stop loss 
coverage as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any 
arrangement or any class of arrangements.
    ``(e) Adjustments for Excess/Stop Loss Coverage.--The Secretary may 
provide for adjustments to the levels of reserves otherwise required 
under subsections (a) and (b) with respect to any arrangement or class 
of arrangements to take into account excess/stop loss coverage provided 
with respect to such arrangement or arrangements.
    ``(f) Alternative Means of Compliance.--The Secretary may permit an 
arrangement (including a prepaid health care arrangement) to 
substitute, for all or part of the reserves required under subsection 
(a), such security, guarantee, or other financial arrangement as the 
Secretary determines to be adequate to enable the arrangement to fully 
meet all its financial obligations on a timely basis.

``SEC. 708. CORRECTIVE ACTIONS.

    ``(a) Actions To Avoid Depletion of Reserves.--A multiple employer 
welfare arrangement with respect to which there is or has been in 
effect an exemption granted under this part shall continue to meet the 
requirements of section 707, irrespective of whether such exemption 
continues in effect. The operating committee of such arrangement shall 
determine semiannually whether the requirements of section 707 are met. 
In any case in which the committee determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the Secretary makes such a determination and so notifies the 
committee, the committee shall immediately notify the qualified actuary 
engaged by the arrangement, and such actuary shall, not later than the 
end of the next following month, make such recommendations to the 
committee for corrective action as the actuary determines necessary to 
ensure compliance with section 707. Not later than 10 days after 
receiving from the actuary recommendations for corrective actions, the 
committee shall notify the Secretary (in such form and manner as the 
Secretary may prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description of the 
actions (if any) that the committee has taken or plans to take in 
response to such recommendations. The committee shall thereafter report 
to the Secretary, in such form and frequency as the Secretary may 
specify to the committee, regarding corrective action taken by the 
committee until the requirements of section 707 are met.
    ``(b) Termination.--
            ``(1) Notice of termination.--In any case in which the 
        operating committee of a multiple employer welfare arrangement 
        with respect to which there is or has been in effect an 
        exemption granted under this part determines that there is 
        reason to believe that the arrangement will terminate, the 
        committee shall so inform the Secretary, shall develop a plan 
        for winding up the affairs of the arrangement in connection 
        with such termination in a manner which will result in timely 
        payment of all benefits for which the arrangement is obligated, 
        and shall submit such plan in writing to the Secretary. Actions 
        required under this paragraph shall be taken in such form and 
        manner as may be prescribed in regulations of the Secretary.
            ``(2) Actions required in connection with termination.--In 
        any case in which--
                    ``(A) the Secretary has been notified under 
                subsection (a) of a failure of a multiple employer 
                welfare arrangement with respect to which there is or 
                has been in effect an exemption granted under this part 
                to meet the requirements of section 707 and has not 
                been notified by the operating committee of the 
                arrangement that corrective action has restored 
                compliance with such requirements, and
                    ``(B) the Secretary determines that the continuing 
                failure to meet the requirements of section 707 can be 
                reasonably expected to result in a continuing failure 
                to pay benefits for which the arrangement is obligated,
        the operating committee of the arrangement shall, at the 
        direction of the Secretary, terminate the arrangement and, in 
        the course of the termination, take such actions as the 
        Secretary may require as necessary to ensure that the affairs 
        of the arrangement will be, to the maximum extent possible, 
        wound up in a manner which will result in timely payment of all 
        benefits for which the arrangement is obligated.

``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF EXEMPTION.

    ``(a) Expiration and Renewal of Exemption.--An exemption granted to 
a multiple employer welfare arrangement under this part shall expire 3 
years after the date on which the exemption is granted. An exemption 
which has expired may be renewed by means of application for an 
exemption in accordance with section 704.
    ``(b) Suspension or Revocation of Exemption by Secretary.--The 
Secretary may suspend or revoke an exemption granted to a multiple 
employer welfare arrangement under this part--
            ``(1) for any cause that may serve as the basis for the 
        denial of an initial application for such an exemption under 
        section 704, or
            ``(2) if the Secretary finds that--
                    ``(A) the arrangement, or the sponsor thereof, in 
                the transaction of business while under the exemption, 
                has used fraudulent, coercive, or dishonest practices, 
                or has demonstrated incompetence, untrustworthiness, or 
                financial irresponsibility,
                    ``(B) the arrangement, or the sponsor thereof, is 
                using such methods or practices in the conduct of its 
                operations, so as to render its further transaction of 
                operations hazardous or injurious to participating 
                employers, or covered individuals,
                    ``(C) the arrangement, or the sponsor thereof, has 
                refused to be examined in accordance with this part or 
                to produce its accounts, records, and files for 
                examination in accordance with this part, or
                    ``(D) any of the officers of the arrangement, or 
                the sponsor thereof, has refused to give information 
                with respect to the affairs of the arrangement or the 
                sponsor or to perform any other legal obligation 
                relating to such an examination when required by the 
                Secretary in accordance with this part.
Any such suspension or revocation under this subsection shall be 
effective only upon a final decision of the Secretary made after notice 
and opportunity for a hearing is provided in accordance with section 
710.
    ``(c) Suspension or Revocation of Exemption Under Court 
Proceedings.--An exemption granted to a multiple employer welfare 
arrangement under this part may be suspended or revoked by a court of 
competent jurisdiction in an action by the Secretary brought under 
paragraph (2), (5), or (6) of section 502(a), except that the 
suspension or revocation under this subsection shall be effective only 
upon notification of the Secretary of such suspension or revocation.
    ``(d) Notification of Participating Employers.--All participating 
employers in a multiple employer welfare arrangement shall be notified 
of the expiration, suspension, or revocation of an exemption granted to 
such arrangement under this part, by such persons and in such form and 
manner as shall be prescribed in regulations of the Secretary, not 
later than 20 days after such expiration or after receipt of notice of 
a final decision requiring such suspension or revocation.
    ``(e) Publication of Expirations, Suspensions, and Revocations.--
The Secretary shall publish all expirations of, and all final decisions 
to suspend or revoke, exemptions granted under this part.

``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

    ``(a) In General.--Any decision by the Secretary which involves the 
denial of an application by a multiple employer welfare arrangement for 
an exemption under this part or the suspension or revocation of such an 
exemption shall contain a statement of the specific reason or reasons 
supporting the Secretary's action, including reference to the specific 
terms of the exemption and the statutory provision or provisions 
relevant to the determination.
    ``(b) Denials of Applications.--In the case of the denial of an 
application for an exemption under this part, the Secretary shall send 
a copy of the decision to the applicant by certified or registered mail 
at the address specified in the records of the Secretary. Such decision 
shall constitute the final decision of the Secretary unless the 
arrangement, or any party that would be prejudiced by the decision, 
files a written appeal of the denial within 30 days after the mailing 
of such decision. The Secretary may affirm, modify, or reverse the 
initial decision. The decision on appeal shall become final upon the 
mailing of a copy by certified or registered mail to the arrangement or 
party that filed the appeal.
    ``(c) Suspensions or Revocations of Exemption.--In the case of the 
suspension or revocation of an exemption granted under this part, the 
Secretary shall send a copy of the decision to the arrangement by 
certified or registered mail at its address, as specified in the 
records of the Secretary. Upon the request of the arrangement, or any 
party that would be prejudiced by the suspension or revocation, filed 
within 15 days of the mailing of the Secretary's decision, the 
Secretary shall schedule a hearing on such decision by written notice, 
sent by certified or registered mail to the arrangement or party 
requesting such hearing. Such notice shall set forth--
            ``(1) a specific date and time for the hearing, which shall 
        be within the 10-day period commencing 20 days after the date 
        of the mailing of the notice, and
            ``(2) a specific place for the hearing, which shall be in 
        the District of Columbia or in the State and county thereof (or 
        parish or other similar political subdivision thereof) in which 
        is located the arrangement's principal place of business.
The decision as affirmed or modified in such hearing shall constitute 
the final decision of the Secretary, unless such decision is reversed 
in such hearing.''.
    (b) Conforming Amendment to Definition of Plan Sponsor.--Section 
3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is amended by adding at 
the end the following new sentence: ``Such term also includes the 
sponsor (as defined in section 701(5)) of a multiple employer welfare 
arrangement, or a multiple employer health plan (as defined in section 
701(10)), with respect to which there is or has been in effect an 
exemption granted under part 7.''.
    (c) Alternative Means of Distribution of Summary Plan 
Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is amended by 
adding at the end the following new subsection:
    ``(c) The Secretary shall prescribe, as an alternative method for 
distributing summary plan descriptions in order to meet the 
requirements of section 104(b)(1) in the case of multiple employer 
welfare arrangements providing benefits consisting of medical care 
described in section 607(1), a means of distribution of such 
descriptions by participating employers.''.
    (d) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 608 the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Exempted multiple employer welfare arrangements treated as 
                            employee welfare benefit plans and exempt 
                            from certain restrictions on preemption.
``Sec. 703. Exemption procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to exempted 
                            arrangements.
``Sec. 706. Disclosure to participating employers by arrangements 
                            providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of exemption.
``Sec. 710. Review of actions of the Secretary.''.

SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

    (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(6)(A)(ii)) is 
amended by inserting ``, but only, in the case of an arrangement which 
provides medical care described in section 607(1) and with respect to 
which an exemption under part 7 is not in effect,'' before ``to the 
extent not inconsistent with the preceding sections of this title''.
    (b) Cross-Reference.--Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the following new 
subparagraph:
    ``(E) For additional rules relating to exemption from subparagraph 
(A)(ii) of multiple employer welfare arrangements providing medical 
care, see part 7.''.

SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
        ``common control'';
            (2) in clause (iii), by striking ``common control shall not 
        be based on an interest of less than 25 percent'' and inserting 
        ``an interest of greater than 25 percent may not be required as 
        the minimum interest necessary for common control'', and by 
        striking ``and'' at the end,
            (3) by redesignating clause (iv) as clause (v), and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only 1 
        participating employer if, at the time the determination under 
        clause (i) is made, the number of individuals who are employees 
        and former employees of any one participating employer and who 
        are covered under the arrangement is greater than 95 percent of 
        the aggregate number of all individuals who are employees or 
        former employees of participating employers and who are covered 
        under the arrangement.''.

SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i) under or pursuant to one or more collective 
        bargaining agreements,''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
                    ``(C) Clause (i) of subparagraph (A) shall apply 
                only if--
                            ``(i) the plan or other arrangement, and 
                        the employee organization or any other entity 
                        sponsoring the plan or other arrangement, do 
                        not--
                                    ``(I) utilize the services of any 
                                licensed insurance agent or broker for 
                                soliciting or enrolling employers or 
                                individuals as participating employers 
                                or covered individuals under the plan 
                                or other arrangement, or
                                    ``(II) pay a commission or any 
                                other type of compensation to a person 
                                that is related either to the volume or 
                                number of employers or individuals 
                                solicited or enrolled as participating 
                                employers or covered individuals under 
                                the plan or other arrangement, or to 
                                the dollar amount or size of the 
                                contributions made by participating 
                                employers or covered individuals to the 
                                plan or other arrangement,
                            ``(ii) not less than 85 percent of the 
                        covered individuals under the plan or other 
                        arrangement are individuals who--
                                    ``(I) are employed within a 
                                bargaining unit covered by at least one 
                                of the collective bargaining agreements 
                                with a participating employer (or are 
                                covered on the basis of an individual's 
                                employment in such a bargaining unit), 
                                or
                                    ``(II) are present or former 
                                employees of the sponsoring employee 
                                organization, of an employer who is or 
                                was a party to at least one of the 
                                collective bargaining agreements, or of 
                                the plan or other arrangement or a 
                                related plan or arrangement (or are 
                                covered on the basis of such present or 
                                former employment),
                            ``(iii) the plan or other arrangement does 
                        not provide benefits to individuals (other than 
                        individuals described in clause (ii)(II)) who 
                        work outside the standard metropolitan 
                        statistical area in which the sponsoring 
                        employee organization represents employees (or 
                        to individuals (other than individuals 
                        described in clause (ii)(II)) on the basis of 
                        such work by others), except that in the case 
                        of a sponsoring employee organization that 
                        represents employees who work outside of any 
                        standard metropolitan statistical area, this 
                        clause shall be applied by reference to the 
                        State in which the sponsoring organization 
                        represents employees,
                            ``(iv) the employee organization or other 
                        entity sponsoring the plan or other arrangement 
                        certifies to the Secretary each year, in a form 
                        and manner which shall be prescribed in 
                        regulations of the Secretary--
                                    ``(I) that the plan or other 
                                arrangement meets the requirements of 
                                clauses (i), (ii), and (iii), and
                                    ``(II) if, for any year, 10 percent 
                                or more of the covered individuals 
                                under the plan are individuals not 
                                described in subclause (I) or (II) of 
                                clause (ii), the total number of 
                                covered individuals and the total 
                                number of covered individuals not so 
                                described.
                    ``(D)(i) Clause (i) of subparagraph (A) shall not 
                apply to a plan or other arrangement that is 
                established or maintained pursuant to one or more 
                collective bargaining agreements which the National 
                Labor Relations Board determines to have been 
                negotiated or otherwise agreed to in a manner or 
                through conduct which violates section 8(a)(2) of the 
                National Labor Relations Act (29 U.S.C. 158(a)(2)).
                    ``(ii)(I) Whenever a State insurance commissioner 
                has reason to believe that this subparagraph is 
                applicable to part or all of a plan or other 
                arrangement, the State insurance commissioner may file 
                a petition with the National Labor Relations Board for 
                a determination under clause (i), along with sworn 
                written testimony supporting the petition.
                    ``(II) The Board shall give any such petition 
                priority over all other petitions and cases, other than 
                other petitions under subclause (I) or cases given 
                priority under section 10 of the National Labor 
                Relations Act (29 U.S.C. 160).
                    ``(III) The Board shall determine, upon the 
                petition and any response, whether, on the facts before 
                it, the plan or other arrangement was negotiated, 
                created, or otherwise agreed to in a manner or through 
                conduct which violates section 8(a)(2) of the National 
                Labor Relations Act (29 U.S.C. 158(a)(2)). Such 
                determination shall constitute a final determination 
                for purposes of this subparagraph and shall be binding 
                in all Federal or State actions with respect to the 
                status of the plan or other arrangement under this 
                subparagraph.
                    ``(IV) A person aggrieved by the determination of 
                the Board under subclause (III) may obtain review of 
                the determination in any United States court of appeals 
                in the circuit in which the collective bargaining at 
                issue occurred. Commencement of proceedings under this 
                subclause shall not, unless specifically ordered by the 
                court, operate as a stay of any State administrative or 
                judicial action or proceeding related to the status of 
                the plan or other arrangement, except that in no case 
                may the court stay, before the completion of the 
                review, an order which prohibits the enrollment of new 
                individuals into coverage under a plan or 
                arrangement.''.

SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    (a) Employee Leasing Healthcare Arrangement Defined.--Section 3 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new paragraph:
    ``(43) Employee Leasing Healthcare Arrangement.--
            ``(A) In general.--Subject to subparagraph (B), the term 
        `employee leasing healthcare arrangement' means any labor 
        leasing arrangement, staff leasing arrangement, extended 
        employee staffing or supply arrangement, or other arrangement 
        under which--
                    ``(i) one business or other entity (hereinafter in 
                this paragraph referred to as the `lessee'), under a 
                lease or other arrangement entered into with any other 
                business or other entity (hereinafter in this paragraph 
                referred to as the `lessor'), receives from the lessor 
                the services of individuals to be performed under such 
                lease or other arrangement, and
                    ``(ii) benefits consisting of medical care 
                described in section 607(1) are provided to such 
                individuals or such individuals and their dependents as 
                participants and beneficiaries.
            ``(B) Exception.--Such term does not include an arrangement 
        described in subparagraph (A) if, under such arrangement, the 
        lessor retains, both legally and in fact, a complete right of 
        direction and control within the scope of employment over the 
        individuals whose services are supplied under such lease or 
        other arrangement, and such individuals perform a specified 
        function for the lessee which is separate and divisible from 
        the primary business or operations of the lessee.''.
    (b) Treatment of Employee Leasing Healthcare Arrangements as 
Multiple Employer Welfare Arrangements.--Section 3(40) of such Act (29 
U.S.C. 1002(40)) (as amended by the preceding provisions of this title) 
is further amended by adding at the end the following new subparagraph:
    ``(E) The term `multiple employer welfare arrangement' includes any 
employee leasing healthcare arrangement, except that such term does not 
include any employee leasing healthcare arrangement which is a multiple 
employer health plan (as defined in section 701(10)).''.
    (c) Special Rules for Employee Leasing Healthcare Arrangements.--
            (1) In general.--Part 7 of subtitle B of title I of such 
        Act (as added by the preceding provisions of this Act) is 
        amended by adding at the end the following new section:

``SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    ``(a) In General.--The requirements of paragraphs (1), (2), and (3) 
of section 704(b) shall be treated as satisfied in the case of a 
multiple employer welfare arrangement that is an employee leasing 
healthcare arrangement if the application for exemption includes 
information which the Secretary determines to be complete and accurate 
and sufficient to demonstrate that the following requirements are met 
with respect to the arrangement:
            ``(1) 3-year tenure.--The lessor has been in operation for 
        not less than 3 years.
            ``(2) Solicitation restrictions.--Employee leasing services 
        provided under the arrangement are not solicited, advertised, 
        or marketed through licensed insurance agents or brokers acting 
        in such capacity.
            ``(3) Creation of employment relationship.--
                    ``(A) Disclosure statement.--Written notice is 
                provided to each applicant for employment subject to 
                coverage under the arrangement, at the time of 
                application for employment and before commencing 
                coverage under the arrangement, stating that the 
                employer is the lessor under the arrangement.
                    ``(B) Informed consent.--Each such applicant signs 
                a written statement consenting to the employment 
                relationship with the lessor.
                    ``(C) Informed recruitment of lessee's employees.--
                In any case in which the lessor offers employment to an 
                employee of a lessee under the arrangement, the lessor 
                informs each employee in writing that his or her 
                acceptance of employment with the lessor is voluntary 
                and that refusal of such offer will not be deemed to be 
                resignation from or abandonment of current employment.
            ``(4) Requisite employer-employee relationship under 
        arrangement.--Under the employer-employee relationship with the 
        employees of the lessor--
                    ``(A) the lessor retains the ultimate authority to 
                hire, terminate, and reassign such employees,
                    ``(B) the lessor is responsible for the payment of 
                wages, payroll-related taxes, and employee benefits, 
                without regard to payment by the lessee to the lessor 
                for its services,
                    ``(C) the lessor maintains the right of direction 
                and control over its employees, except to the extent 
                that the lessee is responsible for supervision of the 
                work performed consistent with the lessee's 
                responsibility for its product or service, and
                    ``(D) in accordance with section 301(a) of the 
                Labor Management Relations Act, 1947 (29 U.S.C. 
                185(a)), the lessor retains in the absence of an 
                applicable collective bargaining agreement, the right 
                to enter into arbitration and to decide employee 
                grievances, and
                    ``(E) no owner, officer, or director of, or partner 
                in, a lessee is an employee of the lessor, and not more 
                than 10 percent of the individuals covered under the 
                arrangement consist of owners, officers, or directors 
                of, or partners in, such a lessee (or any combination 
                thereof).
    ``(b) Definitions.--For purposes of this section--
            ``(1) Lessor.--The term `lessor' means the business or 
        other entity from which services of individuals are obtained 
        under an employee leasing healthcare arrangement.
            ``(2) Lessee.--The term `lessee' means a business or other 
        entity which receives the services of individuals provided 
        under an employee leasing healthcare arrangement.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act (as amended by the preceding provisions of this 
        title) is further amended by inserting after the item relating 
        to section 710 the following new item:

``Sec. 711. Employee leasing healthcare arrangements.''.

SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS AND EMPLOYEE LEASING HEALTHCARE 
              ARRANGEMENTS.

    (a) Enforcement of Filing Requirements.--Section 502 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is 
amended--
            (1) in subsection (a)(6), by striking ``subsection (c)(2) 
        or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
        subsection (c) or subsection (i) or (l)''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
    ``(4) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of such person's failure or refusal 
to file the information required to be filed with the Secretary under 
section 101(e).''.
    (b) Actions by States in Federal Court.--Section 502(a) of such Act 
(29 U.S.C. 1132(a)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``, or''; and
            (3) by adding at the end the following:
            ``(7) by a State official having authority under the law of 
        such State to enforce the laws of such State regulating 
        insurance, to enjoin any act or practice which violates any 
        provision of part 7 which such State has the power to enforce 
        under part 7.''.
    (c) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of such Act (29 U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, an arrangement established or 
maintained for the purpose of offering or providing any benefit 
described in section 3(1) to employees or their beneficiaries as being 
a multiple employer welfare arrangement granted an exemption under part 
7, as being an employee leasing healthcare arrangement under such an 
exemption, or as having been established or maintained under or 
pursuant to a collective bargaining agreement shall, upon conviction, 
be imprisoned not more than five years, be fined under title 18, United 
States Code, or both.''.
    (d) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(m)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of a multiple 
employer welfare arrangement providing benefits consisting of medical 
care described in section 607(1) that--
            ``(A) is not licensed, registered, or otherwise approved 
        under the insurance laws of the States in which the arrangement 
        offers or provides benefits, or
            ``(B) is not operating in accordance with the terms of an 
        exemption granted by the Secretary under part 7,
a district court of the United States shall enter an order requiring 
that the arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of a multiple 
employer welfare arrangement if the arrangement shows that it--
            ``(A) is fully insured, within the meaning of section 
        701(9),
            ``(B) is licensed, registered, or otherwise approved in 
        each State in which it offers or provides benefits, except to 
        the extent that such State does not require licensing, 
        registration, or approval of fully insured multiple employer 
        welfare arrangements, and
            ``(C) with respect to each such State, is operating in 
        accordance with applicable State insurance laws that are not 
        superseded under section 514.
    ``(3) The court may grant such additional equitable or remedial 
relief, including any relief available under this title, as it deems 
necessary to protect the interests of the public and of persons having 
claims for benefits against the arrangement.''.
    (e) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each multiple 
employer welfare arrangement to which this section applies and which 
provides benefits consisting of medical care described in section 
607(1) shall require the operating committee or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the arrangement.''.

SEC. 1217. FILING REQUIREMENTS FOR HEALTH BENEFIT MULTIPLE EMPLOYER 
              WELFARE ARRANGEMENTS.

    Section 101 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1021) is amended--
            (1) by redesignating subsection (e) as subsection (f); and
            (2) by inserting after subsection (d) the following new 
        subsection:
    ``(e)(1) Each multiple employer welfare arrangement shall file with 
the Secretary a registration statement described in paragraph (2) 
within 60 days before commencing operations (in the case of an 
arrangement commencing operations on or after January 1, 1994) and no 
later than February 15 of each year (in the case of an arrangement in 
operation since the beginning of such year), unless, as of the date by 
which such filing otherwise must be made, such arrangement provides no 
benefits consisting of medical care described in section 607(1).
    ``(2) Each registration statement--
            ``(A) shall be filed in such form, and contain such 
        information concerning the multiple employer welfare 
        arrangement and any persons involved in its operation 
        (including whether the arrangement is fully insured), as shall 
        be provided in regulations which shall be prescribed by the 
        Secretary, and
            ``(B) if the arrangement is not fully insured, shall 
        contain a certification that copies of such registration 
        statement have been transmitted by certified mail to--
                    ``(i) in the case of an arrangement with respect to 
                which an exemption under part 7 is in effect, the State 
                insurance commissioner of the domicile State of such 
                arrangement, or
                    ``(ii) in the case of an arrangement which is not 
                so exempt, the State insurance commissioner of each 
                State in which the arrangement is located.
    ``(3) The person or persons responsible for filing the annual 
registration statement are--
            ``(A) the trustee or trustees so designated by the terms of 
        the instrument under which the multiple employer welfare 
        arrangement is established or maintained, or
            ``(B) in the case of a multiple employer welfare 
        arrangement for which the trustee or trustees cannot be 
        identified, or upon the failure of the trustee or trustees of 
        an arrangement to file, the person or persons actually 
        responsible for the acquisition, disposition, control, or 
        management of the cash or property of the arrangement, 
        irrespective of whether such acquisition, disposition, control, 
        or management is exercised directly by such person or persons 
        or through an agent designated by such person or persons.
    ``(4) Any agreement entered into under section 506(c) with a State 
as the primary domicile State with respect to any multiple employer 
welfare arrangement shall provide for simultaneous filings of reports 
required under this subsection with the Secretary and with the State 
insurance commissioner of such State.''.

SEC. 1218. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(c) Responsibility With Respect to Multiple Employer Welfare 
Arrangements.--
            ``(1) State enforcement.--
                    ``(A) Agreements with states.--A State may enter 
                into an agreement with the Secretary for delegation to 
                the State of some or all of the Secretary's authority 
                under sections 502 and 504 to enforce the provisions of 
                this title applicable to multiple employer welfare 
                arrangements with respect to which an exemption under 
                part 7 is or has been in effect. The Secretary shall 
                enter into the agreement if the Secretary determines 
                that the delegation provided for therein would not 
                result in a lower level or quality of enforcement of 
                the provisions of this title.
                    ``(B) Delegations.--Any department, agency, or 
                instrumentality of a State to which authority is 
                delegated pursuant to an agreement entered into under 
                this paragraph may, if authorized under State law and 
                to the extent consistent with such agreement, exercise 
                the powers of the Secretary under this title which 
                relate to such authority.
                    ``(C) Concurrent authority of the secretary.--If 
                the Secretary delegates authority to a State in an 
                agreement entered into under subparagraph (A), the 
                Secretary may continue to exercise such authority 
                concurrently with the State.
                    ``(D) Recognition of primary domicile state.--In 
                entering into any agreement with a State under 
                subparagraph (A), the Secretary shall ensure that, as a 
                result of such agreement and all other agreements 
                entered into under subparagraph (A), only one State 
                will be recognized, with respect to any particular 
                multiple employer welfare arrangement, as the primary 
                domicile State to which authority has been delegated 
                pursuant to such agreements.
            ``(2) Assistance to states.--The Secretary shall--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including, but not limited to, coordinating Federal and 
                State efforts through the establishment of cooperative 
                agreements with appropriate State agencies under which 
                the Pension and Welfare Benefits Administration keeps 
                the States informed of the status of its cases and 
                makes available to the States information obtained by 
                it,
                    ``(B) provide continuing technical assistance to 
                the States with respect to issues involving multiple 
                employer welfare arrangements and this Act,
                    ``(C) assist the States in obtaining from the 
                Office of Regulations and Interpretations timely and 
                complete responses to requests for advisory opinions on 
                issues described in subparagraph (B), and
                    ``(D) distribute copies of all advisory opinions 
                described in subparagraph (C) to the State insurance 
                commissioner of each State.''.

SEC. 1219. EFFECTIVE DATE; TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by this part shall take 
effect January 1, 1994, except that the Secretary of Labor may issue 
regulations before such date under such amendments. The Secretary shall 
issue all regulations necessary to carry out the amendments made by 
this title before the effective date thereof.
    (b) Transitional Rules.--If the sponsor of a multiple employer 
welfare arrangement which, as of January 1, 1994, provides benefits 
consisting of medical care described in section 607(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1167(1)) files with 
the Secretary of Labor an application for an exemption under part 7 of 
subtitle B of title I of such Act within 180 days after such date and 
the Secretary has not, as of 90 days after receipt of such application, 
found such application to be materially deficient, section 514(b)(6)(A) 
of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply with respect to 
such arrangement during the 18-month period following such date. If the 
Secretary determines, at any time after the date of enactment of this 
Act, that any such exclusion from coverage under the provisions of such 
section 514(b)(6)(A) of such Act of a multiple employer welfare 
arrangement would be detrimental to the interests of individuals 
covered under such arrangement, such exclusion shall cease as of the 
date of the determination. Any determination made by the Secretary 
under this subsection shall be in the Secretary's sole discretion.

PART 3--ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS PROVIDING BASIC 
                            HEALTH BENEFITS

SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR GEOGRAPHIC LOCATION 
              REQUIREMENT FOR TAX EXEMPT TRUST STATUS.

    (a) In General.--Paragraph (9) of section 501(c) of the Internal 
Revenue Code of 1986 (relating to exempt organizations) is amended--
            (1) by inserting ``(A)'' after ``(9)''; and
            (2) by adding at the end the following:
            ``(B) Any determination of whether a multiple employer 
        health plan (as defined in section 701(10) of the Employee 
        Retirement Income Security Act of 1974) or an insured multiple 
        employer health plan (as defined in section 701(11) of such 
        Act) is a voluntary employees' beneficiary association meeting 
        the requirements of this paragraph shall be made without regard 
        to any determination of commonality of interest or geographic 
        location if--
                    ``(i) such plan provides at least standard coverage 
                (consistent with section 102(c) of the Affordable 
                Health Care Now Act of 1993), and
                    ``(ii) in the case of an insured multiple employer 
                health plan, it meets the requirements enforcible under 
                section 514(b)(6)(B)(i) of the Employee Retirement 
                Income Security Act of 1974 to the extent not preempted 
                by section 1202 of the Affordable Health Care Now Act 
                of 1993.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to determinations made on or after January 1, 1994.

   PART 4--SIMPLIFYING FILING OF REPORTS FOR EMPLOYERS COVERED UNDER 
                 INSURED MULTIPLE EMPLOYER HEALTH PLANS

SEC. 1231. SINGLE ANNUAL FILING FOR ALL EMPLOYERS COVERED UNDER AN 
              INSURED MULTIPLE EMPLOYER HEALTH PLAN.

    (a) In General.--Section 110 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1030), as amended by section 1211(c) of 
this subtitle, is amended by adding at the end the following new 
subsection:
    ``(d) The Secretary shall prescribe by regulation or otherwise an 
alternative method providing for the filing of a single annual report 
(as referred to in section 104(a)(1)(A)) with respect to all employers 
who are covered under the same insured multiple employer health plan 
(as defined in section 701(11)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act. The Secretary of 
Labor shall prescribe the alternative method referred to in section 
110(d) of the Employee Retirement Income Security Act of 1974, as added 
by such amendment, within 90 days after the date of the enactment of 
this Act.

          PART 5--COMPLIANCE WITH COVERAGE OPTION REQUIREMENTS

SEC. 1241. COMPLIANCE WITH COVERAGE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    (a) Compliance With Applicable Requirements Through Multiemployer 
Plans.--In any case in which an eligible employee is, for any plan 
year, a participant in a group health plan which is a multiemployer 
plan, the requirements of section 1001(a) shall be deemed to be met 
with respect to such employee for such plan year if the employer 
requirements of subsection (c) are met with respect to the eligible 
employee, irrespective of whether, or to what extent, the employer 
makes employer contributions on behalf of the eligible employee.
    (b) Compliance With Applicable Requirements Through Other Multiple 
Employer Health Arrangements.--
            (1) In general.--In any case in which an employer is, for 
        any plan year, a participating employer (as defined in 
        paragraph (3)) in an exempted multiple employer health plan or 
        an insured multiple employer health plan, the requirements of 
        section 1001(a) shall be deemed to be met (and the ERISA 
        requirements of paragraph (2) shall be deemed to be met by the 
        employer) with respect to an eligible employee of the employer 
        if--
                    (A) the employer requirements of subsection (c) are 
                met with respect to the eligible employee, and
                    (B) the applicable ERISA requirements of paragraph 
                (2) are met by the plan with respect to the plan,
        irrespective of whether, or to what extent, the employer makes 
        employer contributions on behalf of the eligible employee.
            (2) Applicable erisa requirements.--The applicable ERISA 
        requirements of this paragraph are the requirements of--
                    (A) part 1 of subtitle B of title I of the Employee 
                Retirement Income Security Act of 1974 (relating to 
                reporting and disclosure),
                    (B) section 503 of such Act (relating to claims 
                procedure), and
                    (C) part 6 of subtitle B of such title I (relating 
                to group health plans),
        to the extent that such requirements relate to employers as 
        plan sponsors or plan administrators.
            (3) Participating employer.--In this subsection, the term 
        ``participating employer'' means, in connection with an 
        exempted multiple employer health plan or an insured multiple 
        employer health plan, any employer if any of its employees, or 
        any of the dependents of its employees, are or were covered 
        under such plan in connection with the employment of the 
        employees.
    (c) Employer Requirements.--The employer requirements of this 
subsection are met under a plan with respect to an eligible employee 
if--
            (1) the employee is eligible under the plan to elect 
        coverage on an annual basis and is provided a reasonable 
        opportunity to make the election in such form and manner and at 
        such times as are provided by the plan,
            (2) subject to section 1001(c), such coverage includes at 
        least the standard coverage (consistent with section 1102(c)),
            (3) the employer facilitates collection of any employee 
        contributions under the plan and permits the employee to elect 
        to have employee contributions under the plan collected through 
        payroll deduction, and
            (4) in the case of a plan to which part 1 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974 
        does not otherwise apply, the employer provides to the employee 
        a summary plan description described in section 102(a)(1) of 
        such Act in the form and manner and at such times as are 
        required under such part 1 with respect to employee welfare 
        benefit plans.

                 Subtitle D--Health Deduction Fairness

SEC. 1301. PERMANENT EXTENSION AND INCREASE IN HEALTH INSURANCE TAX 
              DEDUCTION FOR SELF-EMPLOYED INDIVIDUALS.

    (a) Permanent Extension of Deduction.--
            (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 this subsection 
        shall apply to taxable years beginning after December 31, 1993.
    (b) Increase in Amount of Deduction; Insurance Purchased Must Meet 
Certain Standards.--
            (1) Increase in amount of deduction.--Paragraph (1) of 
        section 162(l) of such Code is amended by striking ``25 percent 
        of'' and inserting ``100 percent (50 percent in the case of 
        taxable years beginning in 1996 or 1997) of''.
            (2) Insurance purchased must meet certain standards.--
        Paragraph (2) of section 162(l) of such Code is amended by 
        adding at the end thereof the following new subparagraph:
                    ``(C) Insurance must meet certain standards.--
                Paragraph (1) shall apply only to insurance which is--
                            ``(i) a MedAccess plan (as defined in 
                        section 1102(a)(2) of such Act), or
                            ``(ii) a health plan which provides at 
                        least the standard coverage (consistent with 
                        section 1102(c) of the Affordable Health Care 
                        Now Act of 1993) with substantial cost-sharing 
                        (as defined for purposes of section 
                        1102(a)(1)(A)(i) of such Act).
                    ``(D) Treatment of group health plans.--For 
                purposes of this subsection, an amount paid into a 
                multiple employer health plan (as defined in section 
                701(10) of the Employee Retirement Income Security Act 
                of 1974) shall be deemed to be an amount paid for 
                insurance which constitutes medical care.''
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1993.

SEC. 1302. DEDUCTION OF HEALTH INSURANCE PREMIUMS FOR CERTAIN 
              PREVIOUSLY UNINSURED INDIVIDUALS.

    (a) In General.--Section 213 of the Internal Revenue Code of 1986 
(relating to medical, dental, etc., expenses) is amended by adding at 
the end thereof the following new subsection:
    ``(f) Deduction for Certain Health Insurance Costs Determined 
Without Regard to Adjusted Gross Income Threshold.--
            ``(1) In general.--Subsection (a) shall be applied without 
        regard to the limitation based on adjusted gross income in the 
        case of the applicable percentage of the amounts paid for 
        insurance referred to in section 162(l)(2)(C) (and including 
        payments referred to in section 162(l)(2)(D)).
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 25 percent for taxable years beginning in 
                1994 or 1995,
                    ``(B) 50 percent for taxable years beginning in 
                1996 or 1997, and
                    ``(C) 100 percent for taxable years beginning after 
                1997.
            ``(3) Deduction not allowed to individuals eligible for 
        employer-subsidized coverage.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any individual--
                            ``(i) who is eligible to participate in any 
                        subsidized health plan maintained by an 
                        employer of such individual or the spouse of 
                        such individual, or
                            ``(ii) who is (or whose spouse is) a member 
                        of a subsidized class of employees of an 
                        employer.
                    ``(B) Subsidized class.--For purposes of 
                subparagraph (A), an individual is a member of a 
                subsidized class of employees of an employer if, at any 
                time during the 3 calendar years ending with or within 
                the taxable year, any member of such class was eligible 
                to participate in any subsidized health plan maintained 
                by such employer.
                    ``(C) Special rules.--
                            ``(i) Controlled groups.--All persons 
                        treated as a single employer under subsection 
                        (a) or (b) of section 52 or subsection (m) or 
                        (o) of section 414 shall be treated as a single 
                        employer for purposes of subparagraph (B).
                            ``(ii) Classes.--Classes of employees shall 
                        be determined under regulations prescribed by 
                        the Secretary based on such factors as the 
                        Secretary determines appropriate to carry out 
                        the purposes of this subsection.
            ``(4) Coordination with deduction for other amounts.--
        Amounts allowable as a deduction under subsection (a) by reason 
        of this subsection shall not be taken into account in 
        determining the deduction under subsection (a) for other 
        amounts.
            ``(5) Subsection not to apply to individuals eligible for 
        medicare.--This subsection shall not apply to amount paid for 
        insurance covering an individual who is eligible for benefits 
        under title XVIII of the Social Security Act.''
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (15) the following new paragraph:
            ``(16) Costs of certain health insurance.--The deduction 
        allowed by section 213 to the extent allowable by reason of 
        section 213(f).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

        Subtitle E--Improved Access to Community Health Services

   PART 1--INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT HEALTH 
                                CENTERS

SEC. 1401. GRANT PROGRAM TO PROMOTE PRIMARY HEALTH CARE SERVICES FOR 
              UNDERSERVED POPULATIONS.

    (a) Authorization.--The Secretary of Health and Human Services 
shall provide for a program of grants to migrant and community health 
centers (receiving grants or contracts under section 329, 330, or 340 
of the Public Health Service Act) in order to promote the provision of 
primary health care services for underserved individuals. Such grants 
may be used--
            (1) to promote the provision of off-site services (through 
        means such as mobile medical clinics);
            (2) to improve birth outcomes in areas with high infant 
        mortality and morbidity;
            (3) to establish primary care clinics in areas identified 
        as in need of such clinics; and
            (4) for recruitment and training costs of necessary 
        providers and operating costs for unreimbursed services.
    (b) Conditions.--(1) Grants under this subsection shall only be 
made upon application, approved by the Secretary.
    (2) The amount of grants made under this section shall be 
determined by the Secretary.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated--
            (1) in fiscal year 1994, $100,000,000,
            (2) in fiscal year 1995, $200,000,000,
            (3) in fiscal year 1996, $300,000,000,
            (4) in fiscal year 1997, $400,000,000, and
            (5) in fiscal year 1998, $500,000,000,
to carry out this section. Of the amounts appropriated each fiscal year 
under this section, at least 10 percent shall be used for grants 
described in subsection (a)(1) and at least 10 percent shall be used 
for grants described in subsection (a)(2). The Secretary may use not to 
exceed 50 percent of the amounts appropriated to carry out this section 
for the purpose of making new grants or contracts under sections 329, 
330, and 340 of the Public Health Service Act.
    (d) Study and Report.--The Secretary shall conduct a study of the 
impact of the grants made under this section to migrant and community 
health centers on access to health care, birth outcomes, and the use of 
emergency room services. Not later than 2 years after the date of the 
enactment of this Act, the Secretary shall submit to Congress a report 
on such study and on recommendations for changes in the programs under 
this section in order to promote the appropriate use of cost-effective 
outpatient services.

   PART 2--GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF SERVICES

SEC. 1411. PROJECTS FOR COORDINATING DELIVERY OF OUTPATIENT PRIMARY 
              HEALTH SERVICES.

    Part D of title III of the Public Health Service Act (42 U.S.C. 
254b et seq.) is amended by adding at the end the following new 
subpart:

                  ``Subpart VII--Delivery of Services

            ``projects for coordinating delivery of services

    ``Sec. 340E. (a) Authority for Grants.--
            ``(1) In general.--The Secretary may make grants to public 
        and nonprofit private entities to carry out demonstration 
        projects for the purpose of increasing access to outpatient 
        primary health services in geographic areas described in 
        subsection (b) through coordinating the delivery of such 
        services under Federal, State, local, and private programs.
            ``(2) Requirement regarding plan.--The Secretary may make a 
        grant under paragraph (1) only if--
                    ``(A) the applicant involved has received a grant 
                under subsection (l) and the Secretary has approved the 
                plan developed with such grant; and
                    ``(B) the applicant agrees to carry out the project 
                under paragraph (1) in accordance with the plan.
    ``(b) Qualified Health Service Areas.--
            ``(1) In general.--A geographic area described in this 
        subsection is a geographic area that--
                    ``(A) is a rational area for the delivery of health 
                services;
                    ``(B) has a population of not more than 500,000 
                individuals; and
                    ``(C)(i) has been designated by the Secretary as an 
                area with a shortage of personal health services; or
                    ``(ii) has a significant number of individuals who 
                have low incomes or who have insufficient insurance 
                regarding health care.
            ``(2) Authority regarding multiple political 
        subdivisions.--The Secretary shall make a determination of 
        whether a geographic area is a geographic area described in 
        paragraph (1) without regard to whether the area is a political 
        subdivision, without regard to whether the area is located in 2 
        or more political subdivisions or States, and without regard to 
        whether the area encompasses 2 or more political subdivisions.
    ``(c) Preferences in Making Grants.--In making grants under 
subsection (a), the Secretary shall give preference to applicants 
demonstrating that, with respect to the outpatient primary health 
services that will be the subject of the project conducted by the 
applicant under such subsection--
            ``(1)(A) the project will result in the reduction of 
        administrative expenses associated with such services by 
        increasing the efficiency of the administrative processes of 
        the providers participating in the project, and (B) the 
        resulting savings will be expended for the direct provision of 
        such services for the designated population; or
            ``(2) the services that will be the subject of the project 
        will be provided in facilities that are underutilized.
    ``(d) Activities of Project Must Serve Designated Population.--The 
Secretary may make a grant under subsection (a) to an applicant only if 
the applicant demonstrates that carrying out the project under such 
subsection will increase access to outpatient primary health services 
for a significant segment of the designated population.
    ``(e)  Matching Funds.--
            ``(1) In general.--With respect to the costs of the project 
        to be carried out under subsection (a) by an applicant, the 
        Secretary may make a grant under such subsection only if the 
        applicant agrees to make available (directly or through 
        donations from public or private entities) non-Federal 
        contributions toward such costs in an amount that is not less 
        than 50 percent of such costs.
            ``(2) Determination of amount contributed.--Non-Federal 
        contributions required in paragraph (1) may be in cash or in 
        kind, fairly evaluated, including plant, equipment, or 
        services. Amounts provided by the Federal Government, or 
        services assisted or subsidized to any significant extent by 
        the Federal Government, may not be included in determining the 
        amount of such non-Federal contributions.
    ``(f) Certain Limitations Regarding Grants.--
            ``(1) Provision of health services; construction of 
        facilities.--The Secretary may make a grant under subsection 
        (a) only if the applicant involved agrees that the grant will 
        not be expended for the direct provision of any health service 
        or for the construction or renovation of facilities.
            ``(2) Duration and amount of grant.--The period during 
        which payments are made for a project under subsection (a) may 
        not exceed 4 years, and the aggregate amount of such payments 
        for the period may not exceed $200,000. The provision of such 
        payments shall be subject to annual approval by the Secretary 
        of the payments and subject to the availability of 
        appropriations for the fiscal year involved to make the 
        payments.
            ``(3) Financial capacity for continuation of project after 
        termination of grant.--The Secretary may make a grant under 
        subsection (a) only if the Secretary determines that there is a 
        reasonable basis for believing that, after termination of 
        payments under such subsection pursuant to paragraph (2), the 
        project under such subsection will have the financial capacity 
        to continue operating.
    ``(g) Agreements Among Participants in Projects.--
            ``(1) Required participants.--The Secretary may make a 
        grant under subsection (a) only if the applicant for the grant 
        has, for purposes of carrying out a project under such 
        subsection, entered into agreements with--
                    ``(A) the chief public health officers, and the 
                chief health officers for the elementary and secondary 
                schools, of each of the political subdivisions of the 
                qualified health service area in which the project 
                under such subsection is to be carried out (or, in the 
                case of a political subdivision that does not have such 
                an official, with another appropriate official of such 
                subdivision);
                    ``(B) each hospital in the qualified health service 
                area;
                    ``(C) representatives of entities in such area that 
                provide outpatient primary health services under 
                Federal, State, local, or private programs;
                    ``(D) representatives of businesses in such area, 
                including small businesses; and
                    ``(E) representatives of nonprofit private entities 
                in such area.
            ``(2) Optional participants.--With respect to compliance 
        with this section, a grantee under subsection (a) may, for 
        purposes of carrying out a project under such subsection, enter 
        into such agreements with public and private entities in the 
        qualified health service area involved (in addition to the 
        entities specified in paragraph (1)) as the grantee may elect.
    ``(h) Expenditures of Grant.--With respect to a project under 
subsection (a), the purposes for which a grant under such subsection 
may be expended include (but are not limited to) expenditures to 
increase the efficiency of the administrative processes of providers 
participating in the project, paying the costs of hiring and 
compensating staff, obtaining computers and other equipment (including 
vehicles to transport individuals to programs providing outpatient 
primary health services), and developing and operating provider 
networks.
    ``(i) Maintenance of Effort.--In the case of services and 
populations that are the subject of a project under subsection (a), the 
Secretary may make such a grant for a fiscal year only if the applicant 
involved agrees that the applicant, and each entity making an agreement 
under subsection (g), will maintain expenditures of non-Federal amounts 
for such services and populations at a level that is not less than the 
level of such expenditures maintained by the applicant and the entity, 
respectively, for the fiscal year preceding the first fiscal year for 
which the applicant receives such a grant.
    ``(j) Reports to Secretary.--The Secretary may make a grant under 
subsection (a) only if the applicant involved agrees to submit to the 
Secretary such reports on the project carried out under such subsection 
as the Secretary may require.
    ``(k) Evaluations and Dissemination of Information.--The Secretary 
shall provide for evaluations of projects carried out under subsection 
(a), and for the collection and dissemination of information developed 
as a result of such projects and as a result of similar projects.
    ``(l) Planning Grants.--
            ``(1) In general.--The Secretary may make grants to public 
        and nonprofit private entities for the purpose of developing 
        plans to carry out projects under subsection (a). Such a grant 
        may be made only if the applicant involved submits to the 
        Secretary information--
                    ``(A) providing a detailed statement of the 
                proposal of the applicant for carrying out the project;
                    ``(B) identifying the geographic area in which the 
                project is to be carried out; and
                    ``(C) demonstrating that the area is a qualified 
                health service area and that the proposal otherwise is 
                in accordance with the requirements established in this 
                section for the receipt of a grant under subsection 
                (a).
            ``(2) Duration and amount of grant.--The period during 
        which payments are made under paragraph (1) for the development 
        of a plan under such paragraph may not exceed 1 year, and the 
        amount of such payments may not exceed $100,000.
    ``(m) Application for Grant.--The Secretary may make a grant under 
subsection (a) or (l) only if the applicant for the grant submits an 
application to the Secretary that--
            ``(1) contains any agreements, assurances, and information 
        required in this section with respect to the grant; and
            ``(2) is in such form, is made in such manner, and contains 
        such other agreements, assurances, and information as the 
        Secretary determines to be necessary to carry out the purpose 
        for which the grant is to be provided.
    ``(n) Definitions.--For purposes of this section:
            ``(1) The term `designated population' means individuals 
        described in subsection (b)(1)(C)(ii).
            ``(2) The term `primary health services' includes 
        preventive health services.
            ``(3) The term `qualified health service area' means a 
        geographic area described in subsection (b).
    ``(o) Authorization of Appropriations.--
            ``(1) Planning for projects.--For the purpose of grants 
        under subsection (l), there is authorized to be appropriated 
        $5,000,000 for fiscal year 1994, to remain available until 
        expended.
            ``(2) Operation of projects.--For the purpose of grants 
        under subsection (a), there is authorized to be appropriated an 
        aggregate $10,000,000 for the fiscal years 1995 through 
        1998.''.

          Subtitle F--Improved Access to Rural Health Services

 PART 1--ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS UNDER 
                                MEDICARE

SEC. 1501. RURAL EMERGENCY ACCESS CARE HOSPITALS DESCRIBED.

    Section 1861 of the Social Security Act (42 U.S.C. 1395x) is 
amended by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and negative operating losses, and 
        the closure of the facility would limit the access of 
        individuals residing in the facility's service area to 
        emergency services.
            ``(D) The facility has entered into (or plans to enter 
        into), with a hospital with a participation agreement in effect 
        under section 1866(a), and under such agreement the hospital 
        shall accept patients transferred to the hospital from the 
        facility and receives data from and transmits data to the 
        facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietician, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part-time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' was deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'), 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means medical and other health services furnished by a rural emergency 
access care hospital.''.

SEC. 1502. COVERAGE OF AND PAYMENT FOR SERVICES.

    (a) Coverage Under Part B.--Section 1832(a)(2) of the Social 
Security Act (42 U.S.C. 1395k(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (I);
            (2) by striking the period at the end of subparagraph (J) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
    (b) Payment Based on Payment for Outpatient Rural Primary Care 
Hospital Services.--
            (1) In general.--Section 1833(a)(6) of the Social Security 
        Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
        ``services,'' and inserting ``services and rural emergency 
        access care hospital services,''.
            (2) Payment methodology described.--Section 1834(g) of such 
        Act (42 U.S.C. 1395m(g)) is amended--
                    (A) in the heading, by striking ``Services'' and 
                inserting ``Services and Rural Emergency Access Care 
                Hospital Services''; and
                    (B) in paragraph (1), by striking ``during a year 
                before 1993'' and inserting ``during a year before the 
                prospective payment system described in paragraph (2) 
                is in effect'';
                    (C) in paragraph (1), by adding at the end the 
                following:
        ``The amount of payment shall be determined under either method 
        without regard to the amount of the customary or other 
        charge.'';
                    (D) in paragraph (2), by striking ``January 1, 
                1993,'' and inserting ``January 1, 1996,''; and
                    (E) by adding at the end the following new 
                paragraph:
            ``(3) Application of methods to payment for rural emergency 
        access care hospital services.--The amount of payment for rural 
        emergency access care hospital services provided during a year 
        shall be determined using the applicable method provided under 
        this subsection for determining payment for outpatient rural 
        primary care hospital services during the year.''.

SEC. 1503. EFFECTIVE DATE.

    The amendments made by sections 1501 and 1502 shall apply to fiscal 
years beginning on or after October 1, 1993.

            PART 2--RURAL MEDICAL EMERGENCIES AIR TRANSPORT

SEC. 1511. GRANTS TO STATES REGARDING AIRCRAFT FOR TRANSPORTING RURAL 
              VICTIMS OF MEDICAL EMERGENCIES.

    Part E of title XII of the Public Health Service Act (42 U.S.C. 
300d-51 et seq.) is amended by adding at the end thereof the following 
new section:

``SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL VICTIMS OF MEDICAL 
              EMERGENCIES.

    ``(a) In General.--The Secretary shall make grants to States to 
assist such States in the creation or enhancement of air medical 
transport systems that provide victims of medical emergencies in rural 
areas with access to treatments for the injuries or other conditions 
resulting from such emergencies.
    ``(b) Application and Plan.--
            ``(1) Application.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application in such form, made in such manner, and 
        containing such agreements, assurances, and information, 
        including a State plan as required in paragraph (2), as the 
        Secretary determines to be necessary to carry out this section.
            ``(2) State plan.--An application submitted under paragraph 
        (1) shall contain a State plan that shall--
                    ``(A) describe the intended uses of the grant 
                proceeds and the geographic areas to be served;
                    ``(B) demonstrates that the geographic areas to be 
                served, as described under subparagraph (A), are rural 
                in nature;
                    ``(C) demonstrate that there is a lack of 
                facilities available and equipped to deliver advanced 
                levels of medical care in the geographic areas to be 
                served;
                    ``(D) demonstrate that in utilizing the grant 
                proceeds for the establishment or enhancement of air 
                medical services the State would be making a cost-
                effective improvement to existing ground-based or air 
                emergency medical service systems;
                    ``(E) demonstrate that the State will not utilize 
                the grant proceeds to duplicate the capabilities of 
                existing air medical systems that are effectively 
                meeting the emergency medical needs of the populations 
                they serve;
                    ``(F) demonstrate that in utilizing the grant 
                proceeds the State is likely to achieve a reduction in 
                the morbidity and mortality rates of the areas to be 
                served, as determined by the Secretary;
                    ``(G) demonstrate that the State, in utilizing the 
                grant proceeds, will--
                            ``(i) maintain the expenditures of the 
                        State for air and ground medical transport 
                        systems at a level equal to not less than the 
                        level of such expenditures maintained by the 
                        State for the fiscal year preceding the fiscal 
                        year for which the grant is received; and
                            ``(ii) ensure that recipients of direct 
                        financial assistance from the State under such 
                        grant will maintain expenditures of such 
                        recipients for such systems at a level at least 
                        equal to the level of such expenditures 
                        maintained by such recipients for the fiscal 
                        year preceding the fiscal year for which the 
                        financial assistance is received;
                    ``(H) demonstrate that persons experienced in the 
                field of air medical service delivery were consulted in 
                the preparation of the State plan;
                    ``(I) contain such other information as the 
                Secretary may determine appropriate.
    ``(c) Considerations in Awarding Grants.--In determining whether to 
award a grant to a State under this section, the Secretary shall--
            ``(1) consider the rural nature of the areas to be served 
        with the grant proceeds and the services to be provided with 
        such proceeds, as identified in the State plan submitted under 
        subsection (b); and
            ``(2) give preference to States with State plans that 
        demonstrate an effective integration of the proposed air 
        medical transport systems into a comprehensive network or plan 
        for regional or statewide emergency medical service delivery.
    ``(d) State Administration and Use of Grant.--
            ``(1) In general.--The Secretary may not make a grant to a 
        State under subsection (a) unless the State agrees that such 
        grant will be administered by the State agency with principal 
        responsibility for carrying out programs regarding the 
        provision of medical services to victims of medical emergencies 
        or trauma.
            ``(2) Permitted uses.--A State may use amounts received 
        under a grant awarded under this section to award subgrants to 
        public and private entities operating within the State.
            ``(3) Opportunity for public comment.--The Secretary may 
        not make a grant to a State under subsection (a) unless that 
        State agrees that, in developing and carrying out the State 
        plan under subsection (b)(2), the State will provide public 
        notice with respect to the plan (including any revisions 
        thereto) and facilitate comments from interested persons.
    ``(e) Number of Grants.--The Secretary shall award grants under 
this section to not less than 7 States.
    ``(f) Reports.--
            ``(1) Requirement.--A State that receives a grant under 
        this section shall annually (during each year in which the 
        grant proceeds are used) prepare and submit to the Secretary a 
        report that shall contain--
                    ``(A) a description of the manner in which the 
                grant proceeds were utilized;
                    ``(B) a description of the effectiveness of the air 
                medical transport programs assisted with grant 
                proceeds; and
                    ``(C) such other information as the Secretary may 
                require.
            ``(2) Termination of funding.--In reviewing reports 
        submitted under paragraph (1), if the Secretary determines that 
        a State is not using amounts provided under a grant awarded 
        under this section in accordance with the State plan submitted 
        by the State under subsection (b), the Secretary may terminate 
        the payment of amounts under such grant to the State until such 
        time as the Secretary determines that the State comes into 
        compliance with such plan.
    ``(g) Definition.--As used in this section, the term `rural areas' 
means geographic areas that are located outside of standard 
metropolitan statistical areas, as identified by the Secretary.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated to make grants under this section, $15,000,000 for fiscal 
year 1994, and such sums as may be necessary for each of the fiscal 
years 1995 and 1996.''.

             PART 3--EMERGENCY MEDICAL SERVICES AMENDMENTS

SEC. 1521. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL SERVICES.

    Title XII of the Public Health Service Act (42 U.S.C. 300d et seq.) 
is amended--
            (1) in the heading for the title, by striking ``TRAUMA 
        CARE'' and inserting ``EMERGENCY MEDICAL SERVICES'';
            (2) in the heading for part A, by striking ``General'' and 
        all that follows and inserting ``General Authorities and 
        Duties''; and
            (3) by amending section 1201 to read as follows:

``SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL SERVICES.

    ``(a) In General.--The Secretary shall establish an office to be 
known as the Office of Emergency Medical Services, which shall be 
headed by a director appointed by the Secretary. The Secretary shall 
carry out this title acting through the Director of such Office.
    ``(b) General Authorities and Duties.--With respect to emergency 
medical services (including trauma care), the Secretary shall--
            ``(1) conduct and support research, training, evaluations, 
        and demonstration projects;
            ``(2) foster the development of appropriate, modern systems 
        of such services through the sharing of information among 
        agencies and individuals involved in the study and provision of 
        such services;
            ``(3) sponsor workshops and conferences;
            ``(4) as appropriate, disseminate to public and private 
        entities information obtained in carrying out paragraphs (1) 
        through (4);
            ``(5) provide technical assistance to State and local 
        agencies;
            ``(6) coordinate activities of the Department of Health and 
        Human Services; and
            ``(7) as appropriate, coordinate activities of such 
        Department with activities of other Federal agencies.
    ``(c) Certain Requirements.--With respect to emergency medical 
services (including trauma care), the Secretary shall ensure that 
activities under subsection (b) are carried out regarding--
            ``(1) maintaining an adequate number of health 
        professionals with expertise in the provision of the services, 
        including hospital-based professionals and prehospital-based 
        professionals;
            ``(2) developing, periodically reviewing, and revising as 
        appropriate, in collaboration with appropriate public and 
        private entities, guidelines for the provision of such services 
        (including, for various typical circumstances, guidelines on 
        the number and variety of professionals, on equipment, and on 
        training);
            ``(3) the appropriate use of available technologies, 
        including communications technologies; and
            ``(4) the unique needs of underserved inner-city areas and 
        underserved rural areas.
    ``(d) Grants, Cooperative Agreements, and Contracts.--In carrying 
out subsections (b) and (c), the Secretary may make grants and enter 
into cooperative agreements and contracts.
    ``(e) Definitions.--For purposes of this part:
            ``(1) The term `hospital-based professional' means a health 
        professional (including an allied health professional) who has 
        expertise in providing one or more emergency medical services 
        and who normally provides the services at a medical facility.
            ``(2) The term `prehospital-based professional' means a 
        health professional (including an allied health professional) 
        who has expertise in providing one or more emergency medical 
        services and who normally provides the services at the site of 
        the medical emergency or during transport to a medical 
        facility.''.

SEC. 1522. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

    (a) Technical Amendments to Facilitate Establishment of Program.--
            (1) In general.--Title XII of the Public Health Service Act 
        (42 U.S.C. 300d et seq.) is amended--
                    (A) by redesignating section 1239 as section 1235;
                    (B) by redesignating sections 1231 and 1233 as 
                sections 1236 and 1237, respectively; and
                    (C) by redesignating sections 1211 through 1222 as 
                sections 1221 through 1232, respectively.
            (2) Modifications in format of title xii.--Title XII of the 
        Public Health Service Act, as amended by paragraph (1) of this 
        subsection, is amended--
                    (A) by striking ``Part B'' and all that follow 
                through ``State Plans'' and inserting the following:

  ``Subpart II--Formula Grants With Respect to Modifications of State 
                                Plans'';

                    (B) by striking ``Part C--General Provisions'' and 
                inserting the following:

                  ``Subpart III--General Provisions'';

                    (C) by redesignating sections 1202 and 1203 as 
                sections 1211 and 1212, respectively; and
                    (D) by inserting before section 1211 (as so 
                redesignated) the following:

                         ``Part B--Trauma Care

            ``Subpart I--Advisory Council; Clearinghouse''.

    (b) State Offices.--Title XII of the Public Health Service Act, as 
amended by subsection (a) of this section, is amended by inserting 
after section 1201 the following new section:

``SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

    ``(a) Program of Grants.--The Secretary may make grants to States 
for the purpose of improving the availability and quality of emergency 
medical services through the operation of State offices of emergency 
medical services.
    ``(b) Requirement of Matching Funds.--
            ``(1) In general.--The Secretary may not make a grant under 
        subsection (a) unless the State involved agrees, with respect 
        to the costs to be incurred by the State in carrying out the 
        purpose described in such subsection, to provide non-Federal 
        contributions toward such costs in an amount that--
                    ``(A) for the first fiscal year of payments under 
                the grant, is not less than $1 for each $3 of Federal 
                funds provided in the grant;
                    ``(B) for any second fiscal year of such payments, 
                is not less than $1 for each $1 of Federal funds 
                provided in the grant; and
                    ``(C) for any third fiscal year of such payments, 
                is not less than $3 for each $1 of Federal funds 
                provided in the grant.
            ``(2) Determination of amount of non-federal 
        contribution.--
                    ``(A) Subject to subparagraph (B), non-Federal 
                contributions required in paragraph (1) may be in cash 
                or in kind, fairly evaluated, including plant, 
                equipment, or services. Amounts provided by the Federal 
                Government, or services assisted or subsidized to any 
                significant extent by the Federal Government, may not 
                be included in determining the amount of such non-
                Federal contributions.
                    ``(B) The Secretary may not make a grant under 
                subsection (a) unless the State involved agrees that--
                            ``(i) for the first fiscal year of payments 
                        under the grant, 100 percent or less of the 
                        non-Federal contributions required in paragraph 
                        (1) will be provided in the form of in-kind 
                        contributions;
                            ``(ii) for any second fiscal year of such 
                        payments, not more than 50 percent of such non-
                        Federal contributions will be provided in the 
                        form of in-kind contributions; and
                            ``(iii) for any third fiscal year of such 
                        payments, such non-Federal contributions will 
                        be provided solely in the form of cash.
    ``(c) Certain Required Activities.--The Secretary may not make a 
grant under subsection (a) unless the State involved agrees that 
activities carried out by an office operated pursuant to such 
subsection will include--
            ``(1) coordinating the activities carried out in the State 
        that relate to emergency medical services;
            ``(2) activities regarding the matters described in 
        paragraphs (1) through (4) section 1201(b);
            ``(3) identifying Federal and State programs regarding 
        emergency medical services and providing technical assistance 
        to public and nonprofit private entities regarding 
        participation in such programs.
    ``(d) Requirement Regarding Annual Budget for Office.--The 
Secretary may not make a grant under subsection (a) unless the State 
involved agrees that, for any fiscal year for which the State receives 
such a grant, the office operated pursuant to subsection (a) will be 
provided with an annual budget of not less than $50,000.
    ``(e) Certain Uses of Funds.--
            ``(1) Restrictions.--The Secretary may not make a grant 
        under subsection (a) unless the State involved agrees that--
                    ``(A) if research with respect to emergency medical 
                services is conducted pursuant to the grant, not more 
                than 10 percent of the grant will be expended for such 
                research; and
                    ``(B) the grant will not be expended to provide 
                emergency medical services (including providing cash 
                payments regarding such services).
            ``(2) Establishment of office.--Activities for which a 
        State may expend a grant under subsection (a) include paying 
        the costs of establishing an office of emergency medical 
        services for purposes of such subsection.
    ``(f) Reports.--The Secretary may not make a grant under subsection 
(a) unless the State involved agrees to submit to the Secretary reports 
containing such information as the Secretary may require regarding 
activities carried out under this section by the State.
    ``(g) Requirement of Application.--The Secretary may not make a 
grant under subsection (a) unless an application for the grant is 
submitted to the Secretary and the application is in such form, is made 
in such manner, and contains such agreements, assurances, and 
information as the Secretary determines to be necessary to carry out 
this section.''.

SEC. 1523. PROGRAMS FOR RURAL AREAS.

    (a) In General.--Title XII of the Public Health Service Act, as 
amended by section 1522, is amended--
            (1) by transferring section 1204 to part A;
            (2) by redesignating such section as section 1203;
            (3) by inserting such section after section 1202; and
            (4) in section 1203 (as so redesignated)--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Demonstration Program Regarding Telecommunications.--
            ``(1) Linkages for rural facilities.--Projects under 
        subsection (a)(1) shall include demonstration projects to 
        establish telecommunications between rural medical facilities 
        and medical facilities that have expertise or equipment that 
        can be utilized by the rural facilities through the 
        telecommunications.
            ``(2) Modes of communication.--The Secretary shall ensure 
        that the telecommunications technologies demonstrated under 
        paragraph (1) include interactive video telecommunications, 
        static video imaging transmitted through the telephone system, 
        and facsimiles transmitted through such system.''.
    (b) Conforming Amendment.--Section 1203 of the Public Health 
Service Act, as redesignated by subsection (a)(2) of this section, is 
amended in the heading for the section by striking ``establishment'' 
and all that follows and inserting ``programs for rural areas.''.

SEC. 1524. FUNDING.

    Title XII of the Public Health Service Act, as amended by the 
preceding provisions of this title, is amended--
            (1) by redesignating parts C through F as parts D through 
        G, respectively;
            (2) by inserting after subpart III of part B the following:

                          ``Part C--Funding'';

            (3) by transferring section 1239 to part C (as so added); 
        and
            (4) in such section, by striking subsections (a) and (b) 
        and inserting the following:
    ``(a) Emergency Medical Services Generally.--
            ``(1) In general.--For the purpose of carrying out section 
        1201 other than with respect to trauma care, there are 
        authorized to be appropriated $2,000,000 for fiscal year 1994, 
        and such sums as may be necessary for each of the fiscal years 
        1995 and 1996.
            ``(2) State offices.--For the purpose of carrying out 
        section 1202, there are authorized to be appropriated 
        $3,000,000 for fiscal year 1994, and such sums as may be 
        necessary for each of the fiscal years 1995 and 1996.
            ``(3) Certain telecommunications demonstrations.--For the 
        purpose of carrying out section 1203(c), there are authorized 
        to be appropriated $10,000,000 for fiscal year 1994 and such 
        sums as may be necessary for each of the fiscal years 1995 and 
        1996.
    ``(b) Trauma Care and Certain Other Activities.--
            ``(1) In general.--For the purpose of carrying out part B, 
        section 1201 with respect to trauma care, and section 1203 
        (other than subsection (c) of such section), there are 
        authorized to be appropriated $60,000,000 for fiscal year 1994, 
        and such sums as may be necessary for each of the fiscal years 
        1995 and 1996.
            ``(2) Allocation of funds by secretary.--
                    ``(A) For the purpose of carrying out subpart I of 
                part B, section 1201 with respect to trauma care, and 
                section 1203 (other than subsection (c) of such 
                section), the Secretary shall make available 10 percent 
                of the amounts appropriated for a fiscal year under 
                paragraph (1).
                    ``(B) For the purpose of carrying out section 1203 
                (other than subsection (c) of such section), the 
                Secretary shall make available 10 percent of the 
                amounts appropriated for a fiscal year under paragraph 
                (1).
                    ``(C)(i) For the purpose of making allotments under 
                section 1221(a), the Secretary shall, subject to 
                subsection (c), make available 80 percent of the 
                amounts appropriated for a fiscal year under paragraph 
                (1).
                    ``(ii) Amounts paid to a State under section 
                1221(a) for a fiscal year shall, for the purposes for 
                which the amounts were paid, remain available for 
                obligation until the end of the fiscal year immediately 
                following the fiscal year for which the amounts were 
                paid.''.

SEC. 1525. CONFORMING AMENDMENTS.

    Title XII of the Public Health Service Act, as amended by the 
preceding provisions of this title, is amended--
            (1) in section 1203(b), by striking ``1214(c)(1)'' and 
        inserting ``1224(c)(1)'';
            (2) in section 1211(b)(3), by striking ``1213(c)'' and 
        inserting ``1223(c)'';
            (3) in section 1221--
                    (A) in subsection (a)--
                            (i) by striking ``1218'' and inserting 
                        ``1228''; and
                            (ii) by striking ``1217'' and inserting 
                        ``1227''; and
                    (B) in subsection (b)--
                            (i) by striking ``1233'' and inserting 
                        ``1237''; and
                            (ii) by striking ``1213'' and inserting 
                        ``1223'';
            (4) in section 1222--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                            (ii) in paragraph (2)(A), by striking 
                        ``1211(c)'' and inserting ``1221(c)''; and
                    (B) in subsection (b), by striking ``1211(a)'' and 
                inserting ``1221(a)'';
            (5) in section 1223--
                    (A) in subsection (a), by striking ``1211(b)'' and 
                inserting ``1221(b)'';
                    (B) in subsection (b)--
                            (i) in paragraph (1), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                            (ii) in paragraph (3), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                    (C) in subsection (d), by striking ``1211(a)'' and 
                inserting ``1221(a)'';
            (6) in section 1224--
                    (A) in each of subsections (a) through (c), by 
                striking ``1211(a)'' and inserting ``1221(a)''; and
                    (B) in subsection (b), by striking ``1213(a)(7)'' 
                and inserting ``1223(a)(7)'';
            (7) in section 1225--
                    (A) in subsection (a)--
                            (i) by striking ``1211(a)'' and inserting 
                        ``1221(a)''; and
                            (ii) by striking ``1233'' and inserting 
                        ``1237''; and
                    (B) in subsection (b), by striking ``1211(b)'' and 
                inserting ``1221(b)'';
            (8) in section 1226, in each of subsections (a) through 
        (c), by striking ``1211(a)'' and inserting ``1221(a)'';
            (9) in section 1227--
                    (A) by striking ``1211(a)'' and inserting 
                ``1221(a)''; and
                    (B) by striking ``1214'' and inserting ``1224'';
            (10) in section 1228--
                    (A) in each of subsections (a) through (c), by 
                striking ``1211(a)'' each place such term appears and 
                inserting ``1221(a)'';
                    (B) in subsection (b), in each of paragraphs (2)(A) 
                and (3)(A), by striking ``1232(a)'' and inserting 
                ``1239(a)''; and
                    (C) in subsection (c)(2)--
                            (i) by striking ``1232(b)(3)'' and 
                        inserting ``1239(b)(3)''; and
                            (ii) by striking ``1217'' and inserting 
                        ``1227'';
            (11) in section 1229(a), by striking ``1211(a)'' each place 
        such term appears and inserting ``1221(a)'';
            (12) in section 1230(a), by striking ``1211(a)'' each place 
        such term appears and inserting ``1221(a)'';
            (13) in section 1231--
                    (A) in each of subsections (a) and (b), by striking 
                ``1211(a)'' each place such term appears and inserting 
                ``1221(a)''; and
                    (B) in each of subsections (a) and (b), by striking 
                ``1211(b)'' and inserting ``1221(b)'';
            (14) in section 1232, by striking ``1211'' and inserting 
        ``1221'';
            (15) in section 1236--
                    (A) in the matter preceding paragraph (1), by 
                striking ``this title'' and inserting ``this part''; 
                and
                    (B) in paragraph (1), by striking ``1213'' and 
                inserting ``1223'';
            (16) in section 1237--
                    (A) in each of subsections (a) and (b), by striking 
                ``1211'' each place such term appears and inserting 
                ``1221'';
                    (B) in subsection (b)--
                            (i) by striking ``part B'' and inserting 
                        ``subpart II''; and
                            (ii) by striking ``1214(c)(1)'' and 
                        inserting ``1224(c)(1)''; and
                    (C) in subsection (c), by striking ``1213'' and 
                inserting ``1223''; and
            (17) in section 1239(c)(1)--
                    (A) by striking ``1211(a)'' and inserting 
                ``1221(a)'';
                    (B) by striking ``1218(a)(2)'' and inserting 
                ``1228(a)(2)''; and
                    (C) by striking ``part B'' and inserting ``subpart 
                II''.

SEC. 1526. EFFECTIVE DATE.

    The amendments made by this part shall take effect October 1, 1993, 
or upon the date of the enactment of this Act, whichever occurs later.

  Subtitle G--State Flexibility in the Medicaid Program: The Medical 
                        Health Allowance Program

SEC. 1601. ESTABLISHMENT OF PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), as amended by section 13631(b) of the Omnibus Budget 
Reconciliation Act of 1993, is amended--
            (1) by redesignating section 1931 as section 1932; and
            (2) by inserting after section 1930 the following new 
        section:

                   ``state health allowance programs

    ``Sec. 1931. (a) Treatment of Expenditures Under Health Allowance 
Programs as Medical Assistance Under State Plan.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, for purposes of determining the amount to be paid 
        to a State under section 1903(a)(1) for quarters in any fiscal 
        year, amounts expended by an eligible State (as described in 
        subsection (b)) during the fiscal year under a State health 
        allowance program (as described in subsection (c)) shall be 
        included in the total amount expended during the fiscal year as 
        medical assistance under the State plan (except as provided 
        under paragraphs (2) and (3) and under subsection (d)(1)(C)).
            ``(2) Federal payment restricted to acute care services.--
        No amounts expended under a State health allowance program that 
        are attributable to medical assistance described in paragraphs 
        (4), (14), (15), (23), or (24) of section 1905(a) shall be 
        included in the total amount expended as medical assistance 
        under the State plan.
            ``(3) Limitation.--In no case shall this subsection result 
        in (A) the total Federal payments to the State for the quarter 
        under this title (including payments attributable to this 
        section and section 1923), exceeding (B) the total Federal 
        payments that the Secretary estimates would have been paid 
        under this title to the State for the quarter if the State did 
        not have a program under this section.
    ``(b) Eligibility of State.--A State is eligible for purposes of 
subsection (a) if the State submits (at such time and in such form as 
the Secretary may require) an application to the Secretary containing 
such information and assurances as the Secretary may require, including 
assurances that the State has adopted and is enforcing standards 
regarding quality assurance for group health plans participating in the 
State health allowance program, including standards regarding--
            ``(1) uniform reporting requirements for such plans 
        relating to a minimum set of clinical data, patient 
        satisfaction data, and other information that may be used by 
        individuals to compare the quality of various plans; and
            ``(2) the establishment or designation of an entity of the 
        State government to collect the data described in subparagraph 
        (A) and to regularly report such data to the Secretary.
    ``(c) State Health Allowance Program Described.--
            ``(1) Enrollment of participating individuals in approved 
        group health plans.--In this section, a State health allowance 
        program is a program in effect in all the political 
        subdivisions of the State (except as provided in (c)) under 
        which the State makes payments to a group health plan (approved 
        under paragraph (2)) which provides coverage to the individual 
        as an allowance towards the costs of providing the individual 
        with benefits under the plan.
            ``(2) Approved plans described.--For purposes of paragraph 
        (1), a State shall approve group health plans in accordance 
        with such standards as the State may establish, except that--
                    ``(A) the State may not approve a plan for a year 
                unless the actuarial value of the benefits provided by 
                the plan (taking into account the cost-sharing 
                associated with the plan) for the year--
                            ``(i) with respect to the first year for 
                        which the plan is approved for purposes of this 
                        subsection, is not less than the actuarial 
                        value of the medical assistance provided under 
                        the State plan under this title for the year 
                        (as determined by the Secretary without regard 
                        to medical assistance described in paragraphs 
                        (4), (14), (15), (23), or (24) of section 
                        1905(a)); and
                            ``(ii) with respect to any subsequent year, 
                        is not greater than the amount determined under 
                        this subparagraph for the preceding year, 
                        increased or decreased by the amount (expressed 
                        as a percentage) by which the actuarial value 
                        of the medical assistance described in clause 
                        (i) for the year exceeds or is less than the 
                        actuarial value of such medical assistance for 
                        the preceding year;
                    ``(B) at least one of the plans approved by the 
                State shall be a health maintenance organization or 
                other plan under which payments are otherwise made on a 
                capitated basis for providing medical assistance to 
                individuals enrolled in the State plan under this 
                title; and
                    ``(C) in the case of an individual who is entitled 
                to benefits under the State plan under this title as of 
                the first month during which the State health allowance 
                program is in effect, an approved plan may not require 
                the individual to contribute a greater amount of cost-
                sharing than the individual would have been required to 
                contribute under the State plan (except as may be 
                imposed on an individual described in subparagraph (B) 
                or subparagraph (C) of subsection (d)(1)).
            ``(3) Waiver of statewideness requirement.--At the request 
        of a State, the Secretary may waive for a period not to exceed 
        3 years (subject to one 3-year extension) the requirement under 
        paragraph (1) that the State health allowance program be in 
        effect in all political subdivisions of the State.
    ``(d) Eligibility of Individuals To Participate in Allowance 
Program.--
            ``(1) Automatic eligibility of medicaid categorically 
        eligible individuals.--Subject to subsection (e), any 
        individual to whom the State makes medical assistance available 
        under the State plan under this title pursuant to clause (i) of 
        section 1902(a)(10)(A) shall be eligible to participate in the 
        State health allowance program.
            ``(2) Mandatory eligibility of individuals with income 
        under the poverty level.--
                    ``(A) In general.--Subject to subsection (e) and 
                subparagraph (B), an individual lawfully residing in 
                the State shall be eligible to participate in the 
                program if the income of the individual's family is 
                equal to or less than 100 percent 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 1991) applicable to a family of the size involved.
                    ``(B) Exception.--If the application of 
                subparagraph (A) would result in--
                            ``(i) the total State expenditures for a 
                        quarter under this title (including 
                        expenditures attributable to this section and 
                        section 1923), exceeding
                            ``(ii) the total State expenditures that 
                        the Secretary estimates would have been made 
                        under this title for the quarter if the State 
                        did not have a program under this section,
                then there shall be substituted for 100 percent in 
                subparagraph (A) such percent as would result in the 
                amount described in clause (i) equaling the amount 
                described in clause (ii).
            ``(3) Optional eligibility of individuals with income up to 
        200 percent of poverty level.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a State health allowance program under 
                this section may make an individual lawfully residing 
                in the State eligible to participate in the program if 
                the income of the individual's family is greater than 
                100 percent (but less than such percentage, not to 
                exceed 200 percent, as the State may specify) of such 
                official poverty line.
                    ``(B) Contribution may be required.--In the case of 
                an individual who is participating in the program under 
                this paragraph, the program may require such an 
                individual to contribute all (or a portion) of the 
                premiums and cost-sharing of such a group health plan 
                if the amount of such contribution is determined in 
                accordance with a sliding scale based on the 
                individual's family income.
    ``(e) Exclusion and Use of Resource Standard.--
            ``(1) Exclusion of elderly medicare-eligible individuals.--
        No individual shall be eligible to participate in the program 
        if the individual is entitled to benefits under title XVIII of 
        the Social Security Act pursuant to section 226 of such Act.
            ``(2) Use of resource standard.--A State may require an 
        individual to meet a resource standard as a condition of 
        eligibility to participate in the program only if the Secretary 
        approves the State's use of such a standard.
    ``(f) Construction.--No provision of any Federal law shall prevent 
a State from enrolling any employee or other individual in accordance 
with this section. The previous sentence shall not be construed as 
permitting a State to require the employer of an individual 
participating in the program to contribute toward the individual's 
premium required for such participation.
    ``(g) Evaluations and Reports.--
            ``(1) Evaluations.--Not later than 3 years after the date 
        of the enactment of this section (and at such subsequent 
        intervals as the Secretary considers appropriate), the 
        Secretary shall evaluate the effectiveness of the State health 
        allowance programs for which Federal financial participation is 
        provided under this section, and the impact of such programs on 
        increasing the number of individuals with health insurance 
        coverage in participating States and in controlling the costs 
        of health care in such States.
            ``(2) Reports.--Not later than 3 years after the date of 
        the enactment of this section (and at such subsequent intervals 
        as the Secretary considers appropriate), the Secretary shall 
        submit a report on the program to Congress.''.
    (b) Ensuring Budget Neutrality Through Reduction in 
Disproportionate Share Hospital Payments for Participating States.--
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4), as amended 
by section 13621(b)(1) of the Omnibus Budget Reconciliation Act of 
1993, is amended by adding at the end the following new subsection:
    ``(h) Reduction in Payment Adjustments for States With Health 
Allowance Programs.--In the case of a State operating a State health 
allowance program under section 1931 in a fiscal year, the Secretary 
shall reduce the total payment adjustments made under this section for 
hospitals in the State for quarters in the year by such amount as the 
Secretary determines to be necessary to ensure that the total amount 
paid to the State under section 1903(a)(1) for the year does not exceed 
the amount that would have been paid to the State under such section 
for the year if the State did not operate such a program.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar quarters beginning on or after January 1, 1994.

SEC. 1602. OPTIONAL USE OF PROGRAM TO OFFER COVERAGE TO SOME OR ALL 
              STATE RESIDENTS.

    Section 1931 of the Social Security Act, as inserted by section 
1601(a)(2), is amended--
            (1) in subsection (c)(2)(A), in the matter before clause 
        (i), by inserting ``, except as provided in subsection 
        (d)(4)(B)(iii),'' after ``unless'', and
            (2) by adding at the end of subsection (d) the following 
        new paragraphs:
            ``(4) Optional enrollment of other individuals.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a State health allowance program under 
                this section may make any individual (or class of 
                individuals) who is not described in paragraph (1), 
                (2), or (3) and who is not offered coverage under an 
                employer group health plan eligible to participate in 
                the program.
                    ``(B) Special rules.--
                            ``(i) Contribution may be required.--In the 
                        case of an individual who is participating in 
                        the program under this paragraph, the program 
                        may require such an individual to contribute 
                        all (or a portion) of the premiums and cost-
                        sharing of such a group health plan.
                            ``(ii) No federal matching payments.--For 
                        purposes of payment to States under section 
                        1903(a), no amounts expended by the State under 
                        the program during a fiscal year on behalf of 
                        an individual enrolled under subparagraph (A) 
                        may be included in the total amount expended 
                        during the fiscal year as medical assistance 
                        under the State plan.
                            ``(iii) Optional use of standard 
                        coverage.--Notwithstanding subsection 
                        (c)(2)(A), with respect to individuals enrolled 
                        under subparagraph (A), such program may 
                        provide standard coverage (consistent with 
                        section 1102(c) of the Affordable Health Care 
                        Now Act of 1993) rather than the benefits of an 
                        actuarial value otherwise required under such 
                        subsection.
            ``(5) Offering of coverage through other programs.--Nothing 
        in this section shall be construed as preventing a State 
        which--
                    ``(A) does not operate a State health allowance 
                program under this section from assuring that 
                individuals in the State who are not offered coverage 
                under an employer group health plan are offered 
                coverage under a health plan, or
                    ``(B) does operate such a program from assuring 
                that individuals in the State who are not described in 
                paragraph (1), (2), or (3) and who are not offered 
                coverage under an employer group health plan are 
                offered coverage under a health plan other than through 
                such program.''.

                Subtitle H--Medicaid Program Flexibility

SEC. 1701. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW STATES MORE 
              FLEXIBILITY IN CONTRACTING FOR COORDINATED CARE SERVICES 
              UNDER MEDICAID.

    (a) In General.--Section 1903(m) of the Social Security Act (42 
U.S.C. 1396b(m)) is amended--
            (1) by striking all that precedes paragraph (4) and 
        inserting the following:
    ``(m) Coordinated Care.--
            ``(1) Payment conditioned on compliance.--
                    ``(A) General rule.--No payment shall be made under 
                this title to a State with respect to expenditures 
                incurred by it for payment to a risk contracting entity 
                or primary care case management entity (as defined in 
                subparagraph (B)), or with respect to an undertaking 
                described in paragraph (6), unless the State and the 
                entity or undertaking meet the applicable requirements 
                of this subsection. For purposes of determining whether 
                payment may be made under this section, the Secretary 
                may reject a State's determination of compliance with 
                any provision of this subsection.
                    ``(B) General definitions.--For purposes of this 
                title--
                            ``(i) Risk contracting entity.--The term 
                        `risk contracting entity' means an entity that 
                        has a contract with the State agency under 
                        which the entity--
                                    ``(I) provides or arranges for the 
                                provision of health care items or 
                                services to individuals eligible for 
                                medical assistance under the State plan 
                                under this title, and
                                    ``(II) is at risk (as defined in 
                                clause (iv)) for part or all of the 
                                cost of such items or services 
                                furnished to such individuals.
                            ``(ii) Primary care case management 
                        program.--The term `primary care case 
                        management program' means a State program under 
                        which individuals eligible for medical 
                        assistance under the State plan under this 
                        title are enrolled with primary care case 
                        management entities, and are entitled to 
                        receive specified health care items and 
                        services covered under such plan only as 
                        arranged for and approved by such entities.
                            ``(iii) At risk.--An entity is `at risk', 
                        for purposes of this subparagraph, if it has a 
                        contract with the State agency under which it 
                        is paid a fixed amount for providing or 
                        arranging for the provision of specified health 
                        care items or services to an individual 
                        eligible for medical assistance and enrolled 
                        with the entity, regardless of whether such 
                        items or services are furnished to such 
                        individual, and is liable for all or part of 
                        the cost of furnishing such items or services, 
                        regardless of whether or the extent to which 
                        such cost exceeds such fixed payment.
                            ``(iv) Primary care case management 
                        entity.--The term `primary care case management 
                        entity' means a health care provider (whether 
                        an individual or an entity) that, under a State 
                        primary care case management program meeting 
                        the requirements of paragraph (7), has a 
                        contract with the State agency under which the 
                        entity arranges for or authorizes the provision 
                        of health care items and services to 
                        individuals eligible for medical assistance 
                        under the State plan under this title, but is 
                        not at risk (as defined in clause (iv)) for the 
                        cost of such items or services provided to such 
                        individuals.
            ``(2) General requirements for risk contracting entities.--
                    ``(A) Federal or state qualification.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if it either--
                            ``(i) is a qualified health maintenance 
                        organization as defined in section 1310(d) of 
                        the Public Health Service Act, as determined by 
                        the Secretary pursuant to section 1312 of that 
                        Act, or
                            ``(ii) is an entity which the State agency 
                        has determined--
                                    ``(I) affords, to individuals 
                                eligible for medical assistance under 
                                the State plan and enrolled with the 
                                entity, access to health care items and 
                                services furnished by the entity, 
                                within the area served by the entity, 
                                at least equivalent to the access such 
                                individuals would have to such health 
                                care items and services in such area if 
                                not enrolled with the entity, and
                                    ``(II) has made adequate provision 
                                against the risk of insolvency, and 
                                assures that individuals eligible for 
                                medical assistance under this title are 
                                not held liable for the entity's debts 
                                in case of the entity's insolvency.
                    ``(B) Internal quality assurance.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if it has in 
                effect an internal quality assurance program that meets 
                the requirements of paragraph (9).
                    ``(C) Contract with state agency.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if the entity has 
                a written contract with the State agency that 
                provides--
                            ``(i) that the entity will comply with all 
                        applicable provisions of this subsection;
                            ``(ii) for a payment methodology based on 
                        experience rating or another actuarially sound 
                        methodology approved by the Secretary, which 
                        guarantees (as demonstrated by such models or 
                        formulas as the Secretary may approve) that 
                        payments to the entity under the contract shall 
                        not exceed 100 percent of expenditures that 
                        would have been made by the State agency in the 
                        absence of the contract;
                            ``(iii) that the Secretary and the State 
                        (or any person or organization designated by 
                        either) shall have the right to audit and 
                        inspect any books and records of the entity 
                        (and of any subcontractor) that pertain--
                                    ``(I) to the ability of the entity 
                                to bear the risk of potential financial 
                                losses, or
                                    ``(II) to services performed or 
                                determinations of amounts payable under 
                                the contract;
                            ``(iv) that in the entity's enrollment, 
                        reenrollment, or disenrollment of individuals 
                        eligible for medical assistance under this 
                        title and eligible to enroll, reenroll, or 
                        disenroll with the entity pursuant to the 
                        contract, the entity will not discriminate 
                        among such individuals on the basis of their 
                        health status or requirements for health care 
                        services;
                            ``(v)(I) that individuals eligible for 
                        medical assistance under the State plan who 
                        have enrolled with the entity are permitted to 
                        terminate such enrollment without cause as of 
                        the beginning of the first calendar month 
                        following a full calendar month after the 
                        request is made for such termination (or at 
                        such times as required pursuant to paragraph 
                        (8)), and
                            ``(II) for notification of each such 
                        individual, at the time of the individual's 
                        enrollment, of the right to terminate 
                        enrollment;
                            ``(vi) for reimbursement, either by the 
                        entity or by the State agency, for medically 
                        necessary services provided--
                                    ``(I) to an individual eligible for 
                                medical assistance under the State plan 
                                and enrolled with the entity, and
                                    ``(II) other than through the 
                                entity because the services were 
                                immediately required due to an 
                                unforeseen illness, injury, or 
                                condition;
                            ``(vii) for disclosure of information in 
                        accordance with paragraph (4) and section 1124;
                            ``(viii) in the case of an entity that has 
                        entered into a contract with a Federally-
                        qualified health center for the provision of 
                        services of such center--
                                    ``(I) that rates of prepayment from 
                                the State are adjusted to reflect fully 
                                the rates of payment specified in 
                                section 1902(a)(13)(E), and
                                    ``(II) that, at the election of 
                                such center, payments made by the 
                                entity to such center for services 
                                described in section 1905(a)(2)(C) are 
                                made at the rates of payment specified 
                                in section 1902(a)(13)(E);
                            ``(ix) that any physician incentive plan 
                        that the entity operates meets the requirements 
                        of section 1876(i)(8);
                            ``(x) for maintenance of sufficient patient 
                        encounter data to identify the physician who 
                        delivers services to patients; and
                            ``(xi) that the entity complies with the 
                        requirement of section 1902(w) with respect to 
                        each enrollee.
            ``(3) Exceptions to requirements for risk contracting 
        entities.--The requirements of paragraph (2) (other than 
        subparagraph (C)(viii)) do not apply to an entity that--
                    ``(A)(i) received a grant of at least $100,000 in 
                the fiscal year ending June 30, 1976, under section 
                329(d)(1)(A) or 330(d)(1) of the Public Health Service 
                Act, and for the period beginning July 1, 1976, and 
                ending on the expiration of the period for which 
                payments are to be made under this title, has been the 
                recipient of a grant under either such section; and
                    ``(ii) provides to its enrollees, on a prepaid 
                capitation or other risk basis, all of the services 
                described in paragraphs (1), (2), (3), (4)(C), and (5) 
                of section 1905(a) and, to the extent required by 
                section 1902(a)(10)(D) to be provided under the State 
                plan, the services described in section 1905(a)(7);
                    ``(B) is a nonprofit primary health care entity 
                located in a rural area (as defined by the Appalachian 
                Regional Commission)--
                            ``(i) which received in the fiscal year 
                        ending June 30, 1976, at least $100,000 (by 
                        grant, subgrant, or subcontract) under the 
                        Appalachian Regional Development Act of 1965), 
                        and
                            ``(ii) for the period beginning July 1, 
                        1976, and ending on the expiration of the 
                        period for which payments are to be made under 
                        this title either has been the recipient of a 
                        grant, subgrant, or subcontract under such Act 
                        or has provided services under a contract 
                        (initially entered into during a year in which 
                        the entity was the recipient of such a grant, 
                        subgrant, or subcontract) with a State agency 
                        under this title on a prepaid capitation or 
                        other risk basis; or
                    ``(C) which has contracted with the State agency 
                for the provision of services (but not including 
                inpatient hospital services) to persons eligible for 
                medical assistance under this title on a prepaid risk 
                basis prior to 1970.''; and
            (2) by adding after paragraph (6) the following new 
        paragraphs:
            ``(7) General requirements for primary care case 
        management.--A State that elects in its State plan under this 
        title to implement a primary care case management program under 
        this subsection shall include in the plan methods for the 
        selection and monitoring of participating primary care case 
        management entities to ensure that--
                    ``(A) the numbers, geographic locations, hours of 
                operation, and other relevant characteristics of such 
                entities are sufficient to afford individuals eligible 
                for medical assistance reasonable access to and choice 
                among such entities;
                    ``(B) such entities and their professional 
                personnel are qualified to provide health care case 
                management services, through methods including ongoing 
                monitoring of compliance with applicable requirements 
                for licensing of health care providers, providing 
                training and certification of primary care case 
                managers, and providing information and technical 
                assistance; and
                    ``(C) such entities are making timely and 
                appropriate decisions with respect to enrollees' need 
                for health care items and services, and are giving 
                timely approval and referral to providers of adequate 
                quality where such items and services are determined to 
                be medically necessary.
            ``(8) State options with respect to enrollment and 
        disenrollment.--
                    ``(A) Mandatory enrollment option.--A State plan 
                may require an individual eligible for medical 
                assistance under the State plan (other than a medicare 
                qualified beneficiary) to enroll with a risk 
                contracting entity or primary care case management 
                entity, without regard to the requirement of section 
                1902(a)(1) (concerning Statewideness), the requirements 
                of section 1902(a)(10)(B) (concerning comparability of 
                benefits), or the requirements of section 1902(a)(23) 
                (concerning freedom of choice of provider), if the 
                individual is permitted a choice--
                            ``(i) between or among two or more risk 
                        contracting entities,
                            ``(ii) between a risk contracting entity 
                        and a primary care case management entity, or
                            ``(iii) between or among two or more 
                        primary care case management entities.
                    ``(B)(i) Restrictions on disenrollment without 
                cause.--A State plan may restrict the period in which 
                individuals enrolled with a qualifying risk contracting 
                entity (as defined in clause (ii)) may terminate such 
                enrollment without cause to the first month of each 
                period of enrollment (as defined in clause (iii)), but 
                only if the State provides notification, at least once 
                during each such enrollment period, to individuals 
                enrolled with such entity of the right to terminate 
                such enrollment and the restriction on the exercise of 
                this right. Such restriction shall not apply to 
                requests for termination of enrollment for cause.
                    ``(ii) For purposes of this subparagraph, the term 
                `qualifying risk contracting entity' means a risk 
                contracting entity that is--
                            ``(I) a qualified health maintenance 
                        organization as defined in section 1310(d) of 
                        the Public Health Service Act;
                            ``(II) an eligible organization with a 
                        contract under section 1876;
                            ``(III) an entity that is receiving (and 
                        has received during the previous 2 years) a 
                        grant of at least $100,000 under section 
                        329(d)(1)(A) or 330(d)(1) of the Public Health 
                        Service Act;
                            ``(IV) an entity that is receiving (and has 
                        received during the previous 2 years) at least 
                        $100,000 (by grant, subgrant, or subcontract) 
                        under the Appalachian Regional Development Act 
                        of 1965;
                            ``(V) a program pursuant to an undertaking 
                        described in paragraph (6) in which at least 25 
                        percent of the membership enrolled on a prepaid 
                        basis are individuals who (I) are not insured 
                        for benefits under part B of title XVIII or 
                        eligible for medical assistance under this 
                        title, and (II) (in the case of such 
                        individuals whose prepayments are made in whole 
                        or in part by any government entity) had the 
                        opportunity at the time of enrollment in the 
                        program to elect other coverage of health care 
                        costs that would have been paid in whole or in 
                        part by any governmental entity; or
                            ``(VI) an entity that, on the date of 
                        enactment of this provision, had a contract 
                        with the State agency under a waiver under 
                        section 1115 or 1915(b) and was not subject to 
                        a requirement under this subsection to permit 
                        disenrollment without cause.
                    ``(iii) For purposes of this subparagraph, the term 
                `period of enrollment' means--
                            ``(I) a period not to exceed 6 months in 
                        duration, or
                            ``(II) a period not to exceed one year in 
                        duration, in the case of a State that, on the 
                        effective date of this subparagraph, had in 
                        effect a waiver under section 1115 of 
                        requirements under this title under which the 
                        State could establish a 1-year minimum period 
                        of enrollment with risk contracting entities.
                    ``(C) Reenrollment of individuals who regain 
                eligibility.--In the case of an individual who--
                            ``(i) in a month is eligible for medical 
                        assistance under the State plan and enrolled 
                        with a risk contracting entity with a contract 
                        under this subsection,
                            ``(ii) in the next month (or next 2 months) 
                        is not eligible for such medical assistance, 
                        but
                            ``(iii) in the succeeding month is again 
                        eligible for such benefits,
                the State plan may enroll the individual for that 
                succeeding month with such entity, if the entity 
                continues to have a contract with the State agency 
                under this subsection.
            ``(9) Requirements for internal quality assurance 
        programs.--The requirements for an internal quality assurance 
        program of a risk contracting entity are that program is 
        written and the program--
                    ``(A) specifies a systematic process including 
                ongoing monitoring, corrective action, and other 
                appropriate activities to achieve specified and 
                measurable goals and objectives for quality of care, 
                and including annual evaluation of the program;
                    ``(B) identifies the organizational units 
                responsible for performing specific quality assurance 
                functions, and ensure that they are accountable to the 
                governing body of the entity and that they have 
                adequate supervision, staff, and other necessary 
                resources to perform these functions effectively;
                    ``(C) if any quality assistance functions are 
                delegated to other entities, ensures that the risk 
                contracting entity remains accountable for all quality 
                assurance functions, and has mechanisms to ensure that 
                all quality assurance activities are carried out;
                    ``(D) includes methods to ensure that physicians 
                and other health care professionals under contract with 
                the entity are qualified to perform the services they 
                provide, and that these qualifications are ensured 
                through appropriate credentialing and recredentialing 
                procedures;
                    ``(E) includes policies addressing enrollee rights 
                and responsibilities, including grievance mechanisms 
                and mechanisms to inform enrollees about access to and 
                use of services provided by the entity;
                    ``(F) provides for continuous monitoring of the 
                delivery of health care, including--
                            ``(i) identification of clinical areas to 
                        be monitored,
                            ``(ii) use of quality indicators and 
                        standards for assessing care delivered, 
                        including availability and accessibility of 
                        care,
                            ``(iii) monitoring, through use of 
                        epidemiological data or chart review, the care 
                        of individuals, as appropriate, and patterns of 
                        care overall, and
                            ``(iv) implementation of corrective 
                        actions; and
                    ``(G) meets any other requirements prescribed by 
                the Secretary after consultation with States.
            ``(10) Independent review and quality assurance.--
                    ``(A) State grievance procedure.--A State 
                contracting with a risk contracting entity or primary 
                care case management entity under this subsection shall 
                provide for a grievance procedure for enrollees of such 
                entity with at least the following elements:
                            ``(i) A toll-free telephone number for 
                        enrollee questions and grievances.
                            ``(ii) A State-operated enrollee grievance 
                        procedure.
                            ``(iii) Periodic notification of enrollees 
                        of their rights with respect to such entity or 
                        program.
                            ``(iv) Periodic sample reviews of 
                        grievances registered with such entity or 
                        program or with the State.
                            ``(v) Periodic survey and analysis of 
                        enrollee satisfaction with such entity or 
                        program.
                    ``(B) State monitoring of risk contracting 
                entities' quality assurance programs.--A State 
                contracting with a risk contracting entity under this 
                subsection shall periodically review such entity's 
                quality assurance program to ensure that it meets the 
                requirements of paragraph (9).
                    ``(C) External independent review of internal 
                quality assurance.--A State contracting with a risk 
                contracting entity under this subsection shall provide 
                for annual external independent review (by a 
                utilization control and peer review organization with a 
                contract under section 1153, or another organization 
                unaffiliated with the State government approved by the 
                Secretary) of such entity's internal quality assurance 
                activities. Such independent review shall include--
                            ``(i) review of the entity's medical care, 
                        through sampling of medical records or other 
                        appropriate methods, for indications of 
                        inappropriate utilization and treatment,
                            ``(ii) review of enrollee inpatient and 
                        ambulatory data, through sampling of medical 
                        records or other appropriate methods, to 
                        determine quality trends,
                            ``(iii) review of the entity's internal 
                        quality assurance activities, and
                            ``(iv) notification of the entity and the 
                        State, and appropriate followup activities, 
                        when the review under this subparagraph 
                        indicates inappropriate care or treatment.''.
    (b) State Option To Guarantee Medicaid Eligibility.--Section 
1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is amended--
                    (A) in subparagraph (A), by striking all that 
                precedes ``(but for this paragraph)'' and inserting 
                ``In the case of an individual who is enrolled--
                            ``(i) with a risk contracting entity (as 
                        defined in section 1903(m)(1)(B)(i)) 
                        responsible for the provision of inpatient 
                        hospital services and any other service 
                        described in paragraphs (2), (3), (4), (5), and 
                        (7) of section 1905(a),
                            ``(ii) with any risk contracting entity (as 
                        so defined) in a State that, on the effective 
                        date of this provision, had in effect a waiver 
                        under section 1115 of requirements under this 
                        title under which the State could extend 
                        eligibility for medical assistance for 
                        enrollees of such entity, or
                            ``(iii) with an eligible organization with 
                        a contract under section 1876 and who would'', 
                        and
                    (B) in subparagraph (B), by striking ``organization 
                or'' each place it appears.
    (c) Conforming Amendments.--
            (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
        7(b)(6)(C)(i)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (2) Section 1902(a)(25)(A) of such Act (42 U.S.C. 
        1396a(a)(25)(A)), as amended by section 13622(a)(1) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended by 
        striking ``health maintenance organizations'' and inserting 
        ``risk contracting entities''.
            (3) Section 1902(a)(25)(H) of such Act (42 U.S.C. 
        1396a(a)(25)(H)), as added by section 13622(b)(3) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended by 
        striking ``health maintenance organization'' and inserting 
        ``risk contracting entity''.
            (4) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
        1396a(a)(30)(C)) is amended by striking all that precedes 
        ``with the results'' and inserting ``provide for independent 
        review and quality assurance of entities with contracts under 
        section 1903(m), in accordance with paragraph (10) of such 
        section,''.
            (5) Section 1902(a)(57) of such Act (42 U.S.C. 
        1396a(a)(57)) is amended by striking ``or health maintenance 
        organization'' and inserting ``or risk contracting entity''.
            (6) Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as 
        amended by sections 13623(a), 13625(a), and 13631(a) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (61);
                    (B) by striking the period at the end of paragraph 
                (62) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(63) at State option, provide for a primary care case 
        management program in accordance with section 1903(m)(7).''.
            (7) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
        is amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (8) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
        amended--
                    (A) in paragraph (1), by striking ``section 
                1903(m)(1)(A)'' and inserting ``section 
                1903(m)(2)(C)(xi)'', and
                    (B) in paragraph (2)(E), by striking ``health 
                maintenance organization'' and ``the organization'' and 
                inserting ``risk contracting entity'' and ``the 
                entity'', respectively.
            (9) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
        amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (10) Section 1903(m)(4)(A) of such Act (42 U.S.C. 
        1396b(m)(4)(A)) is amended--
                    (A) in the first sentence, by striking ``Each 
                health maintenance organization'' and inserting ``Each 
                risk contracting entity'',
                    (B) in the first sentence, by striking ``the 
                organization'' each place it appears and inserting 
                ``the entity'', and
                    (C) in the second sentence, by striking ``an 
                organization'' and ``the organization'' and inserting 
                ``a risk contracting entity'' and ``the risk 
                contracting entity'', respectively.
            (11) Section 1903(m)(4)(B) of such Act (42 U.S.C. 
        1396b(m)(4)(B)) is amended by striking ``organization'' and 
        inserting ``risk contracting entity''.
            (12) Section 1903(m)(5) of such Act (42 U.S.C. 1396b(m)(5)) 
        is amended in paragraphs (A)(iii) and (B)(ii) by striking 
        ``organization'' and inserting ``entity''.
            (13) Section 1903(o) (42 U.S.C. 1396b(o)), as amended by 
        section 13622(a)(2) of the Omnibus Budget Reconciliation Act of 
        1993, is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (14) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
        1396b(w)(7)(A)(viii)) is amended by striking ``health 
        maintenance organizations (and other organizations with 
        contracts under section 1903(m))'' and inserting ``risk 
        contracting entities with contracts under section 1903(m)''.
            (15) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
        amended, in the matter preceding clause (i), by inserting 
        ``(which may be on a prepaid capitation or other risk basis)'' 
        after ``payment'' the first place it appears.
            (16) Section 1908(b) of such Act, as added by section 
        13623(b) of the Omnibus Budget Reconciliation Act of 1993, is 
        amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (17) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
        1396o(b)(2)(D)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (18) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
        1396r-6(b)(4)(D)(iv)) is amended--
                    (A) in the heading, by striking ``hmo'' and 
                inserting ``risk contracting entity'',
                    (B) by striking ``health maintenance organization'' 
                and inserting ``risk contracting entity'' each place it 
                appears, and
                    (C) by striking ``section 1903(m)(1)(A)'' and 
                inserting ``section 1903(m)(1)(B)(i)''.
            (19) Paragraphs (1) and (2) of section 1926(a) of such Act 
        (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
        maintenance organizations'' and inserting ``risk contracting 
        entities''.
            (20) Section 1927 of such Act (42 U.S.C. 1396s) is 
        amended--
                    (A) in subsection (c)(1)(C)(i), as amended by 
                section 13602(a)(1) of the Omnibus Budget 
                Reconciliation Act of 1993, by striking ``health 
                maintenance organization'' and inserting ``risk 
                contracting entity'' , and
                    (B) in subsection (j)(1), by striking ``*** Health 
                Maintenance Organizations, including those 
                organizations'' and inserting ``risk contracting 
                entities''.
    (d) Effective Date.--The amendments made by this section shall 
become effective with respect to calendar quarters beginning on or 
after January 1, 1994.

SEC. 1702. PERIOD OF CERTAIN WAIVERS.

    (a) In General.--Section 1915(h) of the Social Security Act (42 
U.S.C. 1396n(h)) is amended by striking ``No waiver'' and all that 
follows through ``unless the Secretary'' and inserting ``A waiver under 
this section (other than under subsection (c), (d), or (e)) shall be 
for an initial term of 3 years and, upon the request of a State, shall 
be extended for additional 5 year periods unless the Secretary''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to waivers pursuant to applications which are approved, and with 
respect to continuations of waivers for which requests are made, later 
than 30 days after the date of the enactment of this Act.

     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

            Subtitle A--Medical Malpractice Liability Reform

                       PART 1--GENERAL PROVISIONS

SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE LIABILITY ACTIONS.

    (a) Applicability.--This subtitle shall apply with respect to any 
medical malpractice liability claim and to any medical malpractice 
liability action brought in any State or Federal court, except that 
this subtitle shall not apply to a claim or action for damages arising 
from a vaccine-related injury or death to the extent that title XXI of 
the Public Health Service Act applies to the claim or action.
    (b) Preemption.--The provisions of this subtitle shall preempt any 
State law to the extent such law is inconsistent with the limitations 
contained in such provisions. The provisions of this subtitle shall not 
preempt any State law that provides for defenses or places limitations 
on a person's liability in addition to those contained in this 
subtitle, places greater limitations on the amount of attorneys' fees 
that can be collected, or otherwise imposes greater restrictions than 
those provided in this subtitle.
    (c) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in subsection (b) shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum.
    (d) Federal Court Jurisdiction Not Established on Federal Question 
Grounds.--Nothing in this subtitle shall be construed to establish any 
jurisdiction in the district courts of the United States over medical 
malpractice liability actions on the basis of section 1331 or 1337 of 
title 28, United States Code.

SEC. 2002. DEFINITIONS.

    As used in this subtitle:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system established under this subtitle that provides for the 
        resolution of medical malpractice liability claims in a manner 
        other than through medical malpractice liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice liability claim, and any person 
        on whose behalf such a claim is alleged, including the decedent 
        in the case of an action brought through or on behalf of an 
        estate.
            (3) Clear and convincing evidence.--The term ``clear and 
        convincing evidence'' is that measure or degree of proof that 
        will produce in the mind of the trier of fact a firm belief or 
        conviction as to the truth of the allegations sought to be 
        established, except that such measure or degree of proof is 
        more than that required under preponderance of the evidence, 
        but less than that required for proof beyond a reasonable 
        doubt.
            (4) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for hospital and other 
        medical expenses, lost wages, lost employment, and other 
        pecuniary losses.
            (5) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice liability 
        claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional in which the plaintiff 
        alleges a medical malpractice liability claim, but does not 
        include any action in which the plaintiff's sole allegation is 
        an allegation of an intentional tort.
            (9) Medical malpractice liability claim.--The term 
        ``medical malpractice liability claim'' means a claim in which 
        the claimant alleges that injury was caused by the provision of 
        (or the failure to provide) health care services or the use of 
        a medical product.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for physical and 
        emotional pain, suffering, inconvenience, physical impairment, 
        mental anguish, disfigurement, loss of enjoyment of life, loss 
        of consortium, and other nonpecuniary losses, but does not 
        include punitive damages.
            (12) Punitive damages; exemplary damages.--The terms 
        ``punitive damages'' and ``exemplary damages'' mean 
        compensation, in addition to compensation for actual harm 
        suffered, that is awarded for the purpose of punishing a person 
        for conduct deemed to be malicious, wanton, willful, or 
        excessively reckless.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (14) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, and American Samoa.

SEC. 2003. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b) and section 
2017(c), this subtitle shall apply with respect to claims accruing or 
actions brought on or after the expiration of the 3-year period that 
begins on the date of the enactment of this Act.
    (b) Exception for States Requesting Earlier Implementation of 
Reforms.--
            (1) Application.--A State may submit an application to the 
        Secretary requesting the early implementation of this subtitle 
        with respect to claims or actions brought in the State.
            (2) Decision by secretary.--The Secretary shall issue a 
        response to a State's application under paragraph (1) not later 
        than 90 days after receiving the application. If the Secretary 
        determines that the State meets the requirements of this 
        subtitle at the time of submitting its application, the 
        Secretary shall approve the State's application, and this 
        subtitle shall apply with respect to actions brought in the 
        State on or after the expiration of the 90-day period that 
        begins on the date the Secretary issues the response. If the 
        Secretary denies the State's application, the Secretary shall 
        provide the State with a written explanation of the grounds for 
        the decision.

        PART 2--MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 2032(a), or, in the case of a State 
        in which such a system is not in effect for the year, under the 
        alternative Federal system established under section 2032(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described in 
                subparagraph (A) may not be brought in any Federal 
                court unless the claim has been initially resolved 
                under the alternative dispute resolution process 
                established by the Attorney General under such 
                subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
                    (A) the ADR reaches a decision on whether the 
                defendant is liable to the plaintiff for damages; and
                    (B) if the ADR determines that the defendant is 
                liable, the ADR reaches a decision on the amount of 
                damages assessed against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 2012. CALCULATION AND PAYMENT OF DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) Treatment of Punitive Damages.--
            (1) Basis for recovery.--Punitive or exemplary damages 
        shall not be awarded in a medical malpractice liability action 
        unless the claimant establishes by clear and convincing 
        evidence that the injury suffered was the direct result of 
        conduct manifesting a malicious, wanton, willful, or 
        excessively reckless disregard of the safety of others.
            (2) No award against manufacturer of medical product.--In 
        the case of a medical malpractice liability action in which the 
        plaintiff alleges a claim against the manufacturer of a medical 
        product, no punitive or exemplary damages may be awarded 
        against such manufacturer.
            (3) Payments to state for medical quality assurance 
        activities.--
                    (A) In general.--Any punitive or exemplary damages 
                awarded in a medical malpractice liability action shall 
                be paid to the State in which the action is brought or, 
                in a case brought in Federal court, in the State in 
                which the health care services that caused the injury 
                that is the subject of the action were provided.
                    (B) Activities described.--A State shall use 
                amounts paid pursuant to subparagraph (A) to carry out 
                activities to assure the safety and quality of health 
                care services provided in the State, including (but not 
                limited to)--
                            (i) licensing or certifying health care 
                        professionals and health care providers in the 
                        State;
                            (ii) operating alternative dispute 
                        resolution systems;
                            (iii) carrying out public education 
                        programs relating to medical malpractice and 
                        the availability of alternative dispute 
                        resolution systems in the State; and
                            (iv) carrying out programs to reduce 
                        malpractice-related costs for retired providers 
                        or other providers volunteering to provide 
                        services in medically underserved areas.
                    (C) Maintenance of effort.--A State shall use any 
                amounts paid pursuant to subparagraph (A) to supplement 
                and not to replace amounts spent by the State for the 
                activities described in subparagraph (B).
    (c) Periodic Payments for Future Losses.--
            (1) General rule.--In any medical malpractice liability 
        action in which the damages awarded for future economic loss 
        exceeds $100,000, a defendant may not be required to pay such 
        damages in a single, lump-sum payment, but shall be permitted 
        to make such payments periodically based on when the damages 
        are found likely to occur, as such payments are determined by 
        the court.
            (2) Waiver.--A court may waive the application of paragraph 
        (1) with respect to a defendant if the court determines that it 
        is not in the best interests of the plaintiff to receive 
        payments for damages on such a periodic basis.

SEC. 2013. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

    (a) Limitation on Amount of Contingency Fees.--
            (1) In general.--An attorney who represents, on a 
        contingency fee basis, a claimant in a medical malpractice 
        liability claim may not charge, demand, receive, or collect for 
        services rendered in connection with such claim in excess of 
        the following amount recovered by judgment or settlement under 
        such claim:
                    (A) 25 percent of the first $150,000 (or portion 
                thereof) recovered, plus
                    (B) 10 percent of any amount in excess of $150,000 
                recovered.
            (2) Calculation of periodic payments.--In the event that a 
        judgment or settlement includes periodic or future payments of 
        damages, the amount recovered for purposes of computing the 
        limitation on the contingency fee under paragraph (1) shall be 
        based on the cost of the annuity or trust established to make 
        the payments. In any case in which an annuity or trust is not 
        established to make such payments, such amount shall be based 
        on the present value of the payments.
    (b) Requiring Party Contesting ADR Ruling to Pay Attorney's Fees 
and Other Costs.--
            (1) In general.--The court in a medical malpractice 
        liability action shall require the party that (pursuant to 
        section 2011(c)(1)) contested the ruling of the alternative 
        dispute resolution system with respect to the medical 
        malpractice liability claim that is the subject of the action 
        to pay to the opposing party the costs incurred by the opposing 
        party under the action, including attorney's fees, fees paid to 
        expert witnesses, and other litigation expenses (but not 
        including court costs, filing fees, or other expenses paid 
        directly by the party to the court, or any fees or costs 
        associated with the resolution of the claim under the 
        alternative dispute resolution system), but only if--
                    (A) in the case of an action in which the party 
                that contested the ruling is the claimant, the amount 
                of damages awarded to the party under the action does 
                not exceed the amount of damages awarded to the party 
                under the ADR system by at least 10 percent; and
                    (B) in the case of an action in which the party 
                that contested the ruling is the defendant, the amount 
                of damages assessed against the party under the action 
                is not at least 10 percent less than the amount of 
                damages assessed under the ADR system.
            (2) Exceptions.--Paragraph (1) shall not apply if--
                    (A) the party contesting the ruling made under the 
                previous alternative dispute resolution system shows 
                that--
                            (i) the ruling was procured by corruption, 
                        fraud, or undue means,
                            (ii) there was partiality or corruption 
                        under the system,
                            (iii) there was other misconduct under the 
                        system that materially prejudiced the party's 
                        rights, or
                            (iv) the ruling was based on an error of 
                        law;
                    (B) the party contesting the ruling made under the 
                alternative dispute resolution system presents new 
                evidence before the trier of fact that was not 
                available for presentation under the ADR system;
                    (C) the medical malpractice liability action raised 
                a novel issue of law; or
                    (D) the court finds that the application of such 
                paragraph to a party would constitute an undue 
                hardship, and issues an order waiving or modifying the 
                application of such paragraph that specifies the 
                grounds for the court's decision.
            (3) Requirement for performance bond.--The court in a 
        medical malpractice liability action shall require the party 
        that (pursuant to section 2011(c)(1)) contested the ruling of 
        the alternative dispute resolution system with respect to the 
        medical malpractice liability claim that is the subject of the 
        action to post a performance bond (in such amount and 
        consisting of such funds and assets as the court determines to 
        be appropriate), except that the court may waive the 
        application of such requirement to a party if the court 
        determines that the posting of such a bond is not necessary to 
        ensure that the party shall meet the requirements of this 
        subsection to pay the opposing party the costs incurred by the 
        opposing party under the action.
            (4) Limit on attorney's fees paid.--Attorneys' fees that 
        are required to be paid under paragraph (1) by the contesting 
        party shall not exceed the amount of the attorneys' fees 
        incurred by the contesting party in the action. If the 
        attorneys' fees of the contesting party are based on a 
        contingency fee agreement, the amount of attorneys' fees for 
        purposes of the preceding sentence shall not exceed the 
        reasonable value of those services.
            (5) Records.--In order to receive attorneys' fees under 
        paragraph (1), counsel of record in the medical malpractice 
        liability action involved shall maintain accurate, complete 
        records of hours worked on the action, regardless of the fee 
        arrangement with the client involved.
    (c) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 2014. JOINT AND SEVERAL LIABILITY.

    Except as provided in subsection (b), a defendant may be held 
severally but not jointly liable in a medical malpractice action. A 
person found liable for damages in any such action may be found liable, 
if at all, only for those damages directly attributable to the person's 
proportionate share of fault or responsibility for the injury, and may 
not be found liable for damages attributable to the proportionate share 
of fault or responsibility of any other person (without regard to 
whether that person is a party to the action) for the injury, including 
any person bringing the action.

SEC. 2015. STATUTE OF LIMITATIONS.

    A medical malpractice liability claim may not be brought after the 
expiration of the 7-year period that begins on the date the alleged 
injury that is the subject of the claim occurred. If the commencement 
of such an action is stayed or enjoined, the running of the statute of 
limitations under this section shall be suspended for the period of the 
stay or injunction.

SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEGLIGENCE.

    A defendant in a medical malpractice liability action may not be 
found to have acted negligently unless the defendant's conduct at the 
time of providing the health care services that are the subject of the 
action was not reasonable.

SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) Imposition of Higher Standard of Proof.--In the case of a 
medical malpractice liability claim relating to services provided 
during labor or the delivery of a baby, if the health care professional 
against whom the claim is brought did not previously treat the 
individual alleged to have been injured for the pregnancy, the trier of 
fact may not find that the defendant committed malpractice and may not 
assess damages against the health care professional unless the 
malpractice is proven by clear and convincing evidence.
    (b) Applicability to Group Practices or Agreements Among 
Providers.--For purposes of subsection (a), a health care professional 
shall be considered to have previously treated an individual for a 
pregnancy if the professional is a member of a group practice whose 
members previously treated the individual for the pregnancy or is 
providing services to the individual during labor or the delivery of a 
baby pursuant to an agreement with another health care professional.
    (c) Effective Date.--This section shall apply with respect to 
claims accruing or actions brought on or after the expiration of the 2-
year period that begins on the date of the enactment of this Act.

 PART 3--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

SEC. 2031. BASIC REQUIREMENTS.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of part 2 shall apply with respect 
to claims brought under a State alternative dispute resolution system 
or the alternative Federal system in the same manner as such provisions 
apply with respect to medical malpractice liability actions brought in 
the State.

SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1994), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this part 
        for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 2031.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1994, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                2031(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of states with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year--
                    (A) the State shall reimburse the United States (at 
                such time and in such manner as the Secretary may 
                require) for the costs incurred by the United States 
                during the year as a result of the application of the 
                system with respect to the State; and
                    (B) notwithstanding any other provision of law, no 
                funds may be paid to the State (or to any unit of local 
                government in the State) or to any entity in the State 
                pursuant to the Public Health Service Act.

SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this part and the alternative 
Federal system established under section 2032(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

   PART 4--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES TO PARTICIPATE IN 
              DISCIPLINARY ACTIVITIES.

    (a) Role of Professional Societies.--Notwithstanding any other 
provision of State or Federal law, a State agency responsible for the 
conduct of disciplinary actions for a type of health care practitioner 
may enter into agreements with State or county professional societies 
of such type of health care practitioner to permit such societies to 
participate in the licensing of such health care practitioner, and to 
review any health care malpractice action, health care malpractice 
claim or allegation, or other information concerning the practice 
patterns of any such health care practitioner. Any such agreement shall 
comply with subsection (b).
    (b) Requirements of Agreements.--Any agreement entered into under 
subsection (a) for licensing activities or the review of any health 
care malpractice action, health care malpractice claim or allegation, 
or other information concerning the practice patterns of a health care 
practitioner shall provide that--
            (1) the health care professional society conducts such 
        activities or review as expeditiously as possible;
            (2) after the completion of such review, such society shall 
        report its findings to the State agency with which it entered 
        into such agreement;
            (3) the conduct of such activities or review and the 
        reporting of such findings be conducted in a manner which 
        assures the preservation of confidentiality of health care 
        information and of the review process; and
            (4) no individual affiliated with such society is liable 
        for any damages or injury directly caused by the individual's 
        actions in conducting such activities or review.
    (c) Agreements Not Mandatory.--Nothing in this section may be 
construed to require a State to enter into agreements with societies 
described in subsection (a) to conduct the activities described in such 
subsection.
    (d) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOLUNTARY SERVICE BY 
              PHYSICIANS.

    (a) Study.--The Secretary shall conduct a study analyzing the 
existence and effectiveness of incentives adopted by State and local 
governments, insurers, medical societies, and other entities to 
encourage physicians (whether practicing or retired) to volunteer to 
provide health care services in medically underserved areas.
    (b) Reports.--(1) Not later than 1 year after the date of the 
enactment of this Act, the Secretary shall submit an interim report to 
Congress on the study conducted under subsection (a), together with the 
Secretary's recommendations for actions to increase the number of 
physicians volunteering to provide health care services in medically 
underserved areas.
    (2) Not later than 5 years after the date of the enactment of this 
Act, the Secretary shall submit a final report to the Congress on the 
study conducted under subsection (a) (taking into account the effects 
of this subtitle on the incidence and costs of medical malpractice), 
together with the Secretary's recommendations for actions to increase 
the number of physicians volunteering to provide health care services 
in medically underserved areas.

SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PROGRAMS.

    (a) Requirements for Providers.--Each State shall require each 
health care professional and health care provider providing services in 
the State to participate in a risk management program to prevent and 
provide early warning of practices which may result in injuries to 
patients or which otherwise may endanger patient safety.
    (b) Requirements for Insurers.--Each State shall require each 
entity which provides health care professional or provider liability 
insurance to health care professionals and health care providers in the 
State to--
            (1) establish risk management programs based on data 
        available to such entity or sanction programs of risk 
        management for health care professionals and health care 
        providers provided by other entities; and
            (2) require each such professional or provider, as a 
        condition of maintaining insurance, to participate in one 
        program described in paragraph (1) at least once in each 3-year 
        period.
    (c) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.

    (a) Research on Medical Injury Prevention and Compensation.
            (1) In general.--The Secretary shall make grants for the 
        conduct of basic research in the prevention of and compensation 
        for injuries resulting from health care professional or health 
        care provider malpractice, and research of the outcomes of 
        health care procedures.
            (2) Preference for research on certain activities.--In 
        making grants under paragraph (1), the Secretary shall give 
        preference to applications for grants to conduct research on 
        the behavior of health care providers and health care 
        professionals in carrying out their professional duties and of 
        other participants in systems for compensating individuals 
        injured by medical malpractice, the effects of financial and 
        other incentives on such behavior, the determinants of 
        compensation system outcomes, and the costs and benefits of 
        alternative compensation policy options.
            (3) Application.--The Secretary may not make a grant under 
        paragraph (1) unless an applicant submits an application to the 
        Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary may require.
    (b) Grants for Licensing and Disciplinary Activities.--
            (1) In general.--The Secretary shall make grants to States 
        to assist States in improving the State's ability to license 
        and discipline health care professionals.
            (2) Uses for grants.--A State may use a grant awarded under 
        subsection (a) to develop and implement improved mechanisms for 
        monitoring the practices of health care professionals or for 
        conducting disciplinary activities.
            (3) Technical assistance.--The Secretary shall provide 
        technical assistance to States receiving grants under paragraph 
        (1) to assist them in evaluating their medical practice acts 
        and procedures and to encourage the use of efficient and 
        effective early warning systems and other mechanisms for 
        detecting practices which endanger patient safety and for 
        disciplining health care professionals.
            (4) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
    (c) Grants for Public Education Programs.--
            (1) In general.--The Secretary shall make grants to States 
        and to local governments, private nonprofit organizations, and 
        health professional schools (as defined in paragraph (3)) for--
                    (A) educating the general public about the 
                appropriate use of health care and realistic 
                expectations of medical intervention;
                    (B) educating the public about the resources and 
                role of health care professional licensing and 
                disciplinary boards in investigating claims of 
                incompetence or health care malpractice; and
                    (C) developing programs of faculty training and 
                curricula for educating health care professionals in 
                quality assurance, risk management, and medical injury 
                prevention.
            (2) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
            (3) Health professional school defined.--In paragraph (1), 
        the term ``health professional school'' means a school of 
        nursing (as defined in section 853(2) of the Public Health 
        Service Act) or a school or program under section 799(1) of 
        such Act.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated not more than $15,000,000 for each of the first 5 fiscal 
years beginning on or after the date of the enactment of this Act for 
grants under this section.

                Subtitle B--Administrative Cost Savings

              PART 1--STANDARDIZATION OF CLAIMS PROCESSING

SEC. 2101. ADOPTION OF DATA ELEMENTS, UNIFORM CLAIMS, AND UNIFORM 
              ELECTRONIC TRANSMISSION STANDARDS.

    (a) In General.--The Secretary of Health and Human Services (in 
this subtitle referred to as the ``Secretary'') shall adopt standards 
relating to each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health benefit plans, as well as for use in 
        utilization review and management of care (including data 
        fields, formats, and medical nomenclature, and including plan 
        benefit and insurance information).
            (2) Uniform claims forms (including uniform procedure and 
        billing codes for uses with such forms and including 
        information on other health benefit plans that may be liable 
        for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services. Standards 
under paragraph (3) shall include protections to assure the 
confidentiality of patient-specific information and to protect against 
the unauthorized use and disclosure of information.
    (b) Use of Task Forces.--In adopting standards under this section--
            (1) the Secretary shall take into account the 
        recommendations of current taskforces, 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;
            (2) the Secretary shall consult with the National 
        Association of Insurance Commissioners (and, with respect to 
        standards under subsection (a)(3), the American National 
        Standards Institute); and
            (3) the Secretary shall, to the maximum extent practicable, 
        seek to make the standards consistent with any uniform clinical 
        data sets which have been adopted and are widely recognized.
    (c) Deadlines for Promulgation.--The Secretary shall promulgate the 
standards under--
            (1) subsection (a)(1) relating to claims processing data, 
        by not later than 12 months after the date of the enactment of 
        this Act;
            (2) subsection (a)(2) (relating to uniform claims forms) by 
        not later than 12 months after the date of the enactment of 
        this Act; and
            (3)(A) subsection (a)(3) relating to transmission of 
        information concerning hospital and physicians services, by not 
        later than 24 months after the date of the enactment of this 
        Act, and
            (B) subsection (a)(3) relating to transmission of 
        information on other services, by such later date as the 
        Secretary may determine it to be feasible.
    (d) Report to Congress.--Not later than 3 years after the date of 
the enactment of this Act, the Secretary shall report to Congress 
recommendations regarding restructuring the medicare peer review 
quality assurance program given the availability of hospital data in 
electronic form.

SEC. 2102. APPLICATION OF STANDARDS.

    (a) In General.--If the Secretary determines, at the end of the 2-
year period beginning on the date that standards are adopted under 
section 2101 with respect to classes of services, that a significant 
number of claims for benefits for such services under health benefit 
plans are not being submitted in accordance with such standards, the 
Secretary may require, after notice in the Federal Register of not less 
than 6 months, that all providers of such services must submit claims 
to health benefit plans in accordance with such standards. The 
Secretary may waive the application of such a requirement in such cases 
as the Secretary finds that the imposition of the requirement would not 
be economically practicable.
    (b) Significant Number.--The Secretary shall make an affirmative 
determination described in subsection (a) for a class of services only 
if the Secretary finds that there would be a significant, measurable 
additional gain in efficiencies in the health care system that would be 
obtained by imposing the requirement described in such paragraph with 
respect to such services.
    (c) Application of Requirement.--
            (1) In general.--If the Secretary imposes the requirement 
        under subsection (a)--
                    (A) in the case of a requirement that imposes the 
                standards relating to electronic transmission of claims 
                for a class of services, each health care provider that 
                furnishes such services for which benefits are payable 
                under a health benefit plan shall transmit 
                electronically and directly to the plan on behalf of 
                the beneficiary involved a claim for such services in 
                accordance with such standards;
                    (B) any health benefit plan may reject any claim 
                subject to the standards adopted under section 2101 but 
                which is not submitted in accordance with such 
                standards;
                    (C) it is unlawful for a health benefit plan (i) to 
                reject any such claim on the basis of the form in which 
                it is submitted if it is submitted in accordance with 
                such standards or (ii) to require, for the purpose of 
                utilization review or as a condition of providing 
                benefits under the plan, a provider to transmit medical 
                data elements that are inconsistent with the standards 
                established under section 2101(a)(1); and
                    (D) the Secretary may impose a civil money penalty 
                on any provider that knowingly and repeatedly submits 
                claims in violation of such standards or on any health 
                benefit plan (other than a health benefit plan 
                described in paragraph (2)) that knowingly and 
                repeatedly rejects claims in violation of subparagraph 
                (B), in an amount not to exceed $100 for each such 
                claim.
        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 
        subparagraph (D) in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan--
                    (A) that is subject to regulation by a State, and
                    (B) with respect to which the Secretary finds 
                that--
                            (i) the State provides for application of 
                        the standards established under section 2101, 
                        and
                            (ii) the State regulatory program provides 
                        for the appropriate and effective enforcement 
                        of such standards.
    (d) Treatment of Rejections.--If a plan rejects a claim pursuant to 
subsection (c)(1), the plan shall permit the person submitting the 
claim a reasonable opportunity to resubmit the claim on a form or in an 
electronic manner that meets the requirements for acceptance of the 
claim under such subsection.

SEC. 2103. PERIODIC REVIEW AND REVISION OF STANDARDS.

    (a) In General.--The Secretary shall--
            (1) provide for the ongoing receipt and review of comments 
        and suggestions for changes in the standards adopted and 
        promulgated under section 2101;
            (2) establish a schedule for the periodic review of such 
        standards; and
            (3) based upon such comments, suggestions, and review, 
        revise such standards and promulgate such revisions.
    (b) Application of Revised Standards.--If the Secretary under 
subsection (a) revises the standards described in 2101, then, in the 
case of any claim for benefits submitted under a health benefit plan 
more than the minimum period (of not less than 6 months specified by 
the Secretary) after the date the revision is promulgated under 
subsection (a)(3), such standards shall apply under section 2102 
instead of the standards previously promulgated.

SEC. 2104. HEALTH BENEFIT PLAN DEFINED.

    In this subtitle, the term ``health benefit plan'' has the meaning 
given such term in section 112(6) and includes--
            (1) the medicare program (under title XVIII of the Social 
        Security Act) and medicare supplemental health insurance, and
            (2) a State medicaid plan (approved under title XIX of such 
        Act).

               PART 2--ELECTRONIC MEDICAL DATA STANDARDS

SEC. 2111. MEDICAL DATA STANDARDS FOR HOSPITALS AND OTHER PROVIDERS.

    (a) Promulgation of Hospital Data Standards.--
            (1) In general.--Between July 1, 1994, and January 1, 1995, 
        the Secretary shall promulgate standards described in 
        subsection (b) for hospitals concerning electronic medical 
        data.
            (2) Revision.--The Secretary may from time to time revise 
        the standards promulgated under this subsection.
    (b) Contents of Data Standards.--The standards promulgated under 
subsection (a) shall include at least the following:
            (1) A definition of a standard set of data elements for use 
        by utilization and quality control peer review organizations.
            (2) A definition of the set of comprehensive data elements, 
        which set shall include for hospitals the standard set of data 
        elements defined under paragraph (1).
            (3) Standards for an electronic patient care information 
        system with data obtained at the point of care, including 
        standards to protect against the unauthorized use and 
        disclosure of information.
            (4) A specification of, and manner of presentation of, the 
        individual data elements of the sets and system under this 
        subsection.
            (5) Standards concerning the transmission of electronic 
        medical data.
            (6) Standards relating to confidentiality of patient-
        specific information.
The standards under this section shall be consistent with standards for 
data elements established under section 2101.
    (c) Optional Data Standards for Other Providers.--
            (1) In general.--The Secretary may promulgate standards 
        described in paragraph (2) concerning electronic medical data 
        for providers that are not hospitals. The Secretary may from 
        time to time revise the standards promulgated under this 
        subsection.
            (2) Contents of data standards.--The standards promulgated 
        under paragraph (1) for non-hospital providers may include 
        standards comparable to the standards described in paragraphs 
        (2), (4), and (5) of subsection (b) for hospitals.
    (d) Consultation.--In promulgating and revising standards under 
this section, the Secretary shall--
            (1) consult with the American National Standards Institute, 
        hospitals, with the advisory commission established under 
        section 2115, and with other affected providers, health benefit 
        plans, and other interested parties, and
            (2) take into consideration, in developing standards under 
        subsection (b)(1), the data set used by the utilization and 
        quality control peer review program under part B of title XI of 
        the Social Security Act.

SEC. 2112. APPLICATION OF ELECTRONIC DATA STANDARDS TO CERTAIN 
              HOSPITALS.

    (a) Medicare Requirement for Sharing of Hospital Information.--As 
of January 1, 1996, subject to paragraph (2), each hospital, as a 
requirement of each participation agreement under section 1866 of the 
Social Security Act, shall--
            (1) maintain clinical data included in the set of 
        comprehensive data elements under section 2111(b)(2) in 
        electronic form on all inpatients,
            (2) 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 the data set, and
            (3) 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,
in accordance with the standards promulgated under section 2111(a).
    (b) Waiver Authority.--Until January 1, 2000:
            (1) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is a small 
        rural hospital, for such period as the hospital demonstrates 
        compliance with such requirements would constitute an undue 
        financial hardship.
            (2) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is in the 
        process of developing a system to provide the required data set 
        and executes agreements with its fiscal intermediary and its 
        utilization and quality control peer review organization that 
        the hospital will meet the requirements of subsection (a) by a 
        specified date (not later than January 1, 2000).
            (3) The Secretary may waive the application of the 
        requirement of subsection (a)(1) for a hospital that agrees to 
        obtain from its records the data elements that are needed to 
        meet the requirements of paragraphs (2) and (3) of subsection 
        (a) and agrees to subject its data transfer process to a 
        quality assurance program specified by the Secretary.
    (c) Application to Hospitals of the Department of Veterans 
Affairs.--
            (1) In general.--The Secretary of Veterans Affairs shall 
        provide that each hospital of the Department of Veterans 
        Affairs shall comply with the requirements of subsection (a) in 
        the same manner as such requirements would apply to the 
        hospital if it were participating in the Medicare program.
            (2) Waiver.--Such Secretary may waive the application of 
        such requirements to a hospital in the same manner as the 
        Secretary of Health and Human Services may waive under 
        subsection (b) the application of the requirements of 
        subsection (a).

SEC. 2113. ELECTRONIC TRANSMISSION TO FEDERAL AGENCIES.

    (a) In General.--Effective January 1, 2000, if a provider is 
required under a Federal program to transmit a data element that is 
subject to a presentation or transmission standard (as defined in 
subsection (b)), 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.
    (b) Presentation or Transmission Standard Defined.--In subsection 
(a), the term ``presentation or transmission standard'' means a 
standard, promulgated under subsection (b) or (c) of section 2111, 
described in paragraph (4) or (5) of section 2111(b).

SEC. 2114. LIMITATION ON DATA REQUIREMENTS WHERE STANDARDS IN EFFECT.

    (a) In General.--If standards with respect to data elements are 
promulgated under section 2111 with respect to a class of provider, a 
health benefit plan may not require, for the purpose of utilization 
review or as a condition of providing benefits under the plan, that a 
provider in the class--
            (1) provide any data element not in the set of 
        comprehensive data elements specified under such standards, or
            (2) transmit or present any such data element in a manner 
        inconsistent with the applicable standards for such 
        transmission or presentation.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        subsection (a) 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.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 2115. ADVISORY COMMISSION.

    (a) In General.--The Secretary shall establish an advisory 
commission including hospital executives, hospital data base managers, 
physicians, health services researchers, and technical experts in 
collection and use of data and operation of data systems. Such 
commission shall include, as ex officio members, a representative of 
the Director of the National Institutes of Health, the Administrator 
for Health Care Policy and Research, the Secretary of Veterans Affairs, 
and the Director of the Centers for Disease Control.
    (b) Functions.--The advisory commission shall monitor and advise 
the Secretary concerning--
            (1) the standards established under this part, and
            (2) operational concerns about the implementation of such 
        standards under this part.
    (c) Staff.--From the amounts appropriated under subsection (d), the 
Secretary shall provide sufficient staff to assist the advisory 
commission in its activities under this section.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 for each of fiscal years 1994 through 1999 to 
carry out this section.

 PART 3--DEVELOPMENT AND DISTRIBUTION OF COMPARATIVE VALUE INFORMATION

SEC. 2121. STATE COMPARATIVE VALUE INFORMATION PROGRAMS FOR HEALTH CARE 
              PURCHASING.

    (a) Purpose.--In order to assure the availability of comparative 
value information to purchasers of health care in each State, the 
Secretary shall determine whether each State is developing and 
implementing a health care value information program that meets the 
criteria and schedule set forth in subsection (b).
    (b) Criteria and Schedule for State Programs.--The criteria and 
schedule for a State health care value information program in this 
subsection shall be specified by the Secretary as follows:
            (1) The State begins promptly after enactment of this Act 
        to develop (directly or through contractual or other 
        arrangements with one or more States, coalitions of health 
        insurance purchasers, other entities, or any combination of 
        such arrangements) information systems regarding comparative 
        health values.
            (2) The information contained in such systems covers at 
        least the average prices of common health care services (as 
        defined in subsection (d)) and health insurance plans, and, 
        where available, measures of the variability of these prices 
        within a State or other market areas.
            (3) The information described in paragraph (2) is made 
        available within the State beginning not later than one year 
        after the date of the enactment of this Act, and is revised as 
        frequently as reasonably necessary, but at intervals of no 
        greater than one year.
            (4) Not later than 6 years after the date of the enactment 
        of this Act the State has developed information systems that 
        provide comparative costs, quality, and outcomes data with 
        respect to health insurance plans and hospitals and made the 
        information broadly available within the relevant market areas.
Nothing in this section shall preclude a State from providing 
additional information, such as information on prices and benefits of 
different health benefit plans, available.
    (c) Grants to States for the Development of State Programs.--
            (1) Grant authority.--The Secretary may make grants to each 
        State to enable such State to plan the development of its 
        health care value information program and, if necessary, to 
        initiate the implementation of such program. Each State seeking 
        such a grant shall submit an application therefore, containing 
        such information as the Secretary finds necessary to assure 
        that the State is likely to develop and implement a program in 
        accordance with the criteria and schedule in subsection (b).
            (2) Offset authority.--If, at any time within the 3-year 
        period following the receipt by a State of a grant under this 
        subsection, the Secretary is required by section 2122 to 
        implement a health care information program in the State, the 
        Secretary may recover the amount of the grant under this 
        subsection by offset against any other amount payable to the 
        State under the Social Security Act. The amount of the offset 
        shall be made available (from the appropriation account with 
        respect to which the offset was taken) to the Secretary to 
        carry out such section.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as are necessary to make grants 
        under this subsection, to remain available until expended.
    (d) Common Health Care Services Defined.--In this section, the term 
``common health care services'' includes such procedures as the 
Secretary may specify and any additional health care services which a 
State may wish to include in its comparative value information program.
    (e) State Defined.--In this subtitle, the term ``State'' includes 
the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and 
American Samoa.

SEC. 2122. FEDERAL IMPLEMENTATION.

    (a) In General.--If the Secretary finds, at any time, that a State 
has failed to develop or to continue to implement a health care value 
information program in accordance with the criteria and schedule in 
section 2121(b), the Secretary shall take the actions necessary, 
directly or through grants or contract, to implement a comparable 
program in the State.
    (b) Fees.--Fees may be charged by the Secretary for the information 
materials provided pursuant to a program under this section. Any 
amounts so collected shall be deposited in the appropriation account 
from which the Secretary's costs of providing such materials were met, 
and shall remain available for such purposes until expended.

SEC. 2123. COMPARATIVE VALUE INFORMATION CONCERNING FEDERAL PROGRAMS.

    (a) Development.--The head of each Federal agency with 
responsibility for the provision of health insurance or of health care 
services to individuals shall promptly develop health care value 
information relating to each program that such head administers and 
covering the same types of data that a State program meeting the 
criteria of section 2121(b) would provide.
    (b) Dissemination of Information.--Such information shall be made 
generally available to States and to providers and consumers of health 
care services.

SEC. 2124. DEVELOPMENT OF MODEL SYSTEMS.

    (a) In General.--The Secretary shall, directly or through grant or 
contract, develop model systems to facilitate--
            (1) the gathering of data on health care cost, quality, and 
        outcome described in section 2121(b)(4), and
            (2) analyzing such data in a manner that will permit the 
        valid comparison of such data among providers and among health 
        plans.
    (b) Experimentation.--The Secretary shall support experimentation 
with different approaches to achieve the objectives of subsection (a) 
in the most cost effective manner (relative to the accuracy and 
timeliness of the data secured) and shall evaluate the various methods 
to determine their relative success.
    (c) Standards.--When the Secretary considers it appropriate, the 
Secretary may establish standards for the collection and reporting of 
data on health care cost, quality and outcomes in order to facilitate 
analysis and comparisons among States and nationally.
    (d) Report.--By not later than 3 years after the date of the 
enactment of this Act, the Secretary shall report to the Congress and 
the States on the models developed, and experiments conducted, under 
this section.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary for each fiscal year beginning 
with fiscal year 1994 to enable the Secretary to carry out this 
section, including evaluation of the different approaches tested under 
subsection (b) and their relative cost effectiveness.

      PART 4--ADDITIONAL STANDARDS AND REQUIREMENTS; RESEARCH AND 
                             DEMONSTRATIONS

SEC. 2131. STANDARDS RELATING TO USE OF MEDICARE AND MEDICAID 
              MAGNETIZED HEALTH BENEFIT CARDS; SECONDARY PAYOR DATA 
              BANK.

    (a) Magnetized Identification Cards Under Medicare Program.--The 
Secretary shall adopt standards relating to the design and use of 
magnetized medicare identification cards in order to assist health care 
providers providing medicare covered services to individuals--
            (1) in determining whether individuals are eligible for 
        benefits under the medicare program, and
            (2) in billing the medicare program for such services 
        provided to eligible individuals.
Such cards shall be designed to be compatible with machines currently 
employed to transmit information on credit cards. Such cards also shall 
be designed to be able to be used with respect to the provision of 
benefits under medicare supplemental policies.
    (b) Adoption Under Medicaid Plans.--
            (1) In general.--The Secretary shall take such steps as may 
        be necessary to encourage and assist States to design and use 
        magnetized medicaid identification cards that meet such 
        standards, for use under their medicaid plans.
            (2) Limitation on mmis funds.--In applying section 
        1903(a)(3) of the Social Security Act, the Secretary may 
        determine that Federal financial participation is not available 
        under that section to a State which has provided for a 
        magnetized card system that is inconsistent with the standards 
        adopted under subsection (a).
    (c) Medicare and Medicaid Secondary Payor Data Bank.--The Secretary 
shall establish a medicare and medicaid information system which is 
designed to provide information on those group health plans and other 
health benefit plans that are primary payors to the medicare program 
and medicaid program under section 1862(b) or section 1905(a)(25) of 
the Social Security Act.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated, in equal proportions from the Federal Hospital Insurance 
Trust Fund and from the Federal Supplementary Medical Insurance Trust 
Fund, a total of $25,000,000 to carry out subsections (a) and (c), 
including the issuance of magnetized cards to medicare beneficiaries.

SEC. 2132. PREEMPTION OF STATE QUILL PEN LAWS.

    (a) In General.--Effective January 1, 1994, no effect shall be 
given to any provision of State law that requires medical or health 
insurance records (including billing information) to be maintained in 
written, rather than electronic form.
    (b) Secretarial Authority.--The Secretary of Health and Human 
Services may issue regulations to carry out subsection (a). Such 
regulations may provide for such exceptions to subsection (a) as the 
Secretary determines to be necessary to prevent fraud and abuse, with 
respect to controlled substances, and in such other cases as the 
Secretary deems appropriate.

SEC. 2133. USE OF STANDARD IDENTIFICATION NUMBERS.

    (a) In General.--Effective January 1, 1995, each health benefit 
plan shall--
            (1) for each of its beneficiaries that has a social 
        security account number, use that number as the personal 
        identifier for claims processing and related purposes, and
            (2) for each provider that has a unique identifier for 
        purposes of title XVIII of the Social Security Act and that 
        furnishes health care items or services to a beneficiary under 
        the plan, use that identifier as the identifier of that 
        provider for claims processing and related purposes.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        standards established under subsection (a) 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.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 2134. COORDINATION OF BENEFIT STANDARDS.

    (a) Review of Coordination of Benefit Problems.--Between July 1, 
1994, and January 1, 1995, the Secretary shall determine whether 
problems relating to--
            (1) the rules for determining the liability of health 
        benefit plans when benefits are payable under two or more such 
        plans, or
            (2) the availability of information among such health 
        benefit plans when benefits are so payable,
cause significant administrative costs.
    (b) Contingent Promulgation of Standards.--
            (1) In general.--If the Secretary determines that such 
        problems do cause significant administrative costs that could 
        be significantly reduced through the implementation of 
        standards, the Secretary shall promulgate standards 
        concerning--
                    (A) the liability of health benefit plans when 
                benefits are payable under two or more such plans, and
                    (B) the transfer among health benefit plans of 
                appropriate information (which may include standards 
                for the use of unique identifiers, and for the listing 
                of all individuals covered under a health benefit plan) 
                in determining liability in cases when benefits are 
                payable under two or more such plans.
            (2) Effective date.--The standards promulgated under 
        paragraph (1) shall become effective on a date specified by the 
        Secretary, which date shall be not earlier than one year after 
        the date of promulgation of the standards.
    (c) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        standards promulgated under subsection (b) 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.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                standards established under subsection (b), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such standards 
                with respect to such plans.
    (d) Revision of Standards.--If the Secretary establishes standards 
under subsection (b), the Secretary may revise such standards from time 
to time and such revised standards shall be applied under subsection 
(c) on or after such date (not earlier than 6 months after the date the 
revision is promulgated) as the Secretary shall specify.

SEC. 2135. RESEARCH AND DEMONSTRATIONS.

    (a) Demonstrations and Research on Monitoring and Improving Patient 
Care.--
            (1) The Secretary shall provide grants to qualified 
        entities to demonstrate (and conduct research concerning) the 
        application of comprehensive information systems--
                    (A) in continuously monitoring patient care, and
                    (B) in improving patient care.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated from the Federal Hospital 
        Insurance Trust Fund $10,000,000 for each fiscal year 
        (beginning with fiscal year 1994 and ending with fiscal year 
        1998).
    (b) Communication Links.--
            (1) The Secretary may make grants to at least two, but not 
        more than five, community organizations, or coalitions of 
        health care providers, health benefit plans, and purchasers, to 
        establish and document the efficacy of communication links 
        between the information systems of health benefit plans and of 
        health care providers.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.
    (c) Regional or Community Based Clinical Information Systems.--
            (1) The Secretary may make grants to at least two, but not 
        more than five, public or private non-profit entities for the 
        development of regional or community-based clinical information 
        systems.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.
    (d) Ambulatory Care Data Sets.--
            (1) The Secretary may make grants to public or private non-
        profit entities to develop and test, for electronic medical 
        data generated by physicians and other entities (other than 
        hospitals) that provide health care services--
                    (A) the definition of a comprehensive set of data 
                elements, and
                    (B) the specification of, and manner of 
                presentation of, the individual data elements of the 
                set under subparagraph (A).
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.

  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM GROSS INCOME FOR COST OF 
              CATASTROPHIC HEALTH PLAN.

    (a) In General.--Subsection (a) of section 62 of the Internal 
Revenue Code of 1986, as amended by title I, is amended by inserting 
after paragraph (16) the following new paragraph:
            ``(17) Medical expenses attributable to catastrophic health 
        plan coverage.--
                    ``(A) In general.--The deduction allowed by section 
                213 to the extent attributable to coverage under a 
                catastrophic health plan (as defined in section 
                220(c)(2)).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to coverage of an individual who has coverage described 
                in section 220(c)(1)(B)(i).''.
    (b) Coordination With Deduction for Other Medical Expenses.--
Subsection (a) of section 213 of such Code is amended to read as 
follows:
    ``(a) Allowance of Deduction.--There shall be allowed as a 
deduction the expenses paid during the taxable year, not compensated by 
insurance or otherwise, for medical care of the taxpayer, his spouse, 
or a dependent (as defined in section 152) in an amount equal to the 
sum of--
            ``(1) the portion of such expenses attributable to coverage 
        under a catastrophic health plan (as defined in section 
        220(c)(2)), and
            ``(2) the excess of such expenses (other than expenses 
        described in paragraph (1)) over 7.5 percent of the adjusted 
        gross income of the taxpayer.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 2202. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 220 as 
section 221 and by inserting after section 219 the following new 
section:

``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a deduction the applicable percentage 
        of the amounts paid in cash during the taxable year by or on 
        behalf of such individual to a medical savings account for the 
        benefit of such individual and (if any) such individual's 
        spouse and dependents if such spouse and dependents are 
        eligible individuals.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 25 percent for taxable years beginning in 
                1994 or 1995,
                    ``(B) 50 percent for taxable years beginning in 
                1996 or 1997, and
                    ``(C) 100 percent for taxable years beginning after 
                1997.
    ``(b) Limitations.--
            ``(1) Only 1 account per family.--Except as provided in 
        regulations prescribed by this Secretary, no deduction shall be 
        allowed under subsection (a) for amounts paid to any medical 
        savings account for the benefit of an individual, such 
        individual's spouse, or any dependent of such individual or 
        spouse if such individual, spouse, or dependent is a 
        beneficiary of any other medical savings account.
            ``(2) Dollar limitation.--The amount allowable as a 
        deduction under subsection (a) for the taxable year shall not 
        exceed the lesser of--
                    ``(A) the lowest deductible under any catastrophic 
                health plan providing coverage to any beneficiary of 
                the medical savings account, or
                    ``(B)(i) $2,500, or
                    ``(ii) $5,000 if the catastrophic health plan 
                covering the taxpayer provides coverage for more than 1 
                individual.
        A beneficiary of such account who has attained age 65 before 
        the close of the taxable year shall not be taken into account 
        in determining the limitation under the preceding sentence.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means any individual who is covered under a 
                catastrophic health plan throughout the calendar year 
                in which or with which the taxable year ends.
                    ``(B) Limitations.--Such term does not include--
                            ``(i) an individual who is 65 years of age 
                        or older, unless the individual is covered 
                        under a catastrophic health plan that is a 
                        primary plan (within the meaning of section 
                        1862(b)(2)(A) of the Social Security Act); and
                            ``(ii) an individual who has coverage under 
                        a group health plan or health insurance plan 
                        (other than a plan described in 1107(4)(B) of 
                        the Affordable Health Care Now Act of 1993) 
                        that has either a deductible that is less than 
                        the minimum deductible required under a 
                        catastrophic health plan (as defined in 
                        paragraph (2)) or has an actuarial value that 
                        is greater than the value for MedAccess 
                        catastrophic coverage (as provided in section 
                        1102(d) of such Act).
                    ``(C) Deduction not allowed before 1999 to 
                individuals eligible for employer-subsidized 
                coverage.--In the case of any taxable year beginning 
                before January 1, 1999, such term does not include an 
                individual--
                            ``(i) who is eligible to participate in any 
                        subsidized health plan maintained by an 
                        employer of such individual or the spouse of 
                        such individual, or
                            ``(ii) who is (or whose spouse is) a member 
                        of a subsidized class of employees of an 
                        employer.
                The rules of subparagraphs (B) and (C) of section 
                213(f)(3) shall apply for purposes of this preceding 
                sentence.
            ``(2) Catastrophic health plan.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `catastrophic health 
                plan' means a health plan covering specified expenses 
                incurred by an individual for medical care for such 
                individual and the spouse and dependents (as defined in 
                section 152) of such individual only to the extent such 
                expenses covered by the plan for any calendar year 
                exceed $1,800 ($3,600 if the catastrophic health plan 
                covering the taxpayer provides coverage for more than 1 
                individual) or such higher amounts as may be specified 
                by the plan.
                    ``(B) Cost-of-living adjustment.--In the case of 
                any calendar year after 1994, each dollar amount in 
                subparagraph (A) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year.
                If any increase under the preceding sentence is not a 
                multiple of $50, such increase shall be rounded to the 
                nearest multiple of $50.
    ``(d) Medical Savings Accounts.--For purposes of this section--
            ``(1) Medical savings account.--
                    ``(A) In general.--The term `medical savings 
                account' means a trust created or organized in the 
                United States exclusively for the purpose of paying the 
                medical expenses of the beneficiaries of such trust, 
                but only if the written governing instrument creating 
                the trust meets the following requirements:
                            ``(i) Except in the case of a rollover 
                        contribution described in subsection (e)(4), no 
                        contribution will be accepted unless it is in 
                        cash, and contributions will not be accepted in 
                        excess of the amount allowed as a deduction 
                        under this section for the taxable year (or 
                        would be allowed as such a deduction but for 
                        subsection (c)(1)(C)).
                            ``(ii) The trustee is a bank (as defined in 
                        section 408(n)) or another person who 
                        demonstrates to the satisfaction of the 
                        Secretary that the manner in which such person 
                        will administer the trust will be consistent 
                        with the requirements of this section.
                            ``(iii) No part of the trust assets will be 
                        invested in life insurance contracts.
                            ``(iv) The assets of the trust will not be 
                        commingled with other property except in a 
                        common trust fund or common investment fund.
                            ``(v) The interest of an individual in the 
                        balance in his account is nonforfeitable.
                            ``(vi) Under regulations prescribed by the 
                        Secretary, rules similar to the rules of 
                        section 401(a)(9) shall apply to the 
                        distribution of the entire interest of 
                        beneficiaries of such trust.
                    ``(B) Treatment of comparable accounts held by 
                insurance companies.--For purposes of this section, an 
                account held by an insurance company in the United 
                States shall be treated as a medical savings account 
                (and such company shall be treated as a bank) if--
                            ``(i) such account is part of a health 
                        insurance plan that includes a catastrophic 
                        health plan (as defined in subsection (c)(2)),
                            ``(ii) such account is exclusively for the 
                        purpose of paying the medical expenses of the 
                        beneficiaries of such account who are covered 
                        under such catastrophic health plan, and
                            ``(iii) the written instrument governing 
                        the account meets the requirements of clauses 
                        (i), (v), and (vi) of subparagraph (A).
            ``(2) Medical expenses.--
                    ``(A) In general.--The term `medical expenses' 
                means, with respect to an individual, amounts paid or 
                incurred by such individual for--
                            ``(i) medical care (as defined in section 
                        213), or
                            ``(ii) long-term care (as defined in 
                        paragraph (3)),
                for such individual, the spouse of such individual, and 
                any dependent (as defined in section 152) of such 
                individual, but only to the extent such amounts are not 
                compensated for by insurance or otherwise.
                    ``(B) Health plan coverage may not be purchased 
                from account.--
                            ``(i) In general.--Such term shall not 
                        include any amount paid for coverage under a 
                        health plan.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply--
                                    ``(I) in the case of coverage of an 
                                individual under 65 years of age under 
                                a catastrophic health plan or under a 
                                long-term care insurance plan, or
                                    ``(II) in the case of coverage of 
                                an individual 65 years of age or older 
                                under a medicare supplemental policy or 
                                under a long-term care insurance plan 
                                or for payment of premiums under part A 
                                or part B of title XVIII of the Social 
                                Security Act.
            ``(3) Long-term care.--
                    ``(A) In general.--The term `long-term care' means 
                diagnostic, preventive, therapeutic, rehabilitative, 
                maintenance, or personal care services which are 
                required by, and provided to, a chronically ill 
                individual, which have as their primary purpose the 
                direct provision of needed assistance with 1 or more 
                activities of daily living (or the alleviation of the 
                conditions necessitating such assistance) that the 
                individual is certified under subparagraph (B) as being 
                unable to perform, and which are provided in a setting 
                other than an acute care unit of a hospital pursuant to 
                a continuing plan of care prescribed by a physician or 
                registered professional nurse. Such term does not 
                include food or lodging provided in an institutional or 
                other setting, or basic living services associated with 
                the maintenance of a household or participation in 
                community life, such as case management, transportation 
                or legal services, or the performance of home 
                maintenance or household chores.
                    ``(B) Chronically ill individual.--The term 
                `chronically ill individual' means an individual who is 
                certified by a physician or registered professional 
                nurse as being unable to perform at least 3 activities 
                of daily living without substantial assistance from 
                another individual. For purposes of this paragraph, the 
                term `activities of daily living' means bathing, 
                dressing, eating, toileting, transferring, and walking.
            ``(4) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Any amount paid or distributed out of a 
        medical savings account shall be included in the gross income 
        of the individual for whose benefit such account was 
        established unless such amount is used exclusively to pay the 
        medical expenses of such individual.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount allowable as a deduction under subsection (a) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(3) Penalty for distributions not used for medical 
        expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a medical savings account which is 
                not used to pay the medical expenses of the individual 
                for whose benefit the account was established shall be 
                increased by 10 percent of the amount of such payment 
                or distribution which is includible in gross income 
                under paragraph (1).
                    ``(B) Account balance limitation.--If--
                            ``(i) the tax imposed by this chapter is 
                        required to be increased under subparagraph (A) 
                        by reason of a distribution, and
                            ``(ii) after such distribution, the 
                        aggregate balance of all medical savings 
                        accounts established for the benefit of the 
                        individual, is less than the amount of the 
                        deductible under the catastrophic health plan 
                        covering such individual,
                subparagraph (A) shall be applied by substituting `50 
                percent' for `10 percent'.
            ``(4) Rollovers.--Paragraph (1) shall not apply to any 
        amount paid or distributed out of a medical savings account to 
        the individual for whose benefit the account is maintained if 
        the entire amount received (including money and any other 
        property) is paid into another medical savings account for the 
        benefit of such individual not later than the 60th day after 
        the day on which he received the payment or distribution.
            ``(5) Penalty for mandatory distributions not made from 
        account.--
                    ``(A) In general.--If during any taxable year--
                            ``(i) there is a payment of a mandatory 
                        distribution expense incurred by a beneficiary 
                        of a medical savings account, and
                            ``(ii) the person making such payment is 
                        not reimbursed for such payment with a 
                        distribution from such account before the 60th 
                        day after such payment,
                the taxpayer's tax imposed by this chapter for such 
                taxable year shall be increased by 100 percent of the 
                excess of the amount of such payment over the amount of 
                reimbursement made before such 60th day.
                    ``(B) Mandatory distribution expense.--For purposes 
                of subparagraph (A), the term `mandatory distribution 
                expense' means--
                            ``(i) any expense incurred which may be 
                        counted towards a deductible, or for a 
                        copayment or coinsurance, under the 
                        catastrophic health plan covering such 
                        beneficiary, and
                            ``(ii) in the case of a beneficiary who has 
                        attained age 65, any expense for coverage 
                        described in subsection (d)(2)(B)(ii)(II) and 
                        any expense incurred which may be counted 
                        toward a deductible, or for a copayment or 
                        coinsurance, under title XVIII of the Social 
                        Security Act.
    ``(f) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--Any medical savings account is 
        exempt from taxation under this subtitle unless such account 
        has ceased to be a medical savings account by reason of 
        paragraph (2) or (3). Notwithstanding the preceding sentence, 
        any such account shall be subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit the medical savings 
                account was established, such individual engages in any 
                transaction prohibited by section 4975 with respect to 
                the account, the account ceases to be a medical savings 
                account as of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, paragraph (1) of 
                subsection (e) shall be applied as if there were a 
                distribution on such first day in an amount equal to 
                the fair market value (on such first day) of all assets 
                in the account (on such first day) and no portion of 
                such distribution were used to pay medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a medical 
        savings account was established uses the account or any portion 
        thereof as security for a loan, the portion so used is treated 
        as distributed to that individual and not used to pay medical 
        expenses.
    ``(g) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)) or another person who demonstrates 
        to the satisfaction of the Secretary that the manner in which 
        he will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (d).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(h) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (17) the following new paragraph:
            ``(18) Medical savings accounts.--The deduction allowed by 
        section 220.''
    (c) Distributions From Medical Savings Accounts Not Allowed As 
Medical Expense Deduction.--Section 213 of such Code is amended by 
adding at the end thereof the following new subsection:
    ``(g) Coordination With Medical Savings Accounts.--The amount 
otherwise taken into account under subsection (a) as expenses paid for 
medical care shall be reduced by the amount (if any) of the 
distributions from any medical savings account of the taxpayer during 
the taxable year which is not includible in gross income by reason of 
being used for medical care.''
    (d) Exclusion of Employer Contributions To Medical Savings Accounts 
From Employment Taxes.--
            (1) Social security taxes.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by striking ``or'' at the end of paragraph 
                (20), by striking the period at the end of paragraph 
                (21) and inserting ``; or'', and by inserting after 
                paragraph (21) the following new paragraph:
                    ``(22) remuneration paid to or on behalf of an 
                employee if (and to the extent that) at the time of 
                payment of such remuneration it is reasonable to 
                believe that a corresponding deduction is allowable 
                under section 220.''
            (B) Subsection (a) of section 209 of the Social Security 
        Act is amended by striking ``or'' at the end of paragraph (17), 
        by striking the period at the end of paragraph (18) and 
        inserting ``; or'', and by inserting after paragraph (18) the 
        following new paragraph:
            ``(19) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220 of the Internal 
        Revenue Code of 1986.''
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end thereof the 
        following new paragraph:
            ``(10) Employer contributions to medical savings 
        accounts.--The term `compensation' shall not include any 
        payment made to or on behalf of an employee if (and to the 
        extent that) at the time of payment of such remuneration it is 
        reasonable to believe that a corresponding deduction is 
        allowable under section 220.''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (15), by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and by inserting after paragraph (16) the 
        following new paragraph:
                    ``(17) remuneration paid to or on behalf of an 
                employee if (and to the extent that) at the time of 
                payment of such remuneration it is reasonable to 
                believe that a corresponding deduction is allowable 
                under section 220.''
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (19), by striking the period at the end of paragraph (20) and 
        inserting ``; or'', and by inserting after paragraph (20) the 
        following new paragraph:
                    ``(21) remuneration paid to or on behalf of an 
                employee if (and to the extent that) at the time of 
                payment of such remuneration it is reasonable to 
                believe that a corresponding deduction is allowable 
                under section 220.''
    (e) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to individual retirement 
accounts, certain section 403(b) contracts, and certain individual 
retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 220(d)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 220(d)), the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to the account exceeds the amount excludable from gross income under 
section 220 for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the medical savings account in 
a distribution to which section 220(e)(2) applies shall be treated as 
an amount not contributed.''
    (f) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 220(d)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 220(e)(2)(A) to such 
        account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 220(d)'' in subsection (e)(1) after ``described in 
        section 408(a)''.
    (g) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693 of such Code (relating to failure to provide reports on 
individual retirement account or annuities) is amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 220(h) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (h) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following:

                              ``Sec. 220. Medical savings accounts.
                              ``Sec. 221. Cross reference.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (i) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

                         Subtitle D--Anti-Fraud

           PART 1--CRIMINAL PROSECUTION OF HEALTH CARE FRAUD

SEC. 2301. PENALTIES FOR HEALTH CARE FRAUD.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Offense.--Whoever, being a health care provider, knowingly 
engages in any scheme or artifice to defraud any person in connection 
with the provision of health care shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) Definition.--In this section, the term `health care provider' 
means--
            ``(1) a physician, nurse, dentist, therapist, pharmacist, 
        or other professional provider of health care; and
            ``(2) a hospital, health maintenance organization, 
        pharmacy, laboratory, clinic, or other health care facility or 
        a provider of medical services, medical devices, medical 
        equipment, or other medical supplies.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1347. Health care fraud.''.

SEC. 2302. BROADENING APPLICATION OF MAIL FRAUD STATUTE.

    Section 1341 of title 18, United States Code, is amended--
            (1) by inserting ``or deposits or causes to be deposited 
        any matter or thing whatever to be sent or delivered by any 
        private or commercial interstate carrier,'' after ``Postal 
        Service,''; and
            (2) by inserting ``or such carrier'' after ``causes to be 
        delivered by mail''.

SEC. 2303. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated for the purposes of 
carrying out the purposes of this part and the amendments made by this 
part--
            (1) such sums as may be necessary for the Federal Bureau of 
        Investigation to hire, equip, and train no fewer than 225 
        special agents and support staff to investigate health-care 
        fraud cases;
            (2) such sums as may be necessary to hire, equip, and train 
        no fewer than 50 assistant United States Attorneys and support 
        staff to prosecute health-care fraud cases; and
            (3) such sums as may be necessary to hire, equip, and train 
        no fewer than 25 investigators in the Office of Inspector 
        General, Department of Health and Human Services, to be devoted 
        exclusively to health-care fraud cases.

SEC. 2304. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Section 3059 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(c)(1) In special circumstances and in the Attorney General's 
sole discretion, the Attorney General may make a payment of up to 
$10,000 to a person who furnishes information unknown to the Government 
relating to a possible prosecution under section 1101.
    ``(2) A person is not eligible for a payment under paragraph (1) 
if--
            ``(A) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(B) the person knowingly participated in the offense;
            ``(C) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(i) in a criminal, civil, or administrative 
                proceeding;
                    ``(ii) in a congressional, administrative or 
                General Accounting Office report, hearing, audit, or 
                investigation; or
                    ``(iii) by the news media, unless the person is the 
                original source of the information; or
            ``(D) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(3) For the purposes of paragraph (2)(C)(iii), the term `original 
source' means a person who has direct and independent knowledge of the 
information that is furnished and has voluntarily provided the 
information to the Government prior to disclosure by the news media.
    ``(4) Neither the failure of the Attorney General to authorize a 
payment under paragraph (1) nor the amount authorized shall be subject 
to judicial review.''.

  PART 2--COORDINATION OF HEALTH CARE ANTI-FRAUD AND ABUSE ACTIVITIES

SEC. 2311. ESTABLISHMENT OF ALL-PAYER ANTI-FRAUD AND ABUSE PROGRAM.

    (a) In General.--Not later than January 1, 1995, the Secretary 
shall establish in the Office of the Inspector General of the 
Department of Health and Human Services a program--
            (1) 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,
            (2) to conduct investigations, audits, evaluations, and 
        inspections relating to the delivery of and payment for health 
        care in the United States, and
            (3) 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.
    (b) Coordination With Law Enforcement Agencies.--In carrying out 
the program established under subsection (a), the Secretary shall 
consult with, and arrange for the sharing of data and resources with 
the Attorney General, State law enforcement agencies, State medicaid 
fraud and abuse units, and State agencies responsible for the licensing 
and certification of health care providers.
    (c) Coordination With Third Party Insurers.--In carrying out the 
program established under subsection (a), the Secretary shall consult 
with, and arrange for the sharing of data with representatives of 
private sponsors of health benefit plans and other providers of health 
insurance.
    (d) Regulations.--
            (1) In general.--The Secretary shall by regulation 
        establish standards to carry out the program under subsection 
        (a).
            (2) Information standards.--
                    (A) 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 subsection (b) and third 
                party insurers under subsection (c)).
                    (B) 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.
                    (C) 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.
    (e) Ensuring Access to Documentation.--
            (1) In general.--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 section to the same extent as such Inspector General may 
        exercise such authorities to perform the functions assigned to 
        such official by such Act.
            (2) Failure to comply as grounds for exclusion from 
        medicare and medicaid programs.--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 2311 of the 
                Affordable Health Care Now Act of 1993.''.

SEC. 2312. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR INVESTIGATORS 
              AND OTHER PERSONNEL.

    (a) In General.--In addition to any other amounts authorized to be 
appropriated to the Secretary of Health and Human Services for health 
care anti-fraud and abuse activities for a fiscal year, there are 
authorized to be appropriated additional amounts described in 
subsection (b) to enable the Secretary to conduct investigations of 
allegations of health care fraud and otherwise carry out the program 
established under section 2311 in a fiscal year.
    (b) Amounts Described.--The amounts referred to in subsection (a) 
are as follows:
            (1) For fiscal year 1995, $100,000,000.
            (2) For each of the fiscal years 1996 through 1998, such 
        sums as may be necessary to assist the Secretary in carrying 
        out the program established under section 2311 for such a 
        fiscal year.

SEC. 2313. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE TRUST FUND.

    (a) Establishment.--
            (1) 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 paragraph (2) and such amounts as may be deposited in, or 
        appropriated to, such Trust Fund as provided in this subtitle 
        and section 1128A(f)(3) of the Social Security Act.
            (2) 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.
    (b) Management.--
            (1) In general.--The Trust Fund shall be managed by the 
        Secretary through a Managing Trustee designated by the 
        Secretary.
            (2) 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 on 
        original issue at the issue price, or 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.
            (3) 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.
            (4) 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.
            (5) 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.
    (c) 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 section 2311(a) in the fiscal year involved.
    (d) Deposit of Federal Health Anti-Fraud and Abuse Penalties Into 
Trust Fund.--Section 1128A(f)(3) of the Social Security Act (42 U.S.C. 
1320a-7a(f)(3)) is amended by striking ``as miscellaneous receipts of 
the Treasury of the United States'' and inserting ``in the Anti-Fraud 
and Abuse Trust Fund established under section 2313(a) of the 
Affordable Health Care Now Act of 1993''.
    (e) Use of Federal Health Anti-Fraud and Abuse Penalties to Repay 
Beneficiaries for Cost-Sharing.--Section 1128A(f) of the Social 
Security Act (42 U.S.C. 1320a-7a(f)) is amended in the matter preceding 
paragraph (1) by striking ``Secretary and disposed of as follows:'' and 
inserting the following: ``Secretary. If the person against whom such a 
penalty or assessment was assessed collected a payment from an 
individual for providing to the individual the service that is the 
subject of the penalty or assessment, the Secretary shall pay a portion 
of the amount recovered to the individual in the nature of restitution 
in an amount equal to the payment so collected. The Secretary shall 
dispose of any remaining amounts recovered under this section as 
follows:''.

SEC. 2314. 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)--
                    (A) by redesignating paragraph (3) as paragraph 
                (4); and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) With respect to amounts recovered arising out of a 
        claim under a health benefit plan, the portion of such amounts 
        as is determined to have been paid by the plan shall be repaid 
        to the plan.''.
            (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) in consultation with State and local health care 
        officials, 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 and 
        State and local health care officials.''.
    (c) 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.''.
    (d) 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))''.
    (e) Effective Date.--The amendments made by this section shall take 
effect January 1, 1995.

   Subtitle E--Medicare Payment Changes; Part B Premium Tax for High-
                           Income Individuals

                    PART 1--MEDICARE PAYMENT CHANGES

SEC. 2401. ELIMINATION OF MEMBERSHIP LIMITATION FOR MEDICARE HMOS.

    (a) In General.--Section 1876 of the Social Security Act (42 U.S.C. 
1395mm) is amended by striking subsection (f).
    (b) Conforming Amendments.--Such section is further amended--
            (1) in subsection (c)(3)(A)(i), by striking ``in failure to 
        meet the requirements of subsection (f) or would result'', and
            (2) in subsection (i)(1)(C), by striking ``(e), and (f)'' 
        and inserting ``and (e)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contracts entered into on or after the date of the enactment 
of this Act.

SEC. 2402. EXPANSION AND REVISION OF MEDICARE SELECT POLICIES.

    (a) Permitting Medicare Select Policies in All States.--
            (1) In general.--Subsection (c) of section 4358 of the 
        Omnibus Budget Reconciliation Act of 1990 (hereafter referred 
        to as ``OBRA-1990'') is hereby repealed.
            (2) Conforming amendment.--Section 4358 of OBRA-1990 is 
        amended by redesignating subsection (d) as subsection (c).
    (b) Requirements of Medicare Select Policies.--Section 1882(t)(1) 
of the Social Security Act (42 U.S.C. 1395ss(t)(1)) is amended to read 
as follows:
    ``(1)(A) If a medicare supplemental policy meets the 1991 NAIC 
Model Regulation or 1991 Federal Regulation and otherwise complies with 
the requirements of this section except that--
            ``(i) the benefits under such policy are restricted to 
        items and services furnished by certain entities (or reduced 
        benefits are provided when items or services are furnished by 
        other entities), and
            ``(ii) in the case of a policy described in subparagraph 
        (C)(i)--
                    ``(I) the benefits under such policy are not one of 
                the groups or packages of benefits described in 
                subsection (p)(2)(A),
                    ``(II) except for nominal copayments imposed for 
                services covered under part B of this title, such 
                benefits include at least the core group of basic 
                benefits described in subsection (p)(2)(B), and
                    ``(III) an enrollee's liability under such policy 
                for physician's services covered under part B of this 
                title is limited to the nominal copayments described in 
                subclause (II),
the policy shall nevertheless be treated as meeting those standards if 
the policy meets the requirements of subparagraph (B).
    ``(B) A policy meets the requirements of this subparagraph if--
            ``(i) full benefits are provided for items and services 
        furnished through a network of entities which have entered into 
        contracts or agreements with the issuer of the policy,
            ``(ii) full benefits are provided for items and services 
        furnished by other entities if the services are medically 
        necessary and immediately required because of an unforeseen 
        illness, injury, or condition and it is not reasonable given 
        the circumstances to obtain the services through the network,
            ``(iii) the network offers sufficient access,
            ``(iv) the issuer of the policy has arrangements for an 
        ongoing quality assurance program for items and services 
        furnished through the network,
            ``(v)(I) the issuer of the policy provides to each enrollee 
        at the time of enrollment an explanation of--
                    ``(aa) the restrictions on payment under the policy 
                for services furnished other than by or through the 
                network,
                    ``(bb) out of area coverage under the policy,
                    ``(cc) the policy's coverage of emergency services 
                and urgently needed care, and
                    ``(dd) the availability of a policy through the 
                entity that meets the 1991 Model NAIC Regulation or 
                1991 Federal Regulation without regard to this 
                subsection and the premium charged for such policy, and
            ``(II) each enrollee prior to enrollment acknowledges 
        receipt of the explanation provided under subclause (I), and
            ``(vi) the issuer of the policy makes available to 
        individuals, in addition to the policy described in this 
        subsection, any policy (otherwise offered by the issuer to 
        individuals in the State) that meets the 1991 Model NAIC 
        Regulation or 1991 Federal Regulation and other requirements of 
        this section without regard to this subsection.
    ``(C)(i) A policy described in this subparagraph--
            ``(I) is offered by an eligible organization (as defined in 
        section 1876(b)),
            ``(II) is not a policy or plan providing benefits pursuant 
        to a contract under section 1876 or an approved demonstration 
        project described in section 603(c) of the Social Security 
        Amendments of 1983, section 2355 of the Deficit Reduction Act 
        of 1984, or section 9412(b) of the Omnibus Budget 
        Reconciliation Act of 1986, and
            ``(III) provides benefits which, when combined with 
        benefits which are available under this title, are 
        substantially similar to benefits under policies offered to 
        individuals who are not entitled to benefits under this title.
    ``(ii) In making a determination under subclause (III) of clause 
(i) as to whether certain benefits are substantially similar, there 
shall not be taken into account, except in the case of preventive 
services, benefits provided under policies offered to individuals who 
are not entitled to benefits under this title which are in addition to 
the benefits covered by this title and which are benefits an entity 
must provide in order to meet the definition of an eligible 
organization under section 1876(b)(1).''.
    (c) Renewability of Medicare Select Policies.--Section 1882(q)(1) 
of the Social Security Act (42 U.S.C. 1395ss(q)(1)) is amended--
            (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
        as provided in subparagraph (B), each'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively; and
            (3) by adding at the end the following new subparagraph:
            ``(B)(i) Except as provided in clause (ii), in the case of 
        a policy that meets the requirements of subsection (t), an 
        issuer may cancel or nonrenew such policy with respect to an 
        individual who leaves the service area of such policy.
            ``(ii) If an individual described in clause (i) moves to a 
        geographic area where an issuer described in clause (i), or 
        where an affiliate of such issuer, is issuing medicare 
        supplemental policies, such individual must be permitted to 
        enroll in any medicare supplemental policy offered by such 
        issuer or affiliate that provides benefits comparable to or 
        less than the benefits provided in the policy being canceled or 
        nonrenewed. An individual whose coverage is canceled or 
        nonrenewed under this subparagraph shall, as part of the notice 
        of termination or nonrenewal, be notified of the right to 
        enroll in other medicare supplemental policies offered by the 
        issuer or its affiliates.
            ``(iii) For purposes of this subparagraph, the term 
        `affiliate' shall have the meaning given such term by the 1991 
        NAIC Model Regulation.''.
    (d) Civil Money Penalty.--Section 1882(t)(2) of the Social Security 
Act (42 U.S.C. 1395ss(t)(2)) is amended--
            (1) by striking ``(2)'' and inserting ``(2)(A)'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as clauses (i), (ii), (iii), and (iv), respectively;
            (3) in clause (iv), as so redesignated--
                    (A) by striking ``paragraph (1)(E)(i)'' and 
                inserting ``paragraph (1)(B)(v)(I)'', and
                    (B) by striking ``paragraph (1)(E)(ii)'' and 
                inserting ``paragraph (1)(B)(v)(II)'';
            (4) by striking ``the previous sentence'' and inserting 
        ``this subparagraph''; and
            (5) by adding at the end the following new subparagraph:
    ``(B) If the Secretary determines that an issuer of a policy 
approved under paragraph (1) has made a misrepresentation to the 
Secretary or has provided the Secretary with false information 
regarding such policy, the issuer is subject to a civil money penalty 
in an amount not to exceed $100,000 for each such determination. The 
provisions of section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) shall apply to a civil 
money penalty under this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding under section 1128A(a).''.
    (e) Effective Dates.--
            (1) NAIC standards.--If, within 6 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1994 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 6-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (in this subsection as the 
        ``Secretary'') shall promulgate a regulation and section 
        1882(g)(2)(A) of the Social Security Act shall be applied in 
        each State, effective for policies issued to policyholders on 
        and after the date specified in paragraph (3), as if the 
        reference to the Model Regulation adopted in June 6, 1979, were 
        a reference to the 1991 NAIC Model Regulation (as so defined) 
        as changed by the Secretary under this paragraph (such changed 
        Regulation referred to in this subsection as the ``1994 Federal 
        Regulation'').
            (3) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State adopts the 1994 NAIC 
                        Model Regulation or the 1994 Federal 
                        Regulation; or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first adopts such regulations.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies, in 
                consultation with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        medicare supplemental policies to meet the 1994 
                        NAIC Model Regulation or the 1994 Federal 
                        Regulation, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1995. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

SEC. 2403. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF ADMINISTRATION 
              OF PARTS A AND B.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as may be necessary to consolidate the administration 
(including processing systems) of parts A and B of the medicare program 
(under title XVIII of the Social Security Act) including over a 5-year 
period.
    (b) Combination of Intermediary and Carrier Functions.--In taking 
such steps, the Secretary shall contract with a single entity that 
combines the fiscal intermediary and carrier functions in each area 
except where the Secretary finds that special regional or national 
contracts are appropriate.
    (c) Superseding Conflicting Requirements.--The provisions of 
sections 1816 and 1842 of the Social Security Act (including provider 
nominating provisions in such section 1816) are superseded to the 
extent required to carry out this section.

         PART 2--PART B PREMIUM TAX FOR HIGH-INCOME INDIVIDUALS

SEC. 2411. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH 
              HIGH INCOME.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end thereof the following new 
part:

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

                              ``Sec. 59B. Medicare part B premium tax.

``SEC. 59B. MEDICARE PART B PREMIUM TAX.

    ``(a) Imposition of Tax.--In the case of an individual to whom this 
section applies for the taxable year, there is hereby imposed (in 
addition to any other tax imposed by this subtitle) a tax for such 
taxable year equal to the aggregate of the Medicare part B premium 
taxes for each of the months during such year that such individual is 
covered by Medicare part B.
    ``(b) Individuals to Whom Section Applies.--This section shall 
apply to any individual for any taxable year if--
            ``(1) such individual is covered under Medicare part B for 
        any month during such year, and
            ``(2) the modified adjusted gross income of the taxpayer 
        for such taxable year exceeds the threshold amount.
    ``(c) Medicare Part B Premium Tax for Month.--
            ``(1) In general.--The Medicare part B premium tax for any 
        month is \2/3\ the amount equal to the excess of--
                    ``(A) 150 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined for that calendar 
                year under section 1839(b) of the Social Security Act, 
                over
                    ``(B) the total monthly premium under section 1839 
                of the Social Security Act (determined without regard 
                to subsections (b) and (f) of section 1839 of such 
                Act).
            ``(2) Phasein of tax.--If the modified adjusted gross 
        income of the taxpayer for any taxable years exceeds the 
        threshold amount by less than $50,000, the Medicare part B 
        premium tax for any month during such taxable year shall be an 
        amount which bears the same ratio to the amount determined 
        under paragraph (1) (without regard to this paragraph) as such 
        excess bears to $50,000. The preceding sentence shall not apply 
        to any individual whose threshold amount is zero.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $100,000,
                    ``(B) $125,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Medicare part b coverage.--An individual shall be 
        treated as covered under Medicare part B for any month if a 
        premium is paid under part B of title XVIII of the Social 
        Security Act for the coverage of the individual under such part 
        for the month.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703.''
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end thereof the 
following new item:

                              ``Part VIII. Medicare Part B Premiums For 
                                        High-Income Individuals.''
    (c) Effective Date.--The amendments made by this section shall 
apply to months after December 1993 in taxable years ending after 
December 31, 1993.

              Subtitle F--Removing Anti-Trust Impediments

SEC. 2501. ESTABLISHMENT OF LIMITED EXEMPTION PROGRAM FOR HEALTH CARE 
              JOINT VENTURES.

    (a) Establishment.--
            (1) In general.--Not later than 6 months after the date of 
        the enactment of this Act, the Attorney General, after 
        consultation with the Secretary of Health and Human Services 
        and the Interagency Advisory Committee on Competition, 
        Antitrust Policy, and Health Care, shall promulgate specific 
        guidelines under which a health care joint venture may submit 
        an application requesting that the Attorney General provide the 
        entities participating in the joint venture with an exemption 
        under which (notwithstanding any other provision of law)--
                    (A) monetary recovery on a claim under the 
                antitrust laws shall be limited to actual damages if 
                the claim results from conduct within the scope of the 
                joint venture that occurs while the exemption is in 
                effect; and
                    (B) the conduct of the entity in making or 
                performing a contract to carry out the joint venture 
                shall not be deemed illegal per se under the antitrust 
                laws but shall be judged on the basis of its 
                reasonableness, taking into account all relevant 
                factors affecting competition, including (but not 
                limited to) effects on competition in properly defined, 
                relevant research, development, product, process, and 
                service markets (taking into consideration worldwide 
                capacity to the extent that it may be appropriate in 
                the circumstances).
            (2) Deadline for response.--The Attorney General, after 
        consultation with the Secretary and the Advisory Committee, 
        shall approve or disapprove the application of a health care 
        joint venture for an exemption under this subsection not later 
        than 30 days after the Attorney General receives the joint 
        venture's application.
            (3) Providing reasons for disapproval.--If the Attorney 
        General disapproves the application of a health care joint 
        venture for an exemption under this subsection, the Attorney 
        General shall provide the joint venture with a statement 
        explaining the reasons for the Attorney General's disapproval.
    (b) Requirements for Approval.--For purposes of subsection (a), the 
Attorney General shall approve the application of a health care joint 
venture for an exemption under subsection (a) if an entity 
participating in the joint venture submits to the Attorney General an 
application not later than 30 days after the entity has entered into a 
written agreement to participate in the joint venture (or not later 
than 30 days after the date of the enactment of this Act in the case of 
a joint venture in effect as of such date) that contains the following 
information and assurances:
            (1) The identities of the parties to the joint venture.
            (2) The nature, objectives, and planned activities of the 
        joint venture.
            (3) Assurances that the entities participating in the joint 
        venture shall notify the Attorney General of any changes in the 
        information described in paragraphs (1) and (2) during the 
        period for which the exemption is in effect.
    (c) Revocation of Exemption.--
            (1) In general.--The Attorney General, after consultation 
        with the Secretary, may revoke an exemption provided to a 
        health care joint venture under this section if, at any time 
        during which the exemption is in effect, the Attorney General 
        finds that the joint venture no longer meets the applicable 
        requirements for approval under subsection (b), except that the 
        Attorney General may not revoke such an exemption if the 
        failure of the health care joint venture to meet such 
        requirements is merely technical in nature.
            (2) Timing.--The revocation of an exemption under paragraph 
        (1) shall apply only to conduct of the health care joint 
        venture occurring after the exemption is no longer in effect.
    (d) Withdrawal of Application.--Any party that submits an 
application under this section may withdraw such application at any 
time before the Attorney General's response to the application.
    (e) Requirements Relating to Notice and Publication of Exemptions 
and Related Information.--
            (1) Publication of approved applications for exemptions in 
        federal register.--
                    (A) In general.--With respect to each exemption for 
                a health care joint venture provided under subsection 
                (a), the Attorney General (acting jointly with the 
                Secretary) shall--
                            (i) prepare a notice with respect to the 
                        joint venture that identifies the parties to 
                        the venture and that describes the planned 
                        activities of the venture;
                            (ii) submit the notice to the entities 
                        participating in the joint venture; and
                            (iii) after submitting the notice to such 
                        entities (but not later than 30 days after 
                        approving the application for the exemption for 
                        the joint venture), publish the notice in the 
                        Federal Register.
                    (B) Effect of publication.--An exemption provided 
                by the Attorney General under subsection (a) shall take 
                effect as of the date of the publication in the Federal 
                Register of the notice with respect to the exemption 
                pursuant to subparagraph (A).
            (2) Waiver of disclosure requirements for information 
        relating to applications for exemptions.--
                    (A) In general.--All information and documentary 
                material submitted as part of an application of a 
                health care joint venture for an exemption under 
                subsection (a), together with any other information 
                obtained by the Attorney General, the Secretary, or the 
                Advisory Committee in the course of any investigation, 
                administrative proceeding, or case with respect to a 
                potential violation of the antitrust laws by the joint 
                venture with respect to which the exemption applies, 
                shall be exempt from disclosure under section 552 of 
                title 5, United States Code, and shall not be made 
                publicly available by any agency of the United States 
                to which such section applies, except as relevant to a 
                law enforcement investigation or in a judicial or 
                administrative proceeding in which such information and 
                material is subject to any protective order.
                    (B) Exception for information included in federal 
                register notice.--Subparagraph (A) shall not apply with 
                respect to information contained in a notice published 
                in the Federal Register pursuant to paragraph (1).
            (3) Use of information to support or answer claims under 
        antitrust laws.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the fact of disclosure of conduct under an 
                application for an exemption under subsection (a) and 
                the fact of publication of a notice in the Federal 
                Register under paragraph (1) shall be admissible into 
                evidence in any judicial or administrative proceeding 
                for the sole purpose of establishing that a person is 
                entitled to the protections provided by an exemption 
                granted under subsection (a).
                    (B) Effect of rejected application.--If the 
                Attorney General denies, in whole or in part, an 
                application for an exemption under subsection (a), or 
                revokes an exemption under such section, neither the 
                negative determination nor the statement of reasons 
                therefor shall be admissible into evidence in any 
                administrative or judicial proceeding for the purpose 
                of supporting or answering any claim under the 
                antitrust laws.

SEC. 2502. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) Issuance and Effect of Certificate.--The Attorney General, 
after consultation with the Secretary and the Advisory Committee, shall 
issue in accordance with this section a certificate of public advantage 
to each eligible health care joint venture that complies with the 
requirements in effect under this section on or after the expiration of 
the 1-year period that begins on the date of the enactment of this Act 
(without regard to whether or not the Attorney General has promulgated 
regulations to carry out this section by such date). Such venture, and 
the parties to such venture, shall not be liable under any of the 
antitrust laws for conduct described in such certificate and engaged in 
by such venture if such conduct occurs while such certificate is in 
effect.
    (b) Requirements Applicable to Issuance of Certificates.--
            (1) Standards to be met.--The Attorney General shall issue 
        a certificate to an eligible health care joint venture if the 
        Attorney General finds that--
                    (A) the benefits that are likely to result from 
                carrying out the venture outweigh the reduction in 
                competition (if any) that is likely to result from the 
                venture, and
                    (B) such reduction in competition is reasonably 
                necessary to obtain such benefits.
            (2) Factors to be considered.--
                    (A) Weighing of benefits against reduction in 
                competition.--For purposes of making the finding 
                described in paragraph (1)(A), the Attorney General 
                shall consider whether the venture is likely--
                            (i) to maintain or to increase the quality 
                        of health care,
                            (ii) to increase access to health care,
                            (iii) to achieve cost efficiencies that 
                        will be passed on to health care consumers, 
                        such as economies of scale, reduced transaction 
                        costs, and reduced administrative costs,
                            (iv) to preserve the operation of health 
                        care facilities located in underserved 
                        geographical areas,
                            (v) to improve utilization of health care 
                        resources, and
                            (vi) to reduce inefficient health care 
                        resource duplication.
                    (B) Necessity of reduction in competition.--For 
                purposes of making the finding described in paragraph 
                (1)(B), the Attorney General shall consider--
                            (i) the ability of the providers of health 
                        care services that are (or likely to be) 
                        affected by the health care joint venture and 
                        the entities responsible for making payments to 
                        such providers to negotiate societally optimal 
                        payment and service arrangements,
                            (ii) the effects of the health care joint 
                        venture on premiums and other charges imposed 
                        by the entities described in clause (i), and
                            (iii) the availability of equally 
                        efficient, less restrictive alternatives to 
                        achieve the benefits that are intended to be 
                        achieved by carrying out the venture.
    (c) Establishment of Criteria and Procedures.--Subject to 
subsections (d) and (e), not later than 1 year after the date of the 
enactment of this Act, the Attorney General and the Secretary shall 
establish jointly by rule the criteria and procedures applicable to the 
issuance of certificates under subsection (a). The rules shall specify 
the form and content of the application to be submitted to the Attorney 
General to request a certificate, the information required to be 
submitted in support of such application, the procedures applicable to 
denying and to revoking a certificate, and the procedures applicable to 
the administrative appeal (if such appeal is authorized by rule) of the 
denial and the revocation of a certificate. Such information may 
include the terms of the health care joint venture (in the case of a 
venture in existence as of the time of the application) and 
implementation plan for the joint venture.
    (d) Eligible Health Care Joint Venture.--To be an eligible health 
care joint venture for purposes of this section, a health care joint 
venture shall submit to the Attorney General an application that 
complies with the rules in effect under subsection (c) and that 
includes--
            (1) an agreement by the parties to the venture that the 
        venture will not foreclose competition by entering into 
        contracts that prevent health care providers from providing 
        health care in competition with the venture,
            (2) an agreement that the venture will submit to the 
        Attorney General annually a report that describes the 
        operations of the venture and information regarding the impact 
        of the venture on health care and on competition in health 
        care, and
            (3) an agreement that the parties to the venture will 
        notify the Attorney General and the Secretary of the 
        termination of the venture not later than 30 days after such 
        termination occurs.
    (e) Review of Applications for Certificates.--Not later than 30 
days after an eligible health care joint venture submits to the 
Attorney General an application that complies with the rules in effect 
under subsection (c) and with subsection (d), the Attorney General 
shall issue or deny the issuance of such certificate. If, before the 
expiration of such 30-day period, the Attorney General fails to issue 
or deny the issuance of such certificate, the Attorney General shall be 
deemed to have issued such certificate.
    (f) Revocation of Certificate.--Whenever the Attorney General finds 
that a health care joint venture with respect to which a certificate is 
in effect does not meet the standards specified in subsection (b), the 
Attorney General shall revoke such certificate.
    (g) Written Reasons; Judicial Review.--
            (1) Denial and revocation of certificates.--If the Attorney 
        General denies an application for a certificate or revokes a 
        certificate, the Attorney General shall include in the notice 
        of denial or revocation a statement of the reasons relied upon 
        for the denial or revocation of such certificate.
            (2) Judicial review.--
                    (A) After administrative proceeding.--(i) If the 
                Attorney General denies an application submitted or 
                revokes a certificate issued under this section after 
                an opportunity for hearing on the record, then any 
                party to the health care joint venture involved may 
                commence a civil action, not later than 60 days after 
                receiving notice of the denial or revocation, in an 
                appropriate district court of the United States for 
                review of the record of such denial or revocation.
                    (ii) As part of the Attorney General's answer, the 
                Attorney General shall file in such court a certified 
                copy of the record on which such denial or revocation 
                is based. The findings of fact of the Attorney General 
                may be set aside only if found to be unsupported by 
                substantial evidence in such record taken as a whole.
                    (B) Denial or revocation without administrative 
                proceeding.--If the Attorney General denies an 
                application submitted or revokes a certificate issued 
                under this section without an opportunity for hearing 
                on the record, then any party to the health care joint 
                venture involved may commence a civil action, not later 
                than 60 days after receiving notice of the denial or 
                revocation, in an appropriate district court of the 
                United States for de novo review of such denial or 
                revocation.
    (h) Exemption.--A person shall not be liable under any of the 
antitrust laws for conduct necessary--
            (1) to prepare, agree to prepare, or attempt to agree to 
        prepare an application to request a certificate under this 
        section, or
            (2) to attempt to enter into any health care joint venture 
        with respect to which such a certificate is in effect.

SEC. 2503. INTERAGENCY ADVISORY COMMITTEE ON COMPETITION, ANTITRUST 
              POLICY, AND HEALTH CARE.

    (a) Establishment.--There is hereby established the Interagency 
Advisory Committee on Competition, Antitrust Policy, and Health Care. 
The Advisory Committee shall be composed of--
            (1) the Secretary of Health and Human Services (or the 
        designee of the Secretary);
            (2) the Attorney General (or the designee of the Attorney 
        General);
            (3) the Director of the Office of Management and Budget (or 
        the designee of the Director); and
            (4) a representative of the Federal Trade Commission.
    (b) Duties.--The duties of the Advisory Committee are--
            (1) to discuss and evaluate competition and antitrust 
        policy, and their implications with respect to the performance 
        of health care markets;
            (2) to analyze the effectiveness of health care joint 
        ventures receiving exemptions under the program established 
        under section 2501(a) or certificates under section 2502 in 
        reducing the costs of and expanding access to the health care 
        services that are the subject of such ventures; and
            (3) to make such recommendations to Congress not later than 
        2 years after the date of the enactment of this Act (and at 
        such subsequent periods as the Advisory Committee considers 
        appropriate) regarding modifications to the program established 
        under section 2501(a) or to section 2502 as the Advisory 
        Committee considers appropriate, including modifications 
        relating to the costs to health care providers of obtaining an 
        exemption for a joint venture under such program.

SEC. 2504. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``Advisory Committee'' means the Interagency 
        Advisory Committee on Competition, Antitrust Policy, and Health 
        Care established under section 2503.
            (2) The term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition; and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (3) The term ``certificate'' means a certificate of public 
        advantage authorized to be issued under section 2502(a).
            (4) The term ``health care joint venture'' means an 
        agreement (whether existing or proposed) between 2 or more 
        providers of health care services that is entered into solely 
        for the purpose of sharing in the provision of health care 
        services and that involves substantial integration or financial 
        risk-sharing between the parties, but does not include the 
        exchanging of information, the entering into of any agreement, 
        or the engagement in any other conduct that is not reasonably 
        required to carry out such agreement.
            (5) The term ``health care services'' includes services 
        related to the delivery or administration of health care 
        services.
            (6) The term ``liable'' means liable for any civil or 
        criminal violation of the antitrust laws.
            (7) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.
            (8) The term ``Secretary'' means the Secretary of Health 
        and Human Services.

    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   PART 1--APPLICATION OF THE CLAYTON ACT TO MEDICAL SELF-REGULATORY 
                                ENTITIES

SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF-REGULATORY ENTITIES.

    (a) In General.--(1) Except as provided in paragraph (2), no 
damages, interest on damages, cost of suit, or attorney's fee may be 
recovered under section 4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 
15a, 15c), or under any State law similar to such section, from any 
medical self-regulatory entity (including its members, officers, 
employees, consultants, and volunteers or committees thereof) as a 
result of engaging in standard setting or enforcement activities that 
are--
            (A) designed to promote the quality of health care provided 
        to patients, and
            (B) not conducted for purposes of financial gain.
    (2) Paragraph (1) shall not prohibit the recovery of actual 
damages, interest on damages, the cost of suit, or a reasonable 
attorney's fee under section 4 or 4A of the Clayton Act (15 U.S.C. 15, 
15a), or under any State law similar to such section, by a State or the 
United States from a medical self-regulatory entity (including its 
members, officers, employees, consultants, and volunteers or committees 
thereof) for injury sustained as a result of engaging in the conduct 
described in such paragraph.
    (b) Fees.--In any action under section 4, 4C, or 16 of the Clayton 
Act (15 U.S.C. 15, 15c, 26), or under a similar State law, brought 
against any medical self-regulatory entity (including its members, 
officers, employees, consultants, and volunteers or committees thereof) 
as a result of engaging in conduct described in subsection (a)(1), the 
court shall award the cost of suit, including a reasonable attorney's 
fee, to a substantially prevailing defendant.

SEC. 2602. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``medical self-regulatory entity'' means a 
        medical society or association, a specialty board, a recognized 
        accrediting agency, or a hospital medical staff.
            (2) The term ``standard setting and enforcement 
        activities'' means--
                    (A) accreditation of health care practitioners, 
                health care providers, medical education institutions, 
                or medical education programs,
                    (B) technology assessment and risk management 
                activities,
                    (C) the development and implementation of practice 
                guidelines or practice parameters, or
                    (D) official peer review proceedings undertaken by 
                a hospital medical staff (or committee thereof) or a 
                medical society or association for purposes of 
                evaluating the quality of health care provided by a 
                medical professional.

                PART 2--CONSULTATION BY FEDERAL AGENCIES

SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGULATORY ENTITIES 
              RESPECTING MEDICAL PROFESSIONAL GUIDELINES AND STANDARDS.

    Any Federal agency engaged in the establishment of medical 
professional standards shall consult with appropriate medical societies 
or associations, specialty boards, or recognized accrediting agencies, 
if available, in carrying out medical professional standard setting and 
guidelines or standards relating to the practice of medicine.

     Subtitle H--Prefunding Government Health Benefits for Certain 
                               Annuitants

SEC. 2701. REQUIREMENT THAT CERTAIN AGENCIES PREFUND GOVERNMENT HEALTH 
              BENEFITS CONTRIBUTIONS FOR THEIR ANNUITANTS.

    (a) Definitions.--For the purpose of this section--
            (1) the term ``agency'' means any agency or other 
        instrumentality within the executive branch of the Government, 
        the receipts and disbursements of which are not generally 
        included in the totals of the budget of the United States 
        Government submitted by the President;
            (2) the term ``health benefits plan'' means, with respect 
        to an agency, a health benefits plan, established by or under 
        Federal law, in which employees or annuitants of such agency 
        may participate;
            (3) the term ``health-benefits coverage'' means coverage 
        under a health benefits plan'';
            (4) an individual shall be considered to be an ``annuitant 
        of an agency'' if such individual is entitled to an annuity, 
        under a retirement system established by or under Federal law, 
        by virtue of--
                    (A) such individual's service with, and separation 
                from, such agency; or
                    (B) being the survivor of an annuitant under 
                subparagraph (A) or of an individual who died while 
                employed by such agency; and
            (5) the term ``Office'' means the Office of Personnel 
        Management.
    (b) Prefunding Requirement.--
            (1) In general.--Effective as of October 1, 1994, each 
        agency (or February 1, 1995, in the case of the agency with the 
        greatest number of employees, as determined by the Office) 
        shall be required to prepay the Government contributions which 
        are or will be required in connection with providing health-
        benefits coverage for annuitants of such agency.
            (2) Regulations.--The Office shall prescribe such 
        regulations as may be necessary to carry out this section. The 
        regulations shall be designed to ensure at least the following:
                    (A) Amounts paid by each agency shall be sufficient 
                to cover the amounts which would otherwise be payable 
                by such agency (on a ``pay-as-you-go'' basis), on or 
                after the applicable effective date under paragraph 
                (1), on behalf of--
                            (i) individuals who are annuitants of the 
                        agency as of such effective date; and
                            (ii) individuals who are employed by the 
                        agency as of such effective date, or who become 
                        employed by the agency after such effective 
                        date, after such individuals have become 
                        annuitants of the agency (including their 
                        survivors).
                    (B)(i) For purposes of determining any amounts 
                payable by an agency--
                            (I) this section shall be treated as if it 
                        had taken effect at the beginning of the 20-
                        year period which ends on the effective date 
                        applicable under paragraph (1) with respect to 
                        such agency; and
                            (II) in addition to any amounts payable 
                        under subparagraph (A), each agency shall also 
                        be responsible for paying any amounts for which 
                        it would have been responsible, with respect to 
                        the 20-year period described in subclause (I), 
                        in connection with any individuals who are 
                        annuitants or employees of the agency as of the 
                        applicable effective date under paragraph (1).
                    (ii) Any amounts payable under this subparagraph 
                for periods preceding the applicable effective date 
                under paragraph (1) shall be payable in equal 
                installments over the 20-year period beginning on such 
                effective date.
    (c) FASB Standards.--Regulations under subsection (b) shall be in 
conformance with the provisions of standard 106 of the Financial 
Accounting Standards Board, issued in December 1990.
    (d) Clarification.--Nothing in this section shall be considered to 
permit or require duplicative payments on behalf of any individuals.
    (e) Draft Legislation.--The Office shall prepare and submit to 
Congress any draft legislation which may be necessary in order to carry 
out this section.

                  Subtitle I--Miscellaneous Provisions

SEC. 2801. INCREASE IN MINIMUM AGE REQUIRED IN ORDER TO BE ELIGIBLE FOR 
              AN IMMEDIATE CIVIL SERVICE ANNUITY.

    (a) Civil Service Retirement System.--
            (1) With 30 years of service.--Section 8336(a) of title 5, 
        United States Code, is amended to read as follows:
    ``(a)(1) An employee who is separated from the service after 
attaining the minimum retirement age under paragraph (2) and completing 
30 years of service is entitled to an annuity.
    ``(2) The minimum retirement age under this paragraph is--
            ``(A) for an individual whose date of birth is before 
        January 1, 1939, 55 years of age; and
            ``(B) for an individual whose date of birth is after 
        December 31, 1938, and before January 1, 1942, 58 years of age.
    ``(3) The preceding provisions of this subsection shall not apply 
with respect to any individual whose date of birth is after December 
31, 1941.''.
            (2) With 20 years of service.--Section 8336(b) of title 5, 
        United States Code, is amended to read as follows:
    ``(b)(1) An employee who is separated from the service after 
attaining the minimum retirement age under paragraph (2) and completing 
20 years of service is entitled to an annuity.
    ``(2) The minimum retirement age under this paragraph is, for an 
individual whose date of birth is before January 1, 1935, 60 years of 
age.
    ``(3) The preceding provisions of this subsection shall not apply 
with respect to any individual whose date of birth is after December 
31, 1934.''.
            (3) Members of congress.--Section 8336(g) of title 5, 
        United States Code, is amended--
                    (A) by redesignating paragraphs (1) and (2) as 
                subparagraphs (A) and (B), respectively, and by 
                striking ``(g)'' and inserting ``(g)(1)'';
                    (B) in the first sentence by striking ``becoming 60 
                years of age'' and inserting ``satisfying the 
                requirements of paragraph (2)'';
                    (C) in the second sentence by striking ``becoming 
                55 years of age (but before becoming 60 years of age)'' 
                and inserting ``satisfying the requirements of 
                paragraph (3)''; and
                    (D) by adding at the end the following:
    ``(2) A Member shall be considered to satisfy the requirements of 
this paragraph if such Member has attained the minimum retirement age 
which would apply to such Member under section 8336(b), except that 
such requirements shall not be considered satisfied by any Member 
described in section 8336(b)(3).
    ``(3) A Member shall be considered to satisfy the requirements of 
this paragraph if such Member--
            ``(A) has attained the minimum retirement age which would 
        apply to such Member under section 8336(a), but
            ``(B) has not attained the minimum retirement age which 
        would apply to such Member under section 8336(b),
except that such requirements shall not be considered satisfied by any 
Member described in section 8336(b)(3).''.
    (b) Federal Employees' Retirement System.--
            (1) With 20 years of service.--Section 8412(b) of title 5, 
        United States Code, is amended to read as follows:
    ``(b)(1) An employee or Member who is separated from the service 
after attaining the minimum retirement age under paragraph (2) and 
completing 20 years of service is entitled to an annuity.
    ``(2) The minimum retirement age under this paragraph is, for an 
individual whose date of birth is before January 1, 1935, 60 years of 
age.
    ``(3) The preceding provisions of this subsection shall not apply 
with respect to any individual whose date of birth is after December 
31, 1934.''.
            (2) With 30 years of service.--Section 8412(h) of title 5, 
        United States Code, is amended to read as follows:
    ``(h)(1) The applicable minimum retirement age under this 
subsection is--
            ``(A) for an individual whose date of birth is before 
        January 1, 1939, 55 years of age; and
            ``(B) for an individual whose date of birth is after 
        December 31, 1938, and before January 1, 1948, 58 years of age.
    ``(2) Nothing in paragraph (1) shall be considered to apply with 
respect to any individual whose date of birth is after December 31, 
1947.''.
    (c) Conforming Amendment.--Section 8442(c)(2)(B)(i)(I) of title 5, 
United States Code, is amended by striking ``age 60'' and inserting 
``the minimum retirement age under section 8412(b)''.
    (d) Conformance of the Retirement Systems Relating to the Foreign 
Service and the Central Intelligence Agency.--
            (1) Foreign service.--The President shall, in accordance 
        with applicable provisions of section 827 of the Foreign 
        Service Act of 1980 (22 U.S.C. 4067), provide that the Foreign 
        Service Retirement and Disability System and the Foreign 
        Service Pension System are conformed to reflect the amendments 
        made by this section.
            (2) Central intelligence agency.--The President shall, 
        using the authority available to him under section 292 of the 
        Central Intelligence Agency Retirement Act, as set forth in 
        section 802 of the CIARDS Technical Corrections Act of 1992 
        (Public Law 102-496; 106 Stat. 3241), provide that the Central 
        Intelligence Agency Retirement and Disability System shall be 
        conformed to reflect the amendments made by this section.
    (e) Effective Date.--This section and the amendments made by this 
section shall take effect on January 1, 1994, and shall apply with 
respect to annuities based on the service of any individual separating 
on or after that date.

                       TITLE III--LONG-TERM CARE

         Subtitle A--Tax Treatment of Long-term Care Insurance

SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 818 the following new section:

``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this part, a long-term care 
insurance contract shall be treated as an accident or health insurance 
contract.
    ``(b) Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this part, the term 
        `long-term care insurance contract' means any insurance 
        contract issued if--
                    ``(A) the only insurance protection provided under 
                such contract is coverage of qualified long-term care 
                services and benefits incidental to such coverage,
                    ``(B) the maximum benefit under the policy for 
                expenses incurred for any day does not exceed $200,
                    ``(C) such contract does not cover expenses 
                incurred for services or items to the extent that such 
                expenses are reimbursable under title XVIII of the 
                Social Security Act or would be so reimbursable but for 
                the application of a deductible or coinsurance amount,
                    ``(D) such contract is guaranteed renewable,
                    ``(E) such contract does not have any cash 
                surrender value, and
                    ``(F) all refunds of premiums, and all policyholder 
                dividends or similar amounts, under such contract are 
                to be applied as a reduction in future premiums or to 
                increase future benefits.
            ``(2) Special rules.--
                    ``(A) Per diem, etc. payments permitted.--A 
                contract shall not fail to be treated as described in 
                paragraph (1)(A) by reason of payments being made on a 
                per diem or other periodic basis without regard to the 
                expenses incurred during the period to which the 
                payments relate.
                    ``(B) Contract may cover medicare reimbursable 
                expenses where medicare is secondary payor.--Paragraph 
                (1)(C) shall not apply to expenses which are 
                reimbursable under title XVIII of the Social Security 
                Act only as a secondary payor.
                    ``(C) Refunds of premiums.--Paragraph (1)(F) shall 
                not apply to any refund of premiums on surrender or 
                cancellation of the contract.
    ``(c) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, preventive, therapeutic, 
        and rehabilitative services, and maintenance or personal care 
        services, which--
                    ``(A) are required by a chronically ill individual 
                in a qualified facility, and
                    ``(B) are provided pursuant to a plan of care 
                prescribed by a licensed health care practitioner.
            ``(2) Chronically ill individual.--
                    ``(A) In general.--The term `chronically ill 
                individual' means any individual who has been certified 
                by a licensed health care practitioner as--
                            ``(i)(I) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in subparagraph (B)) for a period of at 
                        least 90 days due to a loss of functional 
                        capacity, or
                            ``(II) having a level of disability similar 
                        (as determined by the Secretary in consultation 
                        with the Secretary of Health and Human 
                        Services) to the level of disability described 
                        in subclause (I), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment.
                    ``(B) Activities of daily living.--For purposes of 
                subparagraph (A), each of the following is an activity 
                of daily living:
                            ``(i) Mobility.--The process of walking or 
                        wheeling on a level surface which may include 
                        the use of an assistive device such as a cane, 
                        walker, wheelchair, or brace.
                            ``(ii) Dressing.--The overall complex 
                        behavior of getting clothes from closets and 
                        drawers and then getting dressed.
                            ``(iii) Toileting.--The act of going to the 
                        toilet room for bowel and bladder function, 
                        transferring on and off the toilet, cleaning 
                        after elimination, and arranging clothes or the 
                        ability to voluntarily control bowel and 
                        bladder function, or in the event of 
                        incontinence, the ability to maintain a 
                        reasonable level of personal hygiene.
                            ``(iv) Transfer.--The process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(v) Eating.--The process of getting food 
                        from a plate or its equivalent into the mouth.
            ``(3) Qualified facility.--The term `qualified facility' 
        means--
                    ``(A) a nursing, rehabilitative, hospice, or adult 
                day care facility (including a hospital, retirement 
                home, nursing home, skilled nursing facility, 
                intermediate care facility, or similar institution)--
                            ``(i) which is licensed under State law, or
                            ``(ii) which is a certified facility for 
                        purposes of title XVIII or XIX of the Social 
                        Security Act, or
                    ``(B) an individual's home if a licensed health 
                care practitioner certifies that without home care the 
                individual would have to be cared for in a facility 
                described in subparagraph (A).
            ``(4) Maintenance or personal care services.--The term 
        `maintenance or personal care services' means any care the 
        primary purpose of which is to provide needed assistance with 
        any of the activities of daily living described in paragraph 
        (2)(B).
            ``(5) Licensed health care practitioner.--The term 
        `licensed health care practitioner' means any physician (as 
        defined in section 1861(r) of the Social Security Act) and any 
        registered professional nurse, licensed social worker, or other 
        individual who meets such requirements as may be prescribed by 
        the Secretary.
    ``(d) Continuation Coverage Excise Tax Not To Apply.--This section 
shall not apply in determining whether section 4980B (relating to 
failure to satisfy continuation coverage requirements of group health 
plans) applies.
    ``(e) Inflation Adjustment of $200 Benefit Limit.--
            ``(1) In general.--In the case of a calendar year after 
        1994, the $200 amount contained in subsection (b)(1)(B) shall 
        be increased for such calendar year by the medical care cost 
        adjustment for such calendar year. If any increase determined 
        under the preceding sentence is not a multiple of $10, such 
        increase shall be rounded to the nearest multiple of $10.
            ``(2) Medical care cost adjustment.--For purposes of 
        paragraph (1), the medical care cost adjustment for any 
        calendar year is the percentage (if any) by which--
                    ``(A) the medical care component of the Consumer 
                Price Index (as defined in section 1(f)(5)) for August 
                of the preceding calendar year, exceeds
                    ``(B) such component for August of 1993.''
    (b) Clerical Amendment.--The table of sections for such subpart E 
is amended by inserting after the item relating to section 818 the 
following new item:

                              ``Sec. 818A. Treatment of long-term care 
                                        insurance or plans.''

SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM CARE 
              INSURANCE; INCLUSION OF EMPLOYER-PROVIDED COVERAGE.

    (a) In General.--Subsection (a) of section 104 of the Internal 
Revenue Code of 1986 (relating to compensation for injuries or 
sickness) is amended by striking ``and'' at the end of paragraph (4), 
by striking the period at the end of paragraph (5) and inserting ``, 
and'', and by inserting after paragraph (4) the following new 
paragraph:
            ``(6) benefits under a long-term care insurance contract 
        (as defined in section 818A(b)).''
    (b) Inclusion of Employer-Provided Coverage.--Section 106 of such 
Code (relating to contributions by employer to accident and health 
plans) is amended by adding at the end thereof the following sentence: 
``The preceding sentence shall not apply to any plan providing coverage 
for long-term care services.''

SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) of the Internal 
Revenue Code of 1986 (defining medical care) is amended by striking 
``or'' at the end of subparagraph (B), by redesignating subparagraph 
(C) as subparagraph (D), and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in section 818A(c)), or''.
    (b) Deduction for Long-Term Care Expenses for Parent or 
Grandparent.--Section 213 of such Code (relating to deduction for 
medical expenses) is amended by adding at the end the following new 
subsection:
    ``(g) Special Rule for Certain Long-Term Care Expenses.--For 
purposes of subsection (a), the term `dependent' shall include any 
parent or grandparent of the taxpayer for whom the taxpayer has 
expenses for long-term care services described in section 818A(c), but 
only to the extent of such expenses.''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
        redesignated by subsection (a)) is amended by striking 
        ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
        (A), (B), and (C)''.
            (2)(A) Paragraph (1) of section 213(d) of such Code is 
        amended by adding at the end thereof the following new flush 
        sentence:
        ``In the case of a long-term care insurance contract (as 
        defined in section 818A), only eligible long-term care premiums 
        (as defined in paragraph (10)) shall be taken into account 
        under subparagraph (D).''
            (B) Subsection (d) of section 213 is amended by adding at 
        the end the following new paragraph:
            ``(10) Eligible Long-Term Care Premiums.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible long-term care premiums' means the 
                amount paid during a taxable year for any long-term 
                care insurance contract (as defined in section 818A) 
                covering an individual, to the extent such amount does 
                not exceed the limitation determined under the 
                following table:

        ``In the case of an individual
                                                                       
          with an attained age before the
                                                         The limitation
          close of the taxable year of:
                                                              is:      
                40 or less...........................          $200    
                More than 40 but not more than 50....           375    
                More than 50 but not more than 60....           750    
                More than 60 but not more than 70....         1,600    
                More than 70.........................        2,000.    
                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        1993, each dollar amount contained in paragraph 
                        (1) shall be increased by the medical care cost 
                        adjustment of such amount for such calendar 
                        year. If any increase determined under the 
                        preceding sentence is not a multiple of $10, 
                        such increase shall be rounded to the nearest 
                        multiple of $10.
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the medical care component of 
                                the Consumer Price Index (as defined in 
                                section 1(f)(5)) for August of the 
                                preceding calendar year, exceeds
                                    ``(II) such component for August of 
                                1991.''
            (3) Paragraph (6) of section 213(d) of such Code is 
        amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraphs (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
            (4) Paragraph (7) of section 213(d) of such Code is amended 
        by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)''.

SEC. 3004. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR LONG-TERM 
              CARE INSURANCE CONTRACTS NOT TAXABLE.

    Subsection (a) of section 1035 of the Internal Revenue Code of 1986 
(relating to certain exchanges of insurance contracts) is amended by 
striking the period at the end of paragraph (3) and inserting ``; or'', 
and by adding at the end thereof the following new paragraph:
            ``(4) a contract of life insurance or an endowment or 
        annuity contract for a long-term care insurance contract (as 
        defined in section 818A).''

SEC. 3005. EXCLUSION FROM GROSS INCOME FOR AMOUNTS WITHDRAWN FROM 
              INDIVIDUAL RETIREMENT PLANS OR 401(k) PLANS FOR LONG-TERM 
              CARE INSURANCE.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and by inserting after section 136 the following new section:

``SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS AND 
              SECTION 401(k) PLANS FOR LONG-TERM CARE INSURANCE.

    ``(a) General Rule.--The amount includible in the gross income of 
an individual for the taxable year by reason of qualified distributions 
during such taxable year shall not exceed the excess of--
            ``(1) the amount which would (but for this section) be so 
        includible by reason of such distributions, over
            ``(2) the aggregate premiums paid by such individual during 
        such taxable year for any long-term care insurance contract (as 
        defined in section 818A) for the benefit of such individual or 
        the spouse of such individual.
    ``(b) Qualified Distribution.--For purposes of this section, the 
term `qualified distribution' means any distribution to an individual 
from an individual retirement account or a section 401(k) plan if such 
individual has attained age 59\1/2\ on or before the date of the 
distribution (and, in the case of a distribution used to pay premiums 
for the benefit of the spouse of such individual, such spouse has 
attained age 59\1/2\ on or before the date of the distribution).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Individual retirement account.--The term `individual 
        retirement account' has the meaning given such term by section 
        408(a).
            ``(2) Section 401(k) plan.--The term `section 401(k) plan' 
        means any employer plan which meets the requirements of section 
        401(a) and which includes a qualified cash or deferred 
        arrangement (as defined in section 401(k)).
    ``(d) Special Rules for Section 401(k) Plans.--
            ``(1) Withdrawals cannot exceed elective contributions 
        under qualified cash or deferred arrangement.--This section 
        shall not apply to any distribution from a section 401(k) plan 
        to the extent the aggregate amount of such distributions for 
        the use described in subsection (a) exceeds the aggregate 
        employer contributions made pursuant to the employee's election 
        under section 401(k)(2).
            ``(2) Withdrawals not to cause disqualification.--A plan 
        shall not be treated as failing to satisfy the requirements of 
        section 401, and an arrangement shall not be treated as failing 
        to be a qualified cash or deferred arrangement (as defined in 
        section 401(k)(2)), merely because under the plan or 
        arrangement distributions are permitted which are excludable 
        from gross income by reason of this section.''
    (b) Conforming Amendments.--
            (1) Section 401(k) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals for payment of long-term care premiums, see section 137.''
            (2) Section 408(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals from individual retirement accounts for payment of long-
term care premiums, see section 137.''
            (3) The table of sections for such part III is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 137. Distributions from individual 
                                        retirement accounts and section 
                                        401(k) plans for long-term care 
                                        insurance.
                              ``Sec. 138. Cross references to other 
                                        Acts.''

SEC. 3006. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    Section 101 of the Internal Revenue Code of 1986 (relating to 
certain death benefits) is amended by adding at the end thereof the 
following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        paid or advanced to an individual under a life insurance 
        contract on the life of an insured--
                    ``(A) who is a terminally ill individual, or
                    ``(B) who is a chronically ill individual (as 
                defined in section 818A(c)(2)) who is confined to a 
                qualified facility (as defined in section 
                818A(c)(3)(A)),
        shall be treated as an amount paid by reason of the death of 
        such insured.
            ``(2) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who has been certified by a physician as having an 
        illness or physical condition which can reasonably be expected 
        to result in death in 12 months or less.
            ``(3) Physician.--For purposes of this subsection, the term 
        `physician' has the meaning given to such term by section 
        213(d)(4).''

SEC. 3007. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to taxable years 
beginning after December 31, 1994.

    Subtitle B--Protection of Assets Under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

SEC. 3101. PROTECTION OF ASSETS THROUGH USE OF QUALIFIED LONG-TERM CARE 
              INSURANCE.

    (a) In General.--Title XIX of the Social Security Act, as amended 
by section 1601(a), is amended--
            (1) by redesignating section 1932 as section 1933; and
            (2) by inserting after section 1931 the following new 
        section:

``special rules for asset disregard in the case of qualified long-term 
                        care insurance contracts

    ``Sec. 1932. (a) In General.--Each State plan under this title, as 
a condition for the receipt of payment under section 1903(a) with 
respect to long-term care services (as defined in subsection (c)(1)), 
shall provide that in determining the eligibility of an individual for 
medical assistance under the plan with respect to such services there 
shall be disregarded some or all of the individual's assets which are 
attributable (as determined under subsection (c)(2)) to coverage under 
a qualified long-term care insurance contract (as defined in subsection 
(b)).
    ``(b) Qualified Long-Term Care Insurance Contract Defined.--In this 
section, the term `qualified long-term care insurance contract' means, 
with respect to a State, a long-term care insurance contract (as 
defined in section 818A(b) of the Internal Revenue Code of 1986) 
which--
            ``(1) provides such protection against the costs of 
        receiving long-term care services as the State may require by 
        law;
            ``(2) provides that benefits under the contract shall be 
        paid without regard to eligibility for medical assistance under 
        this title; and
            ``(3) meets such other requirements (such as requirements 
        relating to premiums, disclosure, minimum benefits, rights of 
        conversion, and standards for claims processing) as the State 
        may determine to be appropriate.
    ``(c) Other Definitions.--In this section:
            ``(1) Long-term care services.--The term `long-term care 
        services' means nursing facility services, home health care 
        services, and home and community-based services, and includes 
        such other similar items and services described in section 
        1905(a) as a State may specify.
            ``(2) Attribution rules.--An individual's assets are 
        considered to be `attributable' to a qualified long-term care 
        insurance contract to the extent specified under the State 
        plan. Such a plan shall provide for at least one of the 
        following:
                    ``(A) All assets are considered attributable if the 
                insurance contract provides coverage for at least a 
                specified period of coverage (of not less than 3 years 
                and of not more than 6 years) for long-term care 
                services.
                    ``(B) An amount of assets, up to the dollar 
                limitation on benefits for long-term care services 
                under the contract, is considered attributable to the 
                contract.''.
    (b) Conforming Amendment.--Section 1902(a)(17)(A) of such Act (42 
U.S.C. 1396a(a)(17)(A)) is amended by inserting ``and section 1932'' 
after ``objectives of this title''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply (except as provided under paragraph (2)) to payments to 
        States under title XIX of the Social Security Act for calendar 
        quarters beginning on or after one year after the date of the 
        enactment of this Act, without regard to whether regulations to 
        implement such amendment are promulgated by such date.
            (2) Delay permitted if state legislation required.--In the 
        case of a State plan for medical assistance under title XIX of 
        the Social Security Act which the Secretary of Health and Human 
        Services determines requires State legislation (other than 
        legislation authorizing or appropriating funds) in order for 
        the plan to meet the additional requirements imposed by the 
        amendments made by this section, the State plan shall not be 
        regarded as failing to comply with the requirements of such 
        title solely on the basis of its failure to meet these 
        additional requirements before the first day of the first 
        calendar quarter beginning after the close of the first regular 
        session of the State legislature that begins after the date of 
        the enactment of this Act. For purposes of the previous 
        sentence, in the case of a State that has a 2-year legislative 
        session, each year of such session shall be deemed to be a 
        separate regular session of the State legislature.

                          Subtitle C--Studies

SEC. 3201. FEASIBILITY OF ENCOURAGING HEALTH CARE PROVIDERS TO DONATE 
              SERVICES TO HOMEBOUND PATIENTS.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of encouraging health care providers to donate their 
services to homebound patients. Such study shall include an examination 
of the effects of qualifying such services as a charitable 
contribution.

SEC. 3202. FEASIBILITY OF TAX CREDIT FOR HEADS OF HOUSEHOLDS WHO CARE 
              FOR ELDERLY FAMILY MEMBERS IN THEIR HOMES.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of providing heads of households who care for 
elderly family members in their homes with a tax credit. Such study 
shall estimate the cost of such a tax credit which would apply to 
expenses incurred in the custodial care of such an elderly family 
member to the extent such expenses exceed 5 percent of adjusted gross 
income.

SEC. 3203. CASE MANAGEMENT OF CURRENT LONG-TERM CARE BENEFITS.

    (a) In General.--The Secretary of Health and Human Services shall 
conduct a study of the feasibility of encouraging or requiring the use 
of a single designated public or nonprofit agency (such as an area 
agency on aging) to coordinate, through case management, the provision 
of long-term care benefits under current Federal, State, and local 
programs in a geographic area.
    (b) Report.--The Secretary shall submit to Congress a report on the 
study conducted under subsection (a) by not later than 1 year after the 
date of the enactment of this Act. Such report shall include such 
recommendations regarding changes in legislation to encourage or 
require the use (described in subsection (a)) of an agency to 
coordinate long-term care benefits as may be appropriate.

      Subtitle D--Volunteer Service Credit Demonstration Projects

SEC. 3301. AMENDMENT TO THE OLDER AMERICANS ACT OF 1965.

    (a) In General.--Part B of title IV of the Older Americans Act of 
1965 (42 U.S.C. 3034-3035r) is amended by adding at the end the 
following:

``SEC. 429K. VOLUNTEER SERVICE CREDIT DEMONSTRATION PROJECTS.

    ``(a) Requirements.--The Commissioner shall--
            ``(1) establish and operate (directly, or through the State 
        agency on aging or one or more area agencies on aging) a 
        volunteer service credit demonstration project in all or part 
        of each State;
            ``(2) establish criteria for selecting individuals to whom 
        volunteer services will be provided under volunteer service 
        credit demonstration projects operated under paragraph (1);
            ``(3) recruit and train (directly or through State agencies 
        on aging or area agencies on aging) individuals who volunteer 
        to provide services through such projects;
            ``(4) establish a minimum standard for each service to be 
        provided by volunteers through such projects;
            ``(5) monitor services provided by volunteers through such 
        projects to ensure that standards established under paragraph 
        (4) are met; and
            ``(6) maintain (directly or through State agencies on aging 
        or area agencies on aging) with respect to each individual who 
        provides services through a volunteer service credit 
        demonstration project operated under paragraph (1) a separately 
        identifiable account showing the number of hours such 
        individual provided such services.
    ``(b) Definition.--For purposes of subsection (a), the term 
`volunteer service credit demonstration project' means a demonstration 
project through which homemaker services, respite care for families, 
adult day care, and educational, transportation, and home-delivery 
services are provided by--
            ``(1) volunteer older individuals for the benefit of older 
        individuals or low-income children; or
            ``(2) volunteer individuals of any age for the benefit of 
        older individuals;
in return for the the receipt of similar services under any such 
demonstration project (that is established under this section) at a 
time at which such volunteers are older individuals in need of such 
services.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect October 1, 1994.

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