    [Congressional Bills 103th Congress]
    [From the U.S. Government Publishing Office]
    [S. 1757 Placed on Calendar Senate (PCS)]

                                Calendar No. 335

    103d CONGRESS

      1st Session

                                    S. 1757

    _______________________________________________________________________

                                     A BILL

     To ensure individual and family security through health care coverage
       for all Americans in a manner that contains the rate of growth in
    health care costs and promotes responsible health insurance practices,
    to promote choice in health care, and to ensure and protect the health
                             care of all Americans.

    _______________________________________________________________________

                               November 22, 1993

                Read the second time and placed on the calendar

                                                           Calendar No. 335

    103d CONGRESS
      1st Session
                                    S. 1757

     To ensure individual and family security through health care coverage
       for all Americans in a manner that contains the rate of growth in
    health care costs and promotes responsible health insurance practices,
    to promote choice in health care, and to ensure and protect the health
                             care of all Americans.

    _______________________________________________________________________

                       IN THE SENATE OF THE UNITED STATES

                November 20 (legislative day, November 2), 1993

    Mr. Mitchell (for himself, Mr. Moynihan, Mr. Kennedy, Mr. Daschle, Mr.
        Rockefeller, Mr. Riegle, Mr. Akaka, Mr. Baucus, Mrs. Boxer, Mr.
    Bumpers, Mr. Campbell, Mr. Conrad, Mr. Dodd, Mrs. Feinstein, Mr. Glenn,
    Mr. Graham, Mr. Harkin, Mr. Inouye, Mr. Jeffords, Mr. Leahy, Mr. Levin,
     Mr. Mathews, Ms. Mikulski, Ms. Moseley-Braun, Mrs. Murray, Mr. Pell,
         Mr. Pryor, Mr. Reid, Mr. Simon, and Mr. Wofford) (by request)
          introduced the following bill; which was read the first time

                                November 22,1993

                Read the second time and placed on the calendar

    _______________________________________________________________________

                                     A BILL

     To ensure individual and family security through health care coverage
       for all Americans in a manner that contains the rate of growth in
    health care costs and promotes responsible health insurance practices,
    to promote choice in health care, and to ensure and protect the health
                             care of all Americans.

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

                                                                      Table

    SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.

        (a) Short Title.--This Act may be cited as the ``Health Security
    Act''.
        (b) Table of Titles and Subtitles in Act.--The following are the
    titles and subtitles contained in this Act:

                                                                       Page
                         TITLE I--HEALTH CARE SECURITY

    Subtitle A--Universal Coverage and Individual Responsibility          8
    Subtitle B--Benefits........................................         32
    Subtitle C--State Responsibilities..........................         95
    Subtitle D--Health Alliances................................        118
    Subtitle E--Health Plans....................................        224
    Subtitle F--Federal Responsibilities........................        256
    Subtitle G--Employer Responsiblities........................        303
    Subtitle J--General Definitions; Miscellaneous Provisions...        323
                             TITLE II--NEW BENEFITS

    Subtitle A--Medicare Outpatient Prescription Drug Benefit...        343
    Subtitle B--Long-Term Care..................................        389
                      TITLE III--PUBLIC HEALTH INITIATIVES

    Subtitle A--Workforce Priorities Under Federal Payments.....        504
    Subtitle B--Academic Health Centers.........................        548
    Subtitle C--Health Research Initiatives.....................        560
    Subtitle D--Core Functions of Public Health Programs;               564
                                National Initiatives Regarding
                                Preventive Health.
    Subtitle E--Health Services for Medically Underserved               578
                                Populations.
    Subtitle F--Mental Health; Substance Abuse..................        615
    Subtitle G--Comprehensive School Health Education; School-          627
                                Related Health Services.
    Subtitle H--Public Health Service Initiative................        667
    Subtitle I--Coordination With COBRA Continuation Coverage...        668
                        TITLE IV--MEDICARE AND MEDICAID

    Subtitle A--Medicare and the Alliance System................        674
    Subtitle B--Savings in Medicare Program.....................        752
    Subtitle C--Medicaid........................................        807
    Subtitle D--Increase in SSI Personal Needs Allowance........        832
                    TITLE V--QUALITY AND CONSUMER PROTECTION

    Subtitle A--Quality Management and Improvement..............        835
    Subtitle B--Information Systems, Privacy, and Administrative        859
                                Simplification.
    Subtitle C--Remedies and Enforcement........................        887
    Subtitle D--Medical Malpractice.............................        933
    Subtitle E--Fraud and Abuse.................................        948
    Subtitle F--McCarran-Ferguson Reform........................        979
       TITLE VI--PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS

    Subtitle A--Premium Caps....................................        984
    Subtitle B--Premium-Related Financing.......................       1025
    Subtitle C--Payments to Regional Alliance Health Plans......       1086
                         TITLE VII--REVENUE PROVISIONS

    Subtitle A--Financing Provisions............................       1094
    Subtitle B--Tax Treatment of Employer-Provided Health Care..       1133
    Subtitle C--Employment Status Provisions....................       1143
    Subtitle D--Tax Treatment of Funding of Retiree Health             1153
                                Benefits.
    Subtitle E--Coordination With COBRA Continuing Care                1157
                                Provisions.
    Subtitle F--Tax Treatment of Organizations Providing Health        1159
                                Care Services and Related
                                Organizations.
    Subtitle G--Tax Treatment of Long-term Care Insurance and          1171
                                Services.
    Subtitle H--Tax Incentives for Health Services Providers....       1192
    Subtitle I--Miscellaneous Provisions........................       1199
         TITLE VIII--HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL
                                   GOVERNMENT

    Subtitle A--Military Health Care Reform.....................       1207
    Subtitle B--Department of Veterans Affairs..................       1218
    Subtitle C--Federal Employees Health Benefits Program.......       1233
    Subtitle D--Indian Health Service...........................       1249
    Subtitle E--Amendments to the Employee Retirement Income           1262
                                Security Act of 1974.
    Subtitle F--Special Fund for WIC Program....................       1274
         TITLE IX--AGGREGATE GOVERNMENT PAYMENTS TO REGIONAL ALLIANCES

    Subtitle A--Aggregate State Payments........................       1277
    Subtitle B--Aggregate Federal Alliance Payments.............       1296
    Subtitle C--Borrowing Authority to Cover Cash-Flow                 1308
                                Shortfalls.
     TITLE X--COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION AND
                              AUTOMOBILE INSURANCE

    Subtitle A--Workers Compensation Insurance..................       1314
    Subtitle B--Automobile Insurance............................       1326
    Subtitle C--Commission on Integration of Health Benefits....       1331
    Subtitle D--Federal Employees' Compensation Act.............       1333
    Subtitle E--Davis-Bacon Act and Service Contract Act........       1333
    Subtitle F--Effective Dates.................................       1334
                    TITLE XI--TRANSITIONAL INSURANCE REFORM

                                                                   Findings

    SEC. 2. FINDINGS.

        The Congress finds as follows:
                (1) Under the current health care system in the United
            States--
                        (A) individuals risk losing their health care
                    coverage when they move, when they lose or change jobs,
                    when they become seriously ill, or when the coverage
                    becomes unaffordable;
                        (B) continued escalation of health care costs
                    threatens the economy of the United States, undermines
                    the international competitiveness of the Nation, and
                    strains Federal, State, and local budgets;
                        (C) an excessive burden of forms, paperwork, and
                    bureaucratic procedures confuses consumers and
                    overwhelms health care providers;
                        (D) fraud and abuse sap the strength of the health
                    care system; and
                        (E) health care is a critical part of the economy
                    of the United States and interstate commerce, consumes
                    a significant percentage of public and private
                    spending, and affects all industries and individuals in
                    the United States.
                (2) Under any reform of the health care system--
                        (A) health insurance and high quality health care
                    should be secure, uninterrupted, and affordable for all
                    individuals in the United States;
                        (B) comprehensive health care benefits that meet
                    the full range of health needs, including primary,
                    preventive, and specialized care, should be available
                    to all individuals in the United States;
                        (C) the current high quality of health care in the
                    United States should be maintained;
                        (D) individuals in the United States should be
                    afforded a meaningful opportunity to choose among a
                    range of health plans, health care providers, and
                    treatments;
                        (E) regulatory and administrative burdens should be
                    reduced;
                        (F) the rapidly escalating costs of health care
                    should be contained without sacrificing high quality or
                    impeding technological improvements;
                        (G) competition in the health care industry should
                    ensure that health plans and health care providers are
                    efficient and charge reasonable prices;
                        (H) a partnership between the Federal Government
                    and each State should allow the State and its local
                    communities to design an effective, high-quality system
                    of care that serves the residents of the State;
                        (I) all individuals should have a responsibility to
                    pay their fair share of the costs of health care
                    coverage;
                        (J) a health care system should build on the
                    strength of the employment-based coverage arrangements
                    that now exist in the United States;
                        (K) the penalties for fraud and abuse should be
                    swift and severe; and
                        (L) an individual's medical information should
                    remain confidential and should be protected from
                    unauthorized disclosure and use.

                                                                   Purposes

    SEC. 3. PURPOSES.

        The purposes of this Act are as follows:
                (1) To guarantee comprehensive and secure health care
            coverage.
                (2) To simplify the health care system for consumers and
            health care professionals.
                (3) To control the cost of health care for employers,
            employees, and others who pay for health care coverage.
                (4) To promote individual choice among health plans and
            health care providers.
                (5) To ensure high quality health care.
                (6) To encourage all individuals to take responsibility for
            their health care coverage.

                         TITLE I--HEALTH CARE SECURITY

                           table of contents of title

                                                                       Page
          Subtitle A--Universal Coverage and Individual Responsibility

                           Part 1--Universal Coverage

    Sec. 1001. Entitlement to health benefits...................         14
    Sec. 1002. Individual responsibilities......................         15
    Sec. 1003. Protection of consumer choice....................         15
    Sec. 1004. Applicable health plan providing coverage........         16
    Sec. 1005. Treatment of other nonimmigrants.................         17
    Sec. 1006. Effective date of entitlement....................         18
                Part 2--Treatment of Families and Special Rules

    Sec. 1011. General rule of enrollment of family in same              21
                                health plan.
    Sec. 1012. Treatment of certain families....................         25
    Sec. 1013. Multiple employment situations...................         30
    Sec. 1014. Treatment of residents of States with statewide           32
                                single-payer systems.
                              Subtitle B--Benefits

                     Part 1--Comprehensive Benefit Package

    Sec. 1101. Provision of comprehensive benefits by plans.....         32
               Part 2--Description of Items and Services Covered

    Sec. 1111. Hospital services................................         34
    Sec. 1112. Services of health professionals.................         36
    Sec. 1113. Emergency and ambulatory medical and surgical             38
                                services.
    Sec. 1114. Clinical preventive services.....................         38
    Sec. 1115. Mental illness and substance abuse services......         46
    Sec. 1116. Family planning services and services for                 63
                                pregnant women.
    Sec. 1117. Hospice care.....................................         63
    Sec. 1118. Home health care.................................         64
    Sec. 1119. Extended care services...........................         64
    Sec. 1120. Ambulance services...............................         66
    Sec. 1121. Outpatient laboratory, radiology, and diagnostic          67
                                services.
    Sec. 1122. Outpatient prescription drugs and biologicals....         67
    Sec. 1123. Outpatient rehabilitation services...............         69
    Sec. 1124. Durable medical equipment and prosthetic and              70
                                orthotic devices.
    Sec. 1125. Vision care......................................         71
    Sec. 1126. Dental care......................................         71
    Sec. 1127. Health education classes.........................         73
    Sec. 1128. Investigational treatments.......................         74
                              Part 3--Cost Sharing

    Sec. 1131. Cost sharing.....................................         76
    Sec. 1132. Lower cost sharing...............................         80
    Sec. 1133. Higher cost sharing..............................         82
    Sec. 1134. Combination cost sharing.........................         85
    Sec. 1135. Table of copayments and coinsurance..............         86
    Sec. 1136. Indexing dollar amounts relating to cost sharing.         89
                               Part 4--Exclusions

    Sec. 1141. Exclusions.......................................         90
                   Part 5--Role of the National Health Board

    Sec. 1151. Definition of benefits...........................         92
    Sec. 1152. Acceleration of expanded benefits................         92
    Sec. 1153. Authority with respect to clinical preventive             93
                                services.
    Sec. 1154. Establishment of standards regarding medical              94
                                necessity.
        Part 6--Additional Provisions Relating to Health Care Providers

    Sec. 1161. Override of restrictive State practice laws......         95
    Sec. 1162. Provision of items or services contrary to                95
                                religious belief or moral
                                conviction.
                       Subtitle C--State Responsibilities

    Sec. 1200. Participating State..............................         95
                     Part 1--General State Responsibilities

    Sec. 1201. General State responsibilities...................         97
    Sec. 1202. State responsibilities with respect to alliances.         98
    Sec. 1203. State responsibilities relating to health plans..        101
    Sec. 1204. Financial solvency; fiscal oversight; guaranty           106
                                fund.
    Sec. 1205. Restrictions on funding of additional benefits...        108
              Part 2--Requirements for State Single-payer Systems

    Sec. 1221. Single-payer system described....................        109
    Sec. 1222. General requirements for single-payer systems....        109
    Sec. 1223. Special rules for States operating statewide             114
                                single-payer system.
    Sec. 1224. Special rules for alliance-specific single-payer         117
                                systems.
                          Subtitle D--Health Alliances

    Sec. 1300. Health alliance defined..........................        118
           Part 1--Establsubpart a--regional alliancesrate Alliances
    Sec. 1301. Regional alliance defined........................        118
    Sec. 1302. Board of directors...............................        119
    Sec. 1303. Provider asubpart b--corporate alliancesliances..        120
    Sec. 1311. Corporate alliance defined; individuals eligible         121
                                for coverage through corporate
                                alliances; additional
                                definitions.
    Sec. 1312. Timing of elections..............................        127
    Sec. 1313. Termination of alliance election.................        129
     Part 2--General Responsibilities and Authorities of Regional Alliances

    Sec. 1321. Contracts with health plans......................        131
    Sec. 1322. Offering choice of health plans for enrollment;          132
                                establishment of fee-for-service
                                schedule.
    Sec. 1323. Enrollment rules and procedures..................        138
    Sec. 1324. Issuance of health security cards................        148
    Sec. 1325. Consumer information and marketing...............        148
    Sec. 1326. Ombudsman........................................        150
    Sec. 1327. Data collection; quality.........................        150
    Sec. 1328. Additional duties................................        150
    Sec. 1329. Additional authorities for regional alliances to         151
                                address needs in areas with
                                inadequate health services;
                                prohibition of insurance role.
    Sec. 1330. Prohibition against self-dealing and conflicts of        152
                                interest.
    Part 3--Authorities and Responsibilities of Regional Alliances Relating
                     to Fsubpart a--collection of fundsions
    Sec. 1341. Information and negotiation and acceptance of            153
                                bids.
    Sec. 1342. Calculation and publication of general family            156
                                share and general employer
                                premium amounts.
    Sec. 1343. Determination of family share for families.......        158
    Sec. 1344. Notice of family payments due....................        163
    Sec. 1345. Collections......................................        168
    Sec. 1346. Coordination amsubpart b--paymentsces............        171
    Sec. 1351. Payment to regional alliance health plans........        174
    Sec. 1352. Alliance administrative allowance percentage.....        178
    Sec. 1353. Payments subpart c--financial managementcademic          179
                                health centers and graduate
                                medical education.
    Sec. 1subpart d--reductions in cost sharing; income determinations  180
    Sec. 1371. Reduction in cost sharing for low-income families        183
    Sec. 1372. Application process for cost sharing reductions..        186
    Sec. 1373. Application for premium discounts and reduction          191
                                in liabilities to alliances.
    Sec. 1374. General provisions relating to application               193
                                process.
    Sec. 1375. End-of-year reconciliation for premium discount          196
                                and repayment reduction with
                                actual income.
        Part 4--Responsibilities and Authorities of Corporate Alliances

    Sec. 1381. Contracts with health plans......................        199
    Sec. 1382. Offering choice of health plans for enrollment...        200
    Sec. 1383. Enrollment; issuance of health security card.....        201
    Sec. 1384. Community-rated premiums within premium areas....        203
    Sec. 1385. Assistance for low-wage families.................        205
    Sec. 1386. Consumer information and marketing; data                 206
                                collection and quality;
                                additional duties.
    Sec. 1387. Plan and information requirements................        206
    Sec. 1388. Management of funds; relations with employees....        207
    Sec. 1389. Cost control.....................................        207
    Sec. 1390. Payments by corporate alliance employers to              208
                                corporate alliances.
    Sec. 1391. Coordination of payments.........................        208
    Sec. 1392. Applicability of ERISA enforcement mechanisms for        209
                                enforcement of certain
                                requirements.
    Sec. 1393. Applicability of certain ERISA protections to            209
                                enrolled individuals.
    Sec. 1394. Disclosure and reserve requirements..............        210
    Sec. 1395. Trusteeship by the Secretary of insolvent                211
                                corporate alliance health plans.
    Sec. 1396. Guaranteed benefits under trusteeship of the             216
                                Secretary.
    Sec. 1397. Imposition and collection of periodic assessments        220
                                on self-insured corporate
                                alliance plans.
    Sec. 1398. Payments to Federal government by multiemployer          224
                                corporate alliances for academic
                                health centers and graduate
                                medical education.
                            Subtitle E--Health Plans

    Sec. 1400. Health plan defined..............................        224
         Part 1--Requirements Relating to Comprehensive Benefit Package

    Sec. 1401. Application of requirements......................        226
    Sec. 1402. Requirements relating to enrollment and coverage.        226
    Sec. 1403. Community rating.................................        231
    Sec. 1404. Marketing of health plans; information...........        231
    Sec. 1405. Grievance procedure..............................        233
    Sec. 1406. Health plan arrangements with providers..........        234
    Sec. 1407. Preemption of certain State laws relating to             237
                                health plans.
    Sec. 1408. Financial solvency...............................        239
    Sec. 1409. Requirement for offering cost sharing policy.....        239
    Sec. 1410. Quality assurance................................        239
    Sec. 1411. Provider verification............................        239
    Sec. 1412. Consumer disclosures of utilization management           240
                                protocols.
    Sec. 1413. Confidentiality, data management, and reporting..        240
    Sec. 1414. Participation in reinsurance system..............        241
            Part 2--Requirements Relating to Supplemental Insurance

    Sec. 1421. Imposition of requirements on supplemental               241
                                insurance.
    Sec. 1422. Standards for supplemental health benefit                243
                                policies.
    Sec. 1423. Standards for cost sharing policies..............        246
         Part 3--Requirements Relating to Essential Community Providers

    Sec. 1431. Health plan requirement..........................        249
    Sec. 1432. Sunset of requirement............................        252
     Part 4--Requirements Relating to Workers' Compensation and Automobile
                           Medical Liability Coverage

    Sec. 1441. Reference to requirements relating to workers            256
                                compensation services.
    Sec. 1442. Reference to requirements relating to automobile         256
                                medical liability services.
                      Subtitle F--Federal Responsibilities

               subpart a--establishment of national health board
    Sec. 1501. Creation of National Health Board; membership....        256
    Sec. 1502. Qualifications of board members..................        258
    Sec. 1503. General duties and responsibilities..............        259
    Sec. 1504. Annual report....................................        262
    Sec. 1505. Powers...........................................        263
    Ssubpart b--responsibilities relating to review and approval of state 4
                                    systems
    Sec. 1511. Federal review and action on State systems.......        264
    Sec. 1512. Failure of participating States to meet                  270
                                conditions for compliance.
    Sec. 1513. Reduction in payments for health programs by             272
                                Secretary of Health and Human
                                Services.
    Sec. 1514. Review of Federal determinations.................        273
    Sec. 151subpart c--responsibilities in absence of state systems     273
    Sec. 1521. Application of subpart...........................        275
    Sec. 1522. Federal assumption of responsibilities in non-           275
                                participating States.
    Sec. 1523. Imposition of surcharge on premiums under                277
                                federally-operated system.
    Sec.subpart d--establishment of class factors for charging premiums 278
    Ssubpart e--risk adjustment and reinsurance methodology for payment of
                                     plans
    Sec. 1541. Development of a risk adjustment and reinsurance         279
                                methodology.
    Sec. 1542. Incentives to enroll disadvantaged groups........        285
    Sec. 1543. Advisory committee...............................        285
    Sec. 1544. Research and demonstrations......................        286
    Sec. 1545subpart f--responsibilities for financial requirements     286
    Sec. 1551. Capital standards for regional alliance health           286
                                plan.
    Sec. 1552. Standard for guaranty funds......................        287
      Part 2--Responsisubpart a--general responsibilitiesd Human Services
    Sec. 1571. General responsibilities of Secretary of Health          289
                                and Human Services.
    Sec. 15subpart b--certification of essential community providers    290
    Sec. 1581. Certification....................................        293
    Sec. 1582. Categories of providers automatically certified..        293
    Sec. 1583. Standards for additional providers...............        296
    Sec. 1584. Certification process; review; termination of            297
                                certifications.
    Sec. 1585. Notification of health alliances and                     299
                                participating States.
            Part 3--Specific Responsibilities of Secretary of Labor

    Sec. 1591. Responsibilities of Secretary of Labor...........        300
                     Subtitle G--Employer Responsibilities
    Sec. 1601. Payment requirement..............................        303
    Sec. 1602. Requirement for information reporting............        303
    Sec. 1603. Requirements relating to new employees...........        314
    Sec. 1604. Auditing of records..............................        315
    Sec. 1605. Prohibition of certain employer discrimination...        316
    Sec. 1606. Prohibition on self-funding of cost sharing              316
                                benefits by regional alliance
                                employers.
    Sec. 1607. Equal voluntary contribution requirement.........        317
    Sec. 1608. Employer retiree obligation......................        321
    Sec. 1609. Enforcement......................................        323
           Subtitle J--General Definitions; Miscellaneous Provisions
                          Part 1--General Definitions
    Sec. 1901. Definitions relating to employment and income....        323
    Sec. 1902. Other general definitions........................        331
                      Subtitle B--Miscellaneous Provisions

    Sec. 1911. Use of interim, final regulations................        341
    Sec. 1912. Social Security Act references...................        341

                                                        Title I, Subtitle A

                         TITLE I--HEALTH CARE SECURITY

          Subtitle A--Universal Coverage and Individual Responsibility

                           PART 1--UNIVERSAL COVERAGE

    SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

        (a) In General.--In accordance with this part, each eligible
    individual is entitled to the comprehensive benefit package under
    subtitle B through the applicable health plan in which the individual
    is enrolled consistent with this title.
        (b) Health Security Card.--Each eligible individual is entitled to
    a health security card to be issued by the alliance or other entity
    that offers the applicable health plan in which the individual is
    enrolled.
        (c) Eligible Individual Defined.--In this Act, the term ``eligible
    individual'' means an individual who is residing in the United States
    and who is--
                (1) a citizen or national of the United States;
                (2) an alien permanently residing in the United States
            under color of law (as defined in section 1902(1)); or
                (3) a long-term nonimmigrant (as defined in section
            1902(19)).
        (d) Treatment of Medicare-Eligible Individuals.--Subject to section
    1012(a), a medicare-eligible individual is entitled to health benefits
    under the medicare program instead of the entitlement under subsection
    (a).
        (e) Treatment of Prisoners.--A prisoner (as defined in section
    1902(26)) is entitled to health care services provided by the authority
    responsible for the prisoner instead of the entitlement under
    subsection (a).

    SEC. 1002. INDIVIDUAL RESPONSIBILITIES.

        (a) In General.--In accordance with this Act, each eligible
    individual (other than a medicare-eligible individual)--
                (1) must enroll in an applicable health plan for the
            individual, and
                (2) must pay any premium required, consistent with this
            Act, with respect to such enrollment.
        (b) Limitation on Disenrollment.--No eligible individual shall be
    disenrolled from an applicable health plan until the individual--
                (1) is enrolled under another applicable health plan, or
                (2) becomes a medicare-eligible individual.

    SEC. 1003. PROTECTION OF CONSUMER CHOICE.

        Nothing in this Act shall be construed as prohibiting the
    following:
                (1) An individual from purchasing any health care services.
                (2) An individual from purchasing supplemental insurance
            (offered consistent with this Act) to cover health care
            services not included within the comprehensive benefit package.
                (3) An individual who is not an eligible individual from
            purchasing health insurance (other than through a regional
            alliance).
                (4) Employers from providing coverage for benefits in
            addition to the comprehensive benefit package (subject to part
            2 of subtitle E).

    SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COVERAGE.

        (a) Specification of Applicable Health Plan.--Except as otherwise
    provided:
                (1) General rule: regional alliance health plans.--The
            applicable health plan for a family is a regional alliance
            health plan for the alliance area in which the family resides.
                (2) Corporate alliance health plans.--In the case of a
            family member that is eligible to enroll in a corporate
            alliance health plan under section 1311(c), the applicable
            health plan for the family is such a corporate alliance health
            plan.
        (b) Choice of Plans for Certain Groups.--
                (1) Military personnel and families.--For military
            personnel and families who elect a Uniformed Services Health
            Plan of the Department of Defense under section 1073a(d) of
            title 10, United States Code, as inserted by section 8001(a) of
            this Act, that plan shall be the applicable health plan.
                (2) Veterans.--For veterans and families who elect to
            enroll in a veterans health plan under section 1801 of title
            38, United States Code, as inserted by section 8101(a) of this
            Act, that plan shall be the applicable health plan.
                (3) Indians.--For those individuals who are eligible to
            enroll, and who elect to enroll, in a health program of the
            Indian Health Service under section 8302(b) or 8306(b), that
            program shall be the applicable health plan.

    SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS.

        (a) Undocumented Aliens Ineligible for Benefits.--An undocumented
    alien is not eligible to obtain the comprehensive benefit package
    through enrollment in a health plan pursuant to this Act.
        (b) Diplomats and Other Foreign Government Officials.--Subject to
    conditions established by the National Health Board in consultation
    with the Secretary of State, a nonimmigrant under subparagraph (A) or
    (G) of section 101(a)(15) of the Immigration and Nationality Act may
    obtain the comprehensive benefit package through enrollment in the
    regional alliance health plan for the alliance area in which the
    nonimmigrant resides.
        (c) Reciprocal Treatment of Other Nonimmigrants.--With respect to
    those classes of individuals who are lawful nonimmigrants but who are
    not long-term nonimmigrants (as defined in section 1902(19)) or
    described in subsection (b), such individuals may obtain such benefits
    through enrollment with regional alliance health plans only in
    accordance with such reciprocal agreements between the United States
    and foreign states as may be entered into.

    SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT.

        (a) Regional Alliance Eligible Individuals.--
                (1) In general.--In the case of regional alliance eligible
            individuals residing in a State, the entitlement under this
            part (and requirements under section 1002) shall not take
            effect until the State becomes a participating State (as
            defined in section 1200).
                (2) Transitional rule for corporate alliances.--
                        (A) In general.--In the case of a State that
                    becomes a participating State before the general
                    effective date (as defined in subsection (c)) and for
                    periods before such date, under rules established by
                    the Board, an individual who is covered under a plan
                    (described in subparagraph (C)) based on the individual
                    (or the individual's spouse) being a qualifying
                    employee of a qualifying employer, the individual shall
                    not be treated under this Act as a regional alliance
                    eligible individual.
                        (B) Qualifying employer defined.--In subparagraph
                    (A), the term ``qualifying employer'' means an employer
                    that--
                                (i) is described in section 1311(b)(1)(A),
                            or is participating in a multiemployer plan
                            described in section 1311(b)(1)(B) or plan
                            described in section 1311(b)(1)(C), and
                                (ii) provides such notice to the regional
                            alliance involved as the Board specifies.
                        (C) Benefits plan described.--A plan described in
                    this subparagraph is an employee benefit plan that--
                                (i) provides (through insurance or
                            otherwise) the comprehensive benefit package,
                            and
                                (ii) provides an employer contribution of
                            at least 80 percent of the premium (or premium
                            equivalent) for coverage.
        (b) Corporate Alliance Eligible Individuals.--
                (1) In general.--In the case of corporate alliance eligible
            individuals, the entitlement under this part shall not take
            effect until the general effective date.
                (2) Transition.--For purposes of this Act and before the
            general effective date, in the case of an eligible individual
            who resides in a participating State, the individual is deemed
            a regional alliance eligible individual until the individual
            becomes a corporate alliance eligible individual, unless
            subsection (a)(2)(A) applies to the individual.
        (c) General Effective Date Defined.--In this Act, the term
    ``general effective date'' means January 1, 1998.

                PART 2--TREATMENT OF FAMILIES AND SPECIAL RULES

    SEC. 1011. GENERAL RULE OF ENROLLMENT OF FAMILY IN SAME HEALTH PLAN.

        (a) In General.--Except as provided in this part or otherwise, all
    members of the same family (as defined in subsection (b)) shall be
    enrolled in the same applicable health plan.
        (b) Family Defined.--In this Act, unless otherwise provided, the
    term ``family''--
                (1) means, with respect to an eligible individual who is
            not a child (as defined in subsection (c)), the individual; and
                (2) includes the following persons (if any):
                        (A) The individual's spouse if the spouse is an
                    eligible individual.
                        (B) The individual's children (and, if applicable,
                    the children of the individual's spouse) if they are
                    eligible individuals.
        (c) Classes of Family Enrollment; Terminology.--
                (1) In general.--In this Act, each of the following is a
            separate class of family enrollment:
                        (A) Coverage only of an individual (referred to in
                    this Act as the ``individual'' enrollment or class of
                    enrollment).
                        (B) Coverage of a married couple without children
                    (referred to in this Act as the ``couple-only''
                    enrollment or class of enrollment).
                        (C) Coverage of an unmarried individual and one or
                    more children (referred to in this Act as the ``single
                    parent'' enrollment or class of enrollment).
                        (D) Coverage of a married couple and one or more
                    children (referred to in this Act as the ``dual
                    parent'' enrollment or class of enrollment).
                (2) References to family and couple classes of
            enrollment.--In this Act:
                        (A) Family.--The terms ``family enrollment'' and
                    ``family class of enrollment'', refer to enrollment in
                    a class of enrollment described in subparagraph (B),
                    (C), or (D) of paragraph (1).
                        (B) Couple.--The term ``couple class of
                    enrollment'' refers to enrollment in a class of
                    enrollment described in subparagraph (B) or (D) of
                    paragraph (1).
        (d) Spouse; Married; Couple.--
                (1) In general.--In this Act, the terms ``spouse'' and
            ``married'' mean, with respect to a person, another individual
            who is the spouse of the person or married to the person, as
            determined under applicable State law.
                (2) Couple.--The term ``couple'' means an individual and
            the individual's spouse.
        (e) Child Defined.--
                (1) In general.--In this Act, except as otherwise provided,
            the term ``child'' means an eligible individual who (consistent
            with paragraph (3))--
                        (A) is under 18 years of age (or under 24 years of
                    age in the case of a full-time student), and
                        (B) is a dependent of an eligible individual.
                (2) Application of state law.--Subject to paragraph (3),
            determinations of whether a person is the child of another
            person shall be made in accordance with applicable State law.
                (3) National rules.--The National Health Board may
            establish such national rules respecting individuals who will
            be treated as children under this Act as the Board determines
            to be necessary. Such rules shall be consistent with the
            following principles:
                        (A) Step and foster child.--A child includes a step
                    child or foster child who is an eligible individual
                    living with an adult in a regular parent-child
                    relationship.
                        (B) Disabled child.--A child includes an unmarried
                    dependent eligible individual regardless of age who is
                    incapable of self-support because of mental or physical
                    disability which existed before age 21.
                        (C) Certain 3-generation families.--A child
                    includes the grandchild of an individual, if the parent
                    of the grandchild is a child and the parent and
                    grandchild are living with the grandparent.
                        (D) Treatment of emancipated minors and married
                    individuals.--An emancipated minor or married
                    individual shall not be treated as a child.
                        (E) Children placed for adoption.--A child includes
                    a child who is placed for adoption with an eligible
                    individual.
        (f) Additional Rules.--The Board shall provide for such additional
    exceptions and special rules, including rules relating to--
                (1) families in which members are not residing in the same
            area or in which children are not residing with their parents,
                (2) the treatment of eligible individuals who are under 19
            years of age and who are not a dependent of an eligible
            individual,
                (3) changes in family composition occurring during a year,
            and
                (4) treatment of children of parents who are separated or
            divorced,
    as the Board finds appropriate.

    SEC. 1012. TREATMENT OF CERTAIN FAMILIES.

        (a) Treatment of Medicare-Eligible Individuals Who are Qualifying
    Employees or Spouses of Qualifying Employees.--
                (1) In general.--Except as specifically provided, in the
            case of an individual who is an individual described in
            paragraph (2) with respect to 2 consecutive months in a year
            (and it is anticipated would be in the following month and in
            such following month would be a medicare-eligible individual
            but for this paragraph), the individual shall not be treated as
            a medicare-eligible individual under this Act during such
            following month and the remainder of the year.
                (2) Individual described.--An individual described in this
            paragraph with respect to a month is an individual who is a
            qualifying employee or the spouse or family member of a
            qualifying employee in the month.
        (b) Separate Treatment for Certain Groups of Individuals.--In the
    case of a family that includes one or more individuals in a group
    described in subsection (c)--
                (1) all the individuals in each such group within the
            family shall be treated collectively as a separate family, and
                (2) all the individuals not described in any such group
            shall be treated collectively as a separate family.
        (c) Groups of Individuals Described.--Each of the following is a
    group of individuals described in this subsection:
                (1) AFDC recipients (as defined in section 1902(3)).
                (2) Disabled SSI recipients (as defined in section
            1902(13)) .
                (3) SSI recipients (as defined in section 1902(33)) who are
            not disabled SSI recipients.
                (4) Electing veterans (as defined in subsection (d)(1)).
                (5) Active duty military personnel (as defined in
            subsection (d)(2)).
                (6) Electing Indians (as defined in subsection (d)(3)).
                (7) Prisoners (as defined in section 1902(26)).
        (d) Special Rules.--In this Act:
                (1) Electing veterans.--
                        (A) Defined.--Subject to subparagraph (B), the term
                    ``electing veteran'' means a veteran who makes an
                    election to enroll with a health plan of the Department
                    of Veterans Affairs under chapter 18 of title 38,
                    United States Code, as added by section 8101(a)(1).
                        (B) Family exception.--Subparagraph (A) shall not
                    apply with respect to coverage under a health plan
                    referred to in such subparagraph if, for the area in
                    which the electing veteran resides, such health plan
                    offers coverage to family members of an electing
                    veteran and the veteran elects family enrollment under
                    such plan (instead of individual enrollment).
                (2) Active duty military personnel.--
                        (A) In general.--Subject to subparagraph (B), the
                    term ``active duty military personnel'' means an
                    individual on active duty in the Uniformed Services of
                    the United States.
                        (B) Exception.--If an individual described in
                    subparagraph (A) elects family coverage under section
                    1073a(e)(2)(A) of title 10, United States Code (as
                    added by section 8001(a)), then paragraph (5) of
                    subsection (c) shall not apply with respect to such
                    coverage.
                (3) Electing indians.--
                        (A) In general.--Subject to subparagraph (B), the
                    term ``electing Indian'' means an eligible individual
                    who makes an election under section 8302(b) of this
                    Act.
                        (B) Family election for all individuals eligible to
                    elect.--No such election shall be made with respect to
                    an individual in a family (as defined without regard to
                    this section) unless such election is made for all
                    eligible individuals (described in section 8302(a)) who
                    are family members of the family.
                (4) Multiple choice.--Eligible individuals who are
            permitted to elect coverage under more than one health plan or
            program referred to in this subsection may elect which of such
            plans or programs will be the applicable health plan under this
            Act.
        (e) Qualifying Students.--
                (1) In general.--In the case of a qualifying student
            (described in paragraph (2)), the student may elect to enroll
            in a regional alliance health plan offered by the regional
            alliance for the area in which the school is located.
                (2) Qualifying student.--In paragraph (1), the term
            ``qualifying student'' means an individual who--
                        (A) but for this subsection would receive coverage
                    under a health plan as a child of another person, and
                        (B) is a full-time student at a school in an
                    alliance area that is different from the alliance area
                    (or, in the case of a corporate alliance, such coverage
                    area as the Board may specify) providing the coverage
                    described in subparagraph (A).
              (3) Payment rules.--
                        (A) Continued treatment as family.--Except as
                    provided in subparagraph (B), nothing in this
                    subsection shall be construed as affecting the payment
                    liabilities between families and health alliances or
                    between health alliances and health plans.
                        (B) Transfer payment.--In the case of an election
                    under paragraph (1), for transfer payments see section
                    1346(e).
        (f) Spouses Living in Different Alliance Areas.--The Board shall
    provide for such special rules in applying this Act in the case of a
    couple in which the spouses reside in different alliance areas as the
    Board finds appropriate.

    SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS.

        (a) Multiple Employment of an Individual.--In the case of an
    individual who--
                (1)(A) is not married or (B) is married and whose spouse is
            not a qualifying employee (as defined in section 1901(b)(1)),
                (2) is not a child, and
                (3) who is a qualifying employee both of a regional
            alliance employer and of a corporate alliance employer (or of 2
            corporate alliance employers),
    the individual may elect the applicable health plan to be either a
    regional alliance health plan (for the alliance area in which the
    individual resides) or a corporate alliance health plan (for an
    employer employing the individual).
        (b) Multiple Employment Within a Family.--
                (1) Married couple with employment with a regional alliance
            employer and with a corporate alliance employer.--In the case
            of a married individual--
                        (A) who is a qualifying employee of a regional
                    alliance employer and whose spouse is a qualifying
                    employee of a corporate alliance employer, or
                        (B) who is a qualifying employee of a corporate
                    alliance employer and whose spouse is a qualifying
                    employee of a regional alliance employer,
            the individual and the individual's spouse may elect the
            applicable health plan to be either a regional alliance health
            plan (for the alliance area in which the couple resides) or a
            corporate alliance health plan (for an employer employing the
            individual or the spouse).
                (2) Married couple with different corporate alliance
            employers.--In the case of a married individual--
                        (A) who is a qualifying employee of a corporate
                    alliance employer, and
                        (B) whose spouse is a qualifying employee of a
                    different corporate alliance employer,
            the individual and the individual's spouse may elect the
            applicable health plan to be a corporate alliance health plan
            for an employer employing either the individual or the spouse.

    SEC. 1014. TREATMENT OF RESIDENTS OF STATES WITH STATEWIDE SINGLE-PAYER
                  SYSTEMS.

        (a) Universal Coverage.--Notwithstanding the previous provisions of
    this title, except as provided in part 2 of subtitle C, in the case of
    an individual who resides in a State that has a Statewide single-payer
    system under section 1223, universal coverage shall be provided
    consistent with section 1222(3).
        (b) Individual Responsibilities.--In the case of an individual who
    resides in a single-payer State, the responsibilities of such
    individual under such system shall supersede the obligations of the
    individual under section 1002.

                                                        Title I, Subtitle B

                              Subtitle B--Benefits

                     PART 1--COMPREHENSIVE BENEFIT PACKAGE

    SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY PLANS.

        (a) In General.--The comprehensive benefit package shall consist of
    the following items and services (as described in part 2), subject to
    the cost sharing requirements described in part 3, the exclusions
    described in part 4, and the duties and authority of the National
    Health Board described in part 5:
                (1) Hospital services (described in section 1111).
                (2) Services of health professionals (described in section
            1112).
                (3) Emergency and ambulatory medical and surgical services
            (described in section 1113).
                (4) Clinical preventive services (described in section
            1114).
                (5) Mental illness and substance abuse services (described
            in section 1115).
                (6) Family planning services and services for pregnant
            women (described in section 1116).
                (7) Hospice care (described in section 1117).
                (8) Home health care (described in section 1118).
                (9) Extended care services (described in section 1119).
                (10) Ambulance services (described in section 1120).
                (11) Outpatient laboratory, radiology, and diagnostic
            services (described in section 1121).
                (12) Outpatient prescription drugs and biologicals
            (described in section 1122).
                (13) Outpatient rehabilitation services (described in
            section 1123).
                (14) Durable medical equipment and prosthetic and orthotic
            devices (described in section 1124).
                (15) Vision care (described in section 1125).
                (16) Dental care (described in section 1126).
                (17) Health education classes (described in section 1127).
                (18) Investigational treatments (described in section
            1128).
        (b) No Other Limitations or Cost Sharing.--The items and services
    in the comprehensive benefit package shall not be subject to any
    duration or scope limitation or any deductible, copayment, or
    coinsurance amount that is not required or authorized under this Act.
        (c) Health Plan.--Unless otherwise provided in this subtitle, for
    purposes of this subtitle, the term ``health plan'' has the meaning
    given such term in section 1400.

               PART 2--DESCRIPTION OF ITEMS AND SERVICES COVERED

    SEC. 1111. HOSPITAL SERVICES.

        (a) Coverage.--The hospital services described in this section are
    the following items and services:
                (1) Inpatient hospital services.
                (2) Outpatient hospital services.
                (3) 24-hour a day hospital emergency services.
        (b) Limitation.--The hospital services described in this section do
    not include hospital services provided for the treatment of a mental or
    substance abuse disorder (which are subject to section 1115), except
    for medical detoxification as required for the management of medical
    conditions associated with withdrawal from alcohol or drugs (which is
    not covered under such section).
        (c) Definitions.--For purposes of this subtitle:
                (1) Hospital.--The term ``hospital'' has the meaning given
            such term in section 1861(e) of the Social Security Act, except
            that such term shall include--
                        (A) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(1), a facility of the
                    uniformed services under title 10, United States Code,
                    that is primarily engaged in providing services to
                    inpatients that are equivalent to the services provided
                    by a hospital defined in such section 1861(e);
                        (B) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(2), a facility operated by
                    the Department of Veterans Affairs that is primarily
                    engaged in providing services to inpatients that are
                    equivalent to the services provided by a hospital
                    defined in such section 1861(e); and
                        (C) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(3), a facility operated by
                    the Indian Health Service that is primarily engaged in
                    providing services to inpatients that are equivalent to
                    the services provided by a hospital defined in such
                    section 1861(e).
                (2) Inpatient hospital services.--The term ``inpatient
            hospital services'' means items and services described in
            paragraphs (1) through (3) of section 1861(b) of the Social
            Security Act when provided to an inpatient of a hospital. The
            National Health Board shall specify those health professional
            services described in section 1112 that shall be treated as
            inpatient hospital services when provided to an inpatient of a
            hospital.

    SEC. 1112. SERVICES OF HEALTH PROFESSIONALS.

        (a) Coverage.--The items and services described in this section
    are--
                (1) inpatient and outpatient health professional services,
            including consultations, that are provided in--
                        (A) a home, office, or other ambulatory care
                    setting; or
                        (B) an institutional setting; and
                (2) services and supplies (including drugs and biologicals
            which cannot be self-administered) furnished as an incident to
            such health professional services, of kinds which are commonly
            furnished in the office of a health professional and are
            commonly either rendered without charge or included in the bill
            of such professional.
        (b) Limitation.--The items and services described in this section
    do not include items or services that are described in any other
    section of this part. An item or service that is described in section
    1114 but is not provided consistent with a periodicity schedule for
    such item or service specified in such section or under section 1153
    may be covered under this section if the item or service otherwise
    meets the requirements of this section.
        (c) Definitions.--Unless otherwise provided in this Act, for
    purposes of this Act:
                (1) Health professional.--The term ``health professional''
            means an individual who provides health professional services.
                (2) Health professional services.--The term ``health
            professional services'' means professional services that--
                        (A) are lawfully provided by a physician; or
                        (B) would be described in subparagraph (A) if
                    provided by a physician, but are provided by another
                    person who is legally authorized to provide such
                    services in the State in which the services are
                    provided.

    SEC. 1113. EMERGENCY AND AMBULATORY MEDICAL AND SURGICAL SERVICES.

        The emergency and ambulatory medical and surgical services
    described in this section are the following items and services provided
    by a health facility that is not a hospital and that is legally
    authorized to provide the services in the State in which they are
    provided:
                (1) 24-hour a day emergency services.
                (2) Ambulatory medical and surgical services.

    SEC. 1114. CLINICAL PREVENTIVE SERVICES.

        (a) Coverage.--The clinical preventive services described in this
    section are--
                (1) an item or service for high risk populations (as
            defined by the National Health Board) that is specified and
            defined by the Board under section 1153, but only when the item
            or service is provided consistent with any periodicity schedule
            for the item or service promulgated by the Board;
                (2) except as modified by the National Health Board under
            section 1153, an age-appropriate immunization, test, or
            clinician visit specified in one of subsections (b) through (h)
            that is provided consistent with any periodicity schedule for
            the item or service specified in the applicable subsection or
            by the National Health Board under section 1153; and
                (3) an immunization, test, or clinician visit that is
            provided to an individual during an age range other than the
            age range for such immunization, test, or clinician visit that
            is specified in one of subsections (b) through (h), but only
            when provided consistent with any requirements for such
            immunizations, tests, and clinician visits established by the
            National Health Board under section 1153.
        (b) Individuals Under 3.--For an individual under 3 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are age-appropriate immunizations for the following
            illnesses:
                        (A) Diphtheria.
                        (B) Tetanus.
                        (C) Pertussis.
                        (D) Polio.
                        (E) Haemophilus influenzae type B.
                        (F) Measles.
                        (G) Mumps.
                        (H) Rubella.
                        (I) Hepatitis B.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) 1 hematocrit.
                        (B) 2 blood tests to screen for blood lead levels
                    for individuals who are at risk for lead exposure.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 1 clinician visit for an individual who is
            newborn and 7 other clinician visits.
        (c) Individuals Age 3 to 5.--For an individual at least 3 years of
    age, but less than 6 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are age-appropriate immunizations for the following
            illnesses:
                        (A) Diphtheria.
                        (B) Tetanus.
                        (C) Pertussis.
                        (D) Polio.
                        (E) Measles.
                        (F) Mumps.
                        (G) Rubella.
                (2) Tests.--The tests specified in this subsection are 1
            urinalysis.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 3 clinician visits.
        (d) Individuals Age 6 to 12.--For an individual at least 6 years of
    age, but less than 13 years of age, the clinician visits specified in
    this subsection are 3 clinician visits.
        (e) Individuals Age 13 to 19.--For an individual at least 13 years
    of age, but less than 20 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are age-appropriate immunizations for the following
            illnesses:
                        (A) Tetanus.
                        (B) Diphtheria.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) Papanicolaou smears and pelvic exams, for
                    females who have reached childbearing age and are at
                    risk for cervical cancer, every 3 years, but--
                                (i) annually until 3 consecutive negative
                            smears have been obtained, if medically
                            necessary; and
                                (ii) annually for females who are at risk
                            for fertility related infectious illnesses.
                        (B) Annual screening for chlamydia and gonorrhea
                    for females who have reached childbearing age and are
                    at risk for fertility related infectious illnesses.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 3 clinician visits.
        (f) Individuals Age 20 to 39.--For an individual at least 20 years
    of age, but less than 40 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are booster immunizations against tetanus and
            diphtheria every 10 years.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) Papanicolaou smears and pelvic exams for
                    females every 3 years, but--
                                (i) annually if an abnormal smear has been
                            obtained, until 3 consecutive negative smears
                            have been obtained; and
                                (ii) annually for females who are at risk
                            for fertility related infectious illnesses.
                        (B) Annual screening for chlamydia and gonorrhea
                    for females who are at risk for fertility related
                    infectious illnesses.
                        (C) Cholesterol every 5 years.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 1 clinician visit every 3 years.
        (g) Individuals Age 40 to 49.--For an individual at least 40 years
    of age, but less than 50 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are booster immunizations against tetanus and
            diphtheria every 10 years.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) Papanicolaou smears and pelvic exams for
                    females every 2 years, but--
                                (i) annually if an abnormal smear has been
                            obtained, until 3 consecutive negative smears
                            have been obtained; and
                                (ii) annually for females who are at risk
                            for fertility related infectious illnesses.
                        (B) Annual screening for chlamydia and gonorrhea
                    for females who are at risk for fertility related
                    infectious illnesses.
                        (C) Cholesterol every 5 years.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 1 clinician visit every 2 years.
        (h) Individuals Age 50 to 65.--For an individual at least 50 years
    of age, but less than 65 years of age:
                (1) Immunizations.--The immunizations specified in this
            subsection are booster immunizations against tetanus and
            diphtheria every 10 years.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) Papanicolaou smears and pelvic exams for
                    females every 2 years.
                        (B) Mammograms for females every 2 years.
                        (C) Cholesterol every 5 years.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 1 clinician visit every 2 years.
        (i) Individuals Age 65 or Older.--For an individual at least 65
    years of age who is enrolled under a health plan:
                (1) Immunizations.--The immunizations specified in this
            subsection are as follows:
                        (A) Booster immunizations against tetanus and
                    diphtheria every 10 years.
                        (B) Age-appropriate immunizations for the following
                    illnesses:
                                (i) Influenza.
                                (ii) Pneumococcal invasive disease.
                (2) Tests.--The tests specified in this subsection are as
            follows:
                        (A) Papanicolaou smears and pelvic exams for
                    females who are at risk for cervical cancer every 2
                    years.
                        (B) Mammograms for females every 2 years.
                        (C) Cholesterol every 5 years.
                (3) Clinician visits.--The clinician visits specified in
            this subsection are 1 clinician visit every year.
        (j) Clinician Visit.--For purposes of this section, the term
    ``clinician visit'' includes the following health professional services
    (as defined in section 1112(c)):
                (1) A complete medical history.
                (2) An appropriate physical examination.
                (3) Risk assessment.
                (4) Targeted health advice and counseling, including
            nutrition counseling.
                (5) The administration of age-appropriate immunizations and
            tests specified in subsections (b) through (h).
        (k) Immunizations and Tests Not Administered During Clinician
    Visit.--Notwithstanding subsection (i)(5), the clinical preventive
    services described in this section include an immunization or test
    described in this section that is administered to an individual
    consistent with any periodicity schedule for the immunization or test
    during the age range specified for the immunization or test, and any
    administration fee for such immunization or test, even if the
    immunization or test is not administered during a clinician visit.

    SEC. 1115. MENTAL ILLNESS AND SUBSTANCE ABUSE SERVICES.

        (a) Coverage.--The mental illness and substance abuse services that
    are described in this section are the following items and services for
    eligible individuals, as defined in section 1001(c), who satisfy the
    eligibility requirements in subsection (b):
                (1) Inpatient and residential mental illness and substance
            abuse treatment (described in subsection (c)).
                (2) Intensive nonresidential mental illness and substance
            abuse treatment (described in subsection (d)).
                (3) Outpatient mental illness and substance abuse treatment
            (described in subsection (e)), including case management,
            screening and assessment, crisis services, and collateral
            services.
        (b) Eligibility.--The eligibility requirements referred to in
    subsection (a) are as follows:
                (1) Inpatient, residential, nonresidential, and outpatient
            treatment.--An eligible individual is eligible to receive
            coverage for inpatient and residential mental illness and
            substance abuse treatment, intensive nonresidential mental
            illness and substance abuse treatment, or outpatient mental
            illness and substance abuse treatment (except case management
            and collateral services) if the individual--
                        (A) has, or has had during the 1-year period
                    preceding the date of such treatment, a diagnosable
                    mental disorder or a diagnosable substance abuse
                    disorder; and
                        (B) is experiencing, or is at significant risk of
                    experiencing, functional impairment in family, work,
                    school, or community activities.
            For purposes of this paragraph, an individual who has a
            diagnosable mental disorder or a diagnosable substance abuse
            disorder, is receiving treatment for such disorder, but does
            not satisfy the functional impairment criterion in subparagraph
            (B) shall be treated as satisfying such criterion if the
            individual would satisfy such criterion without such treatment.
                (2) Case management.--An eligible individual is eligible to
            receive coverage for case management if--
                        (A) a health professional designated by the health
                    plan in which the individual is enrolled determines
                    that the individual should receive such services; and
                        (B) the individual is eligible to receive coverage
                    for, and is receiving, outpatient mental illness and
                    substance abuse treatment with respect to a diagnosable
                    mental disorder or a diagnosable substance abuse
                    disorder.
                (3) Screening and assessment and crisis services.--All
            eligible individuals enrolled under a health plan are eligible
            to receive coverage for outpatient mental illness and substance
            abuse treatment consisting of screening and assessment and
            crisis services.
                (4) Collateral services.--An eligible individual is
            eligible to receive coverage for outpatient mental illness and
            substance abuse treatment consisting of collateral services if
            the individual is a family member (described in section
            1011(b)) of an individual who is receiving inpatient and
            residential mental illness and substance abuse treatment,
            intensive nonresidential mental illness and substance abuse
            treatment, or outpatient mental illness and substance abuse
            treatment.
        (c) Inpatient and Residential Treatment.--
                (1) Definition.--For purposes of this subtitle, the term
            ``inpatient and residential mental illness and substance abuse
            treatment'' means the items and services described in
            paragraphs (1) through (3) of section 1861(b) of the Social
            Security Act when provided with respect to a diagnosable mental
            disorder or a diagnosable substance abuse disorder to--
                        (A) an inpatient of a hospital, psychiatric
                    hospital, residential treatment center, residential
                    detoxification center, crisis residential program, or
                    mental illness residential treatment program; or
                        (B) a resident of a therapeutic family or group
                    treatment home or community residential treatment and
                    recovery center for substance abuse.
            The National Health Board shall specify those health
            professional services described in section 1112 that shall be
            treated as inpatient and residential mental illness and
            substance abuse treatment when provided to such an inpatient or
            resident.
                (2) Limitations.--Coverage for inpatient and residential
            mental illness and substance abuse treatment is subject to the
            following limitations:
                        (A) Residential mental illness treatment.--Such
                    treatment, when provided with respect to a diagnosable
                    mental disorder in a setting that is not a hospital or
                    a psychiatric hospital, is covered only to avert the
                    need for, or as an alternative to, treatment in a
                    hospital or a psychiatric hospital, as determined by a
                    health professional designated by the health plan in
                    which the individual receiving such treatment is
                    enrolled.
                        (B) Residential substance abuse treatment.--Such
                    treatment, when provided with respect to a diagnosable
                    substance abuse disorder in a setting that is not a
                    hospital or a psychiatric hospital, is covered only if
                    a health professional designated by the health plan in
                    which the individual receiving such treatment is
                    enrolled determines (based on criteria that the plan
                    may choose to employ) that the individual should
                    receive such treatment.
                        (C) Least restrictive setting.--Such treatment is
                    covered only when--
                                (i) provided to an individual in the least
                            restrictive inpatient or residential setting
                            that is effective and appropriate for the
                            individual; and
                                (ii) less restrictive intensive
                            nonresidential or outpatient treatment would be
                            ineffective or inappropriate.
                        (D) Annual limit.--Prior to January 1, 2001, such
                    treatment is subject to an aggregate annual limit of 30
                    days. A maximum of 30 additional days of such treatment
                    shall be covered for an individual if a health
                    professional designated by the health plan in which the
                    individual is enrolled determines in advance that--
                                (i) the individual poses a threat to his or
                            her own life or the life of another individual;
                            or
                                (ii) the medical condition of the
                            individual requires inpatient treatment in a
                            hospital or a psychiatric hospital in order to
                            initiate, change, or adjust pharmacological or
                            somatic therapy.
                        (E) Inpatient hospital treatment for substance
                    abuse.--Such treatment, when provided in a hospital or
                    a psychiatric hospital with respect to a diagnosable
                    substance abuse disorder, is covered under this section
                    only for detoxification requiring the management of
                    psychiatric conditions associated with withdrawal from
                    alcohol or drugs. The items and services described in
                    this section do not include medical detoxification as
                    required for the management of medical conditions
                    associated with withdrawal from alcohol or drugs (which
                    is covered under section 1111).
        (d) Intensive Nonresidential Treatment.--
                (1) Definition.--For purposes of this subtitle, the term
            ``intensive nonresidential mental illness and substance abuse
            treatment'' means diagnostic or therapeutic items or services
            provided with respect to a diagnosable mental disorder or a
            diagnosable substance abuse disorder to an individual--
                        (A) participating in a partial hospitalization
                    program, a day treatment program, a psychiatric
                    rehabilitation program, or an ambulatory detoxification
                    program; or
                        (B) receiving home-based mental illness services or
                    behavioral aide mental illness services.
            The National Health Board shall specify those health
            professional services described in section 1112 that shall be
            treated as intensive nonresidential mental illness and
            substance abuse treatment when provided to such an individual.
                (2) Limitations.--Coverage for intensive nonresidential
            mental illness and substance abuse treatment is subject to the
            following limitations:
                        (A) Discretion of plan.--An individual shall
                    receive coverage for such treatment if a health
                    professional designated by the health plan in which the
                    individual is enrolled determines (based on criteria
                    that the plan may choose to employ) that the individual
                    should receive such treatment.
                        (B) Treatment purposes.--Such treatment is covered
                    only when provided--
                                (i) to avert the need for, or as an
                            alternative to, treatment in residential or
                            inpatient settings;
                                (ii) to facilitate the earlier discharge of
                            an individual receiving inpatient or
                            residential care;
                                (iii) to restore the functioning of an
                            individual with a diagnosable mental disorder
                            or a diagnosable substance abuse disorder; or
                                (iv) to assist such an individual to
                            develop the skills and gain access to the
                            support services the individual needs to
                            achieve the maximum level of functioning of the
                            individual within the community.
                        (C) Annual limit.--
                                (i) In general.--Prior to January 1, 2001,
                            the number of covered days of inpatient and
                            residential mental illness and substance abuse
                            treatment that are available to an individual
                            under the 30-day limit described in the first
                            sentence of subsection (c)(2)(D) shall be
                            reduced by 1 day for each 2 covered days of
                            intensive nonresidential mental illness and
                            substance abuse treatment that are provided to
                            the individual, until such number is reduced to
                            zero.
                                (ii) Additional days.--After the number of
                            covered days referred to in clause (i) has been
                            reduced to zero with respect to an individual,
                            the individual shall receive coverage for a
                            maximum of 60 days of intensive nonresidential
                            mental illness and substance abuse treatment if
                            a health professional designated by the health
                            plan in which the individual is enrolled
                            determines that the individual should receive
                            such treatment.
                        (D) Detoxification.--Intensive nonresidential
                    mental illness and substance abuse treatment consisting
                    of detoxification is covered only if it is provided in
                    the context of a treatment program.
                        (E) Out-of-pocket maximum.--Prior to January 1,
                    2001, expenses for intensive nonresidential mental
                    illness and substance abuse treatment that an
                    individual incurs prior to satisfying a deductible
                    applicable to such treatment, and copayments and
                    coinsurance paid by or on behalf of the individual for
                    such treatment, may not be applied toward any annual
                    out-of-pocket limit on cost sharing under any cost
                    sharing schedule described in part 3 of this subtitle
                    if such treatment is provided--
                                (i) with respect to a diagnosable substance
                            abuse disorder; or
                                (ii) pursuant to subparagraph (C)(ii).
        (e) Outpatient Treatment.--
                (1) Definition.--For purposes of this subtitle, the term
            ``outpatient mental illness and substance abuse treatment''
            means the following services provided with respect to a
            diagnosable mental disorder or a diagnosable substance abuse
            disorder in an outpatient setting:
                        (A) Screening and assessment.
                        (B) Diagnosis.
                        (C) Medical management.
                        (D) Substance abuse counseling and relapse
                    prevention.
                        (E) Crisis services.
                        (F) Somatic treatment services.
                        (G) Psychotherapy.
                        (H) Case management.
                        (I) Collateral services.
                (2) Limitations.--Coverage for outpatient mental illness
            and substance abuse treatment is subject to the following
            limitations:
                        (A) Health professional services.--Such treatment
                    is covered only when it constitutes health professional
                    services (as defined in section 1112(c)(2)).
                        (B) Discretion of plan.--An individual shall
                    receive coverage for outpatient mental illness and
                    substance abuse treatment consisting of substance abuse
                    counseling and relapse prevention if a health
                    professional designated by the health plan in which the
                    individual is enrolled determines (based on criteria
                    that the plan may choose to employ) that the individual
                    should receive such treatment. This subparagraph does
                    not apply to group therapy covered pursuant to
                    subparagraph (C)(ii)(II).
                        (C) Annual limits.--
                                (i) Psychotherapy and collateral
                            services.--Prior to January 1, 2001,
                            psychotherapy and collateral services are
                            subject to an aggregate annual limit of 30
                            visits per individual. Additional visits may be
                            covered, at the discretion of the health plan
                            in which the individual receiving treatment is
                            enrolled, to prevent hospitalization or to
                            facilitate earlier hospital release, for which
                            the number of covered days of inpatient and
                            residential mental illness and substance abuse
                            treatment that are available to an individual
                            under the 30-day limit described in the first
                            sentence of subsection (c)(2)(D) shall be
                            reduced by 1 day for each 4 visits. After such
                            number has been reduced to zero, no additional
                            visits under the preceding sentence may be
                            covered.
                                (ii) Substance abuse counseling and relapse
                            prevention.--
                                        (I) In general.--Except as provided
                                    in subclause (II), the number of
                                    covered days of inpatient and
                                    residential mental illness and
                                    substance abuse treatment that are
                                    available to an individual under the
                                    30-day limit described in the first
                                    sentence of subsection (c)(2)(D) shall
                                    be reduced by 1 day for each 4 visits
                                    for substance abuse counseling and
                                    relapse prevention that are covered for
                                    the individual under subparagraph (B).
                                    After such number has been reduced to
                                    zero, no visits for substance abuse
                                    counseling and relapse prevention may
                                    be covered, except as provided in
                                    subclause (II).
                                        (II) Group therapy.--Prior to
                                    January 1, 2001, substance abuse
                                    counseling and relapse prevention
                                    consisting of group therapy is subject
                                    to a separate aggregate annual limit of
                                    30 visits, if such therapy occurs
                                    within 12 months after the individual
                                    has received, with respect to a
                                    diagnosable substance abuse disorder,
                                    inpatient and residential mental
                                    illness and substance abuse treatment
                                    or intensive nonresidential mental
                                    illness and substance abuse treatment.
                                    The provisions of clause (i) and
                                    subclause (I) do not apply to therapy
                                    that is described in the preceding
                                    sentence.
                        (D) Detoxification.--Outpatient mental illness and
                    substance abuse treatment consisting of detoxification
                    is covered only if it is provided in the context of a
                    treatment program.
                        (E) Out-of-pocket maximum.--Prior to January 1,
                    2001, expenses for outpatient mental illness and
                    substance abuse treatment that an individual incurs
                    prior to satisfying a deductible applicable to such
                    treatment, and copayments and coinsurance paid by or on
                    behalf of the individual for such treatment, may not be
                    applied toward any annual out-of-pocket limit on cost
                    sharing under any cost sharing schedule described in
                    part 3 of this subtitle.
        (f) Other Definitions.--For purposes of this subtitle:
                (1) Case management.--The term ``case management'' means
            services that assist individuals in gaining access to needed
            medical, social, educational, and other services.
                (2) Diagnosable mental disorder and diagnosable substance
            abuse disorder.--The terms ``diagnosable mental disorder'' and
            ``diagnosable substance abuse disorder'' mean a disorder that--
                        (A) is listed in the Diagnostic and Statistical
                    Manual of Mental Disorders, Third Edition, Revised or a
                    revised version of such manual (except V Codes for
                    Conditions Not Attributable to a Mental Disorder That
                    Are a Focus of Attention or Treatment);
                        (B) is the equivalent of a disorder described in
                    subparagraph (A), but is listed in the International
                    Classification of Diseases, 9th Revision, Clinical
                    Modification, Third Edition or a revised version of
                    such text; or
                        (C) is listed in any authoritative text specifying
                    diagnostic criteria for mental disorders or substance
                    abuse disorders that is identified by the National
                    Health Board.
                (3) Psychiatric hospital.--The term ``psychiatric
            hospital'' has the meaning given such term in section 1861(f)
            of the Social Security Act, except that such term shall
            include--
                        (A) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(1), a facility of the
                    uniformed services under title 10, United States Code,
                    that is engaged in providing services to inpatients
                    that are equivalent to the services provided by a
                    psychiatric hospital;
                        (B) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(2), a facility operated by
                    the Department of Veterans Affairs that is engaged in
                    providing services to inpatients that are equivalent to
                    the services provided by a psychiatric hospital; and
                        (C) in the case of an item or service provided to
                    an individual whose applicable health plan is specified
                    pursuant to section 1004(b)(3), a facility operated by
                    the Indian Health Service that is engaged in providing
                    services to inpatients that are equivalent to the
                    services provided by a psychiatric hospital.

    SEC. 1116. FAMILY PLANNING SERVICES AND SERVICES FOR PREGNANT WOMEN.

        The services described in this section are the following items and
    services:
                (1) Voluntary family planning services.
                (2) Contraceptive devices that--
                        (A) may only be dispensed upon prescription; and
                        (B) are subject to approval by the Secretary of
                    Health and Human Services under the Federal Food, Drug,
                    and Cosmetic Act.
                (3) Services for pregnant women.

    SEC. 1117. HOSPICE CARE.

        The hospice care described in this section is the items and
    services described in paragraph (1) of section 1861(dd) of the Social
    Security Act, as defined in paragraphs (2), (3), and (4)(A) of such
    section (with the exception of paragraph (2)(A)(iii)), except that all
    references to the Secretary of Health and Human Services in such
    paragraphs shall be treated as references to the National Health Board.

    SEC. 1118. HOME HEALTH CARE.

        (a) Coverage.--The home health care described in this section is--
                (1) the items and services described in section 1861(m) of
            the Social Security Act; and
                (2) home infusion drug therapy services described in
            section 1861(ll) of the Social Security Act (as inserted by
            section 2005).
        (b) Limitations.--Coverage for home health care is subject to the
    following limitations:
                (1) Inpatient treatment alternative.--Such care is covered
            only as an alternative to inpatient treatment in a hospital,
            skilled nursing facility, or rehabilitation facility after an
            illness or injury.
                (2) Reevaluation.--At the end of each 60-day period of home
            health care, the need for continued care shall be reevaluated
            by the person who is primarily responsible for providing the
            home health care. Additional periods of care are covered only
            if such person determines that the requirement in paragraph (1)
            is satisfied.

    SEC. 1119. EXTENDED CARE SERVICES.

        (a) Coverage.--The extended care services described in this section
    are the items and services described in section 1861(h) of the Social
    Security Act when provided to an inpatient of a skilled nursing
    facility or a rehabilitation facility.
        (b) Limitations.--Coverage for extended care services is subject to
    the following limitations:
                (1) Hospital alternative.--Such services are covered only
            as an alternative to inpatient treatment in a hospital after an
            illness or injury.
                (2) Annual limit.--Such services are subject to an
            aggregate annual limit of 100 days.
        (c) Definitions.--For purposes of this subtitle:
                (1) Rehabilitation facility.--The term ``rehabilitation
            facility'' means an institution (or a distinct part of an
            institution) which is established and operated for the purpose
            of providing diagnostic, therapeutic, and rehabilitation
            services to individuals for rehabilitation from illness or
            injury.
                (2) Skilled nursing facility.--The term ``skilled nursing
            facility'' means an institution (or a distinct part of an
            institution) which is primarily engaged in providing to
            residents--
                        (A) skilled nursing care and related services for
                    residents who require medical or nursing care; or
                        (B) rehabilitation services to residents for
                    rehabilitation from illness or injury.

    SEC. 1120. AMBULANCE SERVICES.

        (a) Coverage.--The ambulance services described in this section are
    the following items and services:
                (1) Ground transportation by ambulance.
                (2) Air transportation by an aircraft equipped for
            transporting an injured or sick individual.
                (3) Water transportation by a vessel equipped for
            transporting an injured or sick individual.
        (b) Limitations.--Coverage for ambulance services is subject to the
    following limitations:
                (1) Medical indication.--Ambulance services are covered
            only in cases in which the use of an ambulance is indicated by
            the medical condition of the individual concerned.
                (2) Air transport.--Air transportation is covered only in
            cases in which there is no other method of transportation or
            where the use of another method of transportation is contra-
            indicated by the medical condition of the individual concerned.
                (3) Water transport.--Water transportation is covered only
            in cases in which there is no other method of transportation or
            where the use of another method of transportation is contra-
            indicated by the medical condition of the individual concerned.

    SEC. 1121. OUTPATIENT LABORATORY, RADIOLOGY, AND DIAGNOSTIC SERVICES.

        The items and services described in this section are laboratory,
    radiology, and diagnostic services provided upon prescription to
    individuals who are not inpatients of a hospital, hospice, skilled
    nursing facility, or rehabilitation facility.

    SEC. 1122. OUTPATIENT PRESCRIPTION DRUGS AND BIOLOGICALS.

        (a) Coverage.--The items described in this section are the
    following:
                (1) Covered outpatient drugs described in section 1861(t)
            of the Social Security Act (as amended by section 2001(b))--
                        (A) except that, for purposes of this section, a
                    medically accepted indication with respect to the use
                    of a covered outpatient drug includes any use which has
                    been approved by the Food and Drug Administration for
                    the drug, and includes another use of the drug if--
                                (i) the drug has been approved by the Food
                            and Drug Administration; and
                                (ii) such use is supported by one or more
                            citations which are included (or approved for
                            inclusion) in one or more of the following
                            compendia: the American Hospital Formulary
                            Service-Drug Information, the American Medical
                            Association Drug Evaluations, the United States
                            Pharmacopoeia-Drug Information, and other
                            authoritative compendia as identified by the
                            Secretary, unless the Secretary has determined
                            that the use is not medically appropriate or
                            the use is identified as not indicated in one
                            or more such compendia; or
                                (iii) such use is medically accepted based
                            on supportive clinical evidence in peer
                            reviewed medical literature appearing in
                            publications which have been identified for
                            purposes of this clause by the Secretary; and
                        (B) notwithstanding any exclusion from coverage
                    that may be made with respect to such a drug under
                    title XVIII of such Act pursuant to section 1862(a)(18)
                    of such Act.
                (2) Blood clotting factors when provided on an outpatient
            basis.
        (b) Revision of Compendia List.--The Secretary may revise the list
    of compendia in subsection (a)(1)(A)(ii) designated as appropriate for
    identifying medically accepted indications for drugs.
        (c) Blood Clotting Factors.--For purposes of this subtitle, the
    term ``blood clotting factors'' has the meaning given such term in
    section 1861(s)(2)(I) of the Social Security Act.

    SEC. 1123. OUTPATIENT REHABILITATION SERVICES.

        (a) Coverage.--The outpatient rehabilitation services described in
    this section are--
                (1) outpatient occupational therapy;
                (2) outpatient physical therapy; and
                (3) outpatient speech pathology services for the purpose of
            attaining or restoring speech.
        (b) Limitations.--Coverage for outpatient rehabilitation services
    is subject to the following limitations:
                (1) Restoration of capacity or minimization of
            limitations.--Such services include only items or services used
            to restore functional capacity or minimize limitations on
            physical and cognitive functions as a result of an illness or
            injury.
                (2) Reevaluation.--At the end of each 60-day period of
            outpatient rehabilitation services, the need for continued
            services shall be reevaluated by the person who is primarily
            responsible for providing the services. Additional periods of
            services are covered only if such person determines that
            functioning is improving.

    SEC. 1124. DURABLE MEDICAL EQUIPMENT AND PROSTHETIC AND ORTHOTIC
                  DEVICES.

        (a) Coverage.--The items and services described in this section
    are--
                (1) durable medical equipment, including accessories and
            supplies necessary for repair, function, and maintenance of
            such equipment;
                (2) prosthetic devices (other than dental devices) which
            replace all or part of the function of an internal body organ
            (including colostomy bags and supplies directly related to
            colostomy care), including replacement of such devices;
                (3) accessories and supplies which are used directly with a
            prosthetic device to achieve the therapeutic benefits of the
            prosthesis or to assure the proper functioning of the device;
                (4) leg, arm, back, and neck braces;
                (5) artificial legs, arms, and eyes, including replacements
            if required because of a change in the patient's physical
            condition; and
                (6) fitting and training for use of the items described in
            paragraphs (1) through (5).
        (b) Limitation.--An item or service described in this section is
    covered only if it improves functional ability or prevents further
    deterioration in function.
        (c) Durable Medical Equipment.--For purposes of this subtitle, the
    term ``durable medical equipment'' has the meaning given such term in
    section 1861(n) of the Social Security Act.

    SEC. 1125. VISION CARE.

        (a) Coverage.--The vision care described in this section is routine
    eye examinations, diagnosis, and treatment for defects in vision.
        (b) Limitation.--Eyeglasses and contact lenses are covered only for
    individuals less than 18 years of age, according to a periodicity
    schedule established by the Board.

    SEC. 1126. DENTAL CARE.

        (a) Coverage.--The dental care described in this section is the
    following:
                (1) Emergency dental treatment, including simple
            extractions, for acute infections, bleeding, and injuries to
            natural teeth and oral structures for conditions requiring
            immediate attention to prevent risks to life or significant
            medical complications, as specified by the National Health
            Board.
                (2) Prevention and diagnosis of dental disease, including
            oral dental examinations, radiographs, dental sealants,
            fluoride application, and dental prophylaxis.
                (3) Treatment of dental disease, including routine
            fillings, prosthetics for genetic defects, periodontal
            maintenance, and endodontic services.
                (4) Space maintenance procedures to prevent orthodontic
            complications.
                (5) Interceptive orthodontic treatment to prevent severe
            malocclusion.
        (b) Limitations.--Coverage for dental care is subject to the
    following limitations:
                (1) Prevention and diagnosis.--Prior to January 1, 2001,
            the items and services described in subsection (a)(2) are
            covered only for individuals less than 18 years of age. On or
            after such date, such items and services are covered for all
            eligible individuals enrolled under a health plan, except that
            dental sealants are not covered for individuals 18 years of age
            or older.
                (2) Treatment of dental disease.--Prior to January 1, 2001,
            the items and services described in subsection (a)(3) are
            covered only for individuals less than 18 years of age. On or
            after such date, such items and services are covered for all
            eligible individuals enrolled under a health plan, except that
            endodontic services are not covered for individuals 18 years of
            age or older.
                (3) Space maintenance.--The items and services described in
            subsection (a)(4) are covered only for individuals at least 3
            years of age, but less than 13 years of age and--
                        (A) are limited to posterior teeth;
                        (B) involve maintenance of a space or spaces for
                    permanent posterior teeth that would otherwise be
                    prevented from normal eruption if the space were not
                    maintained; and
                        (C) do not include a space maintainer that is
                    placed within 6 months of the expected eruption of the
                    permanent posterior tooth concerned.
                (4) Interceptive orthodontic treatment.--Prior to January
            1, 2001, the items and services described in subsection (a)(5)
            are not covered. On or after such date, such items and services
            are covered only for individuals at least 6 years of age, but
            less than 12 years of age.

    SEC. 1127. HEALTH EDUCATION CLASSES.

        (a) Coverage.--Subject to subsection (b), the items and services
    described in this section are health education and training classes to
    encourage the reduction of behavioral risk factors and to promote
    healthy activities. Such education and training classes may include
    smoking cessation, nutrition counseling, stress management, support
    groups, and physical training classes.
        (b) Discretion of Plan.--A health plan may offer education and
    training classes at its discretion.
        (c) Construction.--This section shall not be construed to include
    or limit education or training that is provided in the course of the
    delivery of health professional services (as defined in section
    1112(c)).

    SEC. 1128. INVESTIGATIONAL TREATMENTS.

        (a) Coverage.--Subject to subsection (b), the items and services
    described in this subsection are qualifying investigational treatments
    that are administered for a life-threatening disease, disorder, or
    other health condition (as defined by the National Health Board).
        (b) Discretion of Plan.--A health plan may cover an investigational
    treatment described in subsection (a) at its discretion.
        (c) Routine Care During Investigational Treatments.--The
    comprehensive benefit package includes an item or service described in
    any other section of this part, subject to the limitations and cost
    sharing requirements applicable to the item or service, when the item
    or service is provided to an individual in the course of an
    investigational treatment, if--
                (1) the treatment is a qualifying investigational
            treatment; and
                (2) the item or service would have been provided to the
            individual even if the individual were not receiving the
            investigational treatment.
        (d) Definitions.--For purposes of this subtitle:
                (1) Qualifying investigational treatment.--The term
            ``qualifying investigational treatment'' means a treatment--
                        (A) the effectiveness of which has not been
                    determined; and
                        (B) that is under clinical investigation as part of
                    an approved research trial.
                (2) Approved research trial.--The term ``approved research
            trial'' means--
                        (A) a research trial approved by the Secretary of
                    Health and Human Services, the Director of the National
                    Institutes of Health, the Commissioner of the Food and
                    Drug Administration, the Secretary of Veterans Affairs,
                    the Secretary of Defense, or a qualified
                    nongovernmental research entity as defined in
                    guidelines of the National Institutes of Health; or
                        (B) a peer-reviewed and approved research program,
                    as defined by the Secretary of Health and Human
                    Services, conducted for the primary purpose of
                    determining whether or not a treatment is safe,
                    efficacious, or having any other characteristic of a
                    treatment which must be demonstrated in order for the
                    treatment to be medically necessary or appropriate.

                              PART 3--COST SHARING

    SEC. 1131. COST SHARING.

        (a) In General.--Each health plan shall offer to individuals
    enrolled under the plan one, but not more than one, of the following
    cost sharing schedules, which schedule shall be offered to all such
    enrollees:
                (1) Lower cost sharing (described in section 1132).
                (2) Higher cost sharing (described in section 1133).
                (3) Combination cost sharing (described in section 1134).
        (b) Cost Sharing for Low-Income Families.--For provisions relating
    to reducing cost sharing for certain low-income families, see section
    1371.
        (c) Deductibles, Cost Sharing, and Out-of-Pocket Limits on Cost
    Sharing.--
                (1) Application on an annual basis.--The deductibles and
            out-of-pocket limits on cost sharing for a year under the
            schedules referred to in subsection (a) shall be applied based
            upon expenses incurred for items and services furnished in the
            year.
                (2) Individual and family general deductibles.--
                        (A) Individual.--Subject to subparagraph (B), with
                    respect to an individual enrolled under a health plan
                    (regardless of the class of enrollment), any individual
                    general deductible in the cost sharing schedule offered
                    by the plan represents the amount of countable expenses
                    (as defined in subparagraph (C)) that the individual
                    may be required to incur in a year before the plan
                    incurs liability for expenses for such items and
                    services furnished to the individual.
                        (B) Family.--In the case of an individual enrolled
                    under a health plan under a family class of enrollment
                    (as defined in section 1011(c)(2)(A)), the individual
                    general deductible under subparagraph (A) shall not
                    apply to countable expenses incurred by any member of
                    the individual's family in a year at such time as the
                    family has incurred, in the aggregate, countable
                    expenses in the amount of the family general deductible
                    for the year.
                        (C) Countable expense.--In this paragraph, the term
                    ``countable expense'' means, with respect to an
                    individual for a year, an expense for an item or
                    service covered by the comprehensive benefit package
                    that is subject to the general deductible and for
                    which, but for such deductible and any other cost
                    sharing under this subtitle, a health plan is liable
                    for payment. The amount of countable expenses for an
                    individual for a year under this paragraph shall not
                    exceed the individual general deductible for the year.
                (3) Coinsurance and copayments.--After a general or
            separate deductible that applies to an item or service covered
            by the comprehensive benefit package has been satisfied for a
            year, subject to paragraph (4), coinsurance and copayments are
            amounts (expressed as a percentage of an amount otherwise
            payable or as a dollar amount, respectively) that an individual
            may be required to pay with respect to the item or service.
                (4) Individual and family limits on cost sharing.--
                        (A) Individual.--Subject to subparagraph (B), with
                    respect to an individual enrolled under a health plan
                    (regardless of the class of enrollment), the individual
                    out-of-pocket limit on cost sharing in the cost sharing
                    schedule offered by the plan represents the amount of
                    expenses that the individual may be required to incur
                    under the plan in a year because of a general
                    deductible, separate deductibles, copayments, and
                    coinsurance before the plan may no longer impose any
                    cost sharing with respect to items or services covered
                    by the comprehensive benefit package that are provided
                    to the individual, except as provided in subsections
                    (d)(2)(E) and (e)(2)(E) of section 1115.
                        (B) Family.--In the case of an individual enrolled
                    under a health plan under a family class of enrollment
                    (as defined in section 1011(c)(2)(A)), the family out-
                    of-pocket limit on cost sharing in the cost sharing
                    schedule offered by the plan represents the amount of
                    expenses that members of the individual's family, in
                    the aggregate, may be required to incur under the plan
                    in a year because of a general deductible, separate
                    deductibles, copayments, and coinsurance before the
                    plan may no longer impose any cost sharing with respect
                    to items or services covered by the comprehensive
                    benefit package that are provided to any member of the
                    individual's family, except as provided in subsections
                    (d)(2)(E) and (e)(2)(E) of section 1115.

    SEC. 1132. LOWER COST SHARING.

        (a) In General.--The lower cost sharing schedule referred to in
    section 1131 that is offered by a health plan--
                (1) may not include a deductible;
                (2) shall have--
                        (A) an annual individual out-of-pocket limit on
                    cost sharing of $1500; and
                        (B) an annual family out-of-pocket limit on cost
                    sharing of $3000;
                (3) except as provided in paragraph (4)--
                        (A) shall prohibit payment of any coinsurance; and
                        (B) subject to section 1152, shall require payment
                    of the copayment for an item or service (if any) that
                    is specified for the item or service in the table under
                    section 1135; and
                (4) shall require payment of coinsurance for an out-of-
            network item or service (as defined in section 1402(f)) in an
            amount that is a percentage (determined under subsection (b))
            of the applicable payment rate for the item or service
            established under section 1322(c), but only if the item or
            service is subject to coinsurance under the higher cost sharing
            schedule described in section 1133.
        (b) Out-of-Network Coinsurance Percentage.--
                (1) In general.--The National Health Board shall determine
            a percentage referred to in subsection (a)(4). The percentage--
                        (A) may not be less than 20 percent; and
                        (B) shall be the same with respect to all out-of-
                    network items and services that are subject to
                    coinsurance, except as provided in paragraph (2).
                (2) Exception.--The National Health Board may provide for a
            percentage that is greater than a percentage determined under
            paragraph (1) in the case of an out-of-network item or service
            for which, under the higher cost sharing schedule described in
            section 1133, the coinsurance is greater than 20 percent of the
            applicable payment rate.

    SEC. 1133. HIGHER COST SHARING.

        (a) In General.--The higher cost sharing schedule referred to in
    section 1131 that is offered by a health plan--
                (1) shall have an annual individual general deductible of
            $200 and an annual family general deductible of $400 that apply
            with respect to expenses incurred for all items and services in
            the comprehensive benefit package except--
                        (A) an item or service with respect to which a
                    separate individual deductible applies under paragraph
                    (2), (3), or (4); or
                        (B) an item or service described in paragraph (5),
                    (6), or (7) with respect to which a deductible does not
                    apply;
                (2) shall require an individual to incur expenses during
            each episode of inpatient and residential mental illness and
            substance abuse treatment (described in section 1115(c)) equal
            to the cost of one day of such treatment before the plan
            provides benefits for such treatment to the individual;
                (3) shall require an individual to incur expenses during
            each episode of intensive nonresidential mental illness and
            substance abuse treatment (described in section 1115(d)) equal
            to the cost of one day of such treatment before the plan
            provides benefits for such treatment to the individual;
                (4) shall require an individual to incur expenses in a year
            for outpatient prescription drugs and biologicals (described in
            section 1122) equal to $250 before the plan provides benefits
            for such items to the individual;
                (5) shall require an individual to incur expenses in a year
            for dental care described in section 1126, except the items and
            services for prevention and diagnosis of dental disease
            described in section 1126(a)(2), equal to $50 before the plan
            provides benefits for such care to the individual;
                (6) may not require any deductible for clinical preventive
            services (described in section 1114);
                (7) may not require any deductible for clinician visits and
            associated services related to prenatal care or 1 post-partum
            visit under section 1116;
                (8) may not require any deductible for the items and
            services for prevention and diagnosis of dental disease
            described in section 1126(a)(2);
                (9) shall have--
                        (A) an annual individual out-of-pocket limit on
                    cost sharing of $1500; and
                        (B) an annual family out-of-pocket limit on cost
                    sharing of $3000;
                (10) shall prohibit payment of any copayment; and
                (11) subject to section 1152, shall require payment of the
            coinsurance for an item or service (if any) that is specified
            for the item or service in the table under section 1135.
        (b) Episodes of Treatment.--
                (1) Inpatient and residential treatment.--For purposes of
            subsection (a)(2), an episode of inpatient and residential
            mental illness and substance abuse treatment shall be
            considered to begin on the date an individual is admitted to a
            facility for such treatment and to end on the date the
            individual is discharged from the facility.
                (2) Intensive nonresidential treatment.--For purposes of
            subsection (a)(3), an episode of intensive nonresidential
            mental illness and substance abuse treatment--
                        (A) shall be considered to begin on the date an
                    individual begins participating in a program described
                    in section 1115(d)(1)(A) and to end on the date the
                    individual ceases such participation; or
                        (B) shall be considered to begin on the date an
                    individual begins receiving home-based or behavioral
                    aide services described in section 1115(d)(1)(B) and to
                    end on the date the individual ceases to receive such
                    services.

    SEC. 1134. COMBINATION COST SHARING.

        (a) In General.--The combination cost sharing schedule referred to
    in section 1131 that is offered by a health plan--
                (1) shall have--
                        (A) an annual individual out-of-pocket limit on
                    cost sharing of $1500; and
                        (B) an annual family out-of-pocket limit on cost
                    sharing of $3000; and
                (2) otherwise shall require different cost sharing for in-
            network items and services than for out-of-network items and
            services.
        (b) In-Network Items and Services.--With respect to an in-network
    item or service (as defined in section 1402(f)(1)), the combination
    cost sharing schedule that is offered by a health plan--
                (1) may not apply a deductible;
                (2) shall prohibit payment of any coinsurance; and
                (3) shall require payment of a copayment in accordance with
            the lower cost sharing schedule described in section 1132.
        (c) Out-of-Network Items and Services.--With respect to an out-of-
    network item or service (as defined in section 1402(f)(2)), the
    combination cost sharing schedule that is offered by a health plan--
                (1) shall require an individual and a family to incur
            expenses before the plan provides benefits for the item or
            service in accordance with the deductibles under the higher
            cost sharing schedule described in section 1133;
                (2) shall prohibit payment of any copayment; and
                (3) shall require payment of coinsurance in accordance with
            such schedule.

    SEC. 1135. TABLE OF COPAYMENTS AND COINSURANCE.

        (a) In General.--The following table specifies, for different items
    and services, the copayments and coinsurance referred to in sections
    1132 and 1133:

                                    Copayments and Coinsurance for Items and Services
    ----------------------------------------------------------------------------------------------------------------
                 Benefit               Section     Lower Cost Sharing Schedule        Higher Cost Sharing Schedule
    ----------------------------------------------------------------------------------------------------------------
    Inpatient hospital services......     1111  No copayment                       20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Outpatient hospital services.....     1111  $10 per visit                      20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Hospital emergency room services.     1111  $25 per visit (unless patient has  20 percent of applicable payment
                                                 an emergency medical condition     rate
                                                 as defined in section 1867(e)(1)
                                                 of the Social Security Act)
    ----------------------------------------------------------------------------------------------------------------
    Services of health professionals.     1112  $10 per visit                      20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Emergency services other than               $25 per visit (unless patient has  20 percent of applicable payment
     hospital emergency room services     1113   an emergency medical condition     rate
                                                 as defined in section 1867(e)(1)
                                                 of the Social Security Act)
    ----------------------------------------------------------------------------------------------------------------
    Ambulatory medical and surgical             $10 per visit                      20 percent of applicable payment
     services........................     1113                                      rate
    ----------------------------------------------------------------------------------------------------------------
    Clinical preventive services.....     1114  No copayment                       No coinsurance
    ----------------------------------------------------------------------------------------------------------------
    Inpatient and residential mental            No copayment                       20 percent of applicable payment
     illness and substance abuse                                                    rate
     treatment.......................     1115
    ----------------------------------------------------------------------------------------------------------------
    Intensive nonresidential mental             No copayment                       20 percent of applicable payment
     illness and substance abuse                                                    rate
     treatment (except treatment
     provided pursuant to section
     1115(d)(2)(C)(ii))..............     1115
    ----------------------------------------------------------------------------------------------------------------
    Intensive nonresidential mental             $25 per visit                      50 percent of applicable payment
     illness and substance abuse                                                    rate
     treatment provided pursuant to
     section 1115(d)(2)(C)(ii).......     1115
    ----------------------------------------------------------------------------------------------------------------
    Outpatient mental illness and               $10 per visit                      20 percent of applicable payment
     substance abuse treatment                                                      rate
     (except psychotherapy,
     collateral services, and case
     management).....................     1115
    ----------------------------------------------------------------------------------------------------------------
    Outpatient psychotherapy and                $25 per visit until January 1,     50 percent of applicable payment
     collateral services.............     1115   2001, and $10 per visit            rate until January 1, 2001, and
                                                 thereafter                         20 percent thereafter
    ----------------------------------------------------------------------------------------------------------------
    Case management..................     1115  No copayment                       No coinsurance
    ----------------------------------------------------------------------------------------------------------------
    Family planning and services for            $10 per visit                      20 percent of applicable payment
     pregnant women (except clinician                                               rate
     visits and associated services
     related to prenatal care and 1
     post-partum visit)..............     1116
    ----------------------------------------------------------------------------------------------------------------
    Clinician visits and associated             No copayment                       No coinsurance
     services related to prenatal
     care and 1 post-partum visit....     1116
    ----------------------------------------------------------------------------------------------------------------
    Hospice care.....................     1117  No copayment                       20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Home health care.................     1118  No copayment                       20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Extended care services...........     1119  No copayment                       20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Ambulance services...............     1120  No copayment                       20 percent of applicable payment
                                                                                    rate
    ----------------------------------------------------------------------------------------------------------------
    Outpatient laboratory, radiology,           No copayment                       20 percent of applicable payment
     and diagnostic services.........     1121                                      rate
    ----------------------------------------------------------------------------------------------------------------
    Outpatient prescription drugs and           $5 per prescription                20 percent of applicable payment
     biologicals.....................     1122                                      rate
    ----------------------------------------------------------------------------------------------------------------
    Outpatient rehabilitation                   $10 per visit                      20 percent of applicable payment
     services........................     1123                                      rate
    ----------------------------------------------------------------------------------------------------------------
    Durable medical equipment and               No copayment                       20 percent of applicable payment
     prosthetic and orthotic devices.     1124                                      rate
    ----------------------------------------------------------------------------------------------------------------
    Vision care......................     1125  $10 per visit (No additional       20 percent of applicable payment
                                                 charge for 1 set of necessary      rate
                                                 eyeglasses for an individual
                                                 less than 18 years of age)
    ----------------------------------------------------------------------------------------------------------------
    Dental care (except space                   $10 per visit                      20 percent of applicable payment
     maintenance procedures and                                                     rate
     interceptive orthodontic
     treatment)......................     1126
    ----------------------------------------------------------------------------------------------------------------
    Space maintenance procedures and            $20 per visit                      40 percent of applicable payment
     interceptive orthodontic                                                       rate
     treatment.......................     1126
    ----------------------------------------------------------------------------------------------------------------
    Health education classes.........     1127  All cost sharing rules determined  All cost sharing rules determined
                                                 by plans                           by plans
    ----------------------------------------------------------------------------------------------------------------
    Investigational treatment for               All cost sharing rules determined  All cost sharing rules determined
     life-threatening condition......     1128   by plans                           by plans
    ----------------------------------------------------------------------------------------------------------------

        (b) Applicable Payment Rate.--For purposes of this section, the
    term ``applicable payment rate'', when used with respect to an item or
    service, means the applicable payment rate for the item or service
    established under section 1322(c).

    SEC. 1136. INDEXING DOLLAR AMOUNTS RELATING TO COST SHARING.

        (a) In General.--Any deductible, copayment, out-of-pocket limit on
    cost sharing, or other amount expressed in dollars in this subtitle for
    items or services provided in a year after 1994 shall be such amount
    increased by the percentage specified in subsection (b) for the year.
        (b) Percentage.--The percentage specified in this subsection for a
    year is equal to the product of the factors described in subsection (d)
    for the year and for each previous year after 1994, minus 1.
        (c) Rounding.--Any increase (or decrease) under subsection (a)
    shall be rounded, in the case of an amount specified in this subtitle
    of--
                (1) $200 or less, to the nearest multiple of $1,
                (2) more than $200, but less than $500, to the nearest
            multiple of $5, or
                (3) $500 or more, to the nearest multiple of $10.
        (d) Factor.--
                (1) In general.--The factor described in this subsection
            for a year is 1 plus the general health care inflation factor
            (as specified in section 6001(a)(3) and determined under
            paragraph (2)) for the year.
                (2) Determination.--In computing such factor for a year,
            the percentage increase in the CPI for a year (referred to in
            section 6001(b)) shall be determined based upon the percentage
            increase in the average of the CPI for the 12-month period
            ending with August 31 of the previous year over such average
            for the preceding 12-month period.

                               PART 4--EXCLUSIONS

    SEC. 1141. EXCLUSIONS.

        (a) Medical Necessity.--The comprehensive benefit package does not
    include--
                (1) an item or service that is not medically necessary or
            appropriate; or
                (2) an item or service that the National Health Board may
            determine is not medically necessary or appropriate in a
            regulation promulgated under section 1154.
        (b) Additional Exclusions.--The comprehensive benefit package does
    not include the following items and services:
                (1) Custodial care, except in the case of hospice care
            under section 1117.
                (2) Surgery and other procedures performed solely for
            cosmetic purposes and hospital or other services incident
            thereto, unless--
                        (A) required to correct a congenital anomaly; or
                        (B) required to restore or correct a part of the
                    body that has been altered as a result of--
                                (i) accidental injury;
                                (ii) disease; or
                                (iii) surgery that is otherwise covered
                            under this subtitle.
                (3) Hearing aids.
                (4) Eyeglasses and contact lenses for individuals at least
            18 years of age.
                (5) In vitro fertilization services.
                (6) Sex change surgery and related services.
                (7) Private duty nursing.
                (8) Personal comfort items, except in the case of hospice
            care under section 1117.
                (9) Any dental procedures involving orthodontic care,
            inlays, gold or platinum fillings, bridges, crowns, pin/post
            retention, dental implants, surgical periodontal procedures, or
            the preparation of the mouth for the fitting or continued use
            of dentures, except as specifically described in section 1126.

                   PART 5--ROLE OF THE NATIONAL HEALTH BOARD

    SEC. 1151. DEFINITION OF BENEFITS.

        (a) In General.--The National Health Board may promulgate such
    regulations or establish such guidelines as may be necessary to assure
    uniformity in the application of the comprehensive benefit package
    across all health plans.
        (b) Flexibility in Delivery.--The regulations or guidelines under
    subsection (a) shall permit a health plan to deliver covered items and
    services to individuals enrolled under the plan using the providers and
    methods that the plan determines to be appropriate.

    SEC. 1152. ACCELERATION OF EXPANDED BENEFITS.

        (a) In General.--Subject to subsection (b), at any time prior to
    January 1, 2001, the National Health Board, in its discretion, may by
    regulation expand the comprehensive benefit package by--
                (1) adding any item or service that is added to the package
            as of January 1, 2001; and
                (2) requiring that a cost sharing schedule described in
            part 3 of this subtitle reflect (wholly or in part) any of the
            cost sharing requirements that apply to the schedule as of
            January 1, 2001.
    No such expansion shall be effective except as of January 1 of a year.
        (b) Condition.--The Board may not expand the benefit package under
    subsection (a) which is to become effective with respect to a year, by
    adding any item or service or altering any cost sharing schedule,
    unless the Board estimates that the additional increase in per capita
    health care expenditures resulting from the addition or alteration, for
    each regional alliance for the year, will not cause any regional
    alliance to exceed its per capita target (as determined under section
    6003).

    SEC. 1153. AUTHORITY WITH RESPECT TO CLINICAL PREVENTIVE SERVICES.

        (a) In General.--With respect to clinical preventive services
    described in section 1114, the National Health Board--
                (1) shall specify and define specific items and services as
            clinical preventive services for high risk populations and
            shall establish and update a periodicity schedule for such
            items and services;
                (2) shall update the periodicity schedules for the age-
            appropriate immunizations, tests, and clinician visits
            specified in subsections (b) through (h) of such section;
                (3) shall establish rules with respect to coverage for an
            immunization, test, or clinician visit that is not provided to
            an individual during the age range for such immunization, test,
            or clinician visit that is specified in one of subsections (b)
            through (h) of such section; and
                (4) may otherwise modify the items and services described
            in such section, taking into account age and other risk
            factors, but may not modify the cost sharing for any such item
            or service.
        (b) Consultation.--In performing the functions described in
    subsection (a), the National Health Board shall consult with experts in
    clinical preventive services.

    SEC. 1154. ESTABLISHMENT OF STANDARDS REGARDING MEDICAL NECESSITY.

        The National Health Board may promulgate such regulations as may be
    necessary to carry out section 1141(a)(2) (relating to the exclusion of
    certain services that are not medically necessary or appropriate).

        PART 6--ADDITIONAL PROVISIONS RELATING TO HEALTH CARE PROVIDERS

    SEC. 1161. OVERRIDE OF RESTRICTIVE STATE PRACTICE LAWS.

        No State may, through licensure or otherwise, restrict the practice
    of any class of health professionals beyond what is justified by the
    skills and training of such professionals.

    SEC. 1162. PROVISION OF ITEMS OR SERVICES CONTRARY TO RELIGIOUS BELIEF
                  OR MORAL CONVICTION.

        A health professional or a health facility may not be required to
    provide an item or service in the comprehensive benefit package if the
    professional or facility objects to doing so on the basis of a
    religious belief or moral conviction.

                                                        Title I, Subtitle C

                       Subtitle C--State Responsibilities

    SEC. 1200. PARTICIPATING STATE.

        (a) In General.--For purposes of the approval of a State health
    care system by the Board under section 1511, a State is a
    ``participating State'' if the State meets the applicable requirements
    of this subtitle.
        (b) Submission of System Document.--
                (1) In general.--In order to be approved as a participating
            State under section 1511, a State shall submit to the National
            Health Board a document (in a form and manner specified by the
            Board) that describes the State health care system that the
            State is establishing (or has established).
                (2) Deadline.--If a State is not a participating State with
            a State health care system in operation by January 1, 1998, the
            provisions of subpart C of part 1 of subtitle F (relating to
            responsibilities in absence of State systems) shall take
            effect.
                (3) Submission of information subsequent to approval.--A
            State approved as a participating State under section 1511
            shall submit to the Board an annual update to the State health
            care system not later than February 15 of each year following
            the first year for which the State is a participating State.
            The update shall contain--
                        (A) such information as the Board may require to
                    determine that the system shall meet the applicable
                    requirements of this Act for the succeeding year; and
                        (B) such information as the Board may require to
                    determine that the State operated the system during the
                    previous year in accordance with the Board's approval
                    of the system for such previous year.

                     PART 1--GENERAL STATE RESPONSIBILITIES

    SEC. 1201. GENERAL STATE RESPONSIBILITIES.

        The responsibilities for a participating State are as follows:
                (1) Regional alliances.--Establishing one or more regional
            alliances (in accordance with section 1202).
                (2) Health plans.--Certifying health plans (in accordance
            with section 1203).
                (3) Financial solvency of plans.--Assuring the financial
            solvency of health plans (in accordance with section 1204).
                (4) Administration.--Designating an agency or official
            charged with coordinating the State responsibilities under this
            Act.
                (5) Workers compensation and automobile insurance.--
            Conforming State laws to meet the requirements of subtitles A
            and B of title X (relating to medical benefits under workers
            compensation and automobile insurance).
                (6) Other responsibilities.--Carrying out other
            responsibilities of participating States specified under this
            Act.

    SEC. 1202. STATE RESPONSIBILITIES WITH RESPECT TO ALLIANCES.

        (a) Establishment of Alliances.--
                (1) In general.--A participating State shall--
                        (A) establish and maintain one or more regional
                    alliances in accordance with this section and subtitle
                    D, and ensure that such alliances meet the requirements
                    of this Act; and
                        (B) designate alliance areas in accordance with
                    subsection (b).
                (2) Deadline.--A State may not be a participating State for
            a year unless the State has established such alliances by March
            1 of the previous year.
        (b) Alliance Areas.--
                (1) In general.--In accordance with this subsection, each
            State shall designate a geographic area assigned to each
            regional alliance. Each such area is referred to in this Act as
            an ``alliance area''.
                (2) Population required.--
                        (A) In general.--Each alliance area shall encompass
                    a population large enough to ensure that the alliance
                    has adequate market share to negotiate effectively with
                    health plans providing the comprehensive benefit
                    package to eligible individuals who reside in the area.
                        (B) Treatment of consolidated metropolitan
                    statistical areas.--An alliance area that includes a
                    Consolidated Metropolitan Statistical Area within a
                    State is presumed to meet the requirement of
                    subparagraph (A).
                (3) Single alliance in each area.--No geographic area may
            be assigned to more than one regional alliance.
                (4) Boundaries.--In establishing boundaries for alliance
            areas, the State may not discriminate on the basis of or
            otherwise take into account race, age, language, religion,
            national origin, socio-economic status, disability, or
            perceived health status.
                (5) Treatment of metropolitan areas.--The entire portion of
            a metropolitan statistical area located in a State shall be
            included in the same alliance area.
                (6) No portions of State permitted to be outside alliance
            area.--Each portion of the State shall be assigned to a
            regional alliance under this subsection.
        (c) State Coordination of Regional Alliances.--One or more States
    may allow or require two or more regional alliances to coordinate their
    operations, whether such alliances are in the same or different States.
    Such coordination may include adoption of joint operating rules,
    contracting with health plans, enforcement activities, and
    establishment of fee schedules for health providers.
        (d) Assistance in Collection of Amounts Owed to Alliances.--Each
    State shall assure that the amounts owed to regional alliances in the
    State are collected and paid to such alliances.
        (e) Assistance in Eligibility Verifications.--
                (1) In general.--Each State shall assure that the
            determinations of eligibility for cost sharing assistance (and
            premium discounts and cost sharing reductions for families) are
            made by regional alliances in the State on the basis of the
            best information available to the alliances and the State.
                (2) Provision of information.--Each State shall use the
            information available to the State under section
            6103(l)(7)(D)(x) of the Internal Revenue Code of 1986 to assist
            regional alliances in verifying such eligibility status.
        (f) Special Requirements for Alliances With Single-Payer System.--
    If the State operates an alliance-specific single-payer system (as
    described in part 2), the State shall assure that the regional alliance
    in which the system is operated meets the requirements for such an
    alliance described in section 1224(b).
        (g) Payment of Shortfalls for Certain Administrative Errors.--Each
    participating State is financially responsible, under section
    9201(c)(2), for administrative errors described in section 9201(e)(2).

    SEC. 1203. STATE RESPONSIBILITIES RELATING TO HEALTH PLANS.

        (a) Criteria for Certification.--
                (1) In general.--For purposes of this section, a
            participating State shall establish and publish the criteria
            that are used in the certification of health plans under this
            section.
                (2) Requirements.--Such criteria shall be established with
            respect to--
                        (A) the quality of the plan,
                        (B) the financial stability of the plan,
                        (C) the plan's capacity to deliver the
                    comprehensive benefit package in the designated service
                    area,
                        (D) other applicable requirements for health plans
                    under parts 1, 3, and 4 of subtitle E, and
                        (E) other requirements imposed by the State
                    consistent with this part.
        (b) Certification of Health Plans.--A participating State shall
    certify each plan as a regional alliance health plan that it determines
    meets the criteria for certification established and published under
    subsection (a).
        (c) Monitoring.--A participating State shall monitor the
    performance of each State-certified regional alliance health plan to
    ensure that it continues to meet the criteria for certification.
        (d) Limitations on Authority.--A participating State may not--
                (1) discriminate against a plan based on the domicile of
            the entity offering of the plan; and
                (2) regulate premium rates charged by health plans, except
            as may be required under title VI (relating to the enforcement
            of cost containment rules for plans in the State) or as may be
            necessary to ensure that plans meet financial solvency
            requirements under section 1408.
        (e) Assuring Adequate Access to a Choice of Health Plans.--
                (1) General access.--
                        (A) In general.--Each participating State shall
                    ensure that--
                                (i) each regional alliance eligible family
                            has adequate access to enroll in a choice of
                            regional alliance health plans providing
                            services in the area in which the individual
                            resides, including (to the maximum extent
                            practicable) adequate access to a plan whose
                            premium is at or below the weighted average
                            premium for plans in the regional alliance, and
                                (ii) each such family that is eligible for
                            a premium discount under section 6104(b) is
                            provided a discount in accordance with such
                            section (including an increase in such discount
                            described in section 6104(b)(2)).
                        (B) Authority.--In order to carry out its
                    responsibility under subparagraph (A), a participating
                    State may require, as a condition of entering into a
                    contract with a regional alliance under section 1321,
                    that one or more certified regional alliance health
                    plans cover all (or selected portions) of the alliance
                    area.
                (2) Access to plans using centers of excellence.--Each
            participating State may require, as a condition of entering
            into a contract with a regional alliance under section 1321,
            that one or more certified health plans provide access (through
            reimbursement, contracts, or otherwise) of enrolled individuals
            to services of centers of excellence (as designated by the
            State in accordance with rules promulgated by the Secretary).
                (3) Use of incentives to enroll and serve disadvantaged
            groups.--A State may provide--
                        (A) for an adjustment to the risk-adjustment
                    methodology under section 1541(b) and other financial
                    incentives to regional alliance health plans to ensure
                    that such plans enroll individuals who are members of
                    disadvantaged groups, and
                        (B) for appropriate extra services, such as
                    outreach to encourage enrollment and transportation and
                    interpreting services to ensure access to care, for
                    certain population groups that face barriers to access
                    because of geographic location, income levels, or
                    racial or cultural differences.
        (f) Coordination of Workers' Compensation Services and Automobile
    Insurance.--Each participating State shall comply with the
    responsibilities regarding workers' compensation and automobile
    insurance specified in subtitles A and B of title X.
        (g) Implementation of Mandatory Reinsurance System.--If the risk
    adjustment and reinsurance methodology developed under section 1541
    includes a mandatory reinsurance system, each participating State shall
    establish a reinsurance program consistent with such methodology and
    any additional standards established by the Board.
        (h) Requirements for Plans Offering Supplemental Insurance.--
    Notwithstanding any other provision of this Act a State may not certify
    a regional alliance health plan under this section if--
                (1) the plan (or any entity with which the plan is
            affiliated under such rules as the Board may establish) offers
            a supplemental health benefit policy (as defined in section
            1421(b)(1)) that fails to meet the applicable requirements for
            such a policy under part 2 of subtitle E (without regard to the
            State in which the policy is offered); or
                (2) the plan offers a cost sharing policy (as defined in
            section 1421(b)(2)) that fails to meet the applicable
            requirements for such a policy under part 2 of subtitle E.

    SEC. 1204. FINANCIAL SOLVENCY; FISCAL OVERSIGHT; GUARANTY FUND.

        (a) Capital Standards.--A participating State shall establish
    capital standards for health plans that meet minimum Federal
    requirements established by the National Health Board under sections
    1503(i) and 1551(a).
        (b) Reporting and Auditing Requirements.--Each participating State
    shall define financial reporting and auditing requirements and
    requirements for fund reserves adequate to monitor the financial status
    of plans.
        (c) Guaranty Fund.--
                (1) Establishment.--Each participating State shall ensure
            that there is a guaranty fund that meets the requirements
            established by the Board under sections 1503(i) and 1552, in
            order to provide financial protection to health care providers
            and others in the case of a failure of a regional alliance
            health plan.
                (2) Assessments to provide funds.--In the case of a failure
            of one or more regional alliance health plans, the State may
            require each regional alliance health plan within the State to
            pay an assessment to the State in an amount not to exceed 2
            percent of the premiums of such plans paid by or on behalf of
            regional alliance eligible individuals during a year for so
            long as necessary to generate sufficient revenue to cover any
            outstanding claims against the failed plan.
        (d) Procedures in Event of Plan Failure.--
                (1) In general.--A participating State shall assure that,
            in the event of the failure of a regional alliance health plan
            in the State, eligible individuals enrolled in the plan will be
            assured continuity of coverage for the comprehensive benefit
            package.
                (2) Designation of state agency.--A participating State
            shall designate an agency of State government that supervises
            or assumes control of the operation of a regional alliance
            health plan in the case of the failure of the plan.
                (3) Protections for health care providers and enrollees.--
            Each participating State shall assure that in the case of a
            plan failure--
                        (A) the guaranty fund shall pay health care
                    providers for items and services covered under the
                    comprehensive benefit package for enrollees of the plan
                    for which the plan is otherwise obligated to make
                    payment;
                        (B) after making all payments required to be made
                    to providers under subparagraph (A), the guaranty fund
                    shall make payments for the operational,
                    administrative, and other costs and debts of the plan
                    (in accordance with requirements imposed by the State
                    based on rules promulgated by the Board);
                        (C) such health care providers have no legal right
                    to seek payment from eligible individuals enrolled in
                    the plan for any such covered items or services (other
                    than the enrollees' obligations under cost sharing
                    arrangements); and
                        (D) health care providers are required to continue
                    caring for such eligible individuals until such
                    individuals are enrolled in a new health plan.
                (4) Plan failure.--For purposes of this section, the
            failure of a health plan means the current or imminent
            inability of the plan to pay claims.

    SEC. 1205. RESTRICTIONS ON FUNDING OF ADDITIONAL BENEFITS.

        If a participating State provides benefits (either directly or
    through regional alliance health plans or otherwise) in addition to
    those covered under the comprehensive benefit package, the State may
    not provide for payment for such benefits through funds provided under
    this Act.

              PART 2--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

    SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED.

        The Board shall approve the application of a State to operate a
    single-payer system if the Board finds that the system--
                (1) meets the requirements of section 1222;
                (2)(A) meets the requirements for a Statewide single-payer
            system under section 1223, in the case of a system offered
            throughout a State; or
                (B) meets the requirements for an alliance-specific single-
            payer system under section 1224, in the case of a system
            offered in a single alliance of a State.

    SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

        Each single-payer system shall meet the following requirements:
                (1) Establishment by state.--The system is established
            under State law, and State law provides for mechanisms to
            enforce the requirements of the system.
                (2) Operation by state.--The system is operated by the
            State or a designated agency of the State.
                (3) Enrollment of eligible individuals.--
                        (A) Mandatory enrollment of all regional alliance
                    individuals.--The system provides for the enrollment of
                    all eligible individuals residing in the State (or, in
                    the case of an alliance-specific single-payer system,
                    in the alliance area) for whom the applicable health
                    plan would otherwise be a regional alliance health
                    plan.
                        (B) Optional enrollment of medicare-eligible
                    individuals.--At the option of the State, the system
                    may provide for the enrollment of medicare-individuals
                    residing in the State (or, in the case of an alliance-
                    specific single-payer system, in the alliance area) if
                    the Secretary of Health and Human Services has approved
                    an application submitted by the State under section
                    1893 of the Social Security Act (as added by section
                    4001(a)) for the integration of medicare beneficiaries
                    into plans of the State. Nothing in this subparagraph
                    shall be construed as requiring that a State have a
                    single-payer system in order to provide for such
                    integration.
                        (C) Optional enrollment of corporate alliance
                    individuals in statewide plans.--At the option of the
                    State, a Statewide single-payer system may provide for
                    the enrollment of individuals residing in the State who
                    are otherwise eligible to enroll in a corporate
                    alliance health plan under section 1311.
                        (D) Options included in state system document.--A
                    State may not exercise any of the options described in
                    subparagraphs (A) or (B) for a year unless the State
                    included a description of the option in the submission
                    of its system document to the Board for the year under
                    section 1200(b).
                        (E) Exclusion of certain individuals.--A single-
                    payer system may not require the enrollment of electing
                    veterans, active duty military personnel, and electing
                    Indians (as defined in 1012(d)).
                (4) Direct payment to providers.--
                        (A) In general.--With respect to providers who
                    furnish items and services included in the
                    comprehensive benefit package to individuals enrolled
                    in the system, the State shall make payments directly
                    to such providers and assume (subject to subparagraph
                    (B)) all financial risk associated with making such
                    payments.
                        (B) Capitated payments permitted.--Nothing in
                    subparagraph (A) shall be construed to prohibit
                    providers furnishing items and services under the
                    system from receiving payments from the plan on a
                    capitated, at-risk basis based on prospectively
                    determined rates.
                (5) Provision of comprehensive benefit package.--
                        (A) In general.--The system shall provide for
                    coverage of the comprehensive benefit package,
                    including the cost sharing provided under the package
                    (subject to subparagraph (B)), to all individuals
                    enrolled in the system.
                        (B) Imposition of reduced cost sharing.--The system
                    may decrease the cost sharing otherwise provided in the
                    comprehensive benefit package with respect to any class
                    of individuals enrolled in the system or any class of
                    services included in the package, so long as the system
                    does not increase the cost sharing otherwise imposed
                    with respect to any other class of individuals or
                    services.
                (6) Cost containment.--The system shall provide for
            mechanisms to ensure, in a manner satisfactory to the Board,
            that--
                        (A) per capita expenditures for items and services
                    in the comprehensive benefit package under the system
                    for a year (beginning with the first year) do not
                    exceed an amount equivalent to the regional alliance
                    per capita premium target that is determined under
                    section 6003 (based on the State being a single
                    regional alliance) for the year;
                        (B) the per capita expenditures described in
                    subparagraph (A) are computed and effectively
                    monitored; and
                        (C) automatic, mandatory, nondiscretionary
                    reductions in payments to health care providers will be
                    imposed to the extent required to assure that such per
                    capita expenditures do not exceed the applicable target
                    referred to in subparagraph (A).
                (7) Requirements generally applicable to health plans.--The
            system shall meet the requirements applicable to a health plan
            under section 1400(a), except that--
                        (A) the system does not have the authority provided
                    to health plans under section 1402(a)(2) (relating to
                    permissible limitations on the enrollment of eligible
                    individuals on the basis of limits on the plan's
                    capacity);
                        (B) the system is not required to meet the
                    requirements of section 1404(a) (relating to
                    restrictions on the marketing of plan materials); and
                        (C) the system is not required to meet the
                    requirements of section 1408 (relating to plan
                    solvency).

    SEC. 1223. SPECIAL RULES FOR STATES OPERATING STATEWIDE SINGLE-PAYER
                  SYSTEM.

        (a) In General.--In the case of a State operating a Statewide
    single-payer system--
                (1) the State shall operate the system throughout the State
            through a single alliance;
                (2) except as provided in subsection (b), the State shall
            meet the requirements for participating States under part 1;
            and
                (3) the State shall assume the functions described in
            subsection (c) that are otherwise required to be performed by
            regional alliances in participating States that do not operate
            a Statewide single-payer system.
        (b) Exceptions to Certain Requirements for Participating States.--
    In the case of a State operating a Statewide single-payer system, the
    State is not required to meet the following requirements otherwise
    applicable to participating States under part 1:
                (1) Establishment of alliances.--The requirements of
            section 1202 (relating to the establishment of alliances).
                (2) Health plans.--The requirements of section 1203
            (relating to health plans), other than the requirement of
            subsection (f) of such section (relating to coordination of
            workers' compensation services and automobile liability
            insurance).
                (3) Financial solvency.--The requirements of section 1204
            (relating to the financial solvency of health plans in the
            State).
        (c) Assumption by State of Certain Requirements Applicable to
    Regional Alliances.--A State operating a Statewide single-payer system
    shall be subject to the following requirements otherwise applicable to
    regional alliances in other participating States:
                (1) Enrollment; issuance of health security cards.--The
            requirements of subsections (a) and (c) of section 1323 and
            section 1324 shall apply to the State, eligible individuals
            residing in the State, and the single-payer system operated by
            the State in the same manner as such requirements apply to a
            regional alliance, alliance eligible individuals, and regional
            alliance health plans.
                (2) Reductions in cost sharing for low-income
            individuals.--The requirement of section 1371 shall apply to
            the State in the same manner as such requirement applies to a
            regional alliance.
                (3) Data collection; quality.--The requirements of section
            1327 shall apply to the State and the single-payer system
            operated by the State in the same manner as such requirement
            applies to a regional alliance and health plans offered through
            a regional alliance.
                (4) Anti-discrimination; coordination.--The requirements of
            section 1328 shall apply to the State in the same manner as
            such requirements apply with respect to a regional alliance.
        (d) Financing.--
                (1) In general.--A State operating a Statewide single-payer
            system shall provide for the financing of the system using, at
            least in part, a payroll-based financing system that requires
            employers to pay at least the amount that the employers would
            be required to pay if the employers were subject to the
            requirements of subtitle B of title VI.
                (2) Use of financing methods.--Such a State may use,
            consistent with paragraph (1), any other method of financing.
        (e) Single-Payer State Defined.--In this Act, the term ``single-
    payer State'' means a State with a Statewide single-payer system in
    effect that has been approved by the Board in accordance with this
    part.

    SEC. 1224. SPECIAL RULES FOR ALLIANCE-SPECIFIC SINGLE-PAYER SYSTEMS.

        (a) In General.--In the case of a State operating an alliance-
    specific single-payer system--
                (1) the State shall meet the requirements for participating
            States under part 1; and
                (2) the regional alliance in which the system is operated
            shall meet the requirements of subsection (b).
        (b) Requirements for Alliance in Which System Operates.--A regional
    alliance in which an alliance-specific single payer system is operated
    shall meet the requirements applicable to regional alliances under
    subtitle D, except that the alliance is not required to meet the
    following requirements of such subtitle:
                (1) Contracts with health plans.--The requirements of
            section 1321 (relating to contracts with health plans).
                (2) Choice of health plans offered.--The requirements of
            subsections (a) or (b) of section 1322 (relating to offering a
            choice of health plans to eligible enrollees).
                (3) Establishment of ombudsman office.--The requirements of
            section 1326(a) (relating to the establishment of an office of
            ombudsman).
                (4) Addressing needs of areas with inadequate health
            services.--The regional alliance does not have any of the
            authorities described in subsections (a) and (b) of section
            1329 (relating to adjusting payments to plans and encouraging
            the establishment of new plans).

                                                        Title I, Subtitle D

                          Subtitle D--Health Alliances

    SEC. 1300. HEALTH ALLIANCE DEFINED.

        In this Act, the term ``health alliance'' means a regional alliance
    (as defined in section 1301) and a corporate alliance (as defined in
    section 1311).

           PART 1--ESTABLISHMENT OF REGIONAL AND CORPORATE ALLIANCES

                         Subpart A--Regional Alliances

    SEC. 1301. REGIONAL ALLIANCE DEFINED.

        In this Act, the term ``regional alliance'' means a non-profit
    organization, an independent state agency, or an agency of the State
    which--
                (1) meets the applicable organizational requirements of
            this subpart, and
                (2) is carrying out activities consistent with part 2.

    SEC. 1302. BOARD OF DIRECTORS.

        (a) In General.--A regional alliance must be governed by a Board of
    Directors appointed consistent with the provisions of this subpart. All
    powers vested in a regional alliance under this Act shall be vested in
    the Board of Directors.
        (b) Membership.--
                (1) In general.--Such a Board of Directors shall consist
            of--
                        (A) members who represent employers whose employees
                    purchase health coverage through the alliance,
                    including self-employed individuals who purchase such
                    coverage; and
                        (B) members who represent individuals who purchase
                    such coverage, including employees who purchase such
                    coverage.
                (2) Equal representation of employers and consumers.--The
            number of members of the Board described under subparagraph (A)
            of paragraph (1) shall be the same as the number of members
            described in subparagraph (B) of such paragraph.
        (c) No Conflict of Interest Permitted.--An individual may not serve
    as a member of the Board of Directors if the individual is one of the
    following (or an immediate family member of one of the following):
                (1) A health care provider.
                (2) An individual who is an employee or member of the Board
            of Directors of, has a substantial ownership in, or derives
            substantial income from, a health care provider, health plan,
            pharmaceutical company, or a supplier of medical equipment,
            devices, or services.
                (3) A person who derives substantial income from the
            provision of health care.
                (4)(A) A member or employee of an association, law firm, or
            other institution or organization that represents the interests
            of one or more health care providers, health plans or others
            involved in the health care field, or (B) an individual who
            practices as a professional in an area involving health care.

    SEC. 1303. PROVIDER ADVISORY BOARDS FOR REGIONAL ALLIANCES.

        Each regional alliance must establish a provider advisory board
    consisting of representatives of health care providers and
    professionals who provide covered services through health plans offered
    by the alliance.

                         Subpart B--Corporate Alliances

    SEC. 1311. CORPORATE ALLIANCE DEFINED; INDIVIDUALS ELIGIBLE FOR
                  COVERAGE THROUGH CORPORATE ALLIANCES; ADDITIONAL
                  DEFINITIONS.

        (a) Corporate Alliance Defined.--In this Act, the term ``corporate
    alliance'' means an eligible sponsor (as defined in subsection (b))
    if--
                (1) the sponsor elects, in a form and manner specified by
            the Secretary of Labor consistent with this subpart, to be
            treated as a corporate alliance under this title and such
            election has not been terminated under section 1313; and
                (2) the sponsor has filed with the Secretary of Labor a
            document describing how the sponsor shall carry out activities
            as such an alliance consistent with part 4.
        (b) Eligible Sponsors.--
                (1) In general.--In this subpart, each of the following is
            an eligible sponsor:
                        (A) Large employer.--An employer that--
                                (i) is a large employer (as defined in
                            subsection (e)(2)) as of the date of an
                            election under subsection (a)(1), and
                                (ii) is not an excluded employer described
                            in paragraph (2).
                        (B) Plan sponsor of a multiemployer plan.--A plan
                    sponsor described in section 3(16)(B)(iii) of Employee
                    Retirement Income Security Act of 1974, but only with
                    respect to a group health plan that is a multiemployer
                    plan (as defined in subsection (e)(3)) maintained by
                    the sponsor and only if--
                                (i) such plan offered health benefits as of
                            September 1, 1993, and
                                (ii) as of both September 1, 1993, and
                            January 1, 1996, such plan has more than 5,000
                            active participants in the United States, or
                            the plan is maintained by one or more
                            affiliates of the same labor organization, or
                            one or more affiliates of labor organizations
                            representing employees in the same industry,
                            covering more than 5,000 employees.
                        (C) Rural electric cooperative and rural telephone
                    cooperative association.--A rural electric cooperative
                    or a rural telephone cooperative association, but only
                    with respect to a group health plan that is maintained
                    by such cooperative or association (or members of such
                    cooperative or association) and only if such plan--
                                (i) offered health benefits as of September
                            1, 1993, and
                                (ii) as of both September 1, 1993, and
                            January 1, 1996, has more than 5,000 full-time
                            employees in the United States entitled to
                            health benefits under the plan.
                (2) Excluded employers.--For purposes of paragraph (1)(A),
            any of the following are excluded employers described in this
            paragraph:
                        (A) An employer whose primary business is employee
                    leasing.
                        (B) The Federal government (other than the United
                    States Postal Service).
                        (C) A State government, a unit of local government,
                    and an agency or instrumentality of government,
                    including any special purpose unit of government.
        (c) Individuals Eligible To Enroll in Corporate Alliance Health
    Plans.--For purposes of part 1 of subtitle A, subject to subsection
    (d)--
                (1) Full-time employees of large employers.--Each eligible
            individual who is a full-time employee (as defined in section
            1901(b)(2)(C)) of a large employer that has an election in
            effect as a corporate alliance is eligible to enroll in a
            corporate alliance health plan offered by such corporate
            alliance.
                (2) Multiemployer alliances.--
                        (A) Participants.--Each participant and beneficiary
                    (as defined in subparagraph (B)) under a multiemployer
                    plan, with respect to which an eligible sponsor of the
                    plan described in subsection (b)(1)(B) has an election
                    in effect as a corporate alliance, is eligible to
                    enroll in a corporate alliance health plan offered by
                    such corporate alliance.
                        (B) Participant and beneficiary defined.--In
                    subparagraph (A), the terms ``participant'' and
                    ``beneficiary'' have the meaning given such terms in
                    section 3 of the Employee Retirement Income Security
                    Act of 1974.
                (3) Full-time employees of rural cooperative alliances.--
            Each full-time employee of a member of a rural electric
            cooperative or rural telephone cooperative association which
            has an election in effect as a corporate alliance (and each
            full-time employee of such a cooperative or association) is
            eligible to enroll in a corporate alliance health plan offered
            by such corporate alliance.
                (4) Ineligible to enroll in regional alliance health
            plan.--Except as provided in section 1013, a corporate alliance
            eligible individual is not eligible to enroll under a regional
            alliance health plan.
        (d) Exclusion of Certain Individuals.--In accordance with rules of
    the Board, the following individuals shall not be treated as corporate
    alliance eligible individuals:
                (1) AFDC recipients.
                (2) SSI recipients.
                (3) Individuals who are described in section 1004(b)
            (relating to veterans, military personnel, and Indians) and who
            elect an applicable health plan described in such section.
                (4) Employees who are seasonal or temporary workers (as
            defined by the Board), other than such workers who are treated
            as corporate alliance eligible individuals pursuant to a
            collective bargaining agreement (as defined by the Secretary of
            Labor).
        (e) Definitions Relating to Corporate Alliances.--In this subtitle,
    except as otherwise provided:
                (1) Group health plan.--The term ``group health plan''
            means an employee welfare benefit plan (as defined in section
            3(1) of the Employee Retirement Income Security Act of 1974)
            providing medical care (as defined in section 213(d) of the
            Internal Revenue Code of 1986) to participants or beneficiaries
            (as defined in section 3 of the Employee Retirement Income
            Security Act of 1974) directly or through insurance,
            reimbursement, or otherwise.
                (2) Large employer.--The term ``large employer'' means an
            employer that has more than 5,000 full-time employees in the
            United States. Such term includes the United States Postal
            Service.
                (3) Multiemployer plan.--The term ``multiemployer plan''
            has the meaning given such term in section 3(37) of the
            Employee Retirement Income Security Act of 1974, and includes
            any plan that is treated as such a plan under title I of such
            Act.
                (4) Rural electric cooperative.--The term ``rural electric
            cooperative'' has the meaning given such term in section
            3(40)(A)(iv) of the Employee Retirement Income Security Act of
            1974.
                (5) Rural telephone cooperative associations.--The term
            ``rural telephone cooperative association'' has the meaning
            given such term in section 3(40)(A)(v) of the Employee
            Retirement Income Security Act of 1974.

    SEC. 1312. TIMING OF ELECTIONS.

        (a) For Large Employers.--
                (1) Current large employers.--
                        (A) In general.--In the case of an employer that is
                    an eligible sponsor described in section 1311(b)(1)(A)
                    as of the most recent January 1 prior to the general
                    effective date, the sponsor's election to be a
                    corporate alliance under such section must be made and
                    filed with the Secretary of Labor not later than the
                    date specified in subparagraph (B).
                        (B) Deadline for notice.--The date specified in
                    this subparagraph is January 1 of the second year
                    preceding the general effective date or, in the case of
                    a State that elects to become a participating State
                    before the general effective date, not later than one
                    month later than the date specified for States under
                    section 1202(a)(2).
                (2) New large employers.--In the case of an employer that
            is not an eligible sponsor described in section 1311(b)(1)(A)
            as of the most recent January 1 prior to the general effective
            date, but first becomes such a sponsor as of a subsequent date,
            the election to be a corporate alliance under such section must
            be made and filed with the Secretary of Labor not later than
            March 1 of the year following the year in which the employer
            first becomes such a sponsor.
                (3) Application of option.--The Secretary of Labor shall
            promulgate rules regarding how the option described in section
            1311(c)(1)(B) will be applied to the determination of whether
            an employer is a large employer before an election is made
            under section 1311.
        (b) For Multiemployer Plans and Rural Cooperatives.--In the case of
    an eligible sponsor described in section 1311(b)(1) (B) or (C), the
    sponsor's election to be a corporate alliance under such section must
    be made and filed with the Secretary of Labor not later than March 1,
    1996.
        (c) Effective Date of Election.--An election made under subsection
    (a) or (b) shall be effective for coverage provided under health plans
    on and after January 1 of the year following the year in which the
    election is made.
        (d) One-time Election.--If an eligible sponsor fails to make the
    election on a timely manner under subsection (a) or (b), the sponsor
    may not make such election at any other time.

    SEC. 1313. TERMINATION OF ALLIANCE ELECTION.

        (a) Termination for Insufficient Number of Full-Time Employees or
    Participants.--If a corporate alliance reports under section 1387(c),
    that there were fewer than 4,800 full-time employees (or, active
    participants, in the case of one or more plans offered by a corporate
    alliance which is an eligible sponsor described in section
    1311(b)(1)(B)) who are enrolled in a health plan through the alliance,
    the election under this part with respect to the alliance shall
    terminate.
        (b) Termination for Failure to Meet Requirements.--
                (1) In general.--If the Secretary of Labor finds that a
            corporate alliance has failed substantially to meet the
            applicable requirements of this subtitle, the Secretary shall
            terminate the election under this part with respect to the
            alliance
                (2) Excess increase in premium equivalent.--If the
            Secretary of Labor finds that the alliance is in violation of
            the requirements of section 6022 (relating to prohibition
            against excess increase in premium expenditures), the Secretary
            shall terminate the alliance in accordance with such section.
        (c) Elective Termination.--A corporate alliance may terminate an
    election under this part by filing with the National Health Board and
    the Secretary of Labor a notice of intent to terminate.
        (d) Effective Date of Termination.--In the case of a termination of
    an election under this section, in accordance with rules established by
    the Secretary of Labor--
                (1) subject to section 6022(a)(1), the termination shall
            take effect as of the effective date of enrollments in regional
            alliance health plans made during the next open enrollment
            period (as provided in section 1323(d)), and
                (2) the enrollment of eligible individuals in corporate
            alliance health plans of the corporate alliance shall be
            terminated as of such date and such individuals shall be
            enrolled in other applicable health plans effective on such
            date.
        (e) Notice to Board.--If an election with respect to a corporate
    alliance is terminated pursuant to subsection (a) or subsection (b),
    the Secretary of Labor shall notify the National Health Board of the
    termination of the election.

     PART 2--GENERAL RESPONSIBILITIES AND AUTHORITIES OF REGIONAL ALLIANCES

    SEC. 1321. CONTRACTS WITH HEALTH PLANS.

        (a) Contracts with Plans.--
                (1) In general.--In order to assure the availability of the
            comprehensive benefit package to eligible individuals residing
            in the alliance area in a cost-effective manner, except as
            provided in this section, each regional alliance shall
            negotiate with any willing State-certified health plan to enter
            into a contract with the alliance for the enrollment under the
            plan of eligible individuals in the alliance area. Subject to
            paragraph (2), a regional alliance shall not enter into any
            such contract with a health plan that is not a State-certified
            health plan.
                (2) Treatment of certain plans.--Each regional alliance
            shall enter into a contract under this section with any
            veterans health plan of the Department of Veterans Affairs and
            with a Uniformed Services Health Plan of the Department of
            Defense, that offers the comprehensive benefit package to
            eligible individuals residing in the alliance area if the
            appropriate official requests to enter into such a contract.
        (b) General Conditions for Denial of Contract by a Regional
    Alliance.--A regional alliance is not required under this section to
    offer a contract with a health plan if--
                (1) the alliance finds that the proposed bid exceeds 120
            percent of the regional alliance per capita prremium target (as
            determined under section 6003); or
                (2) the plan has failed to comply with requirements under
            prior contracts with the alliance, including failing to offer
            coverage for all the services in the comprehensive benefit
            package in the entire service area of the plan.

    SEC. 1322. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT;
                  ESTABLISHMENT OF FEE-FOR-SERVICE SCHEDULE.

        (a) In General.--Each regional alliance must provide to each
    eligible enrollee (as defined in section 1902(14)) with respect to the
    alliance a choice of health plans among the plans which have contracts
    in effect with the alliance under section 1321 (in the case of a
    regional alliance) or section 1341 (in the case of a corporate
    alliance).
        (b) Offering of Plans by Regional Alliances.--
                (1) In general.--Each regional alliance shall include among
            its health plan offerings at least one fee-for-service plan (as
            defined in paragraph (2)).
                (2) Fee-for-service plan defined.--
                        (A) In general.--For purposes of this Act, the term
                    ``fee-for-service plan'' means a health plan that--
                                (i) provides coverage for all items and
                            services included in the comprehensive benefit
                            package that are furnished by any lawful health
                            care provider of the enrollee's choice, subject
                            to reasonable restrictions (described in
                            subparagraph (B)), and
                                (ii) makes payment to such a provider
                            without regard to whether or not there is a
                            contractual arrangement between the plan and
                            the provider.
                        (B) Reasonable restrictions described.--The
                    reasonable restrictions on coverage permitted under a
                    fee-for-service plan (as specified by the National
                    Health Board) are as follows:
                                (i) Utilization review.
                                (ii) Prior approval for specified services.
                                (iii) Exclusion of providers on the basis
                            of poor quality of care, based on evidence
                            obtainable by the plan.
                    Clause (ii) shall not be construed as permitting a plan
                    to require prior approval for non-primary health care
                    services through a gatekeeper or other process.
        (c) Establishment of Fee-for-Service Schedule.--
                (1) In general.--Except in the case of regional alliances
            of a State that has established a Statewide fee schedule under
            paragraph (3), each regional alliance shall establish a fee
            schedule setting forth the payment rates applicable to services
            furnished during a year to individuals enrolled in fee-for-
            service plans (or to services furnished under the fee-for-
            service component of any regional alliance health plan) for use
            by regional alliance health plans under section 1406(c) and
            corporate alliance health plans providing services subject to
            the schedule in the regional alliance area.
                (2) Negotiation with providers.--The fee schedule under
            paragraph (1) shall be established after negotiations with
            providers, and (subject to paragraphs (5) and (6)) providers
            may collectively negotiate the fee schedule with the regional
            alliance.
                (3) Use of statewide schedule.--At the option of a State,
            the State may establish its own statewide fee schedule which
            shall apply to all fee-for-service plans offered by regional
            alliances and corporate alliances in the State instead of
            alliance-specific schedules established under paragraph (1).
                (4) Annual revision.--A regional alliance or State (as the
            case may be) shall annually update the payment rates provided
            under the fee schedule established pursuant to paragraph (1) or
            paragraph (3).
                (5) Activities treated as State action or efforts intended
            to influence government action.--The establishment of a fee
            schedule under this subsection by a regional alliance of a
            State shall be considered to be pursuant to a clearly
            articulated and affirmatively expressed State policy to
            displace competition and to be actively supervised by the
            State, and conduct by providers respecting the establishment of
            the fee schedule, including collective negotiations by
            providers with the regional alliance (or the State) pursuant to
            paragraph (2), shall be considered as efforts intended to
            influence governmental action.
                (6) No boycott permitted.--Nothing in this subsection shall
            be construed to permit providers to threaten or engage in any
            boycott.
                (7) Negotiations defined.--In this subsection,
            ``negotiations'' are the process by which providers
            collectively and jointly meet, confer, consult, discuss, share
            information, among and between themselves in order to agree on
            information to be provided, presentations to be made, and other
            such activities with respect to regional alliances (or States)
            relating to the establishment of the fee schedule (but not
            including any activity that constitutes engaging in or
            threatening to engage in a boycott), as well as any and all
            collective and joint meetings, discussions, presentations,
            conferences, and consultations between or among providers and
            any regional alliance (or State) for the purpose of
            establishing the fee schedule described in this subsection.
        (d) Prospective Budgeting of Fee-for-Service.--
                (1) In general.--The fee schedule established by a regional
            alliance or a State under subsection (c) may be based on
            prospective budgeting described in paragraph (2).
                (2) Prospective budgeting described.--Under prospective
            budgeting--
                        (A) the regional alliance or State (as the case may
                    be) shall negotiate with health providers annually to
                    develop a budget for the designated fee-for-service
                    plan;
                        (B) the negotiated budget shall establish spending
                    targets for each sector of health expenditures made by
                    the plan; and
                        (C) if the regional alliance or State (as the case
                    may be) determines that the utilization of services
                    under the plan is at a level that will result in
                    expenditures under the plan exceeding the negotiated
                    budget, the plan shall reduce the amount of payments
                    otherwise made to providers (through a withhold or
                    delay in payments or adjustments) in such a manner and
                    by such amounts as necessary to assure that
                    expenditures will not exceed the budget.
                (3) Use of prospective budgeting exclusive.--If a regional
            alliance or State establishes the fee schedule for fee-for-
            service plans on the basis of prospective budgeting under this
            subsection, payment for all services provided by fee-for-
            service plans in the alliance or State shall be determined on
            such basis.

    SEC. 1323. ENROLLMENT RULES AND PROCEDURES.

        (a) In General.--Each regional alliance shall assure that each
    regional alliance eligible individual who resides in the alliance area
    is enrolled in a regional alliance health plan and shall establish and
    maintain methods and procedures, consistent with this section,
    sufficient to assure such enrollment. Such methods and procedures shall
    assure the enrollment of alliance eligible individuals at the time they
    first become eligible enrollees in the alliance area, including
    individuals at the time of birth, at the time they move into the
    alliance area, and at the time of reaching the age of individual
    eligibility as an eligible enrollee (and not merely as a family
    member). Each regional alliance shall establish procedures, consistent
    with subtitle A, for the selection of a single health plan in which all
    members of a family are enrolled.
        (b) Point of Service Enrollment Mechanism.--
                (1) In general.--Each regional alliance shall establish a
            point-of-service enrollment mechanism (meeting the requirements
            of this subsection) for enrolling eligible individuals who are
            not enrolled in a health plan of the alliance when the
            individual seeks health services.
                (2) Requirements of mechanism.--Under such a mechanism, if
            an eligible individual seeks to receive services (included in
            the comprehensive benefit package) from a provider in an
            alliance area and does not present evidence of enrollment under
            any applicable health plan, or if the provider has no evidence
            of the individual's enrollment under any such plan, the
            following rules shall apply:
                        (A) Notice to alliance.--Consistent with part 2 of
                    subtitle B of title V, the provider--
                                (i) shall provide the regional alliance
                            with information relating to the identity of
                            the eligible individual, and
                                (ii) may request payment from the regional
                            alliance for the furnishing of such services.
                        (B) Initial determination of eligibility and
                    enrollment status.--The regional alliance shall
                    determine--
                                (i) if the individual is an alliance
                            eligible individual for the alliance, and
                                (ii) if the individual is enrolled under an
                            applicable health plan (including a corporate
                            alliance health plan).
                        (C) Treatment of alliance eligible individuals.--If
                    the regional alliance determines that the individual is
                    an alliance eligible individual with respect to the
                    alliance and--
                                (i) is enrolled under a regional alliance
                            health plan of the alliance, the alliance shall
                            forward the claim to the health plan involved
                            and shall notify the provider (and the
                            individual) of the fact of such enrollment and
                            the forwarding of such claim (and the plan
                            shall make payment to the provider for the
                            services furnished to the individual as
                            described in paragraph (3)(C));
                                (ii) is not enrolled under a regional
                            alliance health plan of the alliance but is
                            required to be so enrolled in a specific health
                            plan as a family member under section 1011, the
                            alliance shall record the individual's
                            enrollment under such specific plan, shall
                            forward the claim to such plan, and shall
                            notify the provider (and the individual) of the
                            fact of such enrollment and the forwarding of
                            such claim (and the plan shall make payment to
                            the provider for the services furnished to the
                            individual as described in paragraph (3)(C));
                            or
                                (iii) is not enrolled under such a plan and
                            is not described in clause (ii), the point-of-
                            service enrollment procedures described in
                            paragraph (3) shall apply.
                        (D) Treatment of individuals enrolled under health
                    plans of other alliances.--If the regional alliance
                    determines that the individual is not an alliance
                    eligible individual with respect to the alliance but
                    the individual is enrolled--
                                (i) under a regional alliance health plan
                            of another alliance, the alliance shall forward
                            the claim to the other regional alliance and
                            shall notify the provider (and the individual)
                            of the fact of such enrollment and the
                            forwarding of such claim (and the plan shall
                            make payment to the provider for the services
                            furnished to the individual as described in
                            paragraph (3)(C)); or
                                (ii) under a corporate alliance health
                            plan, the alliance shall forward the claim to
                            the corporate alliance involved and shall
                            notify the provider (and the individual) of the
                            fact of such enrollment and the forwarding of
                            such claim (and the plan shall make payment to
                            the provider for the services furnished to the
                            individual as described in section
                            1383(b)(2)(B)).
                        (E) Treatment of other alliance eligible
                    individuals not enrolled in health plan.--If the
                    regional alliance determines that the individual is not
                    an alliance eligible individual with respect to the
                    alliance and the individual is an alliance eligible
                    individual with respect to another health alliance but
                    is not enrolled in a health plan of such alliance, the
                    regional alliance shall forward the claim to the other
                    alliance involved and shall notify the provider (and
                    the individual) of the forwarding of such claim and the
                    requirement for prompt enrollment of the individual
                    under an applicable health plan of such alliance
                    pursuant to the procedures described in paragraph (3)
                    (in the case of a regional alliance) or in section
                    1383(b) (in the case of a corporate alliance).
                        (F) Treatment of all other individuals.--The
                    National Board shall promulgate rules regarding the
                    responsibilities of regional alliances relating to
                    individuals whose applicable health plan is not an
                    alliance plan and other individuals the alliance is
                    unable to identify as eligible individuals.
                (3) Point-of-service enrollment procedures described.--The
            point-of-service enrollment procedures under this paragraph are
            as follows:
                        (A) Not later than 10 days after the date an
                    alliance is notified of the receipt of services by an
                    unenrolled eligible individual, the alliance provides
                    the individual with materials describing health plans
                    offered through the alliance.
                        (B) The individual shall be provided a period of 30
                    days in which to enroll in a health plan of the
                    individual's choice. If the individual fails to so
                    enroll during such period, the alliance shall enroll
                    the individual in a health plan of the alliance
                    selected on a random basis.
                        (C) Using the fee-for-service schedule adopted by
                    the alliance under section 1322(c), the health plan in
                    which the individual is enrolled under this
                    subparagraph shall reimburse the provider who provided
                    the services referred to in subparagraph (A) to the
                    same extent as if the individual had been enrolled
                    under the plan at the time of provision of the
                    services.
        (c) Enrollment of New Residents.--
                (1) In general.--Each regional alliance shall establish
            procedures for enrolling regional alliance eligible individuals
            who move into the alliance area.
                (2) Long-term residents.--Such procedures shall assure that
            regional alliance eligible individuals who intend to reside in
            the alliance area for longer than 6 months shall register with
            the regional alliance for the area and shall enroll in a
            regional alliance health plan offered by the alliance.
                (3) Short-term residents.--Such procedures shall permit
            eligible individuals who intend to reside in the alliance area
            for more than 3 months but less than 6 months to choose among
            the following options:
                        (A) To continue coverage through the health plan in
                    which such individual is previously enrolled, in which
                    case coverage for care in the area of temporary
                    residence may be limited to emergency services and
                    urgent care.
                        (B) To register with the regional alliance and
                    enroll in a regional alliance health plan offered by
                    the alliance.
                        (C) To change enrollment in the previous alliance
                    area to enrollment in a health plan of such alliance
                    that provides for coverage on a fee-for-service basis
                    of services provided outside the area of that alliance.
        (d) Changes in Enrollment.--
                (1) Annual open enrollment period to change plan
            enrollment.--Each regional alliance shall hold an annual open
            enrollment period during which each eligible enrollee in the
            alliance has the opportunity to choose among health plans
            offered through the alliance, according to rules to be
            promulgated by the National Health Board.
                (2) Disenrollment for cause.--In addition to the annual
            open enrollment period held under paragraph (1), each regional
            alliance shall establish procedures under which alliance
            eligible individuals enrolled in a plan may disenroll from the
            plan for good cause at any time during a year and enroll in
            another plan of the alliance. Such procedures shall be
            implemented in a manner that ensures continuity of coverage for
            the comprehensive benefit package for such individuals during
            the year.
        (e) Enrollment of Family Members.--Each regional alliance shall
    provide for the enrollment of all family members in the same plan,
    consistent with part 2 of subtitle A.
        (f) Oversubscription of Plans.--
                (1) In general.--Each regional alliance shall establish a
            method for establishing enrollment priorities in the case of a
            health plan that does not have sufficient capacity to enroll
            all eligible individuals seeking enrollment.
                (2) Preference for current members.--Such method shall
            provide that in the case of such an oversubscribed plan--
                        (A) individuals already enrolled in the plan are
                    given priority in continuing enrollment in the plan,
                    and
                        (B) other individuals who seek enrollment during an
                    applicable enrollment period are permitted to enroll in
                    accordance with a random selection method, up to the
                    enrollment capacity of the plan.
        (g) Termination of Enrollment.--
                (1) In general.--Each regional alliance shall establish
            special enrollment procedures to permit alliance eligible
            individuals to change the plan in which they are enrolled in
            the case of the termination of coverage under a plan, in a
            manner that ensures the individuals' continuation of coverage
            for the comprehensive benefit package.
                (2) Failure of a corporate alliance.--Each regional
            alliance shall establish special enrollment procedures to
            permit individuals, who become alliance eligible individuals as
            a result of the failure of a corporate alliance, to enroll
            promptly in regional alliance health plans in a manner that
            ensures the individuals' continuation of coverage for the
            comprehensive benefit package.
        (h) Limitation on Offering of Coverage to Ineligible Individuals.--
    A regional alliance may not knowingly offer coverage under a regional
    alliance health plan or other health insurance or health benefits to an
    individual who is not an eligible individual. Nothing in this section
    shall be construed as affecting the ability of a regional alliance
    health plan or other health plan to offer coverage to such individuals
    without any financial payment or participation by a regional alliance.
        (i) Enforcement of Enrollment Requirement.--In the case of a
    regional alliance eligible individual who fails to enroll in an
    applicable health plan as required under section 1002(a)--
                (1) the applicable regional alliance shall enroll the
            individual in a regional alliance health plan (selected by the
            alliance consistent with this Act and with any rules
            established by the Board), and
                (2) such alliance shall require the payment of twice the
            amount of the family share of premiums that would have been
            payable under subtitle B of title VI if the individual had
            enrolled on a timely basis in the plan, unless the individual
            has established to the satisfaction of the alliance good cause
            for the failure to enroll on a timely basis.

    SEC. 1324. ISSUANCE OF HEALTH SECURITY CARDS.

        A regional alliance is responsible for the issuance of health
    security cards to regional alliance eligible individuals under section
    1001(b).

    SEC. 1325. CONSUMER INFORMATION AND MARKETING.

        (a) Consumer Information.--
                (1) In general.--Before each open enrollment period, each
            regional alliance shall make available to eligible enrollees
            information, in an easily understood and useful form, that
            allows such enrollees (and other alliance eligible individuals)
            to make valid comparisons among health plans offered by the
            alliance.
                (2) Information to be included.--Such information must
            include, in the same format for each plan, such information as
            the National Health Board shall require, including at least the
            following:
                        (A) The cost of the plan, including premiums and
                    average out-of-pocket expenses.
                        (B) The characteristics and availability of health
                    care professionals and institutions participating in
                    the plan.
                        (C) Any restrictions on access to providers and
                    services under the plan.
                        (D) A summary of the annual quality performance
                    report, established pursuant to section 5005(c)(1),
                    which contains measures of quality presented in a
                    standard format.
        (b) Marketing.--Each regional alliance shall, consistent with
    section 1404, review and approve or disapprove the distribution of any
    materials used to market health plans offered through the alliance.

    SEC. 1326. OMBUDSMAN.

        (a) Establishment.--Each regional alliance must establish and
    maintain an office of an ombudsman to assist consumers in dealing with
    problems that arise with health plans and the alliance.
        (b) Optional Financing Through Voluntary Contribution.--At the
    option of the State in which a regional alliance is located, the
    alliance--
                (1) shall permit alliance eligible individuals to designate
            that one dollar of the premium paid for enrollment in the
            individual's regional alliance health plan for the operation of
            the office of the alliance's ombudsman; and
                (2) shall apply any such amounts towards the establishment
            and operation of such office.

    SEC. 1327. DATA COLLECTION; QUALITY.

        Each regional alliance shall comply with requirements of subtitles
    A and B of title V (relating to quality, information systems, and
    privacy), and shall take appropriate steps to ensure that health plans
    offered through the alliance comply with such requirements.

    SEC. 1328. ADDITIONAL DUTIES.

        (a) Anti-Discrimination.--In carrying out its activities under this
    part, a regional alliance may not discriminate against health plans on
    the basis of race, sex, national origin, religion, mix of health
    professionals, location of the plan's headquarters, or (except as
    specifically provided in this part) organizational arrangement.
        (b) Coordination of Enrollment Activities.--Each regional alliance
    shall coordinate, in a manner specified by the National Health Board,
    with other health alliances its activities, including enrollment and
    disenrollment activities, in a manner that ensures continuous,
    nonduplicative coverage of alliance eligible individuals in health
    plans and that minimizes administrative procedures and paperwork.

    SEC. 1329. ADDITIONAL AUTHORITIES FOR REGIONAL ALLIANCES TO ADDRESS
                  NEEDS IN AREAS WITH INADEQUATE HEALTH SERVICES;
                  PROHIBITION OF INSURANCE ROLE.

        (a) Payment Adjustment.--In order to ensure that plans are
    available to all eligible individuals residing in all portions of the
    alliance area, a regional alliance may adjust payments to plans or use
    other financial incentives to encourage health plans to expand into
    areas that have inadequate health services.
        (b) Encouraging New Plans.--Subject to subsection (c), in order to
    encourage the establishment of a new health plan in an area that has
    inadequate health services, an alliance may--
                (1) organize health providers to create such a plan in such
            an area a new health plan targeted at such an area,
                (2) provide assistance with setting up and administering
            such a plan, and
                (3) arrange favorable financing for such a plan.
        (c) Prohibition of Regional Alliances Bearing Risk.--A regional
    alliance may not bear insurance risk.

    SEC. 1330. PROHIBITION AGAINST SELF-DEALING AND CONFLICTS OF INTEREST.

        (a) Promulgation of Standards.--The Board shall promulgate
    standards of conduct in accordance with subsection (b) for any
    administrator, officer, trustee, fiduciary, custodian, counsel, agent,
    or employee of any regional alliance.
        (b) Requirements for Standards.--The standards of conduct referred
    to in subsection (a) shall set forth--
                (1) the types of investment interests, ownership interests,
            affiliations or other employment that would be improper for an
            individual described in subsection (a) to hold during the time
            of the individual's service or employment with an alliance; and
                (2) the circumstances that will constitute impermissible
            conflicts of interest or self-dealing by such employees in
            performing their official duties and functions for any regional
            alliance.
        (c) Civil Monetary Penalty.--Any individual who engages in an
    activity that the individual knows or has reason to know is in
    violation of the regulations and standards promulgated by the Board
    pursuant to subsections (a) and (b) shall be subject, in addition to
    any other penalties that may be prescribed by law, to a civil money
    penalty of not more than $10,000 for each such violation. The
    provisions of section 1128A of the Social Security Act (other than
    subsections (a) and (b)) shall apply to civil money penalties under
    this subsection in the same manner as they apply to a penalty or
    proceeding under section 1128A(a) of such Act.

    PART 3--AUTHORITIES AND RESPONSIBILITIES OF REGIONAL ALLIANCES RELATING
                     TO FINANCING AND INCOME DETERMINATIONS

                         Subpart A--Collection of Funds

    SEC. 1341. INFORMATION AND NEGOTIATION AND ACCEPTANCE OF BIDS.

        (a) Information Provided to Plans Before Soliciting Bids.--
                (1) In general.--Each regional alliance shall make
            available, by April 1 of each year, to each plan that indicates
            an interest in submitting a premium bid under section 6004 in
            the year, information (including information described in
            paragraph (2)) that the Board specifies as being necessary to
            enable a plan to estimate, based upon an accepted bid, the
            amounts payable to such a plan under section 1351.
                (2) Information to be included.--Such information shall
            include the following:
                        (A) The demographic and other characteristics of
                    regional alliance eligible individuals for the regional
                    alliance.
                        (B) The uniform per capita conversion factor for
                    the regional alliance (established under subsection
                    (b)).
                        (C) The premium class factors (established by the
                    Board under section 1531).
                        (D) The regional alliance inflation factor
                    (determined under section 6001(a)).
                        (E) The risk-adjustment factors and reinsurance
                    methodology and payment amounts (published under
                    subsection (c)) to be used by the regional alliance in
                    computing blended plan per capita rates (in accordance
                    with section 6201).
                        (F) The plan bid proportion, the AFDC proportion,
                    the SSI proportion, the AFDC per capita premium amount,
                    and the SSI per capita premium amount, for the year, as
                    computed under subtitle D of title VI.
                        (G) The alliance administrative allowance
                    percentage, computed under section 1352(b).
        (b) Determination of Uniform Per Capita Conversion Factor.--Each
    regional alliance shall specify, not later than April 1 of each year
    (beginning with the year before the first year) a uniform per capita
    conversion factor to be used under section 6102(a)(2) in converting the
    accepted bid for each plan for the year into the premium for an
    individual enrollment for such plan for the year. SSI or AFDC
    recipients shall not be included for purposes of computing the
    conversion factor.
        (c) Determination of Risk-Adjustment Factors and Reinsurance
    Payment Amounts.--Each regional alliance shall compute and publish the
    risk-adjustment factors and reinsurance payment amounts to be used by
    the regional alliance in computing blended plan per capita rates under
    section 6201.
        (d) Solicitation of Bids.--Each regional alliance shall solicit and
    negotiate, consistent with section 6004, with each regional alliance
    health plan a bid for the payment rate on a per capita basis for the
    comprehensive benefit package for all alliance eligible individuals in
    the alliance area.

    SEC. 1342. CALCULATION AND PUBLICATION OF GENERAL FAMILY SHARE AND
                  GENERAL EMPLOYER PREMIUM AMOUNTS.

        (a) Calculation of Components in General Family Share and General
    Employer Premiums.--
                (1) Family share.--Each regional alliance shall compute the
            following components of the general family share of premiums
            (as defined in subsection (b)(1)(B)):
                        (A) Plan premiums.--For each plan offered, the
                    premium for the plan for each class of family
                    enrollment (including the amount of any family
                    collection shortfall).
                        (B) Alliance credit.--The alliance credit amount
                    for each class of family enrollment, under section
                    6103.
                        (C) Excess premium credit.--The amount of any
                    excess premium credit provided under section 6105 for
                    each class of family enrollment.
                        (D) Corporate alliance opt-in credit.--The amount
                    of any corporate alliance opt-in credit provided under
                    section 6106 for each class of family enrollment.
                (2) Employer premiums.--Each regional alliance shall
            compute the following components of the general employer
            premium payment amount (as defined in subsection (b)(2)(B)):
                        (A) Base employer monthly premium per worker.--The
                    base employer monthly premium determined under section
                    6122 for each class of family enrollment.
                        (B) Employer collection shortfall add-on.--The
                    employer collection shortfall add-on computed under
                    section 6125(b).
        (b) Publication.--
                (1) Family share.--
                        (A) In general.--Each regional alliance shall
                    publish, before the open enrollment period in each
                    year, the general family share of the premium (as
                    defined in subparagraph (B)) for each class of family
                    enrollment for each regional alliance health plan to be
                    offered by the alliance in the following year.
                        (B) General family share of premium defined.--In
                    this subpart, the term ``general family share of
                    premium'' means the family share of premium under
                    section 6101 computed without regard to section 6104
                    and without regard to section 6101(b)(2)(C)(v).
                (2) Employer premium.--
                        (A) In general.--Each regional alliance shall
                    publish, in December before each year (beginning with
                    December before the first year) the general employer
                    premium payment amount (as defined in subparagraph (B))
                    for each class of family enrollment for the following
                    year.
                        (B) General employer premium payment amount
                    defined.--In this subpart, the term ``general employer
                    premium payment amount'' means the employer premium
                    payment under section 6121 computed, as an amount per
                    full-time equivalent worker, without regard to sections
                    6124 through 6126.

    SEC. 1343. DETERMINATION OF FAMILY SHARE FOR FAMILIES.

        (a) Amount of Family Share.--The amount charged by a regional
    alliance to a family for a class of family enrollment (specified under
    section 1011(c)) under a regional alliance health plan is equal to the
    family share of premium established under section 6101(a) for the
    family. Based upon the information described in this section, each
    regional alliance shall determine the amount required to be paid under
    section 6101 and under section 6111 for each year for families
    enrolling in regional alliance health plans.
        (b) Family Share Amount.--The amount required to be paid under
    section 6101, with respect to each family, takes into account--
                (1) the general family share of premium (as defined in
            section 1342(b)(1)(B)) for the class of enrollment involved;
                (2) any income-related discount provided under section
            6104(a)(1) for the family; and
                (3) whether or not the family is an SSI or AFDC family.
        (c) Alliance Credit Repayment Amount.--The amount of the alliance
    credit repayment amount under section 6111, with respect to each
    family, takes into account the following:
                (1) The number of months of enrollment, and class of
            enrollment, in regional alliance health plans, used in
            determining the amount of the alliance credit under section
            6103 for the family.
                (2) Reductions in liability under section 6111(b) based on
            employer premium payments based on net earnings from self-
            employment for the family.
                (3) Reductions in liability under section 6112 based on
            months of employment for the family.
                (4) Limitations in liability under section 6113 on the
            basis of the adjusted family income for the family.
                (5) The elimination of liability in the case of certain
            retirees and qualified spouses and children under section 6114.
                (6) The elimination of liability in the case of certain
            working medicare beneficiaries under section 6115.
        (d) Access to Necessary Information to Make Determination.--
    Information required for an alliance to make the determination under
    subsection (a) shall be based on information obtained or maintained by
    the alliance in the conduct of its business, including the following:
                (1) Information required for income-related determinations
            shall be obtained under subpart B.
                (2) Information on SSI and AFDC recipients under subsection
            (e).
                (3) Information submitted on a monthly and annual basis by
            employers under section 1602.
                (4) Information submitted by self-employed individuals on
            net earnings from self-employment under section 1602(d).
                (5) Applications for premium reductions under section 6114.
                (6) Information concerning medicare-eligible individuals
            under subsection (f).
                (7) Any income-related discount provided under section
            6104(a)(1) for the family.
                (8) Whether or not the family is an SSI or AFDC family.
        (e) Information Concerning Cash Assistance Status.--Each
    participating State and the Secretary shall make available (in a time
    and manner specified by the Secretary) to each regional alliance such
    information as may be necessary to determine and verify whether an
    individual is an AFDC or SSI recipient for a month in a year.
        (f) Information Concerning Medicare-Eligible Individuals.--
                (1) Information to regional alliances.--The Secretary shall
            make available to regional alliances (through regional
            information centers or otherwise) information necessary to
            determine--
                        (A) whether an individual is a medicare-eligible
                    individual,
                        (B) the eligibility of individuals for the special
                    treatment under section 6115,
                        (C) if medicare-eligible individuals are described
                    in section 1012(a), and
                        (D) the amounts of payments owed the alliance under
                    section 1894 of the Social Security Act, added by
                    section 4003.
                (2) Information to secretary.--Each regional alliance shall
            make available to the Secretary (through the national
            information system under section 5101 or otherwise) information
            relating to the enrollment of individuals who would be
            medicare-eligible individuals but for section 1012(a).
        (g) Alliance Accounting System.--
                (1) In general.--Each regional alliance shall establish an
            accounting system that meets standards established by the
            Secretary.
                (2) Specifics.--Such system shall collect information, on a
            timely basis for each individual enrolled (and, to the extent
            required by the Secretary, identified and required to be
            enrolled) in a regional alliance health plan regarding--
                        (A) the applicable premium for such enrollment,
                        (B) family members covered under such enrollment,
                        (C) the premium payments made by (or on behalf of)
                    the individual for such enrollment,
                        (D) employer premium payments made respecting the
                    employment of the individual and other employer
                    contributions made respecting such enrollment, and
                        (E) any government contributions made with respect
                    to such enrollment (including contributions for
                    electing veterans and active duty military personnel).
                (3) End-of-year reporting.--Such system shall provide for a
            report, at the end of each year, regarding the total premiums
            imposed, and total amounts collected, for individuals enrolled
            under regional health alliance plans, in such manner as
            identifies net amounts that may be owed to the regional
            alliance.

    SEC. 1344. NOTICE OF FAMILY PAYMENTS DUE.

        (a) Family Statements.--
                (1) Notice of no amount owed.--If the regional alliance
            determines under section 1343 that a family has paid any family
            share required under section 6101 and is not required to repay
            any amount under section 6111 for a year, the alliance shall
            provide notice of such determination to the family. Such notice
            shall include a prominent statement that the family is not
            required to make any additional payment and is not required to
            file any additional information with the regional alliance.
                (2) Notice of amount owed.--
                        (A) In general.--If the regional alliance
                    determines that a family has not paid the entire family
                    share required under section 6101 or is required to
                    repay an amount under section 6111 for a year, the
                    alliance shall provide to the family a notice of such
                    determination.
                        (B) Information on amount due.--Such notice shall
                    include detailed information regarding the amount owed,
                    the basis for the computation (including the amount of
                    any reductions that have been made in the family's
                    liability under subtitle B of title VI), and the date
                    the amount is due and the manner in which such amount
                    is payable.
                        (C) Information on discounts and reductions
                    available.--Such notice shall include--
                                (i) information regarding the discounts and
                            reductions available (under sections 6104,
                            6112, 6113, 6114, and 6115) to reduce or
                            eliminate any liability, and
                                (ii) a worksheet which may be used to
                            calculate reductions in liability based on
                            income under sections 6104 and 6113.
                (3) Inclusion of income reconciliation form for families
            provided premium discounts.--
                        (A) In general.--A notice under this subsection
                    shall include, in the case of a family that has been
                    provided a premium discount under section 6104 (or
                    section 6113) for the previous year, an income
                    reconciliation statement (for use under section 1375)
                    to be completed and returned to the regional alliance
                    (along with any additional amounts owed) by the
                    deadline specified in subsection (b). Such form shall
                    require the submission of such information as the
                    Secretary specifies to establish or verify eligibility
                    for such premium discount.
                        (B) Other families.--Any family which has not been
                    provided such a discount but may be eligible for such a
                    discount may submit such an income reconciliation
                    statement and, if eligible, receive a rebate of the
                    amount of excess family share paid for the previous
                    year.
                        (C) Additional information.--The alliance shall
                    permit a family to provide additional information
                    relating to the amount of such reductions or the income
                    of the family (insofar as it may relate to a premium
                    discount or reduction in liability under section 6104
                    or 6113).
                (4) Timing of notice.--Notices under this subsection shall
            be mailed to each family at least 45 days before the deadline
            specified in subsection (b).
        (b) Deadline for Payment.--The deadline specified in this
    subsection for amounts owed for a year is such date as the Secretary
    may specify, taking into account the dates when the information
    specified in section 1343 becomes available to compute the amounts owed
    and to file income reconciliation statements under section 1375.
    Amounts not paid by such deadline are subject to interest and penalty.
        (c) Change in Regional Alliance.--In the case of a family that
    during a year changes the regional alliance through which the family
    obtains coverage under a regional alliance health plan, the Secretary
    shall establish rules which provide that the regional alliance in which
    the family last obtained such coverage in a year--
                (1) is responsible for recovering amounts due under this
            subpart for the year (whether or not attributable to periods of
            coverage obtained through that alliance);
                (2) shall obtain such information, through the health
            information system implemented under section 5101, as the
            alliance may require in order to compute the amount of any
            liability owed under this subpart (taking into account any
            reduction in such amount under this section), and
                (3) shall provide for the payment to other regional
            alliances of such amounts collected as may be attributable to
            amounts owed for periods of coverage obtained through such
            alliances.
        (d) No Loss of Coverage.--In no case shall the failure to pay
    amounts owed under this subsection result in an individual's or
    family's loss of coverage under this Act.
        (e) Dispute Resolution.--Each regional alliance shall establish a
    fair hearing mechanism for the resolution of disputes concerning
    amounts owed the alliance under this subpart.

    SEC. 1345. COLLECTIONS.

        (a) In General.--Each regional alliance is responsible for the
    collection of all amounts owed the alliance (whether by individuals,
    employers, or others and whether on the basis of premiums owed,
    incorrect amounts of discounts or premium, cost sharing, or other
    reductions made, or otherwise). No amounts are payable by the Federal
    Government under this Act (including section 9102) with respect to the
    failure to collect any such amounts. Each regional alliance shall use
    credit and collection procedures, including the imposition of interest
    charges and late fees for failure to make timely payment, as may be
    necessary to collect amounts owed to the alliance. States assist
    regional alliances in such collection process under section 1202(d).
        (b) Collection of Family Share.--
                (1) Withholding.--
                        (A) in general.--In the case of a family that
                    includes a qualifying employee of an employer, the
                    employer shall deduct from the wages of the qualifying
                    employee (in a manner consistent with any rules of the
                    Secretary of Labor) the amount of the family share of
                    the premium for the plan in which the family is
                    enrolled.
                        (B) Multiple employment.--In the case of a family
                    that includes more than one qualifying employee, the
                    family shall choose the employer to which subparagraph
                    (A) will apply.
                        (C) Payment.--Amounts withheld under this paragraph
                    shall be maintained in a manner consistent with
                    standards established by the Secretary of Labor and
                    paid to the regional alliance involved in a manner
                    consistent with the payment of employer premiums under
                    subsection (c).
                        (D) Satisfaction of liability.--An amount deducted
                    from wages of a qualifying employee by an employer is
                    deemed to have been paid by the employee and to have
                    satisfied the employee's obligation under subsection
                    (a) to the extent of such amount.
                (2) Other methods.--In the case of a family that does not
            include a qualifying employee, the regional alliance shall
            require payment to be made prospectively. Such payment may be
            required to be made not less frequently than monthly. The
            Secretary may issue regulations in order to assure the timely
            and accurate collection of the family share due.
        (c) Timing and Method of Payment of Employer Premiums.--
                (1) Frequency of payment.--Payment of employer premiums
            under section 6121 for a month shall be made not less
            frequently than monthly (or quarterly in the case of such
            payments made by virtue of section 6126). The Secretary of
            Labor may establish a method under which employers that pay
            wages on a weekly or biweekly basis are permitted to make such
            employer payments on such a weekly or biweekly basis.
                (2) Electronic transfer.--A regional alliance may require
            those employers that have the capacity to make payments by
            electronic transfer to make payments under this subsection by
            electronic transfer.
        (d) Assistance.--
                (1) Employer collections.--The Secretary of Labor shall
            provide regional alliances with such technical and other
            assistance as may promote the efficient collection of all
            amounts owed such alliances under this Act by employers. Such
            assistance may include the assessment of civil monetary
            penalties, not to exceed $5,000 or three times the amount of
            the liability owed, whichever is greater, in the case of
            repeated failure to pay (as specified in rules of the Secretary
            of Labor).
                (2) Family collections.--Except as provided in paragraph
            (1), the Secretary shall provide regional alliances with such
            technical and other assistance as may promote the efficient
            collection of other amounts owed such alliances under this Act.
            Such assistance may include the assessment of civil monetary
            penalties, not to exceed $5,000 or three times the amount of
            the liability owed, whichever is greater, in the case of
            repeated failure to pay (as specified in rules of the
            Secretary).
        (e) Receipt of Miscellaneous Amounts.--For payments to regional
    alliances by--
                (1) States, see subtitle A of title IX, and
                (2) the Federal Government, see subtitle B of such title
            and section 1894 of the Social Security Act (as added by
            section 4003).

    SEC. 1346. COORDINATION AMONG REGIONAL ALLIANCES.

        (a) In General.--The regional alliance which offers the regional
    alliance health plan in which a family is enrolled in December of each
    year (in this section referred to as the ``final alliance'') is
    responsible for the collection of any amounts owed by the family under
    this subpart, without regard to whether the family resided in the
    alliance area during the entire year.
        (b) Provision of Information in the Case of Change of Residence.--
    In the case of a family that moves from one alliance area to another
    alliance area during a year, each regional alliance (other than the
    final alliance) is responsible for providing to the final alliance
    (through the national information system under section 5101 or
    otherwise) such information as the final alliance may require in order
    to determine the liability (and reductions in liability under section
    6112) attributable to alliance credits provided by such regional
    alliance.
        (c) Distribution of Proceeds.--In accordance with rules established
    by the Secretary, in consultation with the Secretary of Labor, the
    final alliance shall provide for the distribution of amounts collected
    under this subpart with respect to families in a year in an equitable
    manner among the regional alliances that provided health plan coverage
    to the families in the year.
        (d) Expediting Process.--In order to reduce paperwork and promote
    efficiency in the collection of amounts owed regional alliances under
    this subpart, the Secretary may require or permit regional alliances to
    share such information (through the national information system under
    section 5101 or otherwise) as the Secretary determines to be cost-
    effective, subject to such confidentiality restrictions as may
    otherwise apply.
        (e) Students.--In the case of a qualifying student who makes an
    election described in section 1012(e)(1) (relating to certain full-time
    students who are covered under the plan of a parent but enrolled in a
    health plan offered by a different regional alliance from the one in
    which the parent is enrolled), the regional alliance that offered the
    plan to the parent shall provide for transfers of an appropriate
    portion of the premium (determined in accordance with procedures
    specified by the Board) to the other regional alliance in order to
    compensate that alliance for the provision of such coverage.
        (f) Payments of Certain Amounts to Corporate Alliances.--In the
    case of a married couple in which one spouse is a qualifying employee
    of a regional alliance employer and the other spouse is a qualifying
    employee of a corporate alliance employer, if the couple is enrolled
    with a corporate alliance health plan the regional alliance (which
    receives employer premium payments from such regional alliance employer
    with respect to such employee) shall pay to the corporate alliance the
    amounts so paid (or would be payable by the employer if section 6123
    did not apply).

                              Subpart B--Payments

    SEC. 1351. PAYMENT TO REGIONAL ALLIANCE HEALTH PLANS.

        (a) Computation of Blended Plan Per Capita Payment Amount.--For
    purposes of making payments to plans under this section, each regional
    alliance shall compute, under section 6201(a), a blended plan per
    capita payment amount for each regional alliance health plan for
    enrollment in the alliance for a year.
        (b) Amount of Payment to Plans.--
                (1) In general.--Subject to subsection (e) and section
            6121(b)(5)(B), each regional alliance shall provide for payment
            to each regional alliance health plan, in which an alliance
            eligible individual is enrolled, an amount equal to the net
            blended rate (described in paragraph (2)) adjusted (consistent
            with subsection (c)) to take into account the relative
            actuarial risk associated with the coverage with respect to the
            individual.
                (2) Net blended rate.--The net blended rate described in
            this paragraph is the blended plan per capita payment amount
            (determined under section 6201(a)), reduced by--
                        (A) such amount multiplied by the sum of--
                                (i) the administrative allowance percentage
                            for the regional alliance, computed by the
                            alliance under section 1352(b), and
                                (ii) 1.5 percentage points; and
                        (B) any plan payment reduction imposed under
                    section 6011 for the plan for the year.
        (c) Application of Risk Adjustment and Reinsurance Methodology.--
    Each regional alliance shall use the risk adjustment methodology
    developed under section 1541 in making payments to regional alliance
    health plans under this section, except as provided in section 1542.
        (d) Application of Portion of Set Aside.--Amounts attributable to
    subsection (b)(2)(A)(ii) are paid to the Federal Government (for
    academic health centers and graduate medical education) under section
    1353.
        (e) Treatment of Veterans, Military, and Indian Health Plans and
    Programs.--
                (1) Veterans health plan.--In applying this subtitle (and
            title VI) in the case of a regional alliance health plan that
            is a veterans health plan of the Department of Veterans
            Affairs, the following rules apply:
                        (A) For purposes of applying subtitle A of title
                    VI, families enrolled under the plan shall not be taken
                    into account.
                        (B) The provisions of subtitle A of title VI shall
                    not apply to the plan, other than such provisions as
                    require the plan to submit a per capita amount for each
                    regional alliance area on a timely basis, which amount
                    shall be treated as the final accepted bid of the plan
                    for the area for purposes of subtitle B of such title
                    and this subtitle. This amount shall not be subject to
                    negotiation and not subject to reduction under section
                    6011.
                        (C) For purposes of computing the blended plan per
                    capita payment amount under section 6201(a), the AFDC
                    and SSI proportions (under section 6202(a)) are deemed
                    to be 0 percent.
                (2) Uniformed services health plan.--In applying this
            subtitle (and title VI) in the case of a regional alliance
            health plan that is a Uniformed Services Health Plan of the
            Department of Defense, the following rules apply:
                        (A) For purposes of applying subtitle A of title
                    VI, families enrolled under the plan shall not be taken
                    into account.
                        (B) The provisions of subtitle A of title VI shall
                    not apply to the plan, other than such provisions as
                    require the plan to submit a per capita amount on a
                    timely basis, which amount shall be treated as the
                    final accepted bid of the plan for the area involved
                    for purposes of subtitle B of such title and this
                    subtitle. This amount shall not be subject to
                    negotiation and not subject to reduction under section
                    6011. The Board, in consultation with the Secretary of
                    Defense, shall establish rules relating to the area (or
                    areas) in which such a bid shall apply.
                        (C) For purposes of computing the blended plan per
                    capita payment amount under section 6201(a), the AFDC
                    and SSI proportions (under section 6202(a)) are deemed
                    to be 0 percent.
                (3) Indian health programs.--In applying this subtitle (and
            title VI) in the case of a health program of the Indian Health
            Service, the following rules apply:
                        (A) Except as provided in this paragraph, the plan
                    shall not be considered or treated to be a regional
                    alliance health plan and for purposes of applying title
                    VI, families enrolled under the program shall not be
                    taken into account.
                        (B) In accordance with rules established by the
                    Secretary, regional alliances shall act as agents for
                    the collection of employer premium payments (including
                    payments of corporate alliance employers) required
                    under subtitle B of title VI with respect to qualifying
                    employees who are enrolled under a health program of
                    the Indian Health Service. The Secretary shall permit
                    such alliances to retain a nominal fee to compensate
                    them for such collection activities. In applying this
                    subparagraph, the family share of premium for such
                    employees is deemed to be zero for electing Indians (as
                    defined in section 1012(d)(3)) and for other employees
                    is the amount of the premium established under section
                    8306(b)(4)(A), employees are deemed to be residing in
                    the area of residence (or area of employment), as
                    specified under rules of the Secretary, and the class
                    of enrollment shall be such class (or classes) as
                    specified under rules of the Secretary.

    SEC. 1352. ALLIANCE ADMINISTRATIVE ALLOWANCE PERCENTAGE.

        (a) Specification by Alliance.--Before obtaining bids under section
    6004 from health plans for a year, each regional alliance shall
    establish the administrative allowance for the operation of the
    regional alliance in the year.
        (b) Administrative Allowance Percentage.--Subject to subsection
    (c), the regional alliance shall compute an administrative allowance
    percentage for each year equal to--
                (1) the administrative allowance determined under
            subsection (a) for the year, divided by
                (2) the total of the amounts payable to regional alliance
            health plans under subpart A (as estimated by the alliance and
            determined without regard to section 1345(d)).
        (c) Limitation to 2\1/2\ percent.--In no case shall an
    administrative allowance percentage exceed 2.5 percent.

    SEC. 1353. PAYMENTS TO THE FEDERAL GOVERNMENT FOR ACADEMIC HEALTH
                  CENTERS AND GRADUATE MEDICAL EDUCATION.

        Each regional alliance shall make payment to the Secretary of an
    amount equal to the reduction in payments by the alliance to regional
    alliance health plans attributable to section 1351(b)(2)(A)(ii).

                        Subpart C--Financial Management

    SEC. 1361. MANAGEMENT OF FINANCES AND RECORDS.

        (a) In General.--Each regional alliance shall comply with standards
    established under section 1571(b) (relating to the management of
    finances, maintenance of records, accounting practices, auditing
    procedures, and financial reporting) and under section 1591(d)
    (relating to employer payments).
        (b) Specific Provisions.--In accordance with such standards--
                (1) Financial statements.--
                        (A) In general.--Each regional alliance shall
                    publish periodic audited financial statements.
                        (B) Annual financial audit.--
                                (i) In general.--Each regional alliance
                            shall have an annual financial audit conducted
                            by an independent auditor in accordance with
                            generally accepted auditing standards.
                                (ii) Publication.--A report on each such
                            audit shall be made available to the public at
                            nominal cost.
                                (iii) Required actions for deficiencies.--
                            If the report from such an audit does not bear
                            an unqualified opinion, the alliance shall take
                            such steps on a timely basis as may be
                            necessary to correct any material deficiency
                            identified in the report.
                        (C) Eligibility error rates.--Each regional
                    alliance shall make eligibility determinations for
                    premium discounts, liability reductions, and cost
                    sharing reductions under sections 6104 and 6123,
                    section 6113, and section 1371, respectively, in a
                    manner that maintains the error rates below an
                    applicable maximum permissible error rate specified by
                    the Secretary (or the Secretary of Labor with respect
                    to section 6123). In specifying such a rate, the
                    Secretary shall take into account maximum permissible
                    error rates recognized by the Federal Government under
                    comparable State-administered programs.
                (2) Safeguarding of funds.--Each regional alliance shall
            safeguard family, employer, State, and Federal government
            payments to the alliance in accordance with fiduciary standards
            and shall hold such payments in financial institutions and
            instruments that meet standards recognized or established by
            the Secretary, in consultation with the Secretaries of Labor
            and the Treasury and taking into account current Federal laws
            and regulations relating to fiduciary responsibilities and
            financial management of public funds.
                (3) Contingencies.--Each regional alliance shall provide
            that any surplus of funds resulting from an estimation
            discrepancy described in section 9201(e)(1), up to a reasonable
            amount specified by the Secretary, shall be held in a
            contingency fund established by the alliance and used to fund
            any future shortfalls resulting from such a discrepancy.
                (4) Auditing of employer payments.--
                        (A) In general.--Each regional alliance is
                    responsible for auditing the records of regional
                    alliance employers to assure that employer payments
                    (including the payment of amounts withheld) were made
                    in the appropriate amount as provided under subpart A
                    of part 2 of subtitle B of title VI.
                        (B) Employers with employees residing in different
                    alliance areas.--In the case of a regional alliance
                    employer which has employees who reside in more than
                    one alliance area, the Secretary of Labor, in
                    consultation with the Secretary, shall establish a
                    process for the coordination of regional alliance
                    auditing activities among the regional alliances
                    involved.
                        (C) Appeal.--In the case of an audit conducted by a
                    regional alliance on an employer under this paragraph,
                    an employer or other regional alliance that is
                    aggrieved by the determination in the audit is entitled
                    to review of such audit by the Secretary of Labor in a
                    manner to be provided by such Secretary.

          Subpart D--Reductions in Cost Sharing; Income Determinations

    SEC. 1371. REDUCTION IN COST SHARING FOR LOW-INCOME FAMILIES.

        (a) Reduction.--
                (1) In general.--Subject to subsection (b), in the case of
            a family that is enrolled in a regional alliance health plan
            and that is either (A) an AFDC or SSI family or (B) is
            determined under this subpart to have family adjusted income
            below 150 percent of the applicable poverty level, the family
            is entitled to a reduction in cost sharing in accordance with
            this section.
                (2) Timing of reduction.--The reduction in cost sharing
            shall only apply to items and services furnished after the date
            the application for such reduction is approved under section
            1372(c) and before the date of termination of the reduction
            under this subpart, or, in the case of an AFDC or SSI family,
            during the period in which the family is such a family.
                (3) Information to providers and plans.--Each regional
            alliance shall provide, through electronic means and otherwise,
            health care providers and regional alliance health plans with
            access to such information as may be necessary in order to
            provide for the cost sharing reductions under this section.
        (b) Limitation.--No reduction in cost sharing under subsection
    (c)(1) shall be available for families residing in an alliance area if
    the regional alliance for the area determines that there are sufficient
    low-cost plans (as defined in section 6104(b)(3)) that are lower or
    combination cost sharing plans available in the alliance area to enroll
    AFDC and SSI families and families with family adjusted income below
    150 percent of the applicable poverty level.
        (c) Amount of Cost Sharing Reduction.--
                (1) In general.--Subject to paragraph (2), the reduction in
            cost sharing under this section shall be such reduction as will
            reduce cost sharing to the level of a lower or combination cost
            sharing plan.
                (2) Special treatment of certain afdc and ssi families.--In
            the case of an AFDC or SSI family enrolled in a lower or
            combination cost sharing plan or receiving a reduction in cost
            sharing under paragraph (1), the amount of copayment applied
            with respect to an item or service (other than with respect to
            hospital emergency room services for which there is no
            emergency medical condition, as defined in section 1867(e)(1)
            of the Social Security Act) shall be an amount equal to 20
            percent of the copayment amount otherwise applicable under
            sections 1135 and 1136, rounded to the nearest dollar.
        (d) Administration.--
                (1) In general.--In the case of an approved family (as
            defined in section 1372(b)(3)) enrolled in a regional alliance
            health plan, the regional alliance shall pay the plan for cost
            sharing reductions (other than cost sharing reductions under
            subsection (c)(2)) provided under this section and included in
            payments made by the plan to its providers.
                (2) Estimated payments, subject to reconciliation.--Such
            payment shall be made initially on the basis of reasonable
            estimates of cost sharing reductions incurred by such a plan
            with respect to approved families and shall be reconciled not
            less often than quarterly based on actual claims for items and
            services provided.
        (e) No Cost Sharing for Indians and Certain Veterans and Military
    Personnel.--The provisions of section 6104(a)(3) shall apply to cost
    sharing reductions under this section in the same manner as such
    provisions apply to premium discounts under section 6104.

    SEC. 1372. APPLICATION PROCESS FOR COST SHARING REDUCTIONS.

        (a) Application.--
                (1) In general.--A regional alliance eligible family may
            apply for a determination of the family adjusted income of the
            family, for the purpose of establishing eligibility for cost
            sharing reductions under section 1371.
                (2) Form.--An application under this section shall include
            such information as may be determined by the regional alliance
            (consistent with rules developed by the Secretary) and shall
            include at least information about the family's employment
            status and income.
        (b) Timing.--
                (1) In general.--An application under this section may be
            filed at such times as the Secretary may provide, including
            during any open enrollment period, at the time of a move, or
            after a change in life circumstances (such as unemployment or
            divorce) affecting class of enrollment or amount of family
            share or repayment amount.
                (2) Consideration.--Each regional alliance shall approve or
            disapprove an application under this section, and notify the
            applicant of such decision, within such period (specified by
            the Secretary) after the date of the filing of the application.
                (3) Approved family defined.--In this section and section
            1371, the term ``approved family'' means a family for which an
            application under this section is approved, until the date of
            termination of such approval under this section.
        (c) Approval of Application.--
                (1) In general.--A regional alliance shall approve an
            application of a family under this section filed in a month if
            the application demonstrates that the family adjusted income of
            the family (as defined in subsection (d) and determined under
            paragraph (2)) is (or is expected to be) less than 150 percent
            of the applicable poverty level.
                (2) Use of current income.--In making the determination
            under paragraph (1), a regional alliance shall take into
            account the income for the previous 3-month period and current
            wages from employment (if any), consistent with rules specified
            by the Secretary.
        (d) Family Adjusted Income.--
                (1) In general.--Except as provided in paragraph (4), in
            this Act the term ``family adjusted income'' means, with
            respect to a family, the sum of the adjusted incomes (as
            defined in paragraph (2)) for all members of the family
            (determined without regard to section 1012).
                (2) Adjusted income.--In paragraph (1), the term ``adjusted
            income'' means, with respect to an individual, adjusted gross
            income (as defined in section 62(a) of the Internal Revenue
            Code of 1986)--
                        (A) determined without regard to sections 135,
                    162(l), 911, 931, and 933 of such Code, and
                        (B) increased by the amount of interest received or
                    accrued by the individual which is exempt from tax.
                (3) Presence of additional dependents.--At the option of an
            individual, a family may include (and not be required to
            separate out) the income of other individuals who are claimed
            as dependents of the family for income tax purposes, but such
            individuals shall not be counted as part of the family for
            purposes of determining the size of the family.
        (e) Requirement for Periodic Confirmation and Verification and
    Notices.--
                (1) Confirmation and verification requirement.--The
            continued eligibility of a family for cost sharing reductions
            under this section is conditioned upon the family's eligibility
            being--
                        (A) confirmed periodically by the regional
                    alliance, and
                        (B) verified (through the filing of a new
                    application under this section) by the regional
                    alliance at the time income reconciliation statements
                    are required to be filed under section 1375.
                (2) Rules.--The Secretary shall issue rules related to the
            manner in which alliances confirm and verify eligibility under
            this section.
                (3) Notices of changes in income and employment status.--
                        (A) In general.--Each approved family shall
                    promptly notify the regional alliance of any material
                    increase (as defined by the Secretary) in the family
                    adjusted income.
                        (B) Response.--If a regional alliance receives
                    notice under subparagraph (A) (or from an employer
                    under section 1602(b)(3)(A)(i)) or otherwise receives
                    information indicating a potential significant change
                    in the family's employment status or increase in
                    adjusted family income, the regional alliance shall
                    promptly take steps necessary to reconfirm the family's
                    eligibility.
        (f) Termination of Cost Sharing Reduction.--The regional alliance
    shall, after notice to the family, terminate the reduction of cost
    sharing under this subpart for an approved family if the family fails
    to provide for confirmation or verification or notice required under
    subsection (c) on a timely basis or the alliance otherwise determines
    that the family is no longer eligible for such reduction. The previous
    sentence shall not prevent the family from subsequently reapplying for
    cost sharing reduction under this section.
        (g) Treatment of AFDC and SSI Recipients.--
                (1) No application required.--AFDC and SSI families are not
            required to make an application under this section.
                (2) Notice requirement.--Each State (and the Secretary)
            shall notify each regional alliance, in a manner specified by
            the Secretary, of the identity (and period of eligibility under
            the AFDC or SSI programs) of each AFDC and SSI recipient,
            unless such a recipient elects (in a manner specified by the
            Secretary) not to accept the reduction of cost sharing under
            this section.

    SEC. 1373. APPLICATION FOR PREMIUM DISCOUNTS AND REDUCTION IN
                  LIABILITIES TO ALLIANCES.

        (a) In General.--Any regional alliance eligible family may apply
    for a determination of the family adjusted income of the family, for
    the purpose of establishing eligibility for a premium discount under
    section 6104 or a reduction in liability under section 6113.
        (b) Timing.--Such an application may be filed at such times as an
    application for a cost sharing reduction may be filed under section
    1372(b) and also may be filed after the end of the year to obtain a
    rebate for excess premium payments made during a year.
        (c) Approval of Application.--
                (1) In general.--A regional alliance shall approve an
            application of a family under this section filed in a month--
                        (A) for a premium discount under section 6104, if
                    the application demonstrates that family adjusted
                    income of the family (as determined under paragraph
                    (2)) is (or is expected to be) less than 150 percent of
                    the applicable poverty level, or
                        (B) for a reduction in liability under section
                    6113, if the application demonstrates that the wage-
                    adjusted income (as defined in subsection 6113(d)) of
                    the family (as determined under paragraph (2)) is (or
                    is expected to be) less than 250 percent of the
                    applicable poverty level.
                (2) Use of current income.--In making the determination
            under paragraph (1), a regional alliance shall take into
            account the income for the previous 3-month period and current
            wages from employment (if any) and the statement of estimated
            income for the year (filed under section 1374(c)), consistent
            with rules specified by the Secretary.
        (d) Requirement for Periodic Confirmation and Verification and
    Notices.--The provisions of subsection (e) of section 1372 shall apply
    under this section in the same manner as it applies under such section,
    except that any reference to family adjusted income is deemed a
    reference to wage-adjusted income.

    SEC. 1374. GENERAL PROVISIONS RELATING TO APPLICATION PROCESS.

        (a) Distribution of Applications.--Each regional alliance shall
    distribute applications under this subpart directly to consumers and
    through employers, banks, and designated public agencies.
        (b) To Whom Application Made.--Applications under this subpart
    shall be filed, by person or mail, with a regional alliance or an
    agency designated by the State for this purpose. The application may be
    submitted with an application to enroll with a health plan under this
    subtitle or separately.
        (c) Income Statement.--Each application shall include a declaration
    of estimated annual income for the year involved.
        (d) Form and Contents.--An application for a discount or reduction
    under this subpart shall be in a form and manner specified by the
    Secretary and shall require the provision of information necessary to
    make the determinations required under this subpart.
        (e) Frequency of Applications.--
                (1) In general.--An application under this subpart may be
            filed at any time during the year (including, in the case of
            section 1373, during the reconciliation process).
                (2) Correction of income.--Nothing in paragraph (1) shall
            be construed as preventing an individual or family from, at any
            time, submitting an application to reduce the amount of premium
            discount or reduction of liability under this subpart based
            upon an increase in income from that stated in the previous
            application.
        (f) Timing of Reductions and Discounts.--
                (1) In general.--Subject to reconciliation under section
            1375, premium discounts and cost sharing reductions under this
            subpart shall be applied to premium payments required (and for
            expenses incurred) after the date of approval of the
            application under this subpart.
                (2) AFDC and ssi recipients.--In the case of an AFDC or SSI
            family, in applying paragraph (1), the date of approval of
            benefits under the AFDC or SSI program shall be considered the
            date of approval of an application under this subpart.
        (g) Verification.--The Secretary shall provide for verification, on
    a sample basis or other basis, of the information supplied in
    applications under this part. This verification shall be separate from
    the reconciliation provided under section 1375.
        (h) Help in Completing Applications.--Each regional alliance shall
    assist individuals in the filing of applications and income
    reconciliation statements under this subpart.
        (i) Penalties for Inaccurate Information.--
                (1) Interest for understatements.--Each individual who
            knowingly understates income reported in an application to a
            regional alliance under this subpart or otherwise makes a
            material misrepresentation of information in such an
            application shall be liable to the alliance for excess payments
            made based on such understatement or misrepresentation, and for
            interest on such excess payments at a rate specified by the
            Secretary.
                (2) Penalties for misrepresentation.--In addition to the
            liability established under paragraph (1), each individual who
            knowingly misrepresents material information in an application
            under this subpart to a regional alliance shall be liable to
            the State in which the alliance is located for $2,000 or, if
            greater, three times the excess payments made based on such
            misrepresentation. The State shall provide for the transfer of
            a significant portion of such amount to the regional alliance
            involved.

    SEC. 1375. END-OF-YEAR RECONCILIATION FOR PREMIUM DISCOUNT AND
                  REPAYMENT REDUCTION WITH ACTUAL INCOME.

        (a) In General.--In the case of a family whose application for a
    premium discount or reduction of liability for a year has been approved
    before the end of the year under this subpart, the family shall,
    subject to subsection (c) and by the deadline specified in section
    1344(b) file with the regional alliance an income reconciliation
    statement to verify the family's adjusted income or wage-adjusted
    income, as the case may be, for the previous year. Such a statement
    shall contain such information as the Secretary may specify. Each
    regional alliance shall coordinate the submission of such statements
    with the notice and payment of family payments due under section 1344.
        (b) Reconciliation of Premium Discount and Liability Assistance
    Based on Actual Income.--Based on and using the income reported in the
    reconciliation statement filed under subsection (a) with respect to a
    family, the regional alliance shall compute the amount of premium
    discount or reduction in liability that should have been provided under
    section 6104 or section 6113 with respect for the family for the year
    involved. If the amount of such discount or liability reduction
    computed is--
                (1) greater than the amount that has been provided, the
            family is liable to the regional alliance to pay (directly or
            through an increase in future family share of premiums or other
            payments) a total amount equal to the amount of the excess
            payment, or
                (2) less than the amount that has been provided, the
            regional alliance shall pay to the family (directly or through
            a reduction in future family share of premiums or other
            payments) a total amount equal to the amount of the deficit.
        (c) No Reconciliation for AFDC and SSI Families; No Reconciliation
    for Cost Sharing Reductions.--No reconciliation statement is required
    under this section--
                (1) with respect to cost sharing reductions provided under
            section 1372, or
                (2) for a family that only claims a premium discount or
            liability reduction under this subpart on the basis of being an
            AFDC or SSI family.
        (d) Disqualification for Failure to File.--In the case of any
    family that is required to file a statement under this section in a
    year and that fails to file such a statement by the deadline specified,
    members of the family shall not be eligible for premium reductions
    under section 6104 or reductions in liability under section 6113 until
    such statement is filed. A regional alliance, using rules established
    by the Secretary, shall waive the application of this subsection if the
    family establishes, to the satisfaction of the alliance under such
    rules, good cause for the failure to file the statement on a timely
    basis.
        (e) Penalties for False Information.--Any individual that provides
    false information in a statement under subsection (a) is subject to the
    same liabilities as are provided under section 1374(h) for a
    misrepresentation of material fact described in such section.
        (f) Notice of Requirement.--Each regional alliance (directly or in
    coordination with other regional alliances) shall provide for written
    notice, at the end of each year, of the requirement of this section to
    each family which had received premium discount or reduction in
    liability under this subpart in any month during the preceding year and
    to which such requirement applies.
        (g) Transmittal of Information; Verification.--
                (1) In general.--Each participating State shall transmit
            annually to the Secretary such information relating to the
            income of families for the previous year as the Secretary may
            require to verify such income under this subpart.
                (2) Verification.--Each participating State may use such
            information as it has available to it to assist regional
            alliances in verifying income of families with applications
            filed under this subpart. The Secretary of the Treasury may,
            consistent with section 6103 of the Internal Revenue Code of
            1986, permit return information to be disclosed and used by a
            participating State in verifying such income but only in
            accordance with such section and only if the information is not
            directly disclosed to a regional alliance.
        (h) Construction.--Nothing in this section shall be construed as
    authorizing reconciliation of any cost sharing reduction provided under
    this subpart.

        PART 4--RESPONSIBILITIES AND AUTHORITIES OF CORPORATE ALLIANCES

    SEC. 1381. CONTRACTS WITH HEALTH PLANS.

        (a) Contracts with Plans.--Subject to section 1382, each corporate
    alliance may--
                (1) offer to individuals eligible to enroll under section
            1311(c) coverage under an appropriate self-insured health plan
            (as defined in section 1400(b)), or
                (2) negotiate with a State-certified health plan to enter
            into a contract with the plan for the enrollment of such
            individuals under the plan,
    or do both.
        (b) Terms of Contracts with State-Certified Health Plans.--
    Contracts under this section between a corporate alliance and a State-
    certified health plan may contain such provisions (not inconsistent
    with the requirements of this title) as the alliance and plan may
    provide, except that in no case does such contract remove the
    obligation of the sponsor of the corporate alliance to provide for
    health benefits to corporate alliance eligible individuals consistent
    with this part.

    SEC. 1382. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT.

        (a) In General.--Each corporate alliance must provide to each
    eligible enrollee with respect to the alliance a choice of health plans
    among the plans which have contracts with the alliance under section
    1381.
        (b) Offering of Plans by Alliances.--A corporate alliance shall
    include among its health plan offerings for any eligible enrollee at
    least 3 health plans to enrollees, of which the alliance must offer--
                (1) at least one fee-for-service plan (as defined in
            section 1322(b)(2)); and
                (2) at least two health plans that are not fee-for-service
            plans.

    SEC. 1383. ENROLLMENT; ISSUANCE OF HEALTH SECURITY CARD.

        (a) In General.--
                (1) Enrollment of alliance eligible individuals.--Each
            corporate alliance shall assure that each alliance eligible
            individual with respect to the alliance is enrolled in a
            corporate alliance health plan offered by the alliance, and
            shall establish and maintain methods and procedures consistent
            with this section sufficient to assure such enrollment. Such
            methods and procedures shall assure the enrollment of such
            individuals at the time they first become alliance eligible
            individuals with respect to the alliance.
                (2) Issuance of health security cards.--A corporate
            alliance is responsible for the issuance of health security
            cards to corporate alliance eligible individuals under section
            1001(b).
        (b) Response to Point-of-Service Notices.--If a corporate alliance
    is notified under section 1323(b)(2) regarding an individual who has
    received services and appears to be a corporate alliance eligible
    individual--
                (1) the alliance shall promptly ascertain the individual's
            eligibility as a corporate alliance eligible individual; and
                (2) if the alliance determines that the individual is a
            corporate alliance eligible individual--
                        (A) the alliance shall promptly provide for the
                    enrollment of the individual in a health plan offered
                    by the alliance (and notify the Secretary of Labor of
                    such enrollment), and
                        (B) the alliance shall forward the claim for
                    payment for the services to the health plan in which
                    the individual is so enrolled and the plan shall make
                    payment to the provider for such claim (in a manner
                    consistent with requirements of the Secretary of
                    Labor).
        (c) Annual Open Enrollment; Enrollment of Family Members;
    Oversubscription of Plans.--The provisions of subsections (d) through
    (f) of section 1323 shall apply to a corporate alliance in the same
    manner as such provisions apply to a regional alliance.
        (d) Termination.--
                (1) In general.--The provisions of section 1323(g)(1) shall
            apply to a corporate alliance in the same manner as such
            provisions apply to a regional alliance.
                (2) Failure to pay premiums.--If a corporate alliance fails
            to make premium payments to a health plan, the plan, after
            reasonable written notice to the alliance and the Secretary of
            Labor, may terminate coverage (and any contract with the
            alliance under this part). If such coverage is terminated the
            corporate alliance is responsible for the prompt enrollment of
            alliance eligible individuals whose coverage is terminated in
            another corporate alliance health plan.
        (e) Corporate Alliance Transition.--Each corporate alliance must
    provide coverage--
                (1) as of the first day of any month in which an individual
            first becomes a corporate alliance eligible individual, and
                (2) through the end of the month in the case of a corporate
            alliance eligible individual who loses such eligibility during
            the month.

    SEC. 1384. COMMUNITY-RATED PREMIUMS WITHIN PREMIUM AREAS.

        (a) Application of Community-Rated Premiums.--The premiums charged
    by a corporate alliance for enrollment in a corporate alliance health
    plan (not taking into account any employer premium payment required
    under section 6131) shall vary only by class of family enrollment
    (specified in section 1011(c)) and by premium area.
        (b) Designation of Premium Areas.--
                (1) Designation.--Each corporate alliance shall designate
            premium areas to be used for the imposition of premiums (and
            calculation of employer premium payments) under this Act.
                (2) Conditions.--The boundaries of such areas shall
            reasonably reflect labor market areas or health care delivery
            areas and shall be consistent with rules the Secretary of Labor
            establishes (consistent with paragraph (3)) so that within such
            areas there are not substantial differences in average per
            capita health care expenditures.
                (3) Anti-redlining.--The provisions of paragraphs (4) and
            (5) of section 1202(b) (relating to redlining and metropolitan
            statistical areas) shall apply to the establishment of premium
            areas in the same manner as they apply to the establishment of
            the boundaries of regional alliance areas.
        (c) Applications of Classes of Enrollment.--
                (1) In general.--The premiums shall be applied under this
            section based on class of family enrollment and shall vary
            based on such class in accordance with factors specified by the
            corporate alliance.
                (2) Basis for factors.--Such factors shall be the same in
            each premium area and shall take into account such appropriate
            considerations (including the considerations the Board takes
            into account in the establishment of premium class factors
            under section 1531 and the costs of regional alliance health
            plans providing the comprehensive benefit package for families
            enrolled in the different classes) as the alliance considers
            appropriate, consistent with rules the Secretary of Labor
            establishes.
        (d) Special Treatment of Multiemployer Alliances.--The Secretary of
    Labor shall provide for such exceptions to the requirements of this
    section in the case of a corporate alliance with a sponsor described in
    section 1311(b)(1)(B) as may be appropriate to reflect the unique and
    historical relationship between the employers and employees under such
    alliances.

    SEC. 1385. ASSISTANCE FOR LOW-WAGE FAMILIES.

        Each corporate alliance shall make an additional contribution
    towards the enrollment in health plans of the alliance by certain low-
    wage families in accordance with section 6131(b)(2).

    SEC. 1386. CONSUMER INFORMATION AND MARKETING; DATA COLLECTION AND
                  QUALITY; ADDITIONAL DUTIES.

        The provisions of sections 1325(a), 1327, and 1328 shall apply to a
    corporate alliance in the same manner as such provisions apply to a
    regional alliance.

    SEC. 1387. PLAN AND INFORMATION REQUIREMENTS.

        (a) In General.--A corporate alliance shall provide a written
    submission to the Secretary of Labor (in such form as the Secretary may
    require) detailing how the corporate alliance will carry out its
    activities under this part.
        (b) Annual Information.--A corporate alliance shall provide to the
    Secretary of Labor each year, in such form and manner as the Secretary
    may require, such information as the Secretary may require in order to
    monitor the compliance of the alliance with the requirements of this
    part.
        (c) Annual Notice of Employees or Participants.--
                (1) Corporate alliance.--Each corporate alliance shall
            submit to the Secretary of Labor, by not later than March 1 of
            each year, information on the number of full-time employees or
            participants obtaining coverage through the alliance as of
            January 1 of that year.
                (2) Employers that become large employers.--Each employer
            that is not a corporate alliance but employs 5,000 full-time
            employees as of January 1 of a year, shall submit to the
            Secretary of Labor, by not later than March 1 of the year,
            information on the number of such employees.

    SEC. 1388. MANAGEMENT OF FUNDS; RELATIONS WITH EMPLOYEES.

        (a) Management of Funds.--The management of funds by a corporate
    alliance shall be subject to the applicable fiduciary requirements of
    part 4 of subtitle B of title I of the Employee Retirement Income
    Security Act of 1974, together with the applicable enforcement
    provisions of part 5 of subtitle B of title I of such Act.
        (b) Management of Finances and Records; Accounting System.--Each
    corporate alliance shall comply with standards relating to the
    management of finances and records and accounting systems as the
    Secretary of Labor shall specify.

    SEC. 1389. COST CONTROL.

        Each corporate alliance shall control covered expenditures in a
    manner that meets the requirements of part 2 of subtitle A of title VI.

    SEC. 1390. PAYMENTS BY CORPORATE ALLIANCE EMPLOYERS TO CORPORATE
                  ALLIANCES.

        (a) Large Employer Alliances.--In the case of a corporate alliance
    with a sponsor described in section 1311(b)(1)(A), the sponsor shall
    provide for the funding of benefits, through insurance or otherwise,
    consistent with section 6131, the applicable solvency requirements of
    sections 1394, 1395, and 1396, and any rules established by the
    Secretary of Labor.
        (b) Other Alliances.--In the case of a corporate alliance with a
    sponsor described in subparagraph (B) or (C) of section 1311(b)(1), a
    corporate alliance employer shall make payment of the employer premiums
    required under section 6131 under rules established by the corporate
    alliance, which rules shall be consistent with rules established by the
    Secretary of Labor.

    SEC. 1391. COORDINATION OF PAYMENTS.

        (a) Payments of Certain Amounts to Regional Alliances.--In the case
    of a married couple in which one spouse is a qualifying employee of a
    regional alliance employer and the other spouse is a qualifying
    employee of a corporate alliance employer, if the couple is enrolled
    with a regional alliance health plan, the corporate alliance (which
    receives employer premium payments from such corporate alliance
    employer with respect to such employee) shall pay to the regional
    alliance the amounts so paid.
        (b) Payments of Certain Amounts to Corporate Alliances.--In the
    case of a married couple in which one spouse is a qualifying employee
    of a corporate alliance employer and the other spouse is a qualifying
    employee of another corporate alliance employer, the corporate alliance
    of the corporate alliance health plan in which the couple is not
    enrolled shall pay to the corporate alliance of the plan in which the
    couple is enrolled any employer premium payments received from such
    corporate alliance employer with respect to such employee.

    SEC. 1392. APPLICABILITY OF ERISA ENFORCEMENT MECHANISMS FOR
                  ENFORCEMENT OF CERTAIN REQUIREMENTS.

        The provisions of sections 502 (relating to civil enforcement) and
    504 (relating to investigative authority) of the Employee Retirement
    Income Security Act of 1974 shall apply to enforcement by the Secretary
    of Labor of this part in the same manner and to same extent as such
    provisions apply to enforcement of title I of such Act.

    SEC. 1393. APPLICABILITY OF CERTAIN ERISA PROTECTIONS TO ENROLLED
                  INDIVIDUALS.

        The provisions of sections 510 (relating to interference with
    rights protected under Act) and 511 (relating to coercive interference)
    of the Employee Retirement Income Security Act of 1974 shall apply, in
    relation to the provisions of this Act, with respect to individuals
    enrolled under corporate alliance health plans in the same manner and
    to the same extent as such provisions apply, in relation to the
    provisions of the Employee Retirement Income Security Act of 1974, with
    respect to participants and beneficiaries under employee welfare
    benefit plans covered by title I of such Act.

    SEC. 1394. DISCLOSURE AND RESERVE REQUIREMENTS.

        (a) In General.--The Secretary of Labor shall ensure that each
    corporate alliance health plan which is a self-insured plan maintains
    plan assets in trust as provided in section 403 of the Employee
    Retirement Income Security Act of 1974--
                (1) without any exemption under section 403(b)(4) of such
            Act, and
                (2) in amounts which the Secretary determines are
            sufficient to provide at any time for payment to health care
            providers of all outstanding balances owed by the plan at such
            time.
    The requirements of the preceding sentence may be met through letters
    of credit, bonds, or other appropriate security to the extent provided
    in regulations of the Secretary.
        (b) Disclosure.--Each self-insured corporate alliance health plan
    shall notify the Secretary at such time as the financial reserve
    requirements of this section are not being met. The Secretary may
    assess a civil money penalty of not more than $100,000 against any
    corporate alliance for any failure to provide such notification in such
    form and manner and within such time periods as the Secretary may
    prescribe by regulation.

    SEC. 1395. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT CORPORATE ALLIANCE
                  HEALTH PLANS.

        (a) Appointment of Secretary as Trustee for Insolvent Plans.--
    Whenever the Secretary of Labor determines that a corporate alliance
    health plan which is a self-insured plan will be unable to provide
    benefits when due or is otherwise in a financially hazardous condition
    as defined in regulations of the Secretary, the Secretary shall, upon
    notice to the plan, apply to the appropriate United States district
    court for appointment of the Secretary as trustee to administer the
    plan for the duration of the insolvency. The plan may appear as a party
    and other interested persons may intervene in the proceedings at the
    discretion of the court. The court shall appoint the Secretary trustee
    if the court determines that the trusteeship is necessary to protect
    the interests of the enrolled individuals or health care providers or
    to avoid any unreasonable deterioration of the financial condition of
    the plan or any unreasonable increase in the liability of the Corporate
    Alliance Health Plan Insolvency Fund. The trusteeship of the Secretary
    shall continue until the conditions described in the first sentence of
    this subsection are remedied or the plan is terminated.
        (b) Powers as Trustee.--The Secretary of Labor, upon appointment as
    trustee under subsection (a), shall have the power--
                (1) to do any act authorized by the plan, this Act, or
            other applicable provisions of law to be done by the plan
            administrator or any trustee of the plan,
                (2) to require the transfer of all (or any part) of the
            assets and records of the plan to the Secretary as trustee,
                (3) to invest any assets of the plan which the Secretary
            holds in accordance with the provisions of the plan,
            regulations of the Secretary, and applicable provisions of law,
                (4) to do such other acts as the Secretary deems necessary
            to continue operation of the plan without increasing the
            potential liability of the Corporate Alliance Health Plan
            Insolvency Fund, if such acts may be done under the provisions
            of the plan,
                (5) to require the corporate alliance, the plan
            administrator, any contributing employer, and any employee
            organization representing covered individuals to furnish any
            information with respect to the plan which the Secretary as
            trustee may reasonably need in order to administer the plan,
                (6) to collect for the plan any amounts due the plan and to
            recover reasonable expenses of the trusteeship,
                (7) to commence, prosecute, or defend on behalf of the plan
            any suit or proceeding involving the plan,
                (8) to issue, publish, or file such notices, statements,
            and reports as may be required under regulations of the
            Secretary or by any order of the court,
                (9) to terminate the plan and liquidate the plan assets in
            accordance with applicable provisions of this Act and other
            provisions of law, to restore the plan to the responsibility of
            the corporate alliance, or to continue the trusteeship,
                (10) to provide for the enrollment of individuals covered
            under the plan in an appropriate regional alliance health plan,
            and
                (11) to do such other acts as may be necessary to comply
            with this Act or any order of the court and to protect the
            interests of enrolled individuals and health care providers.
        (c) Notice of Appointment.--As soon as practicable after the
    Secretary's appointment as trustee, the Secretary shall give notice of
    such appointment to--
                (1) the plan administrator,
                (2) each enrolled individual,
                (3) each employer who may be liable for contributions to
            the plan, and
                (4) each employee organization which, for purposes of
            collective bargaining, represents enrolled individuals.
        (d) Additional Duties.--Except to the extent inconsistent with the
    provisions of this Act or part 4 of subtitle B of title I of the
    Employee Retirement Income Security Act of 1974, or as may be otherwise
    ordered by the court, the Secretary of Labor, upon appointment as
    trustee under this section, shall be subject to the same duties as
    those of a trustee under section 704 of title 11, United States Code,
    and shall have the duties of a fiduciary for purposes of such part 4.
        (e) Other Proceedings.--An application by the Secretary of Labor
    under this subsection may be filed notwithstanding the pendency in the
    same or any other court of any bankruptcy, mortgage foreclosure, or
    equity receivership proceeding, or any proceeding to reorganize,
    conserve, or liquidate such plan or its property, or any proceeding to
    enforce a lien against property of the plan.
        (f) Jurisdiction of Court.--
                (1) In general.--Upon the filing of an application for the
            appointment as trustee or the issuance of a decree under this
            subsection, the court to which the application is made shall
            have exclusive jurisdiction of the plan involved and its
            property wherever located with the powers, to the extent
            consistent with the purposes of this subsection, of a court of
            the United States having jurisdiction over cases under chapter
            11 of title 11, United States Code. Pending an adjudication
            under this section such court shall stay, and upon appointment
            by it of the Secretary of Labor as trustee, such court shall
            continue the stay of, any pending mortgage foreclosure, equity
            receivership, or other proceeding to reorganize, conserve, or
            liquidate the plan, the sponsoring alliance, or property of
            such plan or alliance, and any other suit against any receiver,
            conservator, or trustee of the plan, the sponsoring alliance,
            or property of the plan or alliance. Pending such adjudication
            and upon the appointment by it of the Secretary as trustee, the
            court may stay any proceeding to enforce a lien against
            property of the plan or the sponsoring alliance or any other
            suit against the plan or the alliance.
                (2) Venue.--An action under this subsection may be brought
            in the judicial district where the plan administrator resides
            or does business or where any asset of the plan is situated. A
            district court in which such action is brought may issue
            process with respect to such action in any other judicial
            district.
        (g) Personnel.--In accordance with regulations of the Secretary of
    Labor, the Secretary shall appoint, retain, and compensate accountants,
    actuaries, and other professional service personnel as may be necessary
    in connection with the Secretary's service as trustee under this
    section.

    SEC. 1396. GUARANTEED BENEFITS UNDER TRUSTEESHIP OF THE SECRETARY.

        (a) In General.--Subject to subsection (b), the Secretary of Labor
    shall guarantee the payment of all benefits under a corporate alliance
    health plan which is a self-insured plan while such plan is under the
    Secretary's trusteeship under section 1395.
        (b) Limitations.--Any increase in the amount of benefits under the
    plan resulting from a plan amendment which was made, or became
    effective, whichever is later, within 180 days (or such other
    reasonable time as may be prescribed in regulations of the Secretary of
    Labor) before the date of the Secretary's appointment as trustee of the
    plan shall be disregarded for purposes of determining the guarantee
    under this section.
        (c) Corporate Alliance Health Plan Insolvency Fund.--
                (1) Establishment.--The Secretary of Labor shall establish
            a Corporate Alliance Health Plan Insolvency Fund (hereinafter
            in this part referred to as the ``Fund'') from which the
            Secretary shall authorize payment of all guaranteed benefits
            under this section.
                (2) Receipts and disbursements.--
                        (A) Receipts.--The Fund shall be credited with--
                                (i) funds borrowed under paragraph (3),
                                (ii) assessments collected under section
                            1397, and
                                (iii) earnings on investment of the Fund.
                        (B) Disbursements.--The Fund shall be available--
                                (i) for making such payments as the
                            Secretary of Labor determines are necessary to
                            pay benefits guaranteed under this section,
                                (ii) to repay the Secretary of the Treasury
                            such sums as may be borrowed (together with
                            interest thereon) under paragraph (3), and
                                (iii) to pay the operational and
                            administrative expenses of the Fund.
                (3) Borrowing authority.--At the direction of the Secretary
            of Labor, the Fund may, to the extent necessary to carry out
            the purposes of paragraph (1), issue to the Secretary of the
            Treasury notes or other obligations, in such forms and
            denominations, bearing such maturities, and subject to such
            terms and conditions as may be prescribed by the Secretary of
            the Treasury. The total balance of the Fund obligations
            outstanding at any time shall not exceed $500,000,000. Such
            notes or other obligations shall bear interest at a rate
            determined by the Secretary of the Treasury, taking into
            consideration the current average market yield on outstanding
            marketable obligations of the United States of comparable
            maturities during the month preceding the issuance of such
            notes or other obligations by the Fund. The Secretary of the
            Treasury shall purchase any notes or other obligations issued
            by the Fund under this paragraph, and for that purpose the
            Secretary of the Treasury may use as a public debt transaction
            the proceeds from the sale of any securities issued under
            chapter 31 of title 31, United States Code and the purposes for
            which securities may be issued under such chapter are extended
            to include any purchase of such notes and obligations. The
            Secretary of the Treasury may at any time sell any of the notes
            or other obligations acquired by such Secretary under this
            paragraph. All redemptions, purchases, and sales by the
            Secretary of the Treasury of such notes or other obligations
            shall be treated as public debt transactions of the United
            States.
                (4) Investment authority.--Whenever the Secretary of Labor
            determines that the moneys of the Fund are in excess of current
            needs, such Secretary may request the investment of such
            amounts as such Secretary determines advisable by the Secretary
            of the Treasury in obligations issued or guaranteed by the
            United States, but, until all borrowings under paragraph (3)
            have been repaid, the obligations in which such excess moneys
            are invested may not yield a rate of return in excess of the
            rate of interest payable on such borrowings.

    SEC. 1397. IMPOSITION AND COLLECTION OF PERIODIC ASSESSMENTS ON SELF-
                  INSURED CORPORATE ALLIANCE PLANS.

        (a) Imposition of Assessments.--Upon a determination that
    additional receipts to the Fund are necessary in order to enable the
    Fund to repay amounts borrowed by the Fund under section 1396(c)(3)
    while maintaining a balance sufficient to ensure the solvency of the
    Fund, the Secretary of Labor may impose assessments under this section.
    The Secretary shall prescribe from time to time such schedules of
    assessment rates and bases for the application of such rates as may be
    necessary to provide for such repayments.
        (b) Uniformity of Assessments.--The assessment rates so prescribed
    by the Secretary for any period shall be uniform for all plans, except
    that the Secretary may vary the amount of such assessments by category,
    or waive the application of such assessments by category, taking into
    account differences in the financial solvency of, and financial
    reserves maintained by, plans in each category.
        (c) Limitation on Amount of Assessment.--The total amount assessed
    against a corporate alliance health plan under this section during a
    year may not exceed 2 percent of the total premiums paid to the plan
    with respect to corporate alliance eligible individuals enrolled with
    the plan during the year.
        (d) Payment of Assessments.--
                (1) Obligation to pay.--The designated payor of each plan
            shall pay the assessments imposed by the Secretary of Labor
            under this section with respect to that plan when they are due.
            Assessments under this section are payable at the time, and on
            an estimated, advance, or other basis, as determined by the
            Secretary. Assessments shall continue to accrue until the
            plan's assets are distributed pursuant to a termination
            procedure or the Secretary is appointed to serve as trustee of
            the plan under section 1395.
                (2) Late payment charges and interest.--
                        (A) Late payment charges.--If any assessment is not
                    paid when it is due, the Secretary of Labor may assess
                    a late payment charge of not more than 100 percent of
                    the assessment payment which was not timely paid.
                        (B) Waivers.--Subparagraph (A) shall not apply to
                    any assessment payment made within 60 days after the
                    date on which payment is due, if before such date, the
                    designated payor obtains a waiver from the Secretary of
                    Labor based upon a showing of substantial hardship
                    arising from the timely payment of the assessment. The
                    Secretary may grant a waiver under this subparagraph
                    upon application made by the designated payor, but the
                    Secretary may not grant a waiver if it appears that the
                    designated payor will be unable to pay the assessment
                    within 60 days after the date on which it is due.
                        (C) Interest.--If any assessment is not paid by the
                    last date prescribed for a payment, interest on the
                    amount of such assessment at the rate imposed under
                    section 6601(a) of the Internal Revenue Code of 1986
                    shall be paid for the period from such last date to the
                    date paid.
        (e) Civil Action upon Nonpayment.--If any designated payor fails to
    pay an assessment when due, the Secretary of Labor may bring a civil
    action in any district court of the United States within the
    jurisdiction of which the plan assets are located, the plan is
    administered, or in which a defendant resides or is found, for the
    recovery of the amount of the unpaid assessment, any late payment
    charge, and interest, and process may be served in any other district.
    The district courts of the United States shall have jurisdiction over
    actions brought under this subsection by the Secretary without regard
    to the amount in controversy.
        (f) Guarantee Held Harmless.--The Secretary of Labor shall not
    cease to guarantee benefits on account of the failure of a designated
    payor to pay any assessment when due.
        (g) Designated Payor Defined.--
                (1) In general.--For purposes of this section, the term
            ``designated payor'' means--
                        (A) the employer or plan administrator in any case
                    in which the eligible sponsor of the corporate alliance
                    health plan is described in subparagraph (A) of section
                    1311(b)(1); and
                        (B) the contributing employers or the plan
                    administrator in any case in which the eligible sponsor
                    of the corporate alliance is described in subparagraph
                    (B) or (C) of section 1311(b)(1).
                (2) Controlled groups.--If an employer is a member of a
            controlled group, each member of such group shall be jointly
            and severally liable for any assessments required to be paid by
            such employer. For purposes of the preceding sentence, the term
            ``controlled group'' means any group treated as a single
            employer under subsection (b), (c), (m), or (o) of section 414
            of the Internal Revenue Code of 1986.

    SEC. 1398. PAYMENTS TO FEDERAL GOVERNMENT BY MULTIEMPLOYER CORPORATE
                  ALLIANCES FOR ACADEMIC HEALTH CENTERS AND GRADUATE
                  MEDICAL EDUCATION.

        (a) In General.--A corporate alliance with an eligible sponsor
    described in section 1311(b)(1)(B) shall make payment to the Secretary
    of an amount equivalent to the amount (as estimated based on rules
    established by the Secretary and based on the annual per capita
    expenditure equivalent calculated under section 6021) that would have
    been payable by the alliance under section 1353 if the alliance were a
    regional alliance.
        (b) Reference to Exemption from Assessment.--For provision
    exempting certain corporate alliance employers participating in an
    alliance described in subsection (a) from an assessment under section
    3461 of the Internal Revenue Code of 1986, as added by section 7121 of
    this Act, see section 3461(c)(1) of such Code.

                                                        Title I, Subtitle E

                            Subtitle E--Health Plans

    SEC. 1400. HEALTH PLAN DEFINED.

        (a) In General.--In this Act, the term ``health plan'' means a plan
    that provides the comprehensive benefit package and meets the
    requirements of parts 1, 3, and 4 applicable to health plans.
        (b) Appropriate Self-Insured Health Plan.--In this Act, the term
    ``appropriate self-insured health plan'' means a group health plan (as
    defined in section 3(42) of the Employee Retirement Income Security Act
    of 1974) which is a self-insured health plan and with respect to which
    the applicable requirements of title I of the Employee Retirement
    Income Security Act of 1974 are met.
        (c) State-Certified Health Plan.--In this Act, the term ``State-
    certified health plan'' means a health plan that has been certified by
    a State under section 1203(a) (or, in the case in which the Board is
    exercising certification authority under section 1522(b), that has been
    certified by the Board).
        (d) Applicable Regulatory Authority Defined.--In this subtitle, the
    term ``applicable regulatory authority'' means--
                (1) with respect to a self-insured health plan, the
            Secretary of Labor, or
                (2) with respect to a State-certified health plan, the
            State authority responsible for certification of the plan.

         PART 1--REQUIREMENTS RELATING TO COMPREHENSIVE BENEFIT PACKAGE

    SEC. 1401. APPLICATION OF REQUIREMENTS.

        No plan shall be treated under this Act as a health plan--
                (1) unless the plan is a self-insured plan or a State-
            certified plan; or
                (2) on and after the effective date of a finding by the
            applicable regulatory authority that the plan has failed to
            comply with such applicable requirements.

    SEC. 1402. REQUIREMENTS RELATING TO ENROLLMENT AND COVERAGE.

        (a) No Underwriting.--
                (1) In general.--Subject to paragraph (2), each health plan
            offered by a regional alliance or a corporate alliance must
            accept for enrollment every alliance eligible individual who
            seeks such enrollment. No plan may engage in any practice that
            has the effect of attracting or limiting enrollees on the basis
            of personal characteristics, such as health status, anticipated
            need for health care, age, occupation, or affiliation with any
            person or entity.
                (2) Capacity limitations.--With the approval of the
            applicable regulatory authority, a health plan may limit
            enrollment because of the plan's capacity to deliver services
            or to maintain financial stability. If such a limitation is
            imposed, the limitation may not be imposed on a basis referred
            to in paragraph (1).
        (b) No Limits on Coverage; No Pre-Existing Condition Limits.--A
    health plan may not--
                (1) terminate, restrict, or limit coverage for the
            comprehensive benefit package in any portion of the plan's
            service area for any reason, including nonpayment of premiums;
                (2) cancel coverage for any alliance eligible individual
            until that individual is enrolled in another applicable health
            plan;
                (3) exclude coverage of an alliance eligible individual
            because of existing medical conditions;
                (4) impose waiting periods before coverage begins; or
                (5) impose a rider that serves to exclude coverage of
            particular eligible individuals.
        (c) Antidiscrimination.--
                (1) In general.--No health plan may discriminate, or engage
            (directly or through contractual arrangements) in any activity,
            including the selection of a service area, that has the effect
            of discriminating, against an individual on the basis of race,
            national origin, sex, language, socio-economic status, age,
            disability, health status, or anticipated need for health
            services.
                (2) Selection of providers for plan network.--In selecting
            among providers of health services for membership in a provider
            network, or in establishing the terms and conditions of such
            membership, a health plan may not engage in any practice that
            has the effect of discriminating against a provider--
                        (A) based on the race, national origin, sex,
                    language, age, or disability of the provider; or
                        (B) based on the socio-economic status, disability,
                    health status, or anticipated need for health services
                    of a patient of the provider.
                (3) Business necessity.--Except in the case of intentional
            discrimination, it shall not be a violation of this subsection,
            or of any regulation issued under this subsection, for any
            person to take any action otherwise prohibited under this
            subsection, if the action is required by business necessity.
                (4) Regulations.--Not later than 1 year after the date of
            the enactment of this Act, the Secretary of Health and Human
            Services shall issue regulations to carry out this subsection.
        (d) Requirements for Plans Offering Lower Cost Sharing.--Each
    health plan that offers enrollees the lower cost sharing schedule
    referred to in section 1131--
                (1) shall apply such schedule to all items and services in
            the comprehensive benefit package;
                (2) shall offer enrollees the opportunity to obtain
            coverage for out-of-network items and services (as described in
            subsection (f)(2)); and
                (3) notwithstanding section 1403, in the case of an
            enrollee who obtains coverage for such items and services, may
            charge an alternative premium to take into account such
            coverage.
        (e) Treatment of Cost Sharing.--Each health plan, in providing
    benefits in the comprehensive benefit package--
                (1) shall include in its payments to providers, such
            additional reimbursement as may be necessary to reflect cost
            sharing reductions to which individuals are entitled under
            section 1371, and
                (2) shall maintain such claims or encounter records as may
            be necessary to audit the amount of such additional
            reimbursements and the individuals for which such reimbursement
            is provided.
        (f) In-Network and Out-of-Network Items and Services Defined.--
                (1) In-network items and services.--For purposes of this
            Act, the term ``in-network'', when used with respect to items
            or services described in this subtitle, means items or services
            provided to an individual enrolled under a health plan by a
            health care provider who is a member of a provider network of
            the plan (as defined in paragraph (3)).
                (2) Out-of-network items and services.--For purposes of
            this Act, the term ``out-of network'', when used with respect
            to items or services described in this subtitle, means items or
            services provided to an individual enrolled under a health plan
            by a health care provider who is not a member of a provider
            network of the plan (as defined in paragraph (3)).
                (3) Provider network defined.--A ``provider network''
            means, with respect to a health plan, providers who have
            entered into an agreement with the plan under which such
            providers are obligated to provide items and services in the
            comprehensive benefit package to individuals enrolled in the
            plan, or have an agreement to provide services on a fee-for-
            service basis.
        (g) Relation to Detention.--A health plan is not required to
    provide any reimbursement to any detention facility for services
    performed in that facility for detainees in the facility.

    SEC. 1403. COMMUNITY RATING.

        (a) Regional Alliance Health Plans.--Each regional alliance health
    plan may not vary the premium imposed with respect to residents of an
    alliance area, except as may be required under section 6102(a) with
    respect to different types of individual and family coverage under the
    plan.
        (b) Corporate Alliance Health Plans.--Each corporate alliance
    health plan may not vary the premium imposed with respect to
    individuals enrolled in the plan, except as may be required under
    section 1384 with respect to different types of individual and family
    coverage under the plan.

    SEC. 1404. MARKETING OF HEALTH PLANS; INFORMATION.

        (a) Regional Alliance Marketing Restrictions.--
                (1) In general.--The contract entered into between a
            regional alliance and a regional alliance health plan shall
            prohibit the distribution by the health plan of marketing
            materials within the regional alliance that contain false or
            materially misleading information and shall provide for prior
            approval by the regional alliance of any marketing materials to
            be distributed by the plan.
                (2) Entire market.--A health plan offered by a regional
            alliance may not distribute marketing materials to an area
            smaller than the entire area served by the plan.
                (3) Prohibition of tie-ins.--A regional alliance health
            plan, and any agency of such a plan, may not seek to influence
            an individual's choice of plans in conjunction with the sale of
            any other insurance.
        (b) Information Available.--
                (1) In general.--Each regional alliance health plan must
            provide to the regional alliance and make available to alliance
            eligible individuals and health care professionals complete and
            timely information concerning the following:
                        (A) Costs.
                        (B) The identity, locations, qualifications, and
                    availability of participating providers.
                        (C) Procedures used to control utilization of
                    services and expenditures.
                        (D) Procedures for assuring and improving the
                    quality of care.
                        (E) Rights and responsibilities of enrollees.
                        (F) Information on the number of plan members who
                    disenroll from the plan.
                (2) Prohibition against certification of plans providing
            inaccurate information.--No regional alliance health plan may
            be a State-certified health plan under this title if the State
            determines that the plan submitted materially inaccurate
            information under paragraph (1).
        (c) Advance Directives.--Each self-insured health plan and each
    State-certified health plan shall meet the requirement of section
    1866(f) of the Social Security Act (relating to maintaining written
    policies and procedures respecting advance directives) in the same
    manner as such requirement relates to organizations with contracts
    under section 1876 of such Act.

    SEC. 1405. GRIEVANCE PROCEDURE.

        (a) In General.--Each health plan must establish a grievance
    procedure for enrollees to use in pursuing complaints. Such procedure
    shall be consistent with subtitle C of title V.
        (b) Additional Remedies.--If the grievance procedure fails to
    resolve an enrollee's complaint--
                (1) in the case of an enrollee of a regional alliance
            health plan, the enrollee has the option of seeking assistance
            from the office of the ombudsman for the regional alliance
            established under section 1326(a), and
                (2) the enrollee may pursue additional legal remedies,
            including those provided under subtitle C of title V.

    SEC. 1406. HEALTH PLAN ARRANGEMENTS WITH PROVIDERS.

        (a) Requirement.--Each health plan must enter into such agreements
    with health care providers or have such other arrangements as may be
    necessary to assure the provision of all services covered by the
    comprehensive benefit package to eligible individuals enrolled with the
    plan.
        (b) Emergency and Urgent Care Services.--
                (1) In general.--Each health plan must cover emergency and
            urgent care services provided to enrollees, without regard to
            whether or not the provider furnishing such services has a
            contractual (or other) arrangement with the plan to provide
            items or services to enrollees of the plan and in the case of
            emergency services without regard to prior authorization.
                (2) Payment amounts.--In the case of emergency and urgent
            care provided to an enrollee outside of a health plan's service
            area, the payment amounts of the plan shall be based on the fee
            for service rate schedule established by the regional alliance
            for the alliance area where the services were provided.
        (c) Application of Fee Schedule.--
                (1) In general.--Subject to paragraph (2), each regional
            alliance health plan or corporate alliance health plan that
            provides for payment for services on a fee-for-service basis
            shall make such payment in the amounts provided under the fee
            schedule established by the regional alliance under section
            1322(c) (or, in the case of a plan offered in a State that has
            established a Statewide fee schedule under section 1322(c)(3),
            under such Statewide fee schedule).
                (2) Reduction for providers voluntarily reducing charges.--
            If a provider under a health plan voluntarily agrees to reduce
            the amount charged to an individual enrolled under the plan,
            the plan shall reduce the amount otherwise determined under the
            fee schedule applicable under paragraph (1) by the proportion
            of the reduction in such amount charged.
                (3) Reduction for noncomplying plan.--Each regional
            alliance health plan that is a noncomplying plan shall provide
            for reductions in payments under the fee schedule to providers
            that are not participating providers in accordance with section
            6012(b).
        (d) Prohibition Against Balance Billing; Requirement of Direct
    Billing.--
                (1) Prohibition of balance billing.--A provider may not
            charge or collect from an enrollee a fee in excess of the
            applicable payment amount under the applicable fee schedule
            under subsection (c), and the health plan and its enrollees are
            not legally responsible for payment of any amount in excess of
            such applicable payment amount for items and services covered
            under the comprehensive benefits package.
                (2) Direct billing.--A provider may not charge or collect
            from an enrollee amounts that are payable by the health plan
            (including any cost sharing reduction assistance payable by the
            plan) and shall submit charges to such plan in accordance with
            any applicable requirements of part 1 of subtitle B of title V
            (relating to health information systems).
                (3) Coverage under agreements with plans.--The agreements
            or other arrangements entered into under subsection (a) between
            a health plan and the health care providers providing the
            comprehensive benefit package to individuals enrolled with the
            plan shall prohibit a provider from engaging in balance billing
            described in paragraph (1).
        (e) Imposition of Participating Provider Assessment in Case of a
    Noncomplying Plan.--Each regional alliance health plan shall provide
    that if the plan is a noncomplying plan for a year under section 6012,
    payments to participating providers shall be reduced by the applicable
    network reduction percentage under such section.

    SEC. 1407. PREEMPTION OF CERTAIN STATE LAWS RELATING TO HEALTH PLANS.

        (a) Laws Restricting Plans Other Than Fee-for-Service Plans.--
    Except as may otherwise be provided in this section, no State law shall
    apply to any services provided under a health plan that is not a fee-
    for-service plan (or a fee-for-service component of a plan) if such law
    has the effect of prohibiting or otherwise restricting plans from--
                (1) except as provided in section 1203, limiting the number
            and type of health care providers who participate in the plan;
                (2) requiring enrollees to obtain health services (other
            than emergency services) from participating providers or from
            providers authorized by the plan;
                (3) requiring enrollees to obtain a referral for treatment
            by a specialized physician or health institution;
                (4) establishing different payment rates for participating
            providers and providers outside the plan;
                (5) creating incentives to encourage the use of
            participating providers; or
                (6) requiring the use of single-source suppliers for
            pharmacy, medical equipment, and other health products and
            services.
        (b) Preemption of State Corporate Practice Acts.--Any State law
    related to the corporate practice of medicine and to provider ownership
    of health plans or other providers shall not apply to arrangements
    between health plans that are not fee-for-service plans and their
    participating providers.
        (c) Participating Provider Defined.--In this title, a
    ``participating provider'' means, with respect to a health plan, a
    provider of health care services who is a member of a provider network
    of the plan (as described in section 1402(f)(3)).

    SEC. 1408. FINANCIAL SOLVENCY.

        Each regional alliance health plan must--
                (1) meet or exceed minimum capital requirements established
            by States under section 1204(a);
                (2) in the case of a plan operating in a State, must
            participate in the guaranty fund established by the State under
            section 1204(c); and
                (3) meet such other requirements relating to fiscal
            soundness as the State may establish (subject to the
            establishment of any alternative standards by the Board).

    SEC. 1409. REQUIREMENT FOR OFFERING COST SHARING POLICY.

        Each regional alliance health plan shall offer a cost sharing
    policy (as defined in section 1421(b)(2)) to each eligible family
    enrolled under the plan.

    SEC. 1410. QUALITY ASSURANCE.

        Each health plan shall comply with such quality assurance
    requirements as are imposed under subtitle A of title V with respect to
    such a plan.

    SEC. 1411. PROVIDER VERIFICATION.

        Each health plan shall--
                (1) verify the credentials of practitioners and facilities;
                (2) ensure that all providers participating in the plan
            meet applicable State licensing and certification standards;
                (3) oversee the quality and performance of participating
            providers, consistent with section 1410; and
                (4) investigate and resolve consumer complaints against
            participating providers.

    SEC. 1412. CONSUMER DISCLOSURES OF UTILIZATION MANAGEMENT PROTOCOLS.

        Each health plan shall disclose to enrollees (and prospective
    enrollees) the protocols used by the plan for controlling utilization
    and costs.

    SEC. 1413. CONFIDENTIALITY, DATA MANAGEMENT, AND REPORTING.

        (a) In General.--Each health plan shall comply with the
    confidentiality, data management, and reporting requirements imposed
    under subtitle B of title V.
        (b) Treatment of Electronic Information.--
                (1) Accuracy and reliability.--Each health plan shall take
            such measures as may be necessary to ensure that health care
            information in electronic form that the plan, or a member of a
            provider network of the plan, collects for or transmits to the
            Board under subtitle B of title V is accurate and reliable.
                (2) Privacy and security.--Each health plan shall take such
            measures as may be necessary to ensure that health care
            information described in paragraph (1) is not distributed to
            any individual or entity in violation of a standard promulgated
            by the Board under part 2 of subtitle B of title V.

    SEC. 1414. PARTICIPATION IN REINSURANCE SYSTEM.

        Each regional alliance health plan of a State that has established
    a reinsurance system under section 1203(g) shall participate in the
    system in the manner specified by the State.

            PART 2--REQUIREMENTS RELATING TO SUPPLEMENTAL INSURANCE

    SEC. 1421. IMPOSITION OF REQUIREMENTS ON SUPPLEMENTAL INSURANCE.

        (a) In General.--An entity may offer a supplemental insurance
    policy but only if--
                (1) in the case of a supplemental health benefit policy (as
            defined in subsection (b)(1)), the entity and the policy meet
            the requirements of section 1422; and
                (2) in the case of a cost sharing policy (as defined in
            subsection (b)(2)), the entity and the policy meet the
            requirements of section 1423.
        (b) Policies Defined.--
                (1) Supplemental health benefit policy.--
                        (A) In general.--In this part, the term
                    ``supplemental health benefit policy'' means a health
                    insurance policy or health benefit plan offered to an
                    alliance eligible individual which provides--
                                (i) coverage for services and items not
                            included in the comprehensive benefit package,
                            or
                                (ii) coverage for items and services
                            included in such package but not covered
                            because of a limitation in amount, duration, or
                            scope provided under this title,
                    or both.
                        (B) Exclusions.--Such term does not include the
                    following:
                                (i) A cost sharing policy (as defined in
                            paragraph (2)).
                                (ii) A long-term care insurance policy (as
                            defined in section 2304(10)).
                                (iii) Insurance that limits benefits with
                            respect to specific diseases (or conditions).
                                (iv) Hospital or nursing home indemnity
                            insurance.
                                (v) A medicare supplemental policy (as
                            defined in section 1882(g) of the Social
                            Security Act).
                                (vi) Insurance with respect to accidents.
                (2) Cost sharing policy.--In this part, the term ``cost
            sharing policy'' means a health insurance policy or health
            benefit plan offered to an alliance eligible individual which
            provides coverage for deductibles, coinsurance, and copayments
            imposed as part of the comprehensive benefit package under
            subtitle B, whether imposed under a higher cost sharing plan or
            with respect to out-of-network providers.

    SEC. 1422. STANDARDS FOR SUPPLEMENTAL HEALTH BENEFIT POLICIES.

        (a) Prohibiting Duplication of Coverage.--
                (1) In general.--No health plan, insurer, or any other
            person may offer--
                        (A) to any eligible individual a supplemental
                    health benefit policy that duplicates any coverage
                    provided in the comprehensive benefit package; or
                        (B) to any medicare-eligible individual a
                    supplemental health benefit policy that duplicates any
                    coverage provided under the medicare program.
                (2) Exception for medicare-eligible individuals.--For
            purposes of this subsection, for the period in which an
            individual is a medicare-eligible individual and also is an
            alliance eligible individual (and is enrolled under a regional
            alliance or corporate alliance health plan), paragraph (1)(A)
            (and not paragraph (1)(B)) shall apply.
        (b) No Limitation on Individuals Offered Policy.--
                (1) In general.--Except as provided in paragraph (2), each
            entity offering a supplemental health benefit policy must
            accept for enrollment every individual who seeks such
            enrollment, subject to capacity and financial limits.
                (2) Exception for certain offerors.--Paragraph (1) shall
            not apply to any supplemental health benefit policy offered to
            an individual only on the basis of--
                        (A) the individual's employment (in the case of a
                    policy offered by the individual's employer); or
                        (B) the individual's membership or enrollment in a
                    fraternal, religious, professional, educational, or
                    other similar organization.
        (c) Restrictions on Marketing Abuses.--Not later than January 1,
    1996, the Board shall develop (in consultation with the States) minimum
    standards that prohibit marketing practices by entities offering
    supplemental health benefit policies that involve:
                (1) Providing monetary incentives for or tying or otherwise
            conditioning the sale of the policy to enrollment in a regional
            alliance health plan of the entity.
                (2) Using or disclosing to any party information about the
            health status or claims experience of participants in a
            regional alliance health plan for the purpose of marketing such
            a policy.
        (d) Civil Monetary Penalty.--An entity that knowingly and willfully
    violates any provision of this section with respect to the offering of
    a supplemental health benefit policy to any individual shall be subject
    to a civil monetary penalty (not to exceed $10,000) for each such
    violation. The provisions of section 1128A of the Social Security Act
    (other than subsections (a) and (b)) shall apply to civil money
    penalties under this subsection in the same manner as they apply to a
    penalty or proceeding under section 1128A(a) of such Act.

    SEC. 1423. STANDARDS FOR COST SHARING POLICIES.

        (a) Rules for Offering of Policies.--Subject to subsection (f), a
    cost sharing policy may be offered to an individual only if--
                (1) the policy is offered by the regional alliance health
            plan in which the individual is enrolled;
                (2) the regional alliance health plan offers the policy to
            all individuals enrolled in the plan;
                (3) the plan offers each such individual a choice of a
            policy that provides standard coverage and a policy that
            provides maximum coverage (in accordance with standards
            established by the Board); and
                (4) the policy is offered only during the annual open
            enrollment period for regional alliance health plans (described
            in section 1323(d)(1)).
        (b) Prohibition of Coverage of Copayments.--Each cost sharing
    policy may not provide any benefits relating to any copayments
    established under the table of copayments and coinsurance under section
    1135.
        (c) Equivalent Coverage for All Services.--Each cost sharing policy
    must provide coverage for items and services in the comprehensive
    benefit package to the same extent as the policy provides coverage for
    all items and services in the package.
        (d) Requirements for Pricing.--
                (1) In general.--The price of any cost sharing policy
            shall--
                        (A) be the same for each individual to whom the
                    policy is offered;
                        (B) take into account any expected increase in
                    utilization resulting from the purchase of the policy
                    by individuals enrolled in the regional alliance health
                    plan; and
                        (C) not result in a loss-ratio of less than 90
                    percent.
                (2) Loss-ratio defined.--In paragraph (1)(C), a ``loss-
            ratio'' is the ratio of the premium returned to the consumer in
            payout relative to the total premium collected.
        (e) Loss of State Certification for Regional Alliance Health Plans
    Failing to Meet Standards.--A State may not certify a regional alliance
    health plan that offers a cost sharing policy unless the plan and the
    policy meet the standards described in this section.
        (f) Special Rules for FEHBP Supplemental Plans.--Subsection (a)
    shall not apply to an FEHBP supplemental plan described in section
    8203(f)(1), but only if the plan meets the following requirements:
                (1) The plan must be offered to all individuals to whom
            such a plan is required to be offered under section 8203.
                (2) The plan must offer each such individual a choice of a
            policy that provides standard coverage and a policy that
            provides maximum coverage (in accordance with standards
            established by the Board under subsection (a)(3)).
                (3) The plan is offered only during the annual open
            enrollment period for regional alliance health plans (described
            in section 1323(d)(1)).
                (4)(A) The price of the plan shall include an amount,
            established in accordance with rules established by the Board
            in consultation with the Office of Personnel Management, that
            takes into account any expected increase in utilization of the
            items and services in the comprehensive benefit package
            resulting from the purchase of the plan by individuals enrolled
            in a regional alliance health plan.
                (B) The plan provides for payment, in a manner specified by
            the Board in the case of an individual enrolled in the plan and
            in a regional alliance health plan, to the regional alliance
            health plan of an amount equivalent to the additional amount
            described in subparagraph (A).

         PART 3--REQUIREMENTS RELATING TO ESSENTIAL COMMUNITY PROVIDERS

    SEC. 1431. HEALTH PLAN REQUIREMENT.

        (a) In General.--Subject to section 1432, each health plan shall,
    with respect to each electing essential community provider (as defined
    in subsection (d), other than a provider of school health services)
    located within the plan's service area, either--
                (1) enter into a written provider participation agreement
            (described in subsection (b)) with the provider, or
                (2) enter into a written agreement under which the plan
            shall make payment to the provider in accordance with
            subsection (c).
        (b) Participation Agreement.--A participation agreement between a
    health plan and an electing essential community provider under this
    subsection shall provide that the health plan agrees to treat the
    provider in accordance with terms and conditions at least as favorable
    as those that are applicable to other providers participating in the
    health plan with respect to each of the following:
                (1) The scope of services for which payment is made by the
            plan to the provider.
                (2) The rate of payment for covered care and services.
                (3) The availability of financial incentives to
            participating providers.
                (4) Limitations on financial risk provided to other
            participating providers.
                (5) Assignment of enrollees to participating providers.
                (6) Access by the provider's patients to providers in
            medical specialties or subspecialties participating in the
            plan.
        (c) Payments for Providers Without Participation Agreements.--
                (1) In general.--Payment in accordance with this subsection
            is payment based, as elected by the electing essential
            community provider, either--
                        (A) on the fee schedule developed by the applicable
                    regional alliance (or the State) under section 1322(c),
                    or
                        (B) on payment methodologies and rates used under
                    the applicable Medicare payment methodology and rates
                    (or the most closely applicable methodology under such
                    program as the Secretary of Health and Human Services
                    specifies in regulations).
                (2) No application of gate-keeper limitations.--Payment in
            accordance with this subsection may be subject to utilization
            review, but may not be subject to otherwise applicable gate-
            keeper requirements under the plan.
        (d) Election.--
                (1) In general.--In this part, the term ``electing
            essential community provider'' means, with respect to a health
            plan, an essential community provider that elects this subpart
            to apply to the health plan.
                (2) Form of election.--An election under this subsection
            shall be made in a form and manner specified by the Secretary,
            and shall include notice to the health plan involved. Such an
            election may be made annually with respect to a health plan,
            except that the plan and provider may agree to make such an
            election on a more frequent basis.
        (e) Special Rule for Providers of School Health Services.--A health
    plan shall pay, to each provider of school health services located in
    the plan's service area an amount determined by the Secretary for such
    services furnished to enrollees of the plan.

    SEC. 1432. SUNSET OF REQUIREMENT.

        (a) In General.--Subject to subsection (d), the requirement of
    section 1431 shall only apply to health plans offered by a health
    alliance during the 5-year period beginning with the first year in
    which any health plan is offered by the alliance.
        (b) Studies.--In order to prepare recommendations under subsection
    (c), the Secretary shall conduct studies regarding essential community
    providers, including studies that assess--
                (1) the definition of essential community provider,
                (2) the sufficiency of the funding levels for providers,
            for both covered and uncovered benefits under this Act,
                (3) the effects of contracting requirements relating to
            such providers on such providers, health plans, and enrollees,
                (4) the impact of the payment rules for such providers, and
                (5) the impact of national health reform on such providers.
        (c) Recommendations to Congress.--The Secretary shall submit to
    Congress, by not later than March 1, 2001, specific recommendations
    respecting whether, and to what extent, section 1431 should continue to
    apply to some or all essential community providers. Such
    recommendations may include a description of the particular types of
    such providers and circumstances under which such section should
    continue to apply.
        (d) Congressional Consideration.--
                (1) In general.--Recommendations submitted under subsection
            (c) shall apply under this part (and may supersede the
            provisions of subsection (a)) unless a joint resolution
            (described in paragraph (2)) disapproving such recommendations
            is enacted, in accordance with the provisions of paragraph (3),
            before the end of the 60-day period beginning on the date on
            which such recommendations were submitted. For purposes of
            applying the preceding sentence and paragraphs (2) and (3), the
            days on which either House of Congress is not in session
            because of an adjournment of more than three days to a day
            certain shall be excluded in the computation of a period.
                (2) Joint resolution of disapproval.--A joint resolution
            described in this paragraph means only a joint resolution which
            is introduced within the 10-day period beginning on the date on
            which the Secretary submits recommendations under subsection
            (c) and--
                        (A) which does not have a preamble;
                        (B) the matter after the resolving clause of which
                    is as follows: ``That Congress disapproves the
                    recommendations of the Secretary of Health and Human
                    Services concerning the continued application of
                    certain essential community provider requirements under
                    section 1431 of the Health Security Act, as submitted
                    by the Secretary on ______________.'', the blank space
                    being filled in with the appropriate date; and
                        (C) the title of which is as follows: ``Joint
                    resolution disapproving recommendations of the
                    Secretary of Health and Human Services concerning the
                    continued application of certain essential community
                    provider requirements under section 1431 of the Health
                    Security Act, as submitted by the Secretary on
                    ______________.'', the blank space being filled in with
                    the appropriate date.
                (3) Procedures for consideration of resolution of
            disapproval.--Subject to paragraph (4), the provisions of
            section 2908 (other than subsection (a)) of the Defense Base
            Closure and Realignment Act of 1990 shall apply to the
            consideration of a joint resolution described in paragraph (2)
            in the same manner as such provisions apply to a joint
            resolution described in section 2908(a) of such Act.
                (4) Special rules.--For purposes of applying paragraph (3)
            with respect to such provisions--
                        (A) any reference to the Committee on Armed
                    Services of the House of Representatives shall be
                    deemed a reference to an appropriate Committee of the
                    House of Representatives (specified by the Speaker of
                    the House of Representatives at the time of submission
                    of recommendations under subsection (c)) and any
                    reference to the Committee on Armed Services of the
                    Senate shall be deemed a reference to an appropriate
                    Committee of the Senate (specified by the Majority
                    Leader of the Senate at the time of submission of
                    recommendations under subsection (c)); and
                        (B) any reference to the date on which the
                    President transmits a report shall be deemed a
                    reference to the date on which the Secretary submits
                    recommendations under subsection (c).

     PART 4--REQUIREMENTS RELATING TO WORKERS' COMPENSATION AND AUTOMOBILE
                           MEDICAL LIABILITY COVERAGE

    SEC. 1441. REFERENCE TO REQUIREMENTS RELATING TO WORKERS COMPENSATION
                  SERVICES.

        Each health plan shall meet the applicable requirements of part 2
    of subtitle A of title X (relating to provision of workers compensation
    services to enrollees).

    SEC. 1442. REFERENCE TO REQUIREMENTS RELATING TO AUTOMOBILE MEDICAL
                  LIABILITY SERVICES.

        Each health plan shall meet the applicable requirements of part 2
    of subtitle B of title X (relating to provision of automobile medical
    liability services to enrollees).

                                                        Title I, Subtitle F

                      Subtitle F--Federal Responsibilities

                         PART 1--NATIONAL HEALTH BOARD

               Subpart A--Establishment of National Health Board

    SEC. 1501. CREATION OF NATIONAL HEALTH BOARD; MEMBERSHIP.

        (a) In General.--There is hereby created in the Executive Branch a
    National Health Board.
        (b) Composition.--The Board is composed of 7 members appointed by
    the President, by and with the advice and consent of the Senate.
        (c) Chair.--The President shall designate one of the members as
    chair. The chair serves a term concurrent with that of the President.
    The chair may serve a maximum of 3 terms. The chair shall serve as the
    chief executive officer of the Board.
        (d) Terms.--
                (1) In general.--Except as provided in paragraphs (2) and
            (4), the term of each member of the Board, except the chair, is
            4 years and begins when the term of the predecessor of that
            member ends.
                (2) Initial terms.--The initial terms of the members of the
            Board (other than the chair) first taking office after the date
            of the enactment of this Act, shall expire as designated by the
            President, two at the end of one year, two at the end of two
            years, and two at the end of three years.
                (3) Reappointment.--A member (other than the chair) may be
            reappointed for one additional term.
                (4) Continuation in office.--Upon the expiration of a term
            of office, a member shall continue to serve until a successor
            is appointed and qualified.
        (e) Vacancies.--
                (1) In general.--Whenever a vacancy shall occur, other than
            by expiration of term, a successor shall be appointed by the
            President, by and with the consent of the Senate, to fill such
            vacancy, and is appointed for the remainder of the term of the
            predecessor.
                (2) No impairment of function.--A vacancy in the membership
            of the Board does not impair the authority of the remaining
            members to exercise all of the powers of the Board.
                (3) Acting chair.--The Board may designate a Member to act
            as chair during any period in which there is no chair
            designated by the President.
        (f) Meetings; Quorum.--
                (1) Meetings.--At meetings of the Board the chair shall
            preside, and in the absence of the chair, the Board shall elect
            a member to act as chair pro tempore.
                (2) Quorum.--Four members of the Board shall constitute a
            quorum thereof.

    SEC. 1502. QUALIFICATIONS OF BOARD MEMBERS.

        (a) Citizenship.--Each member of the Board shall be a citizen of
    the United States.
        (b) Basis of Selection.--Board members will be selected on the
    basis of their experience and expertise in relevant subjects, including
    the practice of medicine, nursing, or other clinical practices, health
    care financing and delivery, state health systems, consumer protection,
    business, law, and delivery of care to vulnerable populations.
        (c) Exclusive Employment.--During the term of appointment, Board
    members shall serve as employees of the Federal Government and shall
    hold no other employment.
        (d) Prohibition of Conflict of Interest.--A member of the Board may
    not have a pecuniary interest in or hold an official relation to any
    health care plan, health care provider, insurance company,
    pharmaceutical company, medical equipment company, or other affected
    industry. Before entering upon the duties as a member of the Board, the
    member shall certify under oath compliance with this requirement.
        (e) Post-Employment Restrictions.--After leaving the Board, former
    members are subject to post-employment restrictions applicable to
    comparable Federal employees.
        (f) Compensation of Board Members.--Each member of the Board (other
    than the chair) shall receive an annual salary at the annual rate
    payable from time to time for level IV of the Executive Schedule. The
    chair of the Board, during the period of service as chair, shall
    receive an annual salary at the annual rate payable from time to time
    for level III of the Executive Schedule.

    SEC. 1503. GENERAL DUTIES AND RESPONSIBILITIES.

        (a) Comprehensive Benefit Package.--
                (1) Interpretation.--The Board shall interpret the
            comprehensive benefit package, adjust the delivery of
            preventive services under section 1153, and take such steps as
            may be necessary to assure that the comprehensive benefit
            package is available on a uniform national basis to all
            eligible individuals.
                (2) Recommendations.--The Board may recommend to the
            President and the Congress appropriate revisions to such
            package. Such recommendations may reflect changes in
            technology, health care needs, health care costs, and methods
            of service delivery.
        (b) Administration of Cost Containment Provisions.--The Board shall
    oversee the cost containment requirements of subtitle A of title VI and
    certify compliance with such requirements.
        (c) Coverage and Families.--The Board shall develop and implement
    standards relating to the eligibility of individuals for coverage in
    applicable health plans under subtitle A of title I and may provide
    such additional exceptions and special rules relating to the treatment
    of family members under section 1012 as the Board finds appropriate.
        (d) Quality Management and Improvement.--The Board shall establish
    and have ultimate responsibility for a performance-based system of
    quality management and improvement as required by section 5001.
        (e) Information Standards.--The Board shall develop and implement
    standards to establish national health information system to measure
    quality as required by section 5101.
        (f) Participating State Requirements.--Consistent with the
    provisions of subtitle C, the Board shall--
                (1) establish requirements for participating States,
                (2) monitor State compliance with those requirements,
                (3) provide technical assistance, and
    in a manner that ensures access to the comprehensive benefit package
    for all eligible individuals.
        (g) Development of Premium Class Factors.--The Board shall
    establish premium class factors under subpart D of this part.
        (h) Development of Risk-Adjustment Methodology.--The Board shall
    develop a methodology for the risk-adjustment of premium payments to
    regional alliance health plans in accordance with subpart E of this
    part.
        (i) Financial Requirements.--The Board shall establish minimum
    capital requirements and requirements for guaranty funds under subpart
    F of this part.
        (j) Standards for Health Plan Grievance Procedures.--The Board
    shall establish standards for health plan grievance procedures that are
    used by enrollees in pursuing complaints.

    SEC. 1504. ANNUAL REPORT.

        (a) In General.--The Board shall prepare and send to the President
    and Congress an annual report addressing the overall implementation of
    the new health care system.
        (b) Matters To Be Included.--The Board shall include in each annual
    report under this section the following:
                (1) Information on Federal and State implementation.
                (2) Data related to quality improvement.
                (3) Recommendations or changes in the administration,
            regulation and laws related to health care and coverage.
                (4) A full account of all actions taken during the previous
            year.

    SEC. 1505. POWERS.

        (a) Staff; Contract Authority.--The Board shall have authority,
    subject to the provisions of the civil-service laws and chapter 51 and
    subchapter III of chapter 53 of title 5, United States Code, to appoint
    such officers and employees as are necessary to carry out its
    functions. To the extent provided in advance in appropriations Acts,
    the Board may contract with any person (including an agency of the
    Federal Government) for studies and analysis as required to execute its
    functions. Any employee of the Executive Branch may be detailed to the
    Board to assist the Board in carrying out its duties.
        (b) Establishment of Advisory Committees.--The Board may establish
    advisory committees.
        (c) Access to Information.--The Board may secure directly from any
    department or agency of the United States information necessary to
    enable it to carry out its functions, to the extent such information is
    otherwise available to a department or agency of the United States.
    Upon request of the chair, the head of that department or agency shall
    furnish that information to the Board.
        (d) Delegation of Authority.--Except as otherwise provided in this
    Act, the Board may delegate any function to such officers and employees
    as the Board may designate and may authorize such successive
    redelegations of such functions with the Board as the Board deems to be
    necessary or appropriate. No delegation of functions by the Board shall
    relieve the Board of responsibility for the administration of such
    functions.
        (e) Rulemaking.--The National Health Board is authorized to
    establish such rules as may be necessary to carry out this Act.

    SEC. 1506. FUNDING.

        (a) Authorization of Appropriations.--There are authorized to be
    appropriated to the Board such sums as may be necessary for fiscal
    years 1994, 1995, 1996, 1997, and 1998.
        (b) Submission of Budget.--Under the procedures of chapter 11 of
    title 31, United States Code, the budget for the Board for a fiscal
    year shall be reviewed by the Director of the Office of Management and
    Budget and submitted to the Congress as part of the President's
    submission of the Budget of the United States for the fiscal year.

     Subpart B--Responsibilities Relating to Review and Approval of State
                                    Systems

    SEC. 1511. FEDERAL REVIEW AND ACTION ON STATE SYSTEMS.

        (a) Approval of State Systems by National Board.--
                (1) In general.--The National Health Board shall approve a
            State health care system for which a document is submitted
            under section 1200(b) unless the Board finds that the system
            (as set forth in the document) does not (or will not) provide
            for the State meeting the responsibilities for participating
            States under this Act.
                (2) Regulations.--The Board shall issue regulations, not
            later than July 1, 1995, prescribing the requirements for State
            health care systems under parts 2 and 3 of subtitle C, except
            that in the case of a document submitted under section 1200(b)
            before the date of issuance of such regulations, the Board
            shall take action on such document notwithstanding the fact
            that such regulations have not been issued.
                (3) No approval permitted for years prior to 1996.--The
            Board may not approve a State health care system under this
            subpart for any year prior to 1996.
        (b) Review of Completeness of Documents.--
                (1) In general.--If a State submits a document under
            subsection (a)(1), the Board shall notify the State, not later
            than 7 working days after the date of submission, whether or
            not the document is complete and provides the Board with
            sufficient information to approve or disapprove the document.
                (2) Additional information on incomplete document.--If the
            Board notifies a State that the State's document is not
            complete, the State shall be provided such additional period
            (not to exceed 45 days) as the Board may by regulation
            establish in which to submit such additional information as the
            Board may require. Not later than 7 working days after the
            State submits the additional information, the Board shall
            notify the State respecting the completeness of the document.
        (c) Action on Completed Documents.--
                (1) In general.--The Board shall make a determination (and
            notify the State) on whether the State's document provides for
            implementation of a State system that meets the applicable
            requirements of subtitle C--
                        (A) in the case of a State that did not require the
                    additional period described in subsection (b)(2) to
                    file a complete document, not later than 90 days after
                    notifying a State under subsection (b) that the State's
                    document is complete, or
                        (B) in the case of a State that required the
                    additional period described in subsection (b)(2) to
                    file a complete document, not later than 90 days after
                    notifying a State under subsection (b) that the State's
                    document is complete.
                (2) Plans deemed approved.--If the Board does not meet the
            applicable deadline for making a determination and providing
            notice under paragraph (1) with respect to a State's document,
            the Board shall be deemed to have approved the State's document
            for purposes of this Act.
        (d) Opportunity to Respond to Rejected Document.--
                (1) In general.--If (within the applicable deadline under
            subsection (c)(1)) the Board notifies a State that its document
            does not provide for implementation of a State system that
            meets the applicable requirements of subtitle C, the Board
            shall provide the State with a period of 30 days in which to
            submit such additional information and assurances as the Board
            may require.
                (2) Deadline for response.--Not later than 30 days after
            receiving such additional information and assurances, the Board
            shall make a determination (and notify the State) on whether
            the State's document provides for implementation of a State
            system that meets the applicable requirements of subtitle C.
                (3) Plan deemed approved.--If the Board does not meet the
            deadline established under paragraph (2) with respect to a
            State, the Board shall be deemed to have approved the State's
            document for purposes of this Act.
        (e) Approval of Previously Terminated States.--If the Board has
    approved a State system under this part for a year but subsequently
    terminated the approval of the system under section 1512(b)(2), the
    Board shall approve the system for a succeeding year if the State--
                (1) demonstrates to the satisfaction of the Board that the
            failure that formed the basis for the termination no longer
            exists, and
                (2) provides reasonable assurances that the types of
            actions (or inactions) which formed the basis for such
            termination will not recur.
        (f) Revisions to State System.--
                (1) Submission.--A State may revise a system approved for a
            year under this section, except that such revision shall not
            take effect unless the State has submitted to the Board a
            document describing such revision and the Board has approved
            such revision.
                (2) Actions on amendments.--Not later than 60 days after a
            document is submitted under paragraph (1), the Board shall make
            a determination (and notify the State) on whether the
            implementation of the State system, as proposed to be revised,
            meets the applicable requirements of subtitle C. If the Board
            fails to meet the requirement of the preceding sentence, the
            Board shall be deemed to have approved the implementation of
            the State system as proposed to be revised.
                (3) Rejection of amendments.--Subsection (d) shall apply to
            an amendment submitted under this subsection in the same manner
            as it applies to a completed document submitted under
            subsection (b).
        (g) Notification of Non-Participating States.--If a State fails to
    submit a document for a State system by the deadline referred to in
    section 1200, or such a document is not approved under subsection (c),
    the Board shall immediately notify the Secretary of Health and Human
    Services of the State's failure for purposes of applying subpart C in
    that State.

    SEC. 1512. FAILURE OF PARTICIPATING STATES TO MEET CONDITIONS FOR
                  COMPLIANCE.

        (a) In General.--In the case of a participating State, if the Board
    determines that the operation of the State system under subtitle C
    fails to meet the applicable requirements of this Act, sanctions shall
    apply against the State in accordance with subsection (b).
        (b) Type of Sanction Applicable.--The sanctions applicable under
    this part are as follows:
                (1) If the Board determines that the State's failure does
            not substantially jeopardize the ability of eligible
            individuals in the State to obtain coverage for the
            comprehensive benefit package--
                        (A) the Board may order a regional alliance in the
                    State to comply with applicable requirements of this
                    Act and take such additional measures to assure
                    compliance with such requirements as the Board may
                    impose, if the Board determines that the State's
                    failure relates to a requirement applicable to a
                    regional alliance in the State, or
                        (B) if the Board does not take the action described
                    in subparagraph (A) (or if the Board takes the action
                    and determines that the action has not remedied the
                    violation that led to the imposition of the sanction),
                    the Board shall notify the Secretary of Health and
                    Human Services, who shall reduce payments with respect
                    to the State in accordance with section 1513.
                (2) If the Board determines that the failure substantially
            jeopardizes the ability of eligible individuals in the State to
            obtain coverage for the comprehensive benefit package--
                        (A) the Board shall terminate its approval of the
                    State system; and
                        (B) the Board shall notify the Secretary of Health
                    and Human Services, who shall assume the
                    responsibilities described in section 1522.
        (c) Termination of Sanction.--
                (1) Compliance by State.--A State against which a sanction
            is imposed may submit information at any time to the Board to
            demonstrate that the failure that led to the imposition of the
            sanction has been corrected.
                (2) Termination of sanction.--If the Board determines that
            the failure that led to the imposition of a sanction has been
            corrected--
                        (A) in the case of the sanction described in
                    subsection (b)(1)(A), the Board shall notify the
                    regional alliance against which the sanction is
                    imposed; or
                        (B) in the case of any other sanction described in
                    subsection (b), the Board shall notify the Secretary of
                    Health and Human Services.
        (d) Protection of Access to Benefits.--The Board and the Secretary
    of Health and Human Services shall exercise authority to take actions
    under this section with respect to a State only in a manner that
    assures the continuous coverage of eligible individuals under regional
    alliance health plans.

    SEC. 1513. REDUCTION IN PAYMENTS FOR HEALTH PROGRAMS BY SECRETARY OF
                  HEALTH AND HUMAN SERVICES.

        (a) In General.--Upon receiving notice from the Board under section
    1512(b)(1)(B), the Secretary of Health and Human Services shall reduce
    the amount of any of the payments described in subsection (b) that
    would otherwise be made to individuals and entities in the State by
    such amount as the Secretary determines to be appropriate.
        (b) Payments Described.--The payments described in this subsection
    are as follows:
                (1) Payments to academic health centers in the State under
            subtitle B of title III.
                (2) Payments to individuals and entities in the State for
            health research activities under section 301 and title IV of
            the Public Health Service Act.
                (3) Payments to hospitals in the State under part 4 of
            subtitle E of title III (relating to payments to hospitals
            serving vulnerable populations)

    SEC. 1514. REVIEW OF FEDERAL DETERMINATIONS.

        Any State or alliance affected by a determination by the Board
    under this subpart may appeal such determination in accordance with
    section 5231.

    SEC. 1515. FEDERAL SUPPORT FOR STATE IMPLEMENTATION.

        (a) Planning Grants.--
                (1) In general.--Not later than 90 days after the date of
            the enactment of this Act, the Secretary shall make available
            to each State a planning grant to assist a State in the
            development of a health care system to become a participating
            State under subtitle C.
                (2) Formula.--The Secretary shall establish a formula for
            the distribution of funds made available under this subsection.
                (3) Authorization of appropriations.--There are authorized
            to be appropriated $50,000,000 in each of fiscal years 1995 and
            1996 for grants under this subsection.
        (b) Grants for Start-up Support.--
                (1) In general.--The Secretary shall make available to
            States, upon their enacting enabling legislation to become
            participating States, grants to assist in the establishment of
            regional alliances.
                (2) Formula.--The Secretary shall establish a formula for
            the distribution of funds made available under this subsection.
                (3) State matching funds required.--Funds are payable to a
            State under this subsection only if the State provides
            assurances, satisfactory to the Secretary, that amounts of
            State funds (at least equal to the amount made available under
            this subsection) are expended for the purposes described in
            paragraph (1).
                (4) Authorization of appropriations.--There are authorized
            to be appropriated $313,000,000 for fiscal year 1996,
            $625,000,000 for fiscal year 1997, and $313,000,000 for fiscal
            year 1998 for grants under this subsection.

            Subpart C--Responsibilities in Absence of State Systems

    SEC. 1521. APPLICATION OF SUBPART.

        (a) Initial Application.--This subpart shall apply with respect to
    a State as of January 1, 1998, unless--
                (1) the State submits a document for a State system under
            section 1511(a)(1) by July 1, 1997, and
                (2) the Board determines under section 1511 that such
            system meets the requirements of part 1 of subtitle C.
        (b) Termination of Approval of System of Participating State.--In
    the case of a participating State for which the Board terminates
    approval of the State system under section 1512(b)(2), this subpart
    shall apply with respect to the State as of such date as is appropriate
    to assure the continuity of coverage for the comprehensive benefit
    package for eligible individuals in the State.

    SEC. 1522. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN NON-PARTICIPATING
                  STATES.

        (a) Notice.--When the Board determines that this subpart will apply
    to a State for a calendar year, the Board shall notify the Secretary of
    Health and Human Services.
        (b) Establishment of Regional Alliance System.--Upon receiving
    notice under subsection (a), the Secretary shall take such steps,
    including the establishment of regional alliances, and compliance with
    other requirements applicable to participating States under subtitle C,
    as are necessary to ensure that the comprehensive benefit package is
    provided to eligible individuals in the State during the year.
        (c) Requirements for Alliances.--Subject to section 1523, any
    regional alliance established by the Secretary pursuant to this section
    must meet all the requirements applicable under subtitle D to a
    regional alliance established and operated by a participating State,
    and the Secretary shall have the authority to fulfill all the functions
    of such an alliance.
        (d) Establishment of Guaranty Fund.--
                (1) Establishment.--The Secretary must ensure that there is
            a guaranty fund that meets the requirements established by the
            Board under section 1552, in order to provide financial
            protection to health care providers and others in the case of a
            failure of a regional alliance health plan under a regional
            alliance established and operated by the Secretary under this
            section.
                (2) Assessments to provide guaranty funds.--In the case of
            a failure of one or more regional alliance health plans under a
            regional alliance established and operated by the Secretary
            under this section, the Secretary may require each regional
            alliance health plan under the alliance to pay an assessment to
            the Secretary in an amount not to exceed 2 percent of the
            premiums of such plans paid by or on behalf of regional
            alliance eligible individuals during a year for so long as
            necessary to generate sufficient revenue to cover any
            outstanding claims against the failed plan.

    SEC. 1523. IMPOSITION OF SURCHARGE ON PREMIUMS UNDER FEDERALLY-OPERATED
                  SYSTEM.

        (a) In General.--If this subpart applies to a State for a calendar
    year, the premiums charged under the regional alliance established and
    operated by the Secretary in the State shall be equal to premiums that
    would otherwise be charged under a regional alliance established and
    operated by the State, increased by 15 percent. Such 15 percent
    increase shall be used to reimburse the Secretary for any
    administrative or other expenses incurred as a result of establishing
    and operating the system.
        (b) Treatment of Surcharge as Part of Premium.--For purposes of
    determining the compliance of a State for which this subpart applies in
    a year with the requirements for budgeting under subtitle A of title VI
    for the year, the 15 percent increase described in subsection (a) shall
    be treated as part of the premium for payment to a regional alliance.

    SEC. 1524. RETURN TO STATE OPERATION.

        (a) Application Process.--After the establishment and operation of
    an alliance system by the Secretary in a State under section 1522, the
    State may at any time apply to the Board for the approval of a State
    system in accordance with the procedures described in section 1511.
        (b) Timing.--If the Board approves the system of a State for which
    the Secretary has operated an alliance system during a year, the
    Secretary shall terminate the operation of the system, and the State
    shall establish and operate its approved system, as of January 1 of the
    first year beginning after the Board approves the State system. The
    termination of the Secretary's system and the operation of the State's
    system shall be conducted in a manner that assures the continuous
    coverage of eligible individuals in the State under regional alliance
    health plans.

        Subpart D--Establishment of Class Factors for Charging Premiums

    SEC. 1531. PREMIUM CLASS FACTORS.

        (a) In General.--For each class of family enrollment (as specified
    in section 1011(c)), for purposes of title VI, the Board shall
    establish a premium class factor that reflects, subject to subsection
    (b), the relative actuarial value of the comprehensive benefit package
    of the class of family enrollment compared to such value of such
    package for individual enrollment.
        (b) Conditions.--In establishing such factors, the factor for the
    class of individual enrollment shall be 1 and the factor for the
    couple-only class of family enrollment shall be 2.

     Subpart E--Risk Adjustment and Reinsurance Methodology for Payment of
                                     Plans

    SEC. 1541. DEVELOPMENT OF A RISK ADJUSTMENT AND REINSURANCE
                  METHODOLOGY.

        (a) Development.--
                (1) Initial development.--Not later than April 1, 1995, the
            Board shall develop a risk adjustment and reinsurance
            methodology in accordance with this subpart.
                (2) Improvements.--The Board shall make such improvements
            in such methodology as may be appropriate to achieve the
            purposes described in subsection (b)(1).
        (b) Methodology.--
                (1) Purposes.--Such methodology shall provide for the
            adjustment of payments to regional alliance health plans for
            the purposes of--
                        (A) assuring that payments to such plans reflect
                    the expected relative utilization and expenditures for
                    such services by each plan's enrollees compared to the
                    average utilization and expenditures for regional
                    alliance eligible individuals, and
                        (B) protecting health plans that enroll a
                    disproportionate share of regional alliance eligible
                    individuals with respect to whom expected utilization
                    of health care services (included in the comprehensive
                    benefit package) and expected health care expenditures
                    for such services are greater than the average level of
                    such utilization and expenditures for regional alliance
                    eligible individuals.
                (2) Factors to be considered.--In developing such
            methodology, the Board shall take into account the following
            factors:
                        (A) Demographic characteristics.
                        (B) Health status.
                        (C) Geographic area of residence.
                        (D) Socio-economic status.
                        (E) Subject to paragraph (5), (i) the proportion of
                    enrollees who are SSI recipients and (ii) the
                    proportion of enrollees who are AFDC recipients.
                        (F) Any other factors determined by the Board to be
                    material to the purposes described in paragraph (1).
                (3) Zero sum.--The methodology shall assure that the total
            payments to health plans by the regional alliance after
            application of the methodology are the same as the amount of
            payments that would have been made without application of the
            methodology.
                (4) Prospective adjustment of payments.--The methodology,
            to the extent possible and except in the case of a mandatory
            reinsurance system described in subsection (c), shall be
            applied in a manner that provides for the prospective
            adjustment of payments to health plans.
                (5) Treatment of ssi/afdc adjustment.--The Board is not
            required to apply the factor described in clause (i) or (ii) of
            paragraph (2)(E) if the Board determines that the application
            of the other risk adjustment factors described in paragraph (2)
            is sufficient to adjust premiums to take into account the
            enrollment in plans of AFDC recipients and SSI recipients.
                (6) Special consideration for mental illness.--In
            developing the methodology under this section, the Board shall
            give consideration to the unique problems of adjusting payments
            to health plans with respect to individuals with mental
            illness.
                (7) Special consideration for veterans, military, and
            indian health plans.--In developing the methodology under this
            section, the Board shall give consideration to the special
            enrollment and funding provisions relating to plans described
            in section 1004(b).
                (8) Adjustment to account for use of estimates.--Subject to
            section 1361(b)(3) (relating to establishment of regional
            alliance reserve funds), if the total payments made by a
            regional alliance to all regional alliance health plans in a
            year under section 1351(b) exceeds, or is less than, the total
            of such payments estimated by the alliance in the application
            of the methodology under this subsection, because of a
            difference between--
                        (A) the alliance's estimate of the distribution of
                    enrolled families in different risk categories (assumed
                    in the application of risk factors under this
                    subsection in making payments to regional alliance
                    health plans), and
                        (B) the actual distribution of such enrolled
                    families in such categories,
            the methodology under this subsection shall provide for an
            adjustment in the application of such methodology in the second
            succeeding year in a manner that would reduce, or increase,
            respectively, by the amount of such excess (or deficit) the
            total of such payments made by the alliance to all such plans.
        (c) Mandatory Reinsurance.--
                (1) In general.--The methodology developed under this
            section may include a system of mandatory reinsurance, but may
            not include a system of voluntary reinsurance.
                (2) Requirement in certain cases.--If the Board determines
            that an adequate system of prospective adjustment of payments
            to health plans to account for the health status of individuals
            enrolled by regional alliance health plans cannot be developed
            (and ready for implementation) by the date specified in
            subsection (a)(1), the Board shall include a mandatory
            reinsurance system as a component of the methodology. The Board
            may thereafter reduce or eliminate such a system at such time
            as the Board determines that an adequate prospective payment
            adjustment for health status has been developed and is ready
            for implementation.
                (3) Reinsurance system.--The Board, in developing the
            methodology for a mandatory reinsurance system under this
            subsection, shall--
                        (A) provide for health plans to make payments to
                    state-established reinsurance programs for the purpose
                    of reinsuring part or all of the health care expenses
                    for items and services included in the comprehensive
                    benefit package for specified classes of high-cost
                    enrollees or specified high-cost treatments or
                    diagnoses; and
                        (B) specify the manner of creation, structure, and
                    operation of the system in each State, including--
                                (i) the manner (which may be prospective or
                            retrospective) in which health plans make
                            payments to the system, and
                                (ii) the type and level of reinsurance
                            coverage provided by the system.
        (d) Confidentiality of Information.--The methodology shall be
    developed in a manner consistent with privacy standards promulgated
    under section 5120(a). In developing such standards, the Board shall
    take into account any potential need of alliances for certain
    individually identifiable health information in order to carry out
    risk-adjustment and reinsurance activities under this Act, but only to
    the minimum extent necessary to carry out such activities and with
    protections provided to minimize the identification of the individuals
    to whom the information relates.

    SEC. 1542. INCENTIVES TO ENROLL DISADVANTAGED GROUPS.

        The Board shall establish standards under which States may provide
    (under section 1203(e)(3)) for an adjustment in the risk-adjustment
    methodology developed under section 1541 in order to provide a
    financial incentive for regional alliance health plans to enroll
    individuals who are members of disadvantaged groups.

    SEC. 1543. ADVISORY COMMITTEE.

        (a) In General.--The Board shall establish an advisory committee to
    provide technical advice and recommendations regarding the development
    and modification of the risk adjustment and reinsurance methodology
    developed under this subpart.
        (b) Composition.--Such advisory committee shall consist of 15
    individuals and shall include individuals who are representative of
    health plans, regional alliances, consumers, experts, employers, and
    health providers.

    SEC. 1544. RESEARCH AND DEMONSTRATIONS.

        The Secretary shall conduct and support research and demonstration
    projects to develop and improve, on a continuing basis, the risk
    adjustment and reinsurance methodology under this subpart.

    SEC. 1545. TECHNICAL ASSISTANCE TO STATES AND ALLIANCES.

        The Board shall provide technical assistance to States and regional
    alliances in implementing the methodology developed under this subpart.

             Subpart F--Responsibilities for Financial Requirements

    SEC. 1551. CAPITAL STANDARDS FOR REGIONAL ALLIANCE HEALTH PLAN.

        (a) In General.--The Board shall establish, in consultation with
    the States, minimum capital requirements for regional alliance health
    plans, for purposes of section 1204(a).
        (b) $500,000 Minimum.--Subject to subsection (c), under such
    requirements there shall be not less than $500,000 of capital
    maintained for each plan offered in each alliance area, regardless of
    whether or not the same sponsor offered more than one of such plans.
        (c) Additional Capital Requirements.--The Board may require
    additional capital for factors likely to affect the financial stability
    of health plans, including the following:
                (1) Projected plan enrollment and number of providers
            participating in the plan.
                (2) Market share and strength of competition.
                (3) Extent and nature of risk-sharing with participating
            providers and the financial stability of risk-sharing
            providers.
                (4) Prior performance of the plan, risk history, and
            liquidity of assets.
        (d) Development of Standards by NAIC.--The Board may request the
    National Association of Insurance Commissioners to develop model
    standards for the additional capital requirements described in
    subsection (c) and to present such standards to the Board not later
    than July 1, 1995. The Board may accept such standards as the standards
    to be applied under subsection (c) or modify the standards in any
    manner it finds appropriate.

    SEC. 1552. STANDARD FOR GUARANTY FUNDS.

        (a) In General.--In consultation with the States, the Board shall
    establish standards for guaranty funds established by States under
    section 1204(c).
        (b) Guaranty Fund Standards.--The standards established under
    subsection (a) for a guaranty fund shall include the following:
                (1) Each fund must have a method to generate sufficient
            resources to pay health providers and others in the case of a
            failure of a health plan (as described in section 1204(d)(4))
            in order to meet obligations with respect to--
                        (A) services rendered by the health plan for the
                    comprehensive benefit package, including any
                    supplemental coverage for cost sharing provided by the
                    health plan, and
                        (B) services rendered prior to health plan
                    insolvency and services to patients after the
                    insolvency but prior to their enrollment in other
                    health plans.
                (2) The fund is liable for all claims against the plan by
            health care providers with respect to their provision of items
            and services covered under the comprehensive benefit package to
            enrollees of the failed plan. Such claims, in full, shall take
            priority over all other claims. The fund also is liable, to the
            extent and in the manner provided in accordance with rules
            established by the Board, for other claims, including other
            claims of such providers and the claims of contractors,
            employees, governments, or any other claimants.
                (3) The fund stands as a creditor for any payments owed the
            plan to the extent of the payments made by the fund for
            obligations of the plan.
                (4) The fund has authority to borrow against future
            assessments (payable under section 1204(c)(2)) in order to meet
            the obligations of failed plans participating in the fund.

      PART 2--RESPONSIBILITIES OF DEPARTMENT OF HEALTH AND HUMAN SERVICES

                      Subpart A--General Responsibilities

    SEC. 1571. GENERAL RESPONSIBILITIES OF SECRETARY OF HEALTH AND HUMAN
                  SERVICES.

        (a) In General.--Except as otherwise specifically provided under
    this Act (or with respect to administration of provisions in the
    Internal Revenue Code of 1986 or in the Employee Retirement Income
    Security Act of 1974), the Secretary of Health and Human Services shall
    administer and implement all of the provisions of this Act, except
    those duties delegated to the National Health Board, any other
    executive agency, or to any State.
        (b) Financial Management Standards.--The Secretary, in consultation
    with the Secretaries of Labor and the Treasury, shall establish, for
    purposes of section 1361, standards relating to the management of
    finances, maintenance of records, accounting practices, auditing
    procedures, and financial reporting for health alliances. Such
    standards shall take into account current Federal laws and regulations
    relating to fiduciary responsibilities and financial management of
    funds.
        (c) Auditing Regional Alliance Performance.--The Secretary shall
    perform periodic financial and other audits of regional alliances to
    assure that such alliances are carrying out their responsibilities
    under this Act consistent with this Act. Such audits shall include
    audits of alliance performance in the areas of--
                (1) assuring enrollment of all regional alliance eligible
            individuals in health plans,
                (2) management of premium and cost sharing discounts and
            reductions provided; and
                (3) financial management of the alliance, including
            allocation of collection shortfalls.

    SEC. 1572. ADVISORY COUNCIL ON BREAKTHROUGH DRUGS.

        (a) In General.--The Secretary shall appoint an Advisory Council on
    Breakthrough Drugs (in this section referred to as the ``Council'')
    that will examine the reasonableness of launch prices of new drugs that
    represent a breakthrough or significant advance over existing
    therapies.
        (b) Duties.--(1) At the request of the Secretary, or a member of
    the Council, the Council shall make a determination regarding the
    reasonableness of launch prices of a breakthrough drug. Such a
    determination shall be based on--
                (A) prices of other drugs in the same therapeutic class;
                (B) cost information supplied by the manufacturer;
                (C) prices of the drug in countries specified in section
            802(b)(4)(A) of the Federal Food, Drug, and Cosmetic Act;
                (D) projected prescription volume, economies of scale,
            product stability, special manufacturing requirements and
            research costs;
                (E) cost effectiveness relative to the cost of alternative
            course of treatment options, including non-pharmacological
            medical interventions; and
                (F) improvements in quality of life offered by the new
            product, including ability to return to work, ability to
            perform activities of daily living, freedom from attached
            medical devices, and other appropriate measurements of quality
            of life improvements.
        (2) The Secretary shall review the determinations of the Council
    and publish the results of such review along with the Council's
    determination (including minority opinions) as a notice in the Federal
    Register.
        (c) Membership.--The Council shall consist of a chair and 12 other
    persons, appointed without regard to the provisions of title 5, United
    States Code, governing appointments in the competitive service. The
    Council shall include a representative from the pharmaceutical
    industry, consumer organizations, physician organizations, the hospital
    industry, and the managed care industry. Other individuals appointed by
    the Secretary shall be recognized experts in the fields of health care
    economics, pharmacology, pharmacy, and prescription drug reimbursement.
    Only one member of the Council may have direct or indirect financial
    ties to the pharmaceutical industry.
        (d) Term of Appointments.--Appointments shall be for a term of 3
    years, except that the Secretary may provide initially for such shorter
    terms as will ensure that the terms of not more than 5 members expire
    in any one year.
        (e) Compensation.--Members of the Council shall be entitled to
    receive reimbursement of expenses and per diem in lieu of subsistence
    in the same manner as other members of advisory councils appointed by
    the Secretary are provided such reimbursements under the Social
    Security Act.
        (f) No Termination.--Notwithstanding the provisions of the Federal
    Advisory Committee Act, the Council shall continue in existence until
    otherwise specified in law.

           Subpart B--Certification of Essential Community Providers

    SEC. 1581. CERTIFICATION.

        (a) In General.--For purposes of this Act, the Secretary shall
    certify as an ``essential community provider'' any health care provider
    or organization that--
                (1) is within any of the categories of providers and
            organizations specified in section 1582(a), or
                (2) meets the standards for certification under section
            1583(a).
        (b) Timely Establishment of Process.--The Secretary shall take such
    actions as may be necessary to permit health care providers and
    organizations to be certified as essential community providers in a
    State before the beginning of the first year for the State.

    SEC. 1582. CATEGORIES OF PROVIDERS AUTOMATICALLY CERTIFIED.

        (a) In General.--The categories of providers and organizations
    specified in this subsection are as follows:
                (1) Migrant health centers.--A recipient or subrecipient of
            a grant under section 329 of the Public Health Service Act.
                (2) Community health centers.--A recipient or subrecipient
            of a grant under section 330 of the Public Health Service Act.
                (3) Homeless program providers.--A recipient or
            subrecipient of a grant under section 340 of the Public Health
            Service Act.
                (4) Public housing providers.--A recipient or subrecipient
            of a grant under section 340A of the Public Health Service Act.
                (5) Family planning clinics.--A recipient or subrecipient
            of a grant under title X of the Public Health Service Act.
                (6) Indian health programs.--A service unit of the Indian
            Health Service, a tribal organization, or an urban Indian
            program, as defined in the Indian Health Care Improvement Act.
                (7) AIDS providers under ryan white act.--A public or
            private nonprofit health care provider that is a recipient or
            subrecipient of a grant under title XXVI of the Public Health
            Service Act.
                (8) Maternal and child health providers.--A public or
            private nonprofit entity that provides prenatal care, pediatric
            care, or ambulatory services to children, including children
            with special health care needs, and that receives funding for
            such care or services under title V of the Social Security Act.
                (9) Federally qualified health center; rural health
            clinic.--A Federally-qualified health center or a rural health
            clinic (as such terms are defined in section 1861(aa) of the
            Social Security Act).
                (10) Provider of school health services.--A provider of
            school health services that receives funding for such services
            under subtitle G of title III.
                (11) Community practice network.--A qualified community
            practice network receiving development funds under subtitle E
            of title III.
        (b) Subrecipient Defined.--In this subpart, the term
    ``subrecipient'' means, with respect to a recipient of a grant under a
    particular authority, an entity that--
                (1) is receiving funding from such a grant under a contract
            with the principal recipient of such a grant, and
                (2) meets the requirements established to be a recipient of
            such a grant.
        (c) Health Professional Defined.--In this subpart, the term
    ``health professional'' means a physician, nurse, nurse practitioner,
    certified nurse midwife, physician assistant, psychologist, dentist,
    pharmacist, and other health care professional recognized by the
    Secretary.

    SEC. 1583. STANDARDS FOR ADDITIONAL PROVIDERS.

        (a) Standards.--The Secretary shall publish standards for the
    certification of additional categories of health care providers and
    organizations as essential community providers, including the
    categories described in subsection (b). Such a health care provider or
    organization shall not be certified unless the Secretary determines,
    under such standards, that health plans operating in the area served by
    the applicant would not otherwise be able to assure adequate access to
    items and services included in the comprehensive benefit package if
    such a provider was not so certified.
        (b) Categories To Be Included.--The categories described in this
    subsection are as follows:
                (1) Health professionals.--Health professionals--
                        (A) located in an area designated as a health
                    professional shortage area (under section 332 of the
                    Public Health Service Act), or
                        (B) providing a substantial amount of health
                    services (as determined in accordance with standards
                    established by the Secretary) to a medically
                    underserved population (as designated under section 330
                    of such Act).
                (2) Institutional providers.--Public and private nonprofit
            hospitals and other institutional health care providers located
            in such an area or providing health services to such a
            population.
                (3) Other providers.--Other public and private nonprofit
            agencies and organizations that--
                        (A) are located in such an area or providing health
                    services to such a population, and
                        (B) provide health care and services essential to
                    residents of such an area or such populations.

    SEC. 1584. CERTIFICATION PROCESS; REVIEW; TERMINATION OF
                  CERTIFICATIONS.

        (a) Certification Process.--
                (1) Publication of procedures.--The Secretary shall
            publish, not later than 6 months after the date of the
            enactment of this Act, the procedures to be used by health care
            professionals, providers, agencies, and organizations seeking
            certification under this subpart, including the form and manner
            in which an application for such certification is to be made.
                (2) Timely determination.--The Secretary shall make a
            determination upon such an application not later than 60 days
            (or 15 days in the case of a certification for an entity
            described in section 1582) after the date the complete
            application has been submitted. The determination on an
            application for certification of an entity described in section
            1582 shall only involve the verification that the entity is an
            entity described in such section.
        (b) Review of Certifications.--The Secretary shall periodically
    review whether professionals, providers, agencies, and organizations
    certified under this subpart continue to meet the requirements for such
    certification.
        (c) Termination or Denial of Certification.--
                (1) Preliminary finding.--If the Secretary preliminarily
            finds that an entity seeking certification under this section
            does not meet the requirements for such certification or such
            an entity certified under this subpart fails to continue to
            meet the requirements for such certification, the Secretary
            shall notify the entity of such preliminary finding and permit
            the entity an opportunity, under subtitle C of title V, to
            rebut such findings.
                (2) Final determination.--If, after such opportunity, the
            Secretary continues to find that such an entity continues to
            fail to meet such requirements, the Secretary shall terminate
            the certification and shall notify the entity, regional
            alliances, and corporate alliances of such termination and the
            effective date of the termination.

    SEC. 1585. NOTIFICATION OF HEALTH ALLIANCES AND PARTICIPATING STATES.

        (a) In General.--Not less often than annually the Secretary shall
    notify each participating State and each health alliance of essential
    community providers that have been certified under this subpart.
        (b) Contents.--Such notice shall include sufficient information to
    permit each health alliance to notify health plans of the identify of
    each entity certified as an essential community provider, including--
                (1) the location of the provider within each plan's service
            area,
                (2) the health services furnished by the provider, and
                (3) other information necessary for health plans to carry
            out part 3 of subtitle E.

            PART 3--SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR.

    SEC. 1591. RESPONSIBILITIES OF SECRETARY OF LABOR.

        (a) In General.--The Secretary of Labor is responsible--
                (1) under subtitle G, for the enforcement of requirements
            applicable to employers under regional alliances (including
            requirements relating to payment of premiums) and the
            administration of corporate alliances;
                (2) under subtitle D, with respect to elections by eligible
            sponsors to become corporate alliances and the termination of
            such elections;
                (3) under section 1395, for the temporary assumption of the
            operation of self-insured corporate alliance health plans that
            are insolvent;
                (4) under section 1396, for the establishment and
            administration of Corporate Alliance Health Plan Insolvency
            Fund;
                (5) for carrying out any other responsibilities assigned to
            the Secretary under this Act; and
                (6) for administering title I of the Employee Retirement
            Income Security Act of 1974 as it relates to group health plans
            maintained by corporate alliances.
        (b) Agreements with States.--The Secretary of Labor may enter into
    agreements with States in order to enforce responsibilities of
    employers and corporate alliances, and requirements of corporate
    alliance health plans, under subtitle B of title I of the Employee
    Retirement Income Security Act of 1974.
        (c) Consultation with Board.--In carrying out activities under this
    Act with respect to corporate alliances, corporate alliance health
    plans, and employers, the Secretary of Labor shall consult with the
    National Health Board.
        (d) Employer-Related Requirements.--
                (1) In general.--The Secretary of Labor, in consultation
            with the Secretary, shall be responsible for assuring that
            employers--
                        (A) make payments of any employer premiums (and
                    withhold and make payment of the family share of
                    premiums with respect to qualifying employees) as
                    required under this Act, including auditing of regional
                    alliance collection activities with respect to such
                    payments,
                        (B) submit timely reports as required under this
                    Act, and
                        (C) otherwise comply with requirements imposed on
                    employers under this Act.
                (2) Audit and similar authorities.--The Secretary of
            Labor--
                        (A) may carry out such audits (directly or through
                    contract) and such investigations of employers and
                    health alliances,
                        (B) may exercise such authorities under section 504
                    of Employee Retirement Income Security Act of 1974 (in
                    relation to activities under this Act),
                        (C) may, with the permission of the Board, provide
                    (through contract or otherwise) for such collection
                    activities (in relation to amounts owed to regional
                    alliances and for the benefit of such alliances), and
                        (D) may impose such civil penalties under section
                    1345(d)(1),
            as may be necessary to carry out such Secretary's
            responsibilities under this section.
        (e) Authority.--The Secretary of Labor is authorized to issue such
    regulations as may be necessary to carry out section 1607 and
    responsibilities of the Secretary under this Act (including under title
    XI).

                                                        Title I, Subtitle G

                     Subtitle G--Employer Responsibilities

    SEC. 1601. PAYMENT REQUIREMENT.

        (a) In General.--Each employer shall provide for payments required
    under section 6121 or 6131 in accordance with the applicable provisions
    of this Act.
        (b) Employers in Single-Payer States.--In the case of an employer
    with respect to employees who reside in a single-payer State, the
    responsibilities of such employer under such system shall supersede the
    obligations of the employer under subsection (a), except as the Board
    may provide.
        (c) Employers Participating in Regional Alliances Through
    Multiemployer Plans.--In the case of an employer participating in a
    multiemployer plan, which plan elects to serve as a regional alliance
    employer on behalf of its participating employers, the employer's
    payment obligation under section 6121 shall be deemed satisfied if the
    employer pays to the multiemployer plan at least the premium payment
    amount specified in section 6121(b) and the plan has assumed legal
    obligations of such an employer under such section.

    SEC. 1602. REQUIREMENT FOR INFORMATION REPORTING.

        (a) Reporting of End-of-Year Information to Qualifying Employees.--
                (1) In general.--Each employer shall provide to each
            individual who was a qualifying employee of the employer during
            any month in the previous year information described in
            paragraph (2) with respect to the employee.
                (2) Information to be supplied.--The information described
            in this paragraph, with respect to a qualifying employee, is
            the following (as specified by the Secretary):
                        (A) Regional alliance information.--With respect to
                    each regional alliance through which the individual
                    obtained health coverage:
                                (i) The total number of months of full-time
                            equivalent employment (as determined under
                            section 1901(b)(2)) for each class of
                            enrollment.
                                (ii) The amount of wages attributable to
                            qualified employment and the amount of covered
                            wages (as defined in paragraph (4)).
                                (iii) The total amount deducted from wages
                            and paid for the family share of the premium.
                                (iv) Such other information as the
                            Secretary of Labor may specify.
                        (B) Corporate alliance information.--With respect
                    to a qualifying employee who obtains coverage through a
                    corporate alliance health plan:
                                (i) The total number of months of full-time
                            equivalent employees (as determined under
                            section 1901(b)(2)) for each class of
                            enrollment.
                                (ii) Such other information as the
                            Secretary of Labor may specify.
                (3) Alliance specific information.--In the case of a
            qualifying employee with respect to whom an employer made
            employer premium payments during the year to more than one
            regional alliance, the information under this subsection shall
            be reported separately with respect to each such alliance.
                (4) Covered wages defined.--In this section, the term
            ``covered wages'' means wages paid an employee of an employer
            during a month in which the employee was a qualifying employee
            of the employer.
        (b) Reporting of Information for Use of Regional Alliances.--
                (1) In general.--Each employer (including corporate
            alliance employers) shall provide under subsection (f) on
            behalf of each regional alliance information described in
            paragraph (2) on an annual basis, information described in
            paragraph (3) on a monthly basis, and information described in
            paragraph (4) on a one-time basis, with respect to the
            employment of qualifying employees in each year, month, or
            other time, respectively.
                (2) Information to be supplied on an annual basis.--The
            information described in this paragraph, with respect to an
            employer, is the following (as specified by the Secretary of
            Labor):
                        (A) Regional alliance information.--With respect to
                    each regional alliance to which employer premium
                    payments were payable in the year:
                                (i) For each qualifying employee in the
                            year--
                                        (I) The total number of months of
                                    full-time equivalent employment (as
                                    determined under section 1901(b)(2))
                                    for the employee for each class of
                                    enrollment.
                                        (II) The total amount deducted from
                                    wages and paid for the family share of
                                    the premium of the qualifying employee.
                                (ii) The total employer premium payment
                            made under section 6121 for the year with
                            respect to the employment of all qualifying
                            employees residing in the alliance area and, in
                            the case of an employer that has obtained (or
                            seeks to obtain) a premium discount under
                            section 6123, the total employer premium
                            payment that would have been owed for such
                            employment for the year but for such section.
                                (iii) The number of full-time equivalent
                            employees (determined under section 1901(b)(2))
                            for each class of family enrollment in the year
                            (and for each month in the year in the case of
                            an employer that has obtained or is seeking a
                            premium discount under section 6123).
                                (iv) In the case of an employer to which
                            section 6124 applies in a year, such additional
                            information as the Secretary of Labor may
                            require for purposes of that section.
                                (v) The amounts paid (and payable) pursuant
                            to section 6125.
                                (vi) The amount of covered wages for each
                            qualifying employee.
                (3) Information on a monthly basis.--
                        (A) In general.--The information described in this
                    paragraph for a month for an employer is such
                    information as the Secretary of Labor may specify
                    regarding--
                                (i) the identity of each eligible
                            individual who changed qualifying employee
                            status with respect to the employer in the
                            month; and
                                (ii) in the case of such an individual
                            described in subparagraph (B)(i)--
                                        (I) the regional alliance for the
                                    alliance area in which the individual
                                    resides, and
                                        (II) the individual's class of
                                    family enrollment.
                        (B) Changes in qualifying employee status
                    described.--For purposes of subparagraph (A), an
                    individual is considered to have changed qualifying
                    employee status in a month if the individual either (i)
                    is a qualifying employee of the employer in the month
                    and was not a qualifying employee of the employer in
                    the previous month, or (ii) is not a qualifying
                    employee of the employer in the month but was a
                    qualifying employee of the employer in the previous
                    month.
                (4) Initial information.--Each employer, at such time
            before the first year in which qualifying employees of the
            employer are enrolled in regional alliance health plans as the
            Board may specify, shall provide for the reporting of such
            information relating to employment of eligible individuals as
            the Board may specify.
        (c) Reconciliation of Employer Premium Payments.--
                (1) Provision of information.--Each employer (whether or
            not the employer claimed (or claims) an employer premium
            discount under section 6123 for a year) that is liable for
            employer premium payments to a regional alliance for any month
            in a year shall provide the alliance with such information as
            the alliance may require (consistent with rules of the
            Secretary of Labor) to determine the appropriate amount of
            employer premium payments that should have been made for all
            months in the year (taking into account any employer premium
            discount under section 6123 for the employer).
                (2) Deadline.--Such information shall be provided not later
            than the beginning of February of the following year with the
            payment to be made for that month.
                (3) Reconciliation.--
                        (A) Continuing employers.--Based on such
                    information, the employer shall adjust the amount of
                    employer premium payment made in the month in which the
                    information is provided to reflect the amount by which
                    the payments in the previous year were greater or less
                    than the amount of payments that should have been made.
                        (B) Discontinuing employers.--In the case of a
                    person that ceases to be an employer in a year, such
                    adjustment shall be made in the form of a payment to,
                    or from, the alliance involved.
                (4) Special treatment of self-employed individuals.--Except
            as the Secretary of Labor may provide, individuals who are
            employers only by virtue of the operation of section 6126 shall
            have employer premium payments attributable to such section
            reconciled (in the manner previously described in this
            subsection) under the process for the collection of the family
            share of premiums under section 1344 rather than under this
            subsection.
        (d) Special Rules for Self-Employed.--
                (1) In general.--In the case of an individual who is
            treated as an employer under section 6126, the individual shall
            provide, under subsection (f) on behalf of each regional
            alliance, information described in paragraph (2) with respect
            to net earnings from self-employment income of the individual
            in each year.
                (2) Information to be supplied.--The information described
            in this paragraph, with respect to an individual, is such
            information as may be necessary to compute the amount payable
            under section 6131 by virtue of section 6126.
        (e) Form.--Information shall be provided under this section in such
    electronic or other form as the Secretary specifies. Such
    specifications shall be done in a manner that, to the maximum extent
    practicable, simplifies administration for small employers.
        (f) Information Clearinghouse Functions.--
                (1) Designation.--The Board shall provide for the use of
            the regional centers (which are part of the electronic data
            network under section 5103) to perform information
            clearinghouse functions under this section with respect to
            employers and regional and corporate alliances.
                (2) Functions.--The functions referred to in paragraph (1)
            shall include--
                        (A) receipt of information submitted by employers
                    under subsection (b) on an annual (or one-time) basis,
                        (B) from the information received, transmittal of
                    information required to regional alliances, and
                        (C) such other functions as the Board specifies.
        (g) Deadline.--Information required to be provided by an employer
    for a year under this section--
                (1) to a qualifying employee shall be provided not later
            than the date the employer is required under law to provide for
            statements under section 6051 of the Internal Revenue Code of
            1986 for that year, or
                (2) to a health alliance (through a regional center) shall
            be provided not later than the date by which information is
            required to be filed with the Secretary pursuant to agreements
            under section 232 of the Social Security Act for that year.
        (h) Notice to Certain Individuals Who Are Not Employees.--
                (1) In general.--A person that carries on a trade or
            business shall notify in writing each individual described in
            paragraph (2) that the person is not obligated to make any
            employer health care premium payment (under section 6121) in
            relation to the services performed by the individual for the
            person.
                (2) Individual described.--An individual described in this
            paragraph, with respect to a person, is an individual who
            normally performs services for the person in the person's trade
            or business for more than 40 hours per month but who is not an
            employee of the person (within the meaning of section 1901(a)).
                (3) Timing; effective date.--Such notice shall be provided
            within a reasonable time after the individual begins performing
            services for the person, except that in no event is such a
            notice required to be provided with respect to services
            performed before January 1, 1998.
                (4) Exceptions.--The Secretary shall issue regulations
            providing exceptions to the notice requirement of paragraph (1)
            with respect to individuals performing services on an
            irregular, incidental, or casual basis.
                (5) Model notice.--The Secretary shall publish a model
            notice that is easily understood by the average reader and that
            persons may use to satisfy the requirements of paragraph (1).

    SEC. 1603. REQUIREMENTS RELATING TO NEW EMPLOYEES.

        (a) Completion of Enrollment Information Form.--At the time an
    individual is hired as a qualifying employee of a regional alliance
    employer, the employer shall obtain from the individual the following
    information (pursuant to rules established by the Secretary of Labor):
                (1) The identity of the individual.
                (2) The individual's alliance area of residence and whether
            the individual has moved from another alliance area.
                (3) The class of family enrollment applicable to the
            individual.
                (4) The health plan (and health alliance) in which the
            individual is enrolled at that time.
                (5) If the individual has moved from another alliance area,
            whether the individual intends to enroll in a regional alliance
            health plan.
        (b) Transmittal of Information to Alliance.--
                (1) In general.--Each employer shall transmit the
            information obtained under subsection (a) to the regional
            alliance for the alliance area in which the qualifying employee
            resides (or will reside at the time of initial employment).
                (2) Deadline.--Such information shall be transmitted within
            30 days of the date of hiring of the employee.
                (3) Form.--Information under this section may be forwarded
            in electronic form to a regional alliance.
        (c) Provision of Enrollment Form and Information.--In the case of
    an individual described in subsection (a)(5), the employer shall
    provide the individual, at the time of hiring, with--
                (1) such information regarding the choice of, and
            enrollment in, regional alliance health plans, and
                (2) such enrollment form,
    as the regional alliance provides to the employer.

    SEC. 1604. AUDITING OF RECORDS.

        Each regional alliance employer shall maintain such records, and
    provide the regional alliance for the area in which the employer
    maintains the principal place of employment (as specified by the
    Secretary of Labor) with access to such records, as may be necessary to
    verify and audit the information reported under this subtitle.

    SEC. 1605. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

        No employer may discriminate with respect to an employee on the
    basis of the family status of the employee or on the basis of the class
    of family enrollment selected with respect to the employee.

    SEC. 1606. PROHIBITION ON SELF-FUNDING OF COST SHARING BENEFITS BY
                  REGIONAL ALLIANCE EMPLOYERS.

        (a) Prohibition.--A regional alliance employer (and a corporate
    alliance employer with respect to employees who are regional alliance
    eligible individuals) may provide benefits to employees that consist of
    the benefits included in a cost sharing policy (as defined in section
    1421(b)(2)) only through a contribution toward the purchase of a cost
    sharing policy which is funded primarily through insurance.
        (b) Individual and Employer Responsibilities.--In the case of an
    individual who resides in a single-payer State and an employer with
    respect to employees who reside in such a State, the responsibilities
    of such individual and employer under such system shall supersede the
    obligations of the individual and employer under this subtitle.

    SEC. 1607. EQUAL VOLUNTARY CONTRIBUTION REQUIREMENT.

        (a) In General.--
                (1) Equal voluntary employer premium payment requirement.--
                        (A) Regional alliance health plans.--If an employer
                    makes available a voluntary employer premium payment
                    (as defined in subsection (d)) on behalf of a full-time
                    employee (as defined in section 1901(b)(2)(C)) who is
                    enrolled in a regional alliance health plan of a
                    regional alliance in a class of family enrollment, the
                    employer shall make available such a voluntary employer
                    premium payment in the same dollar amount to all
                    qualifying employees (as defined in section 1901(b)(1))
                    of the employer who are enrolled in any regional
                    alliance health plan of the same alliance in the same
                    class of family enrollment.
                        (B) Corporate alliance health plans.--If a
                    corporate alliance employer makes available a voluntary
                    employer premium payment on behalf of a full-time
                    employee who is enrolled in a corporate alliance health
                    plan of a corporate alliance in a class of family
                    enrollment in a premium area (designated under section
                    1384(b)), the employer shall make available such a
                    voluntary employer premium payment in the same dollar
                    amount to all qualifying employees of the employer
                    enrolled in any corporate alliance health plan of the
                    same alliance in the same class of family enrollment in
                    the same premium area.
                        (C) Treatment of part-time employees.--In applying
                    subparagraphs (A) and (B) in the case of a qualifying
                    employee employed on a part-time basis (within the
                    meaning of section 1901(b)(2)(A)(ii)), the dollar
                    amount shall be equal to the full-time employment ratio
                    (as defined in section 1901(b)(2)(B)) multiplied by the
                    dollar amount otherwise required.
                (2) Limit on voluntary employer premium payments.--
                        (A) Regional alliance health plans.--An employer
                    may not make available a voluntary employer premium
                    payment on behalf of an employee (enrolled in a
                    regional alliance health plan of a regional alliance in
                    a class of family enrollment) in an amount that exceeds
                    the maximum amount that could be payable as the family
                    share of premium (described in section 6101(b)(2)) for
                    the most expensive regional alliance health plan of the
                    same alliance for the same class of family enrollment.
                        (B) Corporate alliance health plans.--An employer
                    may not make available a voluntary employer premium
                    payment on behalf of an employee (enrolled in a
                    corporate alliance health plan of a corporate alliance
                    in a class of family enrollment in a premium area,
                    designated under section 1384) in an amount that
                    exceeds the maximum amount that could be payable as the
                    family share of premium (described in section
                    6101(b)(3)) for the most expensive corporate alliance
                    health plan of the same alliance for the same class of
                    family enrollment in the same premium area.
                        (C) Exclusion of plans without material
                    enrollment.--Subparagraphs (A) and (B) shall not take
                    into account any health plan that does not have
                    material enrollment (as determined in accordance with
                    regulations of the Secretary of Labor).
                (3) Nondiscrimination among plans selected.--An employer
            may not discriminate in the wages or compensation paid, or
            other terms or conditions of employment, with respect to an
            employee based on the health plan (or premium of such a plan)
            in which the employee is enrolled.
        (b) Rebate Required in Certain Cases.--
                (1) In general.--Subject to subsection (c), if--
                        (A) an employer makes available a voluntary
                    employer premium payment on behalf of an employee, and
                        (B)(i) the sum of the amount of the applicable
                    alliance credit (under section 6103) and the voluntary
                    employer premium payment, exceeds (ii) the premium for
                    the plan selected,
            the employer must rebate to the employee an amount equal to the
            excess described in subparagraph (B).
                (2) Rebates.--
                        (A) In general.--Any rebate provided under
                    paragraph (1) shall be treated, for purposes of the
                    Internal Revenue Code of 1986, as wages described in
                    section 3121(a) of such Act.
                        (B) Treatment of multiple full-time employment in a
                    family.--In the case of--
                                (i) an individual who is an employee of
                            more than one employer, or
                                (ii) a couple for which both spouses are
                            employees,
                    if more than one employer provides for voluntary
                    employer premium payments, the individual or couple may
                    elect to have paragraph (1) applied with respect to all
                    employment.
        (c) Exception for Collective Bargaining Agreement.--Subsections (a)
    and (b) (other than subsection (a)(2)) shall not apply with respect to
    voluntary employer premium payments made pursuant to a bona fide
    collective bargaining agreement.
        (d) Voluntary Employer Premium Payment.--In this section, the term
    ``voluntary employer premium payment'' means any payment designed to be
    used exclusively (or primarily) towards the cost of the family share of
    premiums for a health plan. Such term does not include any employer
    premiums required to be paid under part 3 of subtitle B of title VI.

    SEC. 1608. EMPLOYER RETIREE OBLIGATION.

        (a) In General.--If an employer was providing, as of October 1,
    1993, a threshold payment (specified in subsection (c)) for a person
    who was a qualifying retired beneficiary (as defined in subsection (b))
    as of such date, the employer shall pay, to or on behalf of that
    beneficiary for each month beginning with January 1998, an amount that
    is not less than the amount specified in subsection (d), but only if
    and for so long as the person remains a qualifying retired beneficiary.
        (b) Qualifying Retired Beneficiary.--In this section, the term
    ``qualifying retired beneficiary'' means a person who is an eligible
    retiree or qualified spouse or child (as such terms are defined in
    subsections (b) and (c) of section 6114).
        (c) Threshold Payment.--The term ``threshold payment'' means, for
    an employer with respect to a health benefit plan providing coverage to
    a qualifying retired beneficiary, a payment--
                (1) for coverage of any item or service described in
            section 1101, and
                (2) the amount of which is at least 20 percent of the
            amount of the premium (or premium equivalent) for such coverage
            with respect to the beneficiary (and dependents).
        (d) Amount.--The amount specified in this subsection is 20 percent
    of the weighted average premium for the regional alliance in which the
    beneficiary resides and for the applicable class of family enrollment.
        (e) Nature of Obligation.--The requirement of this section shall be
    in addition to any other requirement imposed on an employer under this
    Act or otherwise.
        (f) Protection of Collective Bargaining Rights.--Nothing in this
    Act (including this section) shall be construed as affecting collective
    bargaining rights or rights under collective bargaining agreements.

    SEC. 1609. ENFORCEMENT.

        In the case of a person that violates a requirement of this
    subtitle, the Secretary of Labor may impose a civil money penalty, in
    an amount not to exceed $10,000, for each violation with respect to
    each individual.

           Subtitle J--General Definitions; Miscellaneous Provisions

                          PART 1--GENERAL DEFINITIONS

    SEC. 1901. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME.

        (a) In General.--Except as otherwise specifically provided, in this
    Act the following definitions and rules apply:
                (1) Employer, employee, employment, and wages defined.--
            Except as provided in this section--
                        (A) the terms ``wages'' and ``employment'' have the
                    meanings given such terms under section 3121 of the
                    Internal Revenue Code of 1986,
                        (B) the term ``employee'' has the meaning given
                    such term under section 3121 of such Code, subject to
                    the provisions of chapter 25 of such Code, and
                        (C) the term ``employer'' has the same meaning as
                    the term ``employer'' as used in such section 3121.
                (2) Exceptions.--For purposes of paragraph (1)--
                        (A) Employment.--
                                (i) Employment included.--Paragraphs (1),
                            (2), (5), (7) (other than clauses (i) through
                            (iv) of subparagraph (C) and clauses (i)
                            through (v) of subparagraph (F)), (8), (9),
                            (10), (11), (13), (15), (18), and (19) of
                            section 3121(b) of the Internal Revenue Code of
                            1986 shall not apply.
                                (ii) Exclusion of inmates as employees.--
                            Employment shall not include services performed
                            in a penal institution by an inmate thereof or
                            in a hospital or other health care institution
                            by a patient thereof.
                        (B) Wages.--
                                (i) In general.--Paragraph (1) of section
                            3121(a) of the Internal Revenue Code of 1986
                            shall not apply.
                                (ii) Tips not included.--The term ``wages''
                            does not include cash tips.
                        (C) Exclusion of employees outside the united
                    states.--The term ``employee'' does not include an
                    individual who does not reside in the United States.
                        (D) Exclusion of foreign employment.--The term
                    ``employee'' does not include an individual--
                                (i) with respect to service, if the
                            individual is not a citizen or resident of the
                            United States and the service is performed
                            outside the United States, or
                                (ii) with respect to service, if the
                            individual is a citizen or resident of the
                            United States and the service is performed
                            outside the United States for an employer other
                            than an American employer (as defined in
                            section 3121(h) of the Internal Revenue Code of
                            1986).
                (3) Aggregation rules for employers.--For purposes of this
            Act--
                        (A) all employers treated as a single employer
                    under subsection (a) or (b) of section 52 of the
                    Internal Revenue Code of 1986 shall be treated as a
                    single employer, and
                        (B) under regulations of the Secretary of Labor,
                    all employees of organizations which are under common
                    control with one or more organizations which are exempt
                    from income tax under subtitle A of the Internal
                    Revenue Code of 1986 shall be treated as employed by a
                    single employer.
            The regulations prescribed under subparagraph (B) shall be
            based on principles similar to the principles which apply to
            taxable organizations under subparagraph (A).
                (4) Employer premium.--The term ``employer premium'' refers
            to the premium established and imposed under part 2 of subtitle
            B of title VI.
        (b) Qualifying Employee; Full-Time Employment.--
                (1) Qualifying employee.--
                        (A) In general.--In this Act, the term ``qualifying
                    employee'' means, with respect to an employer for a
                    month, an employee (other than a covered child, as
                    defined in subparagraph (C)) who is employed by the
                    employer for at least 40 hours (as determined under
                    paragraph (3)) in the month.
                        (B) No special treatment of medicare beneficiaries,
                    ssi recipients, afdc recipients, and others.--
                    Subparagraph (A) shall apply regardless of whether or
                    not the employee is a medicare-eligible individual, an
                    SSI recipient, an AFDC recipient, an individual
                    described in section 1004(b), an eligible individual or
                    is authorized to be so employed.
                        (C) Covered child defined.--In subparagraph (A),
                    the term ``covered child'' means an eligible individual
                    who is a child and is enrolled under a health plan as a
                    family member described in section 1011(b)(2)(B).
                (2) Full-time equivalent employees; part-time employees.--
                        (A) In general.--For purposes of this Act, a
                    qualifying employee who is employed by an employer--
                                (i) for at least 120 hours in a month, is
                            counted as 1 full-time equivalent employee for
                            the month and shall be deemed to be employed on
                            a full-time basis, or
                                (ii) for at least 40 hours, but less than
                            120 hours, in a month, is counted as a fraction
                            of a full-time equivalent employee in the month
                            equal to the full-time employment ratio (as
                            defined in subparagraph (B)) for the employee
                            and shall be deemed to be employed on a part-
                            time basis.
                        (B) Full-time employment ratio defined.--For
                    purposes of this Act, the term ``full-time employment
                    ratio'' means, with respect to a qualifying employee of
                    an employer in a month, the lesser of 1 or the ratio
                    of--
                                (i) the number of hours of employment such
                            employee is employed by such employer for the
                            month (as determined under paragraph (3)), to
                                (ii) 120 hours.
                        (C) Full-time employee.--For purposes of this Act,
                    the term ``full-time employee'' means, with respect to
                    an employer, an employee who is employed on a full-time
                    basis (as specified in subparagraph (A)) by the
                    employer.
                        (D) Consideration of industry practice.--As
                    provided under rules established by the Board, an
                    employee who is not described in subparagraph (C) shall
                    be considered to be employed on a full-time basis by an
                    employer (and to be a full-time employee of an
                    employer) for a month (or for all months in a 12-month
                    period) if the employee is employed by that employer on
                    a continuing basis that, taking into account the
                    structure or nature of the employment in the industry,
                    represents full time employment.
                (3) Hours of employment.--
                        (A) In general.--For purposes of this Act, the
                    Board shall specify the method for computing hours of
                    employment for employees of an employer consistent with
                    this paragraph. The Board shall take into account rules
                    used for purposes of applying the Fair Labor Standards
                    Act.
                        (B) Hourly wage earners.--In the case of an
                    individual who receives compensation (in the form of
                    hourly wages or compensation) for the performance of
                    services, the individual is considered to be
                    ``employed'' by an employer for an hour if compensation
                    is payable with respect to that hour of employment,
                    without regard to whether or not the employee is
                    actually performing services during such hours.
                (4) Treatment of salaried employees and employees paid on
            contingent or bonus arrangements.--In the case of an employee
            who receives compensation on a salaried basis or on the basis
            of a commission (or other contingent or bonus basis), rather
            than an hourly wage, the Board shall establish rules for the
            conversion of the compensation to hours of employment, taking
            into account the minimum monthly compensation levels for
            workers employed on a full-time basis under the Fair Labor
            Standards Act and other factors the Board considers relevant.
        (c) Definitions Relating to Self-Employment.--In this Act:
                (1) Net earnings from self-employment.--The term ``net
            earnings from self-employment'' has the meaning given such term
            under section 1402(a) of the Internal Revenue Code of 1986.
                (2) Self-employed individual.--The term ``self-employed
            individual'' means, for a year, an individual who has net
            earnings from self-employment for the year.

    SEC. 1902. OTHER GENERAL DEFINITIONS.

        Except as otherwise specifically provided, in this Act the
    following definitions apply:
                (1) Alien permanently residing in the united states under
            color of law.--The term ``alien permanently residing in the
            United States under color of law'' means an alien lawfully
            admitted for permanent residence (within the meaning of section
            101(a)(20) of the Immigration and Nationality Act), and
            includes any of the following:
                        (A) An alien who is admitted as a refugee under
                    section 207 of the Immigration and Nationality Act.
                        (B) An alien who is granted asylum under section
                    208 of such Act.
                        (C) An alien whose deportation is withheld under
                    section 243(h) of such Act.
                        (D) An alien who is admitted for temporary
                    residence under section 210, 210A, or 245A of such Act.
                        (E) An alien who has been paroled into the United
                    States under section 212(d)(5) of such Act for an
                    indefinite period or who has been granted extended
                    voluntary departure as a member of a nationality group.
                        (F) An alien who is the spouse or unmarried child
                    under 21 years of age of a citizen of the United
                    States, or the parent of such a citizen if the citizen
                    is over 21 years of age, and with respect to whom an
                    application for adjustment to lawful permanent
                    residence is pending.
                        (G) An alien within such other classification of
                    permanent resident aliens as the National Health Board
                    may establish by regulation.
                (2) AFDC family.--The term ``AFDC family'' means a family
            composed entirely of one or more AFDC recipients.
                (3) AFDC recipient.--The term ``AFDC recipient'' means, for
            a month, an individual who is receiving aid or assistance under
            any plan of the State approved under title I, X, XIV, or XVI,
            or part A or part E of title IV, of the Social Security Act for
            the month.
                (4) Alliance area.--The term ``alliance area'' means the
            area served by a regional alliance and specified under section
            1202(b).
                (5) Alliance eligible individual.--The term ``alliance
            eligible individual'' means, with respect to a health alliance,
            an eligible individual with respect to whom the applicable
            health plan is a health plan offered by or through such
            alliance and does not include a prisoner.
                (6) Applicable health plan.--The term ``applicable health
            plan'' means, with respect to an eligible individual, the
            health plan specified pursuant to section 1004 and part 2 of
            subtitle A.
                (7) Combination cost sharing plan.--The term ``combination
            cost sharing plan'' means a health plan that provides
            combination cost sharing schedule (consistent with section
            1134).
                (8) Comprehensive benefit package.--The term
            ``comprehensive benefit package'' means the package of health
            benefits provided under subtitle B.
                (9) Consumer price index; cpi.--The terms ``consumer price
            index'' and ``CPI'' mean the Consumer Price Index for all urban
            consumers (U.S. city average), as published by the Bureau of
            Labor Statistics.
                (10) Corporate alliance eligible individual.--The term
            ``corporate alliance eligible individual'' means, with respect
            to a corporate alliance, an eligible individual with respect to
            whom the corporate alliance is the applicable health plan.
                (11) Corporate alliance employer.--The term ``corporate
            alliance employer'' means, with respect to a corporate
            alliance, an employer of an individual who is a participant in
            a corporate alliance health plan of that alliance.
                (12) Corporate alliance health plan.--The term ``corporate
            alliance health plan'' means a health plan offered by a
            corporate alliance.
                (13) Disabled ssi recipient.--The term ``disabled SSI
            recipient'' means an individual who--
                        (A) is an SSI recipient, and
                        (B) has been determined to be disabled for purposes
                    of the supplemental security income program (under
                    title XVI of the Social Security Act).
                (14) Eligible enrollee.--The term ``eligible enrollee''
            means, with respect to a health plan offered by a health
            alliance, an alliance eligible individual, but does not include
            such an individual if the individual is enrolled under such a
            plan as the family member of another alliance eligible
            individual.
                (15) Essential community provider.--The term ``essential
            community provider'' means an entity certified as such a
            provider under subpart B of part 2 of subtitle F.
                (16) Fee-for-service plan.--The term ``fee-for-service
            plan'' means a health plan described in section 1322(b)(2)(A).
                (17) First year.--The term ``first year'' means, with
            respect to--
                        (A) a State that is a participating State in a year
                    before 1998, the year in which the State first is a
                    participating State, or
                        (B) any other State, 1998.
                (18) Higher cost sharing plan.--The term ``higher cost
            sharing plan'' means a health plan that provides a higher cost
            sharing schedule (consistent with section 1133).
                (19) Long-term nonimmigrant.--The term ``long-term
            nonimmigrant'' means a nonimmigrant described in subparagraph
            (E), (H), (I), (J), (K), (L), (M), (N), (O), (Q), or (R) of
            section 101(a)(15) of the Immigration and Nationality Act or an
            alien within such other classification of nonimmigrant as the
            National Health Board may establish by regulation.
                (20) Lower cost sharing plan.--The term ``lower cost
            sharing plan'' means a health plan that provides a lower cost
            sharing schedule (consistent with section 1132).
                (21) Medicare program.--The term ``medicare program'' means
            the health insurance program under title XVIII of the Social
            Security Act.
                (22) Medicare-eligible individual.--The term ``medicare-
            eligible individual'' means, subject to section 1012(a), an
            individual who is entitled to benefits under part A of the
            medicare program.
                (23) Move.--The term ``move'' means, respect to an
            individual, a change of residence of the individual from one
            alliance area to another alliance area.
                (24) National health board; board.--The terms ``National
            Health Board'' and ``Board'' mean the National Health Board
            created under section 1501.
                (25) Poverty level.--
                        (A) In general.--The term ``applicable poverty
                    level'' means, for a family for a year, the official
                    poverty line (as defined by the Office of Management
                    and Budget, and revised annually in accordance with
                    section 673(2) of the Omnibus Budget Reconciliation Act
                    of 1981) applicable to a family of the size involved
                    (as determined under subparagraph (B)) for 1994
                    adjusted by the percentage increase or decrease
                    described in subparagraph (C) for the year involved.
                        (B) Family size.--In applying the applicable
                    poverty level to--
                                (i) an individual enrollment, the family
                            size is deemed to be one person;
                                (ii) a couple-only enrollment, the family
                            size is deemed to be two persons;
                                (iii) a single parent enrollment, the
                            family size is deemed to be three persons; or
                                (iv) a dual parent enrollment, the family
                            size is deemed to be four persons.
                        (C) Percentage adjustment.--The percentage increase
                    or decrease described in this subparagraph for a year
                    is the percentage increase or decrease by which the
                    average CPI for the 12-month-period ending with August
                    31 of the preceding year exceeds such average for the
                    12-month period ending with August 31, 1993.
                        (D) Rounding.--Any adjustment made under
                    subparagraph (A) for a year shall be rounded to the
                    nearest multiple of $100.
                (26) Prisoner.--The term ``prisoner'' means, as specified
            by the Board, an eligible individual during a period of
            imprisonment under Federal, State, or local authority after
            conviction as an adult.
                (27) Regional alliance eligible individual.--The term
            ``regional alliance eligible individual'' means an eligible
            individual with respect to whom a regional alliance health plan
            is an applicable health plan.
                (28) Regional alliance employer.--The term ``regional
            alliance employer'' means, with respect to an employee, an
            employer that is not a corporate alliance employer with respect
            to such employee.
                (29) Regional alliance health plan.--The term ``regional
            alliance health plan'' means a health plan offered by a
            regional alliance.
                (30) Reside.--
                        (A) An individual is considered to reside in the
                    location in which the individual maintains a primary
                    residence (as established under rules of the National
                    Health Board).
                        (B) Under such rules and subject to section
                    1323(c), in the case of an individual who maintains
                    more than one residence, the primary residence of the
                    individual shall be determined taking into account the
                    proportion of time spent at each residence.
                        (C) In the case of a couple only one spouse of
                    which is a qualifying employee, except as the Board may
                    provide, the residence of the employee shall be the
                    residence of the couple.
                (31) Secretary.--The term ``Secretary'' means the Secretary
            of Health and Human Services.
                (32) SSI family.--The term ``SSI family'' means a family
            composed entirely of one or more SSI recipients.
                (33) SSI recipient.--The term ``SSI recipient'' means, for
            a month, an individual--
                        (A) with respect to whom supplemental security
                    income benefits are being paid under title XVI of the
                    Social Security Act for the month,
                        (B) who is receiving a supplementary payment under
                    section 1616 of such Act or under section 212 of Public
                    Law 93-66 for the month, or
                        (C) who is receiving monthly benefits under section
                    1619(a) of the Social Security Act (whether or not
                    pursuant to section 1616(c)(3) of such Act) for the
                    month.
                (34) State.--The term ``State'' includes the District of
            Columbia, Puerto Rico, the Virgin Islands, Guam, American
            Samoa, and the Northern Mariana Islands.
                (35) State medicaid plan.--The term ``State medicaid plan''
            means a plan of medical assistance of a State approved under
            title XIX of the Social Security Act.
                (36) Undocumented alien.--The term ``undocumented alien''
            means an alien who is not a long-term nonimmigrant, a diplomat,
            or described in section 1005(c).
                (37) United States.--The term ``United States'' means the
            50 States, the District of Columbia, Puerto Rico, the Virgin
            Islands, Guam, American Samoa, and Northern Mariana Islands.

                      Subtitle B--Miscellaneous Provisions

    SEC. 1911. USE OF INTERIM, FINAL REGULATIONS.

        In order to permit the timely implementation of the provisions of
    this Act, the National Health Board, the Secretary of Health and Human
    Services, the Secretary of Labor are each authorized to issue
    regulations under this Act on an interim basis that become final on the
    date of publication, subject to change based on subsequent public
    comment.

    SEC. 1912. SOCIAL SECURITY ACT REFERENCES.

        Except as may otherwise be provided, any reference in this title,
    or in title V or VI, to a provision of the Social Security Act shall be
    to that provision of the Social Security Act as in effect on the date
    of the enactment of this Act.

                                                                   Title II

                             TITLE II--NEW BENEFITS

                           table of contents of title

                                                                       Page
           Subtitle A--Medicare Outpatient Prescription Drug Benefit

    Sec. 2001. Coverage of outpatient prescription drugs........        343
    Sec. 2002. Payment rules and related requirements for               349
                                covered outpatient drugs.
    Sec. 2003. Medicare rebates for covered outpatient drugs....        365
    Sec. 2004. Extension of 25 percent rule for portion of              379
                                premium attributable to covered
                                outpatient drugs.
    Sec. 2005. Coverage of home infusion drug therapy services..        380
    Sec. 2006. Conforming amendments to medicaid program........        387
    Sec. 2007. Effective date...................................        389
                           Subtitle B--Long-Term Care

       Part 1--State Programs for Home and Community-based Services for
                         Individuals With Disabilities

    Sec. 2101. State programs for home and community-based              389
                                services for individuals with
                                disabilities.
    Sec. 2102. State plans......................................        390
    Sec. 2103. Individuals with disabilities defined............        398
    Sec. 2104. Home and community-based services covered under          402
                                State plan.
    Sec. 2105. Cost sharing.....................................        408
    Sec. 2106. Quality assurance and safeguards.................        409
    Sec. 2107. Advisory groups..................................        410
    Sec. 2108. Payments to States...............................        412
    Sec. 2109. Total Federal budget; allotments to States.......        415
                   Part 2--Medicaid Nursing Home Improvements

    Sec. 2201. Reference to amendments..........................        425
                    Part subpart a--general provisionsurance
    Sec. 2301. Federal regulations; prior application or certain        426
                                requirements.
    Sec. 2302. National Long-Term Care Insurance Advisory               430
                                Council.
    Sec. 2303. Relation to State law............................        438
    Sec. 2304. Desubpart b--federal standards and requirements..        438
    Sec. 2321. Requirements to facilitate understanding and             443
                                comparison of benefits.
    Sec. 2322. Requirements relating to coverage................        449
    Sec. 2323. Requirements relating to premiums................        454
    Sec. 2324. Requirements relating to sales practices.........        455
    Sec. 2325. Continuation, renewal, replacement, conversion,          461
                                and cancellation of policies.
    Sec. 2326. Requirements rsubpart c--enforcementbenefits.....        470
    Sec. 2342. State programs for enforcement of standards......        474
    Sec. 2342. Authorization of appropriations for State                480
                                programs.
    Sec. 2343. Allotments to States.............................        481
    Sec. 2344. Payments to States...............................        481
    Sec. 2345. Federal oversight of State enforcement...........        482
    Sec. 2346. Effect subpart d--consumer education grantsogram.        483
    Sec. 2361. Grants for consumer education....................        485
         Part 4--Tax Treatment of Long-term Care Insurance and Services

    Sec. 2401. Reference to tax provisions......................        488
       Part 5--Tax Incentives for Individuals With Disabilities Who Work

    Sec. 2501. Reference to tax provision.......................        489
                      Part 6--Demonstration and Evaluation

    Sec. 2601. Demonstration on acute and long-term care                489
                                integration.
    Sec. 2602. Performance review of the long-term care programs        497
                                                 Title II, Subtitle A

           Subtitle A--Medicare Outpatient Prescription Drug Benefit

    SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

        (a) Covered Outpatient Drugs as Medical and Other Health
    Services.--Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C.
    1395x(s)(2)(J)) is amended to read as follows:
                ``(J) covered outpatient drugs;''.
        (b) Definition of Covered Outpatient Drug.--Section 1861(t) of such
    Act (42 U.S.C. 1395x(t)), as amended by section 13553(b) of the Omnibus
    Budget Reconciliation Act of 1993 (hereafter in this subtitle referred
    to as ``OBRA-1993''), is amended--
                (1) in the heading, by adding at the end the following: ``;
            Covered Outpatient Drugs'';
                (2) in paragraph (1), by striking ``paragraph (2)'' and
            inserting ``the succeeding paragraphs of this subsection''; and
                (3) by striking paragraph (2) and inserting the following:
        ``(2) Except as otherwise provided in paragraph (3), the term
    `covered outpatient drug' means any of the following products used for
    a medically accepted indication (as described in paragraph (4)):
                ``(A) A drug which may be dispensed only upon prescription
            and--
                        ``(i) which is approved for safety and
                    effectiveness as a prescription drug under section 505
                    or 507 of the Federal Food, Drug, and Cosmetic Act or
                    which is approved under section 505(j) of such Act;
                        ``(ii)(I) which was commercially used or sold in
                    the United States before the date of the enactment of
                    the Drug Amendments of 1962 or which is identical,
                    similar, or related (within the meaning of section
                    310.6(b)(1) of title 21 of the Code of Federal
                    Regulations) to such a drug, and (II) which has not
                    been the subject of a final determination by the
                    Secretary that it is a `new drug' (within the meaning
                    of section 201(p) of the Federal Food, Drug, and
                    Cosmetic Act) or an action brought by the Secretary
                    under section 301, 302(a), or 304(a) of such Act to
                    enforce section 502(f) or 505(a) of such Act; or
                        ``(iii)(I) which is described in section 107(c)(3)
                    of the Drug Amendments of 1962 and for which the
                    Secretary has determined there is a compelling
                    justification for its medical need, or is identical,
                    similar, or related (within the meaning of section
                    310.6(b)(1) of title 21 of the Code of Federal
                    Regulations) to such a drug, and (II) for which the
                    Secretary has not issued a notice of an opportunity for
                    a hearing under section 505(e) of the Federal Food,
                    Drug, and Cosmetic Act on a proposed order of the
                    Secretary to withdraw approval of an application for
                    such drug under such section because the Secretary has
                    determined that the drug is less than effective for all
                    conditions of use prescribed, recommended, or suggested
                    in the labeling.
                ``(B) A biological product which--
                        ``(i) may only be dispensed upon prescription,
                        ``(ii) is licensed under section 351 of the Public
                    Health Service Act, and
                        ``(iii) is produced at an establishment licensed
                    under such section to produce such product.
                ``(C) Insulin certified under section 506 of the Federal
            Food, Drug, and Cosmetic Act.
        ``(3) The term `covered outpatient drug' does not include any
    product--
                ``(A) which is administered through infusion in a home
            setting unless the product is a covered home infusion drug (as
            defined in paragraph (5));
                ``(B) when furnished as part of, or as incident to, any
            other item or service for which payment may be made under this
            title; or
                ``(C) which is listed under paragraph (2) of section
            1927(d) (other than subparagraph (I) or (J) of such
            subparagraph) as a drug which may be excluded from coverage
            under a State plan under title XIX and which the Secretary
            elects to exclude from coverage under part B.
        ``(4) For purposes of paragraph (2), the term `medically accepted
    indication', with respect to the use of an outpatient drug, includes
    any use which has been approved by the Food and Drug Administration for
    the drug, and includes another use of the drug if--
                ``(A) the drug has been approved by the Food and Drug
            Administration; and
                ``(B)(i) such use is supported by one or more citations
            which are included (or approved for inclusion) in one or more
            of the following compendia: the American Hospital Formulary
            Service-Drug Information, the American Medical Association Drug
            Evaluations, the United States Pharmacopoeia-Drug Information,
            and other authoritative compendia as identified by the
            Secretary, unless the Secretary has determined that the use is
            not medically appropriate or the use is identified as not
            indicated in one or more such compendia, or
                ``(ii) the carrier involved determines, based upon guidance
            provided by the Secretary to carriers for determining accepted
            uses of drugs, that such use is medically accepted based on
            supportive clinical evidence in peer reviewed medical
            literature appearing in publications which have been identified
            for purposes of this clause by the Secretary.
    The Secretary may revise the list of compendia in subparagraph (B)(i)
    designated as appropriate for identifying medically accepted
    indications for drugs.
        ``(5)(A) For purposes of paragraph (3), the term `covered home
    infusion drug' means a covered outpatient drug or an enteral or
    parenteral nutrient dispensed to an individual that--
                ``(i) is administered intravenously, subcutaneously,
            epidurally, or through other means determined by the Secretary,
            using an access device that is inserted in to the body and an
            infusion device to control the rate of flow of the drug,
                ``(ii) is administered in the individual's home (including
            an institution used as the individual's home, other than a
            hospital under subsection (e) or a skilled nursing facility
            that meets the requirements of section 1819(a)), and
                ``(iii)(I) is an antibiotic drug and the Secretary has not
            determined, for the specific drug or the indication to which
            the drug is applied, that the drug cannot generally be
            administered safely and effectively in a home setting, or
                ``(II) is not an antibiotic drug and the Secretary has
            determined, for the specific drug or the indication to which
            the drug is applied, that the drug can generally be
            administered safely and effectively in a home setting.
        ``(B) Not later than January 1, 1996, (and periodically
    thereafter), the Secretary shall publish a list of the drugs, and
    indications for such drugs, that are covered home infusion drugs, with
    respect to which home infusion drug therapy may be provided under this
    title.''.
        (c) Other Conforming Amendments.--(1) Section 1861 of such Act (42
    U.S.C. 1395x) is amended--
                (A) in subsection (s)(2), as amended by section 13553 of
            OBRA-1993--
                        (i) by striking subparagraphs (O) and (Q),
                        (ii) by adding ``and'' at the end of subparagraph
                    (N),
                        (iii) by striking ``; and'' at the end of
                    subparagraph (P) and inserting a period, and
                        (iv) by redesignating subparagraph (P) as
                    subparagraph (O); and
                (B) by striking the subsection (jj) added by section
            4156(a)(2) of the Omnibus Budget Reconciliation Act of 1990.
        (2) Section 1881(b)(1)(C) of such Act (42 U.S.C. 1395rr(b)(1)(C)),
    as amended by section 13566(a) of OBRA-1993, is amended by striking
    ``section 1861(s)(2)(P)'' and inserting ``section 1861(s)(2)(O)''.

    SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED
                  OUTPATIENT DRUGS.

        (a) In General.--Section 1834 of the Social Security Act (42 U.S.C.
    1395m) is amended by inserting after subsection (c) the following new
    subsection:
        ``(d) Payment for and Certain Requirements Concerning Covered
    Outpatient Drugs.--
                ``(1) Deductible.--
                        ``(A) In general.--Payment shall be made under
                    paragraph (2) only for expenses incurred by an
                    individual for a covered outpatient drug during a
                    calendar year after the individual has incurred
                    expenses in the year for such drugs (during a period in
                    which the individual is entitled to benefits under this
                    part) equal to the deductible amount for that year.
                        ``(B) Deductible amount.--
                                ``(i) For purposes of subparagraph (A), the
                            deductible amount is--
                                        ``(I) for 1996, $250, and
                                        ``(II) for any succeeding year, the
                                    amount (rounded to the nearest dollar)
                                    that the Secretary estimates will
                                    ensure that the percentage of the
                                    average number of individuals covered
                                    under this part (other than individuals
                                    enrolled with an eligible organization
                                    under section 1876 or an organization
                                    described in section 1833(a)(1)(A))
                                    during the year who will incur expenses
                                    for covered outpatient drugs equal to
                                    or greater than such amount will be the
                                    same as the percentage for the previous
                                    year.
                                ``(ii) The Secretary shall promulgate the
                            deductible amount for 1997 and each succeeding
                            year during September of the previous year.
                        ``(C) Special rule for determination of expenses
                    incurred.--In determining the amount of expenses
                    incurred by an individual for covered outpatient drugs
                    during a year for purposes of subparagraph (A), there
                    shall not be included any expenses incurred with
                    respect to a drug to the extent such expenses exceed
                    the payment basis for such drug under paragraph (3).
                ``(2) Payment amount.--
                        ``(A) In general.--Subject to the deductible
                    established under paragraph (1), the amount payable
                    under this part for a covered outpatient drug furnished
                    to an individual during a calendar year shall be equal
                    to--
                                ``(i) 80 percent of the payment basis
                            described in paragraph (3), in the case of an
                            individual who has not incurred expenses for
                            covered outpatient drugs during the year
                            (including the deductible imposed under
                            paragraph (1)) in excess of the out-of-pocket
                            limit for the year under subparagraph (B); and
                                ``(ii) 100 percent of the payment basis
                            described in paragraph (3), in the case of any
                            other individual.
                        ``(B) Out-of-pocket limit described.--
                                ``(i) For purposes of subparagraph (A), the
                            out-of-pocket limit for a year is equal to--
                                        ``(I) for 1996, $1000, and
                                        ``(II) for any succeeding year, the
                                    amount (rounded to the nearest dollar)
                                    that the Secretary estimates will
                                    ensure that the percentage of the
                                    average number of individuals covered
                                    under this part (other than individuals
                                    enrolled with an eligible organization
                                    under section 1876 or an organization
                                    described in section 1833(a)(1)(A))
                                    during the year who will incur expenses
                                    for covered outpatient drugs equal to
                                    or greater than such amount will be the
                                    same as the percentage for the previous
                                    year.
                                ``(ii) The Secretary shall promulgate the
                            out-of-pocket limit for 1997 and each
                            succeeding year during September of the
                            previous year.
                        ``(C) Special rule for determination of expenses
                    incurred.--In determining the amount of expenses
                    incurred by an individual for covered outpatient drugs
                    during a year for purposes of subparagraph (A), there
                    shall not be included any expenses incurred with
                    respect to a drug to the extent such expenses exceed
                    the payment basis for such drug under paragraph (3).
                ``(3) Payment basis.--For purposes of paragraph (2), the
            payment basis is the lesser of--
                        ``(A) the actual charge for a covered outpatient
                    drug, or
                        ``(B) the applicable payment limit established
                    under paragraph (4).
                ``(4) Payment limits.--
                        ``(A) Payment limit for single source drugs and
                    multiple source drugs with restrictive prescriptions.--
                    In the case of a covered outpatient drug that is a
                    multiple source drug which has a restrictive
                    prescription, or that is single source drug, the
                    payment limit for a payment calculation period is equal
                    to--
                                ``(i) the 90th percentile of the actual
                            charges (computed on the geographic basis
                            specified by the Secretary) for the drug
                            product for the second previous payment
                            calculation period, or
                                ``(ii) the amount of the administrative
                            allowance (established under paragraph (5))
                            plus the product of the number of dosage units
                            dispensed and the per unit estimated
                            acquisition cost for the drug product
                            (determined under subparagraph (C)) for the
                            period,
                    whichever is less.
                        ``(B) Payment limit for multiple source drugs
                    without restrictive prescriptions.--In the case of a
                    drug that is a multiple source drug which does not have
                    a restrictive prescription, the payment limit for a
                    payment calculation period is equal to the amount of
                    the administrative allowance (established under
                    paragraph (5)) plus the product of the number of dosage
                    units dispensed and the unweighted median of the unit
                    estimated acquisition cost (determined under
                    subparagraph (C)) for the drug products for the period.
                        ``(C) Determination of unit price.--
                                ``(i) In general.--The Secretary shall
                            determine, for the dispensing of a covered
                            outpatient drug product in a payment
                            calculation period, the estimated acquisition
                            cost for the drug product. With respect to any
                            covered outpatient drug product, such cost may
                            not exceed 93 percent of the published average
                            wholesale price for the drug during the period.
                                ``(ii) Compliance with request for
                            information.--If a wholesaler or direct seller
                            of a covered outpatient drug refuses, after
                            being requested by the Secretary, to provide
                            price information requested to carry out clause
                            (i), or deliberately provides information that
                            is false, the Secretary may impose a civil
                            money penalty of not to exceed $10,000 for each
                            such refusal or provision of false information.
                            The provisions of section 1128A (other than
                            subsections (a) and (b)) shall apply to civil
                            money penalties under the previous sentence in
                            the same manner as they apply to a penalty or
                            proceeding under section 1128A(a). Information
                            gathered pursuant to clause (i) shall not be
                            disclosed except as the Secretary determines to
                            be necessary to carry out the purposes of this
                            part.
                ``(5) Administrative allowance for purposes of payment
            limit.--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), the administrative allowance
                    established under this paragraph is--
                                ``(i) for 1996, $5, and
                                ``(ii) for each succeeding year, the amount
                            for the previous year adjusted by the
                            percentage change in the consumer price index
                            for all urban consumers (U.S. city average) for
                            the 12-month period ending with June of that
                            previous year.
                        ``(B) Reduction for mail order pharmacies.--The
                    Secretary may, after consulting with representatives of
                    pharmacists, individuals enrolled under this part, and
                    of private insurers, reduce the administrative
                    allowances established under subparagraph (A) for any
                    covered outpatient drug dispensed by a mail order
                    pharmacy, based on differences between such pharmacies
                    and other pharmacies with respect to operating costs
                    and other economies.
                ``(6) Assuring appropriate prescribing and dispensing
            practices.--
                        ``(A) In general.--The Secretary shall establish a
                    program to identify (and to educate physicians and
                    pharmacists concerning)--
                                ``(i) instances or patterns of unnecessary
                            or inappropriate prescribing or dispensing
                            practices for covered outpatient drugs,
                                ``(ii) instances or patterns of substandard
                            care with respect to such drugs,
                                ``(iii) potential adverse reactions, and
                                ``(iv) appropriate use of generic products.
                        ``(B) Prior authorization.--The Secretary may
                    require advance approval for a covered outpatient drug
                    which the Secretary finds is subject to misuse or
                    inappropriate use, is not cost effective, which is a
                    multiple source drug with a restrictive prescription,
                    or is subject to negotiation under section 1850(c)(3).
                    The Secretary may also establish maximum quantities per
                    prescription and limits on the number of prescription
                    refills. The Secretary shall ensure that any advance
                    approval requirements imposed under this subparagraph
                    do not restrict the access of patients to medically
                    necessary covered outpatient drugs on a timely basis,
                    and assure prompt determinations of approval or
                    disapproval and provide a means for providers and
                    patients to appeal a decision to disapprove a drug.
                        ``(C) Drug use review.--The Secretary may provide
                    for a drug use review program with respect to covered
                    outpatient drugs dispensed to individuals eligible for
                    benefits under this part. Such program may include such
                    elements as the Secretary determines to be necessary to
                    assure that prescriptions (i) are appropriate, (ii) are
                    medically necessary, and (iii) are not likely to result
                    in adverse medical results, including any elements of
                    the State drug use review programs required under
                    section 1927(g) that the Secretary determines to be
                    appropriate.
                ``(7) Administrative improvements.--The Secretary shall
            develop, in consultation with representatives of pharmacies and
            of other interested persons, a standard claims form for covered
            outpatient drugs in accordance with title V of the Health
            Security Act.
                ``(8) Counseling requirements for pharmacies.--A pharmacy
            may not receive any payment under this part for a covered
            outpatient drug unless the pharmacy agrees to answer questions
            of individuals enrolled under this part who receive a covered
            outpatient drug from the pharmacy regarding the appropriate use
            of the drug, potential interactions between the drug and other
            drugs dispensed to the individual, and other matters relating
            to the dispensing of such drugs.
                ``(9) Definitions.--In this subsection:
                        ``(A) Multiple and single source drugs.--The terms
                    `multiple source drug' and `single source drug' have
                    the meanings of those terms under section 1927(k)(7).
                        ``(B) Restrictive prescription.--A drug has a
                    `restrictive prescription' only if--
                                ``(i) in the case of a written
                            prescription, the prescription for the drug
                            indicates, in the handwriting of the physician
                            or other person prescribing the drug and with
                            an appropriate phrase (such as `brand medically
                            necessary') recognized by the Secretary, that a
                            particular drug product must be dispensed, or
                                ``(ii) in the case of a prescription issued
                            by telephone--
                                        ``(I) the physician or other person
                                    prescribing the drug (through use of
                                    such an appropriate phrase) states that
                                    a particular drug product must be
                                    dispensed, and
                                        ``(II) the physician or other
                                    person submits to the pharmacy
                                    involved, within 30 days after the date
                                    of the telephone prescription, a
                                    written confirmation which is in the
                                    handwriting of the physician or other
                                    person prescribing the drug and which
                                    indicates with such appropriate phrase
                                    that the particular drug product was
                                    required to have been dispensed.
                        ``(C) Payment calculation period.--The term
                    `payment calculation period' means the 6-month period
                    beginning with January of each year and the 6-month
                    period beginning with July of each year.''.
        (b) Submission of Claims by Pharmacies.--Section 1848(g)(4) of such
    Act (42 U.S.C. 1395w-4(g)(4)) is amended--
                (1) in the heading--
                        (A) by striking ``Physician'', and
                        (B) by inserting ``by physicians and suppliers''
                    after ``claims'',
                (2) in the matter in subparagraph (A) preceding clause
            (i)--
                        (A) by striking ``For services furnished on or
                    after September 1, 1990, within 1 year'' and inserting
                    ``Within 1 year (90 days in the case of covered
                    outpatient drugs)'',
                        (B) by striking ``a service'' and inserting ``an
                    item or service'', and
                        (C) by inserting ``or of providing a covered
                    outpatient drug,'' after ``basis,'' and
                (3) in subparagraph (A)(i), by inserting ``item or'' before
            ``service.
        (c) Special Rules for Carriers.--
                (1) Use of regional carriers.--Section 1842(b)(2) of such
            Act (42 U.S.C. 1395u(b)(2)) is amended by adding at the end the
            following:
        ``(D) With respect to activities related to covered outpatient
    drugs, the Secretary may enter into contracts with carriers under this
    section to perform the activities on a regional basis.''.
                (2) Payment on other than a cost basis.--Section
            1842(c)(1)(A) of such Act (42 U.S.C. 1395u(c)(1)(A)) is
            amended--
                        (A) by inserting ``(i)'' after ``(c)(1)(A)'',
                        (B) in the first sentence, by inserting ``, except
                    as otherwise provided in clause (ii),'' after ``under
                    this part, and'', and
                        (C) by adding at the end the following:
        ``(ii) To the extent that a contract under this section provides
    for activities related to covered outpatient drugs, the Secretary may
    provide for payment for those activities based on any method of payment
    determined by the Secretary to be appropriate.''.
                (3) Use of other entities for covered outpatient drugs.--
            Section 1842(f) of such Act (42 U.S.C. 1395u(f)) is amended--
                        (A) by striking ``and'' at the end of paragraph
                    (1),
                        (B) by striking the period at the end of paragraph
                    (2) and inserting ``; and'', and
                        (C) by adding at the end the following:
                ``(3) with respect to activities related to covered
            outpatient drugs, any other private entity which the Secretary
            determines is qualified to conduct such activities.''.
                (4) Designated carriers to process claims of railroad
            retirees.--Section 1842(g) of such Act (42 U.S.C. 1395u(g)) is
            amended by inserting ``(other than functions related to covered
            outpatient drugs)'' after ``functions''.
        (d) Contracts for Automatic Data Processing Equipment.--Actions
    taken before 1996 that affect contracts related to the processing of
    claims for covered outpatient drugs (as defined in section 1861(t) of
    the Social Security Act) shall not be subject to section 111 of the
    Federal Property and Administrative Services Act of 1949, and shall not
    be subject to administrative or judicial review.
        (e) Conforming Amendments.--
                (1)(A) Section 1833(a)(1) of such Act (42 U.S.C.
            1395l(a)(1)), as amended by section 13544(b)(2) of OBRA-1993,
            is amended--
                        (i) by striking ``and'' at the end of clause (O),
                    and
                        (ii) by inserting before the semicolon at the end
                    the following: ``, and (Q) with respect to covered
                    outpatient drugs, the amounts paid shall be as
                    prescribed by section 1834(d)''.
                (B) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2))
            is amended in the matter preceding subparagraph (A) by
            inserting ``, except for covered outpatient drugs,'' after
            ``and (I) of such section''.
                (2) Section 1833(b)(2) of such Act (42 U.S.C. 1395l(b)(2))
            is amended by inserting ``or with respect to covered outpatient
            drugs'' before the comma.
                (3) The first sentence of section 1842(h)(2) of such Act
            (42 U.S.C. 1395u(h)(2)) is amended by inserting ``(other than a
            carrier described in subsection (f)(3))'' after ``Each
            carrier''.
                (4) The first sentence of section 1866(a)(2)(A) of such Act
            (42 U.S.C. 1395cc(a)(2)(A)) is amended--
                        (A) in clause (i), by inserting ``section
                    1834(d),'' after ``section 1833(b),'', and
                        (B) in clause (ii), by inserting ``, other than for
                    covered outpatient drugs,'' after ``provider)''.

    SEC. 2003. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.

        (a) In General.--Part B of title XVIII of the Social Security Act
    is amended by adding at the end the following new section:

                     ``rebates for covered outpatient drugs

        ``Sec. 1850. (a) Requirement for Rebate Agreement.--In order for
    payment to be available under this part for covered outpatient drugs of
    a manufacturer dispensed on or after January 1, 1996, the manufacturer
    must have entered into and have in effect a rebate agreement with the
    Secretary meeting the requirements of subsection (b), and an agreement
    to give equal access to discounts in accordance with subsection (e).
        ``(b) Terms, Implementation, and Enforcement of Rebate Agreement.--
                ``(1) Periodic rebates.--
                        ``(A) In general.--A rebate agreement under this
                    section shall require the manufacturer to pay to the
                    Secretary for each calendar quarter, not later than 30
                    days after the date of receipt of the information
                    described in paragraph (2) for such quarter, a rebate
                    in an amount determined under subsection (c) for all
                    covered outpatient drugs of the manufacturer described
                    in subparagraph (B).
                        ``(B) Drugs included in quarterly rebate
                    calculation.--Drugs subject to rebate with respect to a
                    calendar quarter are drugs which are dispensed by a
                    pharmacy during such quarter to individuals (other than
                    individuals enrolled with an eligible organization with
                    a contract under section 1876) eligible for benefits
                    under this part, as reported by such pharmacies to the
                    Secretary.
                ``(2) Information furnished to manufacturers.--
                        ``(A) In general.--The Secretary shall report to
                    each manufacturer, not later than 60 days after the end
                    of each calendar quarter, information on the total
                    number, for each covered outpatient drug, of units of
                    each dosage form, strength, and package size dispensed
                    under the plan during the quarter, on the basis of the
                    data reported to the Secretary described in paragraph
                    (1)(B).
                        ``(B) Audit.--The Comptroller General may audit the
                    records of the Secretary to the extent necessary to
                    determine the accuracy of reports by the Secretary
                    pursuant to subparagraph (A). Adjustments to rebates
                    shall be made to the extent determined necessary by the
                    audit to reflect actual units of drugs dispensed.
                ``(3) Provision of price information by manufacturer.--
                        ``(A) Quarterly pricing information.--Each
                    manufacturer with an agreement in effect under this
                    section shall report to the Secretary, not later than
                    30 days after the last day of each calendar quarter, on
                    the average manufacturer retail price and the average
                    manufacturer non-retail price for each dosage form and
                    strength of each covered outpatient drug for the
                    quarter.
                        ``(B) Base quarter prices.--Each manufacturer of a
                    covered outpatient drug with an agreement under this
                    section shall report to the Secretary, by not later
                    than 30 days after the effective date of such agreement
                    (or, if later, 30 days after the end of the base
                    quarter), the average manufacturer retail price, for
                    such base quarter, for each dosage form and strength of
                    each such covered drug.
                        ``(C) Verification of average manufacturer price.--
                    The Secretary may inspect the records of manufacturers,
                    and survey wholesalers, pharmacies, and institutional
                    purchasers of drugs, as necessary to verify prices
                    reported under subparagraph (A).
                        ``(D) Penalties.--
                                ``(i) Civil money penalties.--The Secretary
                            may impose a civil money penalty on a
                            manufacturer with an agreement under this
                            section--
                                        ``(I) for failure to provide
                                    information required under subparagraph
                                    (A) on a timely basis, in an amount up
                                    to $10,000 per day of delay;
                                        ``(II) for refusal to provide
                                    information about charges or prices
                                    requested by the Secretary for purposes
                                    of verification pursuant to
                                    subparagraph (C), in an amount up to
                                    $100,000; and
                                        ``(III) for provision, pursuant to
                                    subparagraph (A) or (B), of information
                                    that the manufacturer knows or should
                                    know is false, in an amount up to
                                    $100,000 per item of information.
                            Such civil money penalties are in addition to
                            any other penalties prescribed by law. The
                            provisions of section 1128A (other than
                            subsections (a) (with respect to amounts of
                            penalties or additional assessments) and (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).
                                ``(ii) Termination of agreement.--If a
                            manufacturer with an agreement under this
                            section has not provided information required
                            under subparagraph (A) or (B) within 90 days of
                            the deadline imposed, the Secretary may suspend
                            the agreement with respect to covered
                            outpatient drugs dispensed after the end of
                            such 90-day period and until the date such
                            information is reported (but in no case shall a
                            suspension be for less than 30 days).
                ``(4) Length of agreement.--
                        ``(A) In general.--A rebate agreement shall be
                    effective for an initial period of not less than one
                    year and shall be automatically renewed for a period of
                    not less than one year unless terminated under
                    subparagraph (B).
                        ``(B) Termination.--
                                ``(i) By the secretary.--The Secretary may
                            provide for termination of a rebate agreement
                            for violation of the requirements of the
                            agreement or other good cause shown. Such
                            termination shall not be effective earlier than
                            60 days after the date of notice of such
                            termination. The Secretary shall afford a
                            manufacturer an opportunity for a hearing
                            concerning such termination, but such hearing
                            shall not delay the effective date of the
                            termination.
                                ``(ii) By a manufacturer.--A manufacturer
                            may terminate a rebate agreement under this
                            section for any reason. Any such termination
                            shall not be effective until the calendar
                            quarter beginning at least 60 days after the
                            date the manufacturer provides notice to the
                            Secretary.
                                ``(iii) Effective date of termination.--Any
                            termination under this subparagraph shall not
                            affect rebates due under the agreement before
                            the effective date of its termination.
                                ``(iv) Notice to pharmacies.--In the case
                            of a termination under this subparagraph, the
                            Secretary shall notify pharmacies and physician
                            organizations not less than 30 days before the
                            effective date of such termination.
        ``(c) Amount of Rebate.--
                ``(1) Basic rebate.--Each manufacturer shall remit a basic
            rebate to the Secretary for each calendar quarter in an amount,
            with respect to each dosage form and strength of a covered drug
            (except as provided under paragraph (4)), equal to the product
            of--
                        ``(A) the total number of units subject to rebate
                    for such quarter, as described in subsection (b)(1)(B);
                    and
                        ``(B) the greater of--
                                ``(i) the difference between the average
                            manufacturer retail price and the average
                            manufacturer non-retail price,
                                ``(ii) 17 percent of the average
                            manufacturer retail price, or
                                ``(iii) the amount determined pursuant to
                            paragraph (3).
                ``(2) Additional rebate.--Each manufacturer shall remit to
            the Secretary, for each calendar quarter, an additional rebate
            for each dosage form and strength of a covered drug (except as
            provided under paragraph (4)), in an amount equal to--
                        ``(A) the total number of units subject to rebate
                    for such quarter, as described in subsection (b)(1)(B),
                    multiplied by
                        ``(B) the amount, if any, by which the average
                    manufacturer retail price for covered drugs of the
                    manufacturer exceeds the average manufacturer retail
                    price for the base quarter, increased by the percentage
                    increase in the Consumer Price Index for all urban
                    consumers (U.S. average) from the end of such base
                    quarter to the month before the beginning of such
                    calendar quarter.
                ``(3) Negotiated rebate amount for new drugs.--
                        ``(A) In general.--The Secretary may negotiate with
                    the manufacturer a per-unit rebate amount, in
                    accordance with this paragraph, for any covered
                    outpatient drug (except as provided under paragraph
                    (4)) first marketed after June 30, 1993--
                                ``(i) which is not marketed in any country
                            specified in section 802(b)(4)(A) of the
                            Federal Food, Drug, and Cosmetic Act and for
                            which the Secretary believes the average
                            manufacturer's retail price may be excessive,
                            or
                                ``(ii) which is marketed in one or more of
                            such countries, at prices significantly lower
                            than the average manufacturer retail price.
                        ``(B) Maximum rebate amount for drugs marketed in
                    certain countries.--The rebate negotiated pursuant to
                    this paragraph for a drug described in subparagraph
                    (A)(ii) may be an amount up to the difference between
                    the average manufacturer retail price and any price at
                    which the drug is available to wholesalers in a country
                    specified in such section 802(b)(4)(A).
                        ``(C) Factors to be considered.--In making
                    determinations with respect to the prices of a covered
                    drug described in subparagraph (A) and in negotiating a
                    rebate amount pursuant to this paragraph, the Secretary
                    shall take into consideration, as applicable and
                    appropriate, the prices of other drugs in the same
                    therapeutic class, cost information requested by the
                    Secretary and supplied by the manufacturer or estimated
                    by the Secretary, prescription volumes, economies of
                    scale, product stability, special manufacturing
                    requirements, prices of the drug in countries specified
                    in subparagraph (A)(i) (in the case of a drug described
                    in such subparagraph), and other relevant factors.
                        ``(D) Option to exclude coverage.--If the Secretary
                    is unable to negotiate with the manufacturer an
                    acceptable rebate amount with respect to a covered
                    outpatient drug pursuant to this paragraph, the
                    Secretary may exclude such drug from coverage under
                    this part.
                        ``(E) Effective date of exclusion from coverage.--
                    An exclusion of a drug from coverage pursuant to
                    subparagraph (D) shall be effective on and after--
                                ``(i) the date 6 months after the effective
                            date of marketing approval of such drug by the
                            Food and Drug Administration (but in no event
                            earlier than July 1, 1996), or
                                ``(ii) the date the manufacturer terminates
                            negotiations with the Secretary concerning the
                            rebate amount,
                    whichever is earlier.
                ``(4) No rebate required for generic drugs.--Paragraphs (1)
            through (3) shall not apply with respect to a covered
            outpatient drug that is not a single source drug or an
            innovator multiple source drug (as such terms are defined in
            section 1927(k)).
                ``(5) Deposit of rebates.--The Secretary shall deposit
            rebates under this section in the Federal Supplementary Medical
            Insurance Trust Fund established under section 1841.
        ``(d) Confidentiality of Information.--Notwithstanding any other
    provision of law, information disclosed by a manufacturer under this
    section is confidential and shall not be disclosed by the Secretary,
    except--
                ``(A) as the Secretary determines to be necessary to carry
            out this section,
                ``(B) to permit the Comptroller General to review the
            information provided, and
                ``(C) to permit the Director of the Congressional Budget
            Office to review the information provided.
        ``(e) Agreement to Give Equal Access to Discounts.--An agreement
    under this subsection by a manufacturer of covered outpatient drugs
    shall guarantee that the manufacturer will offer, to each wholesaler or
    retailer (or other purchaser representing a group of such wholesalers
    or retailers) that purchases such drugs on substantially the same terms
    (including such terms as prompt payment, cash payment, volume purchase,
    single-site delivery, the use of formularies by purchasers, and any
    other terms effectively reducing the manufacturer's costs) as any other
    purchaser (including any institutional purchaser) the same price for
    such drugs as is offered to such other purchaser. In determining a
    manufacturer's compliance with the previous sentence, there shall not
    be taken into account terms offered to the Department of Veterans
    Affairs, the Department of Defense, or any public program.
        ``(f) Definitions.--For purposes of this section--
                ``(1) Average manufacturer retail price.--The term `average
            manufacturer retail price' means, with respect to a covered
            outpatient drug of a manufacturer for a calendar quarter, the
            average price (inclusive of discounts for cash payment, prompt
            payment, volume purchases, and rebates (other than rebates
            under this section), but exclusive of nominal prices) paid to
            the manufacturer for the drug in the United States for drugs
            distributed to the retail pharmacy class of trade.
                ``(2) Average manufacturer non-retail price.--The term
            `average manufacturer non-retail price' means, with respect to
            a covered outpatient drug of a manufacturer for a calendar
            quarter, the weighted average price (inclusive of discounts for
            cash payment, prompt payment, volume purchases, and rebates
            (other than rebates under this section), but exclusive of
            nominal prices) paid to the manufacturer for the drug in the
            United States by hospitals and other institutional purchasers
            that purchase drugs for institutional use and not for resale.
                ``(3) Base quarter.--The term `base quarter' means, with
            respect to a covered outpatient drug of a manufacturer, the
            calendar quarter beginning April 1, 1993, or (if later) the
            first full calendar quarter during which the drug was marketed
            in the United States.
                ``(4) Covered drug.--The term `covered drug' includes each
            innovator multiple source drug and single source drug, as those
            terms are defined in section 1927(k)(7).
                ``(5) Manufacturer.--The term `manufacturer' means, with
            respect to a covered outpatient drug--
                        ``(A) the entity whose National Drug Code number
                    (as issued pursuant to section 510(e) of the Federal
                    Food, Drug, and Cosmetic Act) appears on the labeling
                    of the drug; or
                        ``(B) if the number described in subparagraph (A)
                    does not appear on the labeling of the drug, the person
                    named as the applicant in a human drug application (in
                    the case of a new drug) or the product license
                    application (in the case of a biological product) for
                    such drug approved by the Food and Drug
                    Administration.''.
        (b) Exclusions From Coverage.--Section 1862(a) of such Act (42
    U.S.C. 1395y(a)), as amended by sections 4034(b)(4) and 4118(b), is
    amended--
                (1) by striking ``and'' at the end of paragraph (15),
                (2) by striking the period at the end of paragraph (16) and
            inserting ``; or'', and
                (3) by inserting after paragraph (16) the following new
            paragraph:
                ``(17) A covered outpatient drug (as described in section
            1861(t))--
                        ``(A) furnished during a year for which the drug's
                    manufacturer does not have in effect a rebate agreement
                    with the Secretary that meets the requirements of
                    section 1850 for the year, or
                        ``(B) excluded from coverage during the year by the
                    Secretary pursuant to section 1850(c)(3)(D) (relating
                    to negotiated rebate amounts for certain new drugs).''.

    SEC. 2004. EXTENSION OF 25 PERCENT RULE FOR PORTION OF PREMIUM
                  ATTRIBUTABLE TO COVERED OUTPATIENT DRUGS.

        Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e)) is
    amended by adding at the end the following:
        ``(3) Notwithstanding the provisions of subsection (a), the portion
    of the monthly premium for each individual enrolled under this part for
    each month after December 1998 that is attributable to covered
    outpatient drugs shall be an amount equal to 50 percent of the portion
    of the monthly actuarial rate for enrollees age 65 and over, as
    determined under subsection (a)(1) and applicable to such month, that
    is attributable to covered outpatient drugs.''.

    SEC. 2005. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.

        (a) In General.--Section 1832(a)(2)(A) of the Social Security Act
    (42 U.S.C. 1395k(a)(2)(A)) is amended by inserting ``and home infusion
    drug therapy services'' before the semicolon.
        (b) Home Infusion Drug Therapy Services Defined.--Section 1861 of
    such Act (42 U.S.C. 1395x) is amended--
                (1) by redesignating the subsection (jj) inserted by
            section 4156(a)(2) of the Omnibus Budget Reconciliation Act of
            1990 as subsection (kk); and
                (2) by inserting after such subsection the following new
            subsection:

                     ``Home Infusion Drug Therapy Services

        ``(ll)(1) The term `home infusion drug therapy services' means the
    items and services described in paragraph (2) furnished to an
    individual who is under the care of a physician--
                ``(A) in a place of residence used as the individual's
            home,
                ``(B) by a qualified home infusion drug therapy provider
            (as defined in paragraph (3)) or by others under arrangements
            with them made by that provider, and
                ``(C) under a plan established and periodically reviewed by
            a physician.
        ``(2) The items and services described in this paragraph are such
    nursing, pharmacy, and related services (including medical supplies,
    intravenous fluids, delivery, and equipment) as are necessary to
    conduct safely and effectively a drug regimen through use of a covered
    home infusion drug (as defined in subsection (t)(5)), but do not
    include such covered home infusion drugs.
        ``(3) The term `qualified home infusion drug therapy provider'
    means any entity that the Secretary determines meets the following
    requirements:
                ``(A) The entity is capable of providing or arranging for
            the items and services described in paragraph (2) and covered
            home infusion drugs.
                ``(B) The entity maintains clinical records on all
            patients.
                ``(C) The entity adheres to written protocols and policies
            with respect to the provision of items and services.
                ``(D) The entity makes services available (as needed) seven
            days a week on a 24-hour basis.
                ``(E) The entity coordinates all service with the patient's
            physician.
                ``(F) The entity conducts a quality assessment and
            assurance program, including drug regimen review and
            coordination of patient care.
                ``(G) The entity assures that only trained personnel
            provide covered home infusion drugs (and any other service for
            which training is required to provide the service safely).
                ``(H) The entity assumes responsibility for the quality of
            services provided by others under arrangements with the entity.
                ``(I) In the case of an entity in any State in which State
            or applicable local law provides for the licensing of entities
            of this nature, the entity (i) is licensed pursuant to such
            law, or (ii) is approved, by the agency of such State or
            locality responsible for licensing entities of this nature, as
            meeting the standards established for such licensing.
                ``(J) The entity meets such other requirements as the
            Secretary may determine are necessary to assure the safe and
            effective provision of home infusion drug therapy services and
            the efficient administration of the home infusion drug therapy
            benefit.''.
        (c) Payment.--
                (1) In general.--Section 1833 of such Act (42 U.S.C. 1395l)
            is amended--
                        (A) in subsection (a)(2)(B), by striking ``or (E)''
                    and inserting ``(E), or (F)'',
                        (B) in subsection (a)(2)(D), by striking ``and'' at
                    the end,
                        (C) in subsection (a)(2)(E), by striking the
                    semicolon and inserting ``; and'',
                        (D) by inserting after subsection (a)(2)(E) the
                    following new subparagraph:
                        ``(F) with respect to home infusion drug therapy
                    services, the amounts described in section 1834(j);'',
                    and
                        (E) in the first sentence of subsection (b), by
                    striking ``services, (3)'' and inserting ``services and
                    home infusion drug therapy services, (3)''.
                (2) Amount described.--Section 1834 of such Act, as amended
            by section 13544(b)(i) of OBRA-1993, is amended by adding at
            the end the following new subsection:
        ``(j) Home Infusion Drug Therapy Services.--
                ``(1) In general.--With respect to home infusion drug
            therapy services, payment under this part shall be made in an
            amount equal to the lesser of the actual charges for such
            services or the fee schedule established under paragraph (2).
                ``(2) Establishment of fee schedule.--The Secretary shall
            establish by regulation before the beginning of 1996 and each
            succeeding year a fee schedule for home infusion drug therapy
            services for which payment is made under this part. A fee
            schedule established under this subsection shall be on a per
            diem basis.''.
                (3) Prohibition on certain referrals.--Section 1877(h)(6)
            of such Act (42 U.S.C. 1395nn(h)(6)), as amended by section
            13562(a) of OBRA-1993, is amended by adding at the end the
            following:
                        ``(L) Home infusion drug therapy services.''.
        (d) Certification.--Section 1835(a)(2) of such Act (42 U.S.C.
    1395n(a)(2)) is amended--
                (1) by striking ``and'' at the end of subparagraph (E),
                (2) by striking the period at the end of subparagraph (F)
            and inserting ``; and'', and
                (3) by inserting after subparagraph (F) the following:
                        ``(G) in the case of home infusion drug therapy
                    services, (i) such services are or were required
                    because the individual needed such services for the
                    administration of a covered home infusion drug, (ii) a
                    plan for furnishing such services has been established
                    and is reviewed periodically by a physician, and (iii)
                    such services are or were furnished while the
                    individual is or was under the care of a physician.''.
        (e) Certification of Home infusion Drug Therapy Providers;
    Intermediate Sanctions for Noncompliance.--
                (1) Treatment as provider of services.--Section 1861(u) of
            such Act (42 U.S.C. 1395x(u)) is amended by inserting ``home
            infusion drug therapy provider,'' after ``hospice program,''.
                (2) Consultation with state agencies and other
            organizations.--Section 1863 of such Act (42 U.S.C. 1395z) is
            amended by striking ``and (dd)(2)'' and inserting ``(dd)(2),
            and (ll)(3)''.
                (3) Use of state agencies in determining compliance.--
            Section 1864(a) of such Act (42 U.S.C. 1395aa(a)) is amended--
                        (A) in the first sentence, by striking ``an agency
                    is a hospice program'' and inserting ``an agency or
                    entity is a hospice program or a home infusion drug
                    therapy provider,''; and
                        (B) in the second sentence--
                                (i) by striking ``institution or agency''
                            and inserting ``institution, agency, or
                            entity'', and
                                (ii) by striking ``or hospice program'' and
                            inserting ``hospice program, or home infusion
                            drug therapy provider''.
                (4) Application of intermediate sanctions.--Section 1846 of
            such Act (42 U.S.C. 1395w-2) is amended--
                        (A) in the heading, by adding ``and for qualified
                    home infusion drug therapy providers'' at the end,
                        (B) in subsection (a), by inserting ``or that a
                    qualified home infusion drug therapy provider that is
                    certified for participation under this title no longer
                    substantially meets the requirements of section
                    1861(ll)(3)'' after ``under this part'', and
                        (C) in subsection (b)(2)(A)(iv), by inserting ``or
                    home infusion drug therapy services'' after ``clinical
                    diagnostic laboratory tests''.
        (f) Use of Regional Intermediaries in Administration of Benefit.--
    Section 1816 of such Act (42 U.S.C. 1395h) is amended by adding at the
    end the following new subsection:
        ``(k) With respect to carrying out functions relating to payment
    for home infusion drug therapy services and covered home infusion
    drugs, the Secretary may enter into contracts with agencies or
    organizations under this section to perform such functions on a
    regional basis.''.
        (g) Conforming Amendments Relating to Coverage of Enteral and
    Parenteral Nutrients, Supplies, and Equipment.--(1) Section
    1834(h)(4)(B) of such Act (42 U.S.C. 1395m(h)(4)(B)) is amended by
    striking ``, except that'' and all that follows through ``equipment''.
        (2) Section 1861(s)(8) of such Act (42 U.S.C. 1395x(s)(8)) is
    amended by inserting after ``dental'' the following: ``devices or
    enteral and parenteral nutrients, supplies, and equipment''.

    SEC. 2006. CONFORMING AMENDMENTS TO MEDICAID PROGRAM.

        (a) In General.--
                (1) Requiring medicare rebate as condition of coverage.--
            The first sentence of section 1927(a)(1) of the Social Security
            Act (42 U.S.C. 1396r-8(a)(1)) is amended--
                        (A) in the first sentence of paragraph (1), by
                    striking ``and paragraph (6)'' and inserting ``,
                    paragraph (6), and (for calendar quarters beginning on
                    or after January 1, 1996) paragraph (7)''; and
                        (B) by adding at the end the following new
                    paragraph:
                ``(7) Requirement relating to rebate agreements for covered
            outpatient drugs under medicare program.--A manufacturer meets
            the requirements of this paragraph for quarters in a year if
            the manufacturer has in effect an agreement with the Secretary
            under section 1850 for providing rebates for covered outpatient
            drugs furnished to individuals under title XVIII during the
            year.''.
                (2) Non-duplication of rebates.--Section 1927(b)(1) of such
            Act (42 U.S.C. 1396r-8(b)(1)) is amended--
                        (A) by redesignating subparagraph (B) as
                    subparagraph (C), and
                        (B) by inserting after subparagraph (A) the
                    following new subparagraph:
                        ``(B) Non-duplication of medicare rebate.--Covered
                    drugs furnished to an individual eligible for benefits
                    under part B of title XVIII and enrolled in a State
                    plan under this title shall not be included in the
                    determination of units of covered outpatient drugs
                    subject to rebate under this section.''.
        (b) Effective Date.--The amendments made by subsection (a) shall
    apply to quarters beginning on or after January 1, 1996.

    SEC. 2007. EFFECTIVE DATE.

        Except as otherwise provided, the amendments made by this subtitle
    shall apply to items and services furnished on or after January 1,
    1996.

                                                       Title II, Subtitle B

                           Subtitle B--Long-Term Care

       PART 1--STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR
                         INDIVIDUALS WITH DISABILITIES

    SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR
                  INDIVIDUALS WITH DISABILITIES.

        (a) In General.--Each State that has a plan for the home and
    community-based services to individuals with disabilities submitted to
    and approved by the Secretary under section 2102(b) is entitled to
    payment in accordance with section 2108.
        (b) No Individual Entitlement Established.--Nothing in this part
    shall be construed to create an entitlement for individuals or a
    requirement that a State with such an approved plan expend the entire
    amount of funds to which it is entitled in any year.

    SEC. 2102. STATE PLANS.

        (a) Plan Requirements.--In order to be approved under subsection
    (b), a State plan for home and community-based services for individuals
    with disabilities must meet the following requirements:
                (1) Eligibility.--
                        (A) In general.--Within the amounts provided by the
                    State (and under section 2108) for such plan, the plan
                    shall provide that services under the plan will be
                    available to individuals with disabilities (as defined
                    in section 2103(a)) in the State.
                        (B) Initial screening.--The plan shall provide a
                    process for the initial screening of individuals who
                    appear to have some reasonable likelihood of being an
                    individual with disabilities.
                        (C) Restrictions.--The plan may not limit the
                    eligibility of individuals with disabilities based on--
                                (i) income,
                                (ii) age,
                                (iii) geography,
                                (iv) nature, severity, or category of
                            disability,
                                (v) residential setting (other than an
                            institutional setting), or
                                (vi) other grounds specified by the
                            Secretary.
                        (D) Maintenance of effort.--The plan must provide
                    assurances that, in the case of an individual receiving
                    medical assistance for home and community-based
                    services under the State medicaid plan as of the date
                    of the enactment of this Act, the State will continue
                    to make available (either under this plan, under the
                    State medicaid plan, or otherwise) to such individual
                    an appropriate level of assistance for home and
                    community-based services, taking into account the level
                    of assistance provided as of such date and the
                    individual's need for home and community-based
                    services.
                (2) Services.--
                        (A) Specification.--Consistent with section 2104,
                    the plan shall specify--
                                (i) the services made available under the
                            plan,
                                (ii) the extent and manner in which such
                            services are allocated and made available to
                            individuals with disabilities, and
                                (iii) the manner in which services under
                            the plan are coordinated with each other and
                            with health and long-term care services
                            available outside the plan for individuals with
                            disabilities.
                        (B) Allocation.--The State plan--
                                (i) shall specify how it will allocate
                            services under the plan, during and after the
                            7-fiscal-year phase-in period beginning with
                            fiscal year 1996, among covered individuals
                            with disabilities, and
                                (ii) may not allocate such services based
                            on the income or other financial resources of
                            such individuals.
                        (C) Limitation on licensure or certification.--The
                    State may not subject consumer-directed providers of
                    personal assistance services to licensure,
                    certification, or other requirements which the
                    Secretary finds not to be necessary for the health and
                    safety of individuals with disabilities.
                        (D) Consumer choice.--To the extent possible, the
                    choice of an individual with disabilities (and that
                    individual's family) regarding which covered services
                    to receive and the providers who will provide such
                    services shall be followed.
                        (E) Requirement to serve low-income individuals.--
                    The plan shall assure that--
                                (i) the proportion of the population of
                            low-income individuals with disabilities in the
                            State that represents individuals with
                            disabilities who are provided home and
                            community-based services either under the plan,
                            under the State medicaid plan, or under both,
                            is not less than
                                (ii) the proportion of the population of
                            the State that represents individuals who are
                            low-income individuals.
                (3) Cost sharing.--The plan shall impose cost sharing with
            respect to covered services only in accordance with section
            2105.
                (4) Types of providers and requirements for
            participation.--The plan shall specify--
                        (A) the types of service providers eligible to
                    participate in the program under the plan, which shall
                    include consumer-directed providers, and
                        (B) any requirements for participation applicable
                    to each type of service provider.
                (5) Budget.--The plan shall specify how the State will
            manage Federal and State funds available under the plan for
            each fiscal year during the period beginning with fiscal year
            1996 and ending with fiscal year 2003 and for each 5-fiscal-
            year periods thereafter to serve all categories of individuals
            with disabilities and meet the requirements of this subsection.
            If the Secretary makes an adjustment under section
            2109(a)(5)(C) for a year, each State shall update the
            specifications under this paragraph to reflect the impact of
            such an adjustment.
                (6) Provider reimbursement.--
                        (A) Payment methods.--The plan shall specify the
                    payment methods to be used to reimburse providers for
                    services furnished under the plan. Such methods may
                    include retrospective reimbursement on a fee-for-
                    service basis, prepayment on a capitation basis,
                    payment by cash or vouchers to individuals with
                    disabilities, or any combination of these methods. In
                    the case of the use of cash or vouchers, the plan shall
                    specify how the plan will assure compliance with
                    applicable employment tax provisions.
                        (B) Payment rates.--The plan shall specify the
                    methods and criteria to be used to set payment rates
                    for services furnished under the plan (including rates
                    for cash payments or vouchers to individuals with
                    disabilities).
                        (C) Plan payment as payment in full.--The plan
                    shall restrict payment under the plan for covered
                    services to those providers that agree to accept the
                    payment under the plan (at the rates established
                    pursuant to subparagraph (B)) and any cost sharing
                    permitted or provided for under section 2105 as payment
                    in full for services furnished under the plan.
                (7) Quality assurance and safeguards.--The State plan shall
            provide for quality assurance and safeguards for applicants and
            beneficiaries in accordance with section 2106.
                (8) Advisory group.--The State plan shall--
                        (A) assure the establishment and maintenance of an
                    advisory group under section 2107(b), and
                        (B) include the documentation prepared by the group
                    under section 2107(b)(4).
                (9) Administration.--
                        (A) State agency.--The plan shall designate a State
                    agency or agencies to administer (or to supervise the
                    administration of) the plan.
                        (B) Administrative expenditures.--Effective
                    beginning with fiscal year 2003, the plan shall contain
                    assurances that not more than 10 percent of
                    expenditures under the plan for all quarters in any
                    fiscal year shall be for administrative costs.
                        (C) Coordination.--The plan shall specify how the
                    plan--
                                (i) will be integrated with the State
                            medicaid plan, titles V and XX of the Social
                            Security Act, programs under the Older
                            Americans Act of 1965, programs under the
                            Developmental Disabilities Assistance and Bill
                            of Rights Act, the Individuals with
                            Disabilities Education Act, and any other
                            Federal or State programs that provide services
                            or assistance targeted to individuals with
                            disabilities, and
                                (ii) will be coordinated with health plans.
                (10) Reports and information to secretary; audits.--The
            plan shall provide that the State will furnish to the
            Secretary--
                        (A) such reports, and will cooperate with such
                    audits, as the Secretary determines are needed
                    concerning the State's administration of its plan under
                    this part, including the processing of claims under the
                    plan, and
                        (B) such data and information as the Secretary may
                    require in order to carry out the Secretary's
                    responsibilities.
                (11) Use of state funds for matching.--The plan shall
            provide assurances that Federal funds will not be used to
            provide for the State share of expenditures under this part.
                (12) Health care worker redeployment requirement.--The plan
            provides for compliance with the requirement of section
            3074(a).
        (b) Approval of Plans.--The Secretary shall approve a plan
    submitted by a State if the Secretary determines that the plan--
                (1) was developed by the State after consultation with
            individuals with disabilities and representatives of groups of
            such individuals, and
                (2) meets the requirements of subsection (a).
    The approval of such a plan shall take effect as of the first day of
    the first fiscal year beginning after the date of such approval (except
    that any approval made before January 1, 1996, shall be effective as of
    January 1, 1996). In order to budget funds allotted under this part,
    the Secretary may establish a deadline for the submission of such a
    plan before the beginning of a fiscal year as a condition of its
    approval effective with that fiscal year.
        (c) Monitoring.--The Secretary shall monitor the compliance of
    State plans with the eligibility requirements of section 2103 and may
    monitor the compliance of such plans with other requirements of this
    part.
        (d) Regulations.--The Secretary shall issue such regulations as may
    be appropriate to carry out this part on a timely basis.

    SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.

        (a) In General.--In this part, the term ``individual with
    disabilities'' means any individual within one or more of the following
    4 categories of individuals:
                (1) Individuals requiring help with activities of daily
            living.--An individual of any age who--
                        (A) requires hands-on or standby assistance,
                    supervision, or cueing (as defined in regulations) to
                    perform three or more activities of daily living (as
                    defined in subsection (c)), and
                        (B) is expected to require such assistance,
                    supervision, or cueing over a period of at least 100
                    days.
                (2) Individuals with severe cognitive or mental
            impairment.--An individual of any age--
                        (A) whose score, on a standard mental status
                    protocol (or protocols) appropriate for measuring the
                    individual's particular condition specified by the
                    Secretary, indicates either severe cognitive impairment
                    or severe mental impairment, or both;
                        (B) who--
                                (i) requires hands-on or standby
                            assistance, supervision, or cueing with one or
                            more activities of daily living,
                                (ii) requires hands-on or standby
                            assistance, supervision, or cueing with at
                            least such instrumental activity (or
                            activities) of daily living related to
                            cognitive or mental impairment as the Secretary
                            specifies, or
                                (iii) displays symptoms of one or more
                            serious behavioral problems (that is on a list
                            of such problems specified by the Secretary)
                            which create a need for supervision to prevent
                            harm to self or others; and
                        (C) whose is expected to meet the requirements of
                    subparagraphs (A) and (B) over a period of at least 100
                    days.
                (3) Individuals with severe or profound mental
            retardation.--An individual of any age who has severe or
            profound mental retardation (as determined according to a
            protocol specified by the Secretary).
                (4) Severely disabled children.--An individual under 6
            years of age who--
                        (A) has a severe disability or chronic medical
                    condition,
                        (B) but for receiving personal assistance services
                    or any of the services described in section 2104(d)(1),
                    would require institutionalization in a hospital,
                    nursing facility, or intermediate care facility for the
                    mentally retarded, and
                        (C) is expected to have such disability or
                    condition and require such services over a period of at
                    least 100 days.
        (b) Determination.--
                (1) In general.--The determination of whether an individual
            is an individual with disabilities shall be made, by persons or
            entities specified under the State plan, using a uniform
            protocol consisting of an initial screening and assessment
            specified by the Secretary. A State may collect additional
            information, at the time of obtaining information to make such
            determination, in order to provide for the assessment and plan
            described in section 2104(b) or for other purposes. The State
            shall establish a fair hearing process for appeals of such
            determinations.
                (2) Periodic reassessment.--The determination that an
            individual is an individual with disabilities shall be
            considered to be effective under the State plan for a period of
            not more than 12 months (or for such longer period in such
            cases as a significant change in an individual's condition that
            may affect such determination is unlikely). A reassessment
            shall be made if there is a significant change in an
            individual's condition that may affect such determination.
        (c) Activity of Daily Living Defined.--In this part, the term
    ``activity of daily living'' means any of the following: eating,
    toileting, dressing, bathing, and transferring.

    SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE PLAN.

        (a) Specification.--
                (1) In general.--Subject to the succeeding provisions of
            this section, the State plan under this part shall specify--
                        (A) the home and community-based services available
                    under the plan to individuals with disabilities (or to
                    such categories of such individuals), and
                        (B) any limits with respect to such services.
                (2) Flexibility in meeting individual needs.--The services
            shall be specified in a manner that permits sufficient
            flexibility for providers to meet the needs of individuals with
            disabilities in a cost effective manner. Subject to subsection
            (e)(1)(B), such services may be delivered in an individual's
            home, a range of community residential arrangements, or outside
            the home.
        (b) Requirement for Needs Assessment and Plan of Care.--
                (1) In general.--The State plan shall provide for home and
            community-based services to an individual with disabilities
            only if--
                        (A) a comprehensive assessment of the individual's
                    need for home and community-based services (regardless
                    of whether all needed services are available under the
                    plan) has been made,
                        (B) an individualized plan of care based on such
                    assessment is developed, and
                        (C) such services are provided consistent with such
                    plan of care.
                (2) Involvement of individuals.--The individualized plan of
            care under paragraph (1)(B) for an individual with disabilities
            shall--
                        (A) be developed by qualified individuals
                    (specified under the State plan),
                        (B) be developed and implemented in close
                    consultation with the individual and the individual's
                    family,
                        (C) be approved by the individual (or the
                    individual's representative), and
                        (D) be reviewed and updated not less often than
                    every 6 months.
                (3) Plan of care.--The plan of care under paragraph (1)(B)
            shall--
                        (A) specify which services specified under the
                    individual plan will be provided under the State plan
                    under this part,
                        (B) identify (to the extent possible) how the
                    individual will be provided any services specified
                    under the plan of care and not provided under the State
                    plan, and
                        (C) specify how the provision of services to the
                    individual under the plan will be coordinated with the
                    provision of other health care services to the
                    individual.
            The State shall make reasonable efforts to identify and arrange
            for services described in subparagraph (B). Nothing in this
            subsection shall be construed as requiring a State (under the
            State plan or otherwise) to provide all the services specified
            in such a plan.
        (c) Mandatory Coverage of Personal Assistance Services.--The State
    plan shall include, in the array of services made available to each
    category of individuals with disabilities, both agency-administered and
    consumer-directed personal assistance services (as defined in
    subsection (g)).
        (d) Additional Services.--
                (1) Types of services.--Subject to subsection (e), services
            available under a State plan under this part shall include any
            (or all) of the following:
                        (A) Case management.
                        (B) Homemaker and chore assistance.
                        (C) Home modifications.
                        (D) Respite services.
                        (E) Assistive devices.
                        (F) Adult day services.
                        (G) Habilitation and rehabilitation.
                        (H) Supported employment.
                        (I) Home health services.
                        (J) Any other care or assistive services (approved
                    by the Secretary) that the State determines will help
                    individuals with disabilities to remain in their homes
                    and communities.
                (2) Criteria for selection of services.--The State plan
            shall specify--
                        (A) the methods and standards used to select the
                    types, and the amount, duration, and scope, of services
                    to be covered under the plan and to be available to
                    each category of individuals with disabilities, and
                        (B) how the types, and the amount, duration, and
                    scope, of services specified meet the needs of
                    individuals within each of the 4 categories of
                    individuals with disabilities.
        (e) Exclusions and Limitations.--
                (1) In general.--A State plan may not provide for coverage
            of--
                        (A) room and board,
                        (B) services furnished in a hospital, nursing
                    facility, intermediate care facility for the mentally
                    retarded, or other institutional setting specified by
                    the Secretary, or
                        (C) items and services to the extent coverage is
                    provided for the individual under a health plan or the
                    medicare program.
                (2) Taking into account informal care.--A State plan may
            take into account, in determining the amount and array of
            services made available to covered individuals with disability,
            the availability of informal care.
        (f) Payment for Services.--A State plan may provide for the use
    of--
                (1) vouchers,
                (2) cash payments directly to individuals with
            disabilities,
                (3) capitation payments to health plans, and
                (4) payment to providers,
    to pay for covered services.
        (g) Personal Assistance Services.--
                (1) In general.--In this section, the term ``personal
            assistance services'' means those services specified under the
            State plan as personal assistance services and shall include at
            least hands-on and standby assistance, supervision, and cueing
            with activities of daily living, whether agency-administered or
            consumer-directed (as defined in paragraph (2)).
                (2) Consumer-directed; agency-administered.--In this part:
                        (A) The term ``consumer-directed'' means, with
                    reference to personal assistance services or the
                    provider of such services, services that are provided
                    by an individual who is selected and managed (and, at
                    the individual's option, trained) by the individual
                    receiving the services.
                        (B) The term ``agency-administered'' means, with
                    respect to such services, services that are not
                    consumer-directed.

    SEC. 2105. COST SHARING.

        (a) No or Nominal Cost Sharing for Poorest.--The State plan may not
    impose any cost sharing (other than nominal cost sharing) for
    individuals with income (as determined under subsection (c)) less than
    150 percent of the official poverty line (referred to in section
    1902(25)(A)) applicable to a family of the size involved (determined
    without regard to section 1902(25)(B)).
        (b) Sliding Scale for Remainder.--The State plan shall impose cost
    sharing in the form of coinsurance (based on the amount paid under the
    State plan for a service)--
                (1) at a rate of 10 percent for individuals with
            disabilities with income not less than 150 percent, and less
            than 200 percent, of such official poverty line (as so
            applied);
                (2) at a rate of 20 percent for such individuals with
            income not less than 200 percent, and less than 250 percent, of
            such official poverty line (as so applied); and
                (3) at a rate of 25 percent for such individuals with
            income equal to at least 250 percent of such official poverty
            line (as so applied).
        (c) Determination of Income for Purposes of Cost Sharing.--The
    State plan shall specify the process to be used to determine the income
    of an individual with disabilities for purposes of this section. Such
    process shall be consistent with standards specified by the Secretary.

    SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.

        (a) Quality Assurance.--The State plan shall specify how the State
    will ensure and monitor the quality of services, including--
                (1) safeguarding the health and safety of individuals with
            disabilities,
                (2) the minimum standards for agency providers and how such
            standards will be enforced,
                (3) the minimum competency requirements for agency provider
            employees who provide direct services under this part and how
            the competency of such employees will be enforced,
                (4) obtaining meaningful consumer input, including consumer
            surveys that measure the extent to which participants receive
            the services described in the plan of care and participant
            satisfaction with such services,
                (5) participation in quality assurance activities, and
                (6) specifying the role of the long-term care ombudsman
            (under the Older Americans Act of 1965) and the Protection and
            Advocacy Agency (under the Developmental Disabilities
            Assistance and Bill of Rights Act) in assuring quality of
            services and protecting the rights of individuals with
            disabilities.
        (b) Safeguards.--
                (1) Confidentiality.--The State plan shall provide
            safeguards which restrict the use or disclosure of information
            concerning applicants and beneficiaries to purposes directly
            connected with the administration of the plan (including
            performance reviews under section 2602).
                (2) Safeguards against abuse.--The State plans shall
            provide safeguards against physical, emotional, or financial
            abuse or exploitation (specifically including appropriate
            safeguards in cases where payment for program benefits is made
            by cash payments or vouchers given directly to individuals with
            disabilities).

    SEC. 2107. ADVISORY GROUPS.

        (a) Federal Advisory Group.--
                (1) Establishment.--The Secretary shall establish an
            advisory group, to advise the Secretary and States on all
            aspects of the program under this part.
                (2) Composition.--The group shall be composed of
            individuals with disabilities and their representatives,
            providers, Federal and State officials, and local community
            implementing agencies. A majority of its members shall be
            individuals with disabilities and their representatives.
        (b) State Advisory Groups.--
                (1) In general.--Each State plan shall provide for the
            establishment and maintenance of an advisory group to advise
            the State on all aspects of the State plan under this part.
                (2) Composition.--Members of each advisory group shall be
            appointed by the Governor (or other chief executive officer of
            the State) and shall include individuals with disabilities and
            their representatives, providers, State officials, and local
            community implementing agencies. A majority of its members
            shall be individuals with disabilities and their
            representatives.
                (3) Selection of members.--Each State shall establish a
            process whereby all residents of the State, including
            individuals with disabilities and their representatives, shall
            be given the opportunity to nominate members to the advisory
            group.
                (4) Particular concerns.--Each advisory group shall--
                        (A) before the State plan is developed, advise the
                    State on guiding principles and values, policy
                    directions, and specific components of the plan,
                        (B) meet regularly with State officials involved in
                    developing the plan, during the development phase, to
                    review and comment on all aspects of the plan,
                        (C) participate in the public hearings to help
                    assure that public comments are addressed to the extent
                    practicable,
                        (D) document any differences between the group's
                    recommendations and the plan,
                        (E) document specifically the degree to which the
                    plan is consumer-directed, and
                        (F) meet regularly with officials of the designated
                    State agency (or agencies) to provide advice on all
                    aspects of implementation and evaluation of the plan.

    SEC. 2108. PAYMENTS TO STATES.

        (a) In General.--Subject to section 2102(a)(9)(B) (relating to
    limitation on payment for administrative costs), the Secretary, in
    accordance with the Cash Management Improvement Act, shall authorize
    payment to each State with a plan approved under this part, for each
    quarter (beginning on or after January 1, 1996), from its allotment
    under section 2109(b), an amount equal to--
                (1) the Federal matching percentage (as defined in
            subsection (b)) of amount demonstrated by State claims to have
            been expended during the quarter for home and community-based
            services under the plan for individuals with disabilities; plus
                (2) an amount equal to 90 percent of amount expended during
            the quarter under the plan for activities (including
            preliminary screening) relating to determination of eligibility
            and performance of needs assessment; plus
                (3) an amount equal to 90 percent (or, beginning with
            quarters in fiscal year 2003, 75 percent) of the amount
            expended during the quarter for the design, development, and
            installation of mechanical claims processing systems and for
            information retrieval; plus
                (4) an amount equal to 50 percent of the remainder of the
            amounts expended during the quarter as found necessary by the
            Secretary for the proper and efficient administration of the
            State plan.
        (b) Federal Matching Percentage.--
                (1) In general.--In subsection (a), the term ``Federal
            matching percentage'' means, with respect to a State, the
            reference percentage specified in paragraph (2) increased by 28
            percentage points, except that the Federal matching percentage
            shall in no case be less than 78 percent or more than 95
            percent.
                (2) Reference percentage.--
                        (A) In general.--The reference percentage specified
                    in this paragraph is 100 percent less the State
                    percentage specified in subparagraph (B), except that--
                                (i) the percentage under this paragraph
                            shall in no case be less than 50 percent or
                            more than 83 percent, and
                                (ii) the percentage for Puerto Rico, the
                            Virgin Islands, Guam, the Northern Mariana
                            Islands, and American Samoa shall be 50
                            percent.
                        (B) State percentage.--The State percentage
                    specified in this subparagraph is that percentage which
                    bears the same ratio to 45 percent as the square of the
                    per capita income of such State bears to the square of
                    the per capita income of the continental United States
                    (including Alaska) and Hawaii.
        (c) Payments on Estimates with Retrospective Adjustments.--The
    method of computing and making payments under this section shall be as
    follows:
                (1) The Secretary shall, prior to the beginning of each
            quarter, estimate the amount to be paid to the State under
            subsection (a) for such quarter, based on a report filed by the
            State containing its estimate of the total sum to be expended
            in such quarter, and such other information as the Secretary
            may find necessary.
                (2) From the allotment available therefore, the Secretary
            shall provide for payment of the amount so estimated, reduced
            or increased, as the case may be, by any sum (not previously
            adjusted under this section) by which the Secretary finds that
            the estimate of the amount to be paid the State for any prior
            period under this section was greater or less than the amount
            which should have been paid.
        (d) Application of Rules Regarding Limitations on Provider-Related
    Donations and Health Care Related Taxes.--The provisions of section
    1903(w) of the Social Security Act shall apply to payments to States
    under this section in the same manner as they apply to payments to
    States under section 1903(a) of such Act .

    SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO STATES.

        (a) Total Federal Budget.--
                (1) Fiscal years 1996 through 2003.--Subject to paragraph
            (5)(C), for purposes of this part, the total Federal budget for
            State plans under this part for each of fiscal years 1996
            through 2003 is the following:
                        (A) For fiscal year 1996, $4.5 billion.
                        (B) For fiscal year 1997, $7.8 billion.
                        (C) For fiscal year 1998, $11.0 billion.
                        (D) For fiscal year 1999, $14.7 billion.
                        (E) For fiscal year 2000, $18.7 billion.
                        (F) For fiscal year 2001, $26.7 billion.
                        (G) For fiscal year 2002, $35.5 billion.
                        (H) For fiscal year 2003, $38.3 billion.
                (2) Subsequent fiscal years.--For purposes of this part,
            the total Federal budget for State plans under this part for
            each fiscal year after fiscal year 2003 is the total Federal
            budget under this subsection for the preceding fiscal year
            multiplied by--
                        (A) a factor (described in paragraph (3))
                    reflecting the change in the CPI for the fiscal year,
                    and
                        (B) a factor (described in paragraph (4))
                    reflecting the change in the number of individuals with
                    disabilities for the fiscal year.
                (3) CPI increase factor.--For purposes of paragraph (2)(A),
            the factor described in this paragraph for a fiscal year is the
            ratio of--
                        (A) the annual average index of the consumer price
                    index for the preceding fiscal year, to--
                        (B) such index, as so measured, for the second
                    preceding fiscal year.
                (4) Disabled population factor.--For purposes of paragraph
            (2)(B), the factor described in this paragraph for a fiscal
            year is 100 percent plus (or minus) the percentage increase (or
            decrease) change in the disabled population of the United
            States (as determined for purposes of the most recent update
            under subsection (b)(3)(D)).
                (5) Additional funds due to medicaid offsets.--
                        (A) In general.--Each participating State must
                    provide the Secretary with information concerning
                    offsets and reductions in the medicaid program
                    resulting from home and community-based services
                    provided disabled individuals under this part, that
                    would have been paid for such individuals under the
                    State medicaid plan but for the provision of similar
                    services under the program under this part. At the time
                    a State first submits its plan under this title and
                    before each subsequent fiscal year (through fiscal year
                    2003), the State also must provide the Secretary with
                    such budgetary information (for each fiscal year
                    through fiscal year 2003), as the Secretary determines
                    to be necessary to carry out this paragraph.
                        (B) Reports.--Each State with a program under this
                    part shall submit such reports to the Secretary as the
                    Secretary may require in order to monitor compliance
                    with subparagraph (A).
                        (C) Adjustments to federal budget.--
                                (i) In general.--For each fiscal year
                            (beginning with fiscal year 1996 and ending
                            with fiscal year 2003) and based on a review of
                            information submitted under subparagraph (A),
                            the Secretary shall determine the amount by
                            which the total Federal budget under subsection
                            (a) will increase. The amount of such increase
                            for a fiscal year shall be limited to the
                            reduction in Federal expenditures of medical
                            assistance (as determined by Secretary) that
                            would have been made under title XIX of the
                            Social Security Act for home and community
                            based services for disabled individuals but for
                            the provision of similar services under the
                            program under this part.
                                (ii) Annual publication.--The Secretary
                            shall publish before the beginning of such
                            fiscal year, the revised total Federal budget
                            under this subsection for such fiscal year (and
                            succeeding fiscal years before fiscal year
                            2003).
                        (D) No duplicate payment.--No payment may be made
                    to a State under this section for any services to the
                    extent that the State received payment for such
                    services under section 1903(a) of the Social Security
                    Act.
                        (E) Construction.--Nothing in this subsection shall
                    be construed as requiring States to determine
                    eligibility for medical assistance under the State
                    medicaid plan on behalf of individuals receiving
                    assistance under this part.
        (b) Allotments to States.--
                (1) In general.--The Secretary shall allot to each State
            for each fiscal year an amount that bears the same ratio to the
            total Federal budget for the fiscal year (specified under
            paragraph (1) or (2) of subsection (a)) as the State allotment
            factor (under paragraph (2) for the State for the fiscal year)
            bears to the sum of such factors for all States for that fiscal
            year.
                (2) State allotment factor.--
                        (A) In general.--For each State for each fiscal
                    year, the Secretary shall compute a State allotment
                    factor equal to the sum of--
                                (i) the base allotment factor (specified in
                            subparagraph (B)), and
                                (ii) the low income allotment factor
                            (specified in subparagraph (C)),
                    for the State for the fiscal year.
                        (B) Base allotment factor.--The base allotment
                    factor, specified in this subparagraph, for a State for
                    a fiscal year is equal to the product of the following:
                                (i) Number of individuals with
                            disabilities.--The number of individuals with
                            disabilities in the State (determined under
                            paragraph (3)) for the fiscal year.
                                (ii) 80 percent of the national per capita
                            budget.--80 percent of the national average per
                            capita budget amount (determined under
                            paragraph (4)) for the fiscal year.
                                (iii) Wage adjustment factor.--The wage
                            adjustment factor (determined under paragraph
                            (5)) for the State for the fiscal year.
                                (iv) Federal matching rate.--The Federal
                            matching rate (determined under section
                            2108(b)) for the fiscal year.
                        (C) Low income allotment factor.--The low income
                    allotment factor, specified in this subparagraph, for a
                    State for a fiscal year is equal to the product of the
                    following:
                                (i) Number of individuals with
                            disabilities.--The number of individuals with
                            disabilities in the State (determined under
                            paragraph (3)) for the fiscal year.
                                (ii) 10 percent of the national per capita
                            budget.--10 percent of the national average per
                            capita budget amount (determined under
                            paragraph (4)) for the fiscal year.
                                (iii) Wage adjustment factor.--The wage
                            adjustment factor (determined under paragraph
                            (5)) for the State for the fiscal year.
                                (iv) Federal matching rate.--The Federal
                            matching rate (determined under section
                            2108(b)) for the fiscal year.
                                (v) Low income index.--The low income index
                            (determined under paragraph (6)) for the State
                            for the preceding fiscal year.
                (3) Number of individuals with disabilities.--The number of
            individuals with disabilities in a State for a fiscal year
            shall be determined as follows:
                        (A) Base.--The Secretary shall determine the number
                    of individuals in the State by age, sex, and income
                    category, based on the 1990 decennial census, adjusted
                    (as appropriate) by the March 1994 current population
                    survey.
                        (B) Disability prevalence level by population
                    category.--The Secretary shall determine, for each such
                    age, sex, and income category, the national average
                    proportion of the population of such category that
                    represents individuals with disabilities. The Secretary
                    may conduct periodic surveys in order to determine such
                    proportions.
                        (C) Base disabled population in a state.--The
                    number of individuals with disabilities in a State in
                    1994 is equal to the sum of the products, for such each
                    age, sex, and income category, of--
                                (i) the population of individuals in the
                            State in the category (determined under
                            subparagraph (A)), and
                                (ii) the national average proportion for
                            such category (determined under subparagraph
                            (B)).
                        (D) Update.--The Secretary shall determine the
                    number of individuals with disabilities in a State in a
                    fiscal year equal to the number determined under
                    subparagraph (C) for the State increased (or decreased)
                    by the percentage increase (or decrease) in the
                    disabled population of the State as determined under
                    the current population survey from 1994 to the year
                    before the fiscal year involved.
                (4) National per capita budget amount.--The national
            average per capita budget amount, for a fiscal year, is--
                        (A) the total Federal budget specified under
                    subsection (a) for the fiscal year; divided by
                        (B) the sum, for the fiscal year, of the numbers of
                    individuals with disabilities (determined under
                    paragraph (3)) for all the States for the fiscal year.
                (5) Wage adjustment factor.--The wage adjustment factor,
            for a State for a fiscal year, is equal to the ratio of--
                        (A) the average hourly wages for service workers
                    (other than household or protective services) in the
                    State, to
                        (B) the national average hourly wages for service
                    workers (other than household or protective services).
            The hourly wages shall be determined under this paragraph based
            on data from the most recent decennial census for which such
            data are available.
                (6) Low income index.--The low income index for each State
            for a fiscal year is the ratio, determined for the preceding
            fiscal year, of--
                        (A) the percentage of the State's population that
                    has income below 150 percent of the poverty level, to
                        (B) the percentage of the population of the United
                    States that has income below 150 percent of the poverty
                    level.
            Such percentages shall be based on data from the most recent
            decennial census for which such data are available, adjusted by
            data from the most recent current population survey as
            determined appropriate by the Secretary.
        (c) State Entitlement.--This part constitutes budget authority in
    advance of appropriations Acts, and represents the obligation of the
    Federal Government to provide for the payment to States of amounts
    described in subsection (a).

                   PART 2--MEDICAID NURSING HOME IMPROVEMENTS

    SEC. 2201. REFERENCE TO AMENDMENTS.

        For amendments to the medicaid program under title XIX of the
    Social Security Act to improve nursing home benefits under such
    program, see part 2 of subtitle C of title IV.

                    PART 3--PRIVATE LONG-TERM CARE INSURANCE

                         Subpart A--General Provisions

    SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION OR CERTAIN
                  REQUIREMENTS.

        (a) In General.--The Secretary, with the advice and assistance of
    the Advisory Council, as appropriate, shall promulgate regulations as
    necessary to implement the provisions of this part, in accordance with
    the timetable specified in subsection (b).
        (b) Timetable for Publication of Regulations.--
                (1) Federal register notice.--Within 120 days after the
            date a majority of the members are first appointed to the
            Advisory Council pursuant to section 2302, the Secretary shall
            publish in the Federal Register a notice setting forth the
            projected timetable for promulgation of regulations required
            under this part. Such timetable shall indicate which
            regulations are proposed to be published by the end of the
            first, second, and third years after appointment of the
            Advisory Council.
                (2) Final deadline.--All regulations required under this
            part shall be published by the end of the third year after
            appointment of the Advisory Council.
        (c) Provisions Effective Without Regard to Promulgation of
    Regulations.--
                (1) In general.--Notwithstanding any other provision of
            this part, insurers shall be required, not later than 6 months
            after the enactment of this Act, regardless of whether final
            implementing regulations have been promulgated by the
            Secretary, to comply with the following provisions of this
            part:
                        (A) Section 2321(c) (standard outline of coverage);
                        (B) Section 2321(d) (reporting to State insurance
                    commissioners);
                        (C) Section 2322(b) (preexisting condition
                    exclusions);
                        (D) Section 2322(c) (limiting conditions on
                    benefits);
                        (E) Section 2322(d) (inflation protection);
                        (F) Section 2324 (sales practices);
                        (G) Section 2325 (continuation, renewal,
                    replacement, conversion, and cancellation of policies);
                    and
                        (H) Section 2326 (payment of benefits).
                (2) Interim requirements.--Before the effective date of
            applicable regulations promulgated by the Secretary
            implementing requirements of this part as specified below, such
            requirements will be considered to be met--
                        (A) in the case of section 2321(c) (requiring a
                    standard outline of coverage), if the long-term care
                    insurance policy meets the requirements of section
                    6.G.(2) of the NAIC Model Act and of section 24 of the
                    NAIC Model Regulation;
                        (B) in the case of section 2321(d) (requiring
                    reporting to the State insurance commissioner), if the
                    insurer meets the requirements of section 14 of the
                    NAIC Model Regulation;
                        (C) in the case of section 2322(c)(1) (general
                    requirements concerning limiting conditions on
                    benefits), if such policy meets the requirements of
                    section 6.D. of the NAIC Model Act;
                        (D) in the case of section 2322(c)(2) (limiting
                    conditions on home health care or community-based
                    services) if such policy meets the requirements of
                    section 11 of the NAIC Model Regulations;
                        (E) in the case of section 2322(d) (concerning
                    inflation protection), if the insurer meets the
                    requirements of section 12 of the NAIC Model
                    Regulation;
                        (F) in the case of section 2324(b) (concerning
                    applications for the purchase of insurance), if the
                    insurer meets the requirements of section 10 of the
                    NAIC Model Regulation;
                        (G) in the case of section 2324(d) (concerning
                    compensation for the sale of policies), if the insurer
                    meets the requirements of the optional regulation
                    entitled ``Permitted Compensation Arrangements''
                    included in the NAIC Model Regulation;
                        (H) in the case of section 2324(g) (concerning
                    sales through employers or membership organizations),
                    if the insurer and the membership organization meet the
                    requirements of section 21.C. of the NAIC Model
                    Regulation;
                        (I) in the case of section 2324(h) (concerning
                    interstate sales of group policies), if the insurer and
                    the policy meet the requirements of section 5 of the
                    NAIC Model Act; and
                        (J) in the case of section 2325(f) (concerning
                    continuation, renewal, replacement, and conversion of
                    policies), if the insurer and the policy meet the
                    requirements of section 7 of the NAIC Model Regulation.

    SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL.

        (a) Appointment.--The Secretary shall appoint an advisory board to
    be known as the National Long-Term Care Insurance Advisory Council.
        (b) Composition.--
                (1) Number and qualifications of members.--The Advisory
            Council shall consist of 5 members, each of whom has
            substantial expertise in matters relating to the provision and
            regulation of long-term care insurance. At least one member
            shall have experience as a State insurance commissioner or
            legislator with expertise in policy development with respect
            to, and regulation of, long-term care insurance.
                (2) Terms of Office.--
                        (A) In general.--Except as otherwise provided in
                    this subsection, members shall be appointed for terms
                    of office of 5 years.
                        (B) Initial members.--Of the initial members of the
                    Council, one shall be appointed for a term of 5 years,
                    one for 4 years, one for 3 years, one for 2 years, and
                    one for 1 year.
                        (C) Two-term limit.--No member shall be eligible to
                    serve in excess of two consecutive terms, but may
                    continue to serve until such member's successor is
                    appointed.
                (3) Vacancies.--Any member appointed to fill a vacancy
            occurring before the expiration of the term of such member's
            predecessor shall be appointed for the remainder of such term.
                (4) Removal.--No member may be removed during the member's
            term of office except for just and sufficient cause.
        (c) Chairperson.--The Secretary shall appoint a Chairperson from
    among the members.
        (d) Compensation.--
                (1) In general.--Except as provided in paragraph (3),
            members of the Advisory Council, while serving on business of
            the Advisory Council, shall be entitled to receive compensation
            at a rate not to exceed the daily equivalent of the rate
            specified for level V of the Executive Schedule under section
            5316 of title 5, United States Code.
                (2) Travel.--Except as provided in paragraph (3), members
            of the Advisory Council, while serving on business of the
            Advisory Council away from their homes or regular places of
            business, may be allowed travel expenses (including per diem in
            lieu of subsistence) as authorized by section 5703(b) of title
            5, United States Code, for persons in the Government service
            employed intermittently.
                (3) Restriction.--A member of the Advisory Council may not
            be compensated under this section if the member is receiving
            compensation or travel expenses from another source while
            serving on business of the Advisory Council.
        (e) Meetings.--The Advisory Council shall meet not less often than
    2 times a year at the direction of the Chairperson.
        (f) Staff and Support.--
                (1) In general.--The Advisory Council shall have a salaried
            executive director appointed by the Chairperson, and staff
            appointed by the executive director with the approval of the
            Chairperson.
                (2) Federal entities.--The head of each Federal department
            and agency shall make available to the Advisory Council such
            information and other assistance as it may require to carry out
            its responsibilities.
        (g) General Responsibilities.--The Advisory Council shall--
                (1) provide advice, recommendations, and assistance to the
            Secretary on matters relating to long-term care insurance as
            specified in this part and as otherwise required by the
            Secretary;
                (2) collect, analyze, and disseminate information relating
            to long-term care insurance in order to increase the
            understanding of insurers, providers, consumers, and regulatory
            bodies of the issues relating to, and to facilitate
            improvements in, such insurance;
                (3) develop for the Secretary's consideration proposed
            models, standards, requirements, and procedures relating to
            long-term care insurance, as appropriate, with respect to the
            content and format of insurance policies, agent and insurer
            practices concerning the sale and servicing of such policies,
            and regulatory activities; and
                (4) monitor the development of the long-term care insurance
            market (including policies, marketing practices, pricing,
            eligibility and benefit preconditions, and claims payment
            procedures) and advise the Secretary concerning the need for
            regulatory changes.
        (h) Specific Matters for Consideration.--The Advisory Council shall
    consider, and provide views and recommendations to the Secretary
    concerning, the following matters relating to long-term care insurance:
                (1) Uniform terms, definitions, and formats.--The Advisory
            Council shall develop and propose to the Secretary uniform
            terminology, definitions, and formats for use in long-term care
            insurance policies.
                (2) Standard outline of coverage.--The Advisory Council
            shall develop and propose to the Secretary a standard format
            for use by all insurers offering long-term care policies for
            the outline of coverage required pursuant to section 2321(c).
                (3) Premiums.--The Advisory Council shall consider, and
            make recommendations to the Secretary concerning--
                        (A) whether Federal standards should be established
                    governing the amounts of and rates of increase in
                    premiums in long-term care policies, and
                        (B) if so, what factors should be taken into
                    account (and whether such factors should include the
                    age of the insured, actuarial information, cost of
                    care, lapse rates, financial reserve requirements,
                    insurer solvency, and tax treatment of premiums, and
                    benefits.
                (4) Upgrades of coverage.--The Advisory Council shall
            consider, and make recommendations to the Secretary concerning,
            whether Federal standards are needed governing the terms and
            conditions insurers may place on insured individuals'
            eligibility to obtain improved coverage (including any
            restrictions considered advisable with respect to premium
            increases, agent commissions, medical underwriting, and age
            rating).
                (5) Threshold conditions for payment of benefits.--The
            Advisory Council shall--
                        (A) consider, and make recommendations to the
                    Secretary concerning, the advisability of establishing
                    standardized sets of threshold conditions (based on
                    degrees of functional or cognitive impairment or on
                    other conditions) for payment of covered benefits;
                        (B) to the extent found appropriate, recommend to
                    the Secretary specific sets of threshold conditions to
                    be used for such purpose;
                        (C) develop and propose to the Secretary, with
                    respect to assessments of insured individuals' levels
                    of need for purposes of receipt of covered benefits--
                                (i) professional qualification standards
                            applicable to individuals making such
                            determinations; and
                                (ii) uniform procedures and formats for use
                            in performing and documenting such assessments.
                (6) Dispute resolution.--The Advisory Council shall
            consider, and make recommendations to the Secretary concerning,
            procedures that insurers and States should be required to
            implement to afford insured individuals a reasonable
            opportunity to dispute denial of benefits under a long-term
            care insurance policy.
                (7) Sales and servicing of policies.--The Advisory Council
            shall consider, and make recommendations to the Secretary
            concerning--
                        (A) training and certification to be required of
                    agents involved in selling or servicing long-term care
                    insurance policies;
                        (B) appropriate limits on commissions or other
                    compensation paid to agents for the sale or servicing
                    of such policies;
                        (C) sales practices that should be prohibited or
                    limited with respect to such policies (including any
                    financial limits that should be applied concerning the
                    individuals to whom such policies may be sold); and
                        (D) appropriate standards and requirements with
                    respect to sales of such policies by or through
                    employers and other entities, to employees, members, or
                    affiliates of such entities.
                (8) Continuing care retirement communities.--The Advisory
            Council shall consider, and make recommendations to the
            Secretary concerning, the extent to which the long-term care
            insurance aspects of continuing care retirement community
            arrangements should be subject to regulation under this part
            (and the Secretary, in consultation with the Secretary of the
            Treasury, shall consider such recommendations and promulgate
            appropriate regulations).
        (i) Activities.--In order to carry out its responsibilities under
    this part, the Advisory Council is authorized to--
                (1) consult individuals and public and private entities
            with experience and expertise in matters relating to long-term
            care insurance (and shall consult the National Association of
            Insurance Commissioners);
                (2) conduct meetings and hold hearings;
                (3) conduct research (either directly or under grant or
            contract);
                (4) collect, analyze, publish, and disseminate data and
            information (either directly or under grant or contract); and
                (5) develop model formats and procedures for insurance
            policies and marketing materials; and develop proposed
            standards, rules, and procedures for regulatory programs.
        (j) Authorization of Appropriations.--There are authorized to be
    appropriated, for activities of the Advisory Council, $1,500,000 for
    fiscal year 1995, and $2,000,000 for each succeeding fiscal year.

    SEC. 2303. RELATION TO STATE LAW.

        Nothing in this part shall be construed as preventing a State from
    applying standards that provide greater protection to insured
    individuals under long-term care insurance policies than the standards
    promulgated under this part, except that such State standards may not
    be inconsistent with any of the requirements of this part or of
    regulations hereunder.

    SEC. 2304. DEFINITIONS.

        For purposes of this part:
                (1) Activity of daily living.--The term ``activity of daily
            living'' means any of the following: eating, toileting,
            dressing, bathing, and transferring.
                (2) Adult day care.--The term ``adult day care'' means a
            program providing social and health-related services during the
            day to six or more adults with disabilities (or such smaller
            number as the Secretary may specify in regulations) in a
            community group setting outside the home.
                (3) Advisory council.--The term ``Advisory Council'' means
            the National Long-Term Care Insurance Advisory Council
            established pursuant to section 2302.
                (4) Certificate.--The term ``certificate'' means a document
            issued to an individual as evidence of such individual's
            coverage under a group insurance policy.
                (5) Continuing care retirement community.--The term
            ``continuing care retirement community'' means a residential
            community operated by a private entity that enters into
            contractual agreements with residents under which such entity
            guarantees, in consideration for residents' purchase of or
            periodic payment for membership in the community, to provide
            for such residents' future long-term care needs.
                (6) Designated representative.--The term ``designated
            representative'' means the person designated by an insured
            individual (or, if such individual is incapacitated, pursuant
            to an appropriate administrative or judicial procedure) to
            communicate with the insurer on behalf of such individual in
            the event of such individual's incapacitation.
                (7) Home health care.--The term ``home health care'' means
            medical and nonmedical services including such services as
            homemaker services, assistance with activities of daily living,
            and respite care provided to individuals in their residences.
                (8) Insured individual.--The term ``insured individual''
            means, with respect to a long-term care insurance policy, any
            individual who has coverage of benefits under such policy.
                (9) Insurer.--The term ``insurer'' means any person that
            offers or sells an individual or group long-term care insurance
            policy under which such person is at risk for all or part of
            the cost of benefits under the policy, and includes any agent
            of such person.
                (10) Long-term care insurance policy.--The term ``long-term
            care insurance policy'' has the meaning given that term in
            section 4 of the NAIC Model Act, except that the last sentence
            of such section shall not apply.
                (11) NAIC model act.--The term ``NAIC Model Act'' means the
            Long-Term Care Insurance Model Act published by the NAIC, as
            amended through January 1993.
                (12) NAIC model regulation.--The term ``NAIC Model
            Regulation'' means the Long-Term Care Insurance Model
            Regulation published by the NAIC, as amended through January
            1993.
                (13) Nursing facility.--The term ``nursing facility'' means
            a facility licensed by the State to provide to residents--
                        (A) skilled nursing care and related services for
                    residents who require medical or nursing care;
                        (B) rehabilitation services for the rehabilitation
                    of injured, disabled, or sick individuals, or
                        (C) on a regular basis, health-related care and
                    services to individuals who because of their mental or
                    physical condition require care and services (above the
                    level of room and board) which can be made available to
                    them only through institutional facilities.
                (14) Policyholder.--The term ``policyholder'' means the
            entity which is the holder of record of a group long-term care
            insurance policy.
                (15) Residential care facility.--The term ``residential
            care facility'' means a facility (including a nursing facility)
            that--
                        (A) provides to residents medical or personal care
                    services (including at a minimum assistance with
                    activities of daily living) in a setting other than an
                    individual or single-family home, and
                        (B) does not provide services of a higher level
                    than can be provided by a nursing facility.
                (16) Respite care.--The term ``respite care'' means the
            temporary provision of care (including assistance with
            activities of daily living) to an individual, in the
            individual's home or another setting in the community, for the
            purpose of affording such individual's unpaid caregiver a
            respite from the responsibilities of such care.
                (17) State insurance commissioner.--The term ``State
            insurance commissioner'' means the State official bearing such
            title, or, in the case of a jurisdiction where such title is
            not used, the State official with primary responsibility for
            the regulation of insurance.

                 Subpart B--Federal Standards and Requirements

    SEC. 2321. REQUIREMENTS TO FACILITATE UNDERSTANDING AND COMPARISON OF
                  BENEFITS.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations designed to standardize formats and terminology used in
    long-term care insurance policies, to require insurers to provide to
    customers and beneficiaries information on the range of public and
    private long-term care coverage available, and to establish such other
    requirements as may be appropriate to promote consumer understanding
    and facilitate comparison of benefits, which shall include at a minimum
    the requirements specified in this section.
        (b) Uniform Terms, Definitions, and Formats.--Insurers shall be
    required to use, in long-term care insurance policies, uniform
    terminology, definitions of terms, and formats, in accordance with
    regulations promulgated by the Secretary, after considering
    recommendations of the Advisory Council.
        (c) Standard Outline of Coverage.--
                (1) In general.--Insurers shall be required to develop for
            each long-term care insurance policy offered or sold, to
            include as a part of each such policy, and to make available to
            each potential purchaser and furnish to each insured individual
            and policyholder, an outline of coverage under such policy
            that--
                        (A) includes the elements specified in paragraph
                    (2),
                        (B) is in a uniform format (as prescribed by
                    Secretary on the basis of recommendations by the
                    Advisory Council),
                        (C) accurately and clearly reflects the contents of
                    the policy, and
                        (D) is updated periodically on such timetable as
                    may be required by the Secretary (or more frequently as
                    necessary to reflect significant changes in outlined
                    information).
                (2) Contents of outline.--The outline of coverage for each
            long-term care insurance policy shall include at least the
            following:
                        (A) Benefits.--A description of--
                                (i) the principal benefits covered,
                            including the extent of--
                                        (I) benefits for services furnished
                                    in residential care facilities, and
                                        (II) other benefits,
                                (ii) the principal exclusions from and
                            limitations on coverage,
                                (iii) the terms and conditions, if any,
                            upon which the insured individual may obtain
                            upgraded benefits, and
                                (iv) the threshold conditions for
                            entitlement to receive benefits.
                        (B) Continuation, renewal, and conversion.--A
                    statement of the terms under which a policy may be--
                                (i) returned (and premium refunded) during
                            an initial examination period,
                                (ii) continued in force or renewed,
                                (iii) converted to an individual policy (in
                            the case of coverage under a group policy),
                        (C) Cancellation.--A statement of the circumstances
                    in which a policy may be terminated, and the refund or
                    nonforfeitures benefits (if any) applicable in each
                    such circumstance, including--
                                (i) death of the insured individual,
                                (ii) nonpayment of premiums,
                                (iii) election by the insured individual
                            not to renew,
                                (iv) any other circumstance.
                        (D) Premium.--A statement of--
                                (i) the total annual premium, and the
                            portion of such premium attributable to each
                            covered benefit,
                                (ii) any reservation by the insurer of a
                            right to change premiums,
                                (iii) any limit on annual premium
                            increases,
                                (iv) any expected premium increases
                            associated with automatic or optional benefit
                            increases (including inflation protection), and
                                (v) any circumstances under which payment
                            of premium is waived.
                        (E) Declaration concerning summary.--A statement,
                    in bold face type on the face of the document in
                    language understandable to the average individual, that
                    the outline of coverage is a summary only, not a
                    contract of insurance, and that the policy contains the
                    contractual provisions that govern.
                        (F) Cost/value comparison.--
                                (i) Information on average costs (and
                            variation in such costs) for nursing facility
                            care (and such other care as the Secretary may
                            specify) and information on the value of
                            benefits relative to such costs.
                                (ii) A comparison of benefits, over a
                            period of at least 20 years, for policies with
                            and without inflation protection.
                                (iii) A declaration as to whether the
                            amount of benefits will increase over time,
                            and, if so, a statement of the type and amount
                            of, any limitations on, and any premium
                            increases for, such benefit increases.
                        (G) Tax treatment.--A statement of the Federal
                    income tax treatment of premiums and benefits under the
                    policy, as determined by the Secretary of the Treasury.
                        (H) Other.--Such other information as the Secretary
                    may require.
        (d) Reporting to State Insurance Commissioner.--Each insurer shall
    be required to report at least annually, to the State insurance
    commissioner of each State in which any long-term care insurance policy
    of the insurer is sold, such information, in such format, as the
    Secretary may specify with respect to each such policy, including--
                (1) the standard outline of coverage required pursuant to
            subsection (c);
                (2) lapse rates and replacement rates for such policies;
                (3) the ratio of premiums collected to benefits paid;
                (4) reserves;
                (5) written materials used in sale or promotion of such
            policy; and
                (6) any other information the Secretary may require.
        (e) Comparison of Long-Term Care Coverage Alternatives.--Each
    insurer shall be required to furnish to each individual before a long-
    term care insurance policy of the insurer is sold to the individual
    information on the conditions of eligibility for, and benefits under,
    each of the following:
                (1) Policies offered by the insurer.--The standard outline
            of coverage, and such other information as the Secretary may
            specify, with respect to each long-term care insurance policy
            offered by the insurer.
                (2) Comparison to other available private insurance.--
            Information, in such format as may be required under this part,
            on--
                        (A) benefits offered under long-term care insurance
                    policies of the insurer (and the threshold conditions
                    for receipt by an insured individual of each such
                    benefit); and
                        (B) additional benefits available under policies
                    offered by other private insurers (to the extent such
                    information is made available by the State insurance
                    commissioner).
                (3) Public programs; regional alliances.--Information
            furnished to the insurer, pursuant to section 2342(b)(2), by
            the State in which such individual resides, on conditions of
            eligibility for, and long-term care benefits (or the lack of
            such benefits) under--
                        (A) each public long-term care program administered
                    by the State,
                        (B) the Medicare programs under title XVIII of the
                    Social Security Act; and
                        (C) each regional alliance operating in the State.

    SEC. 2322. REQUIREMENTS RELATING TO COVERAGE.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations establishing requirements with respect to the terms of and
    benefits under long-term care insurance policies, which shall include
    at a minimum the requirements specified in this section.
        (b) Limitations on Preexisting Condition Exclusions.--
                (1) Initial policies.--A long-term care insurance policy
            may not exclude or limit coverage for any service or benefit,
            the need for which is the result of a medical condition or
            disability because an insured individual received medical
            treatment for, or was diagnosed as having, such condition
            before the issuance of the policy, unless--
                        (A) the insurer, prior to issuance of the policy,
                    determines and documents (with evidence including
                    written evidence that such condition has been treated
                    or diagnosed by a qualified health care professional)
                    that the insured individual had such condition during
                    the 6-month period (or such longer period as the
                    Secretary may specify) ending on the effective date of
                    the policy; and
                        (B) the need or such service or benefit begins
                    within 6 months (or such longer period as the Secretary
                    may specify) following the effective date of the
                    policy.
                (2) Replacement policies.--Solely for purposes of the
            requirements of paragraph (1), with respect to an insured
            individual, the effective date of a long-term care insurance
            policy issued to replace a previous policy, with respect to
            benefits which are the same as or substantially equivalent to
            benefits under such previous policy, shall be considered to be
            the effective date of such previous policy with respect to such
            individual.
        (c) Limiting Conditions on Benefits.--
                (1) In general.--A long-term care insurance policy may
            not--
                        (A) condition eligibility for benefits for a type
                    of service on the need for or receipt of any other type
                    of service (such as prior hospitalization or
                    institutionalization, or a higher level of care than
                    the care for which benefits are covered);
                        (B) condition eligibility for any benefit (where
                    the need for such benefit has been established by an
                    independent assessment of impairment) on any particular
                    medical diagnosis (including any acute condition) or on
                    one of a group of diagnoses;
                        (C) condition eligibility for benefits furnished by
                    licensed or certified providers on compliance by such
                    providers with conditions not required under Federal or
                    State law; or
                        (D) condition coverage of any service on provision
                    of such service by a provider, or in a setting,
                    providing a higher level of care than that required by
                    an insured individual.
                (2) Home care or community-based services.--A long-term
            care insurance policy that provides benefits for any home care
            or community-based services provided in a setting other than a
            residential care facility--
                        (A) may not limit such benefits to services
                    provided by registered nurses or licensed practical
                    nurses;
                        (B) may not limit such benefits to services
                    furnished by persons or entities participating in
                    programs under titles XVIII and XIX of the Social
                    Security Act and in part 1 of this subtitle; and
                        (C) must provide, at a minimum, benefits for
                    personal assistance with activities of daily living,
                    home health care, adult day care, and respite care.
                (3) Nursing facility services.--A long-term care insurance
            policy that provides benefits for any nursing facility
            services--
                        (A) must provide benefits for such services
                    provided by all types of nursing facilities licensed by
                    the State, and
                        (B) may provide benefits for care in other
                    residential facilities.
                (4) Prohibition on discrimination by diagnosis.--A long-
            term care insurance policy may not provide for treatment of--
                        (A) Alzheimer's disease or any other progressive
                    degenerative dementia of an organic origin,
                        (B) any organic or inorganic mental illness,
                        (C) mental retardation or any other cognitive or
                    mental impairment, or
                        (D) HIV infection or AIDS,
            different from the treatment of any other medical condition for
            purposes of determining whether threshold conditions for the
            receipt of benefits have been met, or the amount of benefits
            under the policy.
        (d) Inflation Protection.--
                (1) Requirement to offer.--An insurer offering for sale any
            long-term care insurance policy shall be required to afford the
            purchaser the option to obtain coverage under such policy (upon
            payment of increased premiums) of annual increases in benefits
            at rates in accordance with paragraph (2).
                (2) Rate increase in benefits.--For purposes of paragraph
            (1), the benefits under a policy for each year shall be
            increased by a percentage of the full value of benefits under
            the policy for the previous year, which shall be not less than
            5 percent of such value (or such other rate of increase as may
            be determined by the Secretary to be adequate to offset
            increases in the costs of long-term care services for which
            coverage is provided under the policy).
                (3) Requirement of written rejection.--Inflation protection
            in accordance with paragraph (1) may be excluded from the
            coverage under a policy only if the insured individual (or, if
            different, the person responsible for payment of premiums) has
            rejected in writing the option to obtain such coverage.

    SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations establishing requirements applicable to premiums for long-
    term care insurance policies, which shall include at a minimum the
    requirements specified in this section.
        (b) Limitations on Rates and Increases.--The Secretary, after
    considering recommendations of the Advisory Council, may establish by
    regulation such standards and requirements as may be determined
    appropriate with respect to--
                (1) mandatory or optional State procedures for review and
            approval of premium rates and rate increases or decreases;
                (2) limitations on the amount of initial premiums, or on
            the rate or amount of premium increases;
                (3) the factors to be taken into consideration by an
            insurer in proposing, and by a State in approving or
            disapproving, premium rates and increases; and
                (4) the extent to which consumers should be entitled to
            participate or be represented in the rate-setting process and
            to have access to actuarial and other information relied on in
            setting rates.

    SEC. 2324. REQUIREMENTS RELATING TO SALES PRACTICES.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations establishing requirements applicable to the sale or
    offering for sale of long-term care insurance policies, which shall
    include at a minimum the requirements specified in this section.
        (b) Applications.--Any insurer that offers any long-term care
    insurance policy (including any group policy) shall be required to meet
    such requirements with respect to the content, format, and use of
    application forms for long-term care insurance as the Secretary may
    require by regulation.
        (c) Agent Training and Certification.--An insurer may not sell or
    offer for sale a long-term care insurance policy through an agent who
    does not comply with minimum standards with respect to training and
    certification established by the Secretary after consideration of
    recommendations by the Advisory Council.
        (d) Compensation for Sale of Policies.--Compensation by an insurer
    to an agent or agents for the sale of an original long-term care
    insurance policy, or for servicing or renewing such a policy, may not
    exceed amounts (or percentage shares of premiums or other reference
    amounts) specified by the Secretary in regulations, after considering
    recommendations of the Advisory Council.
        (e) Prohibited Sales Practices.--The following practices by
    insurers shall be prohibited with respect to the sale or offer for sale
    of long-term care insurance policies:
                (1) False and misleading representations.--Making any
            statement or representation--
                        (A) which the insurer knows or should know is false
                    or misleading (including the inaccurate, incomplete, or
                    misleading comparison of long-term care insurance
                    policies or insurers), and
                        (B) which is intended, or would be likely, to
                    induce any person to purchase, retain, terminate,
                    forfeit, permit to lapse, pledge, assign, borrow
                    against, convert, or effect a change with respect to,
                    any long-term care insurance policy.
                (2) Inaccurate completion of medical history.--Making or
            causing to be made (by any means including failure to inquire
            about or to record information relating to preexisting
            conditions) statements or omissions, in records detailing the
            medical history of an applicant for insurance, which the
            insurer knows or should know render such records false,
            incomplete, or misleading in any way material to such
            applicant's eligibility for or coverage under a long-term care
            insurance policy.
                (3) Undue pressure.--Employing force, fright, threat, or
            other undue pressure, whether explicit or implicit, which is
            intended, or would be likely, to induce the purchase of a long-
            term care insurance policy.
                (4) Cold lead advertising.--Using, directly or indirectly,
            any method of contacting consumers (including any method
            designed to induce consumers to contact the insurer or agent)
            for the purpose of inducing the purchase of long-term care
            insurance (regardless of whether such purpose is the sole or
            primary purpose of the contact) without conspicuously
            disclosing such purpose.
        (f) Prohibition on Sale of Duplicate Benefits.--An insurer or agent
    may not sell or issue to an individual a long-term care insurance
    policy that the insurer or agent knows or should know provides for
    coverage that duplicates coverage already provided in another long-term
    care insurance policy held by such individual (unless the policy is
    intended to replace such other policy).
        (g) Sales Through Employers or Membership Organizations.--
                (1) Requirements concerning such arrangements.--In any case
            where an employer, organization, association, or other entity
            (referred to as a ``membership entity'') endorses a long-term
            care insurance policy to, or such policy is marketed or sold
            through such membership entity to, employees, members, or other
            individuals affiliated with such membership entity--
                        (A) the insurer offering such policy shall not
                    permit its marketing or sale through such entity unless
                    the requirements of this subsection are met; and
                        (B) a membership entity that receives any
                    compensation for such sale, marketing, or endorsement
                    of such policy shall be considered the agent of the
                    insurer for purposes of this part.
                (2) Disclosure and information requirements.--A membership
            entity that endorses a long-term care insurance policy, or
            through which such policy is sold, to individuals affiliated
            with such entity, shall--
                        (A) disclose prominently, in a form and manner
                    designed to ensure that each such individual who
                    receives information concerning any such policy through
                    such entity is aware of and understands such
                    disclosure--
                                (i) the manner in which the insurer and
                            policy were selected;
                                (ii) the extent (if any) to which a person
                            independent of the insurer with expertise in
                            long-term care insurance analyzed the
                            advantages and disadvantages of such policy
                            from the standpoint of such individuals
                            (including such matters as the merits of the
                            policy compared to other available benefit
                            packages, and the financial stability of the
                            insurer), and the results of any such analysis;
                                (iii) any organizational or financial ties
                            between the entity (or a related entity) and
                            the insurer (or a related entity); and
                                (iv) the nature of compensation
                            arrangements (if any) and the amount of
                            compensation (including all fees, commissions,
                            and other forms of financial support) for the
                            endorsement or sale of such policy; and
                        (B) make available to such individuals, either
                    directly or through referrals, appropriate counseling
                    to assist such individuals to make educated and
                    informed decisions concerning the purchase of such
                    policies.

    SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CONVERSION, AND
                  CANCELLATION OF POLICIES.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations establishing requirements applicable to the renewal,
    replacement, conversion, and cancellation of long-term care insurance
    policies, which shall include at a minimum the requirements specified
    in this section.
        (b) Insured's Right to Cancel During Examination Period.--Each
    individual insured (or, if different, each individual liable for
    payment of premiums) under a long-term care insurance policy shall have
    the unconditional right to return the policy within 30 days after the
    date of its issuance and delivery, and to obtain a full refund of any
    premium paid.
        (c) Insurer's Right to Cancel (or Deny Benefits) Based on Fraud or
    Nondisclosure.--An insurer shall have the right to cancel a long-term
    care insurance policy, or to refuse to pay a claim for benefits, based
    on evidence that the insured falsely represented or failed to disclose
    information material to the determination of eligibility to purchase
    such insurance, but only if--
                (1) the insurer presents written documentation, developed
            at the time the insured applied for such insurance, of the
            insurer's request for the information thus withheld or
            misrepresented, and the insured individual's response to such
            request;
                (2) the insurer presents medical records or other evidence
            showing that the insured individual knew or should have known
            that such response was false, incomplete, or misleading;
                (3) notice of cancellation is furnished to the insured
            individual before the date 3 years after the effective date of
            the policy (or such earlier date as the Secretary may specify
            in regulations); and
                (4) the insured individual is afforded the opportunity to
            review and refute the evidence presented by the insurer
            pursuant to paragraphs (1) and (2).
        (d) Insurer's Right to Cancel for Nonpayment of Premiums.--
                (1) In general.--Insurers shall have the right to cancel
            long-term care insurance policies for nonpayment of premiums,
            subject to the provisions of this subsection and subsection (e)
            (relating to nonforfeiture).
                (2) Notice and acknowledgement.--
                        (A) In general.--The insurer may not cancel
                    coverage of an insured individual until--
                                (i) the insurer, not earlier than the date
                            when such payment is 30 days past due, has
                            given written notice to the insured individual
                            (by registered letter or the equivalent) of
                            such intent, and
                                (ii) 30 days have elapsed since the insurer
                            obtained written acknowledgment of receipt of
                            such notice from the insured individual (or the
                            designated representative, at the insured
                            individual's option or in the case of an
                            insured individual determined to be
                            incapacitated in accordance with paragraph
                            (4)).
                        (B) Additional Requirement for Group Policies.--In
                    the case of a group long-term care insurance policy,
                    the notice and acknowledgement requirements of
                    subparagraph (A) apply with respect to the policyholder
                    and to each insured individual.
                (3) Reinstatement of coverage of incapacitated
            individuals.--In any case where the coverage of an individual
            under a long-term care insurance policy has been canceled
            pursuant to paragraph (2), the insurer shall be required to
            reinstate full coverage of such individual under such policy,
            retroactive to the effective date of cancellation, if the
            insurer receives from such individual (or the designated
            representative of such individual), within 5 months after such
            date--
                        (A) evidence of a determination of such
                    individual's incapacitation in accordance with
                    paragraph (4) (whether made before or after such date),
                    and
                        (B) payment of all premiums due and past due, and
                    all charges for late payment.
                (4) Determination of incapacitation.--For purposes of this
            subsection, the term ``determination of incapacitation'' means
            a determination by a qualified health professional (in
            accordance with such requirements as the Secretary may
            specify), that an insured individual has suffered a cognitive
            impairment or loss of functional capacity which could
            reasonably be expected to render the individual permanently or
            temporarily unable to deal with business or financial matters.
            The standard used to make such determination shall not be more
            stringent than the threshold conditions for the receipt of
            covered benefits.
                (5) Designation of representative.--The insurer shall be
            required--
                        (A) to require the insured individual, at the time
                    of sale or issuance of a long-term care insurance
                    policy--
                                (i) to designate a representative for
                            purposes of communication with the insurer
                            concerning premium payments in the event the
                            insured individual cannot be located or is
                            incapacitated, or
                                (ii) to complete a signed and dated
                            statement declining to designate a
                            representative, and
                        (B) to obtain from the insured individual, at the
                    time of each premium payment (but in no event less
                    often than once in each 12-month period) reconfirmation
                    or revision of such designation or declination.
        (e) Nonforfeiture.--
                (1) In general.--The Secretary, after consideration of
            recommendations by the Advisory Council, shall by regulation
            require appropriate nonforfeiture benefits with respect to each
            long-term care insurance policy that lapses for any reason
            (including nonpayment of premiums, cancellation, or failure to
            renew, but excluding lapses due to death) after remaining in
            effect beyond a specified minimum period.
                (2) Nonforfeiture benefits.--The standards established
            under this subsection shall require that the amount or
            percentage of nonforfeiture benefits shall increase
            proportionally with the amount of premiums paid by a
            policyholder.
        (f) Continuation, Renewal, Replacement, and Conversion of
    Policies.--
                (1) In general.--Insurers shall not be permitted to cancel,
            or refuse to renew (or replace with a substantial equivalent),
            any long-term care insurance policy for any reason other than
            for fraud or material misrepresentation (as provided in
            subsection (c)) or for nonpayment of premium (as provided in
            subsection (d)).
                (2) Duration and renewal of policies.--Each long-term care
            insurance policy shall contain a provision that clearly
            states--
                        (A) the duration of the policy,
                        (B) the right of the insured individual (or
                    policyholder) to renewal (or to replacement with a
                    substantial equivalent),
                        (C) the date by which, and the manner in which, the
                    option to renew must be exercised, and
                        (D) any applicable restrictions or limitations
                    (which may not be inconsistent with the requirements of
                    this part).
                (3) Replacement of policies.--
                        (A) In general.--Except as provided in subparagraph
                    (B), an insurer shall not be permitted to sell any
                    long-term care insurance policy as a replacement for
                    another such policy unless coverage under such
                    replacement policy is available to an individual
                    insured for benefits covered under the previous policy
                    to the same extent as under such previous policy
                    (including every individual insured under a group
                    policy) on the date of termination of such previous
                    policy, without exclusions or limitations that did not
                    apply under such previous policy.
                        (B) Insured's option to reduce coverage.--In any
                    case where an insured individual covered under a long-
                    term care insurance policy knowingly and voluntarily
                    elects to substitute for such policy a policy that
                    provides less coverage, substitute policy shall be
                    considered a replacement policy for purposes of this
                    part.
                (3) Continuation and conversion rights with respect to
            group policies.--
                        (A) In general.--Insurers shall be required to
                    include in each group long-term care insurance policy,
                    a provision affording to each insured individual, when
                    such policy would otherwise terminate, the opportunity
                    (at the insurer's option, subject to approval of the
                    State insurance commissioner) either to continue or to
                    convert coverage under such policy in accordance with
                    this paragraph.
                        (B) Rights of related individuals.--In the case of
                    any insured individual whose eligibility for coverage
                    under a group policy is based on relationship to
                    another individual, the insurer shall be required to
                    continue such coverage upon termination of the
                    relationship due to divorce or death.
                        (C) Continuation of coverage.--A group policy shall
                    be considered to meet the requirements of this
                    paragraph with respect to rights of an insured
                    individual to continuation of coverage if coverage of
                    the same (or substantially equivalent) benefits for
                    such individual under such policy is maintained,
                    subject only to timely payment of premiums.
                        (D) Conversion of coverage.--A group policy shall
                    be considered to meet the requirements of this
                    paragraph with respect to conversion if it entitles
                    each individual who has been continuously covered under
                    the policy for at least 6 months before the date of the
                    termination to issuance of a replacement policy
                    providing benefits identical to, substantially
                    equivalent to, or in excess of, the benefits under such
                    terminated group policy--
                                (i) without requiring evidence of
                            insurability with respect to benefits covered
                            under such previous policy, and
                                (ii) at premium rates no higher than would
                            apply if the insured individual had initially
                            obtained coverage under such replacement policy
                            on the date such insured individual initially
                            obtained coverage under such group policy.
                (4) Treatment of substantial equivalence.--
                        (A) Under secretary's guidelines.--The Secretary,
                    after considering recommendations by the Advisory
                    Council, shall develop guidelines for comparing long-
                    term care insurance policies for the purpose of
                    determining whether benefits under such policies are
                    substantially equivalent.
                        (B) Before effective date of secretary's
                    guidelines.--During the period prior to the effective
                    date of guidelines published by the Secretary under
                    this paragraph, insurers shall comply with standards
                    for determinations of substantial equivalence
                    established by State insurance commissioners.
                (5) Additional requirements.--Insurers shall comply with
            such other requirements relating to continuation, renewal,
            replacement, and conversion of long-term care insurance
            policies as the Secretary may establish.

    SEC. 2326. REQUIREMENTS RELATING TO PAYMENT OF BENEFITS.

        (a) In General.--The Secretary, after considering (where
    appropriate) recommendations of the Advisory Council, shall promulgate
    regulations establishing requirements with respect to claims for and
    payment of benefits under long-term care insurance policies, which
    shall include at a minimum the requirements specified in this section.
        (b) Standards Relating to Threshold Conditions for Receipt of
    Covered Benefits.--Each long-term care insurance policy shall meet the
    following requirements with respect to identification of, and
    determination of whether an insured individual meets, the threshold
    conditions for receipt of benefits covered under such policy:
                (1) Declaration of threshold conditions.--
                        (A) In general.--The policy shall specify the level
                    (or levels) of functional or cognitive mental
                    impairment (or combination of impairments) required as
                    a threshold condition of entitlement to receive
                    benefits under the policy (which threshold condition or
                    conditions shall be consistent with any regulations
                    promulgated by the Secretary pursuant to subsection
                    (B)).
                        (B) Secretarial responsibility.--The Secretary
                    (after considering the views of the Advisory Council on
                    current practices of insurers concerning, and the
                    appropriateness of standardizing, threshold conditions)
                    may promulgate such regulations as the Secretary finds
                    appropriate establishing standardized thresholds to be
                    used under such policies as preconditions for varying
                    levels of benefits.
                (2) Independent professional assessment.--The policy shall
            provide for a procedure for determining whether the threshold
            conditions specified under paragraph (1) have been met with
            respect to an insured individual which--
                        (A) applies such uniform assessment standards,
                    procedures, and formats as the Secretary may specify,
                    after consideration of recommendations by the Advisory
                    Council;
                        (B) permits an initial evaluation (or, if the
                    initial evaluation was performed by a qualified
                    independent assessor selected by the insurer, a
                    reevaluation) to be made by a qualified independent
                    assessor selected by the insured individual (or
                    designated representative) as to whether the threshold
                    conditions for receipt of benefits have been met;
                        (C) permits the insurer the option to obtain a
                    reevaluation by a qualified independent assessor
                    selected and reimbursed by the insurer;
                        (D) provides that the insurer will consider that
                    the threshold conditions have been met in any case
                    where--
                                (i) the assessment under subparagraph (B)
                            concluded that such conditions had been met,
                            and the insurer declined the option under
                            subparagraph (C), or
                                (ii) assessments under both subparagraphs
                            (B) and (C) concluded that such conditions had
                            been met; and
                        (E) provides for final resolution of the question
                    by a State agency or other impartial third party in any
                    case where assessments under subparagraphs (B) and (C)
                    reach inconsistent conclusions.
                (3) Qualified independent assessor.--For purposes of
            paragraph (2), the term ``qualified independent assessor''
            means a licensed or certified professional, as appropriate,
            who--
                        (A) meets such standards with respect to
                    professional qualifications as may be established by
                    the Secretary, after consulting with the Secretary of
                    the Treasury, and
                        (B) has no significant or controlling financial
                    interest in, is not an employee of, and does not derive
                    more than 5 percent of gross income from, the insurer
                    (or any provider of services for which benefits are
                    available under the policy and in which the insurer has
                    a significant or controlling financial interest).
        (c) Requirements Relating to Claims for Benefits.--Insurers shall
    be required--
                (1) to promptly pay or deny claims for benefits submitted
            by (or on behalf of) insured individuals who have been
            determined pursuant to subsection (b) to meet the threshold
            conditions for payment of benefits;
                (2) to provide an explanation in writing of the reasons for
            payment, partial payment, or denial of each such claim; and
                (3) to provide an administrative procedure under which an
            insured individual may appeal the denial of any claim.

                             Subpart C--Enforcement

    SEC. 2342. STATE PROGRAMS FOR ENFORCEMENT OF STANDARDS.

        (a) Requirement for State Programs Implementing Federal
    Standards.--In order for a State to be eligible for grants under this
    subpart, the State must have in effect a program (including such laws
    and procedures as may be necessary) for the regulation of long-term
    care insurance which the Secretary has determined--
                (1) includes the elements required under this subpart, and
                (2) is designed to ensure the compliance of long-term care
            insurance policies sold in the State, and insurers offering
            such policies and their agents, with the requirements
            established pursuant to subpart B.
        (b) Activities Under State Program.--A State program approved under
    this subpart shall provide for the following procedures and activities:
                (1) Monitoring of insurers and policies.--Procedures for
            ongoing monitoring of the compliance of insurers doing business
            in the State, and of long-term care insurance policies sold in
            the State, with requirements under this part, including at
            least the following:
                        (A) Policy review and certification.--A program for
                    review and certification (and annual recertification)
                    of each such policy sold in the State.
                        (B) Reporting by insurers.--Requirements of annual
                    reporting by insurers selling or servicing long-term
                    care insurance policies in the State, in such form and
                    containing such information as the State may require to
                    determine whether the insurer (and policies) are in
                    compliance with requirements under this part.
                        (C) Data collection.--Procedures for collection,
                    from insurers, service providers, insured individuals,
                    and others, of information required by the State for
                    purposes of carrying out its responsibilities under
                    this part (including authority to compel compliance of
                    insurers with requests for such information).
                        (D) Marketing oversight.--Procedures for monitoring
                    (through sampling or other appropriate procedures) the
                    sales practices of insurers and agents, including
                    review of marketing literature.
                        (E) Oversight of administration of benefits.--
                    Procedures for monitoring (through sampling or other
                    appropriate procedures) insurers' administration of
                    benefits, including monitoring of--
                                (i) determinations of insured individuals'
                            eligibility to receive benefits, and
                                (ii) disposition of claims for payment.
                (2) Information to insurers.--Procedures for furnishing, to
            insurers selling or servicing any long-term care insurance
            policies in the State, information on conditions of eligibility
            for, and benefits under, each public long-term care program
            administered by the State, in order to enable them to comply
            with the requirement under section 2321(e)(3).
                (3) Consumer complaints and dispute resolution.--
            Administrative procedures for the investigation and resolution
            of complaints by consumers, and disputes between consumers and
            insurers, with respect to long-term care insurance, including--
                        (A) procedures for the filing, investigation, and
                    adjudication of consumer complaints with respect to the
                    compliance of insurers and policies with requirements
                    under this part, or other requirements under State law;
                    and
                        (B) procedures for resolution of disputes between
                    insured individuals and insurers concerning eligibility
                    for, or the amount of, benefits payable under such
                    policies, and other issues with respect to the rights
                    and responsibilities of insurers and insured
                    individuals under such policies.
                (4) Technical assistance to insurers.--Provision of
            technical assistance to insurers to help them to understand and
            comply with the requirements of this part, and other State
            laws, concerning long-term care insurance policies and business
            practices.
        (c) State Enforcement Authorities.--A State program meeting the
    requirements of this subpart shall ensure that the State insurance
    commissioner (or other appropriate official or agency) has the
    following authority with respect to long-term care insurers and
    policies:
                (1) Prohibition of sale.--Authority to prohibit the sale,
            or offering for sale, of any long-term care insurance policy
            that fails to comply with all applicable requirements under
            this part.
                (2) Plans of correction.--Authority, in cases where the
            business practices of an insurer are determined not to comply
            with requirements under this part, to require the insurer to
            develop, submit for State approval, and implement a plan of
            correction which must be fulfilled within the shortest period
            possible (not to exceed a year) as a condition of continuing to
            do business in the State.
                (3) Corrective action orders.--Authority, in cases where an
            insurer is determined to have failed to comply with
            requirements of this part, or with the terms of a policy, with
            respect to a consumer or insured individual, to direct the
            insurer (subject to appropriate due process) to eliminate such
            noncompliance within 30 days.
                (4) Civil money penalties.--Authority to assess civil money
            penalties, in amounts for each violative act up to the greater
            of $10,000 or three times the amount of any commission
            involved--
                        (A) for violations of subsections (d) (concerning
                    compensation or sale of policies), (e) (concerning
                    prohibited sales practices), and (f) (prohibition on
                    sale of duplicate benefits) of section 2324,
                        (B) for such other violative acts as the Secretary
                    may specify in regulations, and
                        (C) in such other cases as the State finds
                    appropriate.
                (5) Other authorities.--Such other authorities as the State
            finds necessary or appropriate to enforce requirements under
            this part.
        (d) Records, Reports, and Audits.--As a condition of approval of
    its program under this part, a State must agree to maintain such
    records, make such reports (including expenditure reports), and
    cooperate with such audits, as the Secretary finds necessary to
    determine the compliance of such State program (and insurers and
    policies regulated under such program) with the requirements of this
    part.
        (e) Secretarial Responsibilities.--
                (1) Approval of state programs.--The Secretary shall
            approve a State program meeting the requirements of this part.
                (2) Information on medicare benefits.--The Secretary shall
            furnish, to the official in each State with chief
            responsibility for the regulation of long-term care insurance,
            a description of the Medicare programs under title XVIII of the
            Social Security Act which makes clear the unavailability of
            long-term benefits under such programs, for distribution by
            such State official to insurers selling long-term care
            insurance in the State, in accordance with subsection (b)(2).

    SEC. 2342. AUTHORIZATION OF APPROPRIATIONS FOR STATE PROGRAMS.

        There are authorized to be appropriated $10,000,000 for fiscal year
    1996, $10,000,000 for fiscal year 1997, $7,500,000 for fiscal year
    1998, and $5,000,000 for fiscal year 1999 and each succeeding fiscal
    year, for grants to States with programs meeting the requirements of
    this part, to remain available until expended.

    SEC. 2343. ALLOTMENTS TO STATES.

        The allotment for any fiscal year to a State with a program
    approved under this part shall be an amount determined by the
    Secretary, taking into account the numbers of long-term care insurance
    policies sold, and of elderly individuals residing, in the State, and
    such other factors as the Secretary finds appropriate.

    SEC. 2344. PAYMENTS TO STATES.

        (a) In General.--Each State with a program approved under this part
    shall be entitled to payment under this title for each fiscal year in
    an amount equal to its allotment for such fiscal year, for expenditure
    by such State for up to 50 percent of the cost of activities under such
    program.
        (b) State Share of Program Expenditures.--No Federal funds from any
    source may be used as any part of the non-Federal share of expenditures
    under the State program under this subpart.
        (c) Transfer and Deposit Requirements.--The Secretary shall make
    payments under this section in accordance with section 6503 of title
    31, United States Code.

    SEC. 2345. FEDERAL OVERSIGHT OF STATE ENFORCEMENT.

        (a) In General.--The Secretary shall periodically review State
    regulatory programs approved under section 2341 to determine whether
    they continue to comply with the requirements of this part.
        (b) Notice of Determination of Noncompliance.--The Secretary shall
    promptly notify the State of a determination that a State program fails
    to comply with this part, specifying the requirement or requirements
    not met and the elements of the State program requiring correction.
        (c) Opportunity for Correction.--
                (1) In general.--The Secretary shall afford a State
            notified of noncompliance pursuant to subsection (b) a
            reasonable opportunity to eliminate such noncompliance.
                (2) Correction plans.--In a case where substantial
            corrections are needed to eliminate noncompliance of a State
            program, the Secretary may--
                        (A) permit the State a reasonable time after the
                    date of the notice pursuant to subsection (b) to
                    develop and obtain the Secretary's approval of a
                    correction plan, and
                        (B) permit the State a reasonable time after the
                    date of approval of such plan to eliminate the
                    noncompliance.
        (d) Withdrawal of Program Approval.--In the case of a State that
    fails to eliminate noncompliance with requirements under this part by
    the date specified by the Secretary pursuant to subsection (c), the
    Secretary shall withdraw the approval of the State program pursuant to
    section 2341(e).

    SEC. 2346. EFFECT OF FAILURE TO HAVE APPROVED STATE PROGRAM.

        (a) Restriction on Sale of Long-Term Care Insurance.--
                (1) In general.--No insurer may sell or offer for sale any
            long-term care insurance policy, on or after the date specified
            in subsection (c), in a State that does not have in effect a
            regulatory program approved under section 2341(e).
                (2) Application of prohibition.--For purposes of paragraph
            (1), an insurance policy shall not be considered to be sold or
            offered for sale in a State solely because it is sold or
            offered to a resident of such State.
        (b) Civil Money Penalty.--
                (1) In general.--An insurer shall be subject to a civil
            money penalty, in an amount up to the greater of $10,000 or
            three times any commission involved, for each incident in which
            the insurer sells, or offers to sell, an insurance policy to an
            individual in violation of subsection (a).
                (2) Enforcement procedure.--The Secretary shall enforce the
            provisions of this subsection in accordance with the procedures
            provided under section 5412 of this Act.
        (c) Effective Date.--
                (1) In general.--The date specified in this subsection, for
            purposes of subsection (a), with respect to any requirement
            under this part, is the date one year after the date the
            Secretary first promulgates regulations with respect to such
            requirement.
                (2) Exception.--To the extent that a State demonstrates to
            the Secretary that State legislation is required to meet any
            such requirement, the State shall not be regarded as failing to
            have in effect a program in compliance with this part solely on
            the basis of its failure to comply with such requirement 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 promulgation of the regulation imposing
            such requirement. For purposes of the preceding 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.

                      Subpart D--Consumer Education Grants

    SEC. 2361. GRANTS FOR CONSUMER EDUCATION.

        (a) Grant Program Authorized.--The Secretary is authorized to make
    grants--
                (1) to States,
                (2) to regional alliances (at the option of States within
            which such Alliances are located), and
                (3) to national organizations representing insurance
            consumers, long-term care providers, and insurers,
    for the development and implementation of long-term care information,
    counseling, and other programs.
        (b) Applications.--
                (1) In general.--Each State or organization seeking a grant
            under this section shall submit to the Secretary an
            application, in such format and containing such information as
            the Secretary may require.
                (2) Goals.--Programs under this section shall be directed
            at the goals of increasing consumers' understanding and
            awareness of options available to them with respect to long-
            term care insurance (and alternatives, such as public long-term
            care programs), including--
                        (A) the risk of needing long-term care;
                        (B) the costs associated with long-term care
                    services;
                        (C) the lack of long-term care coverage under the
                    Medicare program, Medicare supplemental (Medigap)
                    policies, and standard private health insurance;
                        (D) the limitations on (and conditions of
                    eligibility for) long-term care coverage under State
                    programs;
                        (E) the availability, and variations in coverage
                    and cost, of private long-term care insurance;
                        (F) features common to many private long-term care
                    insurance policies; and
                        (G) pitfalls to avoid when purchasing a long-term
                    care insurance policy.
                (3) Activities.--An application for a grant under this
            section shall indicate the activities the State or organization
            would carry out under such grant, which activities may
            include--
                        (A) coordination of the activities of State
                    agencies and private entities as necessary to carry out
                    the State's program under this section;
                        (B) collection, analysis, publication, and
                    dissemination of information,
                        (C) conducting or sponsoring of consumer education,
                    outreach, and information programs,
                        (D) providing (directly or through referral)
                    counseling and consultation services to consumers to
                    assist them in choosing long-term care insurance
                    coverage appropriate to their circumstances, and
                        (E) other appropriate activities.
                (4) Priority for innovation.--In awarding grants under this
            section, the Secretary shall give priority to applications
            proposing to use innovative approaches to providing
            information, counseling, and other assistance to individuals
            who might benefit from, or are considering the purchase of,
            long-term care insurance.
        (c) Period of Grants.--Grants under this section shall be for not
    longer than 3 years.
        (d) Evaluations and Reports.--
                (1) By grantees to the secretary.--Each recipient of a
            grant under this section shall annually evaluate the
            effectiveness of its program under such grant, and report its
            conclusions to the Secretary.
                (2) By the secretary to the congress.--The Secretary shall
            annually evaluate, and report to the Congress on, the
            effectiveness of programs under this section, on the basis of
            reports received under paragraph (1) and such independent
            evaluation as the Secretary finds necessary.
        (e) Authorization of Appropriations.--There are authorized to be
    appropriated, for grants under this section--
                (1) $10,000,000 for each of fiscal years 1995 through 1997
            for grants to States, and
                (2) $1,000,000 for each of fiscal years 1995 through 1997,
    for grants to eligible organizations.

         PART 4--TAX TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES

    SEC. 2401. REFERENCE TO TAX PROVISIONS.

        For amendments to the Internal Revenue Code of 1986 relating to the
    treatment of long-term care insurance and services, see subtitle G of
    title VII.

       PART 5--TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES WHO WORK

    SEC. 2501. REFERENCE TO TAX PROVISION.

        For amendment to the Internal Revenue Code of 1986 providing for a
    tax credit for cost of personal assistance services required by
    employed individuals, see section 7901.

                      PART 6--DEMONSTRATION AND EVALUATION

    SEC. 2601. DEMONSTRATION ON ACUTE AND LONG-TERM CARE INTEGRATION.

        (a) Program Authorized.--The Secretary of Health and Human Services
    shall conduct a demonstration program to test the effectiveness of
    various approaches to financing and providing integrated acute and
    long-term care services described in subsection (b) for the chronically
    ill and disabled who meet eligibility criteria under subsection (c).
        (b) Services and Benefits.--
                (1) In general.--Except as provided in paragraph (2), the
            following services and benefits shall be provided under each
            demonstration approved under this section:
                        (A) Comprehensive benefit package.--All benefits
                    included in the comprehensive benefit package under
                    title I of this Act.
                        (B) Transitional benefits.--Specialized benefits
                    relating to the transition from acute to long-term
                    care, including--
                                (i) assessment and consultation,
                                (ii) inpatient transitional care,
                                (iii) medical rehabilitation,
                                (iv) home health care and home care,
                                (v) caregiver support, and
                                (vi) self-help technology.
                        (C) Long-term care benefits.--Long-term care
                    benefits, including--
                                (i) adult day care,
                                (ii) personal assistance services,
                                (iii) homemaker services and chore
                            services;
                                (iv) home-delivered meals;
                                (v) respite services;
                                (vi) nursing facility services in
                            specialized care units;
                                (vii) services in other residential
                            settings including community supported living
                            arrangements and assisted living facilities;
                            and
                                (viii) assistive devices and environmental
                            modifications.
                        (D) Habilitation services.--Specialized
                    habilitation services for participants with
                    developmental disabilities.
                (2) Variations in minimum benefits.--
                        (A) In general.--Subject to the requirement of
                    subparagraph (B), demonstrations may omit specified
                    services listed under subparagraphs (C) and (D) of
                    paragraph (1), or provide additional services, as found
                    appropriate by the Secretary in the case of a
                    particular demonstration, taking into consideration
                    factors such as--
                                (i) the needs of a specialized group of
                            eligible beneficiaries;
                                (ii) the availability of the omitted
                            benefits under other programs in the service
                            area; and
                                (iii) the geographic availability of
                            service providers.
                        (B) Breadth requirement.--In approving variant
                    demonstrations pursuant to subparagraph (A), the
                    Secretary shall ensure that demonstrations under this
                    section, taken as a group, adequately test financing
                    and delivery models covering the entire array of
                    services and benefits described in paragraph (1).
        (c) Eligibility Criteria.--The Secretary shall establish
    eligibility criteria for individuals who may receive services under
    demonstrations under this section. Under such criteria, any of the
    following may be found to be eligible populations for such
    demonstrations:
                (1) Individuals with disabilities who are entitled to
            services and benefits under a State program under part 1 of
            this subtitle.
                (2) Individuals who are entitled to benefits under parts A
            and B of title XVIII of the Social Security Act.
                (3) Individuals who are entitled to medical assistance
            under a State plan under title XIX of the Social Security Act,
            and are also--
                        (A) individuals described in paragraph (2), or
                        (B) individuals eligible for supplemental security
                    income under title XVI of that Act.
        (d) Application.--
                (1) In general.--Each entity seeking to participate in a
            demonstration under this section shall submit an application,
            in such format and containing such information as the Secretary
            may require, including the information specified in this
            subsection.
                (2) Service delivery.--The application shall state the
            services to be provided under the demonstration (either
            directly by the applicant or under other arrangements approved
            by the Secretary), which shall include services specified
            pursuant to subsection (b) and--
                        (A) enrollment services;
                        (B) client assessment and care planning;
                        (C) simplified access to needed services;
                        (D) integrated management of acute and chronic
                    care, including measures to ensure continuity of care
                    across settings and services;
                        (E) quality assurance, grievance, and appeals
                    mechanisms; and
                        (F) such other services as the Secretary may
                    require.
                (3) Consumer protection and participation.--The applicant
            shall provide evidence of consumer participation--
                        (A) in the planning of the demonstration (including
                    a showing of support from community agencies or
                    consumer interest groups); and
                        (B) in the conduct of the demonstration, including
                    descriptions of methods and procedures to be used--
                                (i) to make available to individuals
                            enrolled in the demonstration information on
                            self-help, health promotion and disability
                            prevention practices, and enrollees'
                            contributions to the costs of care;
                                (ii) to ensure participation by such
                            enrollees (or their designated representatives,
                            where appropriate) in care planning and in
                            decisions concerning treatment;
                                (iii) to handle and resolve client
                            grievances and appeals;
                                (iv) to take enrollee views into account in
                            quality assurance and provider contracting
                            procedures; and
                                (v) to evaluate enrollee satisfaction with
                            the program.
                (4) Applicant qualifications.--Applicants for grants under
            this section shall meet eligibility criteria established by the
            Secretary, including requirements relating to--
                        (A) adequate financial controls to monitor
                    administrative and service costs,
                        (B) demonstrated commitment of the Board of
                    Directors or comparable governing body to the goals of
                    demonstration,
                        (C) information systems adequate to pay service
                    providers, to collect required utilization and cost
                    data, and to provide data adequate to permit evaluation
                    of program performance, and
                        (D) compliance with applicable State laws.
        (e) Payments to Participants.--An entity conducting a demonstration
    under this section shall be entitled to receive, with respect to each
    enrollee, for the period during which it is providing to such enrollee
    services under a demonstration under this section, such amounts as the
    Secretary shall provide, which amounts--
                (1) may include risk-based payments and non-risk based
            payments by governmental programs, by third parties, or by
            project enrollees, or any combination of such payments, and
                (2) may vary by project and by enrollee.
        (f) Number and Duration of Demonstration Projects.--
                (1) Request for applications.--The Secretary shall publish
            a request for applications under this section not later than
            one year after enactment of this Act.
                (2) Number and duration.--The Secretary shall authorize not
            more than 25 demonstrations under this section, each of which
            shall run for 7 years from the date of the award.
        (g) Evaluation and Reports.--The Secretary shall evaluate the
    demonstration projects under this section, and shall submit to the
    Congress--
                (1) an interim report, by three years after enactment,
            describing the status of the demonstration and characteristics
            of the approved projects; and
                (2) a final report, by one year after completion of such
            demonstration projects, evaluating their effectiveness
            (including cost-effectiveness), and discussing the advisability
            of including some or all of the integrated models tested in the
            demonstration as a benefit under the comprehensive benefit
            package under title I of this Act, or under the programs under
            title XVIII of the Social Security Act.
        (h) Authorization of Appropriations.--
                (1) For secretarial responsibilities.--
                        (A) In general.--There are authorized to be
                    appropriated $7,000,000 for fiscal year 1996, and
                    $4,500,000 for each of the 6 succeeding fiscal years,
                    for payment of costs of the Secretary in carrying out
                    this section (including costs for technical assistance
                    to potential service providers, and research and
                    evaluation), which amounts shall remain available until
                    expended.
                        (B) Set-aside for feasibility studies.--Of the
                    total amount authorized to be appropriated under
                    subparagraph (A), not less than $1,000,000 shall be
                    available for studies of the feasibility of systems to
                    provide integrated care for nonaged populations
                    (including physically disabled children and adults, the
                    chronically mentally ill, and individuals with
                    disabilities, and combinations of these groups).
                (2) For covered benefits.--There are authorized to be
            appropriated $50,000,000 for the first fiscal year for which
            grants are awarded under this section, and for each of the four
            succeeding fiscal years, for payment of costs of benefits for
            which no public or private program or entity is legally
            obligated to pay.

    SEC. 2602. PERFORMANCE REVIEW OF THE LONG-TERM CARE PROGRAMS.

        (a) In General.--The Secretary of Health and Human Services shall
    prepare and submit to the Congress--
                (1) an interim report, not later than the end of the
            seventh full calendar year beginning after the date of the
            enactment of this Act, and
                (2) a final report, not later than two years after the date
            of the interim report,
    evaluating the effectiveness of the programs established and amendments
    made by this subtitle (and including at a minimum the elements
    specified in subsection (b)).
        (b) Elements of Assessment.--The evaluations to be made, and
    included in the reports required pursuant to subsection (a), include at
    least the following:
                (1) State service delivery programs.--An evaluation of
            States' effectiveness in meeting the needs for home and
            community-based services (including personal assistance
            services) of individuals with disabilities (including
            individuals who do, and who do not, meet the eligibility
            criteria for the service program under part 1, individuals of
            different ages, type and degree of disability, and income
            levels, members of minority groups, and individuals residing in
            rural areas).
                (2) Service access.--An evaluation of the degree of (and
            obstacles to) access of individuals with disabilities to needed
            home and community-based services and to inpatient services.
                (3) Quality.--An evaluation of the quality of long-term
            care services available.
                (4) Private insurance.--An evaluation of the performance of
            the private sector in offering affordable long-term care
            insurance that provides adequate protection against the costs
            of long-term care, and of the effectiveness of Federal
            standards and State enforcement, pursuant to part 3, in
            adequately protecting long-term care insurance consumers.
                (5) Cost issues.--An evaluation of the effectiveness of
            amendments made by this subtitle in containing the costs of
            long-term care, and in limiting the share of such costs borne
            by individuals with lower incomes.
                (6) Service coordination and integration.--An evaluation of
            the effectiveness of the programs established or amended under
            this subtitle in achieving coordination and integration of
            long-term care services, and of such services with acute care
            services and social services, and in ensuring provision of
            services in the least restrictive setting possible.

                                                                  Title III

                      TITLE III--PUBLIC HEALTH INITIATIVES

                           table of contents of title

                                                                       Page
            Subtitle A--Workforce Priorities Under Federal Payments

     Part 1--Institutional Costs of Graduate Medical Education; Workforce
           subpart a--national council regarding workforce priorities
    Sec. 3001subpart b--authorized positions in specialty training      504
    Sec. 3011. Cooperation regarding approved physician training        506
                                programs.
    Sec. 3012. Annual authorization of number of specialty              509
                                positions; requirements
                                regarding primary health care.
    Sec. 3subpart c--institutional costs of graduate medical education  513
    Sec. 3031. Federal formula payments to approved physician           515
                                training programs.
    Sec. 3032. Application for payments.........................        516
    Sec. 3033. Availability of funds for payments; annual amount        517
                                of payments.
    Sec. 3034. Additionalsubpart d--general provisions..........        522
    Sec. 3041. Definitisubpart e--transitional provisions.......        526
    Sec. 3051. Transitional payments to institutions............        527
     Part 2--Institutional Costs of Graduate Nursing Education; Workforce
                                   Priorities

    Sec. 3061. National council; authorized graduate nurse              533
                                training positions;
                                institutional costs.
    Sec. 3062. Applicability of part 1 provisions...............        535
    Sec. 3063. Funding..........................................        536
                            Part 3--Related Programs

    Sec. 3071. Programs of the Secretary of Health and Human            536
                                Services.
    Sec. 3072. Programs of the Secretary of Labor...............        540
    Sec. 3073. National Institute for Health Care Workforce             543
                                Development.
    Sec. 3074. Requirement for certain programs regarding               546
                                redeployment of health care
                                workers.
                      Subtitle B--Academic Health Centers

                            Part 1--Formula Payments

    Sec. 3101. Federal formula payments to academic health              548
                                centers.
    Sec. 3102. Request for payments.............................        551
    Sec. 3103. Availability of funds for payments; annual amount        552
                                of payments.
    Sec. 3104. Additional funding provisions....................        554
             Part 2--Access of Patients to Academic Health Centers

    Sec. 3131. Contracts for ensuring access to centers.........        558
    Sec. 3132. Discretionary grants regarding access to centers.        559
                    Subtitle C--Health Research Initiatives

                     Part 1--Programs for Certain Agencies

    Sec. 3201. Biomedical and behavioral research on health
                                          promotion and disease
    prevention.                                                         560
    Sec. 3202. Health services research.........................        561
                          Part 2--Funding for Programs

    Sec. 3211. Authorizations of appropriations.................        563
        Subtitle D--Core Functions of Public Health Programs; National
                    Initiatives Regarding Preventive Health

                                Part 1--Funding

    Sec. 3301. Authorizations of appropriations.................        564
                Part 2--Core Functions of Public Health Programs

    Sec. 3311. Purposes.........................................        565
    Sec. 3312. Grants to States for core health functions.......        565
    Sec. 3313. Submission of information........................        570
    Sec. 3314. Reports..........................................        571
    Sec. 3315. Application for grant............................        571
    Sec. 3316. General provisions...............................        572
    Sec. 3317. Allocations for certain activities...............        572
    Sec. 3318. Definitions......................................        573
      Part 3--National Initiatives Regarding Health Promotion and Disease
                                   Prevention

    Sec. 3331. Grants for national prevention initiatives.......        573
    Sec. 3332. Priorities.......................................        575
    Sec. 3333. Submission of information........................        576
    Sec. 3334. Application for grant............................        577
       Subtitle E--Health Services for Medically Underserved Populations

                  Part 1--Community and Migrant Health Centers

    Sec. 3401. Authorizations of appropriations.................        578
    Sec. 3402. Use of funds.....................................        579
                 Part 2--Isubpart a--purposes; fundinglth Care
    Sec. 3411. Purposes.........................................        579
    subpart b--development of qualified community health plans and practice
                                    networks
    Sec. 3421. Grants and contracts for development of plans and        581
                                networks.
    Sec. 3422. Preferences in making awards of assistance.......        586
    Sec. 3423. Certain uses of awards...........................        587
    Sec. 3424. Accessibility of services........................        589
    Sec. 3425. Additional agreements............................        592
    Sec. 3426. Submission of certain information................        594
    Sec. 3427. Reports; audits..................................        595
    Sec. 3428. Application for assistance.......................        595
    Ssubpart c--capital cost of development of qualified community health 6
                          plans and practice networks
    Sec. 3441. Loans and loan guarantees regarding plans and            596
                                networks.
    Sec. 3442. Certain requirements.............................        598
    Sec. 3443. Defaults; right of recovery......................        600
    Sec. 3444. Provisions regarding construction or expansion of        603
                                facilities.
    Sec. 3445. Application for assistance.......................        604
    Sec. 3446. Administratsubpart d--enabling services..........        605
    Sec. 3461. Grants and contracts for enabling services.......        605
    Sec. 3462. Authorizations of appropriations.................        608
                     Part 3--National Health Service Corps

    Sec. 3471. Authorizations of appropriations.................        608
    Sec. 3472. Allocation for participation of nurses in                609
                                scholarship and loan repayment
                                programs.
          Part 4--Payments to Hospitals Serving Vulnerable Populations

    Sec. 3481. Payments to hospitals............................        610
    Sec. 3482. Identification of eligible hospitals.............        612
    Sec. 3483. Amount of payments...............................        613
    Sec. 3484. Base year........................................        615
                   Subtitle F--Mental Health; Substance Abuse

                          Part 1--Financial Assistance

    Sec. 3501. Authorizations of appropriations.................        615
    Sec. 3502. Supplemental formula grants for States regarding
                                activities under part B of title
                                   XIX of Public Health Service
    Act.                                                                616
    Sec. 3503. Capital costs of development of certain centers          621
                                and clinics.
               Part 2--Authoritsubpart a--reportticipating States
    Sec. 3511. Report on intsubpart b--pilot programh systems...        622
    Sec. 3521. Pilot program....................................        626
       Subtitle G--Comprehensive School Health Education; School-Related
                                Health Services

                           Part 1--General Provisions

    Sec. 3601. Purposes.........................................        627
    Sec. 3602. Definitions......................................        629
              Part 2--School Health Education; General Provisions

    Sec. 3611. Authorizations of appropriations.................        631
    Sec. 3612. Waivers of statutory and regulatory requirements.        632
      Part 3subpart a--planning grants for state education agenciesencies
    Sec. 3621. Application for grant............................        636
    Sec. 3622. Approval of Secretary............................        638
    Sec. 3623. Amount of grant..................................        638
    Sec. subpart b--implementation grants for state education agencies  639
    Sec. 3631. Application for grant............................        640
    Sec. 3632. Selection of grantees............................        642
    Sec. 3633. Amount of grant..................................        642
    Sec. 3634. Authorized activities; limitation on                     643
                                administrative costs.
    Sec. 3635. Subgrantsubpart c--state and local reports.......        644
    Sec. 3641. State and local reports..........................        646
     Part 4--School Health Education; Grants to Certain Local Educational
                             subpart a--eligibility
    Sec. 365subpart b--planning grants for local education agencies     647
    Sec. 3661. Application for grant............................        647
    Sec. 3662. Selection of grantees............................        649
    Sec. 3663. Amount of grant..................................        649
    Sec.subpart c--implementation grants for local educational agencies 650
    Sec. 3671. Application for grant............................        651
    Sec. 3672. Selection of grantees............................        653
    Sec. 3673. Amount of grant..................................        654
    Sec. 3674. Authorized activities............................        655
    Sec. 3675. Reports..........................................        655
                subpart a--development and operation of projects
    Sec. 3681. Authorizations of appropriations.................        656
    Sec. 3682. Eligibility for development and operation grants.        656
    Sec. 3683. Preferences......................................        658
    Sec. 3684. Grants for development of projects...............        659
    Sec. 3685. Grants for operation of projects.................        662
    Sec. 3686. Fsubpart b--capital costs of developing projects.        666
    Sec. 3691. Loans and loan guarantees regarding projects.....        666
    Sec. 3692. Funding..........................................        667
                  Subtitle H--Public Health Service Initiative

    Sec. 3701. Public health service initiative.................        667
           Subtitle I--Coordination With COBRA Continuation Coverage

    Sec. 3801. Public Health Service Act; coordination with             668
                                COBRA continuation coverage.

                                                      Title III, Subtitle A

            Subtitle A--Workforce Priorities Under Federal Payments

     PART 1--INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION; WORKFORCE
                                   PRIORITIES

           Subpart A--National Council Regarding Workforce Priorities

    SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION.

        (a) In General.--There is established within the Department of
    Health and Human Services a council to be known as the National Council
    on Graduate Medical Education.
        (b) Duties.--The Secretary shall carry out subpart B acting through
    the National Council.
        (c) Composition.--
                (1) In general.--The membership of the National Council
            shall include individuals who are appointed to the Council from
            among individuals who are not officers or employees of the
            United States. Such individuals shall be appointed by the
            Secretary, and shall include individuals from each of the
            following categories:
                        (A) Consumers of health care services.
                        (B) Physicians who are faculty members of medical
                    schools.
                        (C) Physicians in private practice who are not
                    physicians described in subparagraph (B).
                        (D) Officers or employees of regional and corporate
                    health alliances.
                        (E) Officers or employees of health care plans that
                    participate in such alliances.
                        (F) Such other individuals as the Secretary
                    determines to be appropriate.
                (2) Ex officio members; other federal officers or
            employees.--The membership of the National Council shall
            include individuals designated by the Secretary to serve as
            members of the Council from among Federal officers or employees
            who are appointed by the President, or by the Secretary or
            other Federal officers who are appointed by the President with
            the advice and consent of the Senate.
        (d) Chair.--The Secretary shall, from among members of the National
    Council appointed under subsection (c)(1), designate an individual to
    serve as the Chair of the Council.
        (e) Definitions.--For purposes of this subtitle:
                (1) The term ``medical school'' means a school of medicine
            (as defined in section 799 of the Public Health Service Act) or
            a school of osteopathic medicine (as defined in such section).
                (2) The term ``National Council'' means the council
            established in subsection (a).

             Subpart B--Authorized Positions in Specialty Training

    SEC. 3011. COOPERATION REGARDING APPROVED PHYSICIAN TRAINING PROGRAMS.

        (a) In General.--With respect to an approved physician training
    program in a medical specialty, a funding agreement for payments under
    section 3031 for a calendar year is that the program will ensure that
    the number of individuals enrolled in the program in the subsequent
    academic year is in accordance with this subpart.
        (b) Definitions.--
                (1) Approved program.--For purposes of this subtitle:
                        (A) The term ``approved physician training
                    program'', with respect to the medical speciality
                    involved, means a residency or other postgraduate
                    program that trains physicians and meets the following
                    conditions:
                                (i) Participation in the program may be
                            counted toward certification in the medical
                            specialty.
                                (ii) The program is accredited by the
                            Accreditation Council on Graduate Medical
                            Education, or approved by the Council on
                            Postgraduate Training of the American
                            Osteopathic Association.
                        (B) The term ``approved physician training
                    program'' includes any postgraduate program described
                    in subparagraph (A) that provides health services in an
                    ambulatory setting, without regard to whether the
                    program provides inpatient hospital services.
                        (C) The term ``approved physician training
                    program'' includes any postgraduate program described
                    in subparagraph (A), whether operated by academic
                    health centers, teaching hospitals, multispecialty
                    group practices, ambulatory care providers, prepaid
                    health plans, or other entities.
                (2) Eligible program; subpart definition.--For purposes of
            this subpart, the term ``eligible program'', with respect to an
            academic year, means an approved physician training program
            that receives payments under subpart C for the calendar year in
            which the academic year begins.
                (3) Other definitions.--For purposes of this subtitle:
                        (A)(i) The term ``academic year'' means the 1-year
                    period beginning on July 1. The academic year beginning
                    July 1, 1993, is academic year 1993-94.
                        (ii) With respect to the funding agreement
                    described in subsection (a), the term ``subsequent
                    academic year'' means the academic year beginning July
                    1 of the calendar year for which payments are to be
                    made under the agreement.
                        (B) The term ``funding agreement'', with respect to
                    payments under section 3031 to an eligible program,
                    means that the Secretary may make the payments only if
                    the program makes the agreement involved.
                        (C) The term ``medical specialty'' includes all
                    medical, surgical, and other physician specialties and
                    subspecialties.

    SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY POSITIONS;
                  REQUIREMENTS REGARDING PRIMARY HEALTH CARE.

        (a) Annual Authorization of Number of Positions.--In the case of
    each medical specialty, the National Council shall, pursuant to section
    3011, designate for each academic year the number of individuals
    nationwide who are authorized to be enrolled in eligible programs. The
    preceding sentence is subject to subsection (c)(2).
        (b) Primary Health Care.--
                (1) In general.--Subject to paragraph (2), in carrying out
            subsection (a) for an academic year, the National Council shall
            ensure that, of the class of training participants entering
            eligible programs for academic year 1998-99 or any subsequent
            academic year, the percentage of such class that completes
            eligible programs in primary health care is not less than 55
            percent (without regard to the academic year in which the
            members of the class complete the programs).
                (2) Rule of construction.--The requirement of paragraph (1)
            regarding a percentage applies in the aggregate to training
            participants entering eligible programs for the academic year
            involved, and not individually to any eligible program.
        (c) Designations Regarding 3-Year Periods.--
                (1) Designation periods.--For each medical specialty, the
            National Council shall make the annual designations under
            subsection (a) for periods of 3 academic years.
                (2) Initial period.--The first designation period
            established by the National Council after the date of the
            enactment of this Act shall be the academic years 1998-99
            through 2000-01.
        (d) Certain Considerations in Designating Annual Numbers.--
                (1) In general.--Factors considered by the National Council
            in designating the annual number of specialty positions for an
            academic year for a medical specialty shall include the extent
            to which there is a need for additional practitioners in the
            speciality, as indicated by the following:
                        (A) The incidence and prevalence (in the general
                    population and in various other populations) of the
                    diseases, disorders, or other health conditions with
                    which the specialty is concerned.
                        (B) The number of physicians who will be practicing
                    in the specialty in the academic year.
                        (C) The number of physicians who will be practicing
                    in the specialty at the end of the 5-year period
                    beginning on the first day of the academic year.
                (2) Recommendations of private organizations.--In
            designating the annual number of specialty positions for an
            academic year for a medical specialty, the National Council
            shall consider the recommendations of organizations
            representing physicians in the specialty and the
            recommendations of organizations representing consumers of the
            services of such physicians.
                (3) Total of respective annual numbers.--
                        (A) Subject to subparagraph (B), for academic year
                    1998-99 and subsequent academic years, the National
                    Council shall ensure that the total of the respective
                    annual numbers designated under subsection (a) for an
                    academic year is a total that--
                                (i) bears a relationship to the number of
                            individuals who graduated from medical schools
                            in the United States in the preceding academic
                            year; and
                                (ii) is consistent with the purposes of
                            this subpart.
                        (B) For each of the academic years 1998-99 through
                    2002-03, the total determined under subparagraph (A)
                    shall be reduced by a percentage determined by the
                    National Council.
        (e) Definitions.--For purposes of this subtitle:
                (1) The term ``annual number of specialty positions'', with
            respect to a medical specialty, means the number designated by
            the National Council under subsection (a) for eligible programs
            for the academic year involved.
                (2) The term ``designation period'' means a 3-year period
            under subsection (c)(1) for which designations under subsection
            (a) are made by the National Council.
                (3) The term ``primary health care'' means the following
            medical specialties: Family medicine, general internal
            medicine, general pediatrics, and obstetrics and gynecology.
                (4) The term ``specialty position'' means a position as a
            training participant.
                (5) The term ``training participant'' means an individual
            who is enrolled in an approved physician training program.

    SEC. 3013. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS.

        (a) In General.--For each academic year, the National Council shall
    for each medical specialty make allocations among eligible programs of
    the annual number of specialty positions that the Council has
    designated for such year. The preceding sentence is subject to
    subsection (b)(3).
        (b) Allocations Regarding 3-Year Period.--
                (1) In general.--For each medical specialty, the National
            Council shall make the annual allocations under subsection (a)
            for periods of 3 academic years.
                (2) Advance notice to programs.--With respect to the first
            academic year of an allocation period established by the
            National Council, the National Council shall, not later than
            July 1 of the preceding academic year, notify each eligible
            program of the allocations made for the program for each of the
            academic years of the period.
                (3) Initial period.--The first allocation period
            established by the National Council after the date of the
            enactment of this Act shall be the academic years 1998-99
            through 2000-01.
        (c) Certain Considerations.--
                (1) Geographic areas; quality of programs.--In making
            allocations under subsection (a) for eligible programs of the
            various geographic areas, the National Council shall include
            among the factors considered the historical distribution among
            the areas of approved physician training programs, and the
            quality of such programs.
                (2) Underrepresentation of minority groups.--In making an
            allocation under subsection (a) for an eligible program, the
            National Council shall include among the factors considered the
            following:
                        (A) The extent to which the population of training
                    participants in the program includes training
                    participants who are members of racial or ethnic
                    minority groups.
                        (B) With respect to a racial or ethnic group
                    represented among the training participants, the extent
                    to which the group is underrepresented in the field of
                    medicine generally and in the various medical
                    specialities.
                (3) Recommendations of private organizations.--In making
            allocations under subsection (a) for eligible programs, the
            National Council shall consider the recommendations of
            organizations representing physicians in the medical
            specialties and the recommendations of organizations
            representing consumers of the services of such physicians.
        (d) Definitions.--For purposes of this subtitle, the term
    ``allocation period'' means a 3-year period under subsection (b)(1) for
    which allocations under subsection (a) are made by the National
    Council.

          Subpart C--Institutional Costs of Graduate Medical Education

    SEC. 3031. FEDERAL FORMULA PAYMENTS TO APPROVED PHYSICIAN TRAINING
                  PROGRAMS.

        (a) In General.--In the case of an approved physician training
    program that in accordance with section 3032 submits to the Secretary
    an application for calendar year 1996 or any subsequent calendar year,
    the Secretary shall make payments for such year to the program for the
    purpose specified in subsection (b). The Secretary shall make the
    payments in an amount determined in accordance with section 3033, and
    may administer the payments as a contract, grant, or cooperative
    agreement.
        (b) Payments for Operation of Approved Physician Training
    Programs.--The purpose of payments under subsection (a) is to assist an
    eligible program with the costs of operation. A funding agreement for
    such payments is that the approved physician training program involved
    will expend the payments only for such purpose.
        (c) Eligible Program; Subpart Definition.--For purposes of this
    subpart, the term ``eligible program'', with respect to the calendar
    year involved, means an approved physician training program that
    submits to the Secretary an application for such year in accordance
    with section 3032.

    SEC. 3032. APPLICATION FOR PAYMENTS.

        (a) In General.--For purposes of section 3031(a), an application
    for payments under such section for a calendar year is in accordance
    with this section if--
                (1) the approved physician training program involved
            submits the application not later than the date specified by
            the Secretary;
                (2) the application demonstrates that the condition
            described in subsection (b) is met with respect to the program;
                (3) the application contains each funding agreement
            described in this part and the application provides such
            assurances of compliance with the agreements as the Secretary
            may require; and
                (4) 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 part.
        (b) Certain Conditions.--An approved physician training program
    meets the condition described in this subsection for receiving payments
    under section 3031 for a calendar year if the institution within which
    the program operates agrees that such payments will be made by the
    Secretary directly to the program (and such agreement is included in
    the application under subsection (a)), and the Secretary shall ensure
    that such institution is permitted to participate as a provider in a
    regional or corporate alliance health plan during such year only if
    each of the approved physician training programs of the institution
    meets the requirements for receiving payments under such section for
    such year.

    SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF
                  PAYMENTS.

        (a) Annual Health Professions Workforce Account.--
                (1) In general.--Subject to paragraph (2) and section 3034,
            the amount available for a calendar year for making payments
            under sections 3031 and 3051 (constituting an account to be
            known as the annual health professions workforce account) is
            the following, as applicable to the calendar year:
                        (A) In the case of calendar year 1996,
                    $3,200,000,000.
                        (B) In the case of calendar year 1997,
                    $3,550,000,000.
                        (C) In the case of calendar year 1998,
                    $4,800,000,000.
                        (D) In the case of each of the calendar years 1999
                    and 2000, $5,800,000,000.
                        (E) In the case of each subsequent calendar year,
                    the amount specified in subparagraph (D) increased by
                    the product of such amount and the general health care
                    inflation factor for such year (as defined in
                    subsection (d)).
                (2) Transitional provision.--
                        (A) With respect to making payments under sections
                    3031 and 3051 for calendar year 1996 or 1997, the
                    Secretary shall first make payments under section 3031
                    to eligible programs described in subparagraph (B) in
                    the amount determined for the programs under subsection
                    (b) for such year, and then, from such amounts as
                    remain available in the annual health professions
                    workforce account for such year, shall make payments
                    under section 3031 to other eligible programs and shall
                    make payments under section 3051.
                        (B) An eligible program described in this
                    subparagraph is such a program that is operated in a
                    State that is a participating State under title I.
        (b) Amount of Payments for Individual Eligible Programs.--
                (1) In general.--Subject to the annual health professions
            workforce account available for a calendar year, the amount of
            payments required in section 3031 to be made to an eligible
            program for the calendar year is an amount equal to the product
            of--
                        (A) the number of full-time equivalent training
                    participants in the program; and
                        (B) the national average of the costs of such
                    programs in training such a participant, as determined
                    by consideration of the following factors (and as
                    adjusted under paragraph (2)):
                                (i) The national average salary of training
                            participants.
                                (ii) The national average costs of such
                            programs in providing for faculty supervision
                            of training participants and for related
                            activities.
                (2) Additional provisions regarding national average
            cost.--
                        (A) The Secretary shall in accordance with
                    paragraph (1)(B) determine, for academic year 1992-93,
                    an amount equal to the national average described in
                    such paragraph with respect to training a participant
                    in an approved physician training program in the
                    medical specialty involved. The national average
                    applicable under such paragraph for a calendar year for
                    such programs is, subject to subparagraph (B), the
                    amount determined under the preceding sentence
                    increased by the amount necessary to offset the effects
                    of inflation occurring since academic year 1992-93, as
                    determined through use of the consumer price index.
                        (B) The national average determined under
                    subparagraph (A) and applicable to a calendar year
                    shall, in the case of the eligible program involved, be
                    adjusted by a factor to reflect regional differences in
                    the applicable wage and wage-related costs.
        (c) Limitation.--If, subject to subsection (a)(2), the annual
    health professions workforce account available for a calendar year is
    insufficient for providing each eligible program with the amount of
    payments determined under subsection (b) for the program for such year,
    the Secretary shall make such pro rata reductions in the amounts so
    determined as may be necessary to ensure that the total of payments
    made under section 3031 for such year equals the total of such account.
        (d) Definitions.--For purposes of this subtitle:
                (1) The term ``annual health professions workforce
            account'' means the account established pursuant to subsection
            (a)(1).
                (2) The term ``consumer price index'' has the meaning given
            such term in section 1902.
                (3) The term ``general health care inflation factor'', with
            respect to a year, has the meaning given such term in section
            6001(a)(3) for such year.

    SEC. 3034. ADDITIONAL FUNDING PROVISIONS.

        (a) Sources of Funds for Annual Health Professions Workforce
    Account.--The amount specified in section 3033(a)(1) for the annual
    health professions workforce account for a calendar year shall be
    derived from the sources specified in subsection (b).
        (b) Contributions From Medicare Trust Funds, Regional Alliances,
    and Corporate Alliances.--For purposes of subsection (a), the sources
    specified in this subsection for a calendar year are the following:
                (1) Transfers made by the Secretary under section 4051.
                (2) Payments made by regional alliances under section 1353
            and--
                        (A) in the case of each of the calendar years 1996
                    and 1997, transferred in an amount equal to 50 percent
                    of such payments made for the calendar year involved;
                    and
                        (B) in the case of calendar year 1998 and each
                    subsequent calendar year, transferred in an amount
                    equal to the aggregate regional alliance portion
                    determined under subsection (c)(2)(A).
                (3) The transfer made under subsection (d)(1).
        (c) Contributions From Regional and Corporate Alliances.--
                (1) Determination of aggregate regional and corporate
            alliance amount.--For purposes regarding the provision of funds
            for the annual health professions workforce account for a
            calendar year (other than calendar year 1996 or 1997), the
            Secretary shall determine an aggregate regional and corporate
            alliance amount, which amount is to be paid by such alliances
            pursuant to paragraphs (2)(B) and (3) of subsection (b),
            respectively, and which amount shall be equal to the difference
            between--
                        (A) the amount specified in section 3033(a)(1) for
                    the annual health professions workforce account for
                    such year; and
                        (B) the amount transferred under section 4051 for
                    the year.
                (2) Allocation of amount among regional and corporate
            alliances.--With respect to the aggregate regional and
            corporate alliance amount determined under paragraph (1) for a
            calendar year (other than calendar year 1996 or 1997)--
                        (A) the aggregate regional alliance portion of such
                    amount is the product of such amount and the percentage
                    constituted by the ratio of the total plan payments of
                    regional alliances to the combined total plan payments
                    of regional alliances and corporate alliances; and
                        (B) the aggregate corporate alliance portion of
                    such amount is the product of such amount and the
                    percentage constituted by the ratio of the total plan
                    payments of corporate alliances to such combined total
                    plan payments.
        (d) Compliance Regarding Corporate Alliances.--
                (1) In general.--Effective January 15 of calendar year 1996
            and each subsequent calendar year, there is hereby transferred
            to the Secretary, out of any money in the Treasury not
            otherwise appropriated--
                        (A) in the case of each of the calendar years 1996
                    and 1997, an amount equal to the difference between--
                                (i) the amount specified in section
                            3033(a)(1) for the annual health professions
                            workforce account for the calendar year
                            involved; and
                                (ii) the sum of the amount transferred
                            under section 4051 for such year and the amount
                            transferred under subsection (b)(2)(A) for such
                            year; and
                        (B) in the case of calendar year 1998 and each
                    subsequent calendar year, an amount equal to the
                    aggregate corporate alliance portion determined under
                    subsection (c)(2)(B) for the calendar year involved.
                (2) Manner of compliance.--The payment by corporate
            alliances of the tax imposed under section 3461 of the Internal
            Revenue Code of 1986 (as added by section 7121 of this Act),
            together with the transfer made in paragraph (1)(B) for the
            calendar year involved, is deemed to be the payment required
            pursuant to subsection (c)(1) for corporate alliances for such
            year.
                (3) Graduate nurse education.--Effective January 15 of
            calendar year 1996 and each subsequent calendar year, there is
            hereby transferred to the Secretary, out of any money in the
            Treasury not otherwise appropriated, 50 percent of the amount
            specified in section 3063(b) with respect to the annual
            graduate nurse training account.
        (e) Definitions.--For purposes of this subtitle, the term ``plan
    payments'' with respect to a regional or corporate alliance, means the
    amount paid to health plans by the alliance.

                         Subpart D--General Provisions

    SEC. 3041. DEFINITIONS.

        For purposes of this subtitle:
                (1) The term ``academic year'' has the meaning given such
            term in section 3011(b).
                (2) The term ``allocation period'' has the meaning given
            such term in section 3013(d).
                (3) The term ``annual health professions workforce
            account'' has the meaning given such term in section 3033(d).
                (4) The term ``annual number of specialty positions'' has
            the meaning given such term in section 3012(e).
                (5) The term ``approved physician training program'' has
            the meaning given such term in section 3011(b).
                (6) The term ``consumer price index'' has the meaning given
            such term in section 3033(d).
                (7) The term ``designation period'' has the meaning given
            such term in section 3012(e).
                (8) The term ``eligible program'' has the meaning given
            such term in section 3011(b), in the case of subpart B; and has
            the meaning given such term in section 3031(c), in the case of
            subpart C.
                (9) The term ``funding agreement'' has the meaning given
            such term in section 3011(b).
                (10) The term ``general health care inflation factor'' has
            the meaning given such term in section 3033(d).
                (11) The term ``medical school'' has the meaning given such
            term in section 3001(e).
                (12) The term ``medical specialty'' has the meaning given
            such term in section 3011(b).
                (13) The term ``National Council'' has the meaning given
            such term in section 3001(e).
                (14) The term ``plan payments'' has the meaning given such
            term in section 3034(e).
                (15) The term ``primary health care'' has the meaning given
            such term in section 3012(e).
                (16) The term ``specialty position'' has the meaning given
            such term in section 3012(e).
                (17) The term ``training participant'' has the meaning
            given such term in section 3012(e).

                       Subpart E--Transitional Provisions

    SEC. 3051. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

        (a) Payments Regarding Effects of Subpart B Allocations.--For each
    of the four calendar years specified in subsection (b)(2), in the case
    of an institution that submits to the Secretary an application for such
    year in accordance with subsection (d), the Secretary shall make
    payments for the year to the institution for the purpose specified in
    subsection (c). The Secretary shall make the payments in an amount
    determined in accordance with subsection (e), and may administer the
    payments as a contract, grant, or cooperative agreement.
        (b) Institutions Losing Specialty Positions; Relevant Years
    Regarding Payments.--
                (1) Institutions losing specialty positions.--The Secretary
            may make payments under subsection (a) to an institution only
            if, with respect to the calendar year involved, the institution
            meets the following conditions:
                        (A) The institution operates one or more programs
                    that--
                                (i) are approved physician training
                            programs; and
                                (ii) are receiving payments under section
                            3031 for such year.
                        (B) The aggregate number of speciality positions in
                    such programs (in the medical specialities with respect
                    to which such payments are made) is below the aggregate
                    number of such positions at the institution for
                    academic year 1993-94 as a result of allocations under
                    subpart B.
                (2) Relevant years.--The Secretary may make payments under
            subsection (a) to an institution only for the first four
            calendar years after calendar 1997 for which the institution
            meets the conditions described in paragraph (1).
                (3) Eligible institution.--For purposes of this section,
            the term ``eligible institution'' means an institution that
            submits to the Secretary an application in accordance with
            subsection (d).
        (c) Purpose of Payments.--The purpose of payments under subsection
    (a) is to assist an eligible institution with the costs of operation. A
    funding agreement for such payments is that the institution involved
    will expend the payments only for such purpose.
        (d) Application for Payments.--For purposes of subsection (a), an
    application for payments under such subsection is in accordance with
    this subsection if the institution involved submits the application not
    later than the date specified by the Secretary; the application
    demonstrates that the institution meets the conditions described in
    subsection (b)(1) and that the institution has cooperated with the
    approved physician training programs of the institution in meeting the
    condition described in section 3032(b); the application contains each
    funding agreement described in this subpart and the application
    provides such assurances of compliance with the agreements as the
    Secretary may require; 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 subpart.
        (e) Amount of Payments.--
                (1) In general.--Subject to the annual health professions
            workforce account available for the calendar year involved, the
            amount of payments required in subsection (a) to be made to an
            eligible institution for such year is the product of the amount
            determined under paragraph (2) and the applicable percentage
            specified in paragraph (3).
                (2) Number of specialty positions lost; national average
            salary.--For purposes of paragraph (1), the amount determined
            under this paragraph for an eligible institution for the
            calendar year involved is the product of--
                        (A) an amount equal to the aggregate number of
                    full-time equivalent specialty positions lost; and
                        (B) the national average salary of training
                    participants.
                (3) Applicable percentage.--For purposes of paragraph (1),
            the applicable percentage for a calendar year is the following,
            as applicable to such year:
                        (A) For the first calendar year after calendar 1997
                    for which the eligible institution involved meets the
                    conditions described in subsection (b)(1), 100 percent.
                        (B) For the second such year, 75 percent.
                        (C) For the third such year, 50 percent.
                        (D) For the fourth such year, 25 percent.
                (4) Determination of specialty positions lost.--
                        (A) For purposes of this subsection, the aggregate
                    number of specialty positions lost, with respect to a
                    calendar year, is the difference between--
                                (i) the aggregate number of specialty
                            positions described in subparagraph (B) that
                            are estimated for the eligible institution
                            involved for the academic year beginning in
                            such calendar year; and
                                (ii) the aggregate number of such specialty
                            positions at the institution for academic year
                            1993-94.
                        (B) For purposes of subparagraph (A), the specialty
                    positions described in this subparagraph are specialty
                    positions in the medical specialities with respect to
                    which payments under section 3031 are made to the
                    approved physician training programs of the eligible
                    institution involved.
                (5) Additional provision regarding national average
            salary.--
                        (A) The Secretary shall determine, for academic
                    year 1992-93, an amount equal to the national average
                    described in paragraph (2)(B). The national average
                    applicable under such paragraph for a calendar year is,
                    subject to subparagraph (B), the amount determined
                    under the preceding sentence increased by an amount
                    necessary to offset the effects of inflation occurring
                    since academic year 1992-93, as determined through use
                    of the consumer price index.
                        (B) The national average determined under
                    subparagraph (A) and applicable to a calendar year
                    shall, in the case of the eligible institution
                    involved, be adjusted by a factor to reflect regional
                    differences in the applicable wage and wage-related
                    costs.

     PART 2--INSTITUTIONAL COSTS OF GRADUATE NURSING EDUCATION; WORKFORCE
                                   PRIORITIES

    SEC. 3061. NATIONAL COUNCIL; AUTHORIZED GRADUATE NURSE TRAINING
                  POSITIONS; INSTITUTIONAL COSTS.

        (a) Program Regarding Graduate Nurse Training Programs.--The
    Secretary shall, in accordance with this part, carry out a program with
    respect to graduate nurse training programs that is equivalent to the
    program carried out under part 1 with respect to approved physician
    training programs.
        (b) Definitions.--For purposes of this part:
                (1) The term ``graduate nurse training programs'' means
            programs for advanced nurse education, programs for education
            as nurse practitioners, programs for education as nurse
            midwives, programs for education as nurse anesthetists, and
            such other programs for training in clinical nurse specialties
            as are determined by the Secretary to require advanced
            education.
                (2) The term ``graduate nurse training position'' means a
            position as an individual who is enrolled in a graduate nurse
            training program.
                (3) The term ``programs for advanced nurse education''
            means programs meeting the conditions to be programs for which
            awards of grants and contracts may be made under section 821 of
            the Public Health Service Act.
                (4) The term ``programs for education as nurse
            practitioners'' means programs meeting the conditions to be
            programs for which awards of grants and contracts may be made
            under section 822 of the Public Health Service Act for
            education as a nurse practitioners.
                (5) The term ``programs for education as nurse midwives''
            means programs meeting the conditions to be programs for which
            awards of grants and contracts may be made under section 822 of
            the Public Health Service Act for education as nurse midwives.
                (6) The term ``programs for education as nurse
            anesthetists'' means programs meeting the conditions to be
            programs for which awards of grants may be made under section
            831 of the Public Health Service Act for education as nurse
            anesthetists.

    SEC. 3062. APPLICABILITY OF PART 1 PROVISIONS.

        (a) In General.--The provisions of part 1 apply to the program
    carried out under section 3061 to the same extent and in the same
    manner as such provisions apply to the program carried out under part
    1, subject to the subsequent provisions of this section. Section 3051
    does not apply for purposes of the preceding sentence.
        (b) National Council.--With respect to section 3001 as applied to
    this part, the council shall be known as the National Council on
    Graduate Nurse Education (in this part referred to as the ``National
    Council''). The provisions of section 851 of the Public Health Service
    Act regarding the composition of the council under such section apply
    to the composition of the National Council to the same extent and in
    the same manner as such provisions apply to the council under such
    section 851.
        (c) Allocation of Graduate Nurse Training Positions; Formula
    Payments for Operating Costs.--With respect to subparts B and C of part
    1 as applied to this part--
                (1) the funding agreement described in section 3011 is to
            be made by graduate nurse training programs;
                (2) designations under section 3012 and allocations under
            section 3013 apply to graduate nurse training positions; and
                (3) payments under section 3031 are to be made to graduate
            nurse training programs, subject to the requirements for such
            payments.

    SEC. 3063. FUNDING.

        (a) In General.--With respect to sections 3033 and 3034 as applied
    to this part, the provisions of this section apply.
        (b) Annual Graduate Nurse Training Account.--Subject to subsection
    (c), the amount available for each calendar year for making payments
    pursuant to section 3062(c)(3) to graduate nurse training programs
    (constituting an account to be known as the annual graduate nurse
    training account) is $200,000,000.
        (c) Sources of Funds for Account.--The amount specified in
    subsection (b) for the annual graduate nurse training account for a
    calendar year shall be derived from the following sources:
                (1) The transfer under section 3034(d)(3).
                (2) The transfer under section 3104(d)(3).

                            PART 3--RELATED PROGRAMS

    SEC. 3071. PROGRAMS OF THE SECRETARY OF HEALTH AND HUMAN SERVICES.

        (a) In General.--
                (1) Funding.--For purposes of carrying out the programs
            described in this section, there is authorized to be
            appropriated $400,000,000 for fiscal year 1994 and each
            subsequent fiscal year (in addition to amounts that may
            otherwise be authorized to be appropriated for carrying out the
            programs).
                (2) Administration.--The programs described in this section
            and carried out with amounts made available under subsection
            (a) shall be carried out by the Secretary of Health and Human
            Services.
        (b) Primary Care Physician and Physician Assistant Training.--For
    purposes of subsection (a), the programs described in this section
    include programs to support projects to train additional numbers of
    primary care physicians and physician assistants, including projects to
    enhance community-based generalist training for medical students,
    residents, and practicing physicians; to retrain mid-career physicians
    previously certified in a nonprimary care medical specialty; to expand
    the supply of physicians with special training to serve in rural and
    inner-city medically underserved areas; to support expansion of
    service-linked educational networks that train a range of primary care
    providers in community settings; to provide for training in managed
    care, cost-effective practice management, and continuous quality
    improvement; and to develop additional information on primary care
    workforce issues as required to meet future needs in health care.
        (c) Training of Underrepresented Minorities and Disadvantaged
    Persons.--For purposes of subsection (a), the programs described in
    this section include a program to support projects to increase the
    number of underrepresented minority and disadvantaged persons in
    medicine, osteopathy, dentistry, nursing, public health, and other
    health professions, including projects to provide continuing financial
    assistance for such persons entering health professions training
    programs; to increase support for recruitment and retention of such
    persons in the health professions; to maintain efforts to foster
    interest in health careers among such persons at the preprofessional
    level; and to increase the number of minority health professions
    faculty.
        (d) Nurse Training.--For purposes of subsection (a), the programs
    described in this section include a program to support projects to
    support midlevel provider training and address priority nursing
    workforce needs, including projects to train additional nurse
    practitioners and nurse midwives; to support baccalaureate-level nurse
    training programs providing preparation for careers in teaching,
    community health service, and specialized clinical care; to train
    additional nurse clinicians and nurse anesthetists; to support
    interdisciplinary school-based community nursing programs; and to
    promote research on nursing workforce issues.
        (e) Inappropriate Practice Barriers; Full Utilization of Skills.--
    For purposes of subsection (a), the programs described in this section
    include a program--
                (1) to develop and encourage the adoption of model
            professional practice statutes for advanced practice nurses and
            physician assistants, and to otherwise support efforts to
            remove inappropriate barriers to practice by such nurses and
            such physician assistants; and
                (2) to promote the full utilization of the professional
            education and clinical skills of advanced practice nurses and
            physician assistants.
        (f) Other Programs.--For purposes of subsection (a), the programs
    described in this section include a program to train health
    professionals and administrators in managed care, cost-effective
    practice management, continuous quality improvement practices, and
    provision of culturally sensitive care.
        (g) Relationship to Existing Programs.--This section may be carried
    out through programs established in title VII or VIII of the Public
    Health Service Act, as appropriate and as consistent with the purposes
    of such programs.

    SEC. 3072. PROGRAMS OF THE SECRETARY OF LABOR.

        (a) In General.--
                (1) Funding.--For purposes of carrying out the programs
            described in this section, and for carrying out section 3073,
            there is authorized to be appropriated $200,000,000 for fiscal
            year 1994 and each subsequent fiscal year (in addition to
            amounts that may otherwise be authorized to be appropriated for
            carrying out the programs).
                (2) Administration.--The programs described in this section
            and carried out with amounts made available under subsection
            (a) shall be carried out by the Secretary of Labor (in this
            section referred to as the ``Secretary'').
        (b) Retraining Programs; Advanced Career Positions; Workforce
    Adjustment Programs.--
                (1) In general.--For purposes of subsection (a), the
            programs described in this section are the following:
                        (A) A program for skills upgrading and occupational
                    retraining (including retraining health care workers
                    for more advanced positions as technicians, nurses, and
                    physician assistants), and for quality and workforce
                    improvement.
                        (B) A demonstration program to assist workers in
                    health care institutions in obtaining advanced career
                    positions.
                        (C) A program to develop and operate health-worker
                    job banks in local employment services agencies,
                    subject to the following:
                                (i) Such job banks shall be available to
                            all health care providers in the community
                            involved.
                                (ii) Such job banks shall begin operation
                            not later than 90 days after the date of the
                            enactment of this Act.
                        (D) A program to provide for joint labor-management
                    decision-making in the health care sector on workplace
                    matters related to the restructuring of the health care
                    delivery system provided for in this Act.
                        (E) A program to facilitate the comprehensive
                    workforce adjustment initiative.
                (2) Use of funds.--Amounts made available under subsection
            (a) for carrying out this section may be expended for program
            support, faculty development, trainee support, workforce
            analysis, and dissemination of information, as necessary to
            produce required performance outcomes.
        (c) Certain Requirements for Programs.--In carrying out the
    programs described in subsection (b), the Secretary shall, with respect
    to the organizations and employment positions involved, provide for the
    following:
                (1) Explicit, clearly defined skill requirements developed
            for all the positions and projections of the number of openings
            for each position.
                (2) Opportunities for internal career movement.
                (3) Opportunities to work while training or completing an
            educational program.
                (4) Evaluation and dissemination.
                (5) Training opportunities in several forms, as
            appropriate.
        (d) Administrative Requirements.--In carrying out the programs
    described in subsection (b), the Secretary shall, with respect to the
    organizations and employment positions involved, provide for the
    following:
                (1) Joint labor-management implementation and
            administration.
                (2) Discussion with employees as to training needs for
            career advancement.
                (3) Commitment to a policy of internal hirings and
            promotion.
                (4) Provision of support services.
                (5) Consultations with employers and with organized labor.

    SEC. 3073. NATIONAL INSTITUTE FOR HEALTH CARE WORKFORCE DEVELOPMENT.

        (a) Establishment of Institute.--The Secretary of Health and Human
    Services and the Secretary of Labor shall jointly establish an office
    to be known as the National Institute for Health Care Workforce
    Development.
        (b) Director.--The Institute shall be headed by a director, who
    shall be appointed jointly by the Secretaries.
        (c) Duties.--
                (1) In general.--The Director of the Institute shall make
            recommendations to the Secretaries regarding--
                        (A) the supply of health care workers needed for
                    proper staffing of the health care delivery system
                    serving the regional and corporate alliance health
                    plans established under title I;
                        (B) the impact of this Act, and of related changes
                    regarding health care, on health care workers and the
                    needs of such workers with respect to such matters,
                    including needs regarding education, training, and
                    other matters relating to career development; and
                        (C) the development and implementation of high-
                    performance, high-quality health care delivery systems,
                    including employee participation committee systems and
                    employee team systems, that will contribute to the
                    development of better, more effective health care by
                    increasing the role, the responsibilities and the area
                    of independent decision-making authority of health care
                    workers.
                (2) Administration of programs regarding retraining,
            advanced career positions, job banks, and high-performance
            workplaces.--The Secretary of Labor is authorized to--
                        (A) carry out section 3073 acting through the
                    Director of the Institute; and
                        (B) implement the recommendations of the Director
                    regarding employee participation committees and other
                    high-performance systems.
        (d) Advisory Board.--
                (1) In general.--The Secretaries shall establish an
            advisory board to assist in the develop of recommendations
            under subsection (c).
                (2) Composition.--The Advisory Board shall be composed of--
                        (A) the Secretary of Labor;
                        (B) the Secretary of Health and Human Services;
                        (C) representatives of health care workers in
                    organized labor;
                        (D) representatives of health care institutions;
                        (E) representatives of health care education
                    organizations;
                        (F) representatives of consumer organizations; and
                        (G) such other individuals as the Secretaries
                    determine to be appropriate.
        (e) Staff, Quarters, and Other Assistance.--The Secretaries shall
    provide the Institute and the Advisory Board with such staff, quarters,
    and other administrative assistance as may be necessary for the
    Institute and the Advisory Board to carry out this section.
        (f) Definitions.--For purposes of this section:
                (1) The term ``Advisory Board'' means the advisory board
            established under subsection (d).
                (2) The term ``employee participation committees'' means
            committees of workers independently drawn from a facility's
            workforce, or selected by unions where collective bargaining
            agreements are in effect, and which operate without employer
            interference and consult with management on issues of costs and
            efficiency, workplace reorganizations, productivity, and
            quality of care.
                (3) The term ``Institute'' means the Institute established
            under subsection (a).
                (4) The term ``Secretaries'' means the Secretary of Health
            and Human Services and the Secretary of Labor.
        (g) Sunset.--Effective upon the end of calendar year 2000, this
    section is repealed.

    SEC. 3074. REQUIREMENT FOR CERTAIN PROGRAMS REGARDING REDEPLOYMENT OF
                  HEALTH CARE WORKERS.

        (a) State Programs for Home and Community-Based Services for
    Individuals with Disabilities.--With respect to the plan required in
    section 2102(a) (for State programs for home and community-based
    services for individuals with disabilities under part 1 of subtitle B
    of title II), the plan shall, in addition to requirements under such
    part, provide for the following:
                (1) Before initiating the process of implementing the State
            program under such plan, negotiations will be commenced with
            labor unions representing the employees of the affected
            hospitals or other facilities.
                (2) Negotiations under paragraph (1) will address the
            following:
                        (A) The impact of the implementation of the program
                    upon the workforce.
                        (B) Methods to redeploy workers to positions in the
                    proposed system, in the case of workers affected by the
                    program.
                (3) The plan will provide evidence that there has been
            compliance with paragraphs (1) and (2), including a description
            of the results of the negotiations.
        (b) Plan for Integration of Mental Health Systems.--With respect to
    the plan required in section 3511(a) (relating to the integration of
    the mental health and substance abuse services of a State and its
    political subdivisions with the mental health and substance abuse
    services included in the comprehensive benefit package under title I),
    the plan shall, in addition to requirements under such section, provide
    for the following:
                (1) Before initiating the process of implementing the
            integration of such services, negotiations will be commenced
            with labor unions representing the employees of the affected
            hospitals or other facilities.
                (2) Negotiations under paragraph (1) will address the
            following:
                        (A) The impact of the proposed changes upon the
                    workforce.
                        (B) Methods to redeploy workers to positions in the
                    proposed system, in the case of workers affected by the
                    proposed changes.
                (3) The plan will provide evidence that there has been
            compliance with paragraphs (1) and (2), including a description
            of the results of the negotiations.

                                                      Title III, Subtitle B

                      Subtitle B--Academic Health Centers

                            PART 1--FORMULA PAYMENTS

    SEC. 3101. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH CENTERS.

        (a) In General.--In the case of a qualified academic health center
    or qualified teaching hospital that in accordance with section 3102
    submits to the Secretary a written request for calendar year 1996 or
    any subsequent calendar year, the Secretary shall make payments for
    such year to the center or hospital for the purpose specified in
    subsection (b). The Secretary shall make the payments in an amount
    determined in accordance with section 3103, and may administer the
    payments as a contract, grant, or cooperative agreement.
        (b) Payments for Costs Attributable to Academic Nature of
    Institutions.--The purpose of payments under subsection (a) is to
    assist eligible institutions with costs that are not routinely incurred
    by other entities in providing health services, but are incurred by
    such institutions in providing health services by virtue of the
    academic nature of such institutions. Such costs include--
                (1) with respect to productivity in the provision of health
            services, costs resulting from the reduced rate of productivity
            of faculty due to teaching responsibilities;
                (2) the uncompensated costs of clinical research; and
                (3) exceptional costs associated with the treatment of
            health conditions with respect to which an eligible institution
            has specialized expertise (including treatment of rare
            diseases, treatment of unusually severe conditions, and
            providing other specialized health care).
        (c) Definitions.--
                (1) Academic health center.--For purposes of this subtitle,
            the term ``academic health center'' means an entity that--
                        (A) operates a school of medicine or osteopathic
                    medicine, as defined in section 799 of the Public
                    Health Service Act;
                        (B) operates, or is affiliated with, one or more
                    other types of schools or programs described in such
                    section, or with one or more schools of nursing (as
                    defined in section 853 of such Act); and
                        (C) operates, or is affiliated with, one or more
                    teaching hospitals.
                (2) Teaching hospital.--For purposes of this subtitle, the
            term ``teaching hospital'' means a hospital that operates an
            approved physician training program (as defined in section
            3011(b)).
                (3) Qualified center or hospital.--For purposes of this
            subtitle:
                        (A) The term ``qualified academic health center''
                    means an academic health center that operates a
                    teaching hospital.
                        (B) The term ``qualified teaching hospital'' means
                    any teaching hospital other than a teaching hospital
                    that is operated by an academic health center.
                (4) Eligible institution.--For purposes of this subtitle,
            the term ``eligible institution'', with respect to a calendar
            year, means a qualified academic health center, or a qualified
            teaching hospital, that submits to the Secretary a written
            request in accordance with section 3102.

    SEC. 3102. REQUEST FOR PAYMENTS.

      (a) In General.--For purposes of section 3101, a written request for
    payments under such section is in accordance with this section if the
    qualified academic health center or qualified teaching hospital
    involved submits the request not later than the date specified by the
    Secretary; the request is accompanied by each funding agreement
    described in this part; and the request 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 part.
        (b) Continued Status as Academic Health Center.--A funding
    agreement for payments under section 3101 is that the qualified
    academic health center or qualified teaching hospital involved will
    maintain status as such a center or hospital, respectively. For
    purposes of this subtitle, the term ``funding agreement'', with respect
    to payments under section 3101 to such a center or hospital, means that
    the Secretary may make the payments only if the center or hospital
    makes the agreement involved.

    SEC. 3103. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF
                  PAYMENTS.

        (a) Annual Academic Health Center Account.--Subject to section
    3104, the amount available for a calendar year for making payments
    under section 3101 (constituting an account to be known as the annual
    academic health center account) is the following, as applicable to the
    calendar year:
                (1) In the case of calendar year 1996, $3,100,000,000.
                (2) In the case of each of the calendar years 1997 and
            1998, $3,200,000,000.
                (3) In the case of calendar year 1999, $3,700,000,000.
                (4) In the case of calendar year 2000, $3,800,000,000.
                (5) In the case of each subsequent calendar year, the
            amount specified in paragraph (4) increased by the product of
            such amount and the general health care inflation factor (as
            defined in subsection (d)).
        (b) Amount of Payments for Individual Eligible Institutions.--The
    amount of payments required in section 3101 to be made to an eligible
    institution for a calendar year is an amount equal to the product of--
                (1) the annual academic health center account available for
            the calendar year; and
                (2) the percentage constituted by the ratio of--
                        (A) an amount equal to the product of--
                                (i) the portion of the gross receipts of
                            the institution for the preceding calendar year
                            that was derived from providing services to
                            patients (both inpatients and outpatients); and
                                (ii) the indirect teaching adjustment
                            factor determined under section
                            1886(d)(5)(B)(ii) of the Social Security Act
                            (as in effect before January 1, 1998) and--
                                        (I) applicable to patients
                                    discharged from the institution (or
                                    hospitals of the institution, as the
                                    case may be) in such preceding year; or
                                        (II) in the case of patients
                                    discharged on or after January 1, 1998,
                                    applicable to patients discharged in
                                    calendar year 1997; to
                        (B) the sum of the respective amounts determined
                    under subparagraph (A) for eligible institutions.
        (c) Report Regarding Modifications in Formula.--Not later than July
    1, 1996, the Secretary shall submit to the Congress a report containing
    any recommendations of the Secretary regarding policies for allocating
    amounts under subsection (a) among eligible institutions. In making
    such recommendations, the Secretary shall consider the costs described
    in section 3101(b) that are incurred by such institutions.
        (d) Definition.--For purposes of this subtitle:
                (1) The term ``annual academic health center account''
            means the account established pursuant to subsection (a).
                (2) The term ``general health care inflation factor'', with
            respect to a year, has the meaning given such term in section
            6001(a)(3) for such year.

    SEC. 3104. ADDITIONAL FUNDING PROVISIONS.

        (a) Sources of Funds for Annual Academic Health Center Account.--
    The amount specified in section 3103(a) for the annual academic health
    center account for a calendar year shall be derived from the sources
    specified in subsection (b).
        (b) Contributions From Medicare Trust Funds, Regional Alliances,
    and Corporate Alliances.--For purposes of subsection (a), the sources
    specified in this subsection for a calendar year are the following:
                (1) Transfers made by the Secretary under section 4052.
                (2) Payments made by regional alliances under section 1353
            and--
                        (A) in the case of each of the calendar years 1996
                    and 1997, transferred in an amount equal to 50 percent
                    of such payments made for the calendar year involved;
                    and
                        (B) in the case of calendar year 1998 and each
                    subsequent calendar year, transferred in an amount
                    equal to the aggregate regional alliance portion
                    determined under subsection (c)(2)(A).
                (3) The transfer made under subsection (d)(1).
        (c) Contributions From Regional and Corporate Alliances.--
                (1) Determination of aggregate regional and corporate
            alliance amount.--For purposes regarding the provision of funds
            for the annual academic health center account for a calendar
            year (other than calendar year 1996 or 1997), the Secretary
            shall determine an aggregate regional and corporate alliance
            amount, which amount is to be paid by such alliances pursuant
            to paragraphs (2)(B) and (3) of subsection (b), respectively,
            and which amount shall be equal to the difference between--
                        (A) the amount specified in section 3103(a) for the
                    annual academic health center account for such year;
                    and
                        (B) the amount transferred under section 4052 for
                    the year.
                (2) Allocation of amount among regional and corporate
            alliances.--With respect to the aggregate regional and
            corporate alliance amount determined under paragraph (1) for a
            calendar year (other than calendar year 1996 or 1997)--
                        (A) the aggregate regional alliance portion of such
                    amount is the product of such amount and the percentage
                    constituted by the ratio of the total plan payments of
                    regional alliances to the combined total plan payments
                    of regional alliances and corporate alliances; and
                        (B) the aggregate corporate alliance portion of
                    such amount is the product of such amount and the
                    percentage constituted by the ratio of the total plan
                    payments of corporate alliances to such combined total
                    plan payments.
        (d) Compliance Regarding Corporate Alliances.--
                (1) In general.--Effective January 15 of calendar year 1996
            and each subsequent calendar year, there is hereby transferred
            to the Secretary, out of any money in the Treasury not
            otherwise appropriated--
                        (A) in the case of each of the calendar years 1996
                    and 1997, an amount equal to the difference between--
                                (i) the amount specified in section 3103(a)
                            for the annual academic health center account
                            for the calendar year involved; and
                                (ii) the sum of the amount transferred
                            under section 4052 for such year and the amount
                            transferred under subsection (b)(2)(A) for such
                            year; and
                        (B) in the case of calendar year 1998 and each
                    subsequent calendar year, an amount equal to the
                    aggregate corporate alliance portion determined under
                    subsection (c)(2)(B) for the calendar year involved.
                (2) Manner of compliance.--The payment by corporate
            alliances of the tax imposed under section 3461 of the Internal
            Revenue Code of 1986 (as added by section 7121 of this Act),
            together with the transfer made in paragraph (1)(B) for the
            calendar year involved, is deemed to be the payment required
            pursuant to subsection (c)(1) for corporate alliances for such
            year.
                (3) Graduate nurse education.--Effective January 15 of
            calendar year 1996 and each subsequent calendar year, there is
            hereby transferred to the Secretary, out of any money in the
            Treasury not otherwise appropriated, 50 percent of the amount
            specified in section 3063(b) with respect to the annual
            graduate nurse training account.
        (e) Definitions.--For purposes of this subtitle, the term ``plan
    payments'' with respect to a regional or corporate alliance, means the
    amount paid to health plans by the alliance.

             PART 2--ACCESS OF PATIENTS TO ACADEMIC HEALTH CENTERS

    SEC. 3131. CONTRACTS FOR ENSURING ACCESS TO CENTERS.

        (a) Contracts With Health Plans.--Regional and corporate health
    alliances under this Act shall ensure that, in accordance with
    subsection (b), the health plans of the alliances enter into sufficient
    contracts with eligible centers to ensure that enrollees in regional or
    corporate alliance health plans, as appropriate, receive the
    specialized treatment expertise of such centers, subject to such
    exceptions as the Secretary may provide.
        (b) Utilization of Specialized Treatment Expertise of Centers.--
    Contracts under subsection (a) between eligible centers and health
    plans are in accordance with this subsection if the contracts provide
    that, with respect to health conditions within the specialized
    treatment expertise of the centers, health plans will refer medical
    cases involving such conditions to the centers.
        (c) Specialized Treatment Expertise.--For purposes of this
    subtitle, the term ``specialized treatment expertise'', with respect to
    treatment of a health condition by an academic health center, means
    expertise in treating rare diseases, treating unusually severe
    conditions, and providing other specialized health care.

    SEC. 3132. DISCRETIONARY GRANTS REGARDING ACCESS TO CENTERS.

        (a) Rural Information and Referral Systems.--The Secretary may make
    grants to eligible centers for the establishment and operation of
    information and referral systems to provide the services of such
    centers to rural regional and corporate health alliance health plans.
        (b) Other Purposes Regarding Urban and Rural Areas.--The Secretary
    may make grants to eligible centers to carry out activities (other than
    activities carried out under subsection (a)) for the purpose of
    providing the services of eligible centers to residents of rural or
    urban communities who otherwise would not have adequate access to such
    services.

                                                      Title III, Subtitle C

                    Subtitle C--Health Research Initiatives

                     PART 1--PROGRAMS FOR CERTAIN AGENCIES

    SEC. 3201. BIOMEDICAL AND BEHAVIORAL RESEARCH ON HEALTH PROMOTION AND
                  DISEASE PREVENTION.

        Section 402(f) of the Public Health Service Act (42 U.S.C. 282(f)),
    as amended by section 201 of Public Law 103-43 (107 Stat. 144), is
    amended--
                (1) in paragraph (3), by redesignating subparagraphs (A)
            and (B) as clauses (i) and (ii), respectively;
                (2) by redesignating paragraphs (1) through (3) as
            subparagraphs (A) through (C);
                (3) by inserting ``(1)'' after ``(f)''; and
                (4) by adding at the end the following paragraph:
        ``(2)(A) The Director of NIH, in collaboration with the Associate
    Director for Prevention and with the heads of the agencies of the
    National Institutes of Health, shall ensure that such Institutes
    conduct and support biomedical and behavioral research on promoting
    health and preventing diseases, disorders, and other health conditions
    (including Alzheimer's disease, breast cancer, heart disease, and
    stroke).
        ``(B) In carrying out subparagraph (A), the Director of NIH shall
    give priority to conducting and supporting research on child and
    adolescent health (including birth defects), chronic and recurrent
    health conditions, reproductive health, mental health, elderly health,
    substance abuse, infectious diseases, health and wellness promotion,
    and environmental health, and to resource development related to such
    research.''.

    SEC. 3202. HEALTH SERVICES RESEARCH.

        Section 902 of the Public Health Service Act (42 U.S.C. 299a), as
    amended by section 2(b) of Public Law 102-410 (106 Stat. 2094), is
    amended by adding at the end the following subsection:
        ``(f) Research on Health Care Reform.--
                ``(1) In general.--In carrying out section 901(b), the
            Administrator shall conduct and support research on the reform
            of the health care system of the United States, as directed by
            the National Board.
                ``(2) Priorities.--In carrying out paragraph (1), the
            Administrator shall give priority to the following:
                        ``(A) Conducting and supporting research on the
                    appropriateness and effectiveness of alternative
                    clinical strategies; the quality and outcomes of care;
                    and administrative simplification.
                        ``(B) Conducting and supporting research on
                    consumer choice and information resources; the effects
                    of health care reform on health delivery systems;
                    workplace injury and illness prevention; methods for
                    risk adjustment; factors influencing access to health
                    care for underserved populations; and primary care.
                        ``(C) The development of clinical practice
                    guidelines consistent with section 913, the
                    dissemination of such guidelines consistent with
                    section 903, and the assessment of the effectiveness of
                    such guidelines.''.

                          PART 2--FUNDING FOR PROGRAMS

    SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Biomedical and Behavioral Research on Health Promotion and
    Disease Prevention.--For the purpose of carrying out activities
    pursuant to the amendments made by section 3201, there are authorized
    to be appropriated $400,000,000 for fiscal year 1995, and $500,000,000
    for each of the fiscal years 1996 through 2000.
        (b) Health Services Research.--For the purpose of carrying out
    activities pursuant to the amendments made by section 3202, there are
    authorized to be appropriated $150,000,000 for fiscal year 1995,
    $400,000,000 for fiscal year 1996, $500,000,000 for fiscal year 1997,
    and $600,000,000 for each of the fiscal years 1998 through 2000.
        (c) Relation to Other Funds.--The authorizations of appropriations
    established in subsections (a) and (b) are in addition to any other
    authorizations of appropriations that are available for the purposes
    described in such subsections.

                                                      Title III, Subtitle C

        Subtitle D--Core Functions of Public Health Programs; National
                    Initiatives Regarding Preventive Health

                                PART 1--FUNDING

    SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Core Functions of Public Health Programs.--For the purpose of
    carrying out part 2, there are authorized to be appropriated
    $12,000,000 for fiscal year 1995, $325,000,000 for fiscal year 1996,
    $450,000,000 for fiscal year 1997, $550,000,000 for fiscal year 1998,
    $650,000,000 for fiscal year 1999, and $750,000,000 for fiscal year
    2000.
        (b) National Initiatives Regarding Health Promotion and Disease
    Prevention.--For the purpose of carrying out part 3, there are
    authorized to be appropriated $175,000,000 for fiscal year 1996, and
    $200,000,000 for each of the fiscal years 1997 through 2000.
        (c) Relation to Other Funds.--The authorizations of appropriations
    established in subsections (a) and (b) are in addition to any other
    authorizations of appropriations that are available for the purposes
    described in such subsections.

                PART 2--CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

    SEC. 3311. PURPOSES.

        Subject to the subsequent provisions of this subtitle, the purposes
    of this part are to strengthen the capacity of State and local public
    health agencies to carry out the following functions:
                (1) To monitor and protect the health of communities
            against communicable diseases and exposure to toxic
            environmental pollutants, occupational hazards, harmful
            products, and poor quality health care.
                (2) To identify and control outbreaks of infectious disease
            and patterns of chronic disease and injury.
                (3) To inform and educate health care consumers and
            providers about their roles in preventing and controlling
            disease and the appropriate use of medical services.
                (4) To develop and test new prevention and public health
            control interventions.

    SEC. 3312. GRANTS TO STATES FOR CORE HEALTH FUNCTIONS.

        (a) In General.--The Secretary may make grants to States for the
    purpose of carrying out one or more of the functions described in
    subsection (b).
        (b) Core Functions of Public Health Programs.--For purposes of
    subsection (a), the functions described in this subsection are, subject
    to subsection to subsection (c), as follows:
                (1) Data collection, activities related to population
            health measurement and outcomes monitoring, including the
            regular collection and analysis of public health data, vital
            statistics, and personal health services data and analysis for
            planning and needs assessment purposes of data collected from
            health plans through the information system under title V of
            this Act.
                (2) Activities to protect the environment and to assure the
            safety of housing, workplaces, food and water, including the
            following activities:
                        (A) Monitoring the overall public health quality
                    and safety of communities.
                        (B) Assessing exposure to high lead levels and
                    water contamination.
                        (C) Monitoring sewage and solid waste disposal,
                    radiation exposure, radon exposure, and noise levels.
                        (D) Abatement of lead-related hazards.
                        (E) Assuring recreation and worker safety.
                        (F) Enforcing public health safety and sanitary
                    codes.
                        (G) Other activities relating to promoting the
                    public health of communities.
                (3) Investigation and control of adverse health conditions,
            including improvements in emergency treatment preparedness,
            cooperative activities to reduce violence levels in
            communities, activities to control the outbreak of disease,
            exposure related conditions and other threats to the health
            status of individuals.
                (4) Public information and education programs to reduce
            risks to health such as use of tobacco, alcohol and other
            drugs, sexual activities that increase the risk to HIV
            transmission and sexually transmitted diseases, poor diet,
            physical inactivity, and low childhood immunization levels.
                (5) Accountability and quality assurance activities,
            including monitoring the quality of personal health services
            furnished by health plans and providers of medical and health
            services in a manner consistent with the overall quality of
            care monitoring activities undertaken under title V, and
            monitoring communities' overall access to health services.
                (6) Provision of public health laboratory services to
            complement private clinical laboratory services and that screen
            for diseases and conditions such as metabolic diseases in
            newborns, provide toxicology assessments of blood lead levels
            and other environmental toxins, diagnose sexually transmitted
            diseases, tuberculosis and other diseases requiring partner
            notification, test for infectious and food-borne diseases, and
            monitor the safety of water and food supplies.
                (7) Training and education to assure provision of care by
            all health professionals, with special emphasis placed on the
            training of public health professions including
            epidemiologists, biostatisticians, health educators, public
            health administrators, sanitarians and laboratory technicians.
                (8) Leadership, policy development and administration
            activities, including needs assessment, the setting of public
            health standards, the development of community public health
            policies, and the development of community public health
            coalitions.
        (c) Restrictions on Use of Grant.--
                 (1) In general.--A funding agreement for a grant under
            subsection (a) for a State is that the grant will not be
            expended--
                        (A) to provide inpatient services;
                        (B) to make cash payments to intended recipients of
                    health services;
                        (C) to purchase or improve land, purchase,
                    construct, or permanently improve (other than minor
                    remodeling) any building or other facility, or purchase
                    major medical equipment;
                        (D) to satisfy any requirement for the expenditure
                    of non-Federal funds as a condition for the receipt of
                    Federal funds; or
                        (E) to provide financial assistance to any entity
                    other than a public or nonprofit private entity.
                (2) Limitation on administrative expenses.--A funding
            agreement for a grant under subsection (a) is that the State
            involved will not expend more than 10 percent of the grant for
            administrative expenses with respect to the grant.
        (d) Maintenance of Effort.--A funding agreement for a grant under
    subsection (a) is that the State involved will maintain expenditures of
    non-Federal amounts for core health functions at a level that is not
    less than the level of such expenditures maintained by the State for
    the fiscal year preceding the first fiscal year for which the State
    receives such a grant.

    SEC. 3313. SUBMISSION OF INFORMATION.

        The Secretary may make a grant under section 3312 only if the State
    involved submits to the Secretary the following information:
                (1) A description of existing deficiencies in the State's
            public health system (at the State level and the local level),
            using standards of sufficiency developed by the Secretary.
                (2) A description of health status measures to be improved
            within the State (at the State level and the local level)
            through expanded public health functions.
                (3) Measurable outcomes and process objectives for
            improving health status and core health functions for which the
            grant is to be expended.
                (4) Information regarding each such function, which--
                        (A) identifies the amount of State and local
                    funding expended on each such function for the fiscal
                    year preceding the fiscal year for which the grant is
                    sought; and
                        (B) provides a detailed description of how
                    additional Federal funding will improve each such
                    function by both the State and local public health
                    agencies.
                (5) A description of the core health functions to be
            carried out at the local level, and a specification for each
            such function of--
                        (A) the communities in which the function will be
                    carried out; and
                        (B) the amount of the grant to be expended for the
                    function in each community so specified.

    SEC. 3314. REPORTS.

        A funding agreement for a grant under section 3312 is that the
    States involved will, not later than the date specified by the
    Secretary, submit to the Secretary a report describing--
                (1) the purposes for which the grant was expended; and
                (2) describing the extent of progress made by the State in
            achieving measurable outcomes and process objectives described
            in section 3313(3).

    SEC. 3315. APPLICATION FOR GRANT.

        The Secretary may make a grant under section 3312 only if an
    application for the grant is submitted to the Secretary, the
    application contains each agreement described in this part, the
    application contains the information required in section 3314, 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 part.

    SEC. 3316. GENERAL PROVISIONS.

        (a) Uniform Data Sets.--The Secretary, in consultation with the
    States, shall develop uniform sets of data for the purpose of
    monitoring the core health functions carried out with grants under
    section 3312.
        (b) Duration of Grant.--The period during which payments are made
    to a State from a grant under section 3312 may not exceed 5 years. The
    provision of such payments shall be subject to annual approval by the
    Secretary of the payments. This subsection may not be construed as
    establishing a limitation on the number of grants under such section
    that may be made to the State.

    SEC. 3317. ALLOCATIONS FOR CERTAIN ACTIVITIES.

        Of the amounts made available under section 3301 for a fiscal year
    for carrying out this part, the Secretary may reserve not more than 5
    percent for carrying out the following activities:
                (1) Technical assistance with respect to planning,
            development, and operation of core health functions carried out
            under section 3312, including provision of biostatistical and
            epidemiological expertise and provision of laboratory
            expertise.
                (2) Development and operation of a national information
            network among State and local health agencies.
                (3) Program monitoring and evaluation of core health
            functions carried out under section 3312.
                (4) Development of a unified electronic reporting mechanism
            to improve the efficiency of administrative management
            requirements regarding the provision of Federal grants to State
            public health agencies.

    SEC. 3318. DEFINITIONS.

        For purposes of this part:
                (1) The term ``funding agreement'', with respect to a grant
            under section 3312 to a State, means that the Secretary may
            make the grant only if the State makes the agreement involved.
                (2) The term ``core health functions'', with respect to a
            State, means the functions described in section 3312(b).

      PART 3--NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND DISEASE
                                   PREVENTION

    SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIATIVES.

        (a) In General.--The Secretary may make grants to entities
    described in subsection (b) for the purpose of carrying out projects to
    develop and implement innovative community-based strategies to provide
    for health promotion and disease prevention activities for which there
    is a significant need, as identified under section 1701 of the Public
    Health Service Act.
        (b) Eligible Entities.--The entities referred to in subsection (a)
    are agencies of State or local government, private nonprofit
    organizations (including research institutions), and coalitions that
    link two or more of these groups.
        (c) Certain Activities.--The Secretary shall ensure that projects
    carried out under subsection (a)--
                (1) reflect approaches that take into account the special
            needs and concerns of the affected populations;
                (2) are targeted to the most needy and vulnerable
            population groups and geographic areas of the Nation;
                (3) examine links between various high priority preventable
            health problems and the potential community-based remedial
            actions; and
                (4) establish or strengthen the links between the
            activities of agencies engaged in public health activities with
            those of health alliances, health care providers, and other
            entities involved in the personal health care delivery system
            described in title I.

    SEC. 3332. PRIORITIES.

        (a) Establishment.--
                (1) Annual statement.--The Secretary shall for each fiscal
            year develop a statement of proposed priorities for grants
            under section 3331 for the fiscal year.
                (2) Allocations among priorities.--With respect to the
            amounts available under section 3301(b) for the fiscal year for
            carrying out this part, each statement under paragraph (1) for
            a fiscal year shall include a specification of the percentage
            of the amount to be devoted to projects addressing each of the
            proposed priorities established in the statement.
                (3) Process for establishing priorities.--Not later than
            January 1 of each fiscal year, the Secretary shall publish a
            statement under paragraph (1) in the Federal Register. A period
            of 60 days shall be allowed for the submission of public
            comments and suggestions concerning the proposed priorities.
            After analyzing and considering comments on the proposed
            priorities, the Secretary shall publish in the Federal Register
            final priorities (and associated reservations of funds) for
            approval of projects for the following fiscal year.
        (b) Applicability to Making of Grants.--
                (1) In general.--The Secretary may make grants under
            section 3331 for projects that the Secretary determines--
                        (A) are consistent with the applicable final
                    statement of priorities and otherwise meets the
                    objectives described in subsection (a); and
                        (B) will assist in meeting a health need or concern
                    of a population served by a health plan or health
                    alliance established under title I.
                (2) Special consideration for certain projects.--In making
            grants under section 3331, the Secretary shall give special
            consideration to applicants that will carry out projects that,
            in addition to being consistent with the applicable published
            priorities under subsection (a) and otherwise meeting the
            requirements of this part, have the potential for replication
            in other communities.

    SEC. 3333. SUBMISSION OF INFORMATION.

        The Secretary may make a grant under section 3331 only if the
    applicant involved submits to the Secretary the following information:
                (1) A description of the activities to be conducted, and
            the manner in which the activities are expected to contribute
            to meeting one or more of the priority health needs specified
            under section 3332 for the fiscal year for which the grant is
            initially sought.
                (2) A description of the total amount of Federal funding
            requested, the geographic area and populations to be served,
            and the evaluation procedures to be followed.
                (3) Such other information as the Secretary determines to
            be appropriate.

    SEC. 3334. APPLICATION FOR GRANT.

        The Secretary may make a grant under section 3331 only if an
    application for the grant is submitted to the Secretary, the
    application contains each agreement described in this part, the
    application contains the information required in section 3333, 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 part.

       Subtitle E--Health Services for Medically Underserved Populations

                  PART 1--COMMUNITY AND MIGRANT HEALTH CENTERS

                                                      Title III, Subtitle E

    SEC. 3401. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Grants to Community and Migrant Health Centers.--The Secretary
    shall make grants in accordance with this part to migrant health
    centers and community health centers.
        (b) Authorization of Appropriations.--For the purpose of carrying
    out subsection (a), there are authorized to be appropriated
    $100,000,000 for each of the fiscal years 1995 through 2000.
        (c) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (b) for the purpose described in such
    subsection are in addition to any other authorizations of
    appropriations that are available for such purpose.
        (d) Definitions.--For purposes of this subtitle, the terms
    ``migrant health center'' and ``community health center'' have the
    meanings given such terms in sections 329(a)(1) and 330(a) of the
    Public Health Service Act, respectively.

    SEC. 3402. USE OF FUNDS.

        (a) Development, Operation, and Other Purposes Regarding Centers.--
    Subject to subsection (b), grants under section 3401 to migrant health
    centers and community health centers may be made only in accordance
    with the conditions upon which grants are made under sections 329 and
    330 of the Public Health Service Act, respectively.
        (b) Required Financial Reserves.--The Secretary may authorize
    migrant health centers and community health centers to expend a grant
    under section 3401 to establish and maintain the financial reserves
    required under title I for providers of health services.

                 PART 2--INITIATIVES FOR ACCESS TO HEALTH CARE

                          Subpart A--Purposes; Funding

    SEC. 3411. PURPOSES.

        Subject to the provisions of subparts B through D, the purposes of
    this part are as follows:
                (1) To improve access to health services for urban and
            rural medically-underserved populations through a program of
            flexible grants, contracts, and loans.
                (2) To facilitate transition to a system in which
            medically-underserved populations have an adequate choice of
            community-oriented providers and health plans.
                (3) To promote the development of community practice
            networks and community health plans that integrate health
            professionals and health care organizations supported through
            public funding with other providers in medically underserved
            areas.
                (4) To support linkages between providers of health care
            for medically-underserved populations and regional and
            corporate alliance health plans.
                (5) To expand the capacity of community practice networks
            and community health plans in underserved areas by increasing
            the number of practice sites and by renovating and converting
            substandard inpatient and outpatient facilities.
                (6) To link providers in underserved areas with each other
            and with regional health care institutions and academic health
            centers through information systems and telecommunications.
                (7) To support activities that enable medically underserved
            populations to gain access to the health care system and use it
            effectively.

    SEC. 3412. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Development of Qualified Community Health Plans and Practice
    Groups.--For the purpose of carrying out subparts B and C, there are
    authorized to be appropriated $200,000,000 for fiscal year 1995,
    $500,000,000 for fiscal year 1996, $600,000,000 for fiscal year 1997,
    $700,000,000 for fiscal year 1998, $500,000,000 for fiscal year 1999,
    and $200,000,000 for fiscal year 2000.
        (b) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.
        (c) Relationship to Program Regarding School-Related Health
    Services.--This section is subject to section 3692.

    Subpart B--Development of Qualified Community Health Plans and Practice
                                    Networks

    SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND NETWORKS.

        (a) In General.--The Secretary may make grants to and enter into
    contracts with consortia of public or private health care providers for
    the development of qualified community health plans and qualified
    community practice networks. For purposes of this subtitle, the term
    ``qualified community health group'' means such a health plan or such a
    practice network.
        (b) Qualified Community Health Plans.--For purposes of this
    subtitle, the term ``qualified community health plan'' means a health
    plan that meets the following conditions:
                (1) The health plan is a public or nonprofit private entity
            whose principal purpose is, with respect to the items and
            services included in the comprehensive benefit package under
            title I, to provide each of such items and services in one or
            more health professional shortage areas or to provide such
            items and services to a significant number of individuals who
            are members of a medically underserved population.
                (2) The health plan is a participant in one or more health
            alliances.
                (3) Two or more of the categories specified in subsection
            (d) are represented among the entities providing health
            services through the health plan.
        (c) Qualified Community Practice Networks.--For purposes of this
    subtitle, the term ``qualified community practice network'' means a
    consortium of health care providers meeting the following conditions:
                (1) The consortium is a public or nonprofit private entity
            whose principal purpose is the purpose described in subsection
            (b)(1).
                (2) The consortium has an agreement with one or more health
            plans that are participating in one or more health alliances.
                (3) The participation of health care providers in the
            consortium is governed by a written agreement to which each of
            the participating providers is a party.
                (4) Two or more of the categories described in subsection
            (d) are represented among the entities participating in the
            consortium.
        (d) Relevant Categories of Entities.--For purposes of subsections
    (b)(3) and (c)(4), the categories described in this subsection are the
    following categories of entities:
                (1) Physicians, other health professionals, or health care
            institutions that provide health services in one or more health
            professional shortage areas or provide such services to a
            significant number of individuals who are members of a
            medically underserved population, and that do not provide
            health services under any of the programs specified in
            paragraphs (2) through (7) or as employees of public entities.
                (2) Entities providing health services under grants under
            sections 329 and 330 of the Public Health Service Act.
                (3) Entities providing health services under grants under
            sections 340 and 340A of such Act.
                (4) Entities providing health services under grants under
            section 1001 or title XXVI of such Act.
                (5) Entities providing health services under title V of the
            Social Security Act.
                (6) Entities providing health services through rural health
            clinics and other federally qualified health centers.
                (7) Entities providing health services in urban areas
            through programs under title V of the Indian Health Care
            Improvement Act, and entities providing outpatient health
            services through programs under the Indian Self-Determination
            Act.
                (8) Programs providing personal health services and
            operating through State or local public health agencies.
        (e) Rule of Construction.--The consortia to which the Secretary may
    make an award of financial assistance under subsection (a) for the
    development of qualified community practice networks include any health
    plan that participates in one or more health alliances, without regard
    to whether the health plan is a qualified community health plan.
        (f) Service Area.--In making an award of financial assistance under
    subsection (a), the Secretary shall designate the geographic area with
    respect to which the qualified community health group involved is to
    provide health services. A funding agreement for such an award is that
    the qualified community health group involved will provide such
    services in the area so designated.
        (g) Definitions.--For purposes of this subtitle:
                (1) The term ``health professional shortage areas'' means
            health professional shortage areas designated under section 332
            of the Public Health Service Act.
                (2) The term ``medically underserved population'' means a
            medically underserved population designated under section 330
            of the Public Health Service Act.
                (3) The term ``rural health clinic'' has the meaning given
            such term in section 1861(aa)(2) of the Social Security Act.
                (4) The term ``federally qualified health centers'' has the
            meaning given such term in section 1861(aa)(4) of the Social
            Security Act.
                (5) The term ``service area'', with respect to a qualified
            community health group, means the geographic area designated
            under subsection (f).
                (6) The term ``funding agreement'', with respect to an
            award of financial assistance under this section, means that
            the Secretary may make the award only if the applicant for the
            award makes the agreement involved.
                (7) The term ``financial assistance'', with respect to
            awards under subsection (a), means a grant or contract.

    SEC. 3422. PREFERENCES IN MAKING AWARDS OF ASSISTANCE.

        In making awards of financial assistance under section 3421, the
    Secretary shall give preference to applicants in accordance with the
    following:
                (1) The Secretary shall give preference if 3 or more of the
            categories described in subsection (d) of such section will be
            represented in the qualified community health group involved
            (pursuant to subsection (b)(3) or (c)(4) of such section, as
            the case may be).
                (2) Of applicants receiving preference under paragraph (1),
            the Secretary shall give a greater degree of preference
            according to the extent to which a greater number of categories
            are represented.
                (3) Of applicants receiving preference under paragraph (1),
            the Secretary shall give a greater degree of preference if one
            of the categories represented is the category described in
            subsection (d)(1) of such section.

    SEC. 3423. CERTAIN USES OF AWARDS.

        (a) In General.--Subject to subsection (b), the purposes for which
    an award of financial assistance under section 3421 may be expended in
    developing a qualified community health group include the following:
                (1) Planning such group, including entering into contracts
            between the recipient of the award and health care providers
            who are to participate in the group.
                (2) Recruitment, compensation, and training of health
            professionals and administrative staff.
                (3) Acquisition, expansion, modernization, and conversion
            of facilities, including for purposes of providing for sites at
            which health services are to be provided through such group.
                (4) Acquisition and development of information systems
            (exclusive of systems that the Secretary determines are
            information highways).
                (5) Such other expenditures as the Secretary determines to
            be appropriate.
        (b) Twenty-year Obligation Regarding Significant Capital
    Expenditures; Right of Recovery.--
                (1) In general.--With respect to a facility for which
            substantial capital costs are to paid from an award of
            financial assistance under section 3421, the Secretary may make
            the award only if the applicant involved agrees that the
            applicant will be liable to the United States for the amount of
            the award expended for such costs, together with an amount
            representing interest, if at any time during the 20-year period
            beginning on the date of completion of the activities involved,
            the facility--
                        (A) ceases to be a facility utilized by a qualified
                    community health group, or by another public or
                    nonprofit private entity that provides health services
                    in one or more health professional shortage areas or
                    that provides such services to a significant number of
                    individuals who are members of a medically underserved
                    population; or
                        (B) is sold or transferred to any entity other than
                    an entity that is--
                                (i) a qualified community health group or
                            other entity described in subparagraph (A); and
                                (ii) approved by the Secretary as a
                            purchaser or transferee regarding the facility.
                (2) Subordination; waivers.--The Secretary may subordinate
            or waive the right of recovery under paragraph (1), and any
            other Federal interest that may be derived by virtue of an
            award of financial assistance under section 3421 from which
            substantial capital costs are to paid, if the Secretary
            determines that subordination or waiver will further the
            objectives of this part.

    SEC. 3424. ACCESSIBILITY OF SERVICES.

        (a) Services for Certain Individuals.--A funding agreement for an
    award of financial assistance under section 3421 is that the qualified
    community health group involved will ensure that the services of the
    group will be accessible directly or through formal contractual
    arrangements with its participating providers regardless of whether
    individuals who seek care from the applicant are eligible persons under
    title I.
        (b) Use of Third-Party Payors.--A funding agreement for an award of
    financial assistance under section 3421 is that the qualified community
    health group involved will ensure that the health care providers of the
    group are all approved by the Secretary as providers under title XVIII
    of the Social Security Act and by the appropriate State agency as
    providers under title XIX of the Social Security Act, and the applicant
    has made or will make every reasonable effort to collect appropriate
    reimbursement for its costs in providing health services to individuals
    who are entitled to health benefits under title I of this Act,
    insurance benefits under title XVIII of the Social Security Act,
    medical assistance under a State plan approved under title XIX of the
    Social Security Act, or to assistance for medical expenses under any
    other public assistance program or private health insurance program.
        (c) Schedule of Fees.--A funding agreement for an award of
    financial assistance under section 3421 is that the qualified community
    health group involved will--
                (1) prepare a schedule of fees or payments for the
            provision of health services not covered by title I that is
            consistent with locally prevailing rates or charges and
            designed to cover its reasonable costs of operation and has
            prepared a corresponding schedule of discounts to be applied to
            the payment of such fees or payments (or payments of cost
            sharing amounts owed in the case of covered benefits) which
            discounts are applied on the basis of the patient's ability to
            pay; and
                (2) make every reasonable effort to secure from patients
            payment in accordance with such schedules, and to collect
            reimbursement for services to persons entitled to public or
            private insurance benefits or other medical assistance on the
            basis of full fees without application of discounts, except
            that the applicant will ensure that no person is denied service
            based on the person's inability to pay therefor.
        (d) Barriers Within Service Area.--A funding agreement for an award
    of financial assistance under section 3421 is that the qualified
    community health group involved will ensure that the following
    conditions are met:
                (1) In the service area of the group, the group will ensure
            that--
                        (A) the services of the group are accessible to all
                    residents; and
                        (B) to the maximum extent possible, barriers to
                    access to the services of the group are eliminated,
                    including barriers resulting from the area's physical
                    characteristics, its residential patterns, its
                    economic, social and cultural groupings, and available
                    transportation.
                (2) The group will periodically conduct reviews within the
            service area of the group to determine whether the conditions
            described in paragraph (1) are being met.
        (e) Limited Ability to Speak English Language.--A funding agreement
    for an award of financial assistance under section 3421 is that, if the
    service area of the qualified community health group involved includes
    a substantial number of individuals who have a limited ability to speak
    the English language, the applicant will--
                (1) maintain arrangements responsive to the needs of such
            individuals for providing services to the extent practicable in
            the language and cultural context most appropriate to such
            individuals; and
                (2) maintain a sufficient number of staff members who are
            fluent in both English and the languages spoken by such
            individuals, and will ensure that the responsibilities of the
            employees include providing guidance and assistance to such
            individuals and to other staff members of the group.

    SEC. 3425. ADDITIONAL AGREEMENTS.

        (a) Required Services.--A funding agreement for an award of
    financial assistance under section 3421 is that the qualified community
    health group involved will provide enabling services (as defined in
    section 3461(g)) and all of the items and services identified by the
    Secretary in rules regarding qualified community health plans and
    practice networks.
        (b) Quality Control System.--A funding agreement for an award of
    financial assistance under section 3421 is that the qualified community
    health group involved will maintain a community-oriented, patient
    responsive, quality control system under which the group, in accordance
    with regulations prescribed by the Secretary--
                (1) conducts an ongoing quality assurance program for the
            health services delivered by participating provider entities;
                (2) maintains a continuous community health status
            improvement process; and
                (3) maintains a system for development, compilation,
            evaluation and reporting of information to the public regarding
            the costs of operation, service utilization patterns,
            availability, accessibility and acceptability of services,
            developments in the health status of the populations served,
            uniform health and clinical performance measures and financial
            performance of the network or plan.
        (c) Use of Existing Resources.--A funding agreement for an award of
    financial assistance under section 3421 is that the applicant will, in
    developing the qualified community health group involved, utilize
    existing resources to the maximum extent practicable.

    SEC. 3426. SUBMISSION OF CERTAIN INFORMATION.

        (a) Assessment of Need.--The Secretary may make an award of
    financial assistance under section 3421 only if the applicant involved
    submits to the Secretary an assessment of the need that the medically
    underserved population or populations proposed to be served by the
    applicant have for health services and for enabling services (as
    defined in section 3461(g)).
        (b) Description of Intended Expenditures; Related Information.--The
    Secretary may make an award of financial assistance under section 3421
    only if the applicant involved submits to the Secretary the following
    information:
                (1) A description of how the applicant will design the
            proposed quality community health plan or practice network
            (including the service sites involved) for such populations
            based on the assessment of need.
                (2) A description of efforts to secure, within the proposed
            service area of such health plan or practice network (including
            the service sites involved), financial and professional
            assistance and support for the project.
                (3) Evidence of significant community involvement in the
            initiation, development and ongoing operation of the project.

    SEC. 3427. REPORTS; AUDITS.

        A funding agreement for an award of financial assistance under
    section 3421 is that the applicant involved will--
                (1) provide such reports and information on activities
            carried out under this section in a manner and form required by
            the Secretary; and
                (2) provide an annual organization-wide audit that meets
            applicable standards of the Secretary.

    SEC. 3428. APPLICATION FOR ASSISTANCE.

        The Secretary may make an award of financial assistance under
    section 3421 only if an application for the award is submitted to the
    Secretary, the application contains each funding agreement described in
    this subpart, the application contains the information required in
    section 3426, 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 subpart.

    SEC. 3429. GENERAL PROVISIONS.

        (a) Limitation on Number of Awards.--The Secretary may not make
    more than two awards of financial assistance under section 3421 for the
    same project.
        (b) Amount.--The amount of any award of financial assistance under
    section 3421 for any project shall be determined by the Secretary.

     Subpart C--Capital Cost of Development of Qualified Community Health
                          Plans and Practice Networks

    SEC. 3441. LOANS AND LOAN GUARANTEES REGARDING PLANS AND NETWORKS.

        (a) In General.--The Secretary may make loans to, and guarantee the
    payment of principal and interest to Federal and non-Federal lenders on
    behalf of, public and private entities for the capital costs of
    developing qualified community health groups (as defined in section
    3421(a)).
        (b) Preferences; Accessibility of Services; Certain Other
    Provisions.--The provisions of subpart B apply to loans and loan
    guarantees under subsection (a) to the same extent and in the same
    manner as such provisions apply to awards of grants and contracts under
    section 3421.
        (c) Use of Assistance.--
                (1) In general.--With respect to the development of
            qualified community health groups, the capital costs for which
            loans made pursuant to subsection (a) may be expended are,
            subject to paragraphs (2) and (3), the following:
                        (A) The acquisition, modernization, expansion or
                    construction of facilities, or the conversion of
                    unneeded hospital facilities to facilities that will
                    assure or enhance the provision and accessibility of
                    health care and enabling services to medically
                    underserved populations.
                        (B) The purchase of major equipment, including
                    equipment necessary for the support of external and
                    internal information systems.
                        (C) The establishment of reserves required for
                    furnishing services on a prepaid basis.
                        (D) Such other capital costs as the Secretary may
                    determine are necessary to achieve the objectives of
                    this section.
                (2) Priorities regarding use of funds.--In providing loans
            or loan guarantees under subsection (a) for an entity, the
            Secretary shall give priority to authorizing the use of amounts
            for projects for the renovation and modernization of medical
            facilities necessary to prevent or eliminate safety hazards,
            avoid noncompliance with licensure or accreditation standards,
            or projects to replace obsolete facilities.
                (3) Limitation.--The Secretary may authorize the use of
            amounts under subsection (a) for the construction of new
            buildings only if the Secretary determines that appropriate
            facilities are not available through acquiring, modernizing,
            expanding or converting existing buildings, or that
            construction new buildings will cost less.
        (d) Amount of assistance.--The principal amount of loans or loan
    guarantees under subsection (a) may, when added to any other assistance
    under this section, cover up to 100 percent of the costs involved.

    SEC. 3442. CERTAIN REQUIREMENTS.

        (a) Loans.--
                (1) In general.--The Secretary may approve a loan under
            section 3441 only if--
                        (A) the Secretary is reasonably satisfied that the
                    applicant for the project for which the loan would be
                    made will be able to make payments of principal and
                    interest thereon when due; and
                        (B) the applicant provides the Secretary with
                    reasonable assurances that there will be available to
                    it such additional funds as may be necessary to
                    complete the project or undertaking with respect to
                    which such loan is requested.
                (2) Terms and conditions.--Any loan made under section 3441
            shall, subject to the Federal Credit Reform Act of 1990, meet
            such terms and conditions (including provisions for recovery in
            case of default) as the Secretary, in consultation with the
            Secretary of the Treasury, determines to be necessary to carry
            out the purposes of such section while adequately protecting
            the financial interests of the United States. Terms and
            conditions for such loans shall include provisions regarding
            the following:
                        (A) Security.
                        (B) Maturity date.
                        (C) Amount and frequency of installments.
                        (D) Rate of interest, which shall be at a rate
                    comparable to the rate of interest prevailing on the
                    date the loan is made.
        (b) Loan Guarantees.--The Secretary may not approve a loan
    guarantee under section 3441 unless the Secretary determines that the
    terms, conditions, security (if any), schedule and amount of repayments
    with respect to the loan are sufficient to protect the financial
    interests of the United States and are otherwise reasonable. Such loan
    guarantees shall be subject to such further terms and conditions as the
    Secretary determines, in consultation with the Secretary of the
    Treasury, and subject to the Federal Credit Reform Act of 1990, to be
    necessary to ensure that the purposes of this section will be achieved.
        (c) Use of Existing Resources.--The Secretary may provide a loan or
    loan guarantee under section 3441 only if the applicant involved agrees
    that, in developing the qualified community health group involved, the
    applicant will utilize existing resources to the maximum extent
    practicable.

    SEC. 3443. DEFAULTS; RIGHT OF RECOVERY.

        (a) Defaults.--
                (1) In general.--The Secretary may take such action as may
            be necessary to prevent a default on loans or loan guarantees
            under section 3441, including the waiver of regulatory
            conditions, deferral of loan payments, renegotiation of loans,
            and the expenditure of funds for technical and consultative
            assistance, for the temporary payment of the interest and
            principal on such a loan, and for other purposes.
                (2) Foreclosure.--The Secretary may take such action,
            consistent with State law respecting foreclosure procedures, as
            the Secretary deems appropriate to protect the interest of the
            United States in the event of a default on a loan made pursuant
            to section 3441, including selling real property pledged as
            security for such a loan or loan guarantee and for a reasonable
            period of time taking possession of, holding, and using real
            property pledged as security for such a loan or loan guarantee.
                (3) Waivers.--The Secretary may, for good cause, but with
            due regard to the financial interests of the United States,
            waive any right of recovery which the Secretary has by reasons
            of the failure of a borrower to make payments of principal of
            and interest on a loan made pursuant to section 3441, except
            that if such loan is sold and guaranteed, any such waiver shall
            have no effect upon the Secretary's guarantee of timely payment
            of principal and interest.
        (b) Twenty-year Obligation; Right of Recovery.--
                (1) In general.--With respect to a facility for which a
            loan is to be made pursuant to section 3441, the Secretary may
            provide the loan or loan guarantee only if the applicant
            involved agrees that the applicant will be liable to the United
            States for the amount of the loan or loan guarantee, together
            with an amount representing interest, if at any time during the
            20-period beginning on the date of completion of the activities
            involved, the facility--
                        (A) ceases to be a facility utilized by a qualified
                    community health group, or by another public or
                    nonprofit private entity that provides health services
                    in one or more health professional shortage areas or
                    that provides such services to a significant number of
                    individuals who are members of a medically underserved
                    population; or
                        (B) is sold or transferred to any entity other than
                    an entity that is--
                                (i) a qualified community health group or
                            other entity described in subparagraph (A); and
                                (ii) approved by the Secretary as a
                            purchaser or transferee regarding the facility.
                (2) Subordination; waivers.--The Secretary may subordinate
            or waive the right of recovery under paragraph (1), and any
            other Federal interest that may be derived by virtue of a loan
            or loan guarantee under subsection (a), if the Secretary
            determines that subordination or waiver will further the
            objectives of this part.

    SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EXPANSION OF
                  FACILITIES.

        (a) Submission of Information.--In the case of a project for
    construction, conversion, expansion or modernization of a facility, the
    Secretary may provide loans or loan guarantees under section 3441 only
    if the applicant submits to the Secretary the following:
                (1) A description of the site.
                (2) Plans and specifications which meet requirements
            prescribed by the Secretary.
                (3) Information reasonably demonstrating that title to such
            site is vested in one or more of the entities filing the
            application (unless the agreement described in subsection
            (b)(1) is made).
                (4) A specification of the type of assistance being
            requested under section 3441.
        (b) Agreements.--In the case of a project for construction,
    conversion, expansion or modernization of a facility, the Secretary may
    provide loans or loan guarantees under section 3441 only if the
    applicant makes the following agreements:
                (1) Title to such site will be vested in one or more of the
            entities filing the application (unless the assurance described
            in subsection (a)(3) has been submitted under such subsection).
                (2) Adequate financial support will be available for
            completion of the project and for its maintenance and operation
            when completed.
                (3) All laborers and mechanics employed by contractors or
            subcontractors in the performance of work on a project will be
            paid wages at rates not less than those prevailing on similar
            construction in the locality as determined by the Secretary of
            Labor in accordance with the Act of March 3, 1931 (40 U.S.C.
            276a et seq; commonly known as the Davis-Bacon Act), and the
            Secretary of Labor shall have with respect to such labor
            standards the authority and functions set forth in
            Reorganization Plan Numbered 14 of 1950 (15 FR 3176; 5 U.S.C.
            Appendix) and section 276c of title 40.
                (4) The facility will be made available to all persons
            seeking service regardless of their ability to pay.

    SEC. 3445. APPLICATION FOR ASSISTANCE.

        The Secretary may provide loans or loan guarantees under section
    3441 only if an application for such assistance is submitted to the
    Secretary, the application contains each agreement described in this
    subpart, the application contains the information required in section
    3444(a), 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 subpart.

    SEC. 3446. ADMINISTRATION OF PROGRAMS.

        This subpart, and any other program of the Secretary that provides
    loans or loan guarantees, shall be carried out by a centralized loan
    unit established within the Department of Health and Human Services.

                          Subpart D--Enabling Services

    SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING SERVICES.

        (a) In General.--
                (1) Grants and contracts.--The Secretary may make grants to
            and enter into contracts with entities described in paragraph
            (2) to assist such entities in providing the services described
            in subsection (b) for the purpose of increasing the capacity of
            individuals to utilize the items and services included in the
            comprehensive benefits package under title I.
                (2) Relevant entities.--For purposes of paragraph (1), the
            entities described in this paragraph are qualified community
            health groups (as defined in section 3421(a)), and other public
            or nonprofit private entities, that--
                        (A) provide health services in one or more health
                    professional shortage areas or that provide such
                    services to a significant number of individuals who are
                    members of a medically underserved population; and
                        (B) are experienced in providing services to
                    increase the capacity of individuals to utilize health
                    services.
        (b) Enabling Services.--The services referred to in subsection
    (a)(1) are transportation, community and patient outreach, patient
    education, translation services, and such other services as the
    Secretary determines to be appropriate in carrying out the purpose
    described in such subsection.
        (c) Certain Requirements Regarding Project Area.--The Secretary may
    make an award of a grant or contract under subsection (a) only if the
    applicant involved--
                (1) submits to the Secretary--
                        (A) information demonstrating that the medically
                    underserved populations in the community to be served
                    under the award have a need for enabling services; and
                        (B) a proposed budget for providing such services;
                    and
                (2) the applicant for the award agrees that the residents
            of the community will be significantly involved in the project
            carried out with the award.
        (d) Imposition of Fees.--The Secretary may make an award of a grant
    or contract under subsection (a) only if the applicant involved agrees
    that, in the project carried out under such subsection, enabling
    services will be provided without charge to the recipients of the
    services.
        (e) Use of Existing Resources.--The Secretary may make an award of
    a grant or contract under subsection (a) only if the applicant involved
    agrees that, in carrying out the project under such subsection, the
    applicant will utilize existing resources to the maximum extent
    practicable.
        (f) Application for Awards of Assistance.--The Secretary may make
    an award of a grant or contract under subsection (a) only if an
    application for the award is submitted to the Secretary, the
    application contains each agreement described in this subpart, the
    application contains the information required in subsection (d)(1), 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 subpart.
        (g) Definition.--For purposes of this section, the term ``enabling
    services'' means services described in subsection (b) that are provided
    for the purpose described in subsection (a)(1).

    SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Enabling Services.--For the purpose of carrying out section
    3461, there are authorized to be appropriated $200,000,000 for fiscal
    year 1996, $300,000,000 for each of the fiscal years 1997 through 1999,
    and $100,000,000 for fiscal year 2000.
        (b) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.

                     PART 3--NATIONAL HEALTH SERVICE CORPS

    SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Additional Funding; General Corps Program; Allocations
    Regarding Nurses.--For the purpose of carrying out subpart II of part D
    of title III of the Public Health Service Act, and for the purpose of
    carrying out section 3472, there are authorized to be appropriated
    $50,000,000 for fiscal year 1995, $100,000,000 for fiscal year 1996,
    and $200,000,000 for each of the fiscal years 1997 through 2000.
        (b) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.
        (c) Availability of Funds.--An appropriation under this section for
    any fiscal year may be made at any time before that fiscal year and may
    be included in an Act making an appropriation under an authorization
    under subsection (a) for another fiscal year; but no funds may be made
    available from any appropriation under this section for obligation
    under sections 331 through 335, section 336A, and section 337 before
    the fiscal year involved.

    SEC. 3472. ALLOCATION FOR PARTICIPATION OF NURSES IN SCHOLARSHIP AND
                  LOAN REPAYMENT PROGRAMS.

        Of the amounts appropriated under section 3471, the Secretary shall
    reserve such amounts as may be necessary to ensure that, of the
    aggregate number of individuals who are participants in the Scholarship
    Program under section 338A of the Public Health Service Act, or in the
    Loan Repayment Program under section 338B of such Act, the total number
    who are being educated as nurses or are serving as nurses,
    respectively, is increased to 20 percent.

          PART 4--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

    SEC. 3481. PAYMENTS TO HOSPITALS.

        (a) Entitlement Status.--The Secretary shall make payments in
    accordance with this part to eligible hospitals described in section
    3482. The preceding sentence--
                (1) is an entitlement in the Secretary on behalf of such
            eligible hospitals (but is not an entitlement in the State in
            which any such hospital is located or in any individual
            receiving services from any such hospital); and
                (2) constitutes budget authority in advance of
            appropriations Acts and represents the obligation of the
            Federal Government to provide funding for such payments in the
            amounts, and for the fiscal years, specified in subsection (b).
        (b) Amount of Entitlement.--
                (1) In general.--For purposes of subsection (a)(2), the
            amounts and fiscal years specified in this subsection are (in
            the aggregate for all eligible hospitals) $800,000,000 for the
            fiscal year in which the general effective date occurs and for
            each subsequent fiscal year.
                (2) Special rule for years before general effective date.--
                        (A) In general.--For any fiscal year that begins
                    prior to the general effective date, the amount
                    specified in this subsection for purposes of subsection
                    (a)(2) shall be equal to the aggregate DSH percentage
                    of the amount otherwise determined under paragraph (1).
                        (B) Aggregate dsh percentage defined.--In
                    subparagraph (A), the ``aggregate DSH percentage'' for
                    a year is the amount (expressed as a percentage) equal
                    to--
                                (i) the total amount of payment made by the
                            Secretary under section 1903(a) of the Social
                            Security Act during the base year with respect
                            to payment adjustments made under section
                            1923(c) of such Act for hospitals in the States
                            in which eligible hospitals for the year are
                            located; divided by
                                (ii) the total amount of payment made by
                            the Secretary under section 1903(a) of such Act
                            during the base year with respect to payment
                            adjustments made under section 1923(c) of such
                            Act for hospitals in all States.
        (c) Period of Payment.--An eligible hospital shall receive a
    payment under this section for a period of 5 years, without regard to
    the year for which the hospital first receives a payment.
        (d) Payments Made on Quarterly Basis.--Payments to an eligible
    hospital under this section for a year shall be made on a quarterly
    basis during the year.

    SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS.

        (a) Hospitals in Participating States.--In order to be an eligible
    hospital under this part, a hospital must be located in a State that is
    a participating State under this Act, except that an eligible hospital
    remains eligible to receive a payment under this part notwithstanding
    that, during the 5-year period for which the payment is to be made, the
    State in which it is located no longer meets the requirements for
    participating States under this Act.
        (b) State Identification.--In accordance with the criteria
    described in subsection (c) and such procedures as the Secretary may
    require, each State shall identify the hospitals in the State that meet
    such criteria and provide the Secretary with a list of such hospitals.
        (c) Criteria for Eligibility.--A hospital meets the criteria
    described in this subsection if the hospital's low-income utilization
    rate for the base year under section 1923(b)(3) of the Social Security
    Act (as such section is in effect on the day before the date of the
    enactment of this Act) is not less than 25 percent.

    SEC. 3483. AMOUNT OF PAYMENTS.

        (a) Distribution of Allocation for Low-Income Assistance.--
                (1) Allocation from total amount.--Of the total amount
            available for payments under this section in a year, 75 percent
            shall be allocated to hospitals for low-income assistance in
            accordance with this subsection.
                (2) Determination of hospital payment amount.--The amount
            of payment to an eligible hospital from the allocation made
            under paragraph (1) during a year shall be the equal to the
            hospital's low-income percentage of the allocation for the
            year.
        (b) Distribution of Allocation for Assistance for Uncovered
    Services.--
                (1) Allocation from total amount; determination of State-
            specific portion of allocation.--Of the total amount available
            for payments under this section in a year, 25 percent shall be
            allocated to hospitals for assistance in furnishing inpatient
            hospital services that are not covered services under title I
            (in accordance with regulations of the Secretary) in accordance
            with this subsection. The amount available for payments to
            eligible hospitals in a State shall be equal to an amount
            determined in accordance with a methodology specified by the
            Secretary.
                (2) Determination of hospital payment amount.--The amount
            of payment to an eligible hospital in a State from the amount
            available for payments to eligible hospitals in the State under
            paragraph (1) during a year shall be the equal to the
            hospital's low-income percentage of such amount for the year.
        (c) Low-Income Percentage Defined.--
                (1) In general.--In this subsection, an eligible hospital's
            ``low-income percentage'' for a year is equal to the amount
            (expressed as a percentage) of the total low-income days for
            all eligible hospitals for the year that are attributable to
            the hospital.
                (2) Low-income days described.--For purposes of paragraph
            (1), an eligible hospital's low-income days for a year shall be
            equal to the product of--
                        (A) the total number of inpatient days for the
                    hospital for the year (as reported to the Secretary by
                    the State in which the hospital is located, in
                    accordance with a reporting schedule and procedures
                    established by the Secretary); and
                        (B) the hospital's low-income utilization rate for
                    the base year under section 1923(b)(3) of the Social
                    Security Act (as such section is in effect on the day
                    before the date of the enactment of this Act).

    SEC. 3484. BASE YEAR.

        In this part, the ``base year'' is, with respect to a State and
    hospitals in a State, the year immediately prior to the year in which
    the general effective date occurs.

                   Subtitle F--Mental Health; Substance Abuse

                          PART 1--FINANCIAL ASSISTANCE

                                                      Title III, Subtitle F

    SEC. 3501. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) In General.--For the purpose of carrying out this part, there
    are authorized to be appropriated $100,000,000 for fiscal year 1995,
    $150,000,000 for fiscal year 1996, and $250,000,000 for each of the
    fiscal years 1997 through 2000.
        (b) Allocation Among Programs.--Of the amounts made available under
    subsection (a) for a fiscal year--
                (1) the Secretary may reserve for carrying out section 3503
            such amounts as the Secretary determines to be appropriate; and
                (2) the Secretary shall, of the remaining amounts, reserve
            50 percent for carrying out subsection (a) of section 3502 and
            50 percent for carrying out subsection (b) of such section.
        (c) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.

    SEC. 3502. SUPPLEMENTAL FORMULA GRANTS FOR STATES REGARDING ACTIVITIES
                  UNDER PART B OF TITLE XIX OF PUBLIC HEALTH SERVICE ACT.

        (a) Mental Health.--
                (1) In general.--In the case of any State that submits to
            the Secretary an application in accordance with subsection (e)
            for a fiscal year with respect to mental health, the Secretary
            shall make a grant to the State for the purposes authorized in
            subsection (c) with respect to mental health. The grant shall
            consist of the allotment determined under paragraph (2) for the
            State for such year.
                (2) Determination of allotment.--For purposes of paragraph
            (1), the allotment under this paragraph for a State for a
            fiscal year shall be determined as follows: With respect to the
            amount reserved under section 3501(b)(2) for carrying out this
            subsection, section 1918 of the Public Health Service Act shall
            be applied to such amount to the same extent and in the same
            manner as such section 1918 is applied to the amount determined
            under section 1918(a)(2) of such Act.
        (b) Substance Abuse.--
                (1) In general.--In the case of any State that submits to
            the Secretary an application in accordance with subsection (e)
            for a fiscal year with respect to substance abuse, the
            Secretary shall make a grant to the State for the purposes
            authorized in subsection (c) with respect to substance abuse.
            The grant shall consist of the allotment determined under
            paragraph (2) for the State for such year.
                (2) Determination of allotment.--For purposes of paragraph
            (1), the allotment under this paragraph for a State for a
            fiscal year shall be determined as follows: With respect to the
            amount reserved under section 3501(b)(2) for carrying out this
            subsection, section 1933 of the Public Health Service Act shall
            be applied to such amount to the same extent and in the same
            manner as such section 1933 is applied to the amount determined
            pursuant to sections 1933(a)(1)(B)(i) and 1918(a)(2)(A) of such
            Act.
        (c) Use of Grants.--
                (1) In general.--With respect to the expenditure of a grant
            to a State under subsection (a) or (b), the Secretary--
                        (A) shall designate as authorized expenditures such
                    of the activities described in paragraph (2) with
                    respect to mental health and substance abuse,
                    respectively, as the Secretary determines to be
                    appropriate; and
                        (B) may make the grant only if the State agrees to
                    expend the grant in accordance with the activities so
                    designated.
                (2) Description of activities.--The activities referred to
            in paragraph (1) are (as applicable to the grant involved) the
            following:
                        (A) For the purpose of increasing the access of
                    individuals to services relating to mental health and
                    substance abuse, the following services:
                    Transportation, community and patient outreach, patient
                    education, translation services, and such other
                    services as the Secretary determines to be appropriate
                    regarding such purpose.
                        (B) Improving the capacity of State and local
                    service systems to coordinate and monitor mental health
                    and substance abuse services, including improvement of
                    management information systems, and establishment of
                    linkages between providers of mental health and
                    substance abuse services and primary care providers and
                    health plans.
                        (C) Providing incentives to integrate public and
                    private systems for the treatment of mental health and
                    substance abuse disorders.
                        (D) Any activity for which a grant under section
                    1911 or section 1921 of the Public Health Service Act
                    is authorized to be expended.
        (d) Maintenance of Effort.--
                (1) In general.--With respect to the activities for which a
            grant under subsection (a) or (b) is to be made, the Secretary
            may make the grant only if the State involved agrees to
            maintain expenditures of non-Federal amounts for such
            activities at a level that is not less than the level of such
            expenditures maintained by the State for the fiscal year
            preceding the first fiscal year for which the State receives
            such a grant.
                (2) Waiver.--The Secretary may waive all or part of the
            requirement established for a State under paragraph (1) if--
                        (A) the State agrees that the amounts that
                    otherwise would have been subject to such requirement
                    will be expended for the purpose of developing
                    community-based systems of care to promote the eventual
                    integration of the public and private systems for
                    treatment of mental health, or substance abuse, as
                    applicable to the grant;
                        (B) the State submits to the Secretary a request
                    for the waiver and a description of the manner in which
                    the State will carry out such purpose; and
                        (C) the Secretary approves the waiver.
        (e) Application for Grant.--For purposes of subsection (a)(1) and
    (b)(1), an application for a grant under this section regarding mental
    health or substance abuse, respectively, is in accordance with this
    subsection if the State involved submits the application not later than
    the date specified by the Secretary, the application contains each
    applicable agreement described in this section, and the application
    otherwise 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 the purpose involved.

    SEC. 3503. CAPITAL COSTS OF DEVELOPMENT OF CERTAIN CENTERS AND CLINICS.

        (a) In General.--The Secretary may make loans to, and guarantee the
    payment of principal and interest to Federal and non-Federal lenders on
    behalf of, public and private entities for the capital costs to be
    incurred by the entities in the development of non-acute, residential
    treatment centers and community-based ambulatory clinics.
        (b) Priorities Regarding Use of Funds.--In providing loans or loan
    guarantees under subsection (a), the Secretary shall give priority to
    authorizing the use of amounts for projects in health professional
    shortage areas or in geographic area in which there resides a
    significant number of individuals who are members of a medically
    underserved population.
        (c) Applicability of Certain Provisions.--The Secretary may provide
    loans or loan guarantees under subsection (a) only if the applicant
    involved agrees that, except to the extent inconsistent with the
    purpose described in subsection (a), subpart C of part 2 of subtitle E
    applies to such assistance to the same extent and in the same manner as
    such subpart applies to loans and loan guarantees under section 3441.

               PART 2--AUTHORITIES REGARDING PARTICIPATING STATES

                               Subpart A--Report

    SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH SYSTEMS.

        (a) In General.--As a condition of being a participating State
    under title I, each State shall, not later than October 1, 1998, submit
    to the Secretary a report on (including a plan for) the measures to be
    implemented by the State to achieve the integration of the mental
    illness and substance abuse services of the State and its political
    subdivisions with the mental illness and substance abuse services that
    are included in the comprehensive benefit package under title I. The
    plan required in the preceding sentence shall meet the conditions
    described in section 3074(b).
        (b) Required Contents.--With respect to the provision of items and
    services relating to mental illness and substance abuse, the report of
    a State under subsection (a) shall, at a minimum, contain the following
    information:
                (1) Information on the number of individuals served by or
            through mental illness and substance abuse programs
            administered by State and local agencies and the proportion who
            are eligible persons under title I.
                (2) The following information on services furnished to
            eligible persons:
                        (A) Each type of benefit furnished.
                        (B) The mental illness diagnoses for which each
                    type of benefit is covered, the amount, duration and
                    scope of coverage for each covered benefit, and any
                    applicable limits on benefits.
                        (C) Cost sharing rules that apply.
                (3) Information on the extent to which each health provider
            furnishing mental illness and substance abuse services under a
            State program participates in one or more regional or corporate
            alliance health plans, and, in the case of providers that do
            not so participate, the reasons for the lack of participation.
                (4) The amount of revenues from health plans received by
            mental illness and substance abuse providers that are
            participating in such health plans and are funded under one or
            more State programs.
                (5) With respect to the two years preceding the year in
            which the State becomes a participating State under title I--
                        (A) the amount of funds expended by the State and
                    its political subdivisions for each of such years for
                    items and services that are included in the
                    comprehensive benefit package under such title;
                        (B) the amount of funds expended for medically
                    necessary and appropriate items and services not
                    included in such benefit package, including medical
                    care, other health care, and supportive services
                    related to the provision of health care.
                (6) An estimate of the amount that the State will expend to
            furnish items and services not included in such package once
            the expansion of coverage for mental illness and substance
            abuse services is implemented in the year 2001.
                (7) A description of how the State will assure that all
            individuals served by mental illness and substance abuse
            programs funded by the State will be enrolled in a health plan
            and how mental illness and substance abuse services not covered
            under the benefit package will continue to be furnished to such
            enrollees.
                (8) A description of the conditions under which the
            integration of mental illness and substance abuse providers
            into regional and corporate alliances can be achieved, and an
            identification of changes in participation and certification
            requirements that are needed to achieve the integration of such
            programs and providers into health plans.
                (9) If the integration of mental illness and substance
            abuse programs operated by the State into one or more health
            plans is not medically appropriate or feasible for one or more
            groups of individuals treated under State programs, a
            description of the reasons that integration is not feasible or
            appropriate and a plan for assuring the coordination for such
            individuals of the care and services covered under the
            comprehensive benefit package with the additional items and
            services furnished by such programs.
        (c) General Provisions.--Reports under subsection (a) shall be
    provided at the time and in the manner prescribed by the Secretary.

                            Subpart B--Pilot Program

    SEC. 3521. PILOT PROGRAM.

        (a) In General.--The Secretary shall establish a pilot program to
    demonstrate model methods of achieving the integration of the mental
    illness and substance abuse services of the States with the mental
    illness and substance abuse services that are included in the
    comprehensive benefit package under title I.
        (b) Certain Considerations.--With respect to the provision of items
    and services relating to mental illness and substance abuse, the
    Secretary, in carrying out subsection (a), shall consider the
    following:
                (1) The types of items and services needed in addition to
            the items and services included in the comprehensive benefits
            package under title I.
                (2) The optimal methods of treatment for individuals with
            long-term conditions.
                (3) The capacity of alliance health plans to furnish such
            treatment.
                (4) The modifications that should be made in the items and
            services furnished by such health plans.
                (5) The role of publicly-funded health providers in the
            integration of acute and long-term treatment.

       Subtitle G--Comprehensive School Health Education; School-Related
                                Health Services

                           PART 1--GENERAL PROVISIONS

    SEC. 3601. PURPOSES.

                                                      Title III, Subtitle G

        Subject to the subsequent provisions of this subtitle, the purposes
    of this subtitle are as follows:
                (1) To support the provision in kindergarten through grade
            12 of sequential, age-appropriate, comprehensive health
            education programs that address locally relevant priorities.
                (2) To establish a national framework within which States
            can create comprehensive school health education programs
            that--
                        (A) target the health risk behaviors accounting for
                    the majority of the morbidity and mortality among youth
                    and adults, including the following: Tobacco use;
                    alcohol and other drug abuse; sexual behaviors
                    resulting in infection with the human immunodeficiency
                    virus, in other sexually transmitted diseases or in
                    unintended pregnancy; behaviors resulting in
                    intentional and unintentional injuries; dietary
                    patterns resulting in disease; and sedentary
                    lifestyles; and
                        (B) are integrated with plans and programs in the
                    State, if any, under title III of the Goals 2000:
                    Educate America Act and those targeting health
                    promotion and disease prevention goals related to the
                    national health objectives set forth in Healthy People
                    2000.
                (3) To pay the initial costs of planning and establishing
            Statewide comprehensive school health education programs that
            will be implemented and maintained with local, State, and other
            Federal resources.
                (4) To support Federal activities such as research and
            demonstrations, evaluations, and training and technical
            assistance regarding comprehensive school health education.
                (5) To motivate youth, especially low-achieving youth, to
            stay in school, avoid teen pregnancy, and strive for success by
            providing intensive, high-quality health education programs
            that include peer-teaching, family, and community involvement.
                (6) To improve the knowledge and skills of children and
            youth by integrating academic and experiential learning in
            health education with other elements of a comprehensive school
            health program.
                (7) To further the National Education Goals set forth in
            title I of the Goals 2000: Educate America Act and the national
            health objectives set forth in Healthy People 2000.

    SEC. 3602. DEFINITIONS.

        (a) Comprehensive School Health Education Program.--For purposes of
    this subtitle, the term ``comprehensive school health education
    program'' means a program that addresses locally relevant priorities
    and meets the following conditions:
                (1) The program is sequential, and age and developmentally
            appropriate.
                (2) The program is provided, in the area served by the
            program, every year for all students from kindergarten through
            grade 12.
                (3) The program provides comprehensive health education,
            including the following components:
                        (A) Community health.
                        (B) Environmental health.
                        (C) Personal health.
                        (D) Family life.
                        (E) Growth and development.
                        (F) Nutritional health.
                        (G) Prevention and control of disease and
                    disorders.
                        (H) Safety and prevention of injuries.
                        (I) Substance abuse, including tobacco and alcohol
                    use.
                        (J) Consumer health, including education to ensure
                    that students understand the benefits and appropriate
                    use of medical services, including immunizations and
                    other clinical preventive services.
                (4) The program promotes personal responsibility for a
            healthy lifestyle and provides the knowledge and skills
            necessary to adopt a healthy lifestyle, including teaching the
            legal, social, and health consequences of behaviors that pose
            health risks.
                (5) The program is sensitive to cultural and ethnic issues
            in the content of instructional materials and approaches.
                (6) The program includes activities that support
            instruction.
                (7) The program includes activities to promote involvement
            by parents, families, community organizations, and other
            appropriate entities.
                (8) The program is coordinated with other Federal, State,
            and local health education and prevention programs and with
            other Federal, State and local education programs, including
            those carried out under title I of the Elementary and Secondary
            Education Act of 1965.
                (9) The program focuses on the particular health concerns
            of the students in the State, school district, or school, as
            the case may be.
        (b) Other Definitions.--For purposes of this subtitle:
                (1) The term ``local educational agency'' has the meaning
            given such term in section 1471(12) of the Elementary and
            Secondary Education Act of 1965.
                (2) The term ``State educational agency'' has the meaning
            given such term in section 1471(23) of the Elementary and
            Secondary Education Act of 1965.

              PART 2--SCHOOL HEALTH EDUCATION; GENERAL PROVISIONS

    SEC. 3611. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Funding for School Health Education.--For the purpose of
    carrying out parts 3 and 4, there are authorized to be appropriated
    $50,000,000 for each of the fiscal year 1995 through 2000.
        (b) Allocations.--Of the amounts appropriated under subsection (a)
    for a fiscal year--
                (1) the Secretary may reserve not more than $13,000,000 for
            carrying out part 4;
                (2) the Secretary may reserve not more than $5,000,000 to
            support national leadership activities, such as research and
            demonstration, evaluation, and training and technical
            assistance in comprehensive school health education; and
                (3) the Secretary may reserve not more than 5 percent for
            administrative expenses regarding parts 3 and 4.
        (c) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.

    SEC. 3612. WAIVERS OF STATUTORY AND REGULATORY REQUIREMENTS.

        (a) In General.--
                (1) Waivers.--Except as provided in subsection (c), upon
            the request of an entity receiving funds under part 3 or part 4
            and under a program specified in paragraph (2), the Secretary
            of Health and Human Services or the Secretary of Education (as
            the case may be, according to which Secretary administers the
            program so specified) may grant to the entity a waiver of any
            requirement of such program regarding the use of funds, or of
            the regulations issued for the program by the Secretary
            involved, if the following conditions are met with respect to
            such program:
                        (A) The Secretary involved determines that the
                    requirement of such program impedes the ability of the
                    State educational agency or other recipient to achieve
                    more effectively the purposes of part 3 or 4.
                        (B) The Secretary involved determines that, with
                    respect to the use of funds under such program, the
                    requested use of the funds by the entity would be
                    consistent with the purposes of part 3 or 4.
                        (C) In the case of a request for a waiver submitted
                    by a State educational agency, the State educational
                    agency--
                                (i) provides all interested local
                            educational agencies in the State with notice
                            and an opportunity to comment on the proposal;
                            and
                                (ii) submits the comments to the Secretary
                            involved.
                        (D) In the case of a request for a waiver submitted
                    by a local educational agency or other agency,
                    institution, or organization that receives funds under
                    part 3 from the State educational agency, such request
                    has been reviewed by the State educational agency and
                    is accompanied by the comments, if any, of such agency.
                (2) Relevant programs.--For purposes of paragraph (1), the
            programs specified in this paragraph are as follows:
                        (A) In the case of programs administered by the
                    Secretary of Health and Human Services, the following:
                                (i) The program known as the Prevention,
                            Treatment, and Rehabilitation Model Projects
                            for High Risk Youth, carried out under section
                            517 of the Public Health Service Act.
                                (ii) The program known as the State and
                            Local Comprehensive School Health Programs to
                            Prevent Important Health Problems and Improve
                            Educational Outcomes, carried out under such
                            Act.
                        (B) In the case of programs administered by the
                    Secretary of Education, any program carried out under
                    part B of the Drug-Free Schools and Communities Act of
                    1986.
        (b) Waiver Period.--
                (1) In general.--A waiver under this section shall be for a
            period not to exceed three years.
                (2) Extensions.--The Secretary involved under subsection
            (a) may extend such period if the Secretary determines that--
                        (A) the waiver has been effective in enabling the
                    State or affected recipients to carry out the
                    activities for which it was requested and has
                    contributed to improved performance; and
                        (B) such extension is in the public interest.
        (c) Waivers Not Authorized.--The Secretary involved under
    subsection (a) may not waive, under this section, any statutory or
    regulatory requirement relating to--
                (1) comparability of services;
                (2) maintenance of effort;
                (3) the equitable participation of students attending
            private schools;
                (4) parental participation and involvement;
                (5) the distribution of funds to States or to local
            educational agencies or other recipients of funds under the
            programs specified in subsection (a)(2);
                (6) maintenance of records;
                (7) applicable civil rights requirements; or
                (8) the requirements of sections 438 and 439 of the General
            Education Provisions Act.
        (d) Termination of Waiver.--The Secretary involved under subsection
    (a) shall terminate a waiver under this section if the Secretary
    determines that the performance of the State or other recipient
    affected by the waiver has been inadequate to justify a continuation of
    the waiver or if it is no longer necessary to achieve its original
    purposes.

      PART 3--SCHOOL HEALTH EDUCATION; GRANTS TO STATE EDUCATION AGENCIES

            Subpart A--Planning Grants for State Education Agencies

    SEC. 3621. APPLICATION FOR GRANT.

        (a) In General.--Any State educational agency that wishes to
    receive a planning grant under this subpart shall submit an application
    to the Secretary of Health and Human Services, at such time and in such
    manner as the Secretary may require.
        (b) Application; Joint Development; Contents.--An application under
    subsection (a) shall be jointly developed by the State educational
    agency and the State health agencies of the State involved, and shall
    contain the following:
                (1) An assessment of the State's need for comprehensive
            school health education, using goals established by the
            Department of Health and Human Services and the Department of
            Education and the State's school improvement plan, if any,
            under title III of Goals 2000: Educate America Act.
                (2) A description of how the State educational agency will
            collaborate with the State health agency in the planning and
            development of a comprehensive school health education program
            in the State, including coordination of existing health
            education programs and resources.
                (3) A plan to build capacity at the State and local levels
            to provide staff development and technical assistance to local
            educational agency and local health agency personnel involved
            with comprehensive school health education.
                (4) A preliminary plan for evaluating comprehensive school
            health education activities.
                (5) Information demonstrating that the State has
            established a State-level advisory council whose membership
            includes representatives of the State agencies with principal
            responsibilities for programs regarding health, education, and
            mental health.
                (6) A timetable and proposed budget for the planning
            process.
                (7) Such other information and assurances as the Secretary
            may require.
        (c) Number of Grants.--States may receive one planning grant
    annually and no more than two planning grants may be awarded to any one
    State.

    SEC. 3622. APPROVAL OF SECRETARY.

        The Secretary may approve the application of a State under section
    3621 if the Secretary determines that--
                (1) the application meets the requirements of this subpart;
            and
                (2) there is a substantial likelihood that the State will
            be able to develop and implement a comprehensive school health
            education plan that complies with the requirements of subpart
            B.

    SEC. 3623. AMOUNT OF GRANT.

        For any fiscal year, the minimum grant to any State under this
    subpart is an amount determined by the Secretary to be necessary to
    enable the State to conduct the planning process, and the maximum such
    grant is $500,000.

    SEC. 3624. AUTHORIZED ACTIVITIES.

        A State may use funds received under this subpart only for the
    following:
                (1) To establish and carry out the State planning process.
                (2) To conduct Statewide or sub-State regional coordination
            and collaboration activities for local educational agencies,
            local health agencies, and other agencies and organizations, as
            appropriate.
                (3) To conduct activities to build capacity to provide
            staff development and technical assistance services to local
            educational agency and local health agency personnel involved
            with comprehensive school health education.
                (4) To develop student learning objectives and assessment
            instruments.
                (5) To work with State and local health agencies and State
            and local educational agencies to reduce barriers to the
            implementation of comprehensive school health education
            programs in schools.
                (6) To prepare the plan required to receive an
            implementation grant under subpart B.
                (7) To adopt, validate, and disseminate curriculum models
            and program strategies, if the Secretary determines that such
            activities are necessary to achieving the objectives of the
            State's program.

         Subpart B--Implementation Grants for State Education Agencies

    SEC. 3631. APPLICATION FOR GRANT.

        (a) In General.--Any State that wishes to receive an implementation
    grant under this subpart shall submit an application to the Secretary
    of Health and Human Services, at such time, in such manner, and
    containing such information and assurances as the Secretary may
    require.
        (b) Application and State Plan; Joint Development; Contents.--An
    application under subsection (a) shall be jointly developed by the
    State educational agency and the State health agencies of the State
    involved, and shall include a State plan for comprehensive school
    health education programs (as defined in section 3602) that describes
    the following:
                (1) The State's goals and objectives for those programs.
                (2) How the State will allocate funds to local educational
            agencies in accordance with section 3634.
                (3) How the State will coordinate programs under this
            subpart with other local, State and Federal health education
            programs.
                (4) How comprehensive school health education programs will
            be coordinated with other local, State and Federal education
            programs, such as programs under title I of the Elementary and
            Secondary Education Act of 1965, with the State's school
            improvement plan, if any, under title III of the Goals 2000:
            Educate America Act, and with any similar programs.
                (5) How the State has worked with State and local education
            agencies and with State and local health agencies to reduce
            barriers to implementing comprehensive school health education
            programs.
                (6) How the State will monitor the implementation of such
            programs by local educational agencies.
                (7) How the State will build capacity for professional
            development of health educators.
                (8) How the State will provide staff development and
            technical assistance to local educational agencies.
                (9) The respective roles of the State educational agency,
            local educational agencies, the State health agency, and the
            local health agencies in developing and implementing such
            school health education programs.
                (10) How such school health education programs will be
            tailored to the extent practicable to be culturally and
            linguistically sensitive and responsive to the various needs of
            the students served, including individuals with disabilities,
            and individuals from disadvantaged backgrounds (including
            racial and ethnic minorities).
                (11) How the State will evaluate and report on the State's
            progress toward attaining the goals and objectives described in
            paragraph (1).

    SEC. 3632. SELECTION OF GRANTEES.

        (a) Selection of Grantees.--The Secretary shall establish criteria
    for the competitive selection of grantees under this subpart.
        (b) Opportunity for Planning Grant.--If the Secretary does not
    approve a State's application under this subpart and determines that
    the State could benefit from a planning grant under subpart A, the
    Secretary shall inform the State of any planning grant funds that may
    be available to it under subpart A, subject to section 3621(c).

    SEC. 3633. AMOUNT OF GRANT.

        (a) In General.--For any fiscal year, the minimum grant to any
    State under this subpart is an amount determined by the Secretary to be
    necessary to enable the State to conduct the implementation process.
        (b) Criteria.--In determining the amount of any such grant, the
    Secretary may consider such factors as the number of children enrolled
    in schools in the State, the number of school-aged children living in
    poverty in the State, and the scope and quality of the State's plan.

    SEC. 3634. AUTHORIZED ACTIVITIES; LIMITATION ON ADMINISTRATIVE COSTS.

        (a) Subgrants to Local Educational Agencies.--Each State that
    receives funds under this subpart for any fiscal year shall retain not
    more than 75 percent of those funds in the first year, 50 percent of
    those funds in the second and third years, and 25 percent of those
    funds in each succeeding year. Those funds not retained by the State
    shall be used to make grants to local educational agencies in
    accordance with section 3635.
        (b) State-level Activities.--Each State shall use retained funds
    for any fiscal year for the following purposes:
                (1) To conduct Statewide or sub-State regional coordination
            and collaboration activities.
                (2) To adapt, validate, or disseminate program models or
            strategies for comprehensive school health education.
                (3) To build capacity to deliver staff development and
            technical assistance services to local educational agencies,
            and State and local health agencies.
                (4) To promote program activities involving families and
            coordinating program activities with community groups and
            agencies.
                (5) To evaluate and report to the Secretary on the progress
            made toward attaining the goals and objectives described in
            section 3621(b)(1).
                (6) To conduct such other activities to achieve the
            objectives of this subpart as the Secretary may by regulation
            authorize.
        (c) State Administration.--Of the amounts received by a State for a
    fiscal year under this subpart and remaining after any grants to local
    educational agencies made from such amounts, the State may use up to 10
    percent for the costs of administering such amounts, including the
    activities of the State advisory council and monitoring the performance
    of local educational agencies.

    SEC. 3635. SUBGRANTS TO LOCAL EDUCATIONAL AGENCIES.

        (a) Application for Grant.--Any local educational agency that
    wishes to receive a grant under this subpart shall submit an
    application to the State, containing such information and assurances as
    the State may require, including a description of the following:
                (1) The local educational agency's goals and objectives for
            comprehensive school health education programs.
                (2) How the local educational agency will concentrate funds
            in high-need schools and provide sufficient funds to targeted
            schools to ensure the implementation of comprehensive programs.
                (3) How the local educational agency will monitor the
            implementation of these programs.
                (4) How the local educational agency will ensure that
            school health education programs are tailored to the extent
            practicable to be culturally and linguistically sensitive and
            responsive to the various needs of the students served,
            including individuals with disabilities, and individuals from
            disadvantaged backgrounds (including racial and ethnic
            minorities).
                (5) How the local educational agency, in consultation with
            the local health agency, will evaluate and report on its
            progress toward attaining the goals and objectives described in
            paragraph (1).
        (b) Selection of Subgrantees.--Each State shall give priority to
    applications from local educational agencies serving areas with high
    needs, as indicated by criteria developed by the State, which shall
    include, but need not be limited to, high rates of any of the
    following:
                (1) Poverty among school-aged youth.
                (2) Births to adolescents.
                (3) Sexually transmitted diseases among school-aged youth.
                (4) Drug and alcohol use among school-aged youth.
                (5) Violence among school-aged youth.
        (c) Authorized Activities.--Each local educational agency that
    receives a grant under this subpart shall use the grant funds to
    implement comprehensive school health education programs, as defined in
    section 3602.

                       Subpart C--State and Local Reports

    SEC. 3641. STATE AND LOCAL REPORTS.

        (a) State Reports.--Each State that receives a grant under this
    part shall collect and submit to the Secretary such data and other
    information on State and local programs as the Secretary may require.
        (b) In General.-- Each local educational agency that receives a
    grant under subpart B shall collect and report to the State such data
    and other information as the Secretary may require.

     PART 4--SCHOOL HEALTH EDUCATION; GRANTS TO CERTAIN LOCAL EDUCATIONAL
                                    AGENCIES

                             Subpart A--Eligibility

    SEC. 3651. SUBSTANTIAL NEED OF AREA SERVED BY AGENCY.

        Any local educational agency is eligible for a grant under this
    part for any fiscal year if--
                (1) the agency enrolls at least 25,000 students; and
                (2) the geographic area served by the agency has a
            substantial need for such a grant, relative to other geographic
            areas in the United States.

            Subpart B--Planning Grants for Local Education Agencies

    SEC. 3661. APPLICATION FOR GRANT.

        (a) In General.--Any local educational agency that wishes to
    receive a planning grant under this subpart shall submit an application
    to the Secretary of Health and Human Services at such time and in such
    manner as the Secretary may require.
        (b) State Educational Agency Review.--Each such local educational
    agency, before submitting its application to the Secretary, shall
    submit the application to the State educational agency for comment by
    such agency and by the State health agencies of the State.
        (c) Contents of Applications.--Each such application shall contain
    the following:
                (1) An assessment of the local educational agency's need
            for comprehensive school health education, using goals
            established by the Department of Health and Human Services and
            the Department of Education, as well as local health and
            education strategies, such as State school improvement plans,
            if any, under title III of the Goals 2000: Educate America Act.
                (2) Information demonstrating that the local educational
            agency has established or selected a community-level advisory
            council, which shall include representatives of relevant
            community agencies such as those that administer education,
            child nutrition, health, and mental health programs.
                (3) A description of how the local educational agency will
            collaborate with the State educational agency, the State health
            agency, and the local health agency in the planning and
            development of a comprehensive school health education program
            in the local educational agency, including coordination of
            existing health education programs and resources.
                (4) A plan to build capacity at the local educational
            agency to provide staff development and technical assistance to
            local educational agency and local health agency personnel
            involved with comprehensive school health education.
                (5) A preliminary plan for evaluating comprehensive school
            health education activities.
                (6) A timetable and proposed budget for the planning
            process.
                (7) Such other information and assurances as the Secretary
            may require.
        (d) Number of Grants.--Local educational agencies may receive at a
    maximum two annual planning grants.

    SEC. 3662. SELECTION OF GRANTEES.

        (a) Selection Criteria.--The Secretary shall establish criteria for
    the competitive selection of grantees under this part.
        (b) Limitation.--The Secretary shall not approve an application
    from a local educational agency in a State that has an approved plan
    under subpart A or B of part 3 of this subtitle unless the Secretary
    determines, after consultation with the State that the local
    application is consistent with the State plan, if one exists.

    SEC. 3663. AMOUNT OF GRANT.

        For any fiscal year, the minimum grant to any local educational
    agency under this subpart is an amount determined by the Secretary to
    be necessary to enable the local educational agency to conduct the
    planning process, and the maximum such grant is $500,000.

    SEC. 3664. AUTHORIZED ACTIVITIES.

        A local educational agency may use funds received under this
    subpart only for the following:
                (1) To establish and carry out the local educational agency
            planning process.
                (2) To undertake joint training, staffing, administration,
            and other coordination and collaboration activities for local
            educational agencies, local health agencies, and other agencies
            and organizations, as appropriate.
                (3) To conduct activities to build capacity to provide
            staff development and technical assistance services to local
            educational agency and local health agency personnel involved
            with comprehensive school health education.
                (4) To develop student learning objectives and assessment
            instruments.
                (5) To work with State and local health agencies and State
            educational agencies to reduce barriers to the implementation
            of comprehensive school health education programs in schools,
            by, for example, ensuring that adequate time is a available
            during the school day for such programs.
                (6) To prepare the plan required to receive an
            implementation grant under subpart C.

        Subpart C--Implementation Grants for Local Educational Agencies

    SEC. 3671. APPLICATION FOR GRANT.

        (a) In General.--Any local educational agency that wishes to
    receive an implementation grant under this subpart shall submit an
    application to the Secretary of Health and Human Services, at such
    time, in such manner, and containing such information and assurances as
    the Secretary may require.
        (b) State Educational Agency Review.--Each such local educational
    agency shall submit its application to the State educational agency for
    comment before submitting it to the Secretary.
        (c) Local Educational Agency Plan.--Each such application shall
    include a local educational agency plan for comprehensive school health
    education programs (as defined in section 3602) that describes the
    following:
                (1) The local educational agency's goals and objectives for
            those programs.
                (2) How the local educational agency will coordinate
            programs under this subpart with other local, State and Federal
            health education programs.
                (3) How comprehensive school health education programs will
            be coordinated with other local, State and Federal education
            programs, such as programs under title I of the Elementary and
            Secondary Education Act of 1965, and with State's school
            improvement plan, if any, under title III of the Goals 2000:
            Educate America Act.
                (4) How the local educational agency has worked with State
            educational agencies and with State and local health agencies
            to reduce barriers to implementing comprehensive school health
            education programs.
                (5) How local educational agencies will monitor the
            implementation of such programs.
                (6) How the local educational agency, in consultation with
            the State educational agency and State and local health
            agencies and in conjunction with other local professional
            development activities, will build capacity for professional
            development of health educators.
                (7) How the local educational agency, in consultation with
            the State educational agency and State and local health
            agencies, will provide staff development and technical
            assistance.
                (8) The respective roles of the State educational agency,
            local educational agencies, the State health agency, and the
            local health agencies in developing and implementing such
            school health education programs.
                (9) How such school health education programs will be
            tailored to the extent practicable to be culturally and
            linguistically sensitive and responsive to the various needs of
            the students served, including individuals with disabilities,
            and individuals from disadvantaged backgrounds (including
            racial and ethnic minorities).
                (10) How the local educational agency, in consultation with
            the local health agency, will evaluate and report on the local
            educational agency's progress toward attaining the goals and
            objectives described in paragraph (1).

    SEC. 3672. SELECTION OF GRANTEES.

        (a) Selection of Grantees.--The Secretary shall establish criteria
    for the competitive selection of grantees under this subpart.
        (b) Limitation.--The Secretary shall not approve an application
    from a local educational agency in a State that has an approved plan
    under subpart A or B of part 3 unless the Secretary determines, after
    consultation with the State that the local application is consistent
    with such State plan.
        (c) Opportunity for Planning Grant.--If the Secretary does not
    approve a local educational agency's application under this subpart and
    determines that the local educational agency could benefit from a
    planning grant under subpart B, the Secretary shall inform the local
    educational agency of any planning grant funds that may be available to
    it under subpart B, subject to section 3661(d).

    SEC. 3673. AMOUNT OF GRANT.

        (a) In General.--For any fiscal year, the minimum grant to any
    local educational agency under this subpart is an amount determined by
    the Secretary to be necessary to enable the local educational agency to
    conduct the implementation process.
        (b) Criteria.--In determining the amount of any such grant, the
    Secretary may consider such factors as the number of children enrolled
    in schools in the local educational agency, the number of school-aged
    children living in poverty in the local educational agency, and the
    scope and quality of the local educational agency's plan.

    SEC. 3674. AUTHORIZED ACTIVITIES.

        Each local educational agency that receives a grant under this
    subpart shall use the grant funds as follows:
                (1) To implement comprehensive school health education
            programs, as defined in section 3602.
                (2) To conduct local or regional coordination and
            collaboration activities.
                (3) To provide staff development and technical assistance
            to schools, local health agencies, and other community agencies
            involved in providing comprehensive school health education
            programs.
                (4) To administer the program and monitor program
            implementation at the local level.
                (5) To evaluate and report to the Secretary on the local
            educational agency's progress toward attaining the goals and
            objectives described in section 3671(c)(1).
                (6) To conduct such other activities as the Secretary may
            by regulation authorize.

    SEC. 3675. REPORTS.

        Each local educational agency that receives a grant under this
    subpart shall collect and report to the Secretary and the State such
    data and other information as the Secretary may require.

                     PART 5--SCHOOL-RELATED HEALTH SERVICES

                Subpart A--Development and Operation of Projects

    SEC. 3681. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Funding for School-Related Health Services.--For the purpose of
    carrying out this subpart, there are authorized to be appropriated
    $100,000,000 for fiscal year 1996, $275,000,000 for fiscal year 1997,
    $350,000,000 for fiscal year 1998, and $400,000,000 for each of the
    fiscal years 1999 and 2000.
        (b) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purpose
    described in such subsection.

    SEC. 3682. ELIGIBILITY FOR DEVELOPMENT AND OPERATION GRANTS.

        (a) In General.--Entities eligible to apply for and receive grants
    under section 3484 or 3485 are the following:
                (1) State health agencies that apply on behalf of local
            community partnerships and other communities in need of
            adolescent health services within the State.
                (2) Local community partnerships in States in which health
            agencies have not applied.
        (b) Local Community Partnerships.--
                (1) In general.--A local community partnership under
            subsection (a)(2) is an entity that, at a minimum, includes--
                        (A) a local health care provider with experience in
                    delivering services to adolescents;
                        (B) one or more local public schools; and
                        (C) at least one community based organization
                    located in the community to be served that has a
                    history of providing services to at-risk youth in the
                    community.
                (2) Participation.--A partnership described in paragraph
            (1) shall, to the maximum extent feasible, involve broad based
            community participation from parents and youth to be served,
            health and social service providers (including regional
            alliance health plans and corporate alliance health plans in
            which families in the community are enrolled), teachers and
            other public school and school board personnel, the regional
            health alliance in which the schools participating in the
            partnership are located, youth development and service
            organizations, and interested business leaders. Such
            participation may be evidenced through an expanded partnership,
            or an advisory board to such partnership.

    SEC. 3683. PREFERENCES.

        (a) In General.--In making grants under sections 3484 and 3485, the
    Secretary shall give preference to applicants whose communities to be
    served show the most substantial level of need for such services among
    individuals who are between the ages of 10 and 19 (inclusive), as
    measured by indicators of community health including the following:
                (1) High levels of poverty.
                (2) The presence of a medically underserved area or
            population (as defined under section 330(a) of the Public
            Health Service Act).
                (3) A health professional shortage area, as designated
            under section 332 of the Public Health Service Act.
                (4) High rates of indicators of health risk among children
            and youth, including a high proportion of children receiving
            services through the Individuals with Disabilities Education
            Act, adolescent pregnancy, sexually transmitted disease
            (including infection with the human immunodeficiency virus),
            preventable disease, communicable disease, intentional and
            unintentional injuries among children and youth, community and
            gang violence, youth unemployment, juvenile justice
            involvement, and high rates of drug and alcohol exposure.
        (b) Linkage to Qualified Community Health Groups.--In making grants
    under sections 3484 and 3485, the Secretary shall give preference to
    applicants that demonstrate a linkage to qualified community health
    groups (as defined in section 3421(a)).

    SEC. 3684. GRANTS FOR DEVELOPMENT OF PROJECTS.

        (a) In General.--The Secretary may make grants to State health
    agencies or to local community partnerships to develop school health
    service sites.
        (b) Use of Funds.--A project for which a grant may be made under
    subsection (a) may include but not be limited to the cost of the
    following:
                (1) Planning for the provision of school health services.
                (2) Recruitment, compensation, and training of health and
            administrative staff.
                (3) The development of agreements with regional and
            corporate alliance health plans and the acquisition and
            development of equipment and information services necessary to
            support information exchange between school health service
            sites and health plans, health providers, and other entities
            authorized to collect information under this Act.
                (4) In the case of communities described in subsection
            (d)(2)(B), funds to aid in the establishment of local community
            partnerships.
                (5) Other activities necessary to assume operational
            status.
        (c) Application for Grant.--
                (1) In general.--Applicants shall submit applications in a
            form and manner prescribed by the Secretary.
                (2) Applications by state health agencies.--
                        (A) In the case of applicants that are State health
                    agencies, the application shall contain assurances that
                    the State health agency is applying for funds--
                                (i) on behalf of at least one local
                            community partnership; and
                                (ii) on behalf of at least one other
                            community identified by the State as in need of
                            the services funded under this part but without
                            a local community partnership.
                        (B) In the case of communities identified in
                    applications submitted by State health agencies that do
                    not yet have local community partnerships, the State
                    shall describe the steps that will be taken to aid the
                    community in developing a local community partnership.
                        (C) A State applying on behalf of local community
                    partnerships and other communities may retain not more
                    than 10 percent of grants awarded under this subpart
                    for administrative costs.
        (d) Contents of Application.--In order to receive a grant under
    this section, an applicant must include in the application the
    following information:
                (1) An assessment of the need for school health services in
            the communities to be served, using the latest available health
            data and health goals and objectives established by the
            Secretary.
                (2) A description of how the applicant will design the
            proposed school health services to reach the maximum number of
            school-aged children and youth at risk for poor health outcome.
                (3) An explanation of how the applicant will integrate its
            services with those of other health and social service programs
            within the community.
                (4) An explanation of how the applicant will link its
            activities to the regional and corporate alliance health plans
            serving the communities in which the applicant's program is to
            be located.
                (5) A description of linkages with regional and corporate
            health alliances in whose areas the applicant's program is to
            be located.
                (6) A description of a quality assurance program which
            complies with standards that the Secretary may prescribe.
        (e) Number of Grants.--Not more than one planning grant may be made
    to a single applicant. A planning grant may not exceed two years in
    duration.

    SEC. 3685. GRANTS FOR OPERATION OF PROJECTS.

        (a) In General.--The Secretary may make grants to State health
    agencies or to local community partnerships for the cost of operating
    school health service sites.
        (b) Use of Grant.--The costs for which a grant may be made under
    this section include but are not limited to the following:
                (1) The cost of furnishing health services that are not
            covered under title I of this Act or by any other public or
            private insurer.
                (2) The cost of furnishing enabling services, as defined in
            section 3461(g).
                (3) Training, recruitment and compensation of health
            professionals and other staff.
                (4) Outreach services to at-risk youth and to parents.
                (5) Linkage of individuals to health plans, community
            health services and social services.
                (6) Other activities deemed necessary by the Secretary.
        (c) Application for Grant.--Applicants shall submit applications in
    a form and manner prescribed by the Secretary. In order to receive a
    grant under this section, an applicant must include in the application
    the following information:
                (1) A description of the services to be furnished by the
            applicant.
                (2) The amounts and sources of funding that the applicant
            will expend, including estimates of the amount of payments the
            applicant will received from alliance health plans and from
            other sources.
                (3) Such other information as the Secretary determines to
            be appropriate.
        (d) Additional Contents of Application.--In order to receive a
    grant under this section, an applicant must meet the following
    conditions:
                (1) The applicant furnishes the following services:
                        (A) Diagnosis and treatment of simple illnesses and
                    minor injuries.
                        (B) Preventive health services, including health
                    screenings.
                        (C) Enabling services, as defined in section
                    3461(g).
                        (D) Referrals and followups in situations involving
                    illness or injury.
                        (E) Health and social services, counseling
                    services, and necessary referrals, including referrals
                    regarding mental health and substance abuse.
                        (F) Such other services as the Secretary determines
                    to be appropriate.
                (2) The applicant maintains agreements with all regional
            and corporate alliance health plans offering services in the
            applicant's service area.
                (3) The applicant is a participating provider in the
            State's program for medical assistance under title XIX of the
            Social Security Act.
                (4) The applicant does not impose charges on students or
            their families for services (including collection of any cost-
            sharing for services under the comprehensive benefit package
            that otherwise would be required).
                (5) The applicant has reviewed and will periodically review
            the needs of the population served by the applicant in order to
            ensure that its services are accessible to the maximum number
            of school age children and youth in the area, and that, to the
            maximum extent possible, barriers to access to services of the
            applicant are removed (including barriers resulting from the
            area's physical characteristics, its economic, social and
            cultural grouping, the health care utilization patterns of
            children and youth, and available transportation).
                (6) In the case of an applicant which serves a population
            that includes a substantial proportion of individuals of
            limited English speaking ability, the applicant has developed a
            plan to meet the needs of such population to the extent
            practicable in the language and cultural context most
            appropriate to such individuals.
                (7) The applicant will provide non-Federal contributions
            toward the cost of the project in an amount determined by the
            Secretary.
                (8) The applicant will operate a quality assurance program
            consistent with section 3684(e)(6).
        (e) Duration of Grant.--A grant under this section shall be for a
    period determined by the Secretary.
        (f) Reports.--A recipient of funding under this section shall
    provide such reports and information as are required in regulations of
    the Secretary.

    SEC. 3686. FEDERAL ADMINISTRATIVE COSTS.

        Of the amounts made available under section 3681, the Secretary may
    reserve not more than 5 percent for administrative expenses regarding
    this subpart.

                Subpart B--Capital Costs of Developing Projects

    SEC. 3691. LOANS AND LOAN GUARANTEES REGARDING PROJECTS.

        (a) In General.--The Secretary may make loans to, and guarantee the
    payment of principal and interest to Federal and non-Federal lenders on
    behalf of, State health agencies and local community partnerships for
    the capital costs of developing projects in accordance with subpart A.
        (b) Applicability of Certain Provisions.--The provisions of subpart
    A apply to loans and loan guarantees under subsection (a) to the same
    extent and in the same manner as such provisions apply to grants under
    subpart A. Except for any provision inconsistent with the purpose
    described in subsection (a), the provisions of subpart C of part 2 of
    subtitle E apply to loans and loan guarantees under subsection (a) to
    the same extent and in the same manner as such provisions apply to
    loans and loan guarantees under section 3441.

    SEC. 3692. FUNDING.

        Amounts available to the Secretary under section 3412 for the
    purpose of carrying out subparts B and C of part 2 of subtitle E are,
    in addition to such purpose, available to the Secretary for the purpose
    of carrying out this subpart.

                                                      Title III, Subtitle H

                  Subtitle H--Public Health Service Initiative

    SEC. 3701. PUBLIC HEALTH SERVICE INITIATIVE.

        (a) In General.--There is established pursuant to this title a
    Public Health Service Initiative consisting of the total amounts
    authorized and described in subsection (b). The Initiative includes the
    programs of subtitles C through G of this title and the programs of
    subtitle D of title VIII.
        (b) Total of the Amounts Authorized to be Appropriated.--The
    following is the total of the amounts authorized to be appropriated for
    the Initiative under the previous subtitles of this title:
                (1) For fiscal year 1995, $1,125,000,000.
                (2) For fiscal year 1996, $2,984,000,000.
                (3) For fiscal year 1997, $3,830,000,000.
                (4) For fiscal year 1998, $4,205,000,000.
                (5) For fiscal year 1999, $4,055,000,000.
                (6) For fiscal year 2000, $3,666,000,000.
        (c) Use of Amounts; Availability.--
                (1) Use; annual appropriations.--Amounts appropriated to
            carry out the Initiative, including subtitles A through F of
            this title, are available to carry out the specific programs
            for which the amounts are appropriated.
                (2) Availability of appropriated amounts.--Amounts
            appropriated for programs in the Initiative are available until
            expended.

                                                      Title III, Subtitle I

           Subtitle I--Coordination With COBRA Continuation Coverage

    SEC. 3801. PUBLIC HEALTH SERVICE ACT; COORDINATION WITH COBRA
                  CONTINUATION COVERAGE.

        (a) Period of Coverage.--Subparagraph (D) of section 2202(2) of the
    Public Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
                (1) by striking ``or'' at the end of clause (i), by
            striking the period at the end of clause (ii) and inserting ``,
            or'', and by adding at the end the following new clause:
                                ``(iii) eligible for comprehensive health
                            coverage described in section 1101 of the
                            Health Security Act.'', and
                (2) by striking ``or medicare entitlement'' in the heading
            and inserting ``, medicare entitlement, or health security act
            eligibility''.
        (b) Qualified Beneficiary.--Section 2208(3) of such Act (42 U.S.C.
    300bb-8(3)) is amended by adding at the end the following new
    subparagraph:
                        ``(C) Special rule for individuals covered by
                    health security act.--The term `qualified beneficiary'
                    shall not include any individual who, upon termination
                    of coverage under a group health plan, is eligible for
                    comprehensive health coverage described in section 1101
                    of the Health Security Act.''.
        (c) Repeal Upon Implementation of Health Security Act.--
                (1) In general.--Title XXII of such Act (42 U.S.C. 300bb-1
            et seq.) is hereby repealed.
                (2) Conforming amendment.--The table of contents of such
            Act is amended by striking the item relating to title XXII.
                (3) Effective date.--The amendments made by this subsection
            shall take effect on the earlier of--
                        (A) January 1, 1998, or
                        (B) the first day of the first calendar year
                    following the calendar year in which all States have in
                    effect plans under which individuals are eligible for
                    comprehensive health coverage described in section 1101
                    of this Act.

                                                                   Title IV

                        TITLE IV--MEDICARE AND MEDICAID

                           table of contents of title

                                                                       Page
    Sec. 4000. References in title..............................        673
                  Subtitle A--Medicare and the Alliance System

    Part 1--Enrollment of Medicare Beneficiaries in Regional Alliance Plans

    Sec. 4001. Optional State integration of medicare                   674
                                beneficiaries into regional
                                alliance plans.
    Sec. 4002. Individual election to remain in certain health          681
                                plans.
    Sec. 4003. Payments to regional alliances on behalf of              684
                                certain medicare-eligible
                                individuals.
    Sec. 4004. Prohibiting employers from taking into account           685
                                status as medicare beneficiary
                                on any grounds.
     Part 2--Encouraging Managed Care Under Medicare Program; Coordination
                               With Medigap Plans

    Sec. 4011. Enrollment and termination of enrollment.........        689
    Sec. 4012. Uniform informational materials..................        692
    Sec. 4013. Outlier payments.................................        693
    Sec. 4014. Point of service option..........................        695
                      Part 3--Medicare Coverage Expansions

    Sec. 4021. Reference to coverage of outpatient prescription         702
                                drugs.
    Sec. 4022. Expanded coverage for physician assistants, nurse        702
                                practitioners, and clinical
                                nurse specialists.
      Part 4--Coordination With Administrative Simplification and Quality
                             Management Initiatives

    Sec. 4031. Repeal of separate medicare peer review program..        703
    Sec. 4032. Mandatory assignment for all part B services.....        704
    Sec. 4033. Elimination of complexities caused by dual               705
                                funding sources and rules for
                                payment of claims.
    Sec. 4034. Repeal of pro precertification requirement for           706
                                certain surgical procedures.
    Sec. 4035. Requirements for changes in billing procedures...        708
             Part 5--Amendments to Anti-fraud and Abuse Provisions

    Sec. 4041. Anti-kickback provisions.........................        710
    Sec. 4042. Revisions to limitations on physician self-              718
                                referral.
    Sec. 4043. Civil monetary penalties.........................        730
    Sec. 4044. Exclusions from program participation............        738
    Sec. 4045. Sanctions against practitioners and persons for          745
                                failure to comply with statutory
                                obligations relating to quality
                                of care.
    Sec. 4046. Effective date...................................        746
       Part 6--Funding of Graduate Medical Education and Academic Health
                                    Centers

    Sec. 4051. Transfers from medicare trust funds for graduate         746
                                medical education.
    Sec. 4052. Transfers from Hospital Insurance Trust Fund for         748
                                academic health centers.
       Part 7--Coverage of Services Provided by Facilities and Plans of
                  Departments of Defense and Veterans Affairs

    Sec. 4061. Treatment of uniformed services health plan as           749
                                eligible organization under
                                medicare.
    Sec. 4062. Coverage of services provided to medicare                750
                                beneficiaries by plans and
                                facilities of Department of
                                Veterans Affairs.
    Sec. 4063. Conforming amendments............................        752
                    Subtitle B--Savings in Medicare Program

                       Part 1--Savings Relating to Part A

    Sec. 4101. Reduction in update for inpatient hospital               752
                                services.
    Sec. 4102. Reduction in adjustment for indirect medical             753
                                education.
    Sec. 4103. Reduction in payments for capital-related costs          754
                                for inpatient hospital services.
    Sec. 4104. Revisions to payment adjustments for                     757
                                disproportionate share hospitals
                                in participating States.
    Sec. 4105. Moratorium on designation of additional long-term        761
                                care hospitals.
    Sec. 4106. Extension of freeze on updates to routine service        761
                                costs of skilled nursing
                                facilities.
                       Part 2--Savings Relating to Part B

    Sec. 4111. Establishment of cumulative expenditure goals for        762
                                physician services.
    Sec. 4112. Use of real GDP to adjust for volume and                 767
                                intensity; repeal of restriction
                                on maximum reduction permitted
                                in default update.
    Sec. 4113. Reduction in conversion factor for physician fee         768
                                schedule for 1995.
    Sec. 4114. Limitations on payment for physicians' services          769
                                furnished by high-cost hospital
                                medical staffs.
    Sec. 4115. Medicare incentives for physicians to provide            780
                                primary care.
    Sec. 4116. Elimination of formula-driven overpayments for           785
                                certain outpatient hospital
                                services.
    Sec. 4117. Imposition of coinsurance on laboratory services.        786
    Sec. 4118. Application of competitive acquisition process           787
                                for part B items and services.
    Sec. 4119. Application of competitive acquisition procedures        791
                                for laboratory services.
                   Part 3--Savings Relating to Parts A and B

    Sec. 4131. Medicare secondary payer changes.................        792
    Sec. 4132. Payment limits for HMOs and CMPs with risk-              793
                                sharing contracts.
    Sec. 4133. Reduction in routine cost limits for home health         800
                                services.
    Sec. 4134. Imposition of copayment for certain home health          801
                                visits.
    Sec. 4135. Expansion of centers of excellence...............        804
                             Part 4--Part B Premium

    Sec. 4141. General part B premium...........................
     Part 5--Report on Medicare Savings for Fiscal Years 2000 Through 2003

    Sec. 4151. Report on savings................................        806
                              Subtitle C--Medicaid

                     Part 1--Comprehensive Benefit Package

    Sec. 4201. Limiting coverage under medicaid of items and            807
                                services covered under
                                comprehensive benefit package.
    Part 2--Expanding Eligibility for Nursing Facility Services; Long-term
                            Care Integration Option

    Sec. 4211. Spenddown eligibility for nursing facility               809
                                residents.
    Sec. 4212. Increased income and resource disregards for             811
                                nursing facility residents.
    Sec. 4213. Informing nursing home residents about                   813
                                availability of assistance for
                                home and community-based
                                services.
                             Part 3--Other Benefits

    Sec. 4221. Treatment of items and services not covered under        814
                                the comprehensive benefit
                                package.
    Sec. 4222. Establishment of program for poverty-level               818
                                children with special needs.
              Part 4--Discontinuation of Certain Payment Policies

    Sec. 4231. Discontinuation of medicaid DSH payments.........        825
    Sec. 4232. Discontinuation of reimbursement standards for           827
                                inpatient hospital services.
      Part 5--Coordination With Administrative Simplification and Quality
                             Management Initiatives

    Sec. 4241. Requirements for changes in billing procedures...        828
                          Part 6--Medicaid Commission

    Sec. 4251. Medicaid Commission..............................        829
              Subtitle D--Increase in SSI Personal Needs Allowance

    Sec. 4301. Increase in SSI personal needs allowance.........        832

                                                                   Title IV

                        TITLE IV--MEDICARE AND MEDICAID

    SEC. 4000. REFERENCES IN TITLE.

        (a) Amendments to Social Security Act.--Except as otherwise
    specifically provided, whenever in this title an amendment is expressed
    in terms of an amendment to or repeal of a section or other provision,
    the reference shall be considered to be made to that section or other
    provision of the Social Security Act.
        (b) References to OBRA.--In this title, the terms ``OBRA-1986'',
    ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and ``OBRA-1993'' refer to
    the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the
    Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the
    Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the
    Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the
    Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66),
    respectively.

                  Subtitle A--Medicare and the Alliance System

    PART 1--ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE PLANS

    SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES INTO
                  REGIONAL ALLIANCE PLANS.

                                                       Title IV, Subtitle A

        Title XVIII is amended by adding at the end the following:

         ``integration of medicare into state health security programs

        ``Sec. 1893. (a) Payment to States.--The Secretary shall pay a
    participating State that has submitted an application, as specified by
    subsection (b) which the Secretary has approved under subsection (c),
    the amount specified by subsection (d) for the period specified by
    subsection (e) for covered medicare beneficiaries. This section shall
    apply without regard to whether or not a State is a single-payer State.
        ``(b) Application by State.--An application submitted by a
    participating State shall contain the following assurances:
                ``(1) Coverage of all medicare-eligible individuals.--The
            State's application shall assure that the provisions of the
            succeeding paragraphs of this subsection shall apply to all
            medicare-eligible individuals who are residents of the
            State.''.
                ``(2) Enrollment in and selection of health plans.--
                        ``(A) Enrollment.--Each medicare-eligible
                    individual (within a class of medicare beneficiaries
                    covered under the application) who is a resident of the
                    State will be enrolled in a regional alliance health
                    plan serving the area in which the individual resides
                    (or, in the case of an individual who is a resident of
                    a single-payer State, in the Statewide single-payer
                    system operated under part 2 of subtitle C of title I
                    of the Health Security Act).
                        ``(B) Selection.--Each such individual will have
                    the same choice among applicable health plans as other
                    individuals in the State who are eligible individuals
                    under the Health Security Act.
                        ``(C) Offer of fee-for-service plan.--Each such
                    individual shall be offered enrollment in at least one
                    health plan that is a fee-for-service plan (or, in the
                    case of an individual who is a resident of a single-
                    payer State, the Statewide single-payer system under
                    part 2 of subtitle C of title I of the Health Security
                    Act) that meets the following requirements:
                                ``(i) The plan's premium rate, and the
                            actuarial value of the plan's deductibles,
                            coinsurance, and copayments, charged to the
                            individual do not exceed the actuarial value of
                            the coinsurance and deductibles that would be
                            applicable on the average if this section did
                            not apply to those individuals.
                                ``(ii) The plan's payment rates for covered
                            items and services are accepted as payment in
                            full for such items and services.
                ``(3) Coverage of full medicare benefits.--For each health
            plan providing coverage under this section--
                        ``(A) the plan shall cover at least the items and
                    services for which payment would otherwise be made
                    under this title (including payments under section
                    1862(b)(4)), and
                        ``(B) coverage determinations under the plan are
                    made under rules that are no more restrictive than
                    otherwise applicable under this title.
                ``(4) Premium.--During the period for which payments are
            made to a State under this section, the requirements of the
            Health Security Act relating to premiums that are otherwise
            applicable with respect to individuals enrolled in health plans
            in a State shall not apply with respect to medicare-eligible
            individuals in the State who are covered under the State's
            application under this section. Nothing in the previous
            sentence shall operate to permit a State or health plans in a
            State to charge different premiums among medicare-eligible
            individuals within the same premium class under the Health
            Security Act.
                ``(5) Quality assurance.--For each health plan providing
            coverage under this section there are quality assurance
            mechanisms for covered medicare individuals that equal, or
            exceed, such mechanisms otherwise applicable under this title.
                ``(6) Review rights.--Covered medicare individuals have
            review, reconsideration, and appeal rights (including appeals
            to courts of the State) that equal or exceed such rights
            otherwise applicable under this title.
                ``(7) Data reporting and access to documents.--The State
            will--
                        ``(A) provide such utilization and statistical data
                    as the Secretary determines are needed for purposes of
                    the programs established under this title, and
                        ``(B) the State will ensure access by the Secretary
                    or the Comptroller General to relevant documents.
                ``(8) Use of payments.--Payments made to the State under
            subsection (a) will be used only to carry out the purposes of
            this section.
        ``(c) Approval by Secretary.--The Secretary shall approve an
    application under subsection (b) if the Secretary finds--
                ``(1) that the individuals covered under the State's
            application shall receive at least the benefits provided under
            this title (including cost sharing);
                ``(2) that the amount of expenditures that will be made
            under this title will not exceed the amount of expenditures
            that will be made if the State's application is not accepted;
            and
                ``(3) that the State is able and willing to carry out the
            assurances provided in its application.
        ``(d) Amount and Source of Payment.--
                ``(1) Amount of payment.--For purposes of subsection (a),
            the amount of payments to a State--
                        ``(A) for the first year for which payments are
                    made to the State under this section shall be
                    determined by the applicable rate specified in section
                    1876(a)(1)(C) (but at 100 percent, rather than 95
                    percent, of the applicable amount) for each medicare-
                    eligible individual who is a resident of the State (but
                    without regard to any reduction based on payments to be
                    made under section 1876(a)(1)(G)), and
                        ``(B) for each succeeding year, shall be determined
                    by the applicable rate determined under subparagraph
                    (A) or this subparagraph for the preceding year for
                    each such individual, adjusted by the regional alliance
                    inflation factor applicable to regional alliances in
                    the State (as determined in accordance with section
                    6001(a) of the Health Security Act) for the year.
                ``(2) Source of payment.--Payment shall be made from the
            Federal Hospital Insurance Trust Fund and the Federal
            Supplementary Medical Insurance Trust Fund as provided under
            paragraph (5) of section 1876(a) (other than as provided under
            subparagraph (B) of that paragraph).
        ``(e) Period for Which Payment Made.--The period for which payment
    may be made under subsection (a) to a State--
                ``(1) begins with January 1 of the first calendar year for
            which the Secretary approves under subsection (c) the
            application of the State; and
                ``(2) ends--
                        ``(A) on December 31 of the year in which the State
                    notifies the Secretary (before April of that year) that
                    the State no longer intends to receive payments under
                    this section, or
                        ``(B) if the Secretary finds that the State is no
                    longer in substantial compliance with the requirements
                    under paragraphs (2) or (3) of subsection (c), at the
                    time specified by the Secretary.
    No termination is effective under paragraph (2) unless notice has been
    provided to medicare covered individuals, health providers, and health
    plans affected by the termination.
        ``(f) Payments Under this Section as Sole Medicare Benefits.--
    Payments to a State under subsection (a) shall be instead of the
    amounts that would otherwise be payable, pursuant to sections 1814(b)
    and 1833(a), for services furnished to medicare-eligible residents of
    the State covered under the application.
        ``(g) Evaluation.--The Secretary shall evaluate on an ongoing basis
    the compliance of a State with the requirements of this section.
        ``(h) Definitions.--In this section the terms `applicable health
    plan', `fee-for-service plan', `health plan', `medicare-eligible
    individual', `participating State', `single-payer State', and
    `Statewide single-payer system' have the meanings of those terms in the
    Health Security Act.''.

    SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS.

        (a) In General.--Section 1876 (42 U.S.C. 1395mm) is amended by
    adding at the end the following new subsection:
        ``(k)(1) Notwithstanding any other provision of this section, each
    eligible organization with a risk-sharing contract (or which is
    eligible to enter into such a contract, as determined by the Secretary)
    that is the sponsor of a health plan under subtitle E of title I of the
    Health Security Act shall provide each individual who meets the
    requirements of paragraph (2) with the opportunity to elect (by
    submitting an application at such time and in such manner as specified
    by the Secretary) to continue enrollment in such plan (for the same
    benefits as alliance-eligible individuals) and to have payments made by
    the Secretary to the plan on the individual's behalf in accordance with
    paragraph (3). The premium imposed with respect to such an individual
    by the plan shall be in an amount (determined in accordance with rules
    of the Secretary and notwithstanding other provisions of such Act)
    which reflects the difference between the premium otherwise established
    (adjusted by a factor to reflect the actuarial difference between
    medicare beneficiaries and other plan enrollees) and the amount payable
    under paragraph (3).
        ``(2) An individual meets the requirements of this paragraph if the
    individual is--
                ``(A) enrolled in the health plan of an eligible
            organization in a month in which the individual is either not
            entitled to benefits under part A, or is an eligible employee
            (as defined in the Health Security Act) or the spouse or
            dependent of an eligible employee,
                ``(B) entitled to benefits under part A and enrolled under
            part B in the succeeding month,
                ``(C) an eligible individual under the Health Security Act
            in that succeeding month, and
                ``(D) not an eligible employee (as defined in the Health
            Security Act) or the spouse or dependent of an eligible
            employee in that succeeding month.
        ``(3) The Secretary shall make a payment to an eligible
    organization on behalf of each individual enrolled with the
    organization for whom an election is in effect under this subsection in
    an amount determined by the rate specified by subsection (a)(1)(C)
    (notwithstanding the second sentence of paragraph (1)). Such payment
    shall be made from the Federal Hospital Insurance Trust Fund and the
    Federal Supplementary Medical Insurance Trust Fund as provided under
    subsection (a)(5) (other than as provided under subparagraph (B) of
    that paragraph).
        ``(4) The period for which payment may be made under paragraph
    (3)--
                ``(A) begins with the first month for which the individual
            meets the requirements of paragraph (2) (or a later month, in
            the case of a late application, as may be specified by the
            Secretary); and
                ``(B) ends with the earliest of--
                        ``(i) the month following the month--
                                ``(I) in which the individual notifies the
                            Secretary that the individual no longer wishes
                            to be enrolled in the health plan of the
                            eligible organization and to have payment made
                            on the individual's behalf under this
                            subsection; and
                                ``(II) which is a month specified by the
                            Secretary as a uniform open enrollment period
                            under subsection (c)(3)(A)(i), or
                        ``(ii) the month in which the individual ceases to
                    meet the requirements of paragraph (2).
        ``(5) Notwithstanding any other provision of this title, payments
    to an eligible organization under this subsection on behalf of an
    individual shall be the sole payments made with respect to items and
    services furnished to the individual during the period for which the
    individual's election under this subsection is in effect.''.
        (b) Conforming Amendment.--Section 1838(b) (42 U.S.C. 1395q(b)) is
    amended by inserting after ``section 1843(e)'' the following: ``,
    1876(c)(3)(B), 1876(k)(4)(B), or 1890(j)(1)(B)(iv)''.

    SEC. 4003. PAYMENTS TO REGIONAL ALLIANCES ON BEHALF OF CERTAIN
                  MEDICARE-ELIGIBLE INDIVIDUALS.

        Title XVIII, as amended by section 4001, is further amended by
    adding at the end the following new section:

    ``payments to regional alliances on behalf of certain medicare-eligible
                     individuals under health security act

        ``Sec. 1894. The Secretary shall provide for a transfer from the
    Federal Hospital Insurance Trust Fund and the Federal Supplementary
    Medical Insurance Trust Fund, in appropriate proportions, to each
    regional alliance in each year of the amount of the reductions in
    liability owed to the alliance in the year resulting from the
    application of section 6115 of the Health Security Act. In the case of
    an individual to whom such section applies, unless all the members of
    the family would be medicare-eligible individuals (but for section
    1012(a) of such Act), the reductions in liability under section 6115 of
    such Act shall be based upon the alliance credit amount for an
    individual class of enrollment (as defined in section 1011(c)(1)(A) of
    such Act).''.

    SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS AS
                  MEDICARE BENEFICIARY ON ANY GROUNDS.

        (a) Extension of Protections for Working Aged to Group Health Plans
    of All Employers.--Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is
    amended by striking clauses (ii) and (iii).
        (b) Extension of Protections for Disabled Individuals to All Group
    Health Plans.--
                (1) In general.--Section 1862(b)(1)(B) (42 U.S.C.
            1395y(b)(1)(B)), as amended by section 13561(e) of OBRA-1993,
            is amended--
                        (A) in clause (i), by striking ``large group health
                    plans (as defined in clause (iv))'' and inserting
                    ``group health plan (as defined in subparagraph (A)(v),
                    taking into account the exceptions described in clauses
                    (ii) and (iii) of subparagraph (A))''; and
                        (B) by striking clause (iv).
                (2) Conforming amendment.--Section 1862(b)(1)(A)(v) (42
            U.S.C. 1395y(b)(1)(A)(v)) is amended by striking ``this
            subparagraph, and subparagraph (C)'' and inserting ``this
            paragraph''.
        (c) Repeal of Limitation on Period of Protection for Individuals
    With End Stage Renal Disease.--
                (1) In general.--Section 1862(b)(1)(C) (42 U.S.C.
            1395y(b)(1)(C)), as amended by section 13561(c) of OBRA-1993,
            is amended--
                        (A) in clause (i), by striking ``an individual is
                    entitled'' and all that follows through ``such
                    benefits'' and inserting ``an individual (or a member
                    of the individual's family) who is covered under the
                    plan by virtue of the individual's current employment
                    status with an employer is entitled to benefits under
                    this title under section 226A'';
                        (B) in clause (ii), by striking the semicolon at
                    the end and inserting a period; and
                        (C) by striking the matter following clause (ii).
                (2) Conforming amendment.--Section 1862(b)(1) is amended--
                        (A) in subparagraph (A), by striking clause (iv);
                    and
                        (B) in subparagraph (B), by striking clause (ii).
        (d) No Primary Payment for Services Under a Health Plan.--Section
    1862(b)(2)(A) (42 U.S.C. 1395y(b)(2)(A)(i)) is amended--
                (1) by striking ``or'' at the end of clause (i);
                (2) by striking the period at the end of clause (ii) and
            inserting ``, or'';
                (3) by inserting after clause (ii) the following new
            clause:
                                ``(iii) payment has been made, or can
                            reasonably be expected to be made, with respect
                            to the item or service under any health plan
                            under the Health Security Act.''; and
                (4) in the second sentence--
                        (A) by striking ``and'' after ``applies'', and
                        (B) by inserting before the period at the end the
                    following: ``, and a health plan under the Health
                    Security Act to the extent that clause (iii) applies''.
        (e) Simplification of Coordination of Benefits.--Section 1862(b)(4)
    (42 U.S.C. 1395y(b)(4)) is amended by adding after and below
    subparagraph (B) the following:
            ``Notwithstanding the previous sentence, where payment is made
            for an item or service by a primary plan that is a health plan
            (within the meaning of section 1400 of the Health Security Act)
            and for which payment would be made under this title but for
            this subsection, payment may be made under this title (without
            regard to deductibles and coinsurance) in the amount of the
            cost sharing imposed under such primary plan (consistent with
            such Act).''.
        (f) Effective Date.--The amendments made by this section shall
    apply with respect to medicare-eligible individuals residing in a
    participating State as of January 1 of the first year for which the
    State is a participating State.

     PART 2--ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM; COORDINATION
                               WITH MEDIGAP PLANS

    SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLLMENT.

        (a) Uniform Open Enrollment Periods.--
                (1) For capitated plans.--The first sentence of section
            1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by
            inserting ``(which may be specified by the Secretary)'' after
            ``open enrollment period''.
                (2) For medigap plans.--Section 1882(s) (42 U.S.C.
            1395ss(s)) is amended--
                        (A) in paragraph (3), by striking ``paragraphs (1)
                    and (2)'' and inserting ``paragraph (1), (2), or (3)'',
                        (B) by redesignating paragraph (3) as paragraph
                    (4), and
                        (C) by inserting after paragraph (2) the following
                    new paragraph:
        ``(3) Each issuer of a medicare supplemental policy shall have an
    open enrollment period (which shall be the period specified by the
    Secretary under section 1876(c)(3)(A)(i)), of at least 30 days duration
    every year, during which the issuer may not deny or condition the
    issuance or effectiveness of a medicare supplemental policy, or
    discriminate in the pricing of the policy, because of age, health
    status, claims experience, receipt of health care, or medical
    condition. The policy may not provide any time period applicable to
    pre-existing conditions, waiting periods, elimination periods, and
    probationary periods (except as provided by paragraph (2)(B)). The
    Secretary may require enrollment through a third party designated under
    section 1876(c)(3)(B).''.
        (b) Enrollments for New Medicare Beneficiaries and Those Who
    Move.--Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amended--
                (1) in clause (i), by striking ``clause (ii)'' and
            inserting ``clauses (ii) through (iv)'', and
                (2) by adding at the end the following:
        ``(iii) Each eligible organization shall have an open enrollment
    period for each individual eligible to enroll under subsection (d)
    during any enrollment period specified by section 1837 that applies to
    that individual. Enrollment under this clause shall be effective as
    specified by section 1838.
        ``(iv) Each eligible organization shall have an open enrollment
    period for each individual eligible to enroll under subsection (d) who
    has previously resided outside the geographic area which the
    organization serves. The enrollment period shall begin with the
    beginning of the month that precedes the month in which the individual
    becomes a resident of that geographic area and shall end at the end of
    the following month. Enrollment under this clause shall be effective as
    of the first of the month following the month in which the individual
    enrolls.''.
        (c) Enrollment Through Third Party; Uniform Termination of
    Enrollment.--The first sentence of section 1876(c)(3)(B) (42 U.S.C.
    1395mm(c)(3)(B)) is amended--
                (1) by inserting ``(including enrollment through a third
            party)'' after ``regulations'', and
                (2) by striking everything after ``with the eligible
            organization'' and inserting ``during an annual period as
            prescribed by the Secretary, and as specified by the Secretary
            in the case of financial insolvency of the organization, if the
            individual moves from the geographic area served by the
            organization, or in other special circumstances that the
            Secretary may prescribe.''.
        (d) Effective Date.--The amendments made by the previous
    subsections apply to enrollments and terminations of enrollments
    occurring after 1995 (but only after the Secretary of Health and Human
    Services has prescribed the relevant annual period), except that the
    amendments made by subsection (a)(2) apply to enrollments for a
    medicare supplemental policy made after 1995.

    SEC. 4012. UNIFORM INFORMATIONAL MATERIALS.

        (a) For Capitated Plans.--Section 1876(c)(3)(C) (42 U.S.C.
    1395mm(c)(3)(C)) is amended by adding at the end the following: ``In
    addition, the Secretary shall develop and distribute comparative
    materials about all eligible organizations. Each eligible organization
    shall reimburse the Secretary for its pro rata share (as determined by
    the Secretary) of the costs incurred by the Secretary in carrying out
    the requirements of the preceding sentence and other enrollment
    activities.''.
        (b) For Medigap Plans.--Paragraph (1) of section 1882(f) (42 U.S.C.
    1395ss(f)) is amended to read as follows:
        ``(f)(1) The Secretary shall develop and distribute comparative
    materials about all medicare supplemental policies issued in a State.
    Each issuer of such a policy shall reimburse the Secretary for its pro
    rata share (as determined by the Secretary for purposes of section
    1876(c)(3)(C)) of the costs incurred by the Secretary in carrying out
    the requirements of the preceding sentence and other enrollment
    activities, or the issuer shall no longer be considered as meeting the
    requirements of this section.''.
        (c) Effective Date.--The amendments made by this section shall
    apply with respect to materials for enrollment in years after 1995.

    SEC. 4013. OUTLIER PAYMENTS.

        (a) General Rule.--Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1)) is
    amended by adding at the end the following:
        ``(G)(i) In the case of an eligible organization with a risk-
    sharing contract, the Secretary may make additional payments to the
    organization equal to not more than 50 percent of the imputed
    reasonable cost (or, if so requested by the organization, the
    reasonable cost) above the threshold amount of services covered under
    parts A and B and provided (or paid for) in a year by the organization
    to any individual enrolled with the organization under this section.
        ``(ii) For purposes of clause (i), the `imputed reasonable cost' is
    an amount determined by the Secretary on a national, regional, or other
    basis that is related to the reasonable cost of services.
        ``(iii) For purposes of clause (i), the `threshold amount' is an
    amount determined by the Secretary from time to time, adjusted by the
    geographic factor utilized in determining payments to the organization
    under subparagraph (C) and rounded to the nearest multiple of $100,
    such that the total amount to be paid under this subparagraph for a
    year is estimated to be 5 percent or less of the total amount to be
    paid under risk-sharing contracts for services furnished for that year.
        ``(iv) An eligible organization shall submit a claim for additional
    payments under subsection (i) within such time as the Secretary may
    specify.
        ``(v) To the extent that total payments under clause (i) in a
    year--
                ``(I) exceed the payment set aside as a result of the
            reduction under subparagraph (C) for the year, the Secretary
            shall increase the percentage reduction under such subparagraph
            for the following year by such percentage as will result in an
            increase in the reduction equal to such excess in previous
            payments, or
                ``(II) are less than the payment set aside as a result of
            the reduction under subparagraph (C) for the year, the amount
            of such difference shall remain available in the succeeding
            years for additional payments under this subparagraph and the
            Secretary may take such difference into account in establishing
            the percentage reduction under subparagraph (C) for the
            following year.''.
        (b) Conforming Amendment.--Section 1876(a)(1)(C)(i) (42 U.S.C.
    1395mm(a)(1)(C)(i)), as amended by section 4132(a), is further amended
    by inserting ``, and reduced by a uniform percentage (determined by the
    Secretary for a year, subject to adjustment under subparagraph (G)(v))
    so that the total reduction is estimated to equal the amount to be paid
    under subparagraph (G)'' before the period.
        (c) Effective Date.--The amendments made by the preceding
    subsections apply to services furnished after 1994.

    SEC. 4014. POINT OF SERVICE OPTION.

        (a) Point of Service Contracts.--Part C of title XVIII is amended
    by inserting after section 1889 the following:

                           ``point of service option

        ``Sec. 1890. (a) Establishment of Program.--Not later than July 1,
    1995, the Secretary shall promulgate regulations establishing a point-
    of-service program under which individuals entitled to benefits under
    this title (other than individuals enrolled with an eligible
    organization with a risk-sharing contract under section 1876(g)) may
    obtain such benefits through providers and suppliers who are members of
    a point-of-service network established by the Secretary in accordance
    with the criteria described in subsection (b).
        ``(b) Criteria for Networks.--In establishing criteria for point-
    of-service networks under the program under this section, the Secretary
    shall--
                ``(1) designate an appropriate geographic service area for
            each such network to ensure that each network has a sufficient
            number of participating members to provide items and services
            under this title to beneficiaries, except that no such service
            area may be served by more than one such network;
                ``(2) establish requirements for participating members;
                ``(3) establish a schedule of payments for services
            furnished by networks, including a schedule of bundled payment
            arrangements for selected medical and surgical procedures;
                ``(4) delineate permissible incentives to encourage
            physicians and other suppliers to join the network, and to
            encourage individuals to receive services under this title
            through the network;
                ``(5) specify the rules under which carriers under section
            1842 may administer the program;
                ``(6) establish procedures to used for the provision of
            case management services and criteria for determining whether
            (and under which circumstances) services which would otherwise
            not be covered under this title would be covered by the network
            under such case management;
                ``(7) establish standards for the processing and payment of
            claims for payment for services furnished by the network,
            including standards for the apportionment of payments among the
            Trust Funds established under this title;
                ``(8) establish standards for the selection of physicians
            for the network based on practice patterns and a demonstration
            of effective quality assurance;
                ``(9) develop standards to ensure that the point-of-service
            option does not result in a net financial loss to the medicare
            program under this title after the implementation of the option
            in an area, taking into account administrative costs, the costs
            of services (which would otherwise not be covered under this
            title) provided to beneficiaries under case management, and the
            costs of incentives for physicians, other providers, and
            beneficiaries; and
                ``(10) apply such other criteria as the Secretary considers
            appropriate.
        ``(c) Bonus Payments Permitted.--
                ``(1) In general.--Notwithstanding any other provision of
            this title, the Secretary may increase the amount of payment
            otherwise provided under this title for items and services
            furnished by individuals who are members of a point-of-service
            network under this section by a bonus payment (in such amount
            as the Secretary may determine).
                ``(2) Criteria for receiving payment.--The Secretary may
            make a bonus payment under this subsection to members of a
            point-of-service network if the Secretary determines that the
            members of the network have reduced the costs to the medicare
            program of the items and services furnished by the network
            without adversely affecting the quality of care provided to
            beneficiaries.''.
        (b) Conforming Amendments.--
                (1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended--
                        (A) by striking ``and'' at the end of paragraph
                    (3),
                        (B) by substituting ``; and'' for the period at the
                    end of paragraph (4), and
                        (C) by adding at the end the following:
                ``(5) such additional items and services furnished by a
            provider of services to an individual subject to case
            management as may be specified under a point-of-service network
            arrangement under section 1890.''.
                (2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended--
                        (i) in paragraph (1), by inserting ``or (4)'' after
                    ``paragraph (3)'',
                        (ii) by striking ``or'' at the end of paragraph
                    (2),
                        (iii) by substituting ``; and'' for the period at
                    the end of paragraph (3), and
                        (iv) by inserting after paragraph (3) the
                    following:
                ``(4) in the case of items and services furnished through a
            point of service network (as described in section 1890), the
            payment basis specified under the arrangement established for
            such network, plus any bonus payments as determined under
            subsection (c) of that section.''.
                (B) The matter in section 1886(d)(1)(A) (42 U.S.C.
            1395ww(d)(1)(A)) preceding clause (i) is amended by inserting
            ``(other than paragraph (4))'' after ``1814(b)''.
                (3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
                        (A) by striking ``and'' at the end of subparagraph
                    (I),
                        (B) by substituting ``; and'' for the period at the
                    end of subparagraph (J), and
                        (C) by adding at the end the following:
                        ``(K) such additional items and services (other
                    than inpatient services furnished by providers of
                    services) as may be specified under a point-of-service
                    network arrangement under section 1890.''.
                (4) Section 1833 (42 U.S.C. 1395l), as amended by section
            4032, is amended by adding at the end the following new
            subsection:
        ``(u) In the case of items and services furnished through a point
    of service network (as described in section 1890), there shall be paid
    (subject to subsection (b)) amounts equal to 80 percent of the payment
    basis specified in an agreement entered into pursuant to that section,
    plus any bonus payments as determined under subsection (c) of that
    section.''.
                (5) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
            sections 4034(b)(4), 4118(b), and 2003(b), is further amended--
                        (A) in paragraph (7), by striking ``or under
                    paragraph (1)(F)'' and inserting ``, under paragraph
                    (1)(F), or under a contract under section 1890'',
                        (B) by striking ``or'' at the end of paragraph
                    (16),
                        (C) by striking the period at the end of paragraph
                    (17) and inserting ``; or'', and
                        (D) by inserting after paragraph (17) the following
                    new paragraph:
                ``(18) which are furnished to an individual and related to
            a health condition with respect to which the individual is
            subject to case management through a point-of-service network
            under section 1890 but which are not included in the plan of
            care developed for such individual and agreed to by the
            individual and the case manager.''.
        (c) Effective Date.--The amendments made by this subsection shall
    take effect January 1, 1996.

                      PART 3--MEDICARE COVERAGE EXPANSIONS

    SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

        For provisions adding a new outpatient prescription drug benefit to
    the medicare program, see subtitle A of title II.

    SEC. 4022. EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS, NURSE
                  PRACTITIONERS, AND CLINICAL NURSE SPECIALISTS.

        (a) Physician Assistants.--Section 1861(s)(2)(K)(i) (42 U.S.C.
    1395x(s)(2)(K)(i)) is amended by striking ``(I) in a hospital'' and all
    that follows through ``shortage area''.
        (b) Nurse Practitioners and Clinical Nurse Specialists.--Section
    1861(s)(2)(K)(iii) (42 U.S.C. 1395x(s)(2)(K)(iii)) is amended--
                (1) by inserting ``(I)'' before ``in a rural area'', and
                (2) by inserting ``, (II) in any other area, in the case of
            services furnished by nurse practitioners other than services
            furnished to an inpatient of a hospital, or (III) in any other
            area, in the case of services furnished by clinical nurse
            specialists other than services furnished to an inpatient of a
            hospital, skilled nursing facility or nursing facility (as
            defined in section 1919(a)), and'' after ``section
            1886(d)(2)(D))''.
        (c) Conforming Amendments.--(1) Section 1832(a)(2)(B)(iv) (42
    U.S.C. 1395k(a)(2)(B)(iv)) is amended by striking ``provided in a rural
    area (as defined in section 1886(d)(2)(D))'' and inserting ``described
    in section 1861(s)(2)(K)(iii)''.
        (2) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is amended by
    striking ``provided in a rural area''.
        (3) Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is amended by
    striking ``provided in a rural area''.
        (d) Effective Date.--The amendments made by this section shall
    apply to services furnished on or after January 1, 1996.

      PART 4--COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY
                             MANAGEMENT INITIATIVES

    SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM.

        Part B of title XI of the Social Security Act (42 U.S.C. 1301 et
    seq.) is amended by adding at the end the following new section:

                                 ``termination

        ``Sec. 1165. The provisions of this part shall terminate effective
    upon the adoption of the National Quality Management Program under
    subtitle A of title V of the Health Security Act. Any reference to this
    part or any section in this part shall not be effective after such
    date.''.

    SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B SERVICES.

        Section 1833 (42 U.S.C. 1395l) is amended--
                (1) by redesignating the subsection (r) added by section
            4206(b)(2) of OBRA-1990 as subsection (s); and
                (2) by adding at the end the following new subsection:
        ``(t)(1) Notwithstanding any other provision of this part, payment
    under this part for any item or service furnished on or after January
    1, 1996, may only be made on an assignment-related basis.
        ``(2) Except for deductible, coinsurance, or copayment amounts
    applicable under this part, no physician, supplier, or other person may
    bill or collect any amount from an individual enrolled under this part
    or other person for an item or service for which payment may be made
    under this part. No such individual or person is liable for payment of
    any amounts billed in violation of the previous sentence.
        ``(3) If a physician, supplier, or other person knowingly and
    willfully bills or collects an amount in violation of paragraph (2),
    the Secretary may apply sanctions against such physician, supplier, or
    other person in accordance with section 1842(j)(2). Paragraph (4) of
    section 1842(j) shall apply in this paragraph in the same manner as
    such paragraph applies to such section.''.

    SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING SOURCES
                  AND RULES FOR PAYMENT OF CLAIMS.

        (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).
        (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.

    SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN
                  SURGICAL PROCEDURES.

        (a) In General.--Section 1164 (42 U.S.C. 1320c-13) is repealed.
        (b) Conforming Amendments.--
                (1) Section 1154 (42 U.S.C. 1320c-3) is amended--
                        (A) in subsection (a), by striking paragraph (12),
                    and
                        (B) in subsection (d), by striking ``(and except as
                    provided in section 1164)''.
                (2) Section 1833 (42 U.S.C. 1395l) is amended--
                        (A) in subsection (a)(1)(D)(i), by striking ``, or
                    for tests furnished in connection with obtaining a
                    second opinion required under section 1164(c)(2) (or a
                    third opinion, if the second opinion was in
                    disagreement with the first opinion)'';
                        (B) in subsection (a)(1), by striking clause (G);
                        (C) in subsection (a)(2)(A), by striking ``, to
                    items and services (other than clinical diagnostic
                    laboratory tests) furnished in connection with
                    obtaining a second opinion required under section
                    1164(c)(2) (or a third opinion, if the second opinion
                    was in disagreement with the first opinion),'';
                        (D) in subsection (a)(2)(D)(i)--
                                (i) by striking ``basis,'' and inserting
                            ``basis or'', and
                                (ii) by striking ``, or for tests furnished
                            in connection with obtaining a second opinion
                            required under section 1164(c)(2) (or a third
                            opinion, if the second opinion was in
                            disagreement with the first opinion)'';
                        (E) in subsection (a)(3), by striking ``and for
                    items and services furnished in connection with
                    obtaining a second opinion required under section
                    1164(c)(2), or a third opinion, if the second opinion
                    was in disagreement with the first opinion)''; and
                        (F) in the first sentence of subsection (b), by
                    striking ``(4)'' and all that follows through ``and
                    (5)'' and inserting and ``(4)''.
                (3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is
            amended by striking ``and for items and services furnished in
            connection with obtaining a second opinion required under
            section 1164(c)(2), or a third opinion, if the second opinion
            was in disagreement with the first opinion)''.
                (4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
                        (A) by adding ``or'' at the end of paragraph (14),
                        (B) by striking ``; or'' at the end of paragraph
                    (15) and inserting a period, and
                        (C) by striking paragraph (16).
                (5) The third sentence of section 1866(a)(2)(A) (42 U.S.C.
            1395w(a)(2)(A)) is amended by striking ``, with respect to
            items and services furnished in connection with obtaining a
            second opinion required under section 1164(c)(2) (or a third
            opinion, if the second opinion was in disagreement with the
            first opinion),''.
        (c) Effective Date.--The amendments made by this section shall
    apply to services provided on or after the date of the enactment of
    this Act.

    SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.

        (a) Limitation on Frequency of System Changes.--The Secretary of
    Health and Human Services may not implement any change in the system
    used for the billing and processing of claims for payment for items and
    services furnished under title XVIII of the Social Security Act within
    6 months of implementing any previous change in such system.
        (b) Advance Notification to Providers as Requirement for Carriers
    and Fiscal Intermediaries.--
                (1) Fiscal intermediaries.--Section 1816(c) (42 U.S.C.
            1395h(c)) is amended by adding at the end the following new
            paragraph:
        ``(4) Each agreement with an agency or organization under this
    section shall provide that the agency or organization shall notify
    providers of services of any major change in the procedures for billing
    for services furnished under this part at least 120 days before such
    change is to take effect.''.
                (2) Carriers.--Section 1842(b)(3) (42 U.S.C. 1395u(b)(3))
            is amended--
                        (A) by striking ``and'' at the end of subparagraph
                    (G) and the end of subparagraph (H); and
                        (B) by inserting after subparagraph (H) the
                    following new subparagraph:
                ``(I) will notify individuals and entities furnishing items
            and services for which payment may be made under this part of
            any major change in the procedures for billing for such items
            and services at least 120 days before such change is to take
            effect; and''.
                (3) Effective date.--The amendments made by paragraphs (1)
            and (2) shall apply to agreements with fiscal intermediaries
            under section 1816 of the Social Security Act and to contracts
            with carriers under section 1842 of such Act for years
            beginning after the expiration of the 9-month period beginning
            on the date of the enactment of this Act.

             PART 5--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS

    SEC. 4041. ANTI-KICKBACK PROVISIONS.

        (a) Revision to Penalties.--
                (1) Permitting secretary to impose civil monetary
            penalty.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
                        (A) by striking ``or'' at the end of paragraphs (1)
                    and (2);
                        (B) by striking the semicolon at the end of
                    paragraph (3) and inserting ``; or''; and
                        (C) by inserting after paragraph (3) the following
                    new paragraph:
                ``(4) carries out any activity in violation of paragraph
            (1) or (2) of section 1128B(b);''.
                (2) Description of civil monetary penalty applicable.--
            Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
                        (A) by striking ``given).'' at the end of the first
                    sentence and inserting the following: ``given or, in
                    cases under paragraph (4), $50,000 for each such
                    violation).''; and
                        (B) by striking ``claim.'' at the end of the second
                    sentence and inserting the following: ``claim (or, in
                    cases under paragraph (4), damages of not more than
                    three times the total amount of remuneration offered,
                    paid, solicited, or received, without regard to whether
                    a portion of such remuneration was offered, paid,
                    solicited, or received for a lawful purpose).''.
                (3) Increase in criminal penalty.--Paragraphs (1) and (2)
            of section 1128B(b) (42 U.S.C. 1320a-7b(b)) are each amended--
                        (A) by striking ``$25,000'' and inserting
                    ``$50,000''; and
                        (B) by striking the period at the end and inserting
                    the following: ``, and shall be subject to damages of
                    not more than three times the total remuneration
                    offered, paid, solicited, or received, without regard
                    to whether a portion of such remuneration was offered,
                    paid, solicited, or received for a lawful purpose.''.
        (b) Revisions to Exceptions.--
                (1) Exception for discounts.--Section 1128B(b)(3)(A) (42
            U.S.C. 1320a-7b(b)(3)(A)) is amended by striking ``program;''
            and inserting ``program and is not--
                        ``(i) for the furnishing of one item or service
                    without charge or at a reduced charge in exchange for
                    any agreement to buy a different item or service;
                        ``(ii) applicable to one payor but not to providers
                    of services or other entities under title XVIII or a
                    State health care program; or
                        ``(iii) in the form of a cash payment;''.
                (2) Exception for payments to employees.--Section
            1128B(b)(3)(B) (42 U.S.C. 1320a-7b(b)(3)(B)) is amended by
            inserting at the end ``if the amount of remuneration under the
            arrangement is consistent with the fair market value of the
            services and is not determined in a manner that takes into
            account (directly or indirectly) the volume or value of any
            referrals, except that such employee can be paid remuneration
            in the form of a productivity bonus based on services
            personally performed by the employee.''.
                (3) Exception for waiver of coinsurance by certain
            providers.--Section 1128B(b)(3)(D) (42 U.S.C. 1320a-
            7b(b)(3)(D)) is amended to read as follows:
                ``(D) a waiver or reduction of any coinsurance or other
            copayment if the waiver or reduction is made pursuant to a
            public schedule of discounts which the person is obligated as a
            matter of law to apply to certain individuals.''.
                (4) New exception for certain providers.--Section
            1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
                        (A) by striking ``and'' at the end of subparagraph
                    (D);
                        (B) by striking the period at the end of
                    subparagraph (E) and inserting ``; and''; and
                        (C) by adding at the end the following new
                    subparagraph:
                ``(F) any remuneration obtained by or given to an
            individual or entity who receives assistance under a grant or
            cooperative agreement for the provision of health care services
            under title V, title XX, or the Public Health Service Act, or
            is obligated as a matter of law to provide services according
            to a schedule which provides for discounts based on the ability
            of the individual services to pay, if--
                        ``(i) in the case of an individual or entity who
                    receives assistance under a grant or cooperative
                    agreement for the provision of health care services
                    under title V, title XX, or the Public Health Service
                    Act, the remuneration is directly and primarily related
                    to the activity supported by the grant or cooperative
                    agreement; and
                        ``(ii) the remuneration is pursuant to a written
                    arrangement for the use or procurement of space,
                    equipment, goods, or services for the referral of
                    patients that--
                                ``(I) does not result in private inurement
                            to any current employee, officer, member of the
                            Board of Directors, or agent of the recipient
                            or any other person involved in recommending or
                            negotiating the arrangement; and
                                ``(II) does not preclude the referral of
                            patients to other providers of service of the
                            patient's own choosing and does not interfere
                            with the ability of health professionals to
                            refer patients to providers of services they
                            believe are the most appropriate, except to the
                            extent such choices or referrals are limited by
                            the terms of a health plan in which the patient
                            has enrolled or the terms of a grant or
                            cooperative agreement described in clause
                            (i).''.
                (5) New exception for capitated payments.--Section
            1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)), as amended by paragraph
            (4), is further amended--
                        (A) by striking ``and'' at the end of subparagraph
                    (E);
                        (B) by striking the period at the end of
                    subparagraph (F) and inserting ``; and''; and
                        (C) by adding at the end the following new
                    subparagraph--
                ``(G) any reduction in cost sharing or increased benefits
            given to an individual, any amounts paid to a provider of
            services for items or services furnished to an individual, or
            any discount or reduction in price given by the provider for
            such items or services, if the individual is enrolled with and
            such items and services are covered under any of the following:
                        ``(i) A health plan which is furnishing items or
                    services under title XVIII or a State health care
                    program to individuals on an at-risk, prepaid,
                    capitated basis pursuant to a written agreement with
                    the Secretary or a State health care program.
                        ``(ii) An organization receiving payments on a
                    prepaid basis, under a demonstration project under
                    section 402(a) of the Social Security Amendments of
                    1967 or under section 222(a) of the Social Security
                    Amendments of 1972.
                        ``(iii) Any other plan or insurer under which each
                    participating provider is paid wholly on an at-risk,
                    prepaid, capitated basis for such items or services
                    pursuant to a written arrangement between the plan and
                    the provider.''.
        (c) Clarification of Coverage of Employers and Employees.--Section
    1128B(b) (42 U.S.C. 1320a-7b(b)), as amended by subsection (a)(4), is
    further amended by adding at the end the following new paragraph:
        ``(5) In this subsection, the term `referral' includes the referral
    by an employee to his or her employer of any item or service for which
    payment may be made in whole or in part under title XVIII or a State
    health care program.''
        (d) Authorization for the Secretary To Issue Regulations.--Section
    1128B(b) (42 U.S.C. 1320a-7b(b)), as amended by subsections (a)(4) and
    (c), is further amended by adding at the end the following new
    paragraph:
        ``(6) The Secretary is authorized to impose by regulation such
    other requirements as needed to protect against program or patient
    abuse with respect to any of the exceptions described in paragraph
    (3).''.
        (e) Clarification of Other Elements of Offense.--Section 1128B(b)
    (42 U.S.C. 1320a-7b(b)) is amended--
                (1) in paragraph (1) in the matter preceding subparagraph
            (A), by striking ``kind--'' and inserting ``kind with intent to
            be influenced--'';
                (2) in paragraph (1)(A), by striking ``in return for
            referring'' and inserting ``to refer'';
                (3) in paragraph (1)(B), by striking ``in return for
            purchasing, leasing, ordering, or arranging for or
            recommending'' and inserting ``to purchase, lease, order, or
            arrange for or recommend'';
                (4) in paragraph (2) in the matter preceding subparagraph
            (A), by striking ``to induce such person'' and inserting ``with
            intent to influence such person''; and
                (5) by adding at the end of paragraphs (1) and (2) the
            following sentence: ``A violation exists under this paragraph
            if one or more purposes of the remuneration is unlawful under
            this paragraph.''.

    SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

        (a) Clarification of Payment Ban.--Section 1877(a)(1)(B) (42 U.S.C.
    1395nn(a)(1)(B)) is amended to read as follows:
                ``(B) no physician or entity may present or cause to be
            presented a claim under this title or bill to any third party
            payor or other entity for designated health services furnished
            pursuant to a referral prohibited under subparagraph (A).''.
        (b) Clarification of Coverage of Holding Company Type Arrangements
    and Loans.--The last sentence of section 1877(a)(2) (42 U.S.C.
    1395nn(a)(2)) is amended by striking ``an interest in an entity that
    holds an ownership or investment interest in any entity providing the
    designated health service'' and inserting the following: ``a loan from
    the entity, and an interest held indirectly through means such as (but
    not limited to) having a family member hold such investment interest or
    holding a legal or beneficial interest in another entity (such as a
    trust or holding company) that holds such investment interest''.
        (c) Revisions to General Exceptions to Both Ownership and
    Compensation Arrangement Prohibitions.--
                (1) Repeal of exception for physicians' services.--Section
            1877(b) (42 U.S.C. 1395nn(b)) is amended--
                        (A) by striking paragraph (1); and
                        (B) by redesignating paragraphs (2) and (3) as
                    paragraphs (1) and (2).
                (2) Revision to in-office ancillary services exception.--
            Section 1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by
            paragraph (1), is amended--
                        (A) in the matter preceding subparagraph (A), by
                    striking ``services (other than durable medical
                    equipment (excluding infusion pumps) and parenteral and
                    enteral nutrients, equipment, and supplies)'' and
                    inserting ``clinical laboratory services, x-ray and
                    ultrasound services that are provided at low-cost (as
                    determined in accordance with regulations of the
                    Secretary)''; and
                        (B) in subparagraph (A)--
                                (i) in clause (ii)(I), by striking ``(or
                            another physician who is a member of the same
                            group practice)'',
                                (ii) in clause (ii)(II) by inserting ``the
                            same or'' before ``another building'', and
                                (iii) in clause (ii)(II)(bb), by inserting
                            ``all of'' after ``centralized provision of''.
                (3) Revision to prepaid plan exception.--Section
            1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as redesignated by
            paragraph (1), is amended to read as follows:
                ``(2) Prepaid plans.--In the case of designated health
            services furnished by an organization--
                        ``(A) with a risk sharing contract under section
                    1876(g) to an individual enrolled with the
                    organization,
                        ``(B) receiving payments on a prepaid basis, under
                    a demonstration project under section 402(a) of the
                    Social Security Amendments of 1967 or under section
                    222(a) of the Social Security Amendments of 1972, to an
                    individual enrolled with the organization, or
                        ``(C) that is a qualified health maintenance
                    organization (within the meaning of section 1310(d) of
                    the Public Health Service Act) to an individual
                    enrolled with the organization.''.
                (4) New exception for capitated payments.--Section 1877(b)
            (42 U.S.C. 1395nn(b)), as amended by paragraph (1), is amended
            by inserting after paragraph (2) the following new paragraph:
                ``(3) Other capitated payments.--In the case of a
            designated health service, if the designated health service is
            included in the services for which a physician or physician
            group is paid wholly on an at-risk, prepaid, capitated basis by
            a health plan or insurer pursuant to a written arrangement
            between the plan or insurer and the physician or physician
            group.''.
        (d) Revision to Publicly Traded Securities Exception.--Section
    1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the
    time acquired by the physician'' after ``which may be purchased on
    terms generally available to the public''.
        (e) Revision to Rural Provider Exception.--Section 1877(d)(2) (42
    U.S.C. 1395nn(d)(2)) is amended by striking ``substantially all'' and
    inserting ``not less than 85 percent (as determined in accordance with
    regulations of the Secretary)''.
        (f) Revisions to Exceptions Relating to Other Compensation
    Arrangements.--
                (1) Exception for personal services arrangements.--(A)
            Section 1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II))
            is amended to read as follows:
                                        ``(II) If the plan places a
                                    physician or physician group at
                                    substantial financial risk (as
                                    determined by the Secretary pursuant to
                                    section 1876(i)(8)(A)(ii)), for
                                    services not provided by the physician,
                                    the entity complies with the provisions
                                    of subclauses (I) and (II) of section
                                    1876(i)(8)(A)(ii).'';
                (B) Section 1877(e)(3)(B)(ii), 42 U.S.C.
            1395nn(e)(3)(B)(ii) is amended by striking ``may directly or
            indirectly have the effect of'' and inserting ``has the purpose
            of''.
                (2) Repeal of exception for remuneration unrelated to the
            provision of designated health services.--Section 1877(e) (42
            U.S.C. 1395nn(e)) is amended--
                        (A) by striking paragraph (4); and
                        (B) by redesignating paragraphs (5), (6), (7), and
                    (8) as paragraphs (4), (5), (6), and (7).
                (3) Exception for certain physician recruitment.--Section
            1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by
            paragraph (2), is amended to read as follows:
                ``(4) Physician recruitment.--In the case of remuneration
            which is provided by an entity located in a rural area (as
            defined in section 1886(d)(2)(D)) or a health professional
            shortage areas (designated under section 332 of the Public
            Health Service Act), or an entity for which 85 percent of the
            patients are members of a medically underserved population
            designated under section 330 of the Public Health Service Act
            (as determined in accordance with regulations of the
            Secretary), in order to induce a physician who has been
            practicing within the physician's current specialty for less
            than one year to establish staff privileges at the entity, or
            to induce any other physician to relocate his or her primary
            place of practice to the geographic area served by the entity,
            if the following standards are met:
                        ``(A) The arrangement is set forth in a written
                    agreement that specifies the benefits provided by the
                    entity to the physician, the terms under which the
                    benefits are to be provided, and the obligations of
                    each party.
                        ``(B) If a physician is leaving an established
                    practice, the physical location of the new primary
                    place of practice must be not less than 100 miles from
                    the location of the established primary place of
                    practice and at least 85 percent of the revenues of the
                    physician's new practice must be generated from new
                    patients for whom the physician did not previously
                    provide services at the former practice.
                        ``(C) The benefits are provided by the entity for a
                    period not in excess of 3 years, and the terms of the
                    agreement are not renegotiated during this 3-year
                    period in any substantial aspect, unless the
                    physician's new primary place of practice is designated
                    as a health professional shortage area (pursuant to
                    section 332 of the Public Health Service Act) for the
                    physician's specialty category during the entire
                    duration of the relationship between the physician and
                    the entity.
                        ``(D) There is no requirement that the physician
                    make referrals to, be in a position to make or
                    influence referrals to, or otherwise generate business
                    for the entity as a condition for receiving the
                    benefits.
                        ``(E) The physician is not restricted from
                    establishing staff privileges at, referring any service
                    to, or otherwise generating any business for any other
                    entity of the physician's choosing.
                        ``(F) The amount or value of the benefits provided
                    by the entity may not vary (or be adjusted or
                    renegotiated) in any manner based on the volume or
                    value of any expected referrals to or business
                    otherwise generated for the entity by the physician for
                    which payment may be made in whole or in part under
                    this title or a State health care program (as defined
                    in section 1128(h)).
                        ``(G) The physician agrees to treat patients
                    entitled to benefits under this title or enrolled in a
                    State plan for medical assistance under title XIX.''.
                (4) Exception for isolated transactions.--Section
            1877(e)(5) (42 U.S.C. 1395nn(e)(6)), as redesignated by
            paragraph (2), is amended--
                        (A) by redesignating subparagraph (B) as
                    subparagraph (C);
                        (B) by striking ``and'' at the end of subparagraph
                    (A); and
                        (C) by inserting after subparagraph (A) the
                    following new subparagraph:
                        ``(B) there is no financing of the sale between the
                    parties, and''.
                (5) Exception for payments by a physician.--Section
            1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as redesignated by
            paragraph (2), is amended to read as follows:
                ``(7) Payments by a physician for items and services.--
            Payments made by a physician to an individual or entity as
            compensation for items or services if the items or services are
            furnished at a price that is consistent with fair market
            value.''.
                (6) Additional exception for discounts or other reductions
            in price.--Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by
            paragraph (2), is amended by adding at the end the following
            new paragraph:
                ``(8) Discounts or other reductions in price.--Discounts or
            other reductions in price between a physician and an entity for
            items or services for which payment may be made under this
            title so long as the discount or other reduction in price is
            properly disclosed and appropriately reflected in the costs
            claimed or charges made by the physician or entity under this
            title and is not--
                        ``(A) for the furnishing of one item or service
                    without charge or at a reduced charge in exchange for
                    any agreement to buy a different item or service,
                        ``(B) applicable to one or more payers but not to
                    all individuals and entities providing services for
                    which payment may be made under this title, or
                        ``(C) in the form of a cash payment.''.
        (g) Clarification of Sanction Authority.--Section 1877(g)(4) (42
    U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and all
    that follows through ``to such entity,'' and inserting the following:
    ``Any physician or other entity that enters into an arrangement or
    scheme (such as a cross-referral arrangement or an arrangement with
    multiple leases overlapping in time for the same or similar rental
    space or equipment) which the physician or entity knows or should know
    has a principal purpose of inducing referrals to another entity, which
    referrals, if made directly by the physician or entity to such other
    entity,''.
        (h) Clarification of Definition of Remuneration.--Section
    1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as
    follows:
                ``(B) The term `remuneration' includes any payment,
            discount or other reduction in price, forgiveness of debt or
            other benefit made directly or indirectly, overtly or covertly,
            in cash or in kind.''.
        (i) Revision to Definition of Group Practice.--Section 1877(h)(4)
    (42 U.S.C. 1395nn(h)(4)) is amended--
                (1) in subparagraph (A)(vi), by striking the period at the
            end and inserting the following: ``, including a requirement
            for the physical grouping of physician practices as may be
            reasonably required to prevent the abuse of any exceptions
            provided to group practices under this section.''; and
                (2) in subparagraph (B)(i), by striking ``or services
            incident to such personally performed services''.
        (j) Expansion to Cover Additional Items and Services.--Section
    1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section 2005(c)(3),
    is amended--
                (1) in subparagraph (D), by striking ``or other''; and
                (2) by adding at the end the following new subparagraphs:
                        ``(M) Diagnostic services.
                        ``(N) Any other item or service not rendered by the
                    physician personally or by a person under the
                    physician's direct supervision.''.
        (k) Authorization for the Secretary to Issue Regulations.--Section
    1877 (42 U.S.C. 1395nn) is amended by adding the following new
    subsection:
        ``(i) Additional Requirements.--The Secretary is authorized to
    impose by regulation such other requirements as needed to protect
    against program or patient abuse with respect to any of the exceptions
    under this section.''.
        (l) Incorporation of Amendments Made Under OBRA-1993.--In this
    section, any reference to section 1877 of the Social Security Act shall
    be considered a reference to such section as amended by section
    13562(a) of OBRA-1993.

    SEC. 4043. CIVIL MONETARY PENALTIES.

        (a) Prohibition Against Offering Inducements to Individuals
    Enrolled Under Plans.--
                (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C.
            1320a-7a(a)) (as amended by section 4041(a)(1)) is amended--
                        (A) by striking ``; or'' at the end of paragraph
                    (3) and inserting a semicolon;
                        (B) by striking the semicolon at the end of
                    paragraph (4) and inserting ``; or''; and
                        (C) by inserting after paragraph (4) the following
                    new paragraph:
                ``(5) offers, pays, or transfers remuneration to any
            individual eligible for benefits under title XVIII of this Act,
            or under a State health care program (as defined in section
            1128(h)) that such person knows or should know is likely to
            influence such individual to order or receive from a particular
            provider, practitioner, or supplier any item or service for
            which payment may be made, in whole or in part, under title
            XVIII, or a State health care program;''.
                (2) Remuneration defined.--Section 1128A(i) (42 U.S.C.
            1320a-7a(i)) is amended by adding at the end the following new
            paragraph:
                ``(6) The term `remuneration' includes the waiver of
            coinsurance and deductible amounts (or any part thereof), and
            transfers of items or services for free or for other than fair
            market value, except that such term does not include the waiver
            of coinsurance or deductible amounts by a person or entity,
            if--
                        ``(A) the waiver is not offered as part of any
                    advertisement or solicitation;
                        ``(B) the person does not routinely waive
                    coinsurance or deductible amounts; and
                        ``(C) the person--
                                ``(i) waives the coinsurance and deductible
                            amounts after determining in good faith that
                            the individual is indigent;
                                ``(ii) fails to collect coinsurance or
                            deductible amounts after making reasonable
                            collection efforts; or
                                ``(iii) provides for any permissible waiver
                            as specified in section 1128B(b)(3) or in
                            regulations issued by the Secretary.''.
        (b) Claim for Item or Service Based on Incorrect Coding or
    Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
    7a(a)(1)) is amended--
                (1) in subparagraph (A), by striking ``claimed,'' and
            inserting the following: ``claimed, including any person who
            presents or causes to be presented a claim for an item or
            service which includes a procedure or diagnosis code that the
            person knows or should know will result in a greater payment to
            the person than the code applicable to the item or service
            actually provided or actual patient medical condition,'';
                (2) in subparagraph (C), by striking ``or'' at the end;
                (3) in subparagraph (D), by striking ``; or'' and inserting
            ``, or''; and
                (4) by inserting after subparagraph (D) the following new
            subparagraph:
                        ``(E) is for a medical or other item or service
                    that a person knows or should know is not medically
                    necessary; or''.
        (c) Excluded Individual Retaining Ownership or Control Interest in
    Participating Entity.--Section 1128A(a) of such Act, as amended by
    section 4041(a)(1) and subsection (a)(1), is further amended--
                (1) by striking ``or'' at the end of paragraph (4);
                (2) by striking the semicolon at the end of paragraph (5)
            and inserting ``; or''; and
                (3) by inserting after paragraph (5) the following new
            paragraph:
                ``(6) in the case of a person who is not an organization,
            agency, or other entity, who is excluded from participating in
            a program under title XVIII or a State health care program in
            accordance with this section, section 1128, or section 1156 and
            who, during the period of exclusion, retains either a direct or
            indirect ownership or control interest of 5 percent or more in,
            or an ownership or control interest (as defined in section
            1124(a)(3)) in, or who is an officer, director, agent, or
            managing employee (as defined in section 1126(b)) of, an entity
            that is participating in a program under title XVIII or a State
            health care program;''.
        (d) Additional Offenses Relating to Alliance System.--Section
    1128A(a) of such Act, as amended by section 4041(a)(1) and subsections
    (a)(1) and (c), is further amended--
                (1) by striking ``or'' at the end of paragraph (5);
                (2) by striking the semicolon at the end of paragraph (6)
            and inserting ``; or''; and
                (3) by inserting after paragraph (6) the following new
            paragraphs:
                ``(7) engages in a practice that circumvents a payment
            methodology intended to reimburse for two or more discreet
            medical items or services at a single or fixed amount,
            including but not limited to, multiple admissions or
            readmission to hospitals and other institutions reimbursed on a
            diagnosis reimbursement grouping basis;
                ``(8) engages in a practice which has the effect of
            limiting or discouraging (as compared to other plan enrollees)
            the utilization of health care services covered by law or under
            the service contract by title XIX or other publicly subsidized
            patients, including but not limited to differential standards
            for the location and hours of service offered by providers
            participating in the plan;
                ``(9) substantially fails to cooperate with a quality
            assurance program or a utilization review activity;
                ``(10) fails substantially to provide or authorize
            medically necessary items and services that are required to be
            provided to an individual covered under a health plan under the
            Health Security Act or public program for the delivery of or
            payment for health care items or services, if the failure has
            adversely affected (or had a substantial likelihood of
            adversely affecting) the individual;
                ``(11) employs or contracts with any individual or entity
            who is excluded from participating in a program under title
            XVIII or a State health care program in accordance with this
            section, section 1128, or section 1156, for the provision of
            any services (including but not limited to health care,
            utilization review, medical social work, or administrative), or
            employs or contracts with any entity for the direct or indirect
            provision of such services, through such an excluded individual
            or entity; or
                ``(12) submits false or fraudulent statements, data or
            information or claims to the National Health Board established
            under part 1 of subtitle F of title I of the Health Security
            Act, any other Federal agency, a State health care agency, a
            health alliance (under subtitle D of title I of such Act), or
            any other Federal, State or local agency charged with
            implementation or oversight of a health plan under such Act or
            a public program that the person knows or should know is
            fraudulent;''.
        (e) Modifications of Amounts of Penalties and Assessments.--Section
    1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by section 4041(a),
    subsection (a)(1), subsection (c), and subsection (d), is amended in
    the matter following paragraph (12)--
                (1) by striking ``$2,000'' and inserting ``$10,000'';
                (2) by inserting after ``under paragraph (4), $50,000 for
            each such violation'' the following: ``; in cases under
            paragraph (5), $10,000 for each such offer, payment, or
            transfer; in cases under paragraph (6), $10,000 for each day
            the prohibited relationship occurs; in cases under paragraphs
            (7) through (12), an amount not to exceed $50,000 for each such
            determination by the Secretary''; and
                (3) by striking ``twice the amount'' and inserting ``three
            times the amount''.
        (f) Interest on Penalties.--Section 1128A(f) (42 U.S.C. 1320a-
    7a(f)) is amended by adding after the first sentence the following:
    ``Interest shall accrue on the penalties and assessments imposed by a
    final determination of the Secretary in accordance with an annual rate
    established by the Secretary under the Federal Claims Collection Act.
    The rate of interest charged shall be the rate in effect on the date
    the determination becomes final and shall remain fixed at that rate
    until the entire amount due is paid. In addition, the Secretary is
    authorized to recover the costs of collection in any case where the
    penalties and assessments are not paid within 30 days after the
    determination becomes final, or in the case of a compromised amount,
    where payments are more than 90 days past due. In lieu of actual costs,
    the Secretary is authorized to impose a charge of up to 10 percent of
    the amount of penalties and assessments owed to cover the costs of
    collection.''.
        (g) Authorization To Act.--
                (1) In general.--The first sentence of section 1128A(c)(1)
            (42 U.S.C. 1320a-7a(c)(1)) is amended by striking all that
            follows ``(b)'' and inserting the following: ``unless, within
            one year after the date the Secretary presents a case to the
            Attorney General for consideration, the Attorney General brings
            an action in a district court of the United States.''.
                (2) Effective date.--The amendment made by this paragraph
            (1) shall apply to cases presented by the Secretary of Health
            and Human Services for consideration on or after the date of
            the enactment of this Act.
        (h) Deposit of Penalties Collected into All-Payer Account.--Section
    1128A(f)(3) (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 All-Payer Health Care Fraud and Abuse Control
    Account established under section 5402 of the Health Security Act''.
        (i) Clarification of Penalty Imposed on Excluded Provider
    Furnishing Services.--Section 1128A(a)(1)(D) (42 U.S.C. 1320a-
    7a(a)(1)(D)) is amended by inserting ``who furnished the service''
    after ``in which the person''.

    SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION.

        (a) Mandatory Exclusion for Individual Convicted of Criminal
    Offense Related to Health Care Fraud.--Section 1128 (42 U.S.C. 1320a-7)
    is amended--
                (1) by amending paragraph (1) of subsection (a) to read as
            follows:
                ``(1) Convictions of program-related crimes and health care
            fraud.--
                        ``(A) Any individual or entity that has been
                    convicted of a criminal offense related to the delivery
                    of an item or service under title XVIII or under any
                    State health care program; or
                        ``(B) Any individual or entity that has been
                    convicted, under Federal or State law, in connection
                    with the delivery of a health care item or service of a
                    criminal offense relating to fraud, theft,
                    embezzlement, breach of fiduciary responsibility, or
                    other financial misconduct.''; and
                (2) in subsection (b)(1), by striking ``in connection with
            the delivery of a health care item or service or''.
        (b) Establishment of Minimum Period of Exclusion for Certain
    Individuals and Entities Subject to Permissive Exclusion From Medicare
    and State Health Care Programs.--Section 1128(c)(3) (42 U.S.C. 1320a-
    7(c)(3)) is amended by adding at the end the following new
    subparagraphs:
        ``(D) In the case of an exclusion of an individual or entity under
    paragraphs (1), (2), or (3) of subsection (b), the period of exclusion
    shall be a minimum of 3 years, unless the Secretary determines that a
    longer period is appropriate because of aggravating circumstances.
        ``(E) In the case of an exclusion of an individual or entity under
    paragraph (4) or (5) of subsection (b), the period of the exclusion
    shall not be less than the period during which the individual's or
    entity's license to provide health care is revoked, suspended, or
    surrendered, or the individual or the entity is excluded or suspended
    from a Federal or State health care program.
        ``(F) In the case of an exclusion of an individual or entity under
    subsection (b)(6)(B), the period of the exclusion shall be not less
    than 1 year.''.
        (c) Revision to Exclusion for Default on Health Education Loan or
    Scholarship Obligations.--Section 1128(b)(14) (42 U.S.C. 1320a-
    7(b)(14)) is amended by striking ``all reasonable steps'' and inserting
    ``reasonable steps''.
        (d) Permissive Exclusion of Individuals With Ownership or Control
    Interest in Sanctioned Entities.--Section 1128(b) (42 U.S.C. 1320a-
    7(b)) is amended by adding at the end the following new paragraph:
                ``(15) Individuals controlling a sanctioned entity.--Any
            individual who has a direct or indirect ownership or control
            interest of 5 percent or more, or an ownership or control
            interest (as defined in section 1124(a)(3)) in, or who is an
            officer, director, agent, or managing employee (as defined in
            section 1126(b)) of, an entity--
                        ``(A) that has been convicted of any offense
                    described in subsection (a) or in paragraph (1), (2),
                    or (3) of this subsection;
                        ``(B) against which a civil monetary penalty has
                    been assessed under section 1128A; or
                        ``(C) that has been excluded from participation
                    under a program under title XVIII or under a State
                    health care program.''.
        (e) Exclusions Based on Actions Under Alliance System.--Section
    1128 (42 U.S.C. 1320a-7), as amended by subsections (a) and (d), is
    amended--
                (1) in subsection (a)(1)(A), by striking ``XVIII or under a
            State health care program'' and inserting ``XVIII, a State
            health care program, or under an applicable health plan (as
            defined in section 1902(6) of the Health Security Act)'';
                (2) in subsection (b)(5)--
                        (A) by striking ``or'' at the end of subparagraph
                    (A),
                        (B) by adding ``or'' at the end of subparagraph
                    (B), and
                        (C) by inserting after subparagraph (B) the
                    following new subparagraph:
                        ``(C) an applicable health plan (as defined in
                    section 1902(6) of the Health Security Act) under
                    section 5411 or 5412(b)(3) of such Act,'';
                (3) in subsection (b)(6)(B), by striking ``XVIII or under a
            State health care program'' and inserting ``XVIII, a State
            health care program, or an applicable health plan (as defined
            in section 1902(6) of the Health Security Act)'';
                (4) in subsection (b)(7), by striking the period at the end
            and inserting ``, or in section 5412 of the Health Security
            Act.'';
                (5) in subsection (b)(8)(B)--
                        (A) in clause (ii), by striking ``1128A'' and
                    inserting ``1128A or under section 5412 of the Health
                    Security Act'', and
                        (B) in clause (iii), by striking ``XVIII or under a
                    State health care program'' and inserting ``XVIII, a
                    State health care program, or under an applicable
                    health plan (as defined in section 1902(6) of the
                    Health Security Act)'';
                (6) in subsection (b)(9), by striking the period at the end
            and inserting ``, or provide any information requested by the
            Inspector General of the Department of Health and Human
            Services to carry out the All-Payer Health Care Fraud and Abuse
            Control Program established under section 5401 of the Health
            Security Act.'';
                (7) in subsection (b)(11)--
                        (A) by striking ``title XVIII or a State health
                    care program'' and inserting ``title XVIII, a State
                    health care program, or an applicable health plan (as
                    defined in section 1902(6) of the Health Security
                    Act)'',
                        (B) by striking ``Secretary or the appropriate
                    State agency'' and inserting ``Secretary, the
                    appropriate State agency, or plan sponsor'', and
                        (C) by striking ``Secretary or that agency'' and
                    inserting ``Secretary, that agency, or that sponsor'';
                (8) in subsection (b)(12), by adding at the end the
            following new subparagraph:
                        ``(E) Any entity authorized by law to (i) conduct
                    on-site health, safety or patient care reviews and
                    surveys or (ii) to investigate whether any violations
                    of law have occurred, including violations under this
                    section, section 1128A, section 1128B, or part 2 of
                    subtitle E of title V of the Health Security Act.'';
                (9) in subsection (b)(14), by striking ``XVIII or XIX'' and
            inserting ``XVIII, a State health care program, or an
            applicable health plan (as defined in section 1902(6) of the
            Health Security Act)''; and
                (10) in subsection (b)(15)--
                        (A) in subparagraph (B), by striking ``1128A'' and
                    inserting ``1128A or section 5412 of the Health
                    Security Act'', and
                        (B) in subparagraph (C), by striking ``title XVIII
                    or under a State health care program'' and inserting
                    ``title XVIII, a State health care program, or an
                    applicable health plan (as defined in section 1902(6)
                    of the Health Security Act''.
        (f) Appeal of Exclusions to Court of Appeals.--Section 1128(f)(1)
    (42 U.S.C. 1320a-7(f)(1)) is amended by striking the period at the end
    and inserting the following: ``, except that any action brought to
    appeal such decision shall be brought in the United States Court of
    Appeals for the judicial circuit in which the individual or entity
    resides or has a principal place of business (or, if the individual or
    entity does not reside or have a principal place of business within any
    such judicial circuit, in the United States Court of Appeals for the
    District of Columbia Circuit).''.

    SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO
                  COMPLY WITH STATUTORY OBLIGATIONS RELATING TO QUALITY OF
                  CARE.

        (a) Minimum Period of Exclusion for Practitioners and Persons
    Failing To Meet Statutory Obligations.--
                (1) In general.--The second sentence of section 1156(b)(1)
            (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may
            prescribe)'' and inserting ``may prescribe, except that such
            period may not be less than one year)''.
                (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C.
            1320c-5(b)(2)) is amended by striking ``shall remain'' and
            inserting ``shall (subject to the minimum period specified in
            the second sentence of paragraph (1)) remain''.
        (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of
    Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
                (1) in the second sentence, by striking ``and determines''
            and all that follows through ``such obligations,'' and
                (2) by striking the third sentence.
        (c) Amount of Civil Money Penalty.--Section 1156(b)(3) (42 U.S.C.
    1320c-5(b)(3)) is amended by striking ``the actual or estimated cost''
    and inserting the following: ``$50,000 for each instance''.

    SEC. 4046. EFFECTIVE DATE.

        The amendments made by this part shall take effect January 1, 1995.

       PART 6--FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH
                                    CENTERS

    SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL
                  EDUCATION.

        (a) In General.--For purposes of complying with section 3034(a),
    there shall be transferred to the Secretary from the Federal Hospital
    Insurance Trust Fund (established under section 1817 of the Social
    Security Act) and the Federal Supplementary Medical Insurance Trust
    Fund (established under section 1841 of such Act) the following amount
    (in the aggregate), as applicable to a fiscal year:
                (1) In the case of fiscal year 1996, $1,500,000,000.
                (2) In the case of each of the fiscal years 1997 and 1998,
            $1,600,000,000.
                (3) In the case of each subsequent fiscal year, the amount
            specified in paragraph (2) increased by the Secretary's
            estimate of the percentage increase in the consumer price index
            for all urban consumers (U.S. city average) for the 12-month
            period ending with the midpoint of the previous fiscal year.
        (b) Allocation of Amount Among Funds.--With respect to the amount
    required under subsection (a) to be transferred for a year from the
    Federal Hospital Insurance Trust Fund and the Federal Supplementary
    Medical Insurance Trust Fund, the Secretary shall determine an
    equitable allocation of such amount among the funds.
        (c) Termination of Graduate Medical Education Payments Under
    Medicare.--
                (1) In General.-- Section 1886(h) (42 U.S.C. 1395ww(h)) is
            amended by adding at the end the following new paragraph:
                ``(6) Termination of payments attributable to costs of
            training physicians.--Notwithstanding any other provision of
            this section or section 1861(v), no payment may be made under
            this title for direct graduate medical education costs
            attributable to an approved medical residency training program
            for any cost reporting period (or portion thereof) beginning on
            or after October 1, 1995.''.
                (2) Prohibition against recognition of costs.--Section
            1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the
            end the following new subparagraph:
        ``(T) Such regulations shall not include any provision for specific
    recognition of the costs of graduate medical education for hospitals
    for any cost reporting period (or portion thereof) beginning on or
    after October 1, 1995. Nothing in the previous sentence shall be
    construed to affect in any way payments to hospitals for the costs of
    any approved educational activities that are not described in such
    sentence.''.

    SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR ACADEMIC
                  HEALTH CENTERS.

        (a) In General.--For purposes of complying with section 3104(a),
    there shall be transferred to the Secretary from the Federal Hospital
    Insurance Trust Fund (established under section 1817 of the Social
    Security Act) the following amount (in the aggregate), as applicable to
    a fiscal year:
                (1) In the case of fiscal year 1996, $2,100,000,000.
                (2) In the case of each of the fiscal years 1997 and 1998,
            $2,000,000,000.
                (3) In the case of each subsequent fiscal year, the amount
            specified in paragraph (2) increased by the Secretary's
            estimate of the percentage increase in the consumer price index
            for all urban consumers (U.S. city average) for the 12-month
            period ending with the midpoint of the previous fiscal year.
        (b) Termination of Payments Under Medicare.--
                (1) In general.--Section 1886(d)(5)(B) (42 U.S.C.
            1395ww(d)(5)(B)) is amended in the matter preceding clause (i)
            by striking ``The Secretary'' and inserting ``For discharges
            occurring before October 1, 1995, the Secretary''.
                (2) Adjustment to standardized amounts.--Section
            1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by
            striking ``excluding'' and inserting ``for discharges occurring
            before October 1, 1995, excluding''.

       PART 7--COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF
                  DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS

    SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS ELIGIBLE
                  ORGANIZATION UNDER MEDICARE.

        (a) In General.--Section 1876 (42 U.S.C. 1395mm), as amended by
    section 4002(a), is further amended by adding at the end the following
    new subsection:
        ``(l) Notwithstanding any other provision of this section, a
    Uniformed Services Health Plan of the Department of Defense under
    chapter 55 of title 10, United States Code, shall be considered an
    eligible organization under this section, and the Secretary shall make
    payments to such Plan during a year on behalf of any individuals
    entitled to benefits under this title who are enrolled with such a Plan
    during the year in the same amounts and under the same terms and
    conditions under which the Secretary makes payments to eligible
    organizations with risk-sharing contracts under section 1876.''.
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to items and services furnished under title XVIII of the Social
    Security Act on or after October 1, 1995.

    SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDICARE BENEFICIARIES BY
                  PLANS AND FACILITIES OF DEPARTMENT OF VETERANS AFFAIRS.

        (a) In General.--Title XVIII, as amended by sections 4001 and 4003,
    is further amended by adding at the end the following new section:

     ``treatment of plans and facilities of department of veterans affairs
                                  as providers

        ``Sec. 1895. (a) In General.--Notwithstanding any other provision
    of this title--
                ``(1) a VA health plan (as defined in section 1801(2) of
            title 38, United States Code) shall be considered an eligible
            organization for purposes of section 1876; and
                ``(2) a health care facility of the Department of Veterans
            Affairs shall be considered a provider of services under
            section 1861(u).
        ``(b) Eligibility for Payments.--
                ``(1) VA health plans.--The Secretary shall make payments
            to a VA health plan during a year on behalf of any veteran,
            other than a veteran described in section 1831(b) during the
            year (other than any individuals described in section 1831(b)
            of title 38, United States Code) in the same amounts and under
            the same terms and conditions under which the Secretary makes
            payments to eligible organizations with a risk-sharing contract
            under section 1876.
                ``(2) Health care facilities.--The Secretary shall make
            payments to a health care facility of the Department of
            Veterans Affairs for services provided to an individual
            entitled to benefits under this title in the same amounts and
            under the same terms and conditions under which the Secretary
            makes payments to provider of services under this title.''.
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to items and services furnished under title XVIII of the Social
    Security Act on or after January 1, 1998.

    SEC. 4063. CONFORMING AMENDMENTS.

        (a) Part A.--Section 1814 (42 U.S.C. 1395f) is amended by striking
    subsection (c).
        (b) Part B.--Section 1835 (42 U.S.C. 1395n) is amended by striking
    subsection (d).
        (c) Additional Conforming Amendment.--Section 1880(a) (42 U.S.C.
    1395qq(a)) is amended by striking ``, notwithstanding sections 1814(c)
    and 1835(d),''.
        (d) Effective Date.--The amendments made by this section shall take
    effect January 1, 1998.

                                                       Title IV, Subtitle B

                    Subtitle B--Savings in Medicare Program

                       PART 1--SAVINGS RELATING TO PART A

    SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.

        Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended
    by section 13501(a)(1) of OBRA-1993, is amended--
                (1) in subclause (XII)--
                        (A) by striking ``fiscal year 1997'' and inserting
                    ``for each of the fiscal years 1997 through 2000'', and
                        (B) by striking ``0.5 percentage point'' and
                    inserting ``2.0 percentage points''; and
                (2) in subclause (XIII), by striking ``fiscal year 1998''
            and inserting ``fiscal year 2003''.

    SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION.

        (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
    1395ww(d)(5)(B)(ii)) is amended to read as follows:
                ``(ii) For purposes of clause (i)(II), the indirect
            teaching adjustment factor is equal to c * (((1+r) to the nth
            power) - 1), where `r' is the ratio of the hospital's full-time
            equivalent interns and residents to beds and `n' equals .405.
            For discharges occurring on or after--
                        ``(I) May 1, 1986, and before October 1, 1995, `c'
                    is equal to 1.89, and
                        ``(II) October 1, 1995, `c' is equal to 0.74.''.
        (b) No Restandardization of Payment Amounts Required.--Section
    1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking
    ``of 1985'' and inserting ``of 1985, but not taking into account the
    amendments made by section 4102(a) of the Health Security Act''.

    SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR
                  INPATIENT HOSPITAL SERVICES.

        (a) PPS Hospitals.--
                (1) Reduction in base payment rates.--Section 1886(g)(1)(A)
            (42 U.S.C. 1395ww(g)(1)(A)), as amended by section 13501(a)(3)
            of OBRA-1993, is amended by adding at the end the following new
            sentence: ``In addition to the reduction described in the
            preceding sentence, for discharges occurring after September
            30, 1995, the Secretary shall reduce by 7.31 percent the
            unadjusted standard Federal capital payment rate (as described
            in 42 CFR 412.308(c), as in effect on the date of the enactment
            of the Health Security Act) and shall reduce by 10.41 percent
            the unadjusted hospital-specific rate (as described in 42 CFR
            412.328(e)(1), as in effect on the date of the enactment of the
            Health Security Act).''.
                (2) Reduction in update.--Section 1886(g)(1) (42 U.S.C.
            1395ww(g)(1)) is amended--
                        (A) in subparagraph (B)(i)--
                                (i) by striking ``and (II)'' and inserting
                            ``(II)'', and
                                (ii) by striking the semicolon at the end
                            and inserting the following: ``, and (III) an
                            annual update factor established for the
                            prospective payment rates applicable to
                            discharges in a fiscal year which (subject to
                            reduction under subparagraph (C)) will be based
                            upon such factor as the Secretary determines
                            appropriate to take into account amounts
                            necessary for the efficient and effective
                            delivery of medically appropriate and necessary
                            care of high quality;'';
                        (B) by redesignating subparagraph (C) as
                    subparagraph (D); and
                        (C) by inserting after subparagraph (B) the
                    following new subparagraph:
                ``(C)(i) With respect to payments attributable to portions
            of cost reporting periods or discharges occurring during each
            of the fiscal years 1996 through 2003, the Secretary shall
            include a reduction in the annual update factor established
            under subparagraph (B)(i)(III) for discharges in the year equal
            to the applicable update reduction described in clause (ii) to
            adjust for excessive increases in capital costs per discharge
            for fiscal years prior to fiscal year 1992 (but in no event may
            such reduction result in an annual update factor less than
            zero).
                ``(ii) In clause (i), the term `applicable update
            reduction' means, with respect to the update factor for a
            fiscal year--
                        ``(I) 4.9 percentage points; or
                        ``(II) if the annual update factor for the previous
                    fiscal year was less than the applicable update
                    reduction for the previous year, the sum of 4.9
                    percentage points and the difference between the annual
                    update factor for the previous year and the applicable
                    update reduction for the previous year.''.
        (b) PPS-Exempt Hospitals.--Section 1861(v)(1) (42 U.S.C.
    1395x(v)(1)), as amended by section 4051(c)(2), is further amended by
    adding at the end the following new subparagraph:
        ``(U) Such regulations shall provide that, in determining the
    amount of the payments that may be made under this title with respect
    to the capital-related costs of inpatient hospital services furnished
    by a hospital that is not a subsection (d) hospital (as defined in
    section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as
    defined in section 1886(d)(9)(A)), the Secretary shall reduce the
    amounts of such payments otherwise established under this title by 15
    percent for payments attributable to portions of cost reporting periods
    occurring during each of the fiscal years 1996 through 2003.''.

    SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE SHARE
                  HOSPITALS IN PARTICIPATING STATES.

        (a) Application of Alternative Adjustments.--Section 1886(d)(5) (42
    U.S.C. 1395ww(d)(5)) is amended--
                (1) by redesignating subparagraphs (H) and (I) as
            subparagraphs (I) and (J); and
                (2) by inserting after subparagraph (G) the following new
            subparagraph:
        ``(H)(i) In accordance with this subparagraph, the Secretary shall
    provide for an additional payment for each subsection (d) hospital that
    is located in a participating State under the Health Security Act
    during a cost reporting period and that meets the eligibility
    requirements described in clause (iii).
        ``(ii) The amount of the additional payment made under clause (i)
    for each discharge shall be determined by multiplying--
                ``(I) the sum of the amount determined under paragraph
            (1)(A)(ii)(II) (or, if applicable, the amount determined under
            paragraph (1)(A)(iii)) and the amount paid to the hospital
            under subparagraph (A) for the discharge, by
                ``(II) the SSI adjustment percentage for the cost reporting
            period in which the discharge occurs (as defined in clause
            (iv)).
        ``(iii) A hospital meets the eligibility requirements described in
    this clause with respect to a cost reporting period if--
                ``(I) in the case of a hospital that is located in an urban
            area and that has more than 100 beds, the hospital's SSI
            patient percentage (as defined in clause (v)) for the cost
            reporting period is not less than 5.5 percent;
                ``(II) in the case of a hospital that is located in an
            urban area and that has less than 100 beds, the hospital's SSI
            patient percentage is not less than 17 percent;
                ``(III) in the case of a hospital that is classified as a
            rural referral center under subparagraph (C) or a sole
            community hospital under subparagraph (D), the hospital's SSI
            patient percentage for the cost reporting period is not less
            than 23 percent; and
                ``(IV) in the case of any other hospital, the hospital's
            SSI patient percentage is not less than 23 percent.
        ``(iv) For purposes of clause (ii), the `SSI adjustment percentage'
    applicable to a hospital for a cost reporting period is equal to--
                ``(I) in the case of a hospital described in clause
            (iii)(I), the percentage determined in accordance with the
            following formula: e to the nth power - 1, where `e' is the
            natural antilog of 1 and where `n' is equal to (.5642 * (the
            hospital's SSI patient percentage for the cost reporting period
            - .055));
                ``(II) in the case of a hospital described in clause
            (iii)(II) or clause (iii)(IV), 2 percent; and
                ``(III) in the case of a hospital described in clause
            (iii)(III), the sum of 2 percent and .30 percent of the
            difference between the hospital's SSI patient percentage for
            the cost reporting period and 23 percent.
        ``(v) In this subparagraph, a hospital's `SSI patient percentage'
    with respect to a cost reporting period is equal to the fraction
    (expressed as a percentage)--
                ``(I) the numerator of which is the number of the
            hospital's patient days for such period which were made up of
            patients who (for such days) were entitled to benefits under
            part A and were entitled to supplementary security income
            benefits (excluding State supplementation) under title XVI; and
                ``(II) the denominator of which is the number of the
            hospital's patient days for such period which were made up of
            patients who (for such days) were entitled to benefits under
            part A.''.
        (b) No Standardization Resulting From Reduction.--Section
    1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended--
                (1) by striking ``exclude additional payments'' and
            inserting ``adjust such estimate for changes in payments'';
                (2) by striking ``1989 or'' and inserting ``1989,''; and
                (3) by striking the period at the end and inserting the
            following: ``, or the enactment of section 4104 of the Health
            Security Act.''.
        (c) Conforming Amendment.--Section 1886(d)(5)(F)(i) (42 U.S.C.
    1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause (I) by
    inserting after ``hospital'' the following: ``that is not located in a
    State that is a participating State under the Health Security Act''.

    SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE
                  HOSPITALS.

        Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social
    Security Act, a hospital which has an average inpatient length of stay
    (as determined by the Secretary of Health and Human Services) of
    greater than 25 days shall not be treated as a hospital described in
    such clause for purposes of title XVIII of such Act unless the hospital
    was treated as a hospital described in such clause for purposes of such
    title as of the date of the enactment of this Act.

    SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COSTS OF
                  SKILLED NURSING FACILITIES.

        (a) Payments Based on Cost Limits.--Section 1888(a) (42 U.S.C.
    1395yy(a)) is amended by striking ``112 percent'' each place it appears
    and inserting ``100 percent (adjusted by such amount as the Secretary
    determines to be necessary to preserve the savings resulting from the
    enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation
    Act of 1993)''.
        (b) Payments Determined on Prospective Basis.--Section
    1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105
    percent'' and inserting ``100 percent (adjusted by such amount as the
    Secretary determines to be necessary to preserve the savings resulting
    from the enactment of section 13503(b) of the Omnibus Budget
    Reconciliation Act of 1993)''.
        (c) Effective Date.--The amendments made by subsections (a) and (b)
    shall apply to cost reporting periods beginning on or after October 1,
    1995.

                       PART 2--SAVINGS RELATING TO PART B

    SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN
                  SERVICES.

        (a) Use of Cumulative Performance Standard.--Section 1848(f)(2) (42
    U.S.C. 1395w-4(f)(2)) is amended--
                (1) in subparagraph (A)--
                        (A) in the heading, by striking ``In general'' and
                    inserting ``Fiscal years 1991 through 1994.--'',
                        (B) in the matter preceding clause (i), by striking
                    ``a fiscal year (beginning with fiscal year 1991)'' and
                    inserting ``fiscal years 1991, 1992, 1993, and 1994'',
                    and
                        (C) in the matter following clause (iv), by
                    striking ``subparagraph (B)'' and inserting
                    ``subparagraph (C)'';
                (2) in subparagraph (B), by striking ``subparagraph (A)''
            and inserting ``subparagraphs (A) and (B)'';
                (3) by redesignating subparagraphs (B) and (C) as
            subparagraphs (C) and (D); and
                (4) by inserting after subparagraph (A) the following new
            subparagraph:
                        ``(B) Fiscal years beginning with fiscal year
                    1995.--Unless Congress otherwise provides, the
                    performance standard rate of increase, for all
                    physicians' services and for each category of
                    physicians' services, for a fiscal year beginning with
                    fiscal year 1995 shall be equal to the performance
                    standard rate of increase determined under this
                    paragraph for the previous fiscal year, increased by
                    the product of--
                                ``(i) 1 plus the Secretary's estimate of
                            the weighted average percentage increase
                            (divided by 100) in the fees for all
                            physicians' services or for the category of
                            physicians' services, respectively, under this
                            part for portions of calendar years included in
                            the fiscal year involved,
                                ``(ii) 1 plus the Secretary's estimate of
                            the percentage increase or decrease (divided by
                            100) in the average number of individuals
                            enrolled under this part (other than HMO
                            enrollees) from the previous fiscal year to the
                            fiscal year involved,
                                ``(iii) 1 plus the Secretary's estimate of
                            the average annual percentage growth (divided
                            by 100) in volume and intensity of all
                            physicians' services or of the category of
                            physicians' services, respectively, under this
                            part for the 5-fiscal-year period ending with
                            the preceding fiscal year (based upon
                            information contained in the most recent annual
                            report made pursuant to section 1841(b)(2)),
                            and
                                ``(iv) 1 plus the Secretary's estimate of
                            the percentage increase or decrease (divided by
                            100) in expenditures for all physicians'
                            services or of the category of physicians'
                            services, respectively, in the fiscal year
                            (compared with the previous fiscal year) which
                            are estimated to result from changes in law or
                            regulations affecting the percentage increase
                            described in clause (i) and which is not taken
                            into account in the percentage increase
                            described in clause (i),
                    minus 1, multiplied by 100, and reduced by the
                    performance standard factor (specified in subparagraph
                    (C)).''.
        (b) Treatment of Default Update.--
                (1) In general.--Section 1848(d)(3)(B) (42 U.S.C. 1395w-
            4(d)(3)(B)) is amended--
                        (A) in clause (i)--
                                (i) in the heading, by striking ``In
                            general'' and inserting ``1992 through 1996'',
                            and
                                (ii) by striking ``for a year'' and
                            inserting ``for 1992, 1993, 1994, 1995, and
                            1996''; and
                        (B) by adding after clause (ii) the following new
                    clause:
                                ``(iii) Years beginning with 1997.--
                                        ``(I) In general.--The update for a
                                    category of physicians' services for a
                                    year beginning with 1997 provided under
                                    subparagraph (A) shall be increased or
                                    decreased by the same percentage by
                                    which the cumulative percentage
                                    increase in actual expenditures for
                                    such category of physicians' services
                                    for such year was less or greater,
                                    respectively, than the performance
                                    standard rate of increase (established
                                    under subsection (f)) for such category
                                    of services for such year.
                                        ``(II) Cumulative percentage
                                    increase defined.--In subclause (I),
                                    the `cumulative percentage increase in
                                    actual expenditures' for a year shall
                                    be equal to the product of the adjusted
                                    increases for each year beginning with
                                    1995 up to and including the year
                                    involved, minus 1 and multiplied by
                                    100. In the previous sentence, the
                                    `adjusted increase' for a year is equal
                                    to 1 plus the percentage increase in
                                    actual expenditures for the year.''.
                (2) Conforming amendment.--Section 1848(d)(3)(A)(i) (42
            U.S.C. 1395w-4(d)(3)(A)(i)) is amended by striking
            ``subparagraph (B)'' and inserting ``subparagraphs (B) and
            (C)''.

    SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; REPEAL
                  OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT
                  UPDATE.

        (a) Use of Real GDP to Adjust for Volume and Intensity.--Section
    1848(f)(2)(B)(iii) (42 U.S.C. 1395w-4(f)(2)(B)(iii)), as added by
    section 4111(a), is amended to read as follows:
                                ``(iii) 1 plus the average per capita
                            growth in the real gross domestic product
                            (divided by 100) for the 5-fiscal-year period
                            ending with the previous fiscal year (increased
                            by 1.5 percentage points for the category of
                            services consisting of primary care services),
                            and''.
        (b) Repeal of Restriction on Maximum Reduction.--Section
    1848(d)(3)(B)(ii) (42 U.S.C. 1395w-4(d)(3)(B)(ii)), as amended by
    section 13512(b) of OBRA-1993, is amended--
                (1) in the heading, by inserting ``in certain years'' after
            ``adjustment'';
                (2) in the matter preceding subclause (I), by striking
            ``for a year'';
                (3) in subclause (I), by adding ``and'' at the end;
                (4) in subclause (II), by striking ``, and'' and inserting
            a period; and
                (5) by striking subclause (III).
        (c) Repeal of Performance Standard Factor.--
                (1) In general.--Section 1842(f)(2), as amended by section
            4111(a)(3), is amended by striking subparagraph (C) and
            redesignating subparagraph (D) as subparagraph (C).
                (2) Conforming amendment.--Section 1842(f)(2)(B), as added
            by section 4111(a), is amended in the matter following clause
            (iv) by striking ``1, multiplied by 100'' and all that follows
            through ``subparagraph (C))'' and inserting ``1 and multiplied
            by 100''.

    SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE
                  FOR 1995.

        Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is amended--
                (1) in subparagraph (A), by inserting after ``subparagraph
            (B)'' the following: ``, and, in the case of 1995, specified in
            subparagraph (C)'';
                (2) by redesignating subparagraph (C) as subparagraph (D);
            and
                (3) by inserting after subparagraph (B) the following new
            subparagraph:
                        ``(C) Special provision for 1995.--For purposes of
                    subparagraph (A), the conversion factor specified in
                    this subparagraph for 1995 is--
                                ``(i) in the case of physicians' services
                            included in the category of primary care
                            services (as defined in subsection (j)(1)), the
                            conversion factor established under this
                            subsection for 1994 adjusted by the update
                            established under paragraph (3) for 1995; and
                                ``(ii) in the case of any other physicians'
                            services, the conversion factor established
                            under this subsection for 1994 reduced by 3
                            percent and adjusted by the update established
                            under paragraph (3) for 1995.''.

    SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY
                  HIGH-COST HOSPITAL MEDICAL STAFFS.

        (a) In General.--
                (1) Limitations described.--Part B of title XVIII, as
            amended by section 2003(a), is amended by inserting after
            section 1848 the following new section:

      ``limitations on payment for physicians' services furnished by high-
                          cost hospital medical staffs

        ``Sec. 1849. (a) Services Subject to Reduction.--
                ``(1) Determination of hospital-specific per admission
            relative value.--Not later than October 1 of each year
            (beginning with 1997), the Secretary shall determine for each
            hospital--
                        ``(A) the hospital-specific per admission relative
                    value under subsection (b)(2) for the following year;
                    and
                        ``(B) whether such hospital-specific relative value
                    is projected to exceed the allowable average per
                    admission relative value applicable to the hospital for
                    the following year under subsection (b)(1).
                ``(2) Reduction for services at hospitals exceeding
            allowable average per admission relative value.--If the
            Secretary determines (under paragraph (1)) that a medical
            staff's hospital-specific per admission relative value for a
            year (beginning with 1998) is projected to exceed the allowable
            average per admission relative value applicable to the medical
            staff for the year, the Secretary shall reduce (in accordance
            with subsection (c)) the amount of payment otherwise determined
            under this part for each physician's service furnished during
            the year to an inpatient of the hospital by an individual who
            is a member of the hospital's medical staff.
                ``(3) Timing of determination; notice to hospitals and
            carriers.--Not later than October 1 of each year (beginning
            with 1997), the Secretary shall notify the medical executive
            committee of each hospital (as set forth in the Standards of
            the Joint Commission on the Accreditation of Health
            Organizations) of the determinations made with respect to the
            medical staff under paragraph (1).
        ``(b) Determination of Allowable Average Per Admission Relative
    Value and Hospital-Specific Per Admission Relative Values.--
                ``(1) Allowable average per admission relative value.--
                        ``(A) Urban hospitals.--In the case of a hospital
                    located in an urban area, the allowable average per
                    admission relative value established under this
                    subsection for a year is equal to 125 percent (or 120
                    percent for years after 1999) of the median of 1996
                    hospital-specific per admission relative values
                    determined under paragraph (2) for all hospital medical
                    staffs.
                        ``(B) Rural hospitals.--In the case of a hospital
                    located in a rural area, the allowable average per
                    admission relative value established under this
                    subsection for 1998 and each succeeding year, is equal
                    to 140 percent of the median of the 1996 hospital-
                    specific per admission relative values determined under
                    paragraph (2) for all hospital medical staffs.
                ``(2) Hospital-specific per admission relative value.--
                        ``(A) In general.--The hospital-specific per
                    admission relative value projected for a hospital
                    (other than a teaching hospital) for a calendar year,
                    shall be equal to the average per admission relative
                    value (as determined under section 1848(c)(2)) for
                    physicians' services furnished to inpatients of the
                    hospital by the hospital's medical staff (excluding
                    interns and residents) during the second year preceding
                    such calendar year, adjusted for variations in case-mix
                    and disproportionate share status among hospitals (as
                    determined by the Secretary under subparagraph (C)).
                        ``(B) Special rule for teaching hospitals.--The
                    hospital-specific relative value projected for a
                    teaching hospital in a calendar year shall be equal to
                    the sum of--
                                ``(i) the average per admission relative
                            value (as determined under section 1848(c)(2))
                            for physicians' services furnished to
                            inpatients of the hospital by the hospital's
                            medical staff (excluding interns and residents)
                            during the second year preceding such calendar
                            year; and
                                ``(ii) the equivalent per admission
                            relative value (as determined under section
                            1848(c)(2)) for physicians' services furnished
                            to inpatients of the hospital by interns and
                            residents of the hospital during the second
                            year preceding such calendar year, adjusted for
                            variations in case-mix, disproportionate share
                            status, and teaching status among hospitals (as
                            determined by the Secretary under subparagraph
                            (C)). The Secretary shall determine such
                            equivalent relative value unit per admission
                            for interns and residents based on the best
                            available data for teaching hospitals and may
                            make such adjustment in the aggregate.
                        ``(C) Adjustment for teaching and disproportionate
                    share hospitals.--The Secretary shall adjust the
                    allowable per admission relative values otherwise
                    determined under this paragraph to take into account
                    the needs of teaching hospitals and hospitals receiving
                    additional payments under subparagraphs (F) and (G) of
                    section 1886(d)(5). The adjustment for teaching status
                    or disproportionate share shall not be less than zero.
        ``(c) Amount of Reduction.--The amount of payment otherwise made
    under this part for a physician's service that is subject to a
    reduction under subsection (a) during a year shall be reduced 15
    percent, in the case of a service furnished by a member of the medical
    staff of the hospital for which the Secretary determines under
    subsection (a)(1) that the hospital medical staff's projected relative
    value per admission exceeds the allowable average per admission
    relative value.
        ``(d) Reconciliation of Reductions Based on Hospital-Specific
    Relative Value Per Admission With Actual Relative Values.--
                ``(1) Determination of actual average per admission
            relative value.--Not later than October 1 of each year
            (beginning with 1999), the Secretary shall determine the actual
            average per admission relative value (as determined pursuant to
            section 1848(c)(2)) for the physicians' services furnished by
            members of a hospital's medical staff to inpatients of the
            hospital during the previous year, on the basis of claims for
            payment for such services that are submitted to the Secretary
            not later than 90 days after the last day of such previous
            year. The actual average per admission shall be adjusted by the
            appropriate case-mix, disproportionate share factor, and
            teaching factor for the hospital medical staff (as determined
            by the Secretary under subsection (b)(2)(C)). Notwithstanding
            any other provision of this title, no payment may be made under
            this part for any physician's service furnished by a member of
            a hospital's medical staff to an inpatient of the hospital
            during a year unless the hospital submits a claim to the
            Secretary for payment for such service not later than 90 days
            after the last day of the year.
                ``(2) Reconciliation with reductions taken.--In the case of
            a hospital for which the payment amounts for physicians'
            services furnished by members of the hospital's medical staff
            to inpatients of the hospital were reduced under this section
            for a year--
                        ``(A) if the actual average per admission relative
                    value for such hospital's medical staff during the year
                    (as determined by the Secretary under paragraph (1))
                    did not exceed the allowable average per admission
                    relative value applicable to the hospital's medical
                    staff under subsection (b)(1) for the year, the
                    Secretary shall reimburse the fiduciary agent for the
                    medical staff by the amount by which payments for such
                    services were reduced for the year under subsection
                    (c), including interest at an appropriate rate
                    determined by the Secretary;
                        ``(B) if the actual average per admission relative
                    value for such hospital's medical staff during the year
                    is less than 15 percentage points above the allowable
                    average per admission relative value applicable to the
                    hospital's medical staff under subsection (b)(1) for
                    the year, the Secretary shall reimburse the fiduciary
                    agent for the medical staff, as a percent of the total
                    allowed charges for physicians' services performed in
                    such hospital (prior to the withhold), the difference
                    between 15 percentage points and the actual number of
                    percentage points that the staff exceeds the limit
                    allowable average per admission relative value,
                    including interest at an appropriate rate determined by
                    the Secretary; and
                        ``(C) if the actual average per admission relative
                    value for such hospital's medical staff during the year
                    exceeded the allowable average per admission relative
                    value applicable to the hospital's medical staff by 15
                    percentage points or more, none of the withhold is paid
                    to the fiduciary agent for the medical staff.
                ``(3) Medical executive committee of a hospital.--Each
            medical executive committee of a hospital whose medical staff
            is projected to exceed the allowable relative value per
            admission for a year, shall have one year from the date of
            notification that such medical staff is projected to exceed the
            allowable relative value per admission to designate a fiduciary
            agent for the medical staff to receive and disburse any
            appropriate withhold amount made by the carrier.
                ``(4) Alternative reimbursement to members of staff.--At
            the request of a fiduciary agent for the medical staff, if the
            fiduciary agent for the medical staff is owed the reimbursement
            described in paragraph (2)(B) for excess reductions in payments
            during a year, the Secretary shall make such reimbursement to
            the members of the hospital's medical staff, on a pro-rata
            basis according to the proportion of physicians' services
            furnished to inpatients of the hospital during the year that
            were furnished by each member of the medical staff.
        ``(e) Definitions.--In this section, the following definitions
    apply:
                ``(1) Medical staff.--An individual furnishing a
            physician's service is considered to be on the medical staff of
            a hospital--
                        ``(A) if (in accordance with requirements for
                    hospitals established by the Joint Commission on
                    Accreditation of Health Organizations)--
                                ``(i) the individual is subject to bylaws,
                            rules, and regulations established by the
                            hospital to provide a framework for the self-
                            governance of medical staff activities;
                                ``(ii) subject to such bylaws, rules, and
                            regulations, the individual has clinical
                            privileges granted by the hospital's governing
                            body; and
                                ``(iii) under such clinical privileges, the
                            individual may provide physicians' services
                            independently within the scope of the
                            individual's clinical privileges, or
                        ``(B) if such physician provides at least one
                    service to a medicare beneficiary in such hospital.
                ``(2) Rural area; urban area.--The terms `rural area' and
            `urban area' have the meaning given such terms under section
            1886(d)(2)(D).
                ``(3) Teaching hospital.--The term `teaching hospital'
            means a hospital which has a teaching program approved as
            specified in section 1861(b)(6).''.
                (2) Conforming amendments.--(A) Section 1833(a)(1)(N) (42
            U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to
            reduction under section 1849)'' after ``1848(a)(1)''.
                (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w-4(a)(1)(B)) is
            amended by striking ``this subsection,'' and inserting ``this
            subsection and section 1849,''.
        (b) Requiring Physicians To Identify Hospital at Which Service
    Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w-4(g)(4)(A)(i)) is
    amended by striking ``beneficiary,'' and inserting ``beneficiary (and,
    in the case of a service furnished to an inpatient of a hospital,
    report the hospital identification number on such claim form),''.
        (c) Effective Date.--The amendments made by this section shall
    apply to services furnished on or after January 1, 1998.

    SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO PROVIDE PRIMARY CARE.

        (a) Resource-Based Practice Expense Relative Value Units.--
                (1) Increase in practice expense relative value units for
            certain services.--Section 1848(c)(2) (42 U.S.C. 1395w-
            4(c)(2)), as amended by sections 13513 and 13514 of OBRA-93, is
            amended by adding at the end the following new subparagraph:
                        ``(G) Increase in practice expense relative value
                    units for certain services.--The Secretary shall
                    increase the practice expense relative value units
                    applied in primary care services, as defined in section
                    1842(i)(4), by 10 percent, beginning with 1996.''.
                (2) Assuring budget neutrality.--Section 1842(c)(2)(F) (42
            U.S.C. 1395u(c)(2)(F)), as added by section 13513 and amended
            by section 13514 of OBRA-93, is amended by adding at the end
            the following new clause:
                                ``(iii) shall reduce the relative values
                            for all services (other than anesthesia
                            services and primary care services, as defined
                            in section 1842(i)(4)) established under this
                            paragraph (and, in the case of anesthesia
                            services, the conversion factor established by
                            the Secretary for such services) by such
                            percentage as the Secretary determines to be
                            necessary so that, beginning in 1996, the
                            amendment made by section 4115(a)(1) of the
                            Health Security Act would not result in
                            expenditures under this section that exceed the
                            amount of such expenditures that would have
                            been made if such amendment had not been
                            made.''.
                (3) Study.--The Secretary of Health and Human Services
            shall--
                        (A) develop a methodology for implementing in 1997
                    a resource-based system for determining practice
                    expense relative values unit for each physician's
                    service, and
                        (B) transmit a report by June 30, 1996, on the
                    methodology developed under paragraph (1) to the
                    Committees on Ways and Means and Energy and Commerce of
                    the House of Representatives and the Committee on
                    Finance of the Senate. The reported shall include a
                    presentation of the data utilized in developing the
                    methodology and an explanation of the methodology.
        (b) Office Visit Pre- and Post-Time.--
                (1) Increase in work relative value units for office
            visits.--Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)), as
            amended by subsection (a)(1), is amended by adding at the end
            the following new subparagraph:
                        ``(H) Increase in work relative value units for
                    certain services.--The Secretary shall increase the
                    work relative value units applied to office visits by
                    10 percent, beginning with 1996.''.
                (2) Assuring budget neutrality.--Section 1842(c)(2)(F)(iii)
            (42 U.S.C. 1395u(c)(2)(F)(iii)), as added by subsection (a)(2),
            is amended by striking ``section 4115(a)(1)'' and substituting
            ``sections 4115(a)(1) and (b)(1)''.
        (c) Office Consultations.--Section 1848(c)(2) (42 U.S.C. 1395w-
    4(c)(2)), as amended by subsections (a)(1) and (b)(1), is amended by
    adding at the end the following new subparagraph:
                        ``(I) Amendment in relative values for office
                    consultations.--The Secretary shall reduce the work,
                    practice expense and malpractice relative value
                    components of office consultations to be equal to the
                    work, practice expense and malpractice relative value
                    components for comparable office visits beginning with
                    1996. In making such adjustment, the Secretary shall
                    apply the savings from such reduction to increase each
                    of the relative value components for office visits in a
                    manner that would not result in expenditures under this
                    section that exceed the amount of such expenditures
                    that would have been made if such amendment had not
                    been made.''.
        (d) Outlier Intensity Relative Value Adjustments.--
                (1) Adjustment of outlier intensity of relative values.--
            Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)), as amended by
            subsections (a)(1), (b)(1), and (c), is amended by adding at
            the end the following new subparagraph:
                        ``(J) Adjustment of outlier intensity of relative
                    values.--Beginning with 1996, the Secretary shall
                    reduce the work relative value components of
                    procedures, or classes of procedures, where the
                    intensity exceeds thresholds established by the
                    Secretary. In the previous sentence, intensity shall
                    mean the work relative value units for the procedure
                    divided by the time for the procedure. The Secretary
                    shall apply the savings from such reductions to
                    increase the work relative value components of primary
                    care services, as defined in section 1842(i)(4), such
                    that the changes made by this subsection would not
                    result in expenditures under this section that exceed
                    the amount of such expenditures that would have been
                    made if such amendment had not been made.''.
        (e) Changes In Underserved Area Bonus Payments.--
                (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is
            amended--
                        (A) by striking ``10 percent'' and inserting ``a
                    percent'',
                        (B) by striking ``service'' the last place it
                    appears and inserting ``services'', and
                        (C) by adding the following new sentence: ``The
                    percent referred to in the previous sentence is 20
                    percent in the case of primary care services, as
                    defined in section 1842(i)(4), and 10 percent for
                    services other than primary care services furnished in
                    health professional shortage areas located in rural
                    areas as defined in section 1886(d)(2)(D).''.
                (2) The amendments made by paragraph (1) are effective for
            services furnished on or after January 1, 1996.

    SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN
                  OUTPATIENT HOSPITAL SERVICES.

        (a) Ambulatory Surgical Center Procedures.--Section
    1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
                (1) by striking ``of 80 percent''; and
                (2) by striking the period at the end and inserting the
            following: ``, less the amount a provider may charge as
            described in clause (ii) of section 1866(a)(2)(A).''.
        (b) Radiology Services and Diagnostic Procedures.--Section
    1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
                (1) by striking ``of 80 percent''; and
                (2) by striking the period at the end and inserting the
            following: ``, less the amount a provider may charge as
            described in clause (ii) of section 1866(a)(2)(A).''.
        (c) Effective Date.--The amendments made by this section shall
    apply to services furnished during portions of cost reporting periods
    occurring on or after July 1, 1994.

    SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

        (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a)
    (42 U.S.C. 1395l(a)) are each amended--
                (1) by striking ``(or 100 percent'' and all that follows
            through ``the first opinion))''; and
                (2) by striking ``100 percent of such negotiated rate'' and
            inserting ``80 percent of such negotiated rate''.
        (b) Effective Date.--The amendments made by subsection (a) shall
    apply to tests furnished on or after January 1, 1995.

    SEC. 4118. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR PART B
                  ITEMS AND SERVICES.

        (a) General Rule.--Part B of title XVIII of the Social Security Act
    is amended by inserting after section 1846 the following:

                ``competition acquisition for items and services

        ``Sec. 1847. (a) Establishment of Bidding Areas.--
                ``(1) In general.--The Secretary shall establish
            competitive acquisition areas for the purpose of awarding a
            contract or contracts for the furnishing under this part of the
            items and services described in subsection (c) on or after
            January 1, 1995. The Secretary may establish different
            competitive acquisition areas under this subsection for
            different classes of items and services under this part.
                ``(2) Criteria for establishment.--The competitive
            acquisition areas established under paragraph (1) shall--
                        ``(A) initially be, or be within, metropolitan
                    statistical areas; and
                        ``(B) be chosen based on the availability and
                    accessibility of suppliers and the probable savings to
                    be realized by the use of competitive bidding in the
                    furnishing of items and services in the area.
        ``(b) Awarding of Contracts in Areas.--
                ``(1) In general.--The Secretary shall conduct a
            competition among individuals and entities supplying items and
            services under this part for each competitive acquisition area
            established under subsection (a) for each class of items and
            services.
                ``(2) Conditions for awarding contract.--The Secretary may
            not award a contract to any individual or entity under the
            competition conducted pursuant to paragraph (1) to furnish an
            item or service under this part unless the Secretary finds that
            the individual or entity--
                        ``(A) meets quality standards specified by the
                    Secretary for the furnishing of such item or service;
                    and
                        ``(B) offers to furnish a total quantity of such
                    item or service that is sufficient to meet the expected
                    need within the competitive acquisition area.
                ``(3) Contents of contract.--A contract entered into with
            an individual or entity under the competition conducted
            pursuant to paragraph (1) shall specify (for all of the items
            and services within a class)--
                        ``(A) the quantity of items and services the entity
                    shall provide; and
                        ``(B) such other terms and conditions as the
                    Secretary may require.
        ``(c) Services Described.--The items and services to which the
    provisions of this section shall apply are as follows:
                ``(1) Magnetic resonance imaging tests and computerized
            axial tomography scans, including a physician's interpretation
            of the results of such tests and scans.
                ``(2) Oxygen and oxygen equipment.
                ``(3) Such other items and services for which the Secretary
            determines that the use of competitive acquisition under this
            section will be appropriate and cost-effective.''.
        (b) Items and Services To Be Furnished Only Through Competitive
    Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
    section 4034(b)(4), is amended--
                (1) by striking ``or'' at the end of paragraph (14);
                (2) by striking the period at the end of paragraph (15) and
            inserting ``; or''; and
                (3) by inserting after paragraph (15) the following new
            paragraph:
                ``(16) where such expenses are for an item or service
            furnished in a competitive acquisition area (as established by
            the Secretary under section 1847(a)) by an individual or entity
            other than the supplier with whom the Secretary has entered
            into a contract under section 1847(b) for the furnishing of
            such item or service in that area, unless the Secretary finds
            that such expenses were incurred in a case of urgent need.''.
        (c) Reduction in Payment Amounts if Competitive Acquisition Fails
    to Achieve Minimum Reduction in Payments.--Notwithstanding any other
    provision of title XVIII of the Social Security Act, if the
    establishment of competitive acquisition areas under section 1847 of
    such Act (as added by subsection (a)) and the limitation of coverage
    for items and services under part B of such title to items and services
    furnished by providers with competitive acquisition contracts under
    such section does not result in a reduction of at least 10 percent in
    the projected payment amount that would have applied to the item or
    service under part B if the item or service had not been furnished
    through competitive acquisition under such section, the Secretary shall
    reduce the payment amount by such percentage as the Secretary
    determines necessary to result in such a reduction.
        (d) Effective Date.--The amendments made by this section shall
    apply to items and services furnished under part B of title XVIII of
    the Social Security Act on or after January 1, 1995.

    SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR
                  LABORATORY SERVICES.

        (a) In General.--Section 1847(c), as added by section 4118, is
    amended--
                (1) by redesignating paragraph (4) as paragraph (5); and
                (2) by inserting after paragraph (3) the following new
            paragraph:
                ``(4) Clinical diagnostic laboratory tests.''.
        (b) Reduction in Fee Schedule Amounts if Competitive Acquisition
    Fails to Achieve Savings.--Section 1833(h) (42 U.S.C. 1395l(h)) is
    amended by adding at the end the following new paragraph:
        ``(7) Notwithstanding any other provision of this subsection, if
    the Secretary applies the authority provided under section 1847 to
    establish competitive acquisition areas for the furnishing of clinical
    diagnostic laboratory tests in a year and the application of such
    authority does not result in a reduction of at least 10 percent in the
    projected payment amount that would have applied to such tests under
    this section if the tests had not been furnished through competitive
    acquisition under section 1847, the Secretary shall reduce each payment
    amount otherwise determined under the fee schedules and negotiated
    rates established under this subsection by such percentage as the
    Secretary determines necessary to result in such a reduction.''.

                   PART 3--SAVINGS RELATING TO PARTS A AND B

    SEC. 4131. MEDICARE SECONDARY PAYER CHANGES.

        (a) Extension of Data Match.--
                (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is
            amended by striking clause (iii).
                (2) Section 6103(l)(12) of the Internal Revenue Code of
            1986 is amended by striking subparagraph (F).
        (b) Repeal of Sunset on Application to Disabled Employees of
    Employers with More than 100 Employees.--Section 1862(b)(1)(B)(iii) (42
    U.S.C. 1395y(b)(1)(B)(iii)), as amended by section 13561(b) of OBRA-
    1993, is amended--
                (1) in the heading, by striking ``Sunset'' and inserting
            ``Effective date''; and
                (2) by striking ``, and before October 1, 1998''.
        (c) Extension of Period for End Stage Renal Disease
    Beneficiaries.--Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as
    amended by section 13561(c) of OBRA-1993, is amended in the second
    sentence by striking ``and on or before October 1, 1998,''.

    SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK-SHARING
                  CONTRACTS.

        (a) In General.--Section 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C))
    is amended--
                (1) by inserting ``, subject to adjustment to take into
            account the provisions of the succeeding clauses'' before the
            period,
                (2) by striking ``(C)'' and inserting ``(C)(i)'', and
                (3) by adding at the end the following new clauses:
        ``(ii) The portion of the annual per capita rate of payment for
    each such class attributable to payments made from the Federal
    Supplementary Medical Insurance Trust Fund may not exceed 95 percent of
    the following amount (unless the portion of the annual per capita rate
    of payment for each such class attributable to payments made from the
    Federal Hospital Insurance Trust Fund is less than 95 percent of the
    weighted national average of all adjusted average per capita costs
    determined under paragraph (4) for that class that are attributable to
    payments made from the Federal Hospital Insurance Trust Fund):
                ``(I) For 1995, 150 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 80 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 150 percent of that weighted national
            average.
                ``(II) For 1996, 150 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 60 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 150 percent of that weighted national
            average.
                ``(III) For 1997, 150 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 40 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 150 percent of that weighted national
            average.
                ``(IV) For 1998, 150 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 20 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 150 percent of that weighted national
            average.
                ``(V) For 1999 and each succeeding year (subject to the
            establishment by the Secretary of alternative limits under
            clause (vi)), 150 percent of the weighted national average of
            all adjusted average per capita costs determined under
            paragraph (4) for that class that are attributable to payments
            made from such Trust Fund.
        ``(iii) The portion of the annual per capita rate of payment for
    each such class attributable to payments made from the Federal Hospital
    Insurance Trust Fund may not exceed 95 percent of the following amount
    (unless the portion of the annual per capita rate of payment for each
    such class attributable to payments made from the Federal Supplementary
    Medical Insurance Trust Fund is less than 95 percent of the weighted
    national average of all adjusted average per capita costs determined
    under paragraph (4) for that class that are attributable to payments
    made from the Federal Supplementary Medical Insurance Trust Fund):
                ``(I) For 1995, 170 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 80 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 170 percent of that weighted national
            average.
                ``(II) For 1996, 170 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 60 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 170 percent of that weighted national
            average.
                ``(III) For 1997, 170 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 40 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 170 percent of that weighted national
            average.
                ``(IV) For 1998, 170 percent of the weighted national
            average of all adjusted average per capita costs determined
            under paragraph (4) for that class that are attributable to
            payments made from such Trust Fund, plus 20 percent of the
            amount by which (if any) the adjusted average per capita cost
            for that class exceeds 170 percent of that weighted national
            average.
                ``(V) For 1999 and each succeeding year (subject to the
            establishment by the Secretary of alternative limits under
            clause (vi)), 170 percent of the weighted national average of
            all adjusted average per capita costs determined under
            paragraph (4) for that class that are attributable to payments
            made from such Trust Fund.
        ``(iv) For 1995 and succeeding years, the portion of the annual per
    capita rate of payment for each such class attributable to payments
    made from the Federal Supplementary Medical Insurance Trust Fund may
    not be less than 80 percent of 95 percent of the weighted national
    average of all adjusted average per capita costs determined under
    paragraph (4) for that class that are attributable to payments made
    from such Trust Fund, unless the portion of the annual per capita rate
    of payment for each such class attributable to payments made from the
    Federal Hospital Insurance Trust Fund is greater than 95 percent of the
    weighted national average of all adjusted average per capita costs
    determined under paragraph (4) for that class that are attributable to
    payments made from the Federal Hospital Insurance Trust Fund.
        ``(v) For 1995 and succeeding years, the portion of the annual per
    capita rate of payment for each such class attributable to payments
    made from the Federal Hospital Insurance Trust Fund may not be less
    than 80 percent of 95 percent of the weighted national average of all
    adjusted average per capita costs determined under paragraph (4) for
    that class that are attributable to payments made from such Trust Fund,
    unless the portion of the annual per capita rate of payment for each
    such class attributable to payments made from the Federal Supplementary
    Medical Insurance Trust Fund is greater than 95 percent of the weighted
    national average of all adjusted average per capita costs determined
    under paragraph (4) for that class that are attributable to payments
    made from the Federal Supplementary Medical Insurance Trust Fund.
        ``(vi) For 2000 and succeeding years, the Secretary may revise any
    of the percentages otherwise applicable during a year under the
    preceding clauses (other than clause (i)), but only if the aggregate
    payments made under this title to eligible organizations under risk-
    sharing contracts during the year is not greater than the aggregate
    payments that would have been made under this title to such
    organizations during the year if the Secretary had not revised the
    percentages.
        ``(vii) For purposes of clauses (ii) through (v), in determining
    the weighed average of all adjusted average per capita costs determined
    under paragraph (4) for a class, the Secretary shall not take into
    account any costs associated with individuals entitled to benefits
    under this title under section 226A.''.
        (b) Conforming Amendment.--Section 1876(a)(5)(A) (42 U.S.C.
    1395mm(a)(5)(A)) is amended by inserting ``, adjusted to take into
    account the limitations imposed by clauses (ii) through (vi) of
    paragraph (1)(C)'' before the period.

    SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES.

        (a) Reduction in Update to Maintain Freeze in 1996.--Section
    1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
                (1) in subclause (II), by striking ``or'' at the end;
                (2) in subclause (III), by striking ``112 percent,'' and
            inserting ``and before July 1, 1996, 112 percent, or''; and
                (3) by inserting after subclause (III) the following new
            subclause:
                ``(IV) July 1, 1996, 100 percent (adjusted by such amount
            as the Secretary determines to be necessary to preserve the
            savings resulting from the enactment of section 13564(a)(1) of
            the Omnibus Budget Reconciliation Act of 1993),''.
        (b) Basing Limits in Subsequent Years on Median of Costs.--
                (1) In general.--Section 1861(v)(1)(L)(i) (U.S.C.
            1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in
            the matter following subclause (IV) by striking ``the mean''
            and inserting ``the median''.
                (2) Effective date.--The amendment made by paragraph (1)
            shall apply to cost reporting periods beginning on or after
            July 1, 1997.

    SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH VISITS.

        (a) In General.--
                (1) Part a.--Section 1813(a) (42 U.S.C. 1395e(a)) is
            amended by adding at the end the following new paragraph:
        ``(5) The amount payable for home health services furnished to an
    individual under this part shall be reduced by a copayment amount equal
    to 10 percent of the average of all per visit costs for home health
    services furnished under this title determined under section
    1861(v)(1)(L) (as determined by the Secretary on a prospective basis
    for services furnished during a calendar year), unless such services
    were furnished to the individual during the 30-day period that begins
    on the date the individual is discharged as an inpatient from a
    hospital.''.
                (2) Part b.--Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is
            amended--
                        (A) in subparagraph (A), by striking ``to home
                    health services,'' and by striking the comma after
                    ``opinion)'';
                        (B) in subparagraph (D), by striking ``and'' at the
                    end;
                        (C) in subparagraph (E), by striking the semicolon
                    at the end and inserting ``; and''; and
                        (D) by adding at the end the following new
                    subparagraph:
                        ``(F) with respect to home health services--
                                ``(i) the lesser of --
                                        ``(I) the reasonable cost of such
                                    services, as determined under section
                                    1861(v), or
                                        ``(II) the customary charges with
                                    respect to such services,
                            less the amount a provider may charge as
                            described in clause (ii) of section
                            1866(a)(2)(A),
                                ``(ii) if such services are furnished by a
                            public provider of services, or by another
                            provider which demonstrates to the satisfaction
                            of the Secretary that a significant portion of
                            its patients are low-income (and requests that
                            payment be made under this clause), free of
                            charge or at nominal charges to the public, the
                            amount determined in accordance with section
                            1814(b)(2), or
                                ``(iii) if (and for so long as) the
                            conditions described in section 1814(b)(3) are
                            met, the amounts determined under the
                            reimbursement system described in such section,
                    less a copayment amount equal to 10 percent of the
                    average of all per visit costs for home health services
                    furnished under this title determined under section
                    1861(v)(1)(L) (as determined by the Secretary on a
                    prospective basis for services furnished during a
                    calendar year), unless such services were furnished to
                    the individual during the 30-day period that begins on
                    the date the individual is discharged as an inpatient
                    from a hospital;''.
                (3) Provider charges.--Section 1866(a)(2)(A)(i) (42 U.S.C.
            1395cc(a)(2)(A)(i)) is amended--
                        (A) by striking ``deduction or coinsurance'' and
                    inserting ``deduction, coinsurance, or copayment''; and
                        (B) by striking ``or (a)(4)'' and inserting
                    ``(a)(4), or (a)(5)''.
        (b) Effective Date.--The amendments made by subsection (a) shall
    apply to home health services furnished on or after July 1, 1995.

    SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE.

        (a) In General.--The Secretary of Health and Human Services shall
    use a competitive process to contract with centers of excellence for
    cataract surgery, coronary artery by-pass surgery, and such other
    services as the Secretary determines to be appropriate. Payment under
    title XVIII of the Social Security Act will be made for services
    subject to such contracts on the basis of negotiated or all-inclusive
    rates as follows:
                (1) The center shall cover services provided in an urban
            area (as defined in section 1886(d)(2)(D) of the Social
            Security Act) for years beginning with fiscal year 1995.
                (2) The amount of payment made by the Secretary to the
            center under title XVIII of the Social Security Act for
            services covered under the project shall be less than the
            aggregate amount of the payments that the Secretary would have
            made to the center for such services had the project not been
            in effect.
                (3) The Secretary shall make payments to the center on such
            a basis for the following services furnished to individuals
            entitled to benefits under such title:
                        (A) Facility, professional, and related services
                    relating to cataract surgery.
                        (B) Coronary artery bypass surgery and related
                    services.
                        (C) Such other services as the Secretary and the
                    center may agree to cover under the agreement.
        (b) Rebate of Portion of Savings.--In the case of any services
    provided under a demonstration project conducted under subsection (a),
    the Secretary shall make a payment to each individual to whom such
    services are furnished (at such time and in such manner as the
    Secretary may provide) in an amount equal to 10 percent of the amount
    by which--
                (1) the amount of payment that would have been made by the
            Secretary under title XVIII of the Social Security Act to the
            center for such services if the services had not been provided
            under the project, exceeds
                (2) the amount of payment made by the Secretary under such
            title to the center for such services.

                             PART 4--PART B PREMIUM

    SEC. 4141. GENERAL PART B PREMIUM.

        Section 1839(e) (42 U.S.C. 1395r(e)), as amended by section 13571
    of OBRA-1993, is amended--
                (1) in paragraph (1)(A), by striking ``and prior to January
            1999''; and
                (2) in paragraph (2), by striking ``prior to January
            1998''.

     PART 5--REPORT ON MEDICARE SAVINGS FOR FISCAL YEARS 2000 THROUGH 2003

    SEC. 4151. REPORT ON SAVINGS.

        (a) In General.--The Secretary shall submit to Congress, by January
    30, 1999, a report that contains--
                (1) a determination of whether the average, annual rate of
            growth in spending under the medicare program (taking into
            account savings under this subtitle) in the 4-fiscal-year
            period beginning with fiscal year 2000 will exceed the rate of
            growth described in subsection (b); and
                (2) if so, recommendations as to how to achieve the rate of
            growth specified in subsection (b).
        (b) Rate of Growth Described.--The rate of growth described in this
    subsection is the sum of the following:
                (1) CPI.--The average annual percentage change in the CPI.
                (2) Medicare population.--The average, annual percentage
            change in the number of medicare-eligible individuals.
                (3) Real gdp per capita.--The average, annual percentage
            change in the real, per capita gross domestic product of the
            United States, and
                (4) 1 percent.--1 percentage point.

                                                       Title IV, Subtitle C

                              Subtitle C--Medicaid

                     PART 1--COMPREHENSIVE BENEFIT PACKAGE

    SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES
                  COVERED UNDER COMPREHENSIVE BENEFIT PACKAGE.

        (a) Removal of Comprehensive Benefits Package from State Plan.--
    Title XIX is amended by redesignating section 1931 as section 1932 and
    by inserting after section 1930 the following new section:

     ``treatment of comprehensive benefit package under health security act

        ``Sec. 1931. (a) Items and Services Covered Under Comprehensive
    Benefit Package.--If a State plan for medical assistance under this
    title provides for payment in accordance with section 1902(a)(63) for a
    year, notwithstanding any other provision of this title, the State plan
    under this title is not required to provide medical assistance
    consisting of payment for items and services in the comprehensive
    benefit package under subtitle B of title I of the Health Security Act
    for alliance eligible individuals (as defined in section 1902(5) of
    such Act).
        ``(b) Construction.--(1) Payment under section 1902(a)(63) shall
    not constitute medical assistance for purposes of section 1903(a).
        ``(2) This section shall not be construed as affecting the
    provision of medical assistance under this title for items and services
    included in the comprehensive benefit package for--
                ``(A) medicare-eligible individuals, or
                ``(B) certain emergency services to certain aliens under
            section 1903(v)(2).''.
        (b) Substitute Requirement of State Payment.--Section 1902(a) (42
    U.S.C. 1396a(a)), as amended by section 13631(a)(3) of OBRA-1993, is
    amended--
                (1) by striking ``and'' at the end of paragraph (61),
                (2) by striking the period at the end of paragraph (62) and
            inserting ``; and'', and
                (3) by inserting after paragraph (62) the following new
            paragraph:
                ``(63) provide for payment to regional alliances of the
            amounts required under subtitle A of title IX of the Health
            Security Act.''.
        (c) No Federal Financial Participation.--Section 1903(i) (42 U.S.C.
    1396b(i)), as amended by section 13631(h)(1)(C) of OBRA-1993, is
    amended--
                (1) by striking ``or'' at the end of paragraph (14),
                (2) by striking the period at the end of paragraph (15) and
            inserting ``; or'', and
                (3) by inserting after paragraph (15) the following new
            paragraph:
                ``(16) with respect to items and services covered under the
            comprehensive benefit package under subtitle B of title I of
            the Health Security Act for alliance eligible individuals (as
            defined in section 1902(5) of such Act).''.
        (d) Effective Date.--The amendments made by this section shall
    apply with respect to items or services furnished in a State on or
    after January 1 of the first year (as defined in section 1902(17)) for
    the State.

    PART 2--EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES; LONG-TERM
                            CARE INTEGRATION OPTION

    SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS.

        (a) In General.--Section 1902(a)(10)(A)(i) (42 U.S.C.
    1396a(a)(10)(A)(i)) is amended--
                (1) by striking ``or'' at the end of subclause (VI);
                (2) by striking the semicolon at the end of subclause (VII)
            and inserting ``, or''; and
                (3) by inserting after subclause (VII) the following new
            subclause:
                                        ``(VIII) who are individuals who
                                    would meet the income and resource
                                    requirements of the appropriate State
                                    plan described in subclause (I) or the
                                    supplemental security income program
                                    (as the case may be), if incurred
                                    expenses for medical care as recognized
                                    under State law were deducted from
                                    income;''.
        (b) Limitation to Benefits for Nursing Facility Services.--Section
    1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), as amended by section
    13603(c)(1) of OBRA-1993, is amended in the matter following
    subparagraph (F)--
                (1) by striking ``and (XIII)'' and inserting ``(XIII)'';
            and
                (2) by inserting before the semicolon at the end the
            following: ``, and (XIV) the medical assistance made available
            to an individual described in subparagraph (A)(i)(VIII) shall
            be limited to medical assistance for nursing facility services,
            except to the extent that assistance is provided in accordance
            with the election described in section 1932 in the case of a
            State making such election''.
        (c) Effective Date.--The amendments made by subsections (a) and (b)
    shall apply with respect to a State as of January 1, 1996.

    SEC. 4212. INCREASED INCOME AND RESOURCE DISREGARDS FOR NURSING
                  FACILITY RESIDENTS.

        (a) Increased Disregards for Personal Needs Allowance; Resources.--
    Section 1902(a)(10) (42 U.S.C. 1396a(a)(1)) is amended--
                (1) by striking ``and'' at the end of paragraph (F); and
                (2) by adding at the end the following new paragraph:
                        ``(G) that, in determining the eligibility of any
                    individual who is an inpatient in a nursing facility or
                    intermediate care facility for the mentally retarded--
                                ``(i) the first $50 of income for each
                            month shall be disregarded; and
                                ``(ii) in the case of an unmarried
                            individual, the first $12,000 of resources may,
                            at the option of the State, be disregarded;''.
        (b) Conforming SSI Personal Needs Allowance.--For provision
    increasing SSI personal needs allowance, see section 4301.
        (c) Federal Reimbursement for Reductions in State Funds
    Attributable to Increased Disregard.--Section 1903(a) (42 U.S.C.
    1396b(a)) is amended--
                (1) by striking ``plus'' at the end of paragraph (6);
                (2) by striking the period at the end of paragraph (7) and
            inserting ``; plus''; and
                (3) by adding at the end the following new paragraph:
                ``(8) an amount equal to 100 percent of the difference
            between the amount of expenditures made by the State for
            nursing facility services and services in an intermediate care
            facility for the mentally retarded during the quarter and the
            amount of expenditures that would have been made by the State
            for such services during the quarter based on the personal
            needs allowance in effect in the State as of September 30,
            1993.''.
        (d) Effective Date.--The amendments made by subsection (a) shall
    apply with respect to months beginning with January 1996.

    SEC. 4213. INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF
                  ASSISTANCE FOR HOME AND COMMUNITY-BASED SERVICES.

        (a) In General.--Section 1902(a) (42 U.S.C. 1396a(a)), as amended
    by section 4201(b), is amended--
                (1) by striking ``and'' at the end of paragraph (62),
                (2) by striking the period at the end of paragraph (63) and
            inserting ``; and'', and
                (3) by inserting after paragraph (63) the following new
            paragraph:
                ``(64) provide, in the case of an individual who is a
            resident (or who is applying to become a resident) of a nursing
            facility or intermediate care facility for the mentally
            retarded, at the time of application for medical assistance and
            periodically thereafter, the individual (or a designated
            representative) with information on the range of home and
            community-based services for which assistance is available in
            the State either under the plan under this title, under the
            program under part 1 of subtitle B of title II of the Health
            Security Act, or any other public program.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to quarters beginning on or after January 1, 1996.

                             PART 3--OTHER BENEFITS

    SEC. 4221. TREATMENT OF ITEMS AND SERVICES NOT COVERED UNDER THE
                  COMPREHENSIVE BENEFIT PACKAGE.

        (a) Continuation of Eligibility for Assistance for AFDC and SSI
    Recipients.--With respect to an individual who is described in section
    1933(b) of the Social Security Act (as added by subsection (b)(1)),
    nothing in this Act shall be construed as--
                (1) changing the eligibility of the individual for medical
            assistance under title XIX of the Social Security Act for items
            and services not covered under the comprehensive benefit
            package, or
                (2) subject to the amendments made by this subtitle,
            changing the amount, duration, or scope of medical assistance
            required (or permitted) to be provided to the individual under
            such title.
        (b) Limitation on Scope of Assistance for Other Medicaid
    Beneficiaries.--
                (1) In general.--Title XIX, as amended by sections 4201(a)
            and 4213, is amended by redesignating section 1933 as section
            1934 and by inserting after section 1932 the following new
            section:

      ``limitation on scope of assistance for most non-cash beneficiaries

        ``Sec 1933. (a) Limitation.--Notwithstanding any other provision of
    this title, the medical assistance made available under section 1902(a)
    to an individual not described in subsection (b) shall be limited to
    medical assistance for--
                ``(1) long-term care services (as defined in subsection
            (c)); and
                ``(2) medicare cost-sharing (as defined in section
            1905(p)(3)), in accordance with the requirements of section
            1902(a)(10)(E).
        ``(b) Individuals Exempt from Limitation.--The individuals
    described in this subsection are the following:
                ``(1) AFDC recipients (as defined in section 1902(3) of the
            Health Security Act).
                ``(2) SSI recipients (as defined in section 1902(33) of the
            Health Security Act).
                ``(3) Individuals entitled to benefits under title XVIII.
                ``(4) Children under 18 years of age (or, at the option of
            the State, under age 19, 20, or 21).
        ``(c) Long-Term Care Services Defined.--In subsection (a), the term
    `long-term care services' means the following items and services, but
    only to the extent they are not included as an item or service under
    the comprehensive benefit package under the Health Security Act:
                ``(1) Nursing facility services and intermediate care
            facility services for the mentally retarded (including items
            and services that may be included in such services pursuant to
            regulations in effect as of October 26, 1993).
                ``(2) Personal care services.
                ``(3) Home or community-based services provided under a
            waiver granted under subsection (c), (d), or (e) of section
            1915.
                ``(4) Home and community care provided to functionally
            disabled elderly individuals under section 1929.
                ``(5) Community supported living arrangements services
            provided under section 1930.
                ``(6) Case-management services (as described in section
            1915(g)(2)).
                ``(7) Home health care services, clinic services, and
            rehabilitation services that are furnished to an individual who
            has a condition or disability that qualifies the individual to
            receive any of the services described in paragraphs (1) through
            (6).''.
                (2) Conforming amendment.--Section 1902(a)(10) of such Act
            (42 U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) of
            OBRA-1993 and section 4211(b), is amended in the matter
            following subparagraph (G) (as inserted by section 4212(a))--
                        (A) by striking ``and (XIV)'' and inserting
                    ``(XIV)''; and
                        (B) by inserting before the semicolon at the end
                    the following: ``, and (XV) the medical assistance made
                    available to an individual who is not described in
                    section 1933(b) shall be limited in accordance with
                    section 1933''.
        (c) Conforming Amendments Relating to Secondary Payer.--(1) Section
    1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as amended by section
    13622(a) of OBRA-1993, is amended by inserting ``health plans (as
    defined in section 1400 of the Health Security Act),'' after ``of
    1974),''.
        (2) Section 1903(o) (42 U.S.C. 1396b(o)), as so amended, is amended
    by inserting ``and a health plan (as defined in section 1400 of the
    Health Security Act)'' after ``of 1974)''.
        (d) Effective Date.--The amendments made by this section shall
    apply to items and services furnished in a State on or after January 1
    of the first year for which the State is a participating State under
    the Health Security Act.

    SEC. 4222. ESTABLISHMENT OF PROGRAM FOR POVERTY-LEVEL CHILDREN WITH
                  SPECIAL NEEDS.

        (a) Establishment of Program.--Title XIX, as amended by sections
    4201, 4213, and 4221(b), is amended by redesignating section 1934 as
    section 1935 and by inserting after section 1933 the following new
    section:

            ``services for poverty-level children with special needs

        ``Sec 1934. (a) Establishment of Program.--There is hereby
    established a program under which the Secretary shall provide for
    payment on behalf of each qualified child (as defined in subsection
    (b)) during a year for all medically necessary or appropriate items and
    services described in section 1905(a) (including items and services
    described in section 1905(r) but excluding long-term care services
    described in section 1933(c)) that are not included in the
    comprehensive benefit package under subtitle B of title I of the Health
    Security Act.
        ``(b) Qualified Child Defined.--
                ``(1) In general.--In this section, a `qualified child' is
            an eligible individual (as defined in section 1001(c) of the
            Health Security Act) who--
                        ``(A) for years prior to 1998, is a resident of a
                    participating State under the Health Security Act;
                        ``(B) is under the age of 19; and
                        ``(C) meets the requirements relating to financial
                    eligibility described in paragraph (2).
                ``(2) Requirements relating to financial eligibility.--An
            individual meets the requirements of this paragraph if--
                        ``(A) the individual is an AFDC recipient or an SSI
                    recipient (as such terms are defined in section 1902 of
                    the Health Security Act);
                        ``(B) the individual is eligible to receive medical
                    assistance under the State plan under section
                    1902(a)(10)(C); or
                        ``(C) the individual is--
                                ``(i) under one year of age and has
                            adjusted family income at or below 133 percent
                            of the income official poverty line (as defined
                            by the Office of Management and Budget, and
                            revised annually in accordance with section
                            673(2) of the Omnibus Budget Reconciliation Act
                            of 1981, applicable to a family of the size
                            involved) (or, in the case of a State that
                            established an income level greater than 133
                            percent for individuals under 1 year of age for
                            purposes of section 1902(l)(2)(A) as of October
                            1, 1993, an income level which is a percentage
                            of such level not greater than 185 percent),
                                ``(ii) the individual has attained 1 year
                            of age but is under 6 years of age and has
                            adjusted family income at or below 133 percent
                            of such income official poverty line, or
                                ``(iii) the individual was born after
                            September 30, 1983, has attained 6 years of
                            age, and has adjusted family income at or below
                            100 percent of such income official poverty
                            line.
                ``(3) Enrollment procedures.--
                        ``(A) In general.--Not later than July 1, 1995, the
                    Secretary shall establish procedures for the enrollment
                    of qualified children in the program under this section
                    under which--
                                ``(i) essential community providers
                            certified by the Secretary under subpart B of
                            part 2 of subtitle F of title I of the Health
                            Security Act serve as enrollment sites for the
                            program; and
                                ``(ii) any forms used for enrollment
                            purposes are designed to make the enrollment as
                            simple as practicable.
                        ``(B) Individuals under alliance plans
                    automatically enrolled.--The Secretary shall establish
                    a process under which an individual who is a qualified
                    child under paragraph (1) and is enrolled in a health
                    plan (as defined in section 1400(a) of the Health
                    Security Act) shall automatically be deemed to have met
                    any enrollment requirements established under paragraph
                    (1).
        ``(c) Additional Responsibilities of Secretary.--Not later than
    July 1, 1995, the Secretary shall promulgate such regulations as are
    necessary to establish and operate the program under this section,
    including regulations with respect to the following:
                ``(1) The benefits to be provided and the circumstances
            under which such benefits shall be considered medically
            necessary.
                ``(2) Procedures for the periodic redetermination of an
            individual's eligibility for benefits.
                ``(3) Qualification criteria for providers participating in
            the program.
                ``(4) Payment amounts for services provided under the
            program, the methodology used to determine such payment
            amounts, and the procedures for making payments to providers.
                ``(5) Standards to ensure the quality of services and the
            coordination of services under the program with services under
            the comprehensive benefit package, as well as services under
            parts B and H of the Individuals With Disabilities Education
            Act, title V, and any other program providing health care,
            remedial, educational, and social services to qualified
            children as the Secretary may identify.
                ``(6) Hearing and appeals for individuals adversely
            affected by any determination by the Secretary under the
            program.
                ``(7) Such other requirements as the Secretary determines
            to be necessary for the proper and efficient administration of
            the program.
        ``(d) Federal Payment for Program.--
                ``(1) In general.--Subject to paragraph (2), the Secretary
            shall pay 100 percent of the costs of providing benefits under
            this program in a year, including all administrative expenses.
                ``(2) Annual limit on expenditures.--The total amount of
            Federal expenditures that may be made under this section in a
            year may not exceed--
                        ``(A) for a year prior to 1998, an amount equal to
                    total expenditures for medical assistance under State
                    plans under this title during fiscal year 1993 for
                    services described in subsection (a) furnished to
                    qualified children that are attributable to States in
                    which the program is in operation during the year
                    (adjusted to take into account the operation of the
                    program under this section on a calendar year basis)--
                                ``(i) adjusted to take into account any
                            increases or decreases in the number of
                            qualified children under the most recent
                            decennial census, as adjusted by the most
                            recent current population survey for the year
                            in question, and
                                ``(ii) adjusted by the applicable
                            percentage applied to the State non-cash, non-
                            DSH baseline amount for the year under section
                            9003(a) of the Health Security Act;
                        ``(B) for 1998, the total expenditures for medical
                    assistance under State plans under this title during
                    1993 for services described in subsection (a) furnished
                    to qualified children (adjusted to take into account
                    the operation of the program under this section on a
                    calendar year basis)--
                                ``(i) adjusted to take into account any
                            increases or decreases in the number of
                            qualified children under the most recent
                            decennial census, as adjusted by the most
                            recent current population survey for the year
                            in question, and
                                ``(ii) adjusted by the update applied to
                            the State non-cash, non-DSH baseline amount for
                            the year under section 9003(b) of the Health
                            Security Act; and
                        ``(C) for each succeeding year, the limit
                    established under this paragraph for the previous year
                    (adjusted to take into account the operation of the
                    program under this section on a calendar year basis),
                    adjusted by the update applied to the State non-cash
                    baseline amount for the year under section 9003(b) of
                    the Health Security Act.''.
        (b) Repeal of Alternative Eligibility Standards for Children in
    Participating States.--Section 1902(r)(2) (42 U.S.C. 1396a(r)(2)) is
    amended by adding at the end the following new subparagraph:
        ``(C) Subparagraph (A) shall not apply with respect to the
    determination of income and resources for children under age 18 under
    the State plan of a State (other than under the State plan of a State
    that utilized an alternative methodology pursuant to such subparagraph
    as of October 1, 1993)--
                ``(i) in the case of a State that is a participating State
            under the Health Security Act for a year prior to 1998, for
            quarters beginning on or after January 1 of the first year for
            which the State is such a participating State; and
                ``(ii) in the case of any State not described in clause
            (i), for quarters beginning on or after January 1, 1998.''.

              PART 4--DISCONTINUATION OF CERTAIN PAYMENT POLICIES

    SEC. 4231. DISCONTINUATION OF MEDICAID DSH PAYMENTS.

        (a) Elimination of Specific Obligation.--Section 1923(a) (42 U.S.C.
    1396r-4(a)) is amended by adding at the end the following new
    paragraph:
                ``(5) Notwithstanding any other provision of this title,
            the requirement of this subsection shall not apply--
                        ``(A) with respect to a State for any portion of a
                    fiscal year during which the State is a participating
                    State under the Health Security Act; or
                        ``(B) with respect to any State for any months
                    beginning on or after January 1, 1998.''.
        (b) Elimination of State Plan Requirement.--Section 1902(a)(13)(A)
    (42 U.S.C. 1396a(a)(13)(A)) is amended by inserting after ``special
    needs'' the following: ``(but only with respect to any quarters during
    which the State is not a participating State under the Health Security
    Act or with respect to any quarters ending on or before December 31,
    1997)''.
        (c) Elimination of State DSH Allotments and Federal Financial
    Participation.--Section 1923(f) (42 U.S.C. 1396r-4(f)) is amended--
                (1) in paragraph (2), by inserting ``and paragraph (5)''
            after ``subparagraph (B)'', and
                (2) by adding at the end the following new paragraph:
                ``(5) Elimination of allotments for participating States
            and sunset for all States.--
                        ``(A) In general.--Notwithstanding any other
                    provision of this section, the State DSH allotment
                    shall be zero with respect to--
                                ``(i) any participating State under the
                            Health Security Act; and
                                ``(ii) any State for any portion of a
                            fiscal year that occurs on or after January 1,
                            1998.
                        ``(B) No redistribution of reductions.--In the
                    computation of State supplemental amounts under
                    paragraph (3), the State DSH allotments shall be
                    determined under subparagraph (A)(ii) of such paragraph
                    as if this paragraph did not apply.''.

    SEC. 4232. DISCONTINUATION OF REIMBURSEMENT STANDARDS FOR INPATIENT
                  HOSPITAL SERVICES.

        Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)), as amended by
    section 4231(b), is amended by inserting ``(in the case of services
    other than hospital services in a State that is a participating State
    under the Health Security Act)'' before ``are reasonable and
    adequate''.

      PART 5--COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY
                             MANAGEMENT INITIATIVES

    SEC. 4241. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.

        (a) Limitation on Frequency of System Changes; Advance Notification
    to Providers.--Section 1902(a) (42 U.S.C. 1396a(a)), as amended by
    sections 4201(b) and 4214(a), is amended--
                (1) by striking ``and'' at the end of paragraph (63),
                (2) by striking the period at the end of paragraph (64) and
            inserting ``; and'', and
                (3) by inserting after paragraph (64) the following new
            paragraph:
                ``(65) provide that the State--
                        ``(A) will not implement any change in the system
                    used for the billing and processing of claims for
                    payment for items and services furnished under the
                    State plan within 6 months of implementing any previous
                    change in such system; and
                        ``(B) shall notify individuals and entities
                    providing medical assistance under the State plan of
                    any major change in the procedures for billing for
                    services furnished under the plan at least 120 days
                    before such change is to take effect.''.
        (b) Effective Date.--The amendments made by subsection (a) shall
    apply to a State as of January 1 of the first year for which the State
    is a participating State.

                          PART 6--MEDICAID COMMISSION

    SEC. 4251. MEDICAID COMMISSION.

        (a) Establishment.--There is established a commission to be known
    as the ``Medicaid Commission'' (in this section referred to as the
    ``Commission'').
        (b) Membership.--(1) The Commission shall be composed of 15 members
    appointed by the Secretary for the life of the Commission.
        (2) Members shall include representatives of the Federal Government
    and State Governments.
        (3) The Administrator of the Health Care Financing Administration
    shall be an ex officio member of the Commission.
        (4) Individuals, while serving as members of the Commission, shall
    not be entitled to compensation, other than travel expenses, including
    per diem in lieu of subsistence, in accordance with sections 5702 and
    5703 of title 5, United States Code.
        (c) Study.--The Commission shall study options with respect to each
    of the following in relation to the medicaid program under title XIX of
    the Social Security Act:
                (1) Use of block grant.--Whether, and (if so) how, to
            convert payments for services not covered in the comprehensive
            benefit package (for all recipients, including AFDC and SSI
            recipients defined in section 1902) into new financing
            mechanisms that give the States greater flexibility in
            targeting and delivering needed services.
                (2) Integration of acute and long-term care services for
            health plans.--Whether, and (if so) how, to integrate long-term
            care services and the home and community-based services program
            under part 1 of subtitle B of title II with the services
            covered under the comprehensive benefit package offered by
            health plans.
                (3) Consolidating institutional and home and community-
            based long-term care.--Whether, and (if so) how, to offer
            States an option to combine together expenditures under the
            home and community-based services program (under part 1 of
            subtitle B of title II) with continuing home and community-
            based services and institutional care under the medicaid
            program into a global budget for long-term care services, and
            how such a combined program could be implemented.
        (d) Report and Recommendations.--The Commission shall submit to the
    Secretary and the National Health Board, not later than 1 year after
    the date of the enactment of this Act, a report on its study under
    subsection (c). The Commission shall include in such report such
    recommendations for changes in the medicaid program, and the programs
    under this Act, as it deems appropriate.
        (e) Operations.--(1) The Commission shall appoint a chair from
    among its members.
        (2) Upon request of the Chair of the Commission, the head of any
    Federal department or agency may detail, on a reimbursable basis, any
    of the personnel of that department or agency to the Commission to
    assist it in carrying out its duties under this section.
        (3) The Commission may secure directly from any department or
    agency of the United States information necessary to enable it to carry
    out this section. Upon request of the Chair of the Commission, the head
    of that department or agency shall furnish that information to the
    Commission.
        (4) Upon the request of the Commission, the Administrator of
    General Services shall provide to the Commission, on a reimbursable
    basis, the administrative support services necessary for the Commission
    to carry out its responsibilities under this section.
        (f) Termination.--The Commission shall terminate 90 days after the
    date of submission of its report under subsection (d).
        (g) Authorization of Appropriations.--There are authorized to be
    appropriated such sums as may be necessary to carry out this section.

                                                       Title IV, Subtitle D

              Subtitle D--Increase in SSI Personal Needs Allowance

    SEC. 4301. INCREASE IN SSI PERSONAL NEEDS ALLOWANCE.

        (a) In General.--Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is
    amended--
                (1) in clauses (i) and (ii)(I), by striking ``$360'' and
            inserting ``$600''; and
                (2) in clause (iii), by striking ``$720'' and inserting
            ``$1,200''.
        (b) Effective Date.--The amendments made by subsection (a) shall
    apply with respect to months beginning with January 1996.

                                                                    Title V

                    TITLE V--QUALITY AND CONSUMER PROTECTION

                           table of contents of title

                                                                       Page
                 Subtitle A--Quality Management and Improvement

    Sec. 5001. National Quality Management Program..............        835
    Sec. 5002. National Quality Management Council..............        836
    Sec. 5003. National measures of quality performance.........        838
    Sec. 5004. Consumer surveys.................................        842
    Sec. 5005. Evaluation and reporting of quality performance..        843
    Sec. 5006. Development and dissemination of practice                846
                                guidelines.
    Sec. 5007. Research on health care quality..................        849
    Sec. 5008. Regional professional foundations................        851
    Sec. 5009. National Quality Consortium......................        853
    Sec. 5010. Eliminating CLIA requirement for certificate of          855
                                waiver for simple laboratory
                                examinations and procedures.
    Sec. 5011. Uniform standards for health care institutions...        856
    Sec. 5012. Role of alliances in quality assurance...........        857
    Sec. 5013. Role of health plans in quality management.......        858
         Subtitle B--Information Systems, Privacy, and Administrative
                                 Simplification

                       Part 1--Health Information Systems

    Sec. 5101. Establishment of health information system.......        859
    Sec. 5102. Additional requirements for health information           863
                                system.
    Sec. 5103. Electronic data network..........................        865
    Sec. 5104. Unique identifier numbers........................        867
    Sec. 5105. Health security cards............................        868
    Sec. 5106. Technical assistance in the establishment of             870
                                health information systems.
                         Part 2--Privacy of Information

    Sec. 5120. Health information system privacy standards......        871
    Sec. 5121. Other duties with respect to privacy.............        875
    Sec. 5122. Comprehensive Health Information Privacy                 876
                                Protection Act.
    Sec. 5123. Definitions......................................        876
         Part 3--Interim Requirements for Administrative Simplification

    Sec. 5130. Standard benefit forms...........................        878
                           Part 4--General Provisions

    Sec. 5140. National Privacy and Health Data Advisory Council        883
    Sec. 5141. Civil money penalties............................        885
    Sec. 5142. Relationship to other laws.......................        886
                      Subtitle C--Remedies and Enforcement

       Part 1--Review of Bensubpart a--general rulesEnrolled Individuals
    Sec. 5201. Health plan claims procedure.....................        887
    Sec. 5202. Review in regional alliance complaint review             894
                                offices of grievances based on
                                acts or practices by health
                                plans.
    Sec. 5203. Initial proceedings in complaint review offices..        897
    Sec. 5204. Hearings before hearing officers in complaint            899
                                review offices.
    Sec. 5205. Review by Federal Health Plan Review Board.......        905
    Sec. 5206. Rules governing benefit claims determinations....        909
    Sec. 5207. Civil msubpart b--early resolution programs......        909
    Sec. 5211. Establishment of early resolution programs in            911
                                complaint review offices.
    Sec. 5212. Initiation of participation in mediation                 913
                                proceedings.
    Sec. 5213. Mediation proceedings............................        915
    Sec. 5214. Legal effect of participation in mediation               918
                                proceedings.
    Sec. 5215. Enforcement of settlement agreements.............        919
             Part 2--Additional Remedies and Enforcement Provisions

    Sec. 5231. Judicial review of Federal action on State               920
                                systems.
    Sec. 5232. Administrative and judicial review relating to           921
                                cost containment.
    Sec. 5233. Civil enforcement................................        922
    Sec. 5234. Priority of certain bankruptcy claims............        922
    Sec. 5235. Private right to enforce State responsibilities..        923
    Sec. 5236. Private right to enforce Federal responsibilities
                                     in operating a system in a
    State.                                                              923
    Sec. 5237. Private right to enforce responsibilities of             925
                                alliances.
    Sec. 5238. Discrimination claims............................        926
    Sec. 5239. Nondiscrimination in federally assisted programs.        929
    Sec. 5240. Civil action by essential community provider.....        929
    Sec. 5241. Facial constitutional challenges.................        930
    Sec. 5242. Treatment of plans as parties in civil actions...        932
    Sec. 5243. General nonpreemption of existing rights and             932
                                remedies.
                        Subtitle D--Medical Malpractice

                            Part 1--Liability Reform

    Sec. 5301. Federal tort reform..............................        933
    Sec. 5302. Plan-based alternative dispute resolution                937
                                mechanisms.
    Sec. 5303. Requirement for certificate of merit.............        939
    Sec. 5304. Limitation on amount of attorney's contingency           942
                                fees.
    Sec. 5305. Reduction of awards for recovery from collateral         943
                                sources.
    Sec. 5306. Periodic payment of awards.......................        944
       Part 2--Other Provisions Relating to Medical Malpractice Liability

    Sec. 5311. Enterprise liability demonstration project.......        944
    Sec. 5312. Pilot program applying practice guidelines to            946
                                medical malpractice liability
                                actions.
                          Subtitle E--Fraud and Abuse

    Part 1--Establishment of All-payer Health Care Fraud and Abuse Control
                                    Program

    Sec. 5401. All-Payer Health Care Fraud and Abuse Control            948
                                Program.
    Sec. 5402. Establishment of All-Payer Health Care Fraud and         951
                                Abuse Control Account.
    Sec. 5403. Use of funds by Inspector General................        954
      Part 2--Application of Fraud and Abuse Authorities Under the Social
                           Security Act to All Payers

    Sec. 5411. Exclusion from participation.....................        956
    Sec. 5412. Civil monetary penalties.........................        963
    Sec. 5413. Limitations on physician self-referral...........        968
    Sec. 5414. Construction of Social Security Act references...        969
    Part 3--Amendments to Anti-fraud and Abuse Provisions Under the Social
                                  Security Act

    Sec. 5421. Reference to amendments..........................        969
                       Part 4--Amendments to Criminal Law

    Sec. 5431. Health care fraud................................        970
    Sec. 5432. Forfeitures for violations of fraud statutes.....        971
    Sec. 5433. False Statements.................................        972
    Sec. 5434. Bribery and graft................................        973
    Sec. 5435. Injunctive relief relating to health care                975
                                offenses.
    Sec. 5436. Grand jury disclosure............................        975
    Sec. 5437. Theft or embezzlement............................        976
    Sec. 5438. Misuse of health security card or unique                 977
                                identifier.
                  Part 5--Amendments to Civil False Claims Act

    Sec. 5441. Amendments to Civil False Claims Act.............        978
                      Subtitle F--McCarran-Ferguson Reform

    Sec. 5501. Repeal of exemption for health insurance.........        979

                                                        Title V, Subtitle A

                 Subtitle A--Quality Management and Improvement

    SEC. 5001. NATIONAL QUALITY MANAGEMENT PROGRAM.

        Not later than 1 year after the date of the enactment of this Act,
    the National Health Board shall establish and oversee a performance-
    based program of quality management and improvement designed to enhance
    the quality, appropriateness, and effectiveness of health care services
    and access to such services. The program shall be known as the National
    Quality Management Program and shall be administered by the National
    Quality Management Council established under section 5002.

    SEC. 5002. NATIONAL QUALITY MANAGEMENT COUNCIL.

        (a) Establishment.--There is established a council to be known as
    the National Quality Management Council.
        (b) Duties.--The Council shall--
                (1) administer the National Quality Management Program;
                (2) perform any other duty specified as a duty of the
            Council in this subtitle; and
                (3) advise the National Health Board with respect its
            duties under this subtitle.
        (c) Number and Appointment.--The Council shall be composed of 15
    members appointed by the President. The Council shall consist of
    members who are broadly representative of the population of the United
    States and shall include--
                (1) individuals representing the interests of governmental
            and corporate purchasers of health care;
                (2) individuals representing the interests of health plans;
                (3) individuals representing the interests of States;
                (4) individuals representing the interests of health care
            providers and academic health centers (as defined in section
            3101(c)); and
                (5) individuals distinguished in the fields of public
            health, health care quality, and related fields of health
            services research.
        (d) Terms.--
                (1) In general.--Except as provided in paragraph (2),
            members of the Council shall serve for a term of 3 years.
                (2) Staggered rotation.--Of the members first appointed to
            the Council under subsection (c), the President shall appoint 5
            members to serve for a term of 3 years, 5 members to serve for
            a term of 2 years, and 5 members to serve for a term of 1 year.
                (3) Service beyond term.--A member of the Council may
            continue to serve after the expiration of the term of the
            member until a successor is appointed.
        (e) Vacancies.--If a member of the Council does not serve the full
    term applicable under subsection (d), the individual appointed to fill
    the resulting vacancy shall be appointed for the remainder of the term
    of the predecessor of the individual.
        (f) Chair.--The President shall designate an individual to serve as
    the chair of the Council.
        (g) Meetings.--The Council shall meet not less than once during
    each 4-month period and shall otherwise meet at the call of the
    President or the chair.
        (h) Compensation and Reimbursement of Expenses.--Members of the
    Council shall receive compensation for each day (including travel time)
    engaged in carrying out the duties of the Council. Such compensation
    may not be in an amount in excess of the maximum rate of basic pay
    payable for level IV of the Executive Schedule under section 5315 of
    title 5, United States Code.
        (i) Staff.--The National Health Board shall provide to the Council
    such staff, information, and other assistance as may be necessary to
    carry out the duties of the Council.
        (j) Health Care Provider.--For purposes of this subtitle, the term
    ``health care provider'' means an individual who, or entity that,
    provides an item or service to an individual that is covered under the
    health plan (as defined in section 1400) in which the individual is
    enrolled.

    SEC. 5003. NATIONAL MEASURES OF QUALITY PERFORMANCE.

        (a) In General.--The National Quality Management Council shall
    develop a set of national measures of quality performance, which shall
    be used to assess the provision of health care services and access to
    such services.
        (b) Subject of Measures.--National measures of quality performance
    shall be selected in a manner that provides information on the
    following subjects:
                (1) Access to health care services by consumers.
                (2) Appropriateness of health care services provided to
            consumers.
                (3) Outcomes of health care services and procedures.
                (4) Health promotion.
                (5) Prevention of diseases, disorders, and other health
            conditions.
                (6) Consumer satisfaction with care.
        (c) Selection of Measures.--
                (1) Consultation.--In developing and selecting the national
            measures of quality performance, the National Quality
            Management Council shall consult with appropriate interested
            parties, including--
                        (A) States;
                        (B) health plans;
                        (C) employers and individuals purchasing health
                    care through regional and corporate alliances;
                        (D) health care providers;
                        (E) the National Quality Consortium established
                    under section 5009;
                        (F) individuals distinguished in the fields of law,
                    medicine, economics, public health, and health services
                    research;
                        (G) the Administrator for Health Care Policy and
                    Research;
                        (H) the Director of the National Institutes of
                    Health; and
                        (I) the Administrator of the Health Care Financing
                    Administration.
                (2) Criteria.--The following criteria shall be used in
            developing and selecting national measures of quality
            performance:
                        (A) Significance.--When a measure relates to a
                    specific disease, disorder, or other health condition,
                    the disease, disorder, or condition shall be of
                    significance in terms of prevalence, morbidity,
                    mortality, or the costs associated with the prevention,
                    diagnosis, treatment, or clinical management of the
                    disease, disorder, or condition.
                        (B) Range of services.--The set of measures, taken
                    as a whole, shall be representative of the range of
                    services provided to consumers of health care.
                        (C) Reliability and validity.--The measures shall
                    be reliable and valid.
                        (D) Undue burden.--The data needed to calculate the
                    measures shall be obtained without undue burden on the
                    entity or individual providing the data.
                        (E) Variation.--Performance with respect to a
                    measure shall be expected to vary widely among the
                    individuals and entities whose performance is assessed
                    using the measure.
                        (F) Linkage to health outcome.--When a measure is a
                    rate of a process of care, the process shall be linked
                    to a health outcome based upon the best available
                    scientific evidence.
                        (G) Provider control and risk adjustment.--When a
                    measure is an outcome of the provision of care, the
                    outcome shall be within the control of the provider and
                    one with respect to which an adequate risk adjustment
                    can be made.
                        (H) Public health.--The measures may incorporate
                    standards identified by the Secretary of Health and
                    Human Services for meeting public health objectives.
        (d) Updating.--The National Quality Management Council shall review
    and update the set of national measures of quality performance annually
    to reflect changing goals for quality improvement. The Council shall
    establish and maintain a priority list of performance measures that
    within a 5-year period it intends to consider for inclusion within the
    set through the updating process.

    SEC. 5004. CONSUMER SURVEYS.

        (a) In General.--The National Quality Management Council shall
    conduct periodic surveys of health care consumers to gather information
    concerning access to care, use of health services, health outcomes, and
    patient satisfaction. The surveys shall monitor consumer reaction to
    the implementation of this Act and be designed to assess the impact of
    this Act on the general population of the United States and potentially
    vulnerable populations.
        (b) Survey Administration.--The National Quality Management Council
    shall develop and approve a standard design for the surveys, which
    shall be administered by the Administrator for Health Care Policy and
    Research on a plan-by-plan and State-by-State basis. A State may add
    survey questions on quality measures of local interest to surveys
    conducted in the State.
        (c) Sampling Strategies.--The National Quality Management Council
    shall develop sampling strategies that ensure that survey samples
    adequately measure populations that are considered to be at risk of
    receiving inadequate health care and may be difficult to reach through
    consumer-sampling methods, including individuals who--
                (1) fail to enroll in a health plan;
                (2) resign from a plan; or
                (3) are members of a vulnerable population.

    SEC. 5005. EVALUATION AND REPORTING OF QUALITY PERFORMANCE.

        (a) National Goals.--In subject matter areas with respect to which
    the National Quality Management Council determines that sufficient
    information and consensus exist, the Council shall recommend to the
    Board that the Board establish goals for performance by health plans
    and health care providers on a subset of the set of national measures
    of quality performance.
        (b) Impact of Reform.--The National Quality Management Council
    shall evaluate the impact of the implementation of this Act on the
    quality of health care services in the United States and the access of
    consumers to such services.
        (c) Performance Reports.--
                (1) Alliance and health plan reports.--Each health alliance
            annually shall publish and make available to the public a
            performance report outlining in a standard format the
            performance of each health plan offered in the alliance on the
            set of national measures of quality performance. The report
            shall include the results of a smaller number of such measures
            for health care providers who are members of provider networks
            of such plans (as defined in section 1402(f)), if the available
            information is statistically meaningful. The report also shall
            include the results of consumer surveys described in section
            5004 that were conducted in the alliance area during the year
            that is the subject of the report.
                (2) National quality reports.--The National Quality
            Management Council annually shall provide to the Congress and
            to each health alliance a report that--
                        (A) outlines in a standard format the performance
                    of each regional alliance, corporate alliance, and
                    health plan;
                        (B) discusses State-level and national trends
                    relating to health care quality; and
                        (C) presents data for each health alliance from
                    consumer surveys described in section 5004 that were
                    conducted during the year that is the subject of the
                    report.
        (d) Public Availability of Information in National Practitioner
    Data Bank on Defendants, Awards, and Settlements.--
                (1) In general.--Section 427(a) of the Health Care Quality
            Improvement Act (42 U.S.C. 11137(a)) is amended by adding at
            the end the following new sentence: ``Not later than January 1,
            1996, the Secretary shall promulgate regulations under which
            individuals seeking to enroll in health plans under the Health
            Security Act may obtain information reported under this part
            with respect to physicians and other licensed health
            practitioners participating in such plans for whom information
            has been reported under this part on repeated occasions.''.
                (2) Access to data bank for point-of-service contractors
            under medicare.--Section 427(a) of such Act (42 U.S.C.
            11137(a)) is amended--
                        (A) by inserting ``to sponsors of point-of-service
                    networks under section 1890 of the Social Security
                    Act,'' after ``State licensing boards,'', and
                        (B) in the heading, by inserting ``Related'' after
                    ``Care''.

    SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRACTICE GUIDELINES.

        (a) Development of Guidelines.--
                (1) In general.--The National Quality Management Council
            shall direct the Administrator for Health Care Policy and
            Research to develop and periodically review and update
            clinically relevant guidelines that may be used by health care
            providers to assist in determining how diseases, disorders, and
            other health conditions can most effectively and appropriately
            be prevented, diagnosed, treated, and managed clinically.
                (2) Certain Requirements.--Guidelines under paragraph (1)
            shall--
                        (A) be based on the best available research and
                    professional judgment regarding the effectiveness and
                    appropriateness of health care services and procedures;
                        (B) be presented in formats appropriate for use by
                    health care providers, medical educators, medical
                    review organizations, and consumers of health care;
                        (C) include treatment-specific or condition-
                    specific practice guidelines for clinical treatments
                    and conditions in forms appropriate for use in clinical
                    practice, for use in educational programs, and for use
                    in reviewing quality and appropriateness of medical
                    care;
                        (D) include information on risks and benefits of
                    alternative strategies for prevention, diagnosis,
                    treatment, and management of a given disease, disorder,
                    or other health condition;
                        (E) include information on the costs of alternative
                    strategies for the prevention, diagnosis, treatment,
                    and management of a given disease, disorder, or other
                    health condition, where cost information is available
                    and reliable; and
                        (F) be developed in accordance with priorities that
                    shall be established by the National Quality Management
                    Council based on the research priorities that are
                    established under section 5007(b) and the 5-year
                    priority list of performance measures described in
                    section 5003(d).
                (3) Health service utilization protocols.--The National
            Quality Management Council shall establish standards and
            procedures for evaluating the clinical appropriateness of
            protocols used to manage health service utilization.
                (4) Use in medical malpractice liability pilot program.--
            Guidelines developed under this subsection may be used by the
            Secretary of Health and Human Services in the pilot program
            applying practice guidelines to medical malpractice liability
            under section 5312.
        (b) Evaluation and Certification of Other Guidelines.--
                (1) Methodology.--The National Quality Management Council
            shall direct the Administrator for Health Care Policy and
            Research to develop and publish standards relating to
            methodologies for developing the types of guidelines described
            in subsection (a)(1).
                (2) Evaluation and certification.--The National Quality
            Management Council shall direct the Administrator for Health
            Care Policy and Research to establish a procedure by which
            individuals and entities may submit guidelines of the type
            described in subsection (a)(1) to the Council for evaluation
            and certification by the Council using the standards developed
            under paragraph (1).
                (3) Use in medical malpractice liability pilot program.--
            Guidelines certified under paragraph (2) may be used by the
            Secretary of Health and Human Services in the pilot program
            applying practice guidelines to medical malpractice liability
            under section 5312.
        (c) Guideline Clearinghouse.--The National Quality Management
    Council shall direct the Administrator for Health Care Policy and
    Research to establish and oversee a clearinghouse and dissemination
    program for practice guidelines that are developed or certified under
    this section.
        (d) Dissemination of Information on Ineffective Treatments.--The
    National Quality Management Council shall collect and disseminate
    information documenting clinically ineffective treatments and
    procedures.

    SEC. 5007. RESEARCH ON HEALTH CARE QUALITY.

        (a) Research Support.--The National Quality Management Council
    shall direct the Administrator for Health Care Policy and Research to
    support research directly related to the 5-year priority list of
    performance measures described in section 5003(d), including research
    with respect to--
                (1) outcomes of health care services and procedures;
                (2) effective and efficient dissemination of information,
            standards, and guidelines;
                (3) methods of measuring quality and shared decisionmaking;
            and
                (4) design and organization of quality of care components
            of automated health information systems.
        (b) Research Priorities.--The National Quality Management Council
    shall establish priorities for research with respect to the quality,
    appropriateness, and effectiveness of health care and make
    recommendations concerning research projects. In establishing the
    priorities, the National Quality Management Council shall emphasize
    research involving diseases, disorders, and health conditions as to
    which--
                (1) there is the highest level of uncertainty concerning
            treatment;
                (2) there is the widest variation in practice patterns;
                (3) the costs associated with prevention, diagnosis,
            treatment, or clinical management are significant; and
                (4) the rate of incidence or prevalence is high for the
            population as a whole or for particular subpopulations.

    SEC. 5008. REGIONAL PROFESSIONAL FOUNDATIONS.

        (a) Establishment.--The National Health Board shall establish and
    oversee regional professional foundations to perform the duties
    specified in subsection (c).
        (b) Structure and Membership.--
                (1) In general.--The National Quality Consortium
            established under section 5009 shall oversee the establishment
            of regional professional foundations, the membership
            requirements for each foundation, and any other requirement for
            the internal operation of each foundation.
                (2) Entities eligible for membership.--Each regional
            professional foundation shall include at least one academic
            health center (as defined in section 3101(c)). The following
            entities also shall be eligible to serve as members of the
            regional professional foundation for the region in which the
            entity is located:
                        (A) Schools of public health (as defined in section
                    799 of the Public Health Service Act).
                        (B) Other schools and programs defined in such
                    section.
                        (C) Health plans.
                        (D) Regional alliances.
                        (E) Corporate alliances.
                        (F) Health care providers.
        (c) Duties.--A regional professional foundation shall carry out the
    following duties for the region in which the foundation is located
    (such region to be demarcated by the National Health Board with the
    advice of the National Quality Consortium established under section
    5009):
                (1) Developing programs in lifetime learning for health
            professionals (as defined in section 1112(c)(1)) to ensure the
            delivery of quality health care.
                (2) Fostering collaboration among health plans and health
            care providers to improve the quality of primary and
            specialized health care.
                (3) Disseminating information about successful quality
            improvement programs, practice guidelines, and research
            findings.
                (4) Disseminating information on innovative uses of health
            professionals.
                (5) Developing innovative patient education systems that
            enhance patient involvement in decisions relating their health
            care.
                (6) Applying for and conducting research described in
            section 5007.
        (d) Programs in Lifetime Learning.--The programs described in
    subsection (c)(1) shall ensure that health professionals remain abreast
    of new knowledge, acquire new skills, and adopt new roles as technology
    and societal demands change.

    SEC. 5009. NATIONAL QUALITY CONSORTIUM.

        (a) Establishment.--The National Health Board shall establish a
    consortium to be known as the National Quality Consortium.
        (b) Duties.--The Consortium shall--
                (1) establish programs for continuing education for health
            professionals;
                (2) advise the National Quality Management Council and the
            Administrator for Health Care Policy and Research on research
            priorities;
                (3) oversee the development of the regional professional
            foundations established under section 5008;
                (4) advise the National Quality Management Council with
            respect to the funding of proposals to establish such
            foundations;
                (5) consult with the National Quality Management Council
            regarding the selection of national measures of quality
            performance under section 5003(c); and
                (6) advise the National Health Board and the National
            Quality Management Council with respect to any other duty of
            the Board or the Council under this subtitle.
        (c) Membership.--The Consortium shall be composed of 11 members
    appointed by the National Health Board. The members of the Consortium
    shall include--
                (1) 5 individuals representing the interests of academic
            health centers; and
                (2) 6 other individuals representing the interests of one
            of the following persons:
                        (A) Schools of public health.
                        (B) Other schools and programs defined in section
                    799 of the Public Health Service Act (including medical
                    schools, nursing schools, and allied health
                    professional schools).
        (d) Terms.--
                (1) In general.--Except as provided in paragraph (2),
            members of the Consortium shall serve for a term of 3 years.
                (2) Staggered rotation.--Of the members first appointed to
            the Consortium under subsection (c), the National Health Board
            shall appoint 4 members to serve for a term of 3 years, 3
            members to serve for a term of 2 years, and 4 members to serve
            for a term of 1 year.
        (e) Chair.--The National Health Board shall designate an individual
    to serve as the chair of the Consortium.

    SEC. 5010. ELIMINATING CLIA REQUIREMENT FOR CERTIFICATE OF WAIVER FOR
                  SIMPLE LABORATORY EXAMINATIONS AND PROCEDURES.

        (a) In General.--Section 353 of the Public Health Service Act (42
    U.S.C. 263a) is amended--
                (1) in subsection (b), by inserting before the period at
            the end the following: ``or unless the laboratory is exempt
            from the certificate requirement under subsection (d)(2)'';
                (2) by amending paragraph (2) of subsection (d) to read as
            follows:
                ``(2) Exemption from certificate requirement for
            laboratories performing only simple examinations and
            procedures.--A laboratory which performs only laboratory
            examinations and procedures described in paragraph (3) is not
            required to have in effect a certificate under this section.'';
                (3) by striking paragraph (4) of subsection (d); and
                (4) in subsection (m)(1), by striking ``, except that the
            Secretary'' and all that follows and inserting a period.
        (b) Effective Date.--The amendments made by this section shall take
    effect on the first day of the first month beginning after the date of
    the enactment of this Act.

    SEC. 5011. UNIFORM STANDARDS FOR HEALTH CARE INSTITUTIONS.

        (a) Development of Standards.--Not later than 3 years after the
    date of the enactment of this Act, the National Health Board shall
    develop demonstration standards for the licensing of health care
    institutions that address essential performance requirements related to
    patient care. The standards shall be developed in a manner that permits
    them to be applied uniformly to all such institutions, except in the
    areas of fire safety, sanitation, and patient rights, and so as not to
    undermine ongoing nursing home reforms.
        (b) Demonstration Projects.--By January 1, 1996, the National
    Quality Management Council shall complete demonstration projects for
    the standards developed under subsection (a) and shall revise the
    standards according to the findings of such projects. The demonstration
    projects shall evaluate the impact of these standards in ensuring
    quality of care, reducing cost, and reducing burdens on health care
    providers.
        (c) Preemptive Effect of Fully Implemented Standard.--After a
    standard developed under this section is tested, evaluated, revised,
    and fully implemented, it shall replace existing standards, except in
    cases in which statutory changes are necessary to implement such
    standards. In such cases, the National Quality Management Council shall
    recommend to the President and the Congress revisions in Federal
    statutes to conform the statutes to the standards.
        (d) Consolidated Audit and Inspection.--The National Quality
    Management Council shall undertake research efforts designed to develop
    a system for carrying out through grant or contract a single,
    consolidated annual audit and inspection of each health care
    institution and health care provider for the combined purposes of
    Federal, State, local, and private licensure, accreditation, and
    certification.

    SEC. 5012. ROLE OF ALLIANCES IN QUALITY ASSURANCE.

        Each regional alliance and each corporate alliance shall--
                (1) disseminate to consumers information related to quality
            and access to aid in their selection of plans in accordance
            with section 1325;
                (2) disseminate information on the quality of health plans
            and health care providers contained in reports of the National
            Quality Management Council section 5005(c)(2);
                (3) ensure through negotiations with health plans that
            performance and quality standards are continually improved; and
                (4) conduct educational programs in cooperation with
            regional professional foundations to assist consumers in using
            quality and other information in choosing health plans.

    SEC. 5013. ROLE OF HEALTH PLANS IN QUALITY MANAGEMENT.

        Each health plan shall--
                (1) measure and disclose performance on quality measures
            used by--
                        (A) participating States in which the plan does
                    business;
                        (B) regional alliances and corporate alliances that
                    offer the plan; and
                        (C) the National Quality Management Council;
                (2) furnish information required under subtitle B of this
            title and provide such other reports and information on the
            quality of care delivered by health care providers who are
            members of a provider network of the plan (as defined in
            section 1402(f)) as may be required under this Act; and
                (3) maintain quality management systems that--
                        (A) use the national measures of quality
                    performance developed by the National Quality
                    Management Council under section 5003; and
                        (B) measure the quality of health care furnished to
                    enrollees under the plan by all health care providers
                    who are members of a provider network of the plan.

                                                        Title V, Subtitle B

         Subtitle B--Information Systems, Privacy, and Administrative
                                 Simplification

                       PART 1--HEALTH INFORMATION SYSTEMS

    SEC. 5101. ESTABLISHMENT OF HEALTH INFORMATION SYSTEM.

        (a) In General.--Not later than 2 years after the date of the
    enactment of this Act, the National Health Board shall develop and
    implement a health information system by which the Board shall collect,
    report, and regulate the collection and dissemination of the health
    care information described in subsection (e) pursuant to standards
    promulgated by the Board and (if applicable) consistent with policies
    established as part of the National Information Infrastructure Act of
    1993.
        (b) Privacy.--The health information system shall be developed and
    implemented in a manner that is consistent with the privacy and
    security standards established under section 5120.
        (c) Reduction in Administrative Costs.--The health information
    system shall be developed and implemented in a manner that is
    consistent with the objectives of reducing wherever practicable and
    appropriate--
                (1) the costs of providing and paying for health care;
                (2) the time, effort, and financial resources expended by
            persons to provide information to States, the Federal
            Government, health alliances, and health plans.
        (d) Uses of Information.--The health care information described in
    subsection (e) shall be collected and reported in a manner that
    facilitates its use for the following purposes:
                (1) Health care planning, policy development, policy
            evaluation, and research by Federal, State, and local
            governments and regional and corporate alliances.
                (2) Establishing and monitoring payments for health
            services by the Federal Government, States, regional alliances,
            and corporate alliances.
                (3) Assessing and improving the quality of health care.
                (4) Measuring and optimizing access to health care.
                (5) Evaluating the cost of specific clinical or
            administrative functions.
                (6) Supporting public health functions and objectives.
                (7) Improving the ability of health plans, health care
            providers, and consumers to coordinate, improve, and make
            choices about health care.
                (8) Managing and containing costs at the alliance and plan
            levels.
        (e) Health Care Information.--The health care information referred
    to in subsection (a) shall include data on--
                (1) enrollment and disenrollment in health plans;
                (2) clinical encounters and other items and services
            provided by health care providers;
                (3) administrative and financial transactions and
            activities of participating States, regional alliances,
            corporate alliances, health plans, health care providers,
            employers, and individuals that are necessary to determine
            compliance with this Act or an Act amended by this Act;
                (4) the characteristics of regional alliances, including
            the number, and demographic characteristics of eligible
            individuals residing in each alliance area;
                (5) the characteristics of corporate alliances, including
            the number, and demographic characteristics of individuals who
            are eligible to be enrolled in each corporate alliance health
            plan and individuals with respect to whom a large employer has
            exercised an option under section 1311 to make ineligible for
            such enrollment;
                (6) terms of agreement between health plans and the health
            care providers who are members of provider networks of the
            plans (as defined in section 1402(f));
                (7) payment of benefits in cases in which benefits may be
            payable under a health plan and any other insurance policy or
            health program;
                (8) utilization management by health plans and health care
            providers;
                (9) the information collected and reported by the Board or
            disseminated by other individuals or entities as part of the
            National Quality Management Program under subtitle A;
                (10) grievances filed against regional alliances, corporate
            alliances, and health plans and the resolutions of such
            grievances; and
                (11) any other fact that may be necessary to determine
            whether a health plan or a health care provider has complied
            with a Federal statute pertaining to fraud or misrepresentation
            in the provision or purchasing of health care or in the
            submission of a claim for benefits or payment under a health
            plan.

    SEC. 5102. ADDITIONAL REQUIREMENTS FOR HEALTH INFORMATION SYSTEM.

        (a) Consultation.--The health information system shall be developed
    in consultation with--
                (1) Federal agencies that--
                        (A) collect health care information;
                        (B) oversee the collection of information or
                    records management by other Federal agencies;
                        (C) directly provide health care services;
                        (D) provide for payments for health care services;
                    or
                        (E) enforce a provision of this Act or any Act
                    amended by this Act;
                (2) the National Quality Management Council established
            under section 5002;
                (3) participating States;
                (4) regional alliances and corporate alliances;
                (5) health plans;
                (6) representatives of health care providers;
                (7) representatives of employers;
                (8) representatives of consumers of health care;
                (9) experts in public health and health care information
            and technology; and
                (10) representatives of organizations furnishing health
            care supplies, services, and equipment.
        (b) Collection and Transmission Requirements.--In establishing
    standards under section 5101, the National Health Board shall specify
    the form and manner in which individuals and entities are required to
    collect or transmit health care information for or to the Board. The
    Board also shall specify the frequency with which individuals and
    entities are required to transmit such information to the Board. Such
    specifications shall include, to the extent practicable--
                (1) requirements for use of uniform paper forms containing
            standard data elements, definitions, and instructions for
            completion in cases where the collection or transmission of
            data in electronic form is not specified by the Board;
                (2) requirements for use of uniform health data sets with
            common definitions to standardize the collection and
            transmission of data in electronic form;
                (3) uniform presentation requirements for data in
            electronic form; and
                (4) electronic data interchange requirements for the
            exchange of data among automated health information systems.
        (c) Preemption of State ``Pen & Quill'' Laws.--A standard
    established by the National Health Board relating to the form in which
    medical or health plan records are required to be maintained shall
    supercede any contrary provision of State law, except where the Board
    determines that the provision is necessary to prevent fraud and abuse,
    with respect to controlled substances, or for other purposes.

    SEC. 5103. ELECTRONIC DATA NETWORK.

        (a) In General.--As part of the health information system, the
    National Health Board shall oversee the establishment of an electronic
    data network consisting of regional centers that collect, compile, and
    transmit information.
        (b) Consultation.--The electronic data network shall be developed
    in consultation with--
                (1) Federal agencies that--
                        (A) collect health care information;
                        (B) oversee the collection of information or
                    records management by other Federal agencies;
                        (C) directly provide health care services;
                        (D) provide for payments for health care services;
                    or
                        (E) enforce a provision of this Act or any Act
                    amended by this Act;
                (2) the National Quality Management Council established
            under section 5002;
                (3) participating States;
                (4) regional alliances and corporate alliances;
                (5) health plans;
                (6) representatives of health care providers;
                (7) representatives of employers;
                (8) representatives of consumers of health care;
                (9) experts in public health and health care information
            and technology; and
                (10) representatives of organizations furnishing health
            care supplies, services, and equipment.
        (c) Demonstration Projects.--The electronic data network shall be
    tested prior to full implementation through the establishment of
    demonstration projects.
        (d) Disclosure of Individually Identifiable Information.--The
    electronic data network may be used to disclose individually
    identifiable health information (as defined in section 5123(3)) to any
    individual or entity only in accordance with the health information
    system privacy standards promulgated by the National Health Board under
    section 5120.

    SEC. 5104. UNIQUE IDENTIFIER NUMBERS.

        (a) In General.--As part of the health information system, the
    Board shall establish a system to provide for a unique identifier
    number for each--
                (1) eligible individual;
                (2) employer;
                (3) health plan; and
                (4) health care provider.
        (b) Impermissible Data Links.--In establishing the system under
    subsection (a), the National Health Board shall ensure that a unique
    identifier number may not be used to connect individually identifiable
    health information (as defined in section 5123(3)) that is collected as
    part of the health information system or that otherwise may be accessed
    through the number with individually identifiable information from any
    other source, except in cases where the National Health Board
    determines that such connection is necessary to carry out a duty
    imposed on any individual or entity under this Act.
        (c) Permissible Uses of Identifier.--The National Health Board
    shall by regulation establish the purposes for which a unique
    identifier number provided pursuant to this section may be used.

    SEC. 5105. HEALTH SECURITY CARDS.

        (a) Permissible Uses of Card.--A health security card that is
    issued to an eligible individual under section 1001(b) may be used by
    an individual or entity, in accordance with regulations promulgated by
    the Board, only for the purpose of providing or assisting the eligible
    individual in obtaining an item or service that is covered under--
                (1) the applicable health plan in which the individual is
            enrolled (as defined in section 1902);
                (2) a policy consisting of a supplemental health benefit
            policy (described in part 2 of subtitle E of title I), a cost
            sharing policy (described in such part), or both;
                (3) a FEHBP supplemental plan (described in subtitle C of
            title VIII);
                (4) a FEHBP medicare supplemental plan (described in such
            subtitle); or
                (5) such other programs as the Board may specify.
        (b) Form of Card and Encoded Information.--The National Health
    Board shall establish standards respecting the form of health security
    cards and the information to be encoded in electronic form on the
    cards. Such information shall include--
                (1) the identity of the individual to whom the card is
            issued;
                (2) the applicable health plan in which the individual is
            enrolled;
                (3) any policy described in paragraph (2), (3), or (4) of
            subsection (a) in which the individual is enrolled; and
                (4) any other information that the National Health Board
            determines to be necessary in order for the card to serve the
            purpose described in subsection (a).
        (c) Unique Identifier Numbers.--The unique identifier number system
    developed by the National Health Board under section 5104 shall be used
    in encoding the information described in subsection (b).
        (d) Registration of Card.--The Board shall take appropriate steps
    to register the card, the name of the card, and other indicia relating
    to the card as a trademark or service mark (as appropriate) under the
    Trademark Act of 1946. For purposes of this subsection, the ``Trademark
    Act of 1946'' refers to the Act entitled ``An Act to provide for the
    registration and protection of trademarks used in commerce, to carry
    out the provisions of international conventions, and for other
    purposes'', approved July 5, 1946 (15 U.S.C. et seq.).
        (e) Reference to Crime.--For a provision relating to criminal
    penalties for misuse of a health security card or a unique identifier
    number, see section 5438.

    SEC. 5106. TECHNICAL ASSISTANCE IN THE ESTABLISHMENT OF HEALTH
                  INFORMATION SYSTEMS.

        The National Health Board shall provide information and technical
    assistance to participating States, regional alliances, corporate
    alliances, health plans, and health care providers with respect to the
    establishment and operation of automated health information systems.
    Such assistance shall focus on--
                (1) the promotion of community-based health information
            systems; and
                (2) the promotion of patient care information systems that
            collect data at the point of care or as a by-product of the
            delivery of care.

                         PART 2--PRIVACY OF INFORMATION

    SEC. 5120. HEALTH INFORMATION SYSTEM PRIVACY STANDARDS.

        (a) Health Information System Standards.--Not later than 2 years
    after the date of the enactment of this Act, the National Health Board
    shall promulgate standards respecting the privacy of individually
    identifiable health information that is in the health information
    system described in part 1 of this subtitle. Such standards shall
    include standards concerning safeguards for the security of such
    information. The Board shall develop and periodically revise the
    standards in consultation with--
                (1) Federal agencies that--
                        (A) collect health care information;
                        (B) oversee the collection of information or
                    records management by other Federal agencies;
                        (C) directly provide health care services;
                        (D) provide for payments for health care services;
                    or
                        (E) enforce a provision of this Act or any Act
                    amended by this Act;
                (2) the National Quality Management Council established
            under section 5002;
                (3) participating States;
                (4) regional alliances and corporate alliances;
                (5) health plans; and
                (6) representatives of consumers of health care.
        (b) Information Covered.--The standards established under
    subsection (a) shall apply to individually identifiable health
    information collected for or by, reported to or by, or the
    dissemination of which is regulated by, the National Health Board under
    section 5101.
        (c) Principles.--The standards established under subsection (a)
    shall incorporate the following principles:
                (1) Unauthorized disclosure.--All disclosures of
            individually identifiable health information by an individual
            or entity shall be unauthorized unless--
                        (A) the disclosure is by the enrollee identified in
                    the information or whose identity can be associated
                    with the information;
                        (B) the disclosure is authorized by such enrollee
                    in writing in a manner prescribed by the Board;
                        (C) the disclosure is to Federal, State, or local
                    law enforcement agencies for the purpose of enforcing
                    this Act or an Act amended by this Act; or
                        (D) the disclosure otherwise is consistent with
                    this Act and specific criteria governing disclosure
                    established by the Board.
                (2) Minimal disclosure.--All disclosures of individually
            identifiable health information shall be restricted to the
            minimum amount of information necessary to accomplish the
            purpose for which the information is being disclosed.
                (3) Risk adjustment.--No individually identifiable health
            information may be provided by a health plan to a regional
            alliance or a corporate alliance for the purpose of setting
            premiums based on risk adjustment factors.
                (4) Required safeguards.--Any individual or entity who
            maintains, uses, or disseminates individually identifiable
            health information shall implement administrative, technical,
            and physical safeguards for the security of such information.
                (5) Right to know.--An enrollee (or an enrollee
            representative of the enrollee) has the right to know--
                        (A) whether any individual or entity uses or
                    maintains individually identifiable health information
                    concerning the enrollee; and
                        (B) for what purposes the information may be used
                    or maintained.
                (6) Right to access.--Subject to appropriate procedures, an
            enrollee (or an enrollee representative of the enrollee) has
            the right, with respect to individually identifiable health
            information concerning the enrollee that is recorded in any
            form or medium--
                        (A) to see such information;
                        (B) to copy such information; and
                        (C) to have a notation made with or in such
                    information of any amendment or correction of such
                    information requested by the enrollee or enrollee
                    representative.
                (7) Right to notice.--An enrollee and an enrollee
            representative have the right to receive a written statement
            concerning--
                        (A) the purposes for which individually
                    identifiable health information provided to a health
                    care provider, a health plan, a regional alliance, a
                    corporate alliance, or the National Health Board may be
                    used or disclosed by, or disclosed to, any individual
                    or entity; and
                        (B) the right of access described in paragraph (6).
                (8) Use of unique identifier.--When individually
            identifiable health information concerning an enrollee is
            required to accomplish the purpose for which information is
            being transmitted between or among the National Health Board,
            regional and corporate alliances, health plans, and health care
            providers, the transmissions shall use the unique identifier
            number provided to the enrollee pursuant to section 5104 in
            lieu of the name of the enrollee.
                (9) Use for employment decisions.--Individually
            identifiable health care information may not be used in making
            employment decisions.

    SEC. 5121. OTHER DUTIES WITH RESPECT TO PRIVACY.

        (a) Research and Technical Support.--The National Health Board may
    sponsor--
                (1) research relating to the privacy and security of
            individually identifiable health information;
                (2) the development of consent forms governing disclosure
            of such information; and
                (3) the development of technology to implement standards
            regarding such information.
        (c) Education.--The National Health Board shall establish education
    and awareness programs--
                (1) to foster adequate security practices by States,
            regional alliances, corporate alliances, health plans, and
            health care providers;
                (2) to train personnel of public and private entities who
            have access to individually identifiable health information
            respecting the duties of such personnel with respect to such
            information; and
                (3) to inform individuals and employers who purchase health
            care respecting their rights with respect to such information.

    SEC. 5122. COMPREHENSIVE HEALTH INFORMATION PRIVACY PROTECTION ACT.

        (a) In General.--Not later than 3 years after the date of the
    enactment of this Act, the National Health Board shall submit to the
    President and the Congress a detailed proposal for legislation to
    provide a comprehensive scheme of Federal privacy protection for
    individually identifiable health information.
        (b) Code of Fair Information Practices.--The proposal shall include
    a Code of Fair Information Practices to be used to advise enrollees to
    whom individually identifiable health information pertains of their
    rights with respect to such information in an easily understood and
    useful form.
        (c) Enforcement.--The proposal shall include provisions to enforce
    effectively the rights and duties that would be created by the
    legislation.

    SEC. 5123. DEFINITIONS.

        For purposes of this part:
                (1) Enrollee.--The term ``enrollee'' means an individual
            who enrolls or has enrolled under a health plan. The term
            includes a deceased individual who was enrolled under a health
            plan.
                (2) Enrollee representative.--The term ``enrollee
            representative'' means any individual legally empowered to make
            decisions concerning the provision of health care to an
            enrollee or the administrator or executor of the estate of a
            deceased enrollee.
                (3) Individually identifiable health information.--The term
            ``individually identifiable health information'' means any
            information, whether oral or recorded in any form or medium,
            that--
                        (A) identifies or can readily be associated with
                    the identity of an enrollee; and
                        (B) relates to--
                                (i) the past, present, or future physical
                            or mental health of the enrollee;
                                (ii) the provision of health care to the
                            enrollee; or
                                (iii) payment for the provision of health
                            care to the enrollee.

         PART 3--INTERIM REQUIREMENTS FOR ADMINISTRATIVE SIMPLIFICATION

    SEC. 5130. STANDARD BENEFIT FORMS.

        (a) Development.--Not later than 1 year after the date of the
    enactment of this Act, the National Health Board shall develop,
    promulgate, and publish in the Federal Register the following standard
    health care benefit forms:
                (1) An enrollment and disenrollment form to be used to
            record enrollment and disenrollment in a health benefit plan.
                (2) A clinical encounter record to be used by health
            benefit plans and health service providers.
                (3) A claim form to be used in the submission of claims for
            benefits or payment under a health benefit plan.
        (b) Instructions, Definitions, and Codes.--Each standard form
    developed under subsection (a) shall include instructions for
    completing the form that--
                (1) specifically define, to the extent practicable, the
            data elements contained in the form; and
                (2) standardize any codes or data sets to be used in
            completing the form.
        (c) Requirements for Adoption of Forms.--
                (1) Health service providers.--On or after the date that is
            270 days after the publication of the standard forms developed
            under subsection (a), a health service provider that furnishes
            items or services in the United States for which payment may be
            made under a health benefit plan may not--
                        (A) maintain records of clinical encounters
                    involving such items or services that are required to
                    be maintained by the National Health Board in a paper
                    form that is not the clinical encounter record
                    promulgated by the Board; or
                        (B) submit any claim for benefits or payment for
                    such services to such plan in a paper form that is not
                    the claim form promulgated by the National Health
                    Board.
                (2) Health benefit plans.--On or after the date that is 270
            days after the publication of the standard forms developed
            under subsection (a), a health benefit plan may not--
                        (A) record enrollment and disenrollment in a paper
                    form that is not the enrollment and disenrollment form
                    promulgated by the National Health Board;
                        (B) maintain records of clinical encounters that
                    are required to be maintained by the National Health
                    Board in a paper form that is not the clinical
                    encounter record promulgated by the Board; or
                        (C) reject a claim for benefits or payment under
                    the plan on the basis of the form or medium in which
                    the claim is submitted if--
                                (i) the claim is submitted on the claim
                            form promulgated by the National Health Board;
                            and
                                (ii) the plan accepts claims submitted in
                            paper form.
        (d) Definitions.--For purposes of this subtitle:
                (1) Health benefit plan.--
                        (A) In general.--The term ``health benefit plan''
                    means, except as provided in subparagraphs (B) through
                    (D), any public or private entity or program that
                    provides for payments for health care services,
                    including--
                                (i) a group health plan (as defined in
                            section 5000(b)(1) of the Internal Revenue Code
                            of 1986); and
                                (ii) any other health insurance
                            arrangement, including any arrangement
                            consisting of a hospital or medical expense
                            incurred policy or certificate, hospital or
                            medical service plan contract, or health
                            maintenance organization subscriber contract.
                        (B) Plans excluded.--Such term does not include--
                                (i) accident-only, credit, or disability
                            income insurance;
                                (ii) coverage issued as a supplement to
                            liability insurance;
                                (iii) an individual making payment on the
                            individual's own behalf (or on behalf of a
                            relative or other individual) for deductibles,
                            coinsurance, or services not covered under a
                            health benefit plan; and
                                (iv) such other plans as the National
                            Health Board may determine, because of the
                            limitation of benefits to a single type or kind
                            of health care, such as dental services or
                            hospital indemnity plans, or other reasons
                            should not be subject to the requirements of
                            this section.
                        (C) Plans included.--Such term includes--
                                (i) workers compensation or similar
                            insurance insofar as it relates to workers
                            compensation medical benefits (as defined in
                            section 10000(3)) provided by or through health
                            plans; and
                                (ii) automobile medical insurance insofar
                            as it relates to automobile insurance medical
                            benefits (as defined in section 10100(2))
                            provided by or through health plans.
                        (D) Treatment of direct provision of services.--
                    Such term does not include a Federal or State program
                    that provides directly for the provision of health
                    services to beneficiaries.
                (2) Health service provider.--The term ``health service
            provider'' includes a provider of services (as defined in
            section 1861(u) of the Social Security Act), physician,
            supplier, and other person furnishing health care services.
            Such term includes a Federal or State program that provides
            directly for the provision of health services to beneficiaries.
        (e) Interim Nature of Requirements.--The National Health Board may
    modify, update, or supercede any standard form or requirement
    developed, promulgated, or imposed under this section through the
    establishment of a standard under section 5101.

                           PART 4--GENERAL PROVISIONS

    SEC. 5140. NATIONAL PRIVACY AND HEALTH DATA ADVISORY COUNCIL.

        (a) Establishment.--There is established an advisory council to be
    known as the National Privacy and Health Data Advisory Council.
        (b) Duties.--The Council shall advise the National Health Board
    with respect to its duties under this subtitle.
        (c) Number and Appointment.--The Council shall be composed of 15
    members appointed by the National Health Board. The members of the
    Council shall include--
                (1) individuals representing the interests of consumers,
            employers, and other purchasers of health care;
                (2) individuals representing the interests of health plans,
            health care providers, corporate alliances, regional alliances,
            public health agencies, and participating States; and
                (3) individuals distinguished in the fields of data
            collection, data protection and privacy, law, ethics, medical
            and health services research, public health, and civil
            liberties and patient advocacy.
        (d) Terms.--
                (1) In general.--Except as provided in paragraph (2),
            members of the Council shall serve for a term of 3 years.
                (2) Staggered rotation.--Of the members first appointed to
            the Council under subsection (c), the National Health Board
            shall appoint 5 members to serve for a term of 3 years, 5
            members to serve for a term of 2 years, and 5 members to serve
            for a term of 1 year.
                (3) Service beyond term.--A member of the Council may
            continue to serve after the expiration of the term of the
            member until a successor is appointed.
        (e) Vacancies.--If a member of the Council does not serve the full
    term applicable under subsection (d), the individual appointed to fill
    the resulting vacancy shall be appointed for the remainder of the term
    of the predecessor of the individual.
        (f) Chair.--The National Health Board shall designate an individual
    to serve as the chair of the Council.
        (g) Meetings.--The Council shall meet not less than once during
    each 4-month period and shall otherwise meet at the call of the
    National Health Board or the chair.
        (h) Compensation and Reimbursement of Expenses.--Members of the
    Council shall receive compensation for each day (including travel time)
    engaged in carrying out the duties of the Council. Such compensation
    may not be in an amount in excess of the maximum rate of basic pay
    payable for level IV of the Executive Schedule under section 5315 of
    title 5, United States Code.
        (i) Staff.--The National Health Board shall provide to the Council
    such staff, information, and other assistance as may be necessary to
    carry out the duties of the Council.
        (j) Duration.--Notwithstanding section 14(a) of the Federal
    Advisory Committee Act, the Council shall continue in existence until
    otherwise provided by law.

    SEC. 5141. CIVIL MONEY PENALTIES.

        (a) Violation of Health Information System Standards.--Any person
    who the Secretary of Health and Human Services determines--
                (1) is required, but has substantially failed, to comply
            with a standard established by the National Health Board under
            section 5101 or 5120;
                (2) has required the display of, has required the use of,
            or has used a health security card for any purpose other than a
            purpose described in section 5105(a); or
                (3) has required the disclosure of, has required the use
            of, or has used a unique identifier number provided pursuant to
            section 5104 for any purpose that is not authorized by the
            National Health Board pursuant to such section
    shall be subject, in addition to any other penalties that may be
    prescribed by law, to a civil money penalty of not more than $10,000
    for each such violation.
        (b) Standard Benefit Forms.--Any health service provider or health
    benefit plan that the Secretary of Health and Human Services determines
    is required, but has substantially failed, to comply with section
    5130(c) shall be subject, in addition to any other penalties that may
    be prescribed by law, to a civil money penalty of not more than $10,000
    for each such violation.
        (c) Process.--The process for the imposition of a civil money
    penalty under the All-Payer Health Care Fraud and Abuse Control Program
    under part 1 of subtitle E of this title shall apply to a civil money
    penalty under this section in the same manner as such process applies
    to a penalty or proceeding under such program.

    SEC. 5142. RELATIONSHIP TO OTHER LAWS.

        (a) Court Orders.--Nothing in this title shall be construed to
    invalidate or limit the power or authority of any court of competent
    jurisdiction with respect to health care information.
        (b) Public Health Reporting.--Nothing in this title shall be
    construed to invalidate or limit the authorities, powers, or procedures
    established under any law that provides for the reporting of disease,
    child abuse, birth, or death.

                                                        Title V, Subtitle C

                      Subtitle C--Remedies and Enforcement

       PART 1--REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS

                            Subpart A--General Rules

    SEC. 5201. HEALTH PLAN CLAIMS PROCEDURE.

        (a) Definitions.--For purposes of this section--
                (1) Claim.--The term ``claim'' means a claim for payment or
            provision of benefits under a health plan or a request for
            preauthorization of items or services which is submitted to a
            health plan prior to receipt of the items or services.
                (2) Individual claimant.--The term ``individual claimant''
            with respect to a claim means any individual who submits the
            claim to a health plan in connection with the individual's
            enrollment under the plan, or on whose behalf the claim is
            submitted to the plan by a provider.
                (3) Provider claimant.--The term ``provider claimant'' with
            respect to a claim means any provider who submits the claim to
            a health plan with respect to items or services provided to an
            individual enrolled under the plan.
        (b) General Rules Governing Treatment of Claims.--
                (1) Adequate notice of disposition of claim.--In any case
            in which a claim is submitted in complete form to a health
            plan, the plan shall provide to the individual claimant and any
            provider claimant with respect to the claim a written notice of
            the plan's approval or denial of the claim within 30 days after
            the date of the submission of the claim. The notice to the
            individual claimant shall be written in language calculated to
            be understood by the typical individual enrolled under the plan
            and in a form which takes into account accessibility to the
            information by individuals whose primary language is not
            English. In the case of a denial of the claim, the notice shall
            be provided within 5 days after the date of the determination
            to deny the claim, and shall set forth the specific reasons for
            the denial. The notice of a denial shall include notice of the
            right to appeal the denial under paragraph (2). Failure by any
            plan to comply with the requirements of this paragraph with
            respect to any claim submitted to the plan shall be treated as
            approval by the plan of the claim.
                (2) Plan's duty to review denials upon timely request.--The
            plan shall review its denial of the claim if an individual
            claimant or provider claimant with respect to the claim submits
            to the plan a written request for reconsideration of the claim
            after receipt of written notice from the plan of the denial.
            The plan shall allow any such claimant not less than 60 days,
            after receipt of written notice from the plan of the denial, to
            submit the claimant's request for reconsideration of the claim.
                (3) Time limit for review.--The plan shall complete any
            review required under paragraph (2), and shall provide the
            individual claimant and any provider claimant with respect to
            the claim written notice of the plan's decision on the claim
            after reconsideration pursuant to the review, within 30 days
            after the date of the receipt of the request for
            reconsideration.
                (4) De novo reviews.--Any review required under paragraph
            (2)--
                        (A) shall be de novo,
                        (B) shall be conducted by an individual who did not
                    make the initial decision denying the claim and who is
                    authorized to approve the claim, and
                        (C) shall include review by a qualified physician
                    if the resolution of any issues involved requires
                    medical expertise.
        (c) Treatment of Urgent Requests to Plans for Preauthorization.--
                (1) In general.--This subsection applies in the case of any
            claim submitted by an individual claimant or a provider
            claimant consisting of a request for preauthorization of items
            or services (other than emergency services which under section
            1406(b) may not be subject to preauthorization) which is
            accompanied by an attestation that--
                        (A) failure to immediately provide the items or
                    services could reasonably be expected to result in--
                                (i) placing the health of the individual
                            claimant (or, with respect to an individual
                            claimant who is a pregnant woman, the health of
                            the woman or her unborn child) in serious
                            jeopardy,
                                (ii) serious impairment to bodily
                            functions, or
                                (iii) serious dysfunction of any bodily
                            organ or part,
                    or
                        (B) immediate provision of the items or services is
                    necessary because the individual claimant has made or
                    is at serious risk of making an attempt to harm such
                    individual claimant or another individual.
                (2) Shortened time limit for consideration of requests for
            preauthorization.--Notwithstanding subsection (b)(1), a health
            plan shall approve or deny any claim described in paragraph (1)
            within 24 hours after submission of the claim to the plan.
            Failure by the plan to comply with the requirements of this
            paragraph with respect to the claim shall be treated as
            approval by the plan of the claim.
                (3) Expedited exhaustion of plan remedies.--Any claim
            described in paragraph (1) which is denied by the plan shall be
            treated as a claim with respect to which all remedies under the
            plan provided pursuant to this section are exhausted,
            irrespective of any review provided under subsection (b)(2).
                (4) Denial of previously authorized claims not permitted.--
            In any case in which a health plan approves a claim described
            in paragraph (1)--
                        (A) the plan may not subsequently deny payment or
                    provision of benefits pursuant to the claim, unless the
                    plan makes a showing of an intentional
                    misrepresentation of a material fact by the individual
                    claimant, and
                        (B) in the case of a violation of subparagraph (A)
                    in connection with the claim, all remedies under the
                    plan provided pursuant to this section with respect to
                    the claim shall be treated as exhausted.
        (d) Time Limit for Determination of Incompleteness of Claim.--For
    purposes of this section--
                (1) any claim submitted by an individual claimant and
            accepted by a provider serving under contract with a health
            plan and any claim described in subsection (b)(1) shall be
            treated with respect to the individual claimant as submitted in
            complete form, and
                (2) any other claim for benefits under the plan shall be
            treated as filed in complete form as of 10 days after the date
            of the submission of the claim, unless the plan provides to the
            individual claimant and any provider claimant, within such
            period, a written notice of any required matter remaining to be
            filed in order to complete the claim.
    Any filing by the individual claimant or the provider claimant of
    additional matter requested by the plan pursuant to paragraph (2) shall
    be treated for purposes of this section as an initial filing of the
    claim.
        (e) Additional Notice and Disclosure Requirements for Health
    Plans.--In the case of a denial of a claim for benefits under a health
    plan, the plan shall include, together with the specific reasons
    provided to the individual claimant and any provider claimant under
    subsection (b)(1)--
                (1) if the denial is based in whole or in part on a
            determination that the claim is for an item or service which is
            not covered by the comprehensive benefit package or exceeds
            payment rates under the applicable alliance or State fee
            schedule, the factual basis for the determination,
                (2) if the denial is based in whole or in part on exclusion
            of coverage with respect to services because the services are
            determined to comprise an experimental treatment or
            investigatory procedure, the medical basis for the
            determination and a description of the process used in making
            the determination, and
                (3) if the denial is based in whole or in part on a
            determination that the treatment is not medically necessary or
            appropriate or is inconsistent with the plan's practice
            guidelines, the medical basis for the determination, the
            guidelines used in making the determination, and a description
            of the process used in making the determination.
        (f) Waiver of Rights Prohibited.--A health plan may not require any
    party to waive any right under the plan or this Act as a condition for
    approval of any claim under the plan, except to the extent otherwise
    specified in a formal settlement agreement.

    SEC. 5202. REVIEW IN REGIONAL ALLIANCE COMPLAINT REVIEW OFFICES OF
                  GRIEVANCES BASED ON ACTS OR PRACTICES BY HEALTH PLANS.

        (a) Complaint Review Offices.--
                (1) In general.--In accordance with rules which shall be
            prescribed by the Secretary of Labor, each State shall
            establish and maintain a complaint review office for each
            regional alliance established by such State. According to
            designations which shall be made by each State under
            regulations of the Secretary of Labor, the complaint review
            office for a regional alliance established by such State shall
            also serve as the complaint review office for corporate
            alliances operating in the State with respect to individuals
            who are enrolled under plans described in subsection (b)
            maintained by such corporate alliances and who reside within
            the area of the regional alliance.
                (2) Regional alliances not established by States.--In the
            case of any regional alliance established in any State by the
            Secretary of Health and Human Services, the Secretary of Health
            and Human Services shall assume all duties and obligations of
            such State under this part in accordance with the applicable
            regulations of the Secretary of Labor under this part.
        (b) Filings of Complaints by Aggrieved Persons.--In the case of any
    person who is aggrieved by--
                (1) any act or practice engaged in by any health plan which
            consists of or results in denial of payment or provision of
            benefits under the plan or delay in the payment or provision of
            benefits, or
                (2) any act or practice engaged in by any other plan
            maintained by a regional alliance or a corporate alliance which
            consists of or results in denial of payment or provision of
            benefits under a supplemental benefit policy described in
            section 1421(b)(1) or a cost sharing policy described in
            section 1421(b)(2) or delay in the payment or provision of the
            benefits,
    if the denial or delay consists of a failure to comply with the terms
    of the plan (including the provision of benefits in full when due in
    accordance with the terms of the plan), or with the applicable
    requirements of this Act, such person may file a complaint with the
    appropriate complaint review office.
        (c) Exhaustion of Plan Remedies.--Any complaint including a claim
    to which section 5201 applies may not be filed until the complainant
    has exhausted all remedies provided under the plan with respect to the
    claim in accordance with such section.
        (d) Exclusive Means of Review for Plans Maintained by Corporate
    Alliances.--Notwithstanding part 2, proceedings under sections 5203 and
    5204 pursuant to complaints filed under subsection (b), and review
    under section 5205 of determinations made under section 5204, shall be
    the exclusive means of review of acts or practices described in
    subsection (b) which are engaged in by a corporate alliance health plan
    or by any plan maintained by a corporate alliance with respect to
    benefits under a supplemental benefit policy described in section
    1421(b)(1) or a cost sharing policy described in section 1421(b)(2).
        (e) Form of Complaint.--The complaint shall be in writing under
    oath or affirmation, shall set forth the complaint in a manner
    calculated to give notice of the nature of the complaint, and shall
    contain such information as may be prescribed in regulations of the
    Secretary of Labor.
        (f) Notice of Filing.--The complaint review office shall serve by
    certified mail a notice of the complaint (including the date, place,
    and circumstances of the alleged violation) on the person or persons
    alleged in the complaint to have committed the violation within 10 days
    after the filing of the complaint.
        (g) Time Limitation.--Complaints may not be brought under this
    section with respect to any violation later than one year after the
    date on which the violation occurs. This subsection shall not prevent
    the subsequent amending of a complaint.

    SEC. 5203. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

        (a) Elections.--Whenever a complaint is brought to the complaint
    review office under section 5202(b), the complaint review office shall
    provide the complainant with an opportunity, in such form and manner as
    shall be prescribed in regulations of the Secretary of Labor, to elect
    one of the following:
                (1) to forego further proceedings in the complaint review
            office and rely on remedies available in a court of competent
            jurisdiction, with respect to any matter in the complaint with
            respect to which proceedings under this section and section
            5204, and review under section 5205, are not under section
            5202(d) the exclusive means of review,
                (2) to submit the complaint as a dispute under the Early
            Resolution Program established under subpart B and thereby
            suspend further review proceedings under this section pending
            termination of proceedings under the Program, or
                (3) in any case in which an election under paragraph (2) is
            not made, or such an election was made but resolution of all
            matters in the complaint was not obtained upon termination of
            proceedings pursuant to the election by settlement agreement or
            otherwise, to proceed with the complaint to a hearing in the
            complaint review office under section 5204 regarding the
            unresolved matters.
        (b) Effect of Participation in Early Resolution Program.--Any
    matter in a complaint brought to the complaint review office which is
    included in a dispute which is timely submitted to the Early Resolution
    Program established under subpart B shall not be assigned to a hearing
    under section 5204 unless the proceedings under the Program with
    respect to the dispute are terminated without settlement or resolution
    of the dispute with respect to such matter. Upon termination of any
    proceedings regarding a dispute submitted to the Program, the
    applicability of this section to any matter in a complaint which was
    included in the dispute shall not be affected by participation in the
    proceedings, except to the extent otherwise required under the terms of
    any settlement agreement or other formal resolution obtained in the
    proceedings.

    SEC. 5204. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT REVIEW
                  OFFICES.

        (a) Hearing Process.--
                (1) Assignment of complaints to hearing officers and notice
            to parties.--
                        (A) In general.--In the case of an election under
                    section 5203(a)(3)--
                                (i) the complaint review office shall
                            assign the complaint, and each motion in
                            connection with the complaint, to a hearing
                            officer employed by the State in the office;
                            and
                                (ii) the hearing officer shall have the
                            power to issue and cause to be served upon the
                            plan named in the complaint a copy of the
                            complaint and a notice of hearing before the
                            hearing officer at a place fixed in the notice,
                            not less than 5 days after the serving of the
                            complaint.
                        (B) Qualifications for hearing officers.--No
                    individual may serve in a complaint review office as a
                    hearing officer unless the individual meets standards
                    which shall be prescribed by the Secretary of Labor.
                    Such standards shall include experience, training,
                    affiliations, diligence, actual or potential conflicts
                    of interest, and other qualifications deemed relevant
                    by the Secretary of Labor. At no time shall a hearing
                    officer have any official, financial, or personal
                    conflict of interest with respect to issues in
                    controversy before the hearing officer.
                (2) Amendment of complaints.--Any such complaint may be
            amended by the hearing officer conducting the hearing, upon the
            motion of the complainant, in the hearing officer's discretion
            at any time prior to the issuance of an order based thereon.
                (3) Answers.--The party against whom the complaint is filed
            shall have the right to file an answer to the original or
            amended complaint and to appear in person or otherwise and give
            testimony at the place and time fixed in the complaint.
        (b) Additional Parties.--In the discretion of the hearing officer
    conducting the hearing, any other person may be allowed to intervene in
    the proceeding and to present testimony.
        (c) Hearings.--
                (1) De novo hearing.--Each hearing officer shall hear
            complaints and motions de novo.
                (2) Testimony.--The testimony taken by the hearing officer
            shall be reduced to writing. Thereafter, the hearing officer,
            in his or her discretion, upon notice may provide for the
            taking of further testimony or hear argument.
                (3) Authority of hearing officers.--The hearing officer may
            compel by subpoena the attendance of witnesses and the
            production of evidence at any designated place or hearing. In
            case of contumacy or refusal to obey a subpoena lawfully issued
            under this paragraph and upon application of the hearing
            officer, an appropriate district court of the United States may
            issue an order requiring compliance with the subpoena and any
            failure to obey the order may be punished by the court as a
            contempt thereof. The hearing officer may also seek enforcement
            of the subpoena in a State court of competent jurisdiction.
                (4) Expedited hearings.--Notwithstanding section 5203 and
            the preceding provisions of this section, upon receipt of a
            complaint containing a claim described in section 5201(c)(1),
            the complaint review office shall promptly provide the
            complainant with the opportunity to make an election under
            section 5203(a)(3) and assignment to a hearing on the complaint
            before a hearing officer. The complaint review office shall
            ensure that such a hearing commences not later than 24 hours
            after receipt of the complaint by the complaint hearing office.
        (d) Decision of Hearing Officer.--
                (1) In general.--The hearing officer shall decide upon the
            preponderance of the evidence whether to decide in favor of the
            complainant with respect to each alleged act or practice. Each
            such decision--
                        (A) shall include the hearing officer's findings of
                    fact, and
                        (B) shall constitute the hearing officer's final
                    disposition of the proceedings.
                (2) Decisions finding in favor of complainant.--If the
            hearing officer's decision includes a determination that any
            party named in the complaint has engaged in or is engaged in an
            act or practice described in section 5202(b), the hearing
            officer shall issue and cause to be served on such party an
            order which requires such party--
                        (A) to cease and desist from such act or practice,
                        (B) to provide the benefits due under the terms of
                    the plan and to otherwise comply with the terms of the
                    plan and the applicable requirements of this Act,
                        (C) to pay to the complainant prejudgment interest
                    on the actual costs incurred in obtaining the items and
                    services at issue in the complaint, and
                        (D) to pay to the prevailing complainant a
                    reasonable attorney's fee, reasonable expert witness
                    fees, and other reasonable costs relating to the
                    hearing on the charges on which the complainant
                    prevails.
                (3) Decisions not in favor of complainant.--If the hearing
            officer's decision includes a determination that the party
            named in the complaint has not engaged in or is not engaged in
            an act or practice referred to in section 5202(b), the hearing
            officer--
                        (A) shall include in the decision a dismissal of
                    the charge in the complaint relating to the act or
                    practice, and
                        (B) upon a finding that such charge is frivolous,
                    shall issue and cause to be served on the complainant
                    an order which requires the complainant to pay to such
                    party a reasonable attorney's fee, reasonable expert
                    witness fees, and other reasonable costs relating to
                    the proceedings on such charge.
                (4) Submission and service of decisions.--The hearing
            officer shall submit each decision to the complaint review
            office at the conclusion of the proceedings and the office
            shall cause a copy of the decision to be served on the parties
            to the proceedings.
        (e) Review.--
                (1) In general.--The decision of the hearing officer shall
            be final and binding upon all parties. Except as provided in
            paragraph (2), any party to the complaint may, within 30 days
            after service of the decision by the complaint review office,
            file an appeal of the decision with the Federal Health Plan
            Review Board under section 5205 in such form and manner as may
            be prescribed by such Board.
                (2) Exception.--The decision in the case of an expedited
            hearing under subsection (c)(4) shall not be subject to review.
        (f) Court Enforcement of Orders.--
                (1) In general.--If a decision of the hearing officer in
            favor of the complainant is not appealed under section 5205,
            the complainant may petition any court of competent
            jurisdiction for enforcement of the order. In any such
            proceeding, the order of the hearing officer shall not be
            subject to review.
                (2) Awarding of costs.--In any action for court enforcement
            under this subsection, a prevailing complainant shall be
            entitled to a reasonable attorney's fee, reasonable expert
            witness fees, and other reasonable costs relating to such
            action.

    SEC. 5205. REVIEW BY FEDERAL HEALTH PLAN REVIEW BOARD.

        (a) Establishment and Membership.--The Secretary of Labor shall
    establish by regulation a Federal Health Plan Review Board (hereinafter
    in this subtitle referred to as the ``Review Board''). The Review Board
    shall be composed of 5 members appointed by the Secretary of Labor from
    among persons who by reason of training, education, or experience are
    qualified to carry out the functions of the Review Board under this
    subtitle. The Secretary of Labor shall prescribe such rules as are
    necessary for the orderly transaction of proceedings by the Review
    Board. Every official act of the Review Board shall be entered of
    record, and its hearings and records shall be open to the public.
        (b) Review Process.--The Review Board shall ensure, in accordance
    with rules prescribed by the Secretary of Labor, that reasonable notice
    is provided for each appeal before the Review Board of a hearing
    officer's decision under section 5304, and shall provide for the
    orderly consideration of arguments by any party to the hearing upon
    which the hearing officer's decision is based. In the discretion of the
    Review Board, any other person may be allowed to intervene in the
    proceeding and to present written argument. The National Health Board
    may intervene in the proceeding as a matter of right.
        (c) Scope of Review.--The Review Board shall review the decision of
    the hearing officer from which the appeal is made, except that the
    review shall be only for the purposes of determining--
                (1) whether the determination is supported by substantial
            evidence on the record considered as a whole,
                (2) in the case of any interpretation by the hearing
            officer of contractual terms (irrespective of the extent to
            which extrinsic evidence was considered), whether the
            determination is supported by a preponderance of the evidence,
                (3) whether the determination is in excess of statutory
            jurisdiction, authority, or limitations, or in violation of a
            statutory right, or
                (4) whether the determination is without observance of
            procedure required by law.
        (d) Decision of Review Board.--The decision of the hearing officer
    as affirmed or modified by the Review Board (or any reversal by the
    Review Board of the hearing officer's final disposition of the
    proceedings) shall become the final order of the Review Board and
    binding on all parties, subject to review under subsection (e). The
    Review Board shall cause a copy of its decision to be served on the
    parties to the proceedings not later than 5 days after the date of the
    decision.
        (e) Review of Final Orders.--
                (1) In general.--Not later than 60 days after the entry of
            the final order, any person aggrieved by any such final order
            under which the amount or value in controversy exceeds $10,000
            may seek a review of the order in the United States court of
            appeals for the circuit in which the violation is alleged to
            have occurred or in which the complainant resides.
                (2) Further review.--Upon the filing of the record with the
            court, the jurisdiction of the court shall be exclusive and its
            judgment shall be final, except that the judgment shall be
            subject to review by the Supreme Court of the United States
            upon writ of certiorari or certification as provided in section
            1254 of title 28 of the United States Code.
                (3) Enforcement decree in original review.--If, upon appeal
            of an order under paragraph (1), the United States court of
            appeals does not reverse the order, the court shall have the
            jurisdiction to make and enter a decree enforcing the order of
            the Review Board.
        (f) Awarding of Attorneys' Fees and Other Costs and Expenses.--In
    any proceeding before the Review Board under this section or any
    judicial proceeding under subsection (e), the Review Board or the court
    (as the case may be) shall award to a prevailing complainant reasonable
    costs and expenses (including a reasonable attorney's fee) on the
    causes on which the complainant prevails.

    SEC. 5206. RULES GOVERNING BENEFIT CLAIMS DETERMINATIONS.

        (a) In General.--Determinations made under this part or by any
    State court in connection with a complaint based on an act or practice
    described in section 5202(b) shall be in accordance with the provisions
    of this Act, the comprehensive benefit package as provided by this Act,
    the rules and regulations of the National Health Board prescribed under
    this Act, and decisions of the National Health Board under this Act.
        (b) Rights and Remedies Under State Law.--Subject to subsection
    (a), the rights and remedies available in State court against a health
    plan providing services through a regional alliance in connection with
    a complaint based on an act or practice described in section 5202(b)
    shall be governed by State law.

    SEC. 5207. CIVIL MONEY PENALTIES.

        (a) Denial or Delay in Payment or Provision of Benefits.--
                (1) In general.--The Secretary of Labor may assess a civil
            penalty against any health plan, or against any other plan in
            connection with benefits provided thereunder under a
            supplemental benefit policy described in section 1421(b)(1) or
            a cost sharing policy described in section 1421(b)(2), for
            unreasonable denial or delay in the payment or provision of
            benefits thereunder, in an amount not to exceed--
                        (A) $25,000 per violation, or $75,000 per violation
                    in the case of a finding of bad faith on the part of
                    the plan, and
                        (B) in the case of a finding of a pattern or
                    practice of such violations engaged in by the plan,
                    $1,000,000 in addition to the total amount of penalties
                    assessed under subparagraph (A) with respect to such
                    violations.
            For purposes of subparagraph (A), each violation with respect
            to any single individual shall be treated as a separate
            violation.
                (2) Civil action to enforce civil penalty.--The Secretary
            of Labor may commence a civil action in any court of competent
            jurisdiction to enforce a civil penalty assessed under
            paragraph (1).
        (b) Civil Penalties for Certain Other Actions.--The Secretary of
    Labor may assess a civil penalty described in section 5412(b)(1)
    against any corporate alliance health plan, or against any other plan
    sponsored by a corporate alliance in connection with benefits provided
    thereunder under a cost sharing policy described in section 1421(b)(2),
    for any action described in section 5412(a). The Secretary of Labor may
    initiate proceedings to impose such penalty in the same manner as the
    Secretary of Health and Human Services may initiate proceedings under
    section 5412 with respect to actions described in section 5412(a).

                      Subpart B--Early Resolution Programs

    SEC. 5211. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN COMPLAINT
                  REVIEW OFFICES.

        (a) Establishment of Programs.--Each State shall establish and
    maintain an Early Resolution Program in each complaint review office in
    such State. The Program shall include--
                (1) the establishment and maintenance of forums for
            mediation of disputes in accordance with this subpart, and
                (2) the establishment and maintenance of such forums for
            other forms of alternative dispute resolution (including
            binding arbitration) as may be prescribed in regulations of the
            Secretary of Labor.
    Each State shall ensure that the standards applied in Early Resolution
    Programs administered in such State which apply to any form of
    alternative dispute resolution described in paragraph (2) and which
    relate to time requirements, qualifications of facilitators,
    arbitrators, or other mediators, and confidentiality are at least
    equivalent to the standards which apply to mediation proceedings under
    this subpart.
        (b) Duties of Complaint Review Offices.--Each complaint review
    office in a State--
                (1) shall administer its Early Resolution Program in
            accordance with regulations of the Secretary of Labor,
                (2) shall, pursuant to subsection (a)(1)--
                        (A) recruit and train individuals to serve as
                    facilitators for mediation proceedings under the Early
                    Resolution Program from attorneys who have the
                    requisite expertise for such service, which shall be
                    specified in regulations of the Secretary of Labor,
                        (B) provide meeting sites, maintain records, and
                    provide facilitators with administrative support staff,
                    and
                        (C) establish and maintain attorney referral
                    panels,
                (3) shall ensure that, upon the filing of a complaint with
            the office, the complainant is adequately apprised of the
            complainant's options for review under this part, and
                (4) shall monitor and evaluate the Program on an ongoing
            basis.

    SEC. 5212. INITIATION OF PARTICIPATION IN MEDIATION PROCEEDINGS.

        (a) Eligibility of Cases for Submission to Early Resolution
    Program.--A dispute may be submitted to the Early Resolution Program
    only if the following requirements are met with respect to the dispute:
                (1) Nature of dispute.--The dispute consists of an
            assertion by an individual enrolled under a health plan of one
            or more claims against the health plan for payment or provision
            of benefits, or against any other plan maintained by the
            regional alliance or corporate alliance sponsoring the health
            plan with respect to benefits provided under a supplemental
            benefit policy described in section 1421(b)(1) or a cost
            sharing policy described in section 1421(b)(2), based on
            alleged coverage under the plan, and a denial of the claims, or
            a denial of appropriate reimbursement based on the claims, by
            the plan.
                (2) Nature of disputed claim.--Each claim consists of--
                        (A) a claim for payment or provision of benefits
                    under the plan; or
                        (B) a request for information or documents the
                    disclosure of which is required under this Act
                    (including claims of entitlement to disclosure based on
                    colorable claims to rights to benefits under the plan).
        (b) Filing of Election.--A complainant with a dispute which is
    eligible for submission to the Early Resolution Program may make the
    election under section 5203(a)(2) to submit the dispute to mediation
    proceedings under the Program not later than 15 days after the date the
    complaint is filed with the complaint review office under section
    5202(b).
        (c) Agreement to Participate.--
                (1) Election by claimant.--A complainant may elect
            participation in the mediation proceedings only by entering
            into a written participation agreement (including an agreement
            to comply with the rules of the Program and consent for the
            complaint review office to contact the health plan regarding
            the agreement), and by releasing plan records to the Program
            for the exclusive use of the facilitator assigned to the
            dispute.
                (2) Participation by plans or health benefits
            contractors.--Each party whose participation in the mediation
            proceedings has been elected by a claimant pursuant to
            paragraph (1) shall participate in, and cooperate fully with,
            the proceedings. The claims review office shall provide such
            party with a copy of the participation agreement described in
            paragraph (1), together with a written description of the
            Program. Such party shall submit the copy of the agreement,
            together with its authorized signature signifying receipt of
            notice of the agreement, to the claims review office, and shall
            include in the submission to the claims review office a copy of
            the written record of the plan claims procedure completed
            pursuant to section 5201 with respect to the dispute and all
            relevant plan documents. The relevant documents shall include
            all documents under which the plan is or was administered or
            operated, including copies of any insurance contracts under
            which benefits are or were provided and any fee or
            reimbursement schedules for health care providers.

    SEC. 5213. MEDIATION PROCEEDINGS.

        (a) Role of Facilitator.--In the course of mediation proceedings
    under the Early Resolution Program, the facilitator assigned to the
    dispute shall prepare the parties for a conference regarding the
    dispute and serve as a neutral mediator at such conference, with the
    goal of achieving settlement of the dispute.
        (b) Preparations for Conference.--In advance of convening the
    conference, after identifying the necessary parties and confirming that
    the case is eligible for the Program, the facilitator shall analyze the
    record of the claims procedure conducted pursuant to section 5201 and
    any position papers submitted by the parties to determine if further
    case development is needed to clarify the legal and factual issues in
    dispute, and whether there is any need for additional information and
    documents.
        (c) Conference.--Upon convening the conference, the facilitator
    shall assist the parties in identifying undisputed issues and exploring
    settlement. If settlement is reached, the facilitator shall assist in
    the preparation of a written settlement agreement. If no settlement is
    reached, the facilitator shall present the facilitator's evaluation,
    including an assessment of the parties' positions, the likely outcome
    of further administrative action or litigation, and suggestions for
    narrowing the issues in dispute.
        (d) Time Limit.--The facilitator shall ensure that mediation
    proceedings with respect to any dispute under the Early Resolution
    Program shall be completed within 120 days after the election to
    participate. The parties may agree to one extension of the proceedings
    by not more than 30 days if the proceedings are suspended to obtain an
    agency ruling or to reconvene the conference in a subsequent session.
        (e) Inapplicability of Formal Rules.--Formal rules of evidence
    shall not apply to mediation proceedings under the Early Resolution
    Program. All statements made and evidence presented in the proceedings
    shall be admissible in the proceedings. The facilitator shall be the
    sole judge of the proper weight to be afforded to each submission. The
    parties to mediation proceedings under the Program shall not be
    required to make statements or present evidence under oath.
        (f) Representation.--Parties may participate pro se or be
    represented by attorneys throughout the proceedings of the Early
    Resolution Program.
        (g) Confidentiality.--
                (1) In general.--Under regulations of the Secretary of
            Labor, rules similar to the rules under section 574 of title 5,
            United States Code (relating to confidentiality in dispute
            resolution proceedings) shall apply to the mediation
            proceedings under the Early Resolution Program.
                (2) Civil remedies.--The Secretary of Labor may assess a
            civil penalty against any person who discloses information in
            violation of the regulations prescribed pursuant to paragraph
            (1) in the amount of three times the amount of the claim
            involved. The Secretary of Labor may bring a civil action to
            enforce such civil penalty in any court of competent
            jurisdiction.

    SEC. 5214. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROCEEDINGS.

        (a) Process Nonbinding.--Findings and conclusions made in the
    mediation proceedings of the Early Resolution Program shall be treated
    as advisory in nature and nonbinding. Except as provided in subsection
    (b), the rights of the parties under subpart A shall not be affected by
    participation in the Program.
        (b) Resolution Through Settlement Agreement.--If a case is settled
    through participation in mediation proceedings under the Program, the
    facilitator shall assist the parties in drawing up an agreement which
    shall constitute, upon signature of the parties, a binding contract
    between the parties, which shall be enforceable under section 5215.
        (c) Preservation of Rights of Non-Parties.--The settlement
    agreement shall not have the effect of waiving or otherwise affecting
    any rights to review under subpart A, or any other right under this Act
    or the plan, with respect to any person who is not a party to the
    settlement agreement.

    SEC. 5215. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

        (a) Enforcement.--Any party to a settlement agreement entered
    pursuant to mediation proceedings under this subpart may petition any
    court of competent jurisdiction for the enforcement of the agreement,
    by filing in the court a written petition praying that the agreement be
    enforced. In such a proceeding, the order of the hearing officer shall
    not be subject to review.
        (b) Court Review.--It shall be the duty of the court to advance on
    the docket and to expedite to the greatest possible extent the
    disposition of any petition filed under this section, with due
    deference to the role of settlement agreements under this part in
    achieving prompt resolution of disputes involving health plans.
        (c) Awarding of Attorney's Fees and Other Costs and Expenses.--In
    any action by an individual enrolled under a health plan for court
    enforcement under this section, a prevailing plaintiff shall be
    entitled to reasonable costs and expenses (including a reasonable
    attorney's fee and reasonable expert witness fees) on the charges on
    which the plaintiff prevails.

             PART 2--ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

    SEC. 5231. JUDICIAL REVIEW OF FEDERAL ACTION ON STATE SYSTEMS.

        (a) In General.--Any State or alliance that is aggrieved by a
    determination by the National Health Board under subpart B of part 1 of
    subtitle F of title I shall be entitled to judicial review of such
    determination in accordance with this section.
        (b) Judicial Review.--
                (1) Jurisdiction.--The courts of appeals of the United
            States (other than the United States Court of Appeals for the
            Federal Circuit) shall have jurisdiction to review a
            determination described in subsection (a), to affirm the
            determination, or to set it aside, in whole or in part. A
            judgment of a court of appeals in such an action shall be
            subject to review by the Supreme Court of the United States
            upon certiorari or certification as provided in section 1254 of
            title 28, United States Code.
                (2) Petition for review.--A State or an alliance that
            desires judicial review of a determination described in
            subsection (a) shall, within 30 days after it has been notified
            of such determination, file with the United States court of
            appeals for the circuit in which the State or alliance is
            located a petition for review of such determination. A copy of
            the petition shall be transmitted by the clerk of the court to
            the National Health Board, and the Board shall file in the
            court the record of the proceedings on which the determination
            or action was based, as provided in section 2112 of title 28,
            United States Code.
                (3) Scope of review.--The findings of fact of the National
            Health Board, if supported by substantial evidence, shall be
            conclusive; but the court, for good cause shown, may remand the
            case to the Board to take further evidence, and the Board may
            make new or modified findings of fact and may modify its
            previous action, and shall certify to the court the record of
            the further proceedings. Such new or modified findings of fact
            shall likewise be conclusive if supported by substantial
            evidence.

    SEC. 5232. ADMINISTRATIVE AND JUDICIAL REVIEW RELATING TO COST
                  CONTAINMENT.

        There shall be no administrative or judicial review of any
    determination by the National Health Board respecting any matter under
    subtitle A of title VI.

    SEC. 5233. CIVIL ENFORCEMENT.

        Unless otherwise provided in this Act, the district courts of the
    United States shall have jurisdiction of civil actions brought by--
                (1) the Secretary of Labor to enforce any final order of
            such Secretary or to collect any civil monetary penalty
            assessed by such Secretary under this Act; and
                (2) the Secretary of Health and Human Services to enforce
            any final order of such Secretary or to collect any civil
            monetary penalty assessed by such Secretary under this Act.

    SEC. 5234. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS.

        Section 507(a)(8) of title 11, United States Code, is amended to
    read as follows:
                ``(8) Eighth, allowed unsecured claims--
                        ``(A) based upon any commitment by the debtor to
                    the Federal Deposit Insurance Corporation, the
                    Resolution Trust Corporation, the Director of the
                    Office of Thrift Supervision, the Comptroller of the
                    Currency, or the Board of Governors of the Federal
                    Reserve System, or their predecessors or successors, to
                    maintain the capital of an insured depository
                    institution;
                        ``(B) for payments under subtitle B of title IV of
                    the Health Security Act owed to a regional alliance (as
                    defined in section 1301 of such Act);
                        ``(C) for payments owed to a corporate alliance
                    health plan under trusteeship of the Secretary of Labor
                    under section 1395 of the Health Security Act; or
                        ``(D) for assessments and related amounts owed to
                    the Secretary of Labor under section 1397 of the Health
                    Security Act.''.

    SEC. 5235. PRIVATE RIGHT TO ENFORCE STATE RESPONSIBILITIES.

        The failure of a participating State to carry out a responsibility
    applicable to participating States under this Act constitutes a
    deprivation of rights secured by this Act for the purposes of section
    1977 of the Revised Statutes of the United States (42 U.S.C. 1983). In
    an action brought under such section, the court shall exercise
    jurisdiction without regard to whether the aggrieved person has
    exhausted any administrative or other remedies that may be provided by
    law.

    SEC. 5236. PRIVATE RIGHT TO ENFORCE FEDERAL RESPONSIBILITIES IN
                  OPERATING A SYSTEM IN A STATE.

        (a) In General.--The failure of the Secretary of Health and Human
    Services to carry out a responsibility under section 1522 (relating to
    operation of an alliance system in a State) confers an enforceable
    right of action on any person who is aggrieved by such failure. Such a
    person may commence a civil action against the Secretary in an
    appropriate State court or district court of the United States.
        (b) Exhaustion of Remedies.--In an action under subsection (a), the
    court shall exercise jurisdiction without regard to whether the
    aggrieved person has exhausted any administrative or other remedies
    that may be provided by law.
        (c) Relief.--In an action under subsection (a), if the court finds
    that a failure described in such subsection has occurred, the aggrieved
    person may recover compensatory and punitive damages and the court may
    order any other appropriate relief.
        (d) Attorney's Fees.--In an action under subsection (a), the court,
    in its discretion, may allow the prevailing party, other than the
    United States, a reasonable attorney's fee (including expert fees) as
    part of the costs, and the United States shall be liable for costs the
    same as a private person.

    SEC. 5237. PRIVATE RIGHT TO ENFORCE RESPONSIBILITIES OF ALLIANCES.

        (a) In General.--The failure of a regional alliance or a corporate
    alliance to carry out a responsibility applicable to the alliance under
    this Act confers an enforceable right of action on any person who is
    aggrieved by such failure. Such a person may commence a civil action
    against the alliance in an appropriate State court or district court of
    the United States.
        (b) Exhaustion of Remedies.--
                (1) In general.--Except as provided in paragraph (2), in an
            action under subsection (a) the court may not exercise
            jurisdiction until the aggrieved person has exhausted any
            administrative remedies that may be provided by law.
                (2) No exhaustion required.--In an action under subsection
            (a), the court shall exercise jurisdiction without regard to
            whether the aggrieved person has exhausted any administrative
            or other remedies that may be provided by law if the action
            relates to--
                        (A) whether the person is an eligible individual
                    within the meaning of section 1001(c);
                        (B) whether the person is eligible for a premium
                    discount under subpart A of part 1 of subtitle B of
                    title VI;
                        (C) whether the person is eligible for a reduction
                    in cost sharing under subpart D of part 3 of subtitle D
                    of title I; or
                        (D) enrollment or disenrollment in a health plan.
        (c) Relief.--In an action under subsection (a), if the court finds
    that a failure described in such subsection has occurred, the aggrieved
    person may recover compensatory and punitive damages and the court may
    order any other appropriate relief.
        (d) Attorney's Fees.--In any action under subsection (a), the
    court, in its discretion, may allow the prevailing party, other than
    the United States, a reasonable attorney's fee (including expert fees)
    as part of the costs, and the United States shall be liable for costs
    the same as a private person.

    SEC. 5238. DISCRIMINATION CLAIMS.

        (a) Civil Action by Aggrieved Person.--
                (1) In general.--Any person who is aggrieved by the failure
            of a health plan to comply with section 1402(c) may commence a
            civil action against the plan in an appropriate State court or
            district court of the United States.
                (2) Standards.--The standards used to determine whether a
            violation has occurred in a complaint alleging discrimination
            on the basis of age or disability under section 1402(c) shall
            be the standards applied under the Age Discrimination Act of
            1975 (42 U.S.C. 6101 et seq.) and the Americans with
            Disabilities Act of 1990 (42 U.S.C. 12101 et seq.).
                (3) Relief.--In an action under paragraph (1), if the court
            finds that the health plan has failed to comply with section
            1402(c), the aggrieved person may recover compensatory and
            punitive damages and the court may order any other appropriate
            relief.
                (4) Attorney's fees.--In any action under paragraph (1),
            the court, in its discretion, may allow the prevailing party,
            other than the United States, a reasonable attorney's fee
            (including expert fees) as part of the costs, and the United
            States shall be liable for costs the same as a private person.
        (b) Action by Secretary.--Whenever the Secretary of Health and
    Human Services finds that a health plan has failed to comply with
    section 1402(c), or with an applicable regulation issued under such
    section, the Secretary shall notify the plan. If within a reasonable
    period of time the health plan fails or refuses to comply, the
    Secretary may--
                (1) refer the matter to the Attorney General with a
            recommendation that an appropriate civil action be instituted;
                (2) terminate the participation of the health plan in an
            alliance; or
                (3) take such other action as may be provided by law.
        (c) Action by Attorney General.--When a matter is referred to the
    Attorney General under subsection (b)(1), the Attorney General may
    bring a civil action in a district court of the United States for such
    relief as may be appropriate, including injunctive relief. In a civil
    action under this section, the court--
                (1) may grant any equitable relief that the court considers
            to be appropriate;
                (2) may award such other relief as the court considers to
            be appropriate, including compensatory and punitive damages;
            and
                (3) may, to vindicate the public interest when requested by
            the Attorney General, assess a civil money penalty against the
            health plan in an amount--
                        (A) not exceeding $50,000 for a first violation;
                    and
                        (B) not exceeding $100,000 for any subsequent
                    violation.

    SEC. 5239. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

        Federal payments to regional alliances under part 2 of subtitle C
    of title VI shall be treated as Federal financial assistance for
    purposes of section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
    794), section 303 of the Age Discrimination Act of 1975 (42 U.S.C.
    6102), and section 601 of the Civil Rights Act of 1964 (42 U.S.C.
    2000d).

    SEC. 5240. CIVIL ACTION BY ESSENTIAL COMMUNITY PROVIDER.

        (a) In General.--An electing essential community provider (as
    defined in section 1431(d)) who is aggrieved by the failure of a health
    plan to fulfill a duty imposed on the plan by section 1431 may commence
    a civil action against the plan in an appropriate State court or
    district court of the United States.
        (b) Relief.--In an action under subsection (a), if the court finds
    that the health plan has failed to fulfill a duty imposed on the plan
    by section 1431, the electing essential community provider may recover
    compensatory damages and the court may order any other appropriate
    relief.
        (c) Attorney's Fees.--In any action under subsection (a), the
    court, in its discretion, may allow the prevailing party, other than
    the United States, a reasonable attorney's fee (including expert fees)
    as part of the costs, and the United States shall be liable for costs
    the same as a private person.

    SEC. 5241. FACIAL CONSTITUTIONAL CHALLENGES.

        (a) Jurisdiction.--The United States District Court for the
    District of Columbia shall have original and exclusive jurisdiction of
    any civil action brought to invalidate this Act or a provision of this
    Act on the ground of its being repugnant to the Constitution of the
    United States on its face and for every purpose. In any action
    described in this subsection, the district court may not grant any
    temporary order or preliminary injunction restraining the enforcement,
    operation, or execution of this Act or any provision of this Act.
        (b) Statute of Limitations.--An action described in subsection (a)
    shall be commenced not later than 1 year after the date of the
    enactment of this Act.
        (c) Convening of Three-Judge Court.--An action described in
    subsection (a) shall be heard and determined by a district court of
    three judges in accordance with section 2284 of title 28, United States
    Code.
        (d) Consolidation.--When actions described in subsection (a)
    involving a common question of law or fact are pending before a
    district court, the court shall order all the actions consolidated.
        (e) Direct Appeal to Supreme Court.--In any action described in
    subsection (a), an appeal may be taken directly to the Supreme Court of
    the United States from any final judgment, decree, or order in which
    the district court--
                (1) holds this Act or any provision of this Act invalid;
            and
                (2) makes a determination that its holding will materially
            undermine the application of the Act as whole.
        (f) Construction.--This section does not limit--
                (1) the right of any person--
                        (A) to a litigation concerning the Act or any
                    portion of the Act; or
                        (B) to petition the Supreme Court for review of any
                    holding of a district court by writ of certiorari at
                    any time before the rendition of judgment in a court of
                    appeals; or
                (2) the authority of the Supreme Court to grant a writ of
            certiorari for the review described in paragraph (1)(B).

    SEC. 5242. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS.

        (a) In General.--A health plan may sue or be sued under this Act as
    an entity. Service of summons, subpoena, or other legal process of a
    court or hearing officer upon a trustee or an administrator of any such
    plan in his capacity as such shall constitute service upon the plan. In
    a case where a plan has not designated in applicable plan documents an
    individual as agent for the service of legal process, service upon the
    Secretary of Health and Human Services (in the case of a regional
    alliance health plan) or the Secretary of Labor (in the case of a
    corporate alliance health plan) shall constitute such service. The
    Secretary, not later than 15 days after receipt of service under the
    preceding sentence, shall notify the administrator or any trustee of
    the plan of receipt of such service.
        (b) Other Parties.--Any money judgment under this Act against a
    plan referred to in subsection (a) shall be enforceable only against
    the plan as an entity and shall not be enforceable against any other
    person unless liability against such person is established in his
    individual capacity under this Act.

    SEC. 5243. GENERAL NONPREEMPTION OF EXISTING RIGHTS AND REMEDIES.

        Nothing in this title shall be construed to deny, impair, or
    otherwise adversely affect a right or remedy available under law to any
    person on the date of the enactment of this Act or thereafter, except
    to the extent the right or remedy is inconsistent with this title.

                                                        Title V, Subtitle D

                        Subtitle D--Medical Malpractice

                            PART 1--LIABILITY REFORM

    SEC. 5301. FEDERAL TORT REFORM.

        (a) Applicability.--
                (1) In general.--Except as provided in section 5302, this
            part shall apply with respect to any medical malpractice
            liability action brought in any State or Federal court, except
            that this part 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.
                (2) Preemption.--The provisions of this part shall preempt
            any State law to the extent such law is inconsistent with the
            limitations contained in such provisions. The provisions of
            this part 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 part.
                (3) Effect on sovereign immunity and choice of law or
            venue.--Nothing in this part shall be construed to--
                        (A) waive or affect any defense of sovereign
                    immunity asserted by any State under any provision of
                    law;
                        (B) waive or affect any defense of sovereign
                    immunity asserted by the United States;
                        (C) affect the applicability of any provision of
                    the Foreign Sovereign Immunities Act of 1976;
                        (D) preempt State choice-of-law rules with respect
                    to claims brought by a foreign nation or a citizen of a
                    foreign nation; or
                        (E) 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.
                (4) Federal court jurisdiction not established on federal
            question grounds.--Nothing in this part 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.
        (b) Definitions.--In this subtitle, the following definitions
    apply:
                (1) Alternative dispute resolution system; ADR.--The term
            ``alternative dispute resolution system'' or ``ADR'' means a
            system that provides for the resolution of medical malpractice
            claims in a manner other than through medical malpractice
            liability actions.
                (2) Claimant.--The term ``claimant'' means any person who
            alleges a medical malpractice 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) 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.
                (4) 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.
                (5) 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 claim.
                (6) 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 (regardless of the theory
            of liability on which the claim is based) in which the
            plaintiff alleges a medical malpractice claim.
                (7) Medical malpractice claim.--The term ``medical
            malpractice claim'' means a claim brought against a health care
            provider or health care professional in which a claimant
            alleges that injury was caused by the provision of (or the
            failure to provide) health care services, except that such term
            does not include--
                        (A) any claim based on an allegation of an
                    intentional tort; or
                        (B) any claim based on an allegation that a product
                    is defective that is brought against any individual or
                    entity that is not a health care professional or health
                    care provider.

    SEC. 5302. PLAN-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS.

        (a) Application to Malpractice Claims Under Plans.--In the case of
    any medical malpractice claim arising from the provision of (or failure
    to provide) health care services to an individual enrolled in a
    regional alliance health plan or a corporate alliance health plan, no
    medical malpractice liability action may be brought with respect to
    such claim until the final resolution of the claim under the
    alternative dispute resolution system adopted by the plan under
    subsection (b).
        (b) Adoption of Mechanism by Plans.--Each regional alliance health
    plan and corporate alliance health plan shall--
                (1) adopt at least one of the alternative dispute
            resolution methods specified under subsection (c) for the
            resolution of medical malpractice claims arising from the
            provision of (or failure to provide) health care services to
            individuals enrolled in the plan; and
                (2) disclose to enrollees (and potential enrollees), in a
            manner specified by the regional alliance or the corporate
            alliance, the availability and procedures for consumer
            grievances under the plan, including the alternative dispute
            resolution method or methods adopted under this subsection.
        (c) Specification of Permissible Alternative Dispute Resolution
    Methods.--
                (1) In general.--The Board shall, by regulation, develop
            alternative dispute resolution methods for the use by regional
            alliance and corporate alliance health plans in resolving
            medical malpractice claims under subsection (a). Such methods
            shall include at least the following:
                        (A) Arbitration.--The use of arbitration.
                        (B) Mediation.--The use of required mediation.
                        (C) Early offers of settlement.--The use of a
                    process under which parties are required to make early
                    offers of settlement.
                (2) Standards for establishing methods.--In developing
            alternative dispute resolution methods under paragraph (1), the
            Board shall assure that the methods promote the resolution of
            medical malpractice claims in a manner that--
                        (A) is affordable for the parties involved;
                        (B) provides for timely resolution of claims;
                        (C) provides for the consistent and fair resolution
                    of claims; and
                        (D) provides for reasonably convenient access to
                    dispute resolution for individuals enrolled in plans.
        (d) Further Redress.--A plan enrollee dissatisfied with the
    determination reached as a result of an alternative dispute resolution
    method applied under this section may, after the final resolution of
    the enrollee's claim under the method, bring a cause of action to seek
    damages or other redress with respect to the claim to the extent
    otherwise permitted under State law.

    SEC. 5303. REQUIREMENT FOR CERTIFICATE OF MERIT.

        (a) Requiring Submission With Complaint.--No medical malpractice
    liability action may be brought by any individual unless, at the time
    the individual brings the action (except as provided in subsection
    (b)(1)), the individual submits an affidavit--
                (1) declaring that the individual (or the individual's
            attorney) has consulted and reviewed the facts of the action
            with a qualified specialist (as defined in subsection (c));
                (2) including a written report by a qualified specialist
            that clearly identifies the individual and that includes the
            specialist's determination that, after a review of the medical
            record and other relevant material, there is a reasonable and
            meritorious cause for the filing of the action against the
            defendant; and
                (3) on the basis of the qualified specialist's review and
            consultation, that the individual (or the individual's
            attorney) has concluded that there is a reasonable and
            meritorious cause for the filing of the action.
        (b) Extension in Certain Instances.--
                (1) In general.--Subject to paragraph (2), subsection (a)
            shall not apply with respect to an individual who brings a
            medical malpractice liability action without submitting an
            affidavit described in such subsection if--
                        (A) the individual is unable to obtain the
                    affidavit before the expiration of the applicable
                    statute of limitations; or
                        (B) at the time the individual brings the action,
                    the individual has been unable to obtain medical
                    records or other information necessary to prepare the
                    affidavit requested pursuant to any applicable law.
                (2) Deadline for submission where extension applies.--In
            the case of an individual who brings an action for which
            paragraph (1) applies, the action shall be dismissed unless the
            individual submits the affidavit described in subsection (a)
            not later than--
                        (A) in the case of an action for which subparagraph
                    (A) of paragraph (1) applies, 90 days after bringing
                    the action; or
                        (B) in the case of an action for which subparagraph
                    (B) of paragraph (1) applies, 90 days after obtaining
                    the information described in such subparagraph.
        (c) Qualified Specialist Defined.--In subsection (a), a ``qualified
    specialist'' means, with respect to a medical malpractice liability
    action, a health care professional who--
                (1) is knowledgeable of, and has expertise in, the same
            specialty area of practice that is the subject of the action;
            and
                (2) is reasonably believed by the individual bringing the
            action (or the individual's attorney)--
                        (A) to be knowledgeable in the relevant issues
                    involved in the particular action,
                        (B) to practice (or to have practiced within the
                    preceding 6 years) or to teach (or to have taught
                    within the preceding 6 years) in the same area of
                    health care or medicine that is at issue in the action,
                    and
                        (C) to be qualified by experience or demonstrated
                    competence in the subject matter of the case.
        (d) Sanctions for Submitting False Allegations.--Upon the motion of
    any party or its own initiative, the court in a medical malpractice
    liability action may impose a sanction on a party or the party's
    attorney (or both), including a requirement that the party reimburse
    the other party to the action for costs and reasonable attorney's fees,
    if any information contained in an affidavit described in subsection
    (a) is submitted without reasonable cause and is found to be untrue.

    SEC. 5304. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES.

        (a) In General.--An attorney who represents, on a contingency fee
    basis, a plaintiff in a medical malpractice liability action may not
    charge, demand, receive, or collect for services rendered in connection
    with such action (including the resolution of the claim that is the
    subject of the action under any alternative dispute resolution system)
    in excess of 33\1/3\ percent of the total amount recovered by judgment
    or settlement in such action.
        (b) 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 subsection (a) 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.
        (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. 5305. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL SOURCES.

        The total amount of damages recovered by a plaintiff in a medical
    malpractice liability action shall be reduced by the amount of any past
    or future payment which the plaintiff has received or for which the
    plaintiff is eligible on account of the same injury for which the
    damages are awarded, including payment under--
                (1) Federal or State disability or sickness programs;
                (2) Federal, State, or private health insurance programs;
                (3) private disability insurance programs;
                (4) employer wage continuation programs; and
                (5) any other program, if the payment is intended to
            compensate the plaintiff for the same injury for which damages
            are awarded.

    SEC. 5306. PERIODIC PAYMENT OF AWARDS.

        At the request of any party to a medical malpractice liability
    action, the defendant shall not be required to pay damages in a single,
    lump-sum payment, but shall be permitted to make such payments
    periodically based on such schedule as the court considers appropriate,
    taking into account the periods for which the injured party will need
    medical and other services.

       PART 2--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

    SEC. 5311. ENTERPRISE LIABILITY DEMONSTRATION PROJECT.

        (a) Establishment.--Not later than January 1, 1996, the Secretary
    shall establish a demonstration project under which the Secretary shall
    provide funds (in such amount as the Secretary considers appropriate)
    to one or more eligible States to demonstrate whether substituting
    liability for medical malpractice on the part of the health plan in
    which a physician participates for the personal liability of the
    physician will result in improvements in the quality of care provided
    under the plan, reductions in defensive medical practices, and better
    risk management.
        (b) Eligibility of State.--A State is eligible to participate in
    the demonstration project established under subsection (a) if the State
    submits an application to the Secretary (at such time and in such form
    as the Secretary may require) containing such information and
    assurances as the Secretary may require, including assurances that the
    State--
                (1) has entered into an agreement with a health plan (other
            than a fee-for-service plan) operating in the State under which
            the plan assumes legal liability with respect to any medical
            malpractice claim arising from the provision of (or failure to
            provide) services under the plan by any physician participating
            in the plan;
                (2) has provided that, under the law of the State, a
            physician participating in a plan that has entered into an
            agreement with the State under paragraph (1) may not be liable
            in damages or otherwise for such a claim and the plan may not
            require such physician to indemnify the plan for any such
            liability; and
                (3) will provide the Secretary with such reports on the
            operation of the project as the Secretary may require.
        (c) Authorization of Appropriations.--There are authorized to be
    appropriated such sums as may be necessary to carry out demonstration
    projects under this section.

    SEC. 5312. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO MEDICAL
                  MALPRACTICE LIABILITY ACTIONS.

        (a) Establishment.--Not later than 1 year after the Secretary
    determines that appropriate practice guidelines are available, the
    Secretary shall establish a pilot program under which the Secretary
    shall provide funds (in such amount as the Secretary considers
    appropriate) to one or more eligible States to determine the effect of
    applying practice guidelines in the resolution of medical malpractice
    liability actions.
        (b) Eligibility of State.--A State is eligible to participate in
    the pilot program established under subsection (a) if the State submits
    an application to the Secretary (at such time and in such form as the
    Secretary may require) containing--
                (1) assurances that, under the law of the State, in the
            resolution of any medical malpractice liability action, it
            shall be a complete defense to any allegation that a party
            against whom the action is filed was negligent that, in the
            provision of (or the failure to provide) the services that are
            the subject of the action, the party followed the appropriate
            practice guideline established by the National Quality
            Management Program under subtitle A; and
                (2) such other information and assurances as the Secretary
            may require.
        (c) Reports to Congress.--Not later than 3 months after the last
    day of each year for which the pilot program established under
    subsection (a) is in effect, the Secretary shall submit a report to
    Congress describing the operation of the program during the previous
    year and containing such recommendations as the Secretary considers
    appropriate, including recommendations relating to revisions to the
    laws governing medical malpractice liability.

                          Subtitle E--Fraud and Abuse

                                                        Title V, Subtitle E

    PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL
                                    PROGRAM

    SEC. 5401. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM.

        (a) In General.--Not later than January 1, 1996, the Secretary
    (acting through the Inspector General of the Department of Health and
    Human Services) and the Attorney General shall establish a program--
                (1) to coordinate the functions of the Attorney General,
            the Secretary, and other organizations with respect to the
            prevention, detection, and control of health care fraud and
            abuse,
                (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 this subtitle and
            other statutes applicable to health care fraud and abuse.
        (b) Coordination With Law Enforcement Agencies.--In carrying out
    the program under subsection (a), the Secretary and Attorney General
    shall consult with, and arrange for the sharing of data and resources
    with Federal, State and local law enforcement agencies, State Medicaid
    Fraud Control Units, and State agencies responsible for the licensing
    and certification of health care providers.
        (c) Coordination With Health Alliances and Health Plans.--In
    carrying out the program under subsection (a), the Secretary and
    Attorney General shall consult with, and arrange for the sharing of
    data with representatives of health alliances and health plans.
        (d) Authorities of Attorney General and Inspector General.--In
    carrying out duties under subsection (a), the Attorney General and the
    Inspector General are authorized--
                (1) to conduct, supervise, and coordinate audits, civil and
            criminal investigations, inspections, and evaluations relating
            to the program established under such subsection; and
                (2) to have access (including on-line access as requested
            and available) to all records available to health alliances and
            health plans relating to the activities described in paragraph
            (1) (subject to restrictions based on the confidentiality of
            certain information under part 2 of subtitle B).
        (e) 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 or
    communications to the Secretary or Attorney General in conjunction with
    their performance of duties under this section, 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.
        (f) Authorizations of Appropriations for Investigators and Other
    Personnel.--In addition to any other amounts authorized to be
    appropriated to the Secretary and the Attorney General for health care
    anti-fraud and abuse activities for a fiscal year, there are authorized
    to be appropriated such additional amounts as may be necessary to
    enable the Secretary and the Attorney General to conduct
    investigations, audits, evaluations, and inspections of allegations of
    health care fraud and abuse and otherwise carry out the program
    established under subsection (a) in a fiscal year.
        (g) Use of Powers Under Inspector General Act of 1978.--In carrying
    out duties and responsibilities under the program established under
    subsection (a), the Inspector General is authorized to exercise all
    powers granted under the Inspector General Act of 1978 to the same
    manner and extent as provided in that Act.
        (h) Definition.--In this part and part 2, the term ``Inspector
    General'' means the Inspector General of the Department of Health and
    Human Services.

    SEC. 5402. ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE
                  CONTROL ACCOUNT.

        (a) Establishment.--
                (1) In general.--There is hereby created on the books of
            the Treasury of the United States an account to be known as the
            ``All-Payer Health Care Fraud and Abuse Control Account'' (in
            this section referred to as the ``Anti-Fraud Account''). The
            Anti-Fraud Account shall consist of such gifts and bequests as
            may be made as provided in paragraph (2) and such amounts as
            may be deposited in such Anti-Fraud Account as provided in
            section 5412(d)(2) and title XI of the Social Security Act. It
            shall also include the following:
                        (A) All criminal fines imposed in cases involving a
                    Federal health care offense (as defined in subsection
                    (d)).
                        (B) Penalties and damages imposed under the False
                    Claims Act (31 U.S.C. 3729 et seq.), in cases involving
                    claims related to the provision of health care items
                    and services (other than funds awarded to a relator or
                    for restitution).
                        (C) Administrative penalties and assessments
                    imposed under titles XI, XVIII, and XIX of the Social
                    Security Act and section 5412 (except as otherwise
                    provided by law).
                        (D) Amounts resulting from the forfeiture of
                    property by reason of a Federal health care offense.
            Any such funds received on or after the date of the enactment
            of this Act shall be deposited in the Anti-Fraud Account.
                (2) Authorization to accept gifts.--The Anti-Fraud Account
            is authorized to accept on behalf of the United States money
            gifts and bequests made unconditionally to the Anti-Fraud
            Account, for the benefit of the Anti-Fraud Account or any
            activity financed through the Anti-Fraud Account.
        (b) Use of Funds.--
                (1) In general.--Amounts in the Anti-Fraud Account shall be
            available without appropriation and until expended as
            determined jointly by the Secretary and Attorney General in
            carrying out the All-Payer Health Care Fraud and Abuse Control
            Program established under section 5401 (including the
            administration of the Program), and may be used to cover costs
            incurred in operating the Program, including--
                        (A) costs of prosecuting health care matters
                    (through criminal, civil and administrative
                    proceedings);
                        (B) costs of investigations (including equipment,
                    salaries, administratively uncontrollable work, travel,
                    and training of law enforcement personnel);
                        (C) costs of financial and performance audits of
                    health care programs and operations; and
                        (D) costs of inspections and other evaluations.
                (2) Funds used to supplement agency appropriations.--It is
            intended that disbursements made from the Anti-Fraud Account to
            any Federal agency be used to increase and not supplant the
            recipient agency's appropriated operating budget.
        (c) Annual Report.--The Secretary and the Attorney General shall
    submit an annual report to Congress on the amount of revenue which is
    generated and disbursed by the Anti-Fraud Account in each fiscal year.
        (d) Federal Health Care Offense Defined.--The term ``Federal health
    care offense'' means a violation of, or a criminal conspiracy to
    violate--
                (1) sections 226, 668, 1033, or 1347 of title 18, United
            States Code;
                (2) section 1128B of the Social Security Act;
                (3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, or
            1954 of title 18, United States Code, if the violation or
            conspiracy relates to health care fraud;
                (4) sections 501 or 511 of the Employee Retirement Income
            Security Act of 1974, if the violation or conspiracy relates to
            health care fraud; or
                (5) sections 301, 303(a)(2), or 303 (b) or (e) of the
            Federal Food Drug and Cosmetic Act, if the violation or
            conspiracy relates to health care fraud.

    SEC. 5403. USE OF FUNDS BY INSPECTOR GENERAL.

        (a) Reimbursements for Investigations.--
                (1) In general.--The Inspector General is authorized to
            receive and retain for current use reimbursement for the costs
            of conducting investigations, when such restitution is ordered
            by a court, voluntarily agreed to by the payor, or otherwise.
                (2) Crediting.--Funds received by the Inspector General as
            reimbursement for costs of conducting investigations shall be
            deposited to the credit of the appropriation from which
            initially paid, or to appropriations for similar purposes
            currently available at the time of deposit, and shall remain
            available for obligation for 1 year from the date of their
            deposit.
                (3) Exception for forfeitures.--This subsection does not
            apply to investigative costs paid to the Inspector General from
            the Department of Justice Asset Forfeiture Fund, which monies
            shall be deposited and expended in accordance with subsection
            (b).
        (b) HHS Office of Inspector General Asset Forfeiture Proceeds
    Fund.--
                (1) In general.--There is established in the Treasury of
            the United States the ``HHS Office of Inspector General Asset
            Forfeiture Proceeds Fund,'' to be administered by the Inspector
            General, which shall be available to the Inspector General
            without fiscal year limitation for expenses relating to the
            investigation of matters within the jurisdiction of the
            Inspector General.
                (2) Deposits.--There shall be deposited in the Fund all
            proceeds from forfeitures that have been transferred to the
            Inspector General from the Department of Justice Asset
            Forfeiture Fund under section 524 of title 28, United States
            Code.

      PART 2--APPLICATION OF FRAUD AND ABUSE AUTHORITIES UNDER THE SOCIAL
                           SECURITY ACT TO ALL PAYERS

    SEC. 5411. EXCLUSION FROM PARTICIPATION.

        (a) Mandatory Exclusion.--The Secretary shall exclude an individual
    or entity from participation in any applicable health plan if the
    individual or entity is excluded from participation in a public program
    under, or is otherwise described in, section 1128(a) of the Social
    Security Act (relating to individuals and entities convicted of health
    care-related crimes or patient abuse).
        (b) Permissive Exclusion.--The Secretary may exclude an individual
    or entity from participation in any applicable health plan if the
    individual or entity is excluded from participation in a public program
    under, or is otherwise described in, section 1128(b) of the Social
    Security Act (other than paragraphs (6)(A), (6)(C), (6)(D), (10), or
    (13) of such section).
        (c) Notice, Effective Date, and Period of Exclusion.--(1) An
    exclusion under this section or section 5412(b)(3) shall be effective
    at such time and upon such reasonable notice to the public and to the
    individual or entity excluded as may be specified in regulations
    consistent with paragraph (2).
        (2) Such an exclusion shall be effective with respect to services
    furnished to an individual on or after the effective date of the
    exclusion.
        (3)(A) The Secretary shall specify, in the notice of exclusion
    under paragraph (1) and the notice under section 5412(e), the minimum
    period (or, in the case of an exclusion of an individual excluded from
    participation in a public program under, or is otherwise described in,
    section 1128(b)(12) of the Social Security Act, the period) of the
    exclusion.
        (B) In the case of a mandatory exclusion under subsection (a), the
    minimum period of exclusion shall be not less than 5 years.
        (C) In the case of an exclusion of an individual excluded from
    participation in a public program under, or is otherwise described in,
    paragraph (1), (2), or (3) of section 1128(b) of the Social Security
    Act, the period of exclusion shall be a minimum of 3 years, unless the
    Secretary determines that a longer period is necessary because of
    aggravating circumstances.
        (D) In the case of an exclusion of an individual or entity excluded
    from participation in a public program under, or is otherwise described
    in, paragraph (4), (5)(A), or (5)(B) of section 1128(b) of the Social
    Security Act, the period of the exclusion shall not be less than the
    period during which the individual's or entity's license to provide
    health care is revoked, suspended or surrendered, or the individual or
    the entity is excluded or suspended from a Federal or State health care
    program.
        (E) In the case of an exclusion of an individual or entity
    described in paragraph (6)(B) of section 1128(b) of the Social Security
    Act, the period of the exclusion shall be not less than 1 year.
        (F) In the case of an exclusion of an individual described in
    paragraph (12) of section 1128(b) of the Social Security Act, the
    period of the exclusion shall be equal to the sum of--
                (i) the length of the period in which the individual failed
            to grant the immediate access described in that paragraph, and
                (ii) an additional period, not to exceed 90 days, set by
            the Secretary.
        (d) Notice to Entities Administering Public Programs for the
    Delivery of or Payment for Health Care Items or Services.--(1) The
    Secretary shall exercise the authority under this section in a manner
    that results in an individual's or entity's exclusion from all
    applicable health plans for the delivery of or payment for health care
    items or services.
        (2) The Secretary shall promptly notify each sponsor of an
    applicable health plan and each entity that administers a State health
    care program described in section 1128(h) of the Social Security Act of
    the fact and circumstances of each exclusion (together with the period
    thereof) effected against an individual or entity under this section or
    under section 5412(b)(3).
        (e) Notice to State Licensing Agencies.--The provisions of section
    1128(e) of the Social Security Act shall apply to this section in the
    same manner as such provisions apply to sections 1128 and 1128A of such
    Act.
        (f) Notice, Hearing, and Judicial Review.--(1) Subject to paragraph
    (2), any individual or entity that is excluded (or directed to be
    excluded) from participation under this section is entitled to
    reasonable notice and opportunity for a hearing thereon by the
    Secretary to the same extent as is provided in section 205(b) of the
    Social Security Act, and to judicial review of the Secretary's final
    decision after such hearing as is provided in section 205(g) of such
    Act, except that such action shall be brought in the Court of Appeals
    of the United States for the judicial circuit in which the individual
    or entity resides, or has a principal place of business, or, if the
    individual or entity does not reside or have a principal place of
    business within any such judicial circuit, in the United States Court
    of Appeals for the District of Columbia Circuit.
        (2) Unless the Secretary determines that the health or safety of
    individuals receiving services warrants the exclusion taking effect
    earlier, any individual or entity that is the subject of an adverse
    determination based on paragraphs (6)(B), (7), (8), (9), (11), (12),
    (14), or (15) of section 1128(b) of the Social Security Act, shall be
    entitled to a hearing by an administrative law judge (as provided under
    section 205(b) of the Social Security Act) on the determination before
    any exclusion based upon the determination takes effect. If a hearing
    is requested, the exclusion shall be effective upon the issuance of an
    order by the administrative law judge upholding the determination of
    the Secretary to exclude.
        (3) The provisions of section 205(h) of the Social Security Act
    shall apply with respect to this section or section 5412(b)(3) to the
    same extent as such provisions apply with respect to title II of such
    Act.
        (g) Application for Termination of Exclusion.--(1) An individual or
    entity excluded (or directed to be excluded) from participation under
    this section or section 5412(b)(3) may apply to the Secretary, in a
    manner specified by the Secretary in regulations and at the end of the
    minimum period of exclusion (or, in the case of an individual or entity
    described in section 1128(b)(12), the period of exclusion) provided
    under this section or section 5412(b)(3) and at such other times as the
    Secretary may provide, for termination of the exclusion.
        (2) The Secretary may terminate the exclusion if the Secretary
    determines, on the basis of the conduct of the applicant which occurred
    after the date of the notice of exclusion or which was unknown to the
    Secretary at the time of the exclusion, that--
                (A) there is no basis under this section or section
            5412(b)(3) for a continuation of the exclusion, and
                (B) there are reasonable assurances that the types of
            actions which formed the basis for the original exclusion have
            not recurred and will not recur.
        (3) The Secretary shall promptly notify each sponsor of an
    applicable health plan and each entity that administers a State health
    care program described in section 1128(h) of the Social Security Act of
    each termination of exclusion made under this subsection.
        (h) Convicted Defined.--In this section, the term ``convicted'' has
    the meaning given such term in section 1128(i) of the Social Security
    Act.
        (i) Request for Exclusion.--The sponsor of any applicable health
    plan (including a State in the case of a regional alliance health plan
    and the Secretary of Labor in the case of a corporate alliance health
    plan) may request that the Secretary of Health and Human Services
    exclude an individual or entity with respect to actions under such a
    plan in accordance with this section.
        (j) Effect of Exclusion.--Notwithstanding any other provision of
    this Act, no payment may be made under a health plan for the delivery
    of or payment for any item or service (other than an emergency item or
    service, not including items or services furnished in an emergency room
    of a hospital) furnished--
                (1) by an individual or entity during the period when such
            individual or entity is excluded pursuant to this section or
            section 5412(b)(3) from participation in a health plan; or
                (2) at the medical direction or on the prescription of a
            physician during the period when the physician is excluded
            pursuant to this section or section 5412(b)(3) from
            participation in a health plan and the person furnishing the
            item or service knew or had reason to know of the exclusion
            (after a reasonable time period after reasonable notice has
            been furnished to the person).
        (k) Delegation.--The Secretary may delegate authority granted under
    this section to the Inspector General.

    SEC. 5412. CIVIL MONETARY PENALTIES.

        (a) Actions Subject to Penalty.--Any person who is determined by
    the Secretary to have committed any of the following actions with
    respect to an applicable health plan shall be subject to a penalty in
    accordance with subsection (b):
                (1) Actions subject to penalty under medicare, medicaid,
            and other social security health programs.--Any action that
            would subject the person to a penalty under paragraphs (1)
            through (12) of section 1128A(a) of the Social Security Act if
            the action was taken with respect to title V, XVIII, XIX, or XX
            of such Act.
                (2) Termination of enrollment.--The termination of an
            individual's enrollment (including the refusal to re-enroll an
            individual) in violation of subtitle E of title I or State law.
                (3) Discriminating on basis of medical condition.--The
            engagement in any practice that would reasonably be expected to
            have the effect of denying or discouraging the initial or
            continued enrollment in a health plan by individuals whose
            medical condition or history indicates a need for substantial
            future medical services.
                (4) Inducing enrollment on false pretenses.--The engagement
            in any practice to induce enrollment in an applicable health
            plan through representations to individuals which the person
            knows or should know are false or fraudulent.
                (5) Providing incentives to enroll.--The offer or payment
            of remuneration to any individual that such person knows or
            should know is likely to influence such individual to enroll in
            a particular plan, or to cause such individual to induce others
            to enroll in a particular plan.
        (b) Penalties Described.--
                (1) General rule.--Any person who the Secretary determines
            has committed an action described in paragraphs (2) through (5)
            of subsection (a) shall be subject to a civil monetary penalty
            in an amount not to exceed $50,000 for each such determination.
                (2) Actions subject to penalties under social security
            act.--In the case of a person who the Secretary determines has
            committed an action described in paragraph (1) of subsection
            (a), the person shall be subject to the civil monetary penalty
            (together with any additional assessment) to which the person
            would be subject under section 1128A of the Social Security Act
            if the action on which the determination is based had been
            committed with respect to title V, XVIII, XIX, or XX of such
            Act.
                (3) Determinations to exclude permitted.--In addition to
            any civil monetary penalty or assessment imposed under this
            subsection, the Secretary may make a determination in the same
            proceeding to exclude the person from participation in all
            applicable health plans for the delivery of or payment for
            health care items or services (in accordance with section
            5411(c)).
        (c) Procedures for Imposition of Penalties.--
                (1) Applicability of procedures under social security
            act.--Except as otherwise provided in paragraph (2), the
            provisions of section 1128A of the Social Security Act (other
            than subsections (a) and (b) and the second sentence of
            subsection (f)) shall apply to the imposition of a civil
            monetary penalty, assessment, or exclusion under this section
            in the same manner as such provisions apply with respect to the
            imposition of a penalty, assessment, or exclusion under section
            1128A of such Act.
                (2) Authority of secretary of labor and states to impose
            penalties, assessments, and exclusions.--
                        (A) In general.--The Secretary of Labor or a State
                    may initiate an action to impose a civil monetary
                    penalty, assessment, or exclusion under this section
                    with respect to actions relating to a corporate
                    alliance health plan or a regional alliance health
                    plan, respectively, if authorized by the Attorney
                    General and the Secretary pursuant to regulations
                    promulgated by the Secretary in consultation with the
                    Attorney General.
                        (B) Requirements described.--Under the regulations
                    promulgated under subparagraph (A), the Attorney
                    General and the Secretary shall review an action
                    proposed by the Secretary of Labor or a State, and not
                    later than 120 days after receiving notice of the
                    proposed action from the Secretary of Labor or the
                    State, shall--
                                (i) approve the proposed action to be taken
                            by the Secretary of Labor or the State;
                                (ii) disapprove the proposed action; or
                                (iii) assume responsibility for initiating
                            a criminal, civil, or administrative action
                            based on the information provided in the
                            notice.
                        (C) Action deemed approved if deadline missed.--If
                    the Attorney General and the Secretary fail to respond
                    to a proposed action by the Secretary of Labor or a
                    State within the period described in subparagraph (B),
                    the Attorney General and the Secretary shall be deemed
                    to have approved the proposed action to be taken by the
                    Secretary of Labor or the State.
        (d) Treatment of Amounts Recovered.--Any amounts recovered under
    this section shall be paid to the Secretary and disposed of as follows:
                (1) Such portions of the amounts recovered as is determined
            to have been improperly paid from an applicable health plan for
            the delivery of or payment for health care items or services
            shall be repaid to such plan.
                (2) The remainder of the amounts recovered shall be
            deposited in the All-Payer Health Care Fraud and Abuse Control
            Account established under section 5402.
        (e) Notification of Licensing Authorities.--Whenever the
    Secretary's determination to impose a penalty, assessment, or exclusion
    under this section becomes final, the Secretary shall notify the
    appropriate State or local licensing agency or organization (including
    the agency specified in section 1864(a) and 1902(a)(33) of the Social
    Security Act) that such a penalty, assessment, or exclusion has become
    final and the reasons therefor.

    SEC. 5413. LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

        The provisions of section 1877 of the Social Security Act shall
    apply--
                (1) to items and services (and payments and claims for
            payment for such items and services) furnished under any
            applicable health plan in the same manner as such provisions
            apply to designated health services (and payments and claims
            for payment for such services) under title XVIII of the Social
            Security Act; and
                (2) to a State (with respect to an item or service
            furnished or payment made under a regional alliance health
            plan) and to the Secretary of Labor (with respect to an item or
            service furnished or payment made under a corporate alliance
            health plan) in the same manner as such provisions apply to the
            Secretary.

    SEC. 5414. CONSTRUCTION OF SOCIAL SECURITY ACT REFERENCES.

        (a) Incorporation of Other Amendments.--Any reference in this part
    to a provision of the Social Security Act shall be considered a
    reference to the provision as amended under title IV.
        (b) Effect of Subsequent Amendments.--Except as provided in
    subsection (a), any reference to a provision of the Social Security Act
    in this part shall be deemed to be a reference to such provision as in
    effect on the date of the enactment of this Act, and (except as
    Congress may otherwise provide) any amendments made to such provisions
    after such date shall not be taken into account in determining the
    applicability of such provisions to individuals and entities under this
    Act.

    PART 3--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS UNDER THE SOCIAL
                                  SECURITY ACT

    SEC. 5421. REFERENCE TO AMENDMENTS.

        For provisions amending the anti-fraud and abuse provisions
    existing under the Social Security Act, see part 5 of subtitle A of
    title IV.

                       PART 4--AMENDMENTS TO CRIMINAL LAW

    SEC. 5431. 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) Whoever knowingly executes, or attempts to execute, a scheme
    or artifice--
                ``(1) to defraud any health alliance, health plan, or other
            person, in connection with the delivery of or payment for
            health care benefits, items, or services;
                ``(2) to obtain, by means of false or fraudulent pretenses,
            representations, or promises, any of the money or property
            owned by, or under the custody or control of, any health
            alliance, health plan, or person in connection with the
            delivery of or payment for health care benefits, items, or
            services;
    shall be fined under this title or imprisoned not more than 10 years,
    or both. If the violation results in serious bodily injury (as defined
    in section 1365 of this title) such person shall be imprisoned for life
    or any term of years.
        ``(b) As used in this section, the terms `health alliance' and
    `health plan' have the meanings given those terms in title I of the
    Health Security Act.''.
        (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:

    ``1347. Health care fraud.''.

    SEC. 5432. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

        (a) In General.--Section 982(a) of title 18, United States Code, is
    amended by inserting after paragraph (5) the following:
        ``(6) If the court determines that a Federal health care offense
    (as defined in section 5402(d) of the Health Security Act) is of a type
    that poses a serious threat to the health of any person or has a
    significant detrimental impact on the health care system, the court, in
    imposing sentence on a person convicted of that offense, shall order
    that person to forfeit property, real or personal, that--
                ``(A)(i) is used in the commission of the offense; or
                ``(ii) constitutes or is derived from proceeds traceable to
            the commission of the offense; and
                ``(B) is of a value proportionate to the seriousness of the
            offense.''.
        (b) Proceeds of Health Care Fraud Forfeitures.--Section
    524(c)(4)(A) of title 28, United States Code, is amended by inserting
    ``all proceeds of forfeitures relating to Federal health care offenses
    (as defined in section 5402(d) of the Health Security Act), and'' after
    ``except''.

    SEC. 5433. FALSE STATEMENTS.

        (a) In General.--Chapter 47 of title 18, United States Code, is
    amended by adding at the end the following:
    ``Sec. 1033. False statements relating to health care matters
        ``(a) Whoever, in any matter involving a health alliance or health
    plan, knowingly and willfully falsifies, conceals, or covers up by any
    trick, scheme, or device a material fact, or makes any false,
    fictitious, or fraudulent statements or representations, or makes or
    uses any false writing or document knowing the same to contain any
    false, fictitious, or fraudulent statement or entry, shall be fined
    under this title or imprisoned not more than 5 years, or both.
        ``(b) As used in this section the terms `health alliance' and
    `health plan' have the meanings given those terms in title I of the
    Health Security Act.''.
        (b) Clerical Amendment.--The table of sections at the beginning of
    chapter 47 of title 18, United States Code, is amended by adding at the
    end the following:

    ``1033. False statements relating to health care matters.''.

    SEC. 5434. BRIBERY AND GRAFT.

        (a) In General.--Chapter 11 of title 18, United States Code, is
    amended by adding at the end the following:
    ``Sec. 226. Bribery and graft in connection with health care
        ``(a) Whoever--
                ``(1) directly or indirectly, corruptly gives, offers, or
            promises anything of value to a health care official, or offers
            or promises a health care official to give anything of value to
            any other person, with intent--
                        ``(A) to influence any of the health care
                    official's actions, decisions, or duties relating to a
                    health alliance or health plan;
                        ``(B) to influence such an official to commit or
                    aid in the committing, or collude in or allow, any
                    fraud, or make opportunity for the commission of any
                    fraud, on a health alliance or health plan; or
                        ``(C) to induce such an official to engage in any
                    conduct in violation of the lawful duty of such
                    official; or
                ``(2) being a health care official, directly or indirectly,
            corruptly demands, seeks, receives, accepts, or agrees to
            accept anything of value personally or for any other person or
            entity, the giving of which violates paragraph (1) of this
            subsection;
    shall be fined under this title or imprisoned not more than 15 years,
    or both.
        ``(b) Whoever, otherwise than as provided by law for the proper
    discharge of any duty, directly or indirectly gives, offers, or
    promises anything of value to a health care official, for or because of
    any of the health care official's actions, decisions, or duties
    relating to a health care alliance or health plan, shall be fined under
    this title or imprisoned not more than two years, or both.
        ``(c) As used in this section--
                ``(1) the term `health care official' means--
                        ``(A) an administrator, officer, trustee,
                    fiduciary, custodian, counsel, agent, or employee of
                    any health care alliance or health plan;
                        ``(B) an officer, counsel, agent, or employee, of
                    an organization that provides services under contract
                    to any health alliance or health plan;
                        ``(C) an official or employee of a State agency
                    having regulatory authority over any health alliance or
                    health plan;
                        ``(D) an officer, counsel, agent, or employee of a
                    health care sponsor; and
                ``(2) the term `health care sponsor' means any individual
            or entity serving as the sponsor of a health alliance or health
            plan for purposes of the Health Security Act, and includes the
            joint board of trustees or other similar body used by two or
            more employers to administer a health alliance or health plan
            for purposes of such Act.''.
        (b) Clerical Amendment.--The table of chapters at the beginning of
    chapter 11 of title 18, United States Code, is amended by adding at the
    end the following:

    ``226. Bribery and graft in connection with health care.''.

    SEC. 5435. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

        Section 1345(a)(1) of title 18, United States Code, is amended--
                (1) by striking ``or'' at the end of subparagraph (A);
                (2) by inserting ``or'' at the end of subparagraph (B); and
                (3) by adding at the end the following:
                ``(C) committing or about to commit a Federal health care
            offense (as defined in section 5402(d) of the Health Security
            Act);''.

    SEC. 5436. GRAND JURY DISCLOSURE.

        Section 3322 of title 18, United States Code, is amended--
                (1) by redesignating subsections (c) and (d) as subsections
            (d) and (e), respectively; and
                (2) by inserting after subsection (b) the following:
        ``(c) A person who is privy to grand jury information concerning a
    health law violation--
                ``(1) received in the course of duty as an attorney for the
            Government; or
                ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal
            Rules of Criminal Procedure;
    may disclose that information to an attorney for the Government to use
    in any civil proceeding related to a Federal health care offense (as
    defined in section 5402(d) of the Health Security Act).''.

    SEC. 5437. THEFT OR EMBEZZLEMENT.

        (a) In General.--Chapter 31 of title 18, United States Code, is
    amended by adding at the end the following:
    ``Sec. 668. Theft or embezzlement in connection with health care
        ``(a) Whoever embezzles, steals, willfully and unlawfully converts
    to the use of any person other than the rightful owner, or
    intentionally misapplies any of the moneys, securities, premiums,
    credits, property, or other assets of a health alliance, health plan,
    or of any fund connected with such an alliance or plan, shall be fined
    under this title or imprisoned not more than 10 years, or both.
        ``(b) As used in this section, the terms `health alliance' and
    `health plan' have the meanings given those terms under title I of the
    Health Security Act.''.
        (b) Clerical Amendment.--The table of sections at the beginning of
    chapter 31 of title 18, United States Code, is amended by adding at the
    end the following:

    ``668. Theft or embezzlement in connection with health care.''.

    SEC. 5438. MISUSE OF HEALTH SECURITY CARD OR UNIQUE IDENTIFIER.

        (a) In General.--Chapter 33 of title 18, United States Code, is
    amended by adding at the end the following:
    ``Sec. 716. Misuse of health security card or unique identifier
        ``Whoever--
                ``(1) requires the display of, requires the use of, or uses
            a health security card that is issued under section 1001(b) of
            the Health Security Act for any purpose other than a purpose
            described in section 5105(a) of such Act; or
                ``(2) requires the disclosure of, requires the use of, or
            uses a unique identifier number provided pursuant to section
            5104 of such Act for any purpose that is not authorized by the
            National Health Board pursuant to such section;
    shall be fined under this title or imprisoned not more than 2 years, or
    both.''.
        (b) Amendment to Chapter Heading.--The heading for chapter 33 of
    title 18, United States Code, is amended to read as follows:

           ``CHAPTER 33--EMBLEMS, INSIGNIA, IDENTIFIERS, AND NAMES''.

        (c) Clerical Amendment to Table of Sections.--The table of sections
    at the beginning of chapter 33, United States Code, is amended by
    adding at the end the following new item:

    ``716. Misuse of health security card or unique identifier.''.
        (d) Clerical Amendment to Table of Chapters.--The item relating to
    chapter 33 in the table of chapters at the beginning of part 1 of title
    18, United States Code, is amended to read as follows:

    ``33. Emblems, insignia, identifiers, and names.............     701''.

                  PART 5--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

    SEC. 5441. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

        Section 3729 of title 31, United States Code, is amended--
                (1) in subsection (a)(7), by inserting ``or to a health
            plan'' after ``property to the Government'';
                (2) in the matter following subsection (a)(7), by inserting
            ``or health plan'' before ``sustains because of the act of that
            person,'';
                (3) at the end of the first sentence of subsection (a), by
            inserting ``or health plan'' before ``sustains because of the
            act of the person.'';
                (4) in subsection (c)--
                        (A) by inserting ``the term'' after ``section,'';
                    and
                        (B) by adding at the end the following: ``The term
                    also includes any request or demand, whether under
                    contract of otherwise, for money or property which is
                    made or presented to a health plan.''; and
                (5) by adding at the end the following:
        ``(f) Health Plan Defined.--For purposes of this section, the term
    `health plan' has the meaning given such term under section 1400 of the
    Health Security Act.''.

                                                        Title V, Subtitle F

                      Subtitle F--McCarran-Ferguson Reform

    SEC. 5501. REPEAL OF EXEMPTION FOR HEALTH INSURANCE.

        (a) In General.--Section 3 of the Act of March 9, 1945 (15 U.S.C.
    1013), known as the McCarran-Ferguson Act, is amended by adding at the
    end the following:
        ``(c) Notwithstanding that the business of insurance is regulated
    by State law, nothing in this Act shall limit the applicability of the
    following Acts to the business of insurance to the extent that such
    business relates to the provision of health benefits:
                ``(1) The Sherman Act (15 U.S.C. 1 et seq.).
                ``(2) The Clayton Act (15 U.S.C. 12 et seq.).
                ``(3) Federal Trade Commission Act (15 U.S.C. 41 et seq.).
                ``(4) The Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C.
            21a et seq.), known as the Robinson-Patman Antidiscrimination
            Act.''.
        (b) Effective Date.--The amendment made by subsection (a) shall
    take effect on the first day of the sixth month beginning after the
    date of the enactment of this Act.

                                                                   Title VI

       TITLE VI--PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS

                           table of contents of title

                                                                       Page
    Sec. 6000. General definitions..............................        982
                            Subtitle A--Premium Caps

              subpart a--computation of targets and accepted bids
    Sec. 6001. Computation of regional alliance inflation               984
                                factors.
    Sec. 6002. Board determination of national per capita               990
                                baseline premium target.
    Sec. 6003. Determination of alliance per capita premium             995
                                targets.
    Sec. 6004. Alliance initial bidding and negotiation process.       1000
    Sec. 6005. State financial incentives.......................       1004
    Sec. 6006. Recommendations to eliminate regional variations        1005
                                in alliance targets due to
                                variation in practice patterns;
                                congressional consideration.
    Sec. 6subpart b--plan and provider payment reductions to maintain  1012
                          expenditures within targetsrtain
                                determinations.
    Sec. 6011. Plan payment reduction...........................       1012
    Sec. 6012. Provider payment reduction.......................       1017
                Part 2--Corporate Alliances Health Expenditures

    Sec. 6021. Calculation of premium equivalents...............       1020
    Sec. 6022. Termination of corporate alliance for excess            1021
                                increase in expenditures.
                    Part 3--Treatment of Single-payer States

    Sec. 6031. Special rules for single-payer States............       1024
                         Part 4--Transition Provisions

    Sec. 6041. Monitoring prices and expenditures...............       1024
                     Subtitle B--Premium-Related Financings

                        Partsubpart a--family shareents
    Sec. 6101. Family share of premium..........................       1025
    Sec. 6102. Amount of premium................................       1028
    Sec. 6103. Alliance credit..................................       1030
    Sec. 6104. Premium discount based on income.................       1030
    Sec. 6105. Excess premium credit............................       1042
    Sec. 6106. Corporate alliance opt-in credit.................       1044
    Sec. 6subpart b--repayment of alliance credit by certain families  1045
    Sec. 6111. Repayment of alliance credit by certain families.       1047
    Sec. 6112. No liability for families employed full-time;           1048
                                reduction in liability for part-
                                time employment.
    Sec. 6113. Limitation of liability based on income..........       1051
    Sec. 6114. Special treatment of certain retirees and               1055
                                qualified spouses and children.
    Sec. 6115. Special treatment of certain medicare                   1058
                                beneficiaries.
                     subpart a--regional alliance employers
    Sec. 6121. Employer premium payment required................       1058
    Sec. 6122. Computation of base employment monthly premium...       1063
    Sec. 6123. Premium discount for certain employers...........       1070
    Sec. 6124. Payment adjustment for large employers electing         1075
                                coverage in a regional alliance.
    Sec. 6125. Employer collection shortfall add-on.............       1081
    Sec. 6126. Applisubpart b--corporate alliance employers.....       1081
    Sec. 6131. Employer premium payment required................       1084
             Subtitle C--Payments to Regional Alliance Health Plans

    Sec. 6201. Computation of blended plan per capita payment          1086
                                amount.
    Sec. 6202. Computation of plan bid, AFDC, and SSI                  1088
                                proportions.

    SEC. 6000. GENERAL DEFINITIONS.

        (a) Definitions Relating to Bids.--In this title:
                (1) Accepted bid.--The term ``accepted bid'' means the bid
            which is agreed to between a regional alliance health plan and
            a regional alliance for coverage of the comprehensive benefit
            package in the alliance area under subpart A of part 1.
                (2) Final accepted bid.--The term ``final accepted bid''
            means the accepted bid, taking into account any voluntary
            reduction in such bid made under section 6004(e).
                (3) Weighted average accepted bid.--The term ``weighted
            average accepted bid'' means, for a regional alliance for a
            year, the average of the accepted bids for all regional
            alliance health plans offered by such alliance, weighted to
            reflect the relative enrollment of regional alliance eligible
            individuals among such plans.
                (4) Reduced weighted average accepted bid.--The term
            ``reduced weighted average accepted bid'', for a health plan
            offered by a regional alliance for a year, is the lesser of--
                        (A) the weighted average accepted bid for the
                    regional alliance for the year (determined using the
                    final accepted bids as the accepted bids), or
                        (B) the regional alliance per capita target for the
                    year.
        (b) Weighted Average Premium.--In this title, the term ``weighted
    average premium'' means, for a class of family enrollment and with
    respect to a regional alliance for a year, the product of--
                (1) reduced weighted average accepted bid (as defined in
            subsection (a)(4));
                (2) the uniform per capita conversion factor (established
            under section 1341(b)) for the alliance; and
                (3) the premium class factor established by the Board for
            that class under section 1531.
        (c) Incorporation of Other Definitions.--Except as otherwise
    provided in this title, the definitions of terms in subtitle J of title
    I of this Act shall apply to this title.

                            Subtitle A--Premium Caps

                 PART 1--REGIONAL ALLIANCE HEALTH EXPENDITURES

              Subpart A--Computation of Targets and Accepted Bids

                                                       Title VI, Subtitle A

    SEC. 6001. COMPUTATION OF REGIONAL ALLIANCE INFLATION FACTORS.

        (a) Computation.--
                (1) In general.--This section provides for the computation
            of factors that limit the growth of premiums for the
            comprehensive benefit package in regional alliance health
            plans. The Board shall compute and publish, not later than
            March 1 of each year (beginning with 1995) the regional
            alliance inflation factor (as defined in paragraph (2)) for
            each regional alliance for the following year.
                (2) Regional alliance inflation factor.--In this part, the
            term ``regional alliance inflation factor'' means, for a year
            for a regional alliance--
                        (A) the general health care inflation factor for
                    the year (as defined in paragraph (3));
                        (B) adjusted under subsection (c) (to take into
                    account material changes in the demographic and socio-
                    economic characteristics of the population of alliance
                    eligible individuals);
                        (C) decreased by the percentage adjustment (if any)
                    provided with respect to the regional alliance under
                    subsection (d) (relating to adjustment for previous
                    excess expenditures); and
                        (D) in the case of the year 2001, increased by a
                    factor that the Board determines to reflect the ratio
                    of (i) the actuarial value of the increase in benefits
                    provided in that year under the comprehensive benefit
                    package to (ii) the actuarial value of the benefits
                    that would have been in such package in the year
                    without regard to the increase.
            For purposes of subparagraph (D)(i), the actuarial value of the
            increase with respect to mental illness and substance abuse
            services (included within the comprehensive benefit package)
            shall not exceed an actuarial value based on the amount of the
            total expenditures that would have been made in 2001 by States
            and subdivisions of States for mental illness and substance
            abuse services (included in such package as of 2001) if this
            Act had not been enacted.
                (3) General health care inflation factor.--
                        (A) 1996 through 2000.--In this part, the term
                    ``general health care inflation factor'', for a year,
                    means the percentage increase in the CPI (as specified
                    under subsection (b)) for the year plus the following:
                                (i) For 1996, 1.5 percentage points.
                                (ii) For 1997, 1.0 percentage points.
                                (iii) For 1998, 0.5 percentage points.
                                (iv) For 1999 and for 2000, 0 percentage
                            points.
                        (B) Years after 2000.--
                                (i) Recommendation to congress.--In 1999,
                            the Board shall submit to Congress
                            recommendations on what the general health care
                            inflation factor should be for years beginning
                            with 2001.
                                (ii) Failure of congress to act.--If the
                            Congress fails to enact a law specifying the
                            general health care inflation factor for a year
                            after 2000, the Board, in January of the year
                            before the year involved, shall compute such
                            factor for the year involved. Such factor shall
                            be the product of the factors described in
                            subparagraph (C) for that fiscal year, minus 1.
                        (C) Factors.--The factors described in this
                    subparagraph for a year are the following:
                                (i) CPI.--1 plus the percentage change in
                            the CPI for the year, determined based upon the
                            percentage change in the average of the CPI for
                            the 12-month period ending with August 31 of
                            the previous fiscal year over such average for
                            the preceding 12-month period.
                                (ii) Real gdp per capita.--1 plus the
                            average annual percentage change in the real,
                            per capita gross domestic product of the United
                            States during the 3-year period ending in the
                            preceding calendar year, determined by the
                            Board based on data supplied by the Department
                            of Commerce.
        (b) Projection of Increase in CPI.--
                (1) In general.--For purposes of this section, the Board
            shall specify, as of the time of publication, the annual
            percentage increase in the CPI (as defined in section 1902(9))
            for the following year.
                (2) Data to be used.--Such increase shall be the projection
            of the CPI contained in the budget of the United States
            transmitted by the President to the Congress in the year.
        (c) Special Adjustment for Material Changes in Demographic
    Characteristics of Population.--
                (1) Adjustment for corporate alliance opt-in.--
                        (A) In general.--The Board shall develop a method
                    for adjusting the regional alliance inflation factor
                    for each regional alliance in order to reflect material
                    changes in the demographic characteristics of regional
                    alliance eligible individuals residing in the alliance
                    area (in comparison with such characteristics for the
                    previous year) as a result of one or more corporate
                    alliances terminating an election under section 1313.
                        (B) Basis for adjustments.--Adjustments under this
                    paragraph (whether an increase or decrease) shall be
                    based on the characteristics and factors used for
                    making adjustments in payments under section 6124.
                (2) Adjustment for regional trend compared to national
            trend.--
                        (A) In general.--The Board shall develop a method
                    for adjusting the regional alliance inflator factor for
                    each regional alliance in order to reflect material
                    changes in the demographic characteristics (including
                    at least age, gender, and socio-economic status) and
                    health status of regional alliance eligible individuals
                    residing in the alliance area in comparison with the
                    average change in such characteristics for such
                    individuals residing in the United States. The
                    adjustment under this paragraph shall be for changes
                    not taken into account in the adjustment under
                    paragraph (1).
                        (B) Neutral adjustment.--Such method (and any
                    annual adjustment under this paragraph) shall be
                    designed to result in the adjustment effected under
                    this paragraph for a year not changing the weighted
                    average of the regional alliance inflation factors.
                (3) Application.--The Board shall provide, on an annual
            basis, for an adjustment of regional alliance inflation factors
            under this subsection using such methods.
        (d) Consultation Process.--The Board shall have a process for
    consulting with representatives of States and regional alliances before
    establishing the regional alliance inflation factors for each year
    under this section.

    SEC. 6002. BOARD DETERMINATION OF NATIONAL PER CAPITA BASELINE PREMIUM
                  TARGET.

        (a) In General.--Not later than January 1, 1995, the Board shall
    determine a national per capita baseline premium target. Such target is
    equal to--
                (1) the national average per capita current coverage health
            expenditures (determined under subsection (b)),
                (2) updated under subsection (c).
        (b) Determination of National Average Per Capita Current Coverage
    Health Expenditures.--
                (1) In general.--The Board shall determine the national
            average per capita current coverage health expenditures equal
            to--
                        (A) total covered current health care expenditures
                    (described in paragraph (2)), divided by
                        (B) the estimated population in the United States
                    of regional alliance eligible individuals (as
                    determined by the Board as of 1993 under paragraph (4))
                    for whom such expenditures were determined.
            The population under subparagraph (B) shall not include SSI
            recipients or AFDC recipients.
                (2) Current health care expenditures.--For purposes of
            paragraph (1)(A), the Board shall determine current health care
            expenditures as follows:
                        (A) Determination of total expenditures.--The Board
                    shall first determine the amount of total payments made
                    for items and services included in the comprehensive
                    benefit package (determined without regard to cost
                    sharing) in the United States in 1993.
                        (B) Removal of certain expenditures not to be
                    covered through regional alliances.--The amount so
                    determined shall be decreased by the proportion of such
                    amount that is attributable to any of the following:
                                (i) Medicare beneficiaries (other than such
                            beneficiaries who are regional alliance
                            eligible individuals).
                                (ii) AFDC recipients or SSI recipients.
                                (iii) Expenditures which are paid for
                            through workers' compensation or automobile or
                            other liability insurance.
                                (iv) Expenditures by parties (including the
                            Federal Government) that the Board determines
                            will not be payable by regional alliance health
                            plans for coverage of the comprehensive benefit
                            package under this Act.
                        (C) Addition of projected expenditures for
                    uninsured and underinsured individuals.--The amount so
                    determined and adjusted shall be increased to take into
                    account increased utilization of, and expenditures for,
                    items and services covered under the comprehensive
                    benefit package likely to occur, as a result of
                    coverage under a regional alliance health plan of
                    individuals who, as of 1993 were uninsured or
                    underinsured with respect to the comprehensive benefit
                    package. In making such determination, such
                    expenditures shall be based on the estimated average
                    cost for such services in 1993 (and not on private
                    payment rates established for such services). In making
                    such determination, the estimated amount of
                    uncompensated care in 1993 shall be removed and will
                    not include adjustments to offset payments below costs
                    by public programs.
                        (D) Addition of health plan and alliance costs of
                    administration.--The amount so determined and adjusted
                    shall be increased by an estimated percentage
                    (determined by the Board, but no more than 15 percent)
                    that reflects the proportion of premiums that are
                    required for health plan and regional alliance
                    administration (including regional alliance costs for
                    administration of income-related premium discounts and
                    cost sharing reductions) and for State premium taxes
                    (which taxes shall be limited to such amounts in 1993
                    as are attributable to the health benefits to be
                    included in the comprehensive benefit package).
                        (E) Decrease for cost sharing.--The amount so
                    determined and adjusted shall be decreased by a
                    percentage that reflects (i) the estimated average
                    percentage of total amounts payable for items and
                    services covered under the comprehensive benefit
                    package that will be payments in the form of cost
                    sharing under a higher cost sharing plan, and (ii) the
                    percentage reduction in utilization estimated to result
                    from the application of high cost sharing.
                (3) Special rules.--
                        (A) Benefits used.--The determinations under this
                    section shall be based on the comprehensive benefit
                    package as in effect in 1996.
                        (B) Assuming no change in expenditure pattern.--The
                    determination under paragraph (2) shall be made without
                    regard to any change in the pattern of expenditures
                    that may result from the enrollment of AFDC recipients
                    and SSI recipients in regional alliance health plans.
                (4) Eligible individuals.--In this subsection, the
            determination of who are regional alliance eligible individuals
            under this subsection shall be made as though this Act was
            fully in effect in each State as of 1993.
        (c) Updating.--
                (1) In general.--Subject to paragraph (3), the Board shall
            update the amount determined under subsection (b)(1) for each
            of 1994 and 1995 by the appropriate update factor described in
            paragraph (2) for the year.
                (2) Appropriate update factor.--In paragraph (1), the
            appropriate update factor for a year is 1 plus the annual
            percentage increase for the year (as determined by the
            Secretary, based on actual or projected information) in private
            sector health care spending for items and services included in
            the comprehensive benefit package (as of 1996).
                (3) Limit.--The total, cumulative update under this
            subsection shall not exceed 15 percent.

    SEC. 6003. DETERMINATION OF ALLIANCE PER CAPITA PREMIUM TARGETS.

        (a) Initial Determination.--Not later than January 1, 1995, the
    Board shall determine, for each regional alliance for 1996, a regional
    alliance per capita premium target. Such target shall equal--
                (1) the national per capita baseline premium target
            (determined by the Board under section 6002),
                (2) updated by the regional alliance inflation factor (as
            determined under section 6001(a)(2)) for 1996, and
                (3) adjusted by the adjustment factor for the regional
            alliance (determined under subsection (c)).
        (b) Subsequent Determinations.--
                (1) Determination.--Not later than March 1 of each year
            (beginning with 1996) the Board shall determine, for each
            regional alliance for the succeeding year a regional alliance
            per capita premium target.
                (2) General rule.--Subject to subsection (e), such target
            shall equal--
                        (A) the regional alliance per capita target
                    determined under this section (without regard to
                    subsection (e)) for the regional alliance for the
                    previous year,
                        (B) updated by the regional alliance inflation
                    factor (as determined in section 6001(a)) for the year.
                (3) Adjustment for previous excess rate of increase in
            expenditures.--Such target for a year is subject to a decrease
            under section 6001(d).
        (c) Adjustment Factors for Regional Alliances for Initial
    Determination.--
                (1) In general.--The Board shall establish an adjustment
            factor for each regional alliance in a manner consistent with
            this subsection.
                (2) Considerations.--In establishing the factor for each
            regional alliance, the Board shall consider, using information
            of the type described in paragraph (3), the difference between
            the national average of the factors taken into account in
            determining the national per capita baseline premium target and
            such factors for the regional alliance, including variations in
            health care expenditures and in rates of uninsurance and
            underinsurance in the different alliance areas and including
            variations in the proportion of expenditures for services
            provided by academic health centers in the different alliance
            areas.
                (3) Type of information.--The type of information described
            in this paragraph is--
                        (A) information on variations in premiums across
                    States and across alliance areas within a State (based
                    on surveys and other data);
                        (B) information on variations in per capita health
                    spending by State, as measured by the Secretary;
                        (C) information on variations across States in per
                    capita spending under the medicare program and in such
                    spending among alliance areas within a State under such
                    program; and
                        (D) area rating factors commonly used by actuaries.
                (4) Application of factors in neutral manner.--The
            application of the adjustment factors under this subsection for
            1996 shall be done in a manner so that the weighted average of
            the regional alliance per capita premium targets for 1996 is
            equal to the national per capita baseline premium target
            determined under section 6002. Such weighted average shall be
            based on the Board's estimate of the expected distribution of
            alliance eligible individuals (taken into account under section
            6002) among the regional alliances.
                (5) Consultation process.--The Board shall have a process
            for consulting with representatives of States and regional
            alliances before establishing the adjustment for regional
            alliances under this subsection.
        (d) Treatment of Certain States.--
                (1) Non-alliance states.--In the case of a State that is
            not a participating State or otherwise has not established
            regional alliances, the entire State shall be treated under the
            provisions of this part as composing a single regional
            alliance.
                (2) Changes in alliance boundaries.--In the case of a State
            that changes the boundaries of its regional alliances
            (including the establishment of such alliances after 1996), the
            Board shall provide a method for computing a regional alliance
            per capita premium target for each regional alliance affected
            by such change in a manner that--
                        (A) reflects the factors taken into account in
                    establishing the adjustment factors for regional
                    alliances under subsection (c), and
                        (B) results in the weighted average of the newly
                    computed regional targets for the regional alliances
                    affected by the change equal to the weighted average of
                    the regional targets for the regional alliances as
                    previously established.
        (e) Adjustment for Previous Excess Rate of Increase in
    Expenditures.--
                (1) In general.--If the actual weighted average accepted
            bid for a regional alliance for a year (as determined by the
            Board based on actual enrollment in the first month of the
            year) exceeds the regional alliance per capita premium target
            (determined under this section) for the year, then the regional
            alliance per capita premium target shall be reduced, by \1/2\
            of the excess percentage (described in paragraph (2)) for the
            year, for each of the 2 succeeding years.
                (2) Excess percentage.--The excess percentage described in
            this paragraph for a year is the percentage by which--
                        (A) the actual weighted average accepted bid
                    (referred to in paragraph (1)) for a regional alliance
                    for the year, exceeds
                        (B) the regional alliance per capita premium target
                    (determined under this section) for the year.

    SEC. 6004. ALLIANCE INITIAL BIDDING AND NEGOTIATION PROCESS.

        (a) Bidding Process.--
                (1) Obtaining bids.--
                        (A) In general.--Not later than July 1 before the
                    first year, and not later than August 1 of each
                    succeeding year, the regional alliance shall have
                    obtained premium bids from each plan seeking to
                    participate as a regional alliance health plan with
                    respect to the alliance in the following year.
                        (B) Disclosure.--In obtaining such bids, a regional
                    alliance may determine to disclose (or not to disclose)
                    the regional alliance per capita premium target for the
                    regional alliance (determined under section 6003) for
                    the year involved.
                        (C) Condition.--Each bid submitted by a plan under
                    this subsection shall be conditioned upon the plan's
                    agreement to accept any payment reduction that may be
                    imposed under section 6011.
                (2) Negotiation process.--Following the bidding process
            under paragraph (1), a State may provide for negotiations with
            health plans relating to the premiums to be charged by such
            plans. Such negotiations may result in the resubmission of
            bids, but in no case shall a health plan resubmit a bid that
            exceeds its prior bid.
                (3) Legally binding bids.--All bids submitted under this
            subsection must be legally binding with respect to the plans
            involved.
                (4) Acceptance.--The final bid submitted by a plan under
            this subsection shall be considered to be the final accepted
            bid, except as provided in subsection (e).
                (5) Assistance.--The Board shall provide regional alliances
            with such information and technical assistance as may assist
            such alliances in the bidding process under this subsection.
        (b) Submission of Information to Board.--By not later than
    September 1 of each year for which bids are obtained under subsection
    (a), each regional alliance shall submit to the Board a report that
    discloses--
                (1) information regarding the final bids obtained under
            subsection (a) by the different plans;
                (2)(A) for the first year, any information the Board may
            request concerning an estimation of the enrollment likely in
            each such plan of alliance eligible individuals who will be
            offered enrollment in a health plan by alliance in the first
            year, or
                (B) for a succeeding year, the actual distribution of
            enrollment of alliance eligible individuals in regional
            alliance health plans in the year in which the report is
            transmitted; and
                (3) limitations on capacity of regional alliance health
            plans.
        (c) Computation of Weighted Average Accepted Bid.--
                (1) In general.--For each regional alliance the Board shall
            determine a weighted average accepted bid for each year for
            which bids are obtained under subsection (a). Such
            determination shall be based on information on accepted bids
            for the year, submitted under subsection (b)(1), and shall take
            into account, subject to paragraph (2), the information on
            enrollment distribution submitted under subsection (b)(2).
                (2) Enrollment distribution rules.--In making the
            determination under paragraph (1) for a regional alliance, the
            Board shall establish rules respecting the treatment of
            enrollment in plans that are discontinued or are newly offered.
        (d) Notice to Certain Alliances.--
                (1) In general.--By not later than October 1 of each year
            for which bids are obtained, the Board shall notify a regional
            alliance--
                        (A) if the weighted average accepted bid
                    (determined under subsection (c)) for the alliance is
                    greater than the regional alliance per capita premium
                    target for the alliance (determined under section 6003)
                    for the year, and
                        (B) of the reduced weighted average accepted bid
                    for the alliance.
                (2) Notice of premium reductions.--If notice is provided to
            a regional alliance under paragraph (1), the Board shall notify
            the regional alliance and each noncomplying plan of any plan
            payment reduction computed under section 6011 for such a plan
            and the opportunity to voluntarily reduce the accepted bid
            under subsection (e) in order to avoid such a reduction.
        (e) Voluntary Reduction of Accepted Bid (Final Accepted Bid).--
    After the Board has determined under subsection (c) the weighted
    average accepted bid for a regional alliance and the Board has
    determined plan payment reductions, before such date as the Board may
    specify (in order to provide for an open enrollment period), a
    noncomplying plan has the opportunity to voluntarily reduce its
    accepted bid by the amount of the plan payment reduction that would
    otherwise apply to the plan. Such reduction shall not affect the amount
    of the plan payment reduction for any other plan for that year.

    SEC. 6005. STATE FINANCIAL INCENTIVES.

        (a) Election.--Any participating State may elect to assume
    responsibility for containment of health care expenditures in the State
    consistent with this part. Such responsibility shall include submitting
    annual reports to the Board on any activities undertaken by the State
    to contain such expenditures. A participating State may regulate the
    rates charged by providers furnishing health care items and services to
    all private payers. Such regulation of rates may not cause a corporate
    alliance health plan to be charged, directly or indirectly, rates
    different from those charged other health plans for the same items and
    services or otherwise discriminate against corporate alliance health
    plans.
        (b) Financial Incentive.--In the case of a State that has made an
    election under subsection (a), if the Board determines for a particular
    year (beginning with the first year) that the statewide weighted
    average of the reduced weighted average accepted bids (based on actual
    average enrollment for the year), for regional alliances in the State,
    is less than the statewide weighted average of the regional alliance
    per capita premium targets (based upon such enrollment) for such
    alliances for the year, then the amount of the State maintenance-of-
    effort payment under section 9001(b), for the following year, shall be
    reduced by \1/2\ of the product of--
                (1)(A) the amount by which the amount of such statewide
            average target exceeds the amount of such statewide average
            accepted bid, divided by (B) the amount of such target; and
                (2) the total of the amount of the Federal payments made in
            that particular year to regional alliances in the State under
            subtitle B of title IX.

    SEC. 6006. RECOMMENDATIONS TO ELIMINATE REGIONAL VARIATIONS IN ALLIANCE
                  TARGETS DUE TO VARIATION IN PRACTICE PATTERNS;
                  CONGRESSIONAL CONSIDERATION.

        (a) Establishment of Advisory Commission on Regional Variations in
    Health Expenditures.--The chair of the Board shall establish, by not
    later than 60 days after the date of appointment of the first chair, an
    advisory commission on regional variations in health expenditures.
        (b) Composition.--The advisory commission shall be composed of
    consumers, employers, providers, representatives of health plans,
    States, regional alliances, individuals with expertise in the financing
    of health care, individuals with expertise in the economics of health
    care, and representatives of diverse geographic areas.
        (c) Elimination of Regional Variation in Premiums Due to Practice
    Pattern.--
                (1) Commission study.--The advisory commission shall
            examine methods of eliminating variation in regional alliance
            per capita premium targets due to variation in practice
            patterns, not due to other factors (such as health care input
            prices and demographic factors), by 2002.
                (2) Commission report.--The advisory commission shall
            submit to the Board a report that specifies one or more methods
            for eliminating the variation described in paragraph (1).
                (3) Board recommendations.--The Board shall submit to
            Congress, by not later July 1, 1995, detailed recommendations
            respecting the specific method to be used to eliminate the
            variation described in paragraph (1) by 2002. Such
            recommendations may take into account regional variations in
            demographic or health status and in health care input prices,
            based on the availability of accurate proxies for measuring
            price variation. In taking into account health care input
            prices, the Board shall explain what percentage of variation
            found should be adjusted and what percentage of the premium
            should be adjusted.
        (d) Congressional Consideration.--
                (1) In general.--Detailed recommendations submitted under
            subsection (c)(3) shall apply under this subtitle unless a
            joint resolution (described in paragraph (2)) disapproving such
            recommendations is enacted, in accordance with the provisions
            of paragraph (3), before the end of the 60-day period beginning
            on the date on which such recommendations were submitted. For
            purposes of applying the preceding sentence and paragraphs (2)
            and (3), the days on which either House of Congress is not in
            session because of an adjournment of more than three days to a
            day certain shall be excluded in the computation of a period.
                (2) Joint resolution of disapproval.--A joint resolution
            described in this paragraph means only a joint resolution which
            is introduced within the 10-day period beginning on the date on
            which the Board submits recommendations under subsection (e)(3)
            and--
                        (A) which does not have a preamble;
                        (B) the matter after the resolving clause of which
                    is as follows: ``That Congress disapproves the
                    recommendations of the National Health Board concerning
                    elimination of regional variation in regional alliance
                    premiums, as submitted by the Board on
                    ______________.'', the blank space being filled in with
                    the appropriate date; and
                        (C) the title of which is as follows: ``Joint
                    resolution disapproving recommendations of the National
                    Health Board concerning elimination of regional
                    variation in regional alliance premiums, as submitted
                    by the Board on ______________.'', the blank space
                    being filled in with the appropriate date.
                (3) Procedures for consideration of resolution of
            disapproval.--Subject to paragraph (4), the provisions of
            section 2908 (other than subsection (a)) of the Defense Base
            Closure and Realignment Act of 1990 shall apply to the
            consideration of a joint resolution described in paragraph (2)
            in the same manner as such provisions apply to a joint
            resolution described in section 2908(a) of such Act.
                (4) Special rules.--For purposes of applying paragraph (3)
            with respect to such provisions--
                        (A) any reference to the Committee on Armed
                    Services of the House of Representatives shall be
                    deemed a reference to an appropriate Committee of the
                    House of Representatives (specified by the Speaker of
                    the House of Representatives at the time of submission
                    of recommendations under subsection (c)(3)) and any
                    reference to the Committee on Armed Services of the
                    Senate shall be deemed a reference to an appropriate
                    Committee of the Senate (specified by the Majority
                    Leader of the Senate at the time of submission of
                    recommendations under subsection (c)(3)); and
                        (B) any reference to the date on which the
                    President transmits a report shall be deemed a
                    reference to the date on which the Board submits a
                    recommendation under subsection (c)(3).
        (e) Elimination of Regional Variation State Payment Amounts.--
                (1) Commission study.--The advisory commission shall
            examine methods of reducing variation among States in the level
            of payments required under subtitle A of title IX by 2002. The
            commission shall examine methods of reducing variation due to
            practice patterns, historical differences in the rates of
            reimbursement to providers, and in the amount, duration, and
            scope of benefits covered under State medicaid plans.
                (2) Commission report.--The advisory commission shall
            submit to the Board a report that specifies one or more methods
            for reducing the variation described in paragraph (1).
                (3) Board recommendations.--The Board shall submit to
            Congress, by not later than July 1, 1995, detailed
            recommendations respecting the specific method to be used to
            reduce the variation described in paragraph (1) by 2002 in a
            budget neutral manner with respect to total government payments
            and payments by the Federal Government. In submitting
            recommendations under this paragraph, the Board shall consider
            the fiscal capacity of the States.
                (4) Congressional consideration.--
                        (A) In general.--Subject to the succeeding
                    provisions of this paragraph, the provisions of
                    subsection (d) shall apply to recommendations under
                    paragraph (3) in the same manner as they apply to
                    recommendations under subsection (c)(3).
                        (B) Special rules.--In applying subparagraph (A)--
                                (i) the following shall be substituted for
                            the matter after the resolving clause described
                            in subsection (d)(2)(B): ``That Congress
                            disapproves the recommendations of the National
                            Health Board concerning reduction of regional
                            variation in State payments, as submitted by
                            the Board on ______________.''; and
                                (ii) the following shall be substituted for
                            the title described in subsection (d)(2)(C):
                            ``Joint resolution disapproving recommendations
                            of the National Health Board concerning
                            reducing regional variation in State payments,
                            as submitted by the Board on ______________.''.
        (f) Information.--The advisory commission shall provide the Board,
    States, and regional alliances with information about regional
    differences in health care costs and practice patterns.

    SEC. 6007. REFERENCE TO LIMITATION ON ADMINISTRATIVE AND JUDICIAL
                  REVIEW OF CERTAIN DETERMINATIONS.

        For limitation on administrative and judicial review of certain
    determinations under this part, see section 5232.

          Subpart B--Plan and Provider Payment Reductions to Maintain
                          Expenditures within Targets

    SEC. 6011. PLAN PAYMENT REDUCTION.

        (a) Plan Payment Reduction.--In order to assure that payments to
    regional alliance health plans by a regional alliance are consistent
    with the applicable regional alliance per capita target for the
    alliance (computed under this subtitle), each noncomplying plan (as
    defined in subsection (b)(2)) for a year is subject to a reduction in
    plan payment (under section 1351) by the amount equal to plan payment
    reduction specified in subsection (c) for the year.
        (b) Noncomplying Alliance and Noncomplying Plan Defined.--In this
    part:
                (1) Noncomplying alliance.--The term ``noncomplying
            alliance'' means, for a year, a regional alliance for which the
            weighted average accepted bid (computed under section 6004(c))
            exceeds the regional alliance per capita premium target for the
            year.
                (2) Noncomplying plan.--The term ``noncomplying plan''
            means, for a year, a regional alliance health plan offered
            through a noncomplying alliance if the final accepted bid for
            the year exceeds the maximum complying bid (as defined in
            subsection (d)) for the year. No plan shall be a noncomplying
            plan for a year before the first year in which the plan is
            offered by a regional alliance.
        (c) Amount of Plan Payment Reduction.--
                (1) In general.--The amount of the plan payment reduction,
            for a noncomplying plan offered by an alliance, is the
            alliance-wide reduction percentage (as defined in paragraph
            (2)) of the excess bid amount (as defined in paragraph (3)) for
            the plan.
                (2) Alliance-wide reduction percentage.--
                        (A) In general.--In paragraph (1), the term
                    ``alliance-wide reduction percentage'' means, for a
                    noncomplying plan offered by an alliance for a year--
                                (i) the amount by which (I) the weighted
                            average accepted bid (computed under section
                            6004(c)(1)) for the alliance for the year,
                            exceeds (II) the regional alliance per capita
                            target for the alliance for the year; divided
                            by
                                (ii) the sum, for noncomplying plans
                            offered by the alliance, of the plan
                            proportions of alliance excess bid amounts
                            (described in subparagraph (B)(i)) for the
                            year.
                        (B) Plan proportion of alliance excess bid amount
                    described.--
                                (i) In general.--The ``plan proportion of
                            alliance excess bid amount'' described in this
                            clause, for a noncomplying plan, is the product
                            of--
                                        (I) the excess bid amount (as
                                    defined in paragraph (3)) for the plan,
                                    and
                                        (II) the plan enrollment proportion
                                    (as defined in clause (ii)) for the
                                    plan.
                                (ii) Plan enrollment proportion.--In clause
                            (i)(II), the term ``plan enrollment
                            proportion'' means, with respect to a health
                            plan offered by a regional alliance, the total
                            enrollment of alliance eligible individuals
                            enrolled in such plan expressed as a percentage
                            of the total enrollment of alliance eligible
                            individuals in all regional alliance plans
                            offered by the alliance. Such proportion shall
                            be computed based on the information used in
                            computing the weighted average accepted bid for
                            the alliance under section 6004(c)(1).
                (3) Excess bid amount.--In this subsection, the ``excess
            bid amount'', with respect to a noncomplying plan for a year,
            is the amount by which--
                        (A) the accepted bid for the year (not taking into
                    account any voluntary reduction under section 6004(e)),
                    exceeds
                        (B) the maximum complying bid (as defined in
                    subsection (d)) for the plan for the year.
        (d) Maximum Complying Bid.--
                (1) First year.--In this part for the first year, the
            ``maximum complying bid'' for each plan offered by a regional
            alliance, is the regional alliance per capita premium target
            for the alliance (determined under section 6003) for the year.
                (2) Subsequent years.--In this part, subject to paragraph
            (3), for a subsequent year, the ``maximum complying bid'', for
            a plan offered by an alliance for a year, is the sum of the
            following:
                        (A) Net previous year accepted bid for plan.--The
                    accepted bid for the previous year (not taking into
                    account any voluntary reduction under section 6004(e)),
                    minus the amount of any plan payment reduction for the
                    plan for that year.
                        (B) Alliance-wide inflation allowance.--The amount
                    by which--
                                (i) the regional alliance per capita
                            premium target for the year, exceeds
                                (ii) such target for the previous year, or,
                            if less, the weighted average accepted bid
                            (computed under section 6004(c)(1)) for such
                            year.
                (3) Special rules for new plans.--
                        (A) In general.--Subject to subparagraph (B), in
                    the case of a plan that is first offered by a regional
                    alliance in a year after the first year the maximum
                    complying bid shall be the regional alliance per capita
                    premium target for the year.
                        (B) Authority.--The Board or a State may establish
                    rules to modify the application of subparagraph (A) for
                    regional alliance health plans in the State in order--
                                (i) to prevent abusive premium practices by
                            entities previously offering plans, or
                                (ii) to encourage the availability of all
                            types of plans in the State and to permit
                            establishment of new plans.

    SEC. 6012. PROVIDER PAYMENT REDUCTION.

        (a) Participating Providers.--
                (1) In general.--Each regional alliance health plan, as
            part of its contract under section 1406(e) with any
            participating provider (as defined in section 1407(c), or group
            of participating providers) shall--
                        (A) include a provision that provides that if the
                    plan is a noncomplying plan for a year, payments to the
                    provider (or group) shall be reduced by the applicable
                    network reduction percentage (described in paragraph
                    (2)) for the year, and
                        (B) not include any provision which the State
                    determines otherwise varies the payments to such
                    providers (or group) because of, or in relation to, a
                    plan payment reduction under section 6011 or otherwise
                    is intended to nullify the effect of subparagraph (A).
            The Board may issue regulations relating to the requirements of
            this paragraph.
                (2) Applicable network reduction percentage.--
                        (A) In general.--Subject to subparagraph (B), the
                    ``applicable network reduction percentage'', with
                    respect to participating providers of a noncomplying
                    plan for a year is--
                                (i) the plan payment reduction amount for
                            the plan for the year (as determined under
                            section 6011(c)), divided by
                                (ii) the final accepted bid for the plan
                            for the year,
                    adjusted under subparagraph (B).
                        (B) Induced volume offset.--The Board shall provide
                    for an appropriate increase of the percentage reduction
                    computed under subparagraph (A) to take into account
                    any estimated increase in volume of services provided
                    that may reasonably be anticipated as a consequence of
                    applying a reduction in payment under this subsection.
                    The Board may compute and apply such increase
                    differently for different classes of providers or
                    services or different types of health plans (as the
                    Board may define).
        (b) Other Providers.--
                (1) In general.--Each regional alliance health plan that is
            a noncomplying plan in a year shall provide for a reduction in
            the amount of payments to providers (or groups of providers)
            that are not participating providers under the applicable
            alliance fee schedule under section 1406(c)(3) by the
            applicable nonnetwork reduction percentage (described in
            paragraph (2)) for the year.
                (2) Applicable nonnetwork reduction percentage.--
                        (A) In general.--Subject to subparagraph (B), the
                    ``applicable nonnetwork reduction percentage'', with
                    respect to nonparticipating providers of a noncomplying
                    plan for a year is--
                                (i) the plan payment reduction amount for
                            the plan for the year (as determined under
                            section 6011(c)), divided by
                                (ii) the final accepted bid for the plan
                            for the year,
                    adjusted under subparagraph (B).
                        (B) Induced volume offset.--The Board shall provide
                    for an appropriate increase of the percentage reduction
                    computed under subparagraph (A) to take into account
                    any estimated increase in volume of services provided
                    that may reasonably be anticipated as a consequence of
                    applying a reduction in payment under this subsection.
                    The Board may compute and apply such increase
                    differently for different classes of providers or
                    services or different types of health plans (as the
                    Board may define).
        (c) Application to Cost Sharing and to Balance Billing
    Restrictions.--For purposes of applying section 1406(d) (relating to
    balance billing limitations) and part 3 of subtitle B of title I
    (relating to computation of cost sharing), the payment basis otherwise
    used for computing any limitation on billing or cost sharing shall be
    such payment basis as adjusted by any reductions effected under this
    section.

                PART 2--CORPORATE ALLIANCES HEALTH EXPENDITURES

    SEC. 6021. CALCULATION OF PREMIUM EQUIVALENTS.

        (a) In General.--By January 1, 1998, the Board shall develop a
    methodology for calculating an annual per capita expenditure equivalent
    for amounts paid for coverage for the comprehensive benefit package
    within a corporate alliance.
        (b) Adjustment Permitted.--Such methodology shall permit a
    corporate alliance to petition the Secretary of Labor for an adjustment
    of the inflation adjustment that would otherwise apply to compensate
    for material changes in the demographic characteristics of the eligible
    individuals receiving coverage through the alliance.
        (c) Reporting.--In 2001 and each subsequent year, each corporate
    alliance shall report to the Secretary of Labor, in a form and manner
    specified by the Secretary, the average of the annual per capita
    expenditure equivalent for the previous 3-year period.

    SEC. 6022. TERMINATION OF CORPORATE ALLIANCE FOR EXCESS INCREASE IN
                  EXPENDITURES.

        (a) Termination.--
                (1) In general.--If a corporate alliance has two excess
            years (as defined in subsection (b)) in a 3-year-period, then,
            effective beginning with the second year following the second
            excess year in such period--
                        (A) the Secretary of Labor shall terminate the
                    corporate alliance, and
                        (B) employers that were corporate alliance
                    employers with respect to such corporate alliance shall
                    become regional alliance employers (unless, in the case
                    of a corporate alliance with a plan sponsor described
                    in subparagraph (B) or (C) of section 1311(b)(1), the
                    employers become corporate alliance employers of
                    another such corporate alliance).
                (2) Initial 3-year-period.--Paragraph (1) shall first apply
            to the 3-year-period beginning with 1998.
                (3) Special subsequent treatment for large employers.--In
            the case of corporate alliance employers described in paragraph
            (1)(B) that are large employers, the employer premium payments
            under section 6121 are subject to adjustment under section
            6124.
                (4) No further election.--If a corporate alliance of a
            large employer is terminated under this subsection, no employer
            that is a corporate alliance employer for that alliance is
            eligible to be a sponsor of a corporate alliance.
        (b) Excess Year.--
                (1) In general.--In subsection (a), the term ``excess
            year'' means, for a corporate alliance, a year (after 2000) for
            which--
                        (A) the rate of increase for the corporate alliance
                    (specified in paragraph (2)) for the year, exceeds
                        (B) the national corporate inflation factor
                    (specified in paragraph (3)) for the year.
                (2) Rate of increase for corporate alliance.--The rate of
            increase for a corporate alliance for a year, specified in this
            paragraph, is the percentage by which--
                        (A) the average of the annual per capita
                    expenditure equivalent for the corporate alliance
                    (reported under section 6021(c)) for the 3-year period
                    ending with such year, exceeds
                        (B) the average of the annual per capita
                    expenditure equivalent for the corporate alliance
                    (reported under such subsection) for the 3-year period
                    ending with the previous year.
                (3) National corporate inflation factor.--The national
            corporate inflation factor for a year, specified in this
            paragraph, is the average of the general health care inflation
            factors (as defined in section 6001(a)(3)) for each of the 3
            years ending with such year.

                    PART 3--TREATMENT OF SINGLE-PAYER STATES

    SEC. 6031. SPECIAL RULES FOR SINGLE-PAYER STATES.

        In the case of a Statewide single-payer State, for purposes of
    section 1222(6), the Board shall compute a Statewide per capita premium
    target for each year in the same manner as a regional alliance per
    capita premium target is determined under section 6003.

                         PART 4--TRANSITION PROVISIONS

    SEC. 6041. MONITORING PRICES AND EXPENDITURES.

        (a) In General.--The Secretary shall establish a program to monitor
    prices and expenditures in the health care system in the United States.
        (b) Reports.--The Secretary shall periodically report to the
    President on--
                (1) the rate of increase in expenditures in each sector of
            the health care system, and
                (2) how such rates compare with rate of overall increase in
            health care spending and rate of increase in the consumer price
            index.
        (c) Access to Information.--
                (1) In general.--The Secretary may obtain, through surveys
            or otherwise, information on prices and expenditures for health
            care services. The Secretary may compel health care providers
            and third party payers to disclose such information as is
            necessary to carry out the program under this section.
                (2) Confidentiality.--Non-public information obtained under
            this subsection with respect to individual patients is
            confidential.
        (d) Periodic Reports.--The Secretary shall periodically issue
    public reports on the matters described in subsection (b).

                                                       Title VI, Subtitle B

                     Subtitle B--Premium-Related Financings

                        PART 1--FAMILY PREMIUM PAYMENTS

                            Subpart A--Family Share

    SEC. 6101. FAMILY SHARE OF PREMIUM.

        (a) Requirement.--Each family enrolled in a regional alliance
    health plan or in a corporate alliance health plan in a class of family
    enrollment is responsible for payment of the family share of premium
    payable respecting such enrollment. Such premium may be paid by an
    employer or other person on behalf of such a family.
        (b) Family Share of Premium Defined.--
                (1) In general.--In this subtitle, the term ``family share
            of premium'' means, with respect to enrollment of a family--
                        (A) in a regional alliance health plan, the amount
                    specified in paragraph (2) for the class, or
                        (B) in a corporate alliance health plan, the amount
                    specified in paragraph (3) for the class.
                (2) Regional alliance.--
                        (A) In general.--The amount specified in this
                    paragraph for a health plan based on a class of family
                    enrollment is the sum of the base amounts described in
                    subparagraph (B) reduced (but not below zero) by the
                    sum of the amounts described in subparagraph (C).
                        (B) Base.--The base amounts described in this
                    subparagraph (for a plan for a class of enrollment) are
                    as follows:
                                (i) Regional alliance premium.--The premium
                            specified in section 6102(a) with respect to
                            such class of enrollment.
                                (ii) Family collection shortfall.--20
                            percent of the family collection shortfall add-
                            on (computed under section 6107 for such
                            class).
                        (C) Credits and discounts.--The amounts described
                    in this subparagraph (for a plan for a class of
                    enrollment) are as follows:
                                (i) Alliance credit.--The amount of the
                            alliance credit under section 6103(a).
                                (ii) Income related discount.--The amount
                            of any income-related discount provided under
                            section 6104(a)(1).
                                (iii) Excess premium credit.--The amount of
                            any excess premium credit provided under
                            section 6105.
                                (iv) Corporate alliance opt-in credit.--The
                            amount of any corporate alliance opt-in credit
                            provided under section 6106.
                                (v) Additional credit for ssi and afdc
                            recipients.--In the case of an SSI or AFDC
                            family or for whom the amount described in
                            clause (ii) is equal to the amount described in
                            section 6104(b)(1)(A), the amount described in
                            subparagraph (B)(ii).
                        (D) Limit on miscellaneous credits.--In no case
                    shall the family share, due to credits under
                    subparagraph (C), be less than zero.
                (3) Corporate alliance.--
                        (A) In general.--The amount specified in this
                    paragraph for a health plan based on a class of family
                    enrollment is the premium described in subparagraph (B)
                    reduced (but not below zero) by the sum of the amounts
                    described in subparagraph (C).
                        (B) Premium.--The premium described in this
                    subparagraph (for a plan for a class of enrollment) is
                    premium specified under section 1384 with respect to
                    the plan and class of enrollment involved.
                        (C) Credits and discounts.--The amounts described
                    in this subparagraph (for a plan for a class of
                    enrollment) are as follows:
                                (i) Alliance credit.--The amount of the
                            alliance credit under section 6103(b).
                                (ii) Income related discount.--The amount
                            of any income-related discount provided under
                            section 6104(a)(2).

    SEC. 6102. AMOUNT OF PREMIUM.

        (a) Regional Alliance.--The amount of the premium charged by a
    regional alliance for all families in a class of family enrollment
    under a regional alliance health plan offered by the alliance is equal
    to the product of--
                (1) the final accepted bid for the plan (as defined in
            section 6000(a)(2)),
                (2) the uniform per capita conversion factor (specified
            under section 1341(b)) for the alliance, and
                (3) the premium class factor established by the Board for
            that class under section 1531.
        (b) Reference to Corporate Alliance Premium Provisions.--The amount
    of the premium charged by a corporate alliance for all families in a
    class of family enrollment under a corporate alliance health plan
    offered by the alliance is specified under section 1384.
        (c) Special Rules for Divided Families.--In the case of an
    individual who is a qualifying employee of an employer, if the
    individual has a spouse or child who is not treated as part of the
    individual's family because of section 1012--
                (1) the combined premium for both families under this
            section shall be computed as though such section had not
            applied if such combined premium is less than the total of the
            premiums otherwise applicable (without regard to this
            subsection),
                (2) the regional alliance shall divide such combined
            premium between the families proportionally (consistent with
            rules established by the Board), and
                (3) in such case, credits and other amounts shall be pro-
            rated in a manner consistent with rules established by the
            Board.

    SEC. 6103. ALLIANCE CREDIT.

        (a) Regional Alliances.--The credit provided under this section for
    a family enrolled in a regional alliance health plan through a regional
    alliance for a class of family enrollment is equal to 80 percent of the
    weighted average premium (as defined in section 6000(b)) for health
    plans offered by the alliance for the class.
        (b) Corporate Alliances.--The credit provided under this section
    for a family enrolled in a corporate alliance health plan for a class
    of family enrollment is equal to the minimum employer premium payment
    required under section 6131 with respect to the family.

    SEC. 6104. PREMIUM DISCOUNT BASED ON INCOME.

        (a) In General.--
                (1) Enrollees in regional alliance health plans.--Each
            family enrolled with a regional alliance health plan is
            entitled to a premium discount under this section, in the
            amount specified in subsection (b), if the family--
                        (A) is an AFDC or SSI family,
                        (B) is determined, under subpart D of part 3 of
                    subtitle D of title I, to have family adjusted income
                    below 150 percent of the applicable poverty level, or
                        (C) is a family described in subsection (c)(3) for
                    which the family obligation amount under subsection (c)
                    for the year would otherwise exceed a specified percent
                    of family adjusted income described in such subsection.
                (2) Enrollees in corporate alliance health plans.--
                        (A) In general.--Subject to subparagraph (B), each
                    family enrolled with a corporate alliance health plan
                    in a class of family enrollment by virtue of the full-
                    time employment of a low-wage employee (as defined in
                    subparagraph (B)) is entitled to a premium discount
                    under this section in the amount (if any) by which--
                                (i) 95 percent of the premium (specified in
                            section 1384) for the least expensive corporate
                            alliance health plan that is offered to the
                            employee and that is a lower or combination
                            cost sharing plan (as defined in paragraphs (7)
                            and (20) of section 1902 for that class and
                            premium area), exceeds
                                (ii) the alliance credit under section
                            6103(b) for that class.
                        (B) Low-wage employee defined.--
                                (i) In general.--In this paragraph, the
                            term ``low-wage employee'' means, with respect
                            to an employer, an employee who is employed on
                            a full-time basis and who is receiving wages
                            (as defined in section 1901(a)(1)(A)) for
                            employment for the employer, at an annual rate
                            of less than $15,000 (as adjusted under clause
                            (ii)).
                                (ii) Indexing.--For a year after 1994, the
                            dollar amount specified in clause (i) shall be
                            increased or decreased by the same percentage
                            as the percentage increase or decrease by which
                            the average CPI (described in section 1902(9))
                            for the 12-month-period ending with August 31
                            of the preceding year exceeds such average for
                            the 12-month period ending with August 31,
                            1993.
                        (C) Timing of determination.--
                                (i) In general.--The determination of
                            whether or not an employee is a low-wage
                            employee shall be made, in accordance with
                            rules of the Secretary of Labor, at the time of
                            initial enrollment and shall also be made at
                            the time of each subsequent open enrollment
                            period, on the basis of the wages payable by
                            the employer at that time.
                                (ii) Effective date.--Such determination
                            shall apply as of the effective date of the
                            initial enrollment, or, in the case of an open
                            enrollment period, as of the effective date of
                            changes in enrollment during such period.
                (3) No liability for indians and certain veterans and
            military personnel.--
                        (A) In general.--In the case of an individual
                    described in subparagraph (B), because the applicable
                    health plan does not impose any premium for such an
                    individual, the individual is not eligible for any
                    premium discount under this section.
                        (B) Individuals described.--An individual described
                    in this subparagraph is--
                                (i) an electing veteran (as defined in
                            section 1012(d)(1)) who is enrolled under a
                            health plan of the Department of Veterans
                            Affairs and who, under the laws and rules as in
                            effect as of December 31, 1994, has a service-
                            connected disability or who is unable to defray
                            the expenses of necessary care as determined
                            under section 1722(a) of title 38, United
                            States Code,
                                (ii) active duty military personnel (as
                            defined in section 1012(d)(2)), and
                                (iii) an electing Indian (as defined in
                            section 1012(d)(3)).
                (4) Monthly application to afdc and ssi families.--
            Paragraph (1)(A) (and the family obligation amount under
            subsection (c) insofar as it relates to an AFDC or SSI family)
            shall be applied to the premium or family obligation amount
            only for months in which the family is such an AFDC or SSI
            family.
        (b) Amount of Premium Discount for Regional Alliance Health
    Plans.--
                (1) In general.--Subject to the succeeding paragraphs of
            this subsection, the amount of the premium discount under this
            subsection for a family enrolled in a regional alliance health
            plan under a class of family enrollment is equal to--
                        (A) 20 percent of the weighted average premium for
                    regional alliance health plans offered by the regional
                    alliance for that class of enrollment, increased by any
                    amount provided under paragraph (2); reduced (but not
                    below zero) by
                        (B) the sum of--
                                (i) the family obligation amount described
                            in subsection (c), and
                                (ii) the amount of any employer payment
                            (not required under part 2) towards the family
                            share of premiums for covered members of the
                            family.
                (2) Increase to assure enrollment in at-or-below-average-
            cost plan.--If a regional alliance determines that a family
            eligible for a discount under this section is unable to enroll
            in a at-or-below-average-cost plan (as defined in paragraph
            (3)) that serves the area in which the family resides, the
            amount of the premium discount under this subsection is
            increased but only to such amount as will permit the family to
            enroll in a regional alliance health plan without the need to
            pay a family share of premium under this part in excess of the
            sum described in paragraph (1)(B).
                (3) At-or-below-average-cost plan defined.--In this
            section, the term ``at-or-below-average-cost plan'' means a
            regional alliance health plan the premium for which does not
            exceed, for the class of family enrollment involved, the
            weighted average premium for the regional alliance.
        (c) Family Obligation Amount.--
                (1) Determination.--Subject to paragraphs (2) and (3), the
            family obligation amount under this subsection is determined as
            follows:
                        (A) No obligation if income below income threshold
                    amount or if afdc or ssi family.--If the family
                    adjusted income (as defined in section 1372(d)) of the
                    family is less than the income threshold amount
                    (specified in paragraph (4)) or if the family is an
                    AFDC or SSI family, the family obligation amount is
                    zero.
                        (B) Income above income threshold amount.--If such
                    income is at least such income threshold amount and the
                    family is not an AFDC or SSI family, the family
                    obligation amount is the sum of the following:
                                (i) For income (above income threshold
                            amount) up to the poverty level.--The product
                            of the initial marginal rate (specified in
                            paragraph (2)) and the amount by which--
                                        (I) the family adjusted income (not
                                    including any portion that exceeds the
                                    applicable poverty level for the class
                                    of family involved), exceeds
                                        (II) such income threshold amount.
                                (ii) Graduated phase out of discount up to
                            150 percent of poverty level.--The product of
                            the final marginal rate (specified in paragraph
                            (2)) and the amount by which the family
                            adjusted income exceeds 100 percent (but is
                            less than 150 percent) of the applicable
                            poverty level.
                (2) Marginal rates.--In paragraph (1)--
                        (A) Individual marginal rates.--For a year for an
                    individual class of enrollment--
                                (i) Initial marginal rate.--The initial
                            marginal rate is the ratio of--
                                        (I) 3 percent of the applicable
                                    poverty level for the individual class
                                    of enrollment for the year, to
                                        (II) the amount by which such
                                    poverty level exceeds such income
                                    threshold amount.
                                (ii) Final marginal rate.--The final
                            marginal rate is the ratio of--
                                        (I) the amount by which the general
                                    family share (as defined in
                                    subparagraph (C)) for an individual
                                    class of enrollment exceeds 3 percent
                                    of the applicable poverty level (for an
                                    individual class of enrollment for the
                                    year); to
                                        (II) 50 percent of such poverty
                                    level.
                        (B) Family marginal rates.--For a year for a family
                    class of enrollment (as defined in section
                    1011(c)(2)(A))--
                                (i) Initial marginal rate.--The initial
                            marginal rate is the ratio of--
                                        (I) 3 percent of the applicable
                                    poverty level for a dual parent class
                                    of enrollment for the year, to
                                        (II) the amount by which such
                                    poverty level exceeds such income
                                    threshold amount.
                                (ii) Final marginal rate.--The final
                            marginal rate is the ratio of--
                                        (I) the amount by which the general
                                    family share (as defined in
                                    subparagraph (C)) for a dual parent
                                    class of enrollment exceeds 3 percent
                                    of the applicable poverty level (for
                                    such a class for the year); to
                                        (II) 50 percent of such poverty
                                    level.
                        (C) General family share.--In subparagraphs (A) and
                    (B), the term ``general family share'' means, for a
                    class, the weighted average premium for the class minus
                    the alliance credit (determined without regard to this
                    section).
                (3) Limitation to 3.9 percent for all families.--
                        (A) In general.--
                                (i) Families with income below 150 percent
                            of poverty.--In the case of a family with
                            family adjusted income of less than 150 percent
                            of the applicable poverty level, in no case
                            shall the family obligation amount under this
                            subsection for the year exceed 3.9 percent
                            (adjusted under subparagraph (C)) of the amount
                            of such adjusted income.
                                (ii) Other families with income below
                            $40,000.--In the case of a family with family
                            adjusted income of at least 150 percent of the
                            applicable poverty level but less than $40,000
                            (adjusted under subparagraph (B)) for a year,
                            the family obligation amount under this
                            subsection for the year is equal to 3.9 percent
                            (adjusted under subparagraph (C)) of the amount
                            of such adjusted income.
                        (B) Indexing of dollar amounts.--
                                (i) In general.--For a year after 1994, the
                            dollar amounts specified in subparagraph (A)(i)
                            and in section 6113(d)(1)(B) shall be increased
                            or decreased by the same percentage as the
                            percentage increase or decrease by which the
                            average CPI (described in section 1902(9)) for
                            the 12-month-period ending with August 31 of
                            the preceding year exceeds such average for the
                            12-month period ending with August 31, 1993.
                                (ii) Rounding.--The dollar amounts adjusted
                            under this subparagraph shall be rounded each
                            year to the nearest multiple of $100.
                        (C) Indexing of percentage.--
                                (i) In general.--The percentage specified
                            in subparagraph (A) shall be adjusted for any
                            year after 1994 so that the percentage for the
                            year bears the same ratio to the percentage so
                            specified as the ratio of--
                                        (I) 1 plus the general health care
                                    inflation factor (as defined in section
                                    6001(a)(3)) for the year, bears to
                                        (II) 1 plus the percentage
                                    specified in section 1136(b) (relating
                                    to indexing of dollar amounts related
                                    to cost sharing) for the year.
                                (ii) Rounding.--Any adjustment under clause
                            (i) for a year shall be rounded to the nearest
                            multiple of \1/10\ of 1 percentage point.
                (4) Income threshold amount.--
                        (A) In general.--For purposes of this subtitle, the
                    income threshold amount specified in this paragraph is
                    $1,000 (adjusted under subparagraph (B)) .
                        (B) Indexing.--For a year after 1994, the income
                    threshold amount specified in subparagraph (A) shall be
                    increased or decreased by the same percentage as the
                    percentage increase or decrease by which the average
                    CPI (described in section 1902(9)) for the 12-month-
                    period ending with August 31 of the preceding year
                    exceeds such average for the 12-month period ending
                    with August 31, 1993.
                        (C) Rounding.--Any increase or decrease under
                    subparagraph (B) for a year shall be rounded to the
                    nearest multiple of $10.

    SEC. 6105. EXCESS PREMIUM CREDIT.

        (a) In General.--If plan payment reductions are made for one or
    more regional alliance health plans offered by a regional alliance for
    plan payments in a year under section 6021, the alliance shall provide
    for a credit under this section, in the amount described in subsection
    (b), in the case of each family enrolled in a regional alliance health
    plan offered by the alliance for premiums in the year.
        (b) Amount of Credit.--
                (1) In general.--Subject to paragraph (2), the amount of
            the credit under this subsection, for a family enrolled in a
            class of family enrollment for a regional alliance for a year,
            is the amount that would be the weighted average premium for
            such alliance, class, and year, if the per capita excess
            premium amount (determined under subsection (c)) for the
            alliance for the year were substituted for the reduced weighted
            average accepted bid for the regional alliance for the year.
                (2) Adjustment to account for use of estimates.--Subject to
            section 1361(b)(3), if the total payments made by a regional
            alliance to all regional alliance health plans in a year under
            section 1351(b) exceeds (or is less than) the total of such
            payments estimated by the alliance (based on the reduced
            weighted average accepted bid under subsection (c)(1)), because
            of a difference between--
                        (A) the alliance's estimate of the distribution of
                    enrolled families between excess premium plans and
                    other plans, and
                        (B) the actual distribution of such enrolled
                    families among such plans,
            the amount of the credit under this section in the second
            succeeding year shall be reduced (or increased, respectively)
            by the amount of such excess (or deficit) in the total of such
            payments made by the alliance to all such plans.
        (c) Per Capita Excess Premium Amount.--The per capita excess
    premium amount, for a regional alliance for a year, is the amount by
    which--
                (1) the reduced weighted average accepted bid (as defined
            in section 6000(a)(1)) for the alliance for the year, exceeds
                (2) the regional alliance per capita premium target for the
            alliance for the year.

    SEC. 6106. CORPORATE ALLIANCE OPT-IN CREDIT.

        (a) In General.--If a regional alliance is owed a payment
    adjustment under section 6124 for a year, then the alliance shall
    provide for a credit under this section equal to 20 percent of the
    amount described in subsection (b), in the case of each family enrolled
    in a regional alliance plan offered by the alliance.
        (b) Amount of Credit.--The amount described in this subsection, for
    a family enrolled in a class of family enrollment for a regional
    alliance for a year, is the amount that would be the weighted average
    premium for such alliance, class, and year, if the per capita corporate
    alliance opt-in amount (determined under subsection (c)) for the
    alliance for the year were substituted for the reduced weighted average
    accepted bid for the regional alliance for the year.
        (c) Per Capita Corporate Alliance Opt-in Amount.--The per capita
    corporate alliance opt-in amount, for a regional alliance for a year,
    is--
                (1) the total amount of the payment adjustments owed for
            the year under section 6124, divided by
                (2) the estimated average number of regional alliance
            eligible individuals in the regional alliance during the year
            (reduced by the average number of such individuals whose family
            share of premiums, determined without regard to this section
            and section 6107, is zero).

    SEC. 6107. FAMILY COLLECTION SHORTFALL ADD-ON.

        (a) In General.--The family collection shortfall add-on, for a
    regional alliance for a class of enrollment for a year, is the amount
    that would be the weighted average premium for such alliance, class,
    and year, if the per capita collection shortfall amount (determined
    under subsection (b)) for the alliance for the year were substituted
    for the reduced weighted average accepted bid for the regional alliance
    for the year.
        (b) Computation of Per Capita Adjustment for Collection
    Shortfalls.--
                (1) Per capita collection shortfall amount.--The per capita
            collection shortfall amount, for a regional alliance for a
            year, under this subsection is equal to--
                        (A) the amount estimated under paragraph (2)(A) for
                    the year, divided by
                        (B) the estimated average number of regional
                    alliance eligible individuals in the regional alliance
                    during the year (reduced by the average number of such
                    individuals whose family share of premiums, determined
                    without regard to this section and section 6106, is
                    zero).
                (2) Aggregate collection shortfall.--
                        (A) In general.--Each regional alliance shall
                    estimate, for each year (beginning with the first year)
                    the total amount of payments which the alliance can
                    reasonably identify as owed to the alliance under this
                    Act (taking into account any premium reduction or
                    discount under this subtitle and including amounts owed
                    under subpart B and not taking into account any
                    penalties) for the year and not likely to be collected
                    (after making collection efforts described in section
                    1345) during a period specified by the Secretary
                    beginning on the first day of the year.
                        (B) Exclusion of government debts.--The amount
                    under subparagraph (A) shall not include any payments
                    owed to a regional alliance by the Federal, State, or
                    local governments.
                        (C) Adjustment for previous shortfall estimation
                    discrepancy.--Subject to section 1361(b)(3), the amount
                    estimated under this paragraph for a year shall be
                    adjusted to reflect over (or under) estimations in the
                    amounts so computed under this paragraph for previous
                    years (based on actual collections), taking into
                    account interest payable based upon borrowings (or
                    savings) attributable to such over or under
                    estimations.

          Subpart B--Repayment of Alliance Credit by Certain Families

    SEC. 6111. REPAYMENT OF ALLIANCE CREDIT BY CERTAIN FAMILIES.

        (a) In General.--Subject to the succeeding provisions of this
    subpart, each family which is provided an alliance credit under section
    6103(a) for a class of enrollment is liable to the regional alliance
    for repayment of an amount equal to the base employment monthly premium
    (applicable to such class) for the month under section 6122.
        (b) Reduction for Self-Employment Payments.--The liability of a
    family under this section for a year shall be reduced (but not below
    zero) by the amount of any employer payments made in the year under
    section 6126 based on the net earnings from self-employment of a family
    member.

    SEC. 6112. NO LIABILITY FOR FAMILIES EMPLOYED FULL-TIME; REDUCTION IN
                  LIABILITY FOR PART-TIME EMPLOYMENT.

        (a) In General.--The amount of any liability under section 6111
    shall be reduced, in accordance with rules established by the National
    Health Board consistent with this section, based on employer premiums
    payable under section 6121 with respect to the employment of a family
    member who is a qualifying employee or with respect to a family member.
    In no case shall the reduction under this section result in any payment
    owing to a family.
        (b) Credit for Full-Time and Part-Time Employment.--
                (1) In general.--Under rules of the Board, in the case of a
            family enrolled under a class of family enrollment, if a family
            member is a qualifying employee for a month and (except in the
            case described in section 6114(a)) the employer is liable for
            payment under section 6121 based on such employment--
                        (A) Full-time employment credit.--If the employment
                    is on a full-time basis (as defined in section
                    1901(b)(2)(A)) the liability under section 6111 shall
                    be reduced by the credit amount described in
                    subparagraph (C).
                        (B) Part-time employment credit.--If the employment
                    is on a part-time basis (as defined in section
                    1901(b)(2)(A)) the liability under section 6111 shall
                    be reduced by the employment ratio (as defined in
                    section 1901(b)(2)(B)) of the credit amount described
                    in subparagraph (C).
                        (C) Full-time monthly credit.--The amount of the
                    credit under this subparagraph, with respect to
                    employment by an employer in a month, is \1/12\ (or, if
                    applicable, the fraction described in paragraph (2)) of
                    the amount owed under section 6111, based on the class
                    of enrollment, for the year.
                (2) Coverage during only part of a year.--In the case of a
            family that is not enrolled in a regional alliance health plan
            for all the months in a year, the fraction described in this
            paragraph is 1 divided by the number of months in the year in
            which the family was enrolled in such a plan.
                (3) Aggregation of credits.--For purposes of paragraph
            (1)--
                        (A) Individuals.--In the case of an individual who
                    is a qualifying employee of more than one employer in a
                    month, the credit for the month shall equal the sum of
                    the credits earned with respect to employment by each
                    employer. Such sum may exceed the credit amount
                    described in paragraph (1)(C).
                        (B) Couples.--In the case of a couple each spouse
                    of which is a qualifying employee in a month, the
                    credit for the month shall equal the sum of the credits
                    earned with respect to employment by each spouse. Such
                    sum may exceed the credit amount described in paragraph
                    (1)(C).
        (c) Treatment of Change of Enrollment Status.--In the case of a
    family for which the class of family enrollment changes during a year,
    the Board shall establish rules for appropriate conversion and
    allocation of the credit amounts under the previous provisions of this
    section in a manner that reflects the relative values of the base
    employment monthly premiums (as determined under section 6122) among
    the different classes of family enrollment.

    SEC. 6113. LIMITATION OF LIABILITY BASED ON INCOME.

        (a) In General.--In the case of an eligible family described in
    subsection (b), the repayment amount required under this subpart (after
    taking into account any work credit earned under section 6112) with
    respect to a year shall not exceed the amount of liability described in
    subsection (c) for the year.
        (b) Eligible Family Described.--An eligible family described in
    this subsection is a family which is determined, under subpart B of
    part 3 of subtitle D of title I by the regional alliance for the
    alliance area in which the family resides, to have wage-adjusted income
    (as defined in subsection (d)) below 250 percent of the applicable
    poverty level.
        (c) Amount of Liability.--
                (1) Determination.--Subject to subsection (f), in the case
            of a family enrolled in a class of enrollment with wage-
            adjusted income (as defined in subsection (d)), the amount of
            liability under this subsection is determined as follows:
                        (A) No obligation if income below income threshold
                    amount or if afdc or ssi family.--If such income is
                    less than the income threshold amount (specified in
                    section 6104(c)(4)) or if the family is an AFDC or SSI
                    family, the amount of liability is zero.
                        (B) Income above income threshold amount.--If such
                    income is at least such income threshold amount and the
                    family is not an AFDC or SSI family, the amount of
                    liability is the sum of the following:
                                (i) 5.5 percent of income (above income
                            threshold amount) up to the poverty level.--The
                            initial marginal rate (specified in paragraph
                            (2)(A)) of the amount by which--
                                        (I) the wage-adjusted income (not
                                    including any portion that exceeds the
                                    applicable poverty level for the class
                                    of family involved), exceeds
                                        (II) such income threshold amount.
                                (ii) Graduated phase out of discount up to
                            250 percent of poverty level.--The final
                            marginal rate (specified in paragraph (2)(B))
                            of the amount by which the wage-adjusted income
                            exceeds 100 percent of the applicable poverty
                            level.
                (2) Marginal rates.--In paragraph (1)--
                        (A) Initial marginal rate.--The initial marginal
                    rate, for a year for a class of enrollment, is the
                    ratio of--
                                (i) 5.5 percent of the applicable poverty
                            level for the class of enrollment for the year,
                            to
                                (ii) the amount by which such poverty level
                            exceeds such income threshold amount.
                        (B) Final marginal rate.--The final marginal rate,
                    for a year for a class of enrollment, is the ratio of--
                                (i) the amount by which (I) the amount of
                            the repayment amount described in section
                            6111(a) exceeds (II) 5.5 percent of the
                            applicable poverty level (for the class and
                            year); to
                                (ii) 150 percent of such poverty level.
                (3) Monthly application to afdc and ssi families.--
            Paragraph (1) insofar as it relates to an AFDC or SSI family
            shall be applied so as to reduce to zero the liability amount
            only for months in which the family is such an AFDC or SSI
            family.
        (d) Wage-Adjusted Income Defined.--In this subtitle, the term
    ``wage-adjusted income'' means, for a family, family adjusted income of
    the family (as defined in section 1372(d)(1)), reduced by the sum of
    the following:
                (1)(A) Subject to subparagraph (B), the amount of any wages
            included in such family's income that is received for
            employment which is taken into account in the computation of
            the amount of employer premiums under section 6121 (without
            consideration of section 6126).
                (B) The reduction under subparagraph (A) shall not exceed
            for a year $5,000 (adjusted under section 6104(c)(3)(B))
            multiplied by the number of months (including portions of
            months) of employment with respect to which employer premiums
            were payable under section 6121 (determined in a manner
            consistent with section 1901(b)(3)).
                (2) The amount of net earnings from self employment of the
            family taken into account under section 6126.
                (3) The amount of unemployment compensation included in
            income under section 85 of the Internal Revenue Code of 1986.
        (e) Determinations.--A family's wage-adjusted income and the amount
    of liability under subsection (c) shall be determined by the applicable
    regional alliance upon application by a family under under subpart B of
    part 3 of subtitle D of title I.
        (f) No Liability for Indians and Certain Veterans and Military
    Personnel.--The provisions of paragraph (3) of section 6104(a) shall
    apply to the reduction in liability under this section in the same
    manner as such paragraph applies to the premium discount under section
    6104.

    SEC. 6114. SPECIAL TREATMENT OF CERTAIN RETIREES AND QUALIFIED SPOUSES
                  AND CHILDREN.

        (a) Treatment as Full-Time Employee.--Subject to subsection (d), an
    individual who is an eligible retiree (as defined in subsection (b)) or
    a qualified spouse or child (as defined in subsection (c)) for a month
    in a year (beginning with 1998) is considered, for purposes of section
    6112, to be a full-time employee described in such section in such
    month.
        (b) Eligible Retiree Defined.--In this section, the term ``eligible
    retiree'' means, for a month, an individual who establishes to the
    satisfaction of the regional alliance (for the alliance area in which
    the individual resides), pursuant to rules of the Secretary, that the
    individual, as of the first day of the month--
                (1) is at least 55, but less than 65, years of age,
                (2) is not employed on a full-time basis (as defined in
            section 1901(b)(2)(A)),
                (3) would be eligible (under section 226(a) of the Social
            Security Act) for hospital insurance benefits under part A of
            title XVIII of such Act if the individual were 65 years of age
            based only on the employment of the individual, and
                (4) is not a medicare-eligible individual.
        (c) Qualified Spouse or Child Defined.--In subsection (a), the term
    ``qualified spouse or child'' means, in relation to an eligible retiree
    for a month, an individual who establishes to the satisfaction of the
    regional alliance (for the alliance area in which the individual
    resides) under rules of the Secretary that the requirements in one of
    the following paragraphs is met with respect to the individual:
                (1) The individual (A) is under 65 years of age and is (and
            has been for a period of at least one year) married to an
            eligible retiree or (B) is a child of the eligible retiree.
                (2) In the case of a person who was an eligible retiree at
            the time of the person's death--
                        (A) the individual was (and had for a period of at
                    least one year been) married to the retiree at the time
                    of the person's death,
                        (B) the individual is under 65 years of age,
                        (C) the individual is not employed on a full-time
                    basis (as defined in section 1901(b)(2)(A)),
                        (D) the individual is not remarried, and
                        (E) the deceased spouse would still be an eligible
                    retiree in the month if such spouse had not died.
                (3) The individual is a child of an individual described in
            paragraph (2).
        (d) Application.--An individual may not be determined to be an
    eligible retiree or qualified spouse or child unless an application has
    been filed with the regional alliance. Such application shall contain
    such information as the Secretary may require to establish such status
    and verify information in the application. Any material
    misrepresentation in the application is subject to a penalty in the
    same manner as a misrepresentation described in section 1374(i)(2).

    SEC. 6115. SPECIAL TREATMENT OF CERTAIN MEDICARE BENEFICIARIES.

        In the case of an individual who would be a medicare-eligible
    individual in a month but for the application of section 1012(a) on the
    basis of employment (in the month or a previous month) of the
    individual or the individual's spouse or parent, the individual (or
    spouse or parent, as the case may be) so employed is considered, for
    purposes of section 6112, to be a full-time employee described in such
    section in such month.

                       PART 2--EMPLOYER PREMIUM PAYMENTS

                     Subpart A--Regional Alliance Employers

    SEC. 6121. EMPLOYER PREMIUM PAYMENT REQUIRED.

        (a) Requirement.--
                (1) In general.--Each regional alliance employer described
            in paragraph (2) for a month shall pay to the regional alliance
            that provides health coverage to a qualifying employee of the
            employer an employer premium in a amount at least equal to the
            amount specified in subsection (b). Such payments shall be made
            in accordance with section 1345(c).
                (2) Employer described.--An employer described in this
            paragraph for a month is an employer that in the month employs
            one or more qualifying employees (as defined in section
            1901(b)(1)).
                (3) Treatment of certain employment by corporate alliance
            employers.--A corporate alliance employer shall be deemed, for
            purposes of this subpart, to be a regional alliance employer
            with respect to qualifying employees who are not corporate
            alliance eligible individuals.
        (b) Premium Payment Amount.--
                (1) In general.--Except as provided in section 6123
            (relating to a discount for certain employers), section 6124
            (relating to large employers electing coverage in a regional
            alliance), and section 6125 (relating to the employer
            collection shortfall add-on), the amount of the employer
            premium payment, for a month for qualifying employees of the
            employer who reside in an alliance area, is the sum of the
            payment amounts computed under paragraph (2) for each class of
            family enrollment with respect to such employees in such area.
                (2) Payment amount for all employees in a class of family
            enrollment.--Subject to paragraph (3), the payment amount under
            this paragraph, for an employer for a class of family
            enrollment for a month for qualifying employees residing in an
            alliance area, is the product of--
                        (A) the base employment monthly premium determined
                    under section 6122 for the class of family enrollment
                    for the previous month for the regional alliance, and
                        (B) the number of full-time equivalent employees
                    (determined under section 1901(b)(2)) enrolled in that
                    class of family enrollment for the previous month and
                    residing in the alliance area.
                (3) Treatment of certain employees.--In applying this
            subpart in the case of a qualifying employee (other than a
            medicare-eligible individual) who is not enrolled in any
            alliance health plan--
                        (A) the employee is deemed enrolled in a regional
                    alliance health plan (for the alliance area in which
                    the individual resides) in the dual parent class of
                    enrollment, and
                        (B) if the employee's residence is not known, the
                    employee is deemed to reside in the alliance area in
                    which the employee principally is employed for the
                    employer.
                (4) Transitional rules for first month in first year for a
            state.--In the case of an employer for a State in the first
            month of the State's first year--
                        (A) the premium amount for such month shall be
                    computed by substituting ``month'' for ``previous
                    month'' in paragraph (2);
                        (B) payment for such month shall be made on the
                    first of the month based on an estimate of the payment
                    for such month;
                        (C) an adjustment shall be made to the payment in
                    the following month to reflect the difference between
                    the payment in the first month and the payment in the
                    following month (calculated without regard to the
                    adjustment under this subparagraph); and
                        (D) the reconciliation of premiums for such first
                    month under section 1602(c) shall be included in the
                    reconciliation of premiums for the following 12 months.
                (5) Special rules for divided families.--In the case of an
            individual who is a qualifying employee of an employer, if the
            individual has a spouse or child who is not treated as part of
            the individual's family because of section 1012--
                        (A) the employer premium payment under this section
                    shall be computed as though such section had not
                    applied, and
                        (B) the regional alliance shall make proportional
                    payments (consistent with rules established by the
                    Secretary) to the health plans (if different) of the
                    qualifying employee and of the employee's spouse and
                    children.
        (c) Application During Transition Period.--
                (1) In general.--For purposes of applying this subpart in
            the case of an employer described in paragraph (3), there shall
            only be taken into account qualifying employees (and wages of
            such employees) who reside in a participating State.
                (2) Exception.--Paragraph (1) shall not apply in
            determining the average number of full-time equivalent
            employees or whether an employer is a small employer.
                (3) Employer described.--An employer described in this
            paragraph is an employer that employs one or more qualifying
            employees in a participating State and one or more qualifying
            employees in a State that is not a participating State.

    SEC. 6122. COMPUTATION OF BASE EMPLOYMENT MONTHLY PREMIUM.

        (a) In General.--Each regional alliance shall provide for the
    computation for each year (beginning with the first year) of a base
    employment monthly premium for each class of family enrollment as
    follows:
                (1) Individual enrollment.--The base employment monthly
            premium for the individual class of enrollment is equal to \1/
            12\ of 80 percent of the credit-adjusted weighted average
            premium (as defined in paragraph (4)) for such regional
            alliance for the individual class of enrollment.
                (2) Couple-only enrollment.--
                        (A) In general.--The base employment monthly
                    premium for the couple-only class of enrollment is
                    equal to \1/12\ of 80 percent of the product described
                    in subparagraph (B), divided by the sum described in
                    subparagraph (C).
                        (B) Total premiums for couple-only enrollments.--
                    The product described in this subparagraph is--
                                (i) the credit-adjusted weighted average
                            premium for such regional alliance for the
                            couple-only class of enrollment, multiplied by
                                (ii) the sum, for all the months in the
                            year, of the number of covered families
                            receiving coverage through regional alliance
                            health plans of the regional alliance within
                            such class of enrollment in each such month.
                        (C) Number of workers and extra workers.--The sum
                    described in this subparagraph is--
                                (i) the sum specified in subparagraph
                            (B)(ii), plus
                                (ii) the number of additional workers
                            (determined under subsection (b)(1)), for
                            families receiving coverage within such class
                            from regional alliance health plans offered by
                            the regional alliance.
                (3) Single and dual parent enrollments.--
                        (A) In general.--The base employment monthly
                    premium for the single parent and dual parent classes
                    of enrollment is equal to \1/12\ of 80 percent of the
                    sum described in subparagraph (B), divided by the sum
                    described in subparagraph (C).
                        (B) Total premiums for single and dual parent
                    enrollments.--The sum described in this subparagraph is
                    the sum of the products described in the following
                    clauses:
                                (i) Total premiums for single parent
                            enrollment.--The product of--
                                        (I) the credit-adjusted weighted
                                    average premium for such regional
                                    alliance for the single parent class of
                                    enrollment, multiplied by
                                        (II) the sum, for all the months in
                                    the year, of the number of covered
                                    families receiving coverage through
                                    regional alliance health plans of the
                                    regional alliance within such class of
                                    enrollment in each such month.
                                (ii) Total premiums for dual parent
                            enrollment.--The product of--
                                        (I) the credit-adjusted weighted
                                    average premium for such regional
                                    alliance for the dual parent class of
                                    enrollment, multiplied by
                                        (II) the sum, for all the months in
                                    the year, of the number of covered
                                    families receiving coverage through
                                    regional alliance health plans of the
                                    regional alliance within such class of
                                    enrollment in each such month.
                        (C) Number of workers and extra workers.--The sum
                    described in this subparagraph is--
                                (i) the sum specified in subparagraph
                            (B)(i)(II); plus
                                (ii) the sum specified in subparagraph
                            (B)(ii)(II); plus
                                (iii) the number of additional workers
                            (determined under subsection (b)(1)), for
                            families receiving coverage within the dual
                            parent class of enrollment from regional
                            alliance health plans offered by the regional
                            alliance.
                (4) Credit-adjusted weighted average premium defined.--In
            this subsection, the term ``credit-adjusted weighted average
            premium'' means, for a class of enrollment and a regional
            alliance, the weighted average premium for the class and
            alliance, reduced by the amount described in section 6106(b)
            for such class and alliance.
        (b) Determination of Additional Workers for Couple-Only and Dual
    Parent Class.--
                (1) In general.--Subject to paragraph (4), the regional
            alliance shall determine, for each couple class of family
            enrollment and in a manner specified by the Board, an estimated
            total number of additional workers equal to--
                        (A) 12 times the alliance-wide monthly average
                    number of premium payments (as determined under
                    paragraph (2)) for covered families (as defined in
                    paragraph (3)) within such class of enrollment, minus
                        (B) the sum described in subsection (a)(2)(B)(ii)
                    or (a)(3)(B)(ii)(II) for the couple-only and dual
                    parent classes, respectively.
                (2) Computation of alliance-wide monthly average number.--
                        (A) In general.--In determining the alliance-wide
                    monthly average number of premium payments under
                    paragraph (1)(A), a covered family shall count for a
                    month as 1, or, if greater, the number computed under
                    subparagraph (B) (but in no case greater than 2).
                        (B) Counting of families in which both spouses are
                    qualifying employees.--The number computed under this
                    subparagraph over all families within a couple-only or
                    dual parent class of enrollment in which both spouses
                    are qualifying employees is determined on an alliance-
                    wide basis based on the following:
                                (i) For such a spouse, determine, using the
                            rules under section 1902(b)(1)(A), how many
                            full-time equivalent employees the spouse is
                            counted as, but not to exceed 1 for either
                            spouse.
                                (ii) Add the 2 numbers determined under
                            clause (i) for spouses in such families.
                (3) Covered family defined.--In this subsection, the term
            ``covered family'' means a family other than--
                        (A) an SSI family or AFDC family,
                        (B) a family in which a spouse is a medicare-
                    eligible individual, or
                        (C) a family that is enrolled in a health plan
                    other than a regional alliance health plan.
                (4) Adjustment to account for use of estimates.--Subject to
            section 1361(b)(3), if the total receipts of a regional
            alliance to all regional alliance health plans in a year under
            this subpart exceeds, or is less than, the total of such
            receipts estimated by the alliance (based on the base
            employment monthly premium under subsection (a)), because of a
            difference between--
                        (A) the alliance's estimate of the estimated total
                    number of additional workers for the alliance and the
                    estimate of the number of covered families, and
                        (B) the actual total number of additional workers
                    and the actual number of covered families,
            the estimated total number of additional workers to be applied
            under this section in the second succeeding year shall be
            reduced, or increased, respectively, in a manner that results
            in total receipts of the alliance under this subpart in such
            succeeding year being increased or decreased by the amount of
            such excess (or deficit).
        (c) Basis for Determinations.--
                (1) Premiums.--The determinations of premiums and families
            under plans under this section shall be made in a manner
            determined by the Board and based on the premiums and families
            used by the Board in carrying out subtitle A and shall be based
            on estimates on an annualized basis.
                (2) Employment.--The determinations of employment under
            this section for the first year for a State shall be based on
            estimates of employment established by the regional alliance in
            accordance with standards promulgated by the Secretary of Labor
            in consultation with the National Health Board.
                (3) Reports.--In accordance with rules established by the
            Secretary of Labor in consultation with the National Health
            Board, a regional alliance may require regional alliance
            employers to submit such periodic information on employment as
            may be necessary to monitor the determinations made under this
            section, including months and extent of employment.
        (d) Timing of Determination.--Determinations under this section for
    a year shall be made by not later than December 1, or such other date
    as the Board may specify, before the beginning of the year.

    SEC. 6123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS.

        (a) Employer Discount.--
                (1) In general.--Subject to section 6124(c) (relating to
            phase in for certain large corporate alliance employers) and
            section 6125 (relating to the employer collection shortfall
            add-on), the amount of the employer premium payment required
            under this subpart for a regional alliance employer for any
            year shall not exceed the limiting percentage (as defined in
            subsection (b)) of the employer's wages for that year.
                (2) Exclusion of governmental employers and certain
            corporate alliance employers.--Paragraph (1) shall not apply
            to--
                        (A) the Federal Government, a State government, or
                    a unit of local government, or a unit or
                    instrumentality of such government, before 2002; and
                        (B) a corporate alliance employer which is treated
                    as a regional alliance employer under section
                    6131(a)(2).
        (b) Limiting Percentage Defined.--In subsection (a)--
                (1) Any employer.--For an employer that is not a small
            employer (as defined in subsection (c)), the limiting
            percentage is 7.9 percent.
                (2) Small employers.--For an employer that is a small
            employer and that has an average number of full-time equivalent
            employees and average annual wages per full-time equivalent
            employee (as determined under subsection (d)), the limiting
            percentage is the applicable percentage determined based on
            following table:

                                                   Limiting Percentage
    ----------------------------------------------------------------------------------------------------------------
                                          Employer's average annual wages per full-time equivalent employee are:
       Average number of full-time   -------------------------------------------------------------------------------
          equivalent employees        $0-$12,000  $12,001-$15,000  $15,001-$18,000  $18,001-$21,000  $21,001-$24,000
    ----------------------------------------------------------------------------------------------------------------
    Fewer than 25...................       3.5%           4.4%             5.3%             6.2%             7.1%
    25 but fewer than 50............       4.4%           5.3%             6.2%             7.1%             7.9%
    50 but not over 75..............       5.3%           6.2%             7.1%             7.9%             7.9%
    ----------------------------------------------------------------------------------------------------------------

        (c) Small Employer Defined.--
                (1) In general.--In this section--
                        (A) the term ``small employer'' means an employer
                    that does not employ, on average, more than 75 full-
                    time equivalent employees; and
                        (B) the average number of full-time equivalent
                    employees shall be determined by averaging the number
                    of full-time equivalent employees employed by the
                    employer in each countable month during the year.
                (2) Countable month.--In paragraph (1), the term
            ``countable month'' means, for an employer, a month in which
            the employer employs any qualifying employee.
                (3) Determinations.--The number of full-time equivalent
            employees shall be determined using the rules under section
            1901(b)(2).
        (d) Average Annual Wages Per Full-Time Equivalent Employee
    Defined.--
                (1) In general.--In this section, the term ``average annual
            wages per full-time equivalent employee'' means, for an
            employer for a year--
                        (A) the total wages paid in the year to individuals
                    who, at the time of payment of the wages, are
                    qualifying employees of the employer; divided by
                        (B) the number of full-time equivalent employees of
                    the employer in the year.
                (2) Determination.--The Board may establish rules relating
            to the computation of the average annual wages for employers.
        (e) Determinations.--For purposes of this section, the number of
    employees and average wages shall be determined on an annual basis.
        (f) Treatment of Certain Self-employed Individuals.--In the case of
    an individual who is a partner in a partnership, is a 2-percent
    shareholder in an S corporation (within the meaning of section 1372 of
    the Internal Revenue Code of 1986), or is any other individual who
    carries on a trade or business as a sole proprietorship, for purposes
    of this section--
                (1) the individual is deemed to be an employee of the
            partnership, S corporation, or proprietorship, and
                (2) the individual's net earnings from self employment
            attributable to the partnership, S corporation, or sole
            proprietorship are deemed to be wages from the partnership, S
            corporation, or proprietorship.
        (g) Application to Employers.--An employer that claims that this
    section applies--
                (1) shall provide notice to the regional alliance involved
            of the claim at the time of making payments under this subpart;
            and
                (2) shall make available such information (and provide
            access to such information) as the regional alliance may
            require (in accordance with regulations of the Secretary of
            Labor) to audit the determination of--
                        (A) whether the employer is a small employer, and,
                    if so, the average number of full-time equivalent
                    employees and average annual wages of the employer; and
                        (B) the total wages paid by the employer for
                    qualifying employees.
        (h) Treatment of Multi-Alliance Employers.--In the case in which
    this section is applied to an employer that makes employer premium
    payments to more than one regional alliance, the reduction under this
    section shall be applied in a pro-rated manner to the premium payments
    made to all such alliances.

    SEC. 6124. PAYMENT ADJUSTMENT FOR LARGE EMPLOYERS ELECTING COVERAGE IN
                  A REGIONAL ALLIANCE.

        (a) Application of Section.--
                (1) In general.--Except as otherwise provided in this
            subsection, this section shall apply to the employer premium
            payments for full-time employees in a State of an employer if--
                        (A)(i) the employer is an eligible sponsor
                    described in section 1311(b)(1)(A), (ii) the employer
                    elected to be a corporate alliance under section
                    1312(a)(1), and (iii) the election is terminated under
                    section 1313;
                        (B)(i) the employer is such an eligible sponsor as
                    of the first day of the first year of the State, and
                    (ii) the employer did not provide the notice required
                    under section 1312(a)(1) (with respect to an election
                    to become a corporate alliance); or
                        (C)(i) the employer is such an eligible sponsor,
                    (ii) the employer subsequently became a large employer
                    and elected to be a corporate alliance under section
                    1312(a)(2), and (iii) the election was terminated under
                    section 1313.
                (2) Effective date.--In the case of an employer described
            in--
                        (A) paragraph (1)(A) or (1)(C), this section shall
                    first apply on the effective date of the termination of
                    the election under section 1313, or
                        (B) paragraph (1)(B), this section shall first
                    apply as of January 1, 1996 (or, if later with respect
                    to a State, the first day of the first year for the
                    State).
                (3) Treatment of employees in small establishments.--This
            section shall not apply to the payment of premiums for full-
            time employees of an employer described in paragraph (1)(A) or
            (1)(C), if the employees are employed at an establishment with
            respect to which the option described in section 1311(c)(1)(B)
            was exercised.
                (4) Sunset.--This section shall cease applying to an
            employer with respect to employment in a State after the 7th
            year in which this section applies to the employer in the
            State.
                (5) Large employer defined.--In this section, the term
            ``large employer'' has the meaning given such term in section
            1311(e)(3).
        (b) Additional Amount.--
                (1) In general.--If an employer subject to this section for
            a year has an excess risk proportion (specified in paragraph
            (3)) of greater than zero with respect to an alliance area,
            then the employer shall provide, on a monthly basis, for
            payment to the regional alliance for such area of an amount
            equal to \1/12\ of the excess risk amount described in
            paragraph (2) for the year.
                (2) Excess risk amount.--The excess risk amount described
            in this paragraph, for an employer for a year with respect to
            an alliance area, is equal to the product of the following:
                        (A) The reduced weighted average accepted bid for
                    the regional alliance for the area for the year.
                        (B) The total average number of alliance eligible
                    individuals who--
                                (i) were full-time employees (or family
                            members of such employees) of the employer, and
                                (ii) residing in the regional alliance
                            area,
                    in the year before the first year in which this section
                    applies to the employer.
                        (C) The excess risk proportion (specified in
                    paragraph (3)) for the employer for such area.
                        (D) The phase-down percentage (specified in
                    paragraph (4)) for the year.
                (3) Excess risk proportion.--
                        (A) In general.--The ``excess risk proportion'',
                    specified in this paragraph, with respect to an
                    employer and an alliance area, is a percentage that
                    reflects, for the year before the first year in which
                    this section applies to the employer, the amount by
                    which--
                                (i) the average demographic risk for
                            employees (and family members) described in
                            paragraph (2)(B) residing in the alliance area,
                            exceeds
                                (ii) the average demographic risk for all
                            regional alliance eligible individuals residing
                            in the area.
                        (B) Measurement of demographic risk.--
                                (i) In general.--Demographic risk under
                            subparagraph (A) shall be measured, in a manner
                            specified by the Board, based on the
                            demographic characteristics described in
                            section 6001(c)(1)(A), that relate to the
                            actuarial value of the comprehensive benefit
                            package.
                                (ii) Provision of information.--Each
                            employer to which this section applies shall
                            submit, to each regional alliance for which an
                            additional payment may be required under this
                            section, such information (and at such time) as
                            the Board may require in order to determine the
                            demographic risk referred to in subparagraph
                            (A)(i).
                (4) Phase-down percentage.--The phase down percentage,
            specified in this paragraph for an employer for--
                        (A) each of the first 4 years to which this section
                    applies to the employer, is 100 percent,
                        (B) the fifth such year, is 75 percent,
                        (C) the sixth such year, is 50 percent, and
                        (D) the seventh such year, is 25 percent.
        (c) Phase in of Employer Premium Discount.--For--
                (1) each of the first 4 years in which this section applies
            to such employer, section 6123 shall not apply to the employer;
                (2) the fifth such year, section 6123 shall apply to the
            employer but the reduction in premium payment effected by such
            section shall be 25 percent of the reduction that would
            otherwise apply (but for this subsection);
                (3) the sixth such year, section 6123 shall apply to the
            employer but the reduction in premium payment effected by such
            section shall be 50 percent of the reduction that would
            otherwise apply (but for this subsection);
                (4) the seventh such year, section 6123 shall apply to the
            employer but the reduction in premium payment effected by such
            section shall be 75 percent of the reduction that would
            otherwise apply (but for this subsection); or
                (5) a subsequent year, section 6123 shall apply to the
            employer without any reduction under this subsection.

    SEC. 6125. EMPLOYER COLLECTION SHORTFALL ADD-ON.

        (a) In General.--The amount payable by an employer under this
    subpart shall be increased by the amount computed under subsection (b).
        (b) Amount.--The amount under this subsection for an employer is
    equal to the premium payment amount that would be computed under
    section 6121(b)(2) if the per capita collection shortfall amount
    (computed under section 6107(b)(1)) for the year were substituted for
    the reduced weighted average accepted bid for the year. The reduced
    weighted average accepted bid is used under section 6000(b)(1) in
    computing the weighted average premium, which in turn is used under
    section 6122(a)(1) in computing the base employment monthly premium,
    which in turn is used under section 6121(b)(2)(A) in computing the
    employer premium amount.
        (c) Discount Not Applicable.--Section 6123 shall not apply to the
    increase in the amount payable by virtue of this section.

    SEC. 6126. APPLICATION TO SELF-EMPLOYED INDIVIDUALS.

        (a) In General.--A self-employed individual (as defined in section
    1901(c)(2)) shall be considered, for purposes of this subpart to be an
    employer of himself or herself and to pay wages to himself or herself
    equal to the amount of net earnings from self-employment (as defined in
    section 1901(c)(1)).
        (b) Credit for Employer Premiums.--
                (1) In general.--In the case of a self-employed individual,
            the amount of any employer premium payable by virtue of
            subsection (a) in a year shall be reduced (but not below zero)
            by the sum of the following:
                        (A) Subject to paragraph (2), the amount of any
                    employer premiums payable under this subpart
                    (determined not taking into account any adjustment in
                    the premium amounts under section 6123 or 6124) with
                    respect to the employment of that individual in the
                    year.
                        (B) The product of (i) the number of months in the
                    year the individual was employed on a full-time basis
                    by a corporate alliance employer, and (ii) the employer
                    premium that would have been payable for such months
                    under this subpart (determined not taking into account
                    any adjustment in the premium amounts under section
                    6123 or 6124) for the class of enrollment if such
                    employer had been a regional alliance employer.
                (2) Special rule for certain closely-held businesses.--
                        (A) In general.--In the case of an individual who--
                                (i) has wage-adjusted income (as defined in
                            section 6113(d), determined without regard to
                            paragraphs (1)(B) and (2) thereof) that exceeds
                            250 percent (or such higher percentage as the
                            Board may establish) of the applicable poverty
                            level, and
                                (ii) is both a substantial owner and an
                            employee of a closely held business,
                    the amount of any reduction under paragraph (1)(A) that
                    is attributable to the individual's employment by that
                    business shall be appropriately reduced in accordance
                    with rules prescribed by the Board, in order to prevent
                    individuals from avoiding payment of the full amount
                    owed through fraudulent or secondary employment
                    arrangements.
                        (B) Closely held business.--For purposes of
                    subparagraph (A), a business is ``closely held'' if it
                    is an employer that meets the requirements of section
                    542(a)(2) of the Internal Revenue Code of 1986 or
                    similar requirements as appropriate in the case of a
                    partnership or other entity.

                    Subpart B--Corporate Alliance Employers

    SEC. 6131. EMPLOYER PREMIUM PAYMENT REQUIRED.

        (a) Per Employee Premium Payment.--Subject to section 6124, each
    corporate alliance employer of a corporate alliance that in a month in
    a year employs a qualifying employee who is--
                (1) enrolled in a corporate alliance health plan offered by
            the alliance, shall provide for a payment toward the premium
            for the plan in an amount at least equal to the corporate
            employer premium specified in subsection (b); or
                (2) is not so enrolled, shall make employer premium
            payments with respect to such employment under subpart A in the
            same manner as if the employer were a regional alliance
            employer (except as otherwise provided in such subpart).
        (b) Corporate Employer Premium.--
                (1) Amount.--
                        (A) In general.--Except as provided in paragraph
                    (2), the amount of the corporate employer premium for a
                    month in a year for a class of family enrollment for a
                    family residing in a premium area (established under
                    section 1384(b)) is 80 percent of the weighted average
                    monthly premium of the corporate alliance health plans
                    offered by the corporate alliance for that class of
                    enrollment for families residing in that area.
                        (B) Application to self-insured plans.--In applying
                    this paragraph in the case of one or more corporate
                    alliance health plans that are self-insured plans--
                                (i) the ``premium'' for the plan is the
                            actuarial equivalent of such premium, based
                            upon the methodology (or such other consistent
                            methodology) used under section 6021(a)
                            (relating to application of premium caps to
                            corporate alliance health plans), and
                                (ii) the premium amount, for different
                            classes and, if applicable, for different
                            premium areas, shall be computed in a manner
                            based on such factors as may bear a reasonable
                            relationship to costs for the provision of the
                            comprehensive benefit package to the different
                            classes in such areas.
                    The Secretary of Labor shall establish rules to carry
                    out this subparagraph.
                (2) Low-wage employees.--In the case of a low-wage employee
            entitled to a premium discount under section 6104(a)(2), the
            amount of the employer premium payment for a month in a year
            for a class of family enrollment shall be increased by the
            amount of such premium discount.
        (c) Determinations.--
                (1) Basis.--Determinations under this section shall be made
            based on such information as the Secretary of Labor shall
            specify.
                (2) Timing.--Determinations of the monthly premiums under
            this section for months in a year shall be made not later than
            December 1 of the previous year.

                                                       Title VI, Subtitle C

             Subtitle C--Payments to Regional Alliance Health Plans

    SEC. 6201. COMPUTATION OF BLENDED PLAN PER CAPITA PAYMENT AMOUNT.

        (a) In General.--For purposes of section 1351, the blended plan per
    capita payment amount for a regional alliance health plan for
    enrollments in an alliance for a year is equal to the sum of the 3
    components described in subsection (b), multiplied by any adjustment
    factor applied for the year under section 6202(d).
        (b) Sum of Products.--The 3 components described in this subsection
    are:
                (1) Plan bid component for that plan.--The product of--
                                (A) the final accepted bid for plan (as
                            defined in section 6000(a)(2)) for the year,
                            and
                                (B) the plan bid proportion determined
                            under section 6202(a)(1) for the year.
                (2) AFDC component for alliance.--The product of--
                                (A) the AFDC per capita premium amount for
                            the regional alliance for the year (determined
                            under section 9012), and
                                (B) the AFDC proportion determined under
                            section 6202(a)(2) for the year.
                (3) SSI component for alliance.--The product of--
                                (A) the SSI per capita premium amount for
                            the regional alliance for the year (determined
                            under section 9013) for the year, and
                                (B) the SSI proportion determined under
                            section 6202(a)(3) for the year.

    SEC. 6202. COMPUTATION OF PLAN BID, AFDC, AND SSI PROPORTIONS.

        (a) In General.--For purposes of this subtitle:
                (1) Plan bid proportion.--The ``plan bid proportion'' is,
            for a class of enrollment, 1 minus the sum of (A) the AFDC
            proportion, and (B) the SSI proportion.
                (2) AFDC proportion.--The ``AFDC proportion'' is, for a
            class of family enrollment for a year, the ratio of--
                        (A) the average of the number of AFDC recipients
                    (as determined under subsection (c)) enrolled in
                    regional alliance health plans in that class of
                    enrollment for the year, to
                        (B) the average of the total number of individuals
                    enrolled in regional alliance health plans in that
                    class of enrollment for the year.
                (3) SSI proportion.--The ``SSI proportion'' is, for a class
            of family enrollment for a year, the ratio of--
                        (A) the average of the number of SSI recipients (as
                    determined under subsection (c)) enrolled in regional
                    alliance health plans in that class of enrollment for
                    the year, to
                        (B) the average described in paragraph (2)(B).
        (b) Computation.--
                (1) Projections.--The proportions described in subsection
            (a) shall be determined and applied by the State, based upon
            the best available data, at least 1 month before the date bids
            are submitted under section 6004 before the beginning of the
            calendar year involved.
                (2) Actual.--For purposes of making adjustments under
            subsection (d), the regional alliance shall determine, after
            the end of each year, the actual proportions described in
            subsection (a).
        (c) Counting of AFDC and SSI Recipients.--For purposes of
    subsections (a)(2)(A) and (a)(3)(A), the terms ``SSI recipient'' and
    ``AFDC recipient'' do not include a medicare-eligible individual.
        (d) Adjustments For Discrepancies In Estimations.--
                (1) In general.--If the actual AFDC proportion or SSI
            proportion (as determined under subsection (a)) for a year (in
            this subsection referred to as the ``reference year''),
            determined after the end of the year based upon actual number
            of AFDC recipients and SSI recipients in the year, is different
            from the projected AFDC and SSI proportions (as determined
            under subsection (b)(1)) used in computing the blended plan
            payment amount for the year, then, subject to section
            1361(b)(3), the regional alliance shall adjust the blended plan
            payment amount in the second succeeding year (in this
            subsection referred to as the ``applicable year'') in the
            manner described in paragraph (2). By regulation the Secretary
            may apply the adjustment, based on estimated amounts, in the
            year before the applicable year, with final adjustment in the
            applicable year.
                (2) Adjustment described.--
                        (A) Positive cash flow.--If the cash flow
                    difference (as defined in paragraph (3)(A)) for the
                    reference year is positive, then in the applicable year
                    the blended plan payment amount shall be increased by
                    the adjustment percentage described in paragraph (4).
                        (B) Negative cash flow.--If the cash flow
                    difference (as defined in paragraph (3)(A)) for the
                    reference year is negative, then in the applicable year
                    the blended plan payment amount shall be reduced by the
                    adjustment percentage described in paragraph (4).
                (3) Cash flow difference defined.--In this subsection:
                        (A) In general.--The term ``cash flow difference''
                    means, for a regional alliance for a reference year--
                                (i) the actual cash flow (as defined in
                            subparagraph (B)) for the alliance for the
                            year, minus
                                (ii) the reconciled cash flow (as defined
                            in subparagraph (C)) for the alliance for the
                            year.
                        (B) Actual cash flow.--The term ``actual cash
                    flow'' means, for a regional alliance for a reference
                    year, the total amount paid by the regional alliance to
                    the regional alliance health plans in the year based on
                    the blended plan payment amount (computed on the basis
                    of projected AFDC and SSI proportions determined under
                    subsection (b)(1)).
                        (C) Reconciled cash flow.--The term ``reconciled
                    cash flow'' means, for a regional alliance for a
                    reference year, the total amount that would have been
                    paid to regional alliance health plans in the year if
                    such payments had been made based on the blended plan
                    payment amount computed on the basis of the actual AFDC
                    and SSI proportions for the year (determined under
                    subsection (b)(2), rather than based on such payment
                    amount computed on the basis of the projected AFDC and
                    SSI proportions for the year (determined under
                    subsection (b)(1)).
                (4) Percentage adjustment.--The percentage adjustment
            described in this paragraph for a regional alliance for an
            applicable year is the ratio (expressed as a percentage) of--
                        (A) the cash flow difference for the reference
                    year, to
                        (B) the total payments estimated by the regional
                    alliance to be paid to regional alliance health plans
                    under this subtitle in the applicable year (determined
                    without regard to any adjustment under this
                    subsection).

                                                                  Title VII

                         TITLE VII--REVENUE PROVISIONS

                           table of contents of title

                                                                       Page
    Sec. 7001. Amendment of 1986 Code...........................       1094
                        Subtitle A--Financing Provisions

                  Part 1--Increase in Tax on Tobacco Products

    Sec. 7111. Increase in excise taxes on tobacco products.....       1094
    Sec. 7112. Modifications of certain tobacco tax provisions..       1100
    Sec. 7113. Imposition of excise tax on manufacture or              1105
                                importation of roll-your-own
                                tobacco.
                       Part 2--Health Related Assessments

    Sec. 7121. Health related assessments.......................       1107
               Part 3--Recapture of Certain Health Care Subsidies

    Sec. 7131. Recapture of certain health care subsidies              1116
                                received by high-income
                                individuals.
                            Part 4--Other Provisions

    Sec. 7141. Modification to self-employment tax treatment of        1125
                                certain S corporation
                                shareholders and partners.
    Sec. 7142. Extending medicare coverage of, and application         1128
                                of hospital insurance tax to,
                                all State and local government
                                employees.
           Subtitle B--Tax Treatment of Employer-Provided Health Care

    Sec. 7201. Limitation on exclusion for employer-provided           1133
                                health benefits.
    Sec. 7202. Health benefits may not be provided under               1138
                                cafeteria plans.
    Sec. 7203. Increase in deduction for health insurance costs        1139
                                of self-employed individuals.
    Sec. 7204. Limitation on prepayment of medical insurance           1142
                                premiums.
                    Subtitle C--Employment Status Provisions

    Sec. 7301. Anti-abuse regulations relating to employment           1143
                                status.
    Sec. 7302. Increase in services reporting penalties.........       1144
    Sec. 7303. Revision of section 530 safe harbor rules........       1146
        Subtitle D--Tax Treatment of Funding of Retiree Health Benefits

    Sec. 7401. Post-retirement medical and life insurance              1153
                                reserves.
    Sec. 7402. Health benefits accounts maintained by pension          1154
                                plans.
         Subtitle E--Coordination With COBRA Continuing Care Provisions

    Sec. 7501. Coordination with COBRA continuing care                 1157
                                provisions.
       Subtitle F--Tax Treatment of Organizations Providing Health Care
                       Services and Related Organizations

    Sec. 7601. Treatment of nonprofit health care organizations.       1159
    Sec. 7602. Tax treatment of taxable organizations providing        1163
                                health insurance and other
                                prepaid health care services.
    Sec. 7603. Exemption from income tax for regional alliances.       1170
       Subtitle G--Tax Treatment of Long-term Care Insurance and Services

    Sec. 7701. Qualified long-term care services treated as            1171
                                medical care.
    Sec. 7702. Treatment of long-term care insurance............       1175
    Sec. 7703. Tax treatment of accelerated death benefits under       1187
                                life insurance contracts.
    Sec. 7704. Tax treatment of companies issuing qualified
                                      accelerated death benefit
    riders.                                                            1190
            Subtitle H--Tax Incentives for Health Services Providers

    Sec. 7801. Nonrefundable credit for certain primary health         1192
                                services providers.
    Sec. 7802. Expensing of medical equipment...................       1197
                      Subtitle I--Miscellaneous Provisions

    Sec. 7901. Credit for cost of personal assistance services
                                           required by employed
    individuals.                                                       1199
    Sec. 7902. Denial of tax-exempt status for borrowings of           1204
                                health care-related entities.
    Sec. 7903. Disclosure of return information for                    1205
                                administration of certain
                                programs under the Health
                                Security Act.

    SEC. 7001. AMENDMENT OF 1986 CODE.

        Except as otherwise expressly provided, whenever in this title an
    amendment or repeal is expressed in terms of an amendment to, or repeal
    of, a section or other provision, the reference shall be considered to
    be made to a section or other provision of the Internal Revenue Code of
    1986.

                                                      Title VII, Subtitle A

                        Subtitle A--Financing Provisions

                  PART 1--INCREASE IN TAX ON TOBACCO PRODUCTS

    SEC. 7111. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

        (a) Cigarettes.--Subsection (b) of section 5701 is amended--
                (1) by striking ``$12 per thousand ($10 per thousand on
            cigarettes removed during 1991 or 1992)'' in paragraph (1) and
            inserting ``$49.50 per thousand'', and
                (2) by striking ``$25.20 per thousand ($21 per thousand on
            cigarettes removed during 1991 or 1992)'' in paragraph (2) and
            inserting ``$103.95 per thousand''.
        (b) Cigars.--Subsection (a) of section 5701 is amended--
                (1) by striking ``$1.125 cents per thousand (93.75 cents
            per thousand on cigars removed during 1991 or 1992)'' in
            paragraph (1) and inserting ``$38.62\1/2\ per thousand'', and
                (2) by striking ``equal to'' and all that follows in
            paragraph (2) and inserting ``equal to 52.594 percent of the
            price for which sold but not more than $123.75 per thousand.''
        (c) Cigarette Papers.--Subsection (c) of section 5701 is amended by
    striking ``0.75 cent (0.625 cent on cigarette papers removed during
    1991 or 1992)'' and inserting ``3.09 cents''.
        (d) Cigarette Tubes.--Subsection (d) of section 5701 is amended by
    striking ``1.5 cents (1.25 cents on cigarette tubes removed during 1991
    or 1992)'' and inserting ``6.19 cents''.
        (e) Smokeless Tobacco.--Subsection (e) of section 5701 is amended--
                (1) by striking ``36 cents (30 cents on snuff removed
            during 1991 or 1992)'' in paragraph (1) and inserting
            ``$12.86'', and
                (2) by striking ``12 cents (10 cents on chewing tobacco
            removed during 1991 or 1992)'' in paragraph (2) and inserting
            ``$12.62''.
        (f) Pipe Tobacco.--Subsection (f) of section 5701 is amended by
    striking ``67.5 cents (56.25 cents on pipe tobacco removed during 1991
    or 1992)'' and inserting ``$13.17\1/2\''.
        (g) Effective Date.--The amendments made by this section shall
    apply to articles removed (as defined in section 5702(k) of the
    Internal Revenue Code of 1986, as amended by this Act) after September
    30, 1994.
        (h) Floor Stocks Taxes.--
                (1) Imposition of tax.--On tobacco products and cigarette
            papers and tubes manufactured in or imported into the United
            States which are removed before October 1, 1994, and held on
            such date for sale by any person, there is hereby imposed a tax
            in an amount equal to the excess of--
                        (A) the tax which would be imposed under section
                    5701 of the Internal Revenue Code of 1986 on the
                    article if the article had been removed on such date,
                    over
                        (B) the prior tax (if any) imposed under section
                    5701 or 7652 of such Code on such article.
                (2) Authority to exempt cigarettes held in vending
            machines.--To the extent provided in regulations prescribed by
            the Secretary, no tax shall be imposed by paragraph (1) on
            cigarettes held for retail sale on October 1, 1994, by any
            person in any vending machine. If the Secretary provides such a
            benefit with respect to any person, the Secretary may reduce
            the $500 amount in paragraph (3) with respect to such person.
                (3) Credit against tax.--Each person shall be allowed as a
            credit against the taxes imposed by paragraph (1) an amount
            equal to $500. Such credit shall not exceed the amount of taxes
            imposed by paragraph (1) for which such person is liable.
                (4) Liability for tax and method of payment.--
                        (A) Liability for tax.--A person holding cigarettes
                    on October 1, 1994, to which any tax imposed by
                    paragraph (1) applies shall be liable for such tax.
                        (B) Method of payment.--The tax imposed by
                    paragraph (1) shall be paid in such manner as the
                    Secretary shall prescribe by regulations.
                        (C) Time for payment.--The tax imposed by paragraph
                    (1) shall be paid on or before December 31, 1994.
                (5) Articles in foreign trade zones.--Notwithstanding the
            Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any
            other provision of law, any article which is located in a
            foreign trade zone on October 1, 1994, shall be subject to the
            tax imposed by paragraph (1) if--
                        (A) internal revenue taxes have been determined, or
                    customs duties liquidated, with respect to such article
                    before such date pursuant to a request made under the
                    1st proviso of section 3(a) of such Act, or
                        (B) such article is held on such date under the
                    supervision of a customs officer pursuant to the 2d
                    proviso of such section 3(a).
                (6) Definitions.--For purposes of this subsection--
                        (A) In general.--Terms used in this subsection
                    which are also used in section 5702 of the Internal
                    Revenue Code of 1986 shall have the respective meanings
                    such terms have in such section, and such term shall
                    include articles first subject to the tax imposed by
                    section 5701 of such Code by reason of the amendments
                    made by this Act.
                        (B) Secretary.--The term ``Secretary'' means the
                    Secretary of the Treasury or his delegate.
                (7) Controlled groups.--Rules similar to the rules of
            section 5061(e)(3) of such Code shall apply for purposes of
            this subsection.
                (8) Other laws applicable.--All provisions of law,
            including penalties, applicable with respect to the taxes
            imposed by section 5701 of such Code shall, insofar as
            applicable and not inconsistent with the provisions of this
            subsection, apply to the floor stocks taxes imposed by
            paragraph (1), to the same extent as if such taxes were imposed
            by such section 5701. The Secretary may treat any person who
            bore the ultimate burden of the tax imposed by paragraph (1) as
            the person to whom a credit or refund under such provisions may
            be allowed or made.

    SEC. 7112. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

        (a) Exemption for Exported Tobacco Products and Cigarette Papers
    and Tubes To Apply Only to Articles Marked for Export.--
                (1) Subsection (b) of section 5704 is amended by adding at
            the end thereof the following new sentence: ``Tobacco products
            and cigarette papers and tubes may not be transferred or
            removed under this subsection unless such products or papers
            and tubes bear such marks, labels, or notices as the Secretary
            shall by regulations prescribe.''
                (2) Section 5761 is amended by redesignating subsections
            (c) and (d) as subsections (d) and (e), respectively, and by
            inserting after subsection (b) the following new subsection:
        ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for
    Export.--Except as provided in subsections (b) and (d) of section
    5704--
                ``(1) every person who sells, relands, or receives within
            the jurisdiction of the United States any tobacco products or
            cigarette papers or tubes which have been labeled or shipped
            for exportation under this chapter,
                ``(2) every person who sells or receives such relanded
            tobacco products or cigarette papers or tubes, and
                ``(3) every person who aids or abets in such selling,
            relanding, or receiving,
    shall, in addition to the tax and any other penalty provided in this
    title, be liable for a penalty equal to the greater of $1,000 or 5
    times the amount of the tax imposed by this chapter. All tobacco
    products and cigarette papers and tubes relanded within the
    jurisdiction of the United States, and all vessels, vehicles, and
    aircraft used in such relanding or in removing such products, papers,
    and tubes from the place where relanded, shall be forfeited to the
    United States.''
                (3) Subsection (a) of section 5761 is amended by striking
            ``subsection (b)'' and inserting ``subsection (b) or (c)''.
                (4) Subsection (d) of section 5761, as redesignated by
            paragraph (2), is amended by striking ``The penalty imposed by
            subsection (b)'' and inserting ``The penalties imposed by
            subsections (b) and (c)''.
                (5)(A) Subpart F of chapter 52 is amended by adding at the
            end thereof the following new section:

    ``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO
                  PRODUCTS.

        ``(a) In General.--Tobacco products and cigarette papers and tubes
    previously exported from the United States may be imported or brought
    into the United States only as provided in section 5704(d).
        ``(b) Cross Reference.--

                                    ``For penalty for the sale of
    cigarettes in the United States which are labeled for export, see
    section 5761(d).''
                (B) The table of sections for subpart F of chapter 52 is
            amended by adding at the end thereof the following new item:

                                  ``Sec. 5754. Restriction on importation
                                            of previously exported tobacco
                                            products.''
        (b) Importers Required To Be Qualified.--
                (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and
            5763(b) and (c) are each amended by inserting ``or importer''
            after ``manufacturer''.
                (2) The heading of subsection (b) of section 5763 is
            amended by inserting ``Qualified Importers,'' after
            ``Manufacturers,''.
                (3) The heading for subchapter B of chapter 52 is amended
            by inserting ``and Importers'' after ``Manufacturers''.
                (4) The item relating to subchapter B in the table of
            subchapters for chapter 52 is amended by inserting ``and
            importers'' after ``manufacturers''.
        (c) Repeal of Tax-Exempt Sales to Employees of Cigarette
    Manufacturers.--
                (1) Subsection (a) of section 5704 is amended--
                        (A) by striking ``Employee Use or'' in the heading,
                    and
                        (B) by striking ``for use or consumption by
                    employees or'' in the text.
                (2) Subsection (e) of section 5723 is amended by striking
            ``for use or consumption by their employees, or for
            experimental purposes'' and inserting ``for experimental
            purposes''.
        (d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of
    section 5704 is amended by striking ``and manufacturers may similarly
    remove such articles for use of the United States;''.
        (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
    Subsection (c) of section 5701 is amended by striking ``On each book or
    set of cigarette papers containing more than 25 papers,'' and inserting
    ``On cigarette papers,''.
        (f) Storage of Tobacco Products.--Subsection (k) of section 5702 is
    amended by inserting ``under section 5704'' after ``internal revenue
    bond''.
        (g) Authority To Prescribe Minimum Manufacturing Activity
    Requirements.--Section 5712 is amended by striking ``or'' at the end of
    paragraph (1), by redesignating paragraph (2) as paragraph (3), and by
    inserting after paragraph (1) the following new paragraph:
                ``(2) the activity proposed to be carried out at such
            premises does not meet such minimum capacity or activity
            requirements as the Secretary may prescribe, or''.
        (h) Limitation on Cover Over of Tax on Tobacco Products.--Section
    7652 is amended by adding at the end thereof the following new
    subsection:
        ``(h) Limitation on Cover Over of Tax on Tobacco Products.--For
    purposes of this section, with respect to taxes imposed under section
    5701 or this section on any tobacco product or cigarette paper or tube,
    the amount covered into the treasuries of Puerto Rico and the Virgin
    Islands shall not exceed the rate of tax under section 5701 in effect
    on the article on the day before the date of the enactment of the
    Health Security Act.''
        (i) Effective Date.--The amendments made by this section shall
    apply to articles removed (as defined in section 5702(k) of the
    Internal Revenue Code of 1986, as amended by this Act) after September
    30, 1994.

    SEC. 7113. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF
                  ROLL-YOUR-OWN TOBACCO.

        (a) In General.--Section 5701 (relating to rate of tax) is amended
    by redesignating subsection (g) as subsection (h) and by inserting
    after subsection (f) the following new subsection:
        ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco,
    manufactured in or imported into the United States, there shall be
    imposed a tax of $12.50 per pound (and a proportionate tax at the like
    rate on all fractional parts of a pound).''
        (b) Roll-Your-Own Tobacco.--Section 5702 (relating to definitions)
    is amended by adding at the end thereof the following new subsection :
        ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco'
    means any tobacco which, because of its appearance, type, packaging, or
    labeling, is suitable for use and likely to be offered to, or purchased
    by, consumers as tobacco for making cigarettes.''
        (c) Technical Amendments.--
                (1) Subsection (c) of section 5702 is amended by striking
            ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
            your-own tobacco''.
                (2) Subsection (d) of section 5702 is amended--
                        (A) in the material preceding paragraph (1), by
                    striking ``or pipe tobacco'' and inserting ``pipe
                    tobacco, or roll-your-own tobacco'', and
                        (B) by striking paragraph (1) and inserting the
                    following new paragraph:
                ``(1) a person who produces cigars, cigarettes, smokeless
            tobacco, pipe tobacco, or roll-your-own tobacco solely for his
            own personal consumption or use, and''.
                (3) The chapter heading for chapter 52 is amended to read
            as follows:

        ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

                (4) The table of chapters for subtitle E is amended by
            striking the item relating to chapter 52 and inserting the
            following new item:

                                  ``Chapter 52. Tobacco products and
                                            cigarette papers and tubes.''
        (d) Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to roll-your-own tobacco removed (as defined in section
            5702(k) of the Internal Revenue Code of 1986, as amended by
            this Act) after September 30, 1994.
                (2) Transitional rule.--Any person who--
                        (A) on the date of the enactment of this Act is
                    engaged in business as a manufacturer of roll-your-own
                    tobacco or as an importer of tobacco products or
                    cigarette papers and tubes, and
                        (B) before October 1, 1994, submits an application
                    under subchapter B of chapter 52 of such Code to engage
                    in such business,
            may, notwithstanding such subchapter B, continue to engage in
            such business pending final action on such application. Pending
            such final action, all provisions of such chapter 52 shall
            apply to such applicant in the same manner and to the same
            extent as if such applicant were a holder of a permit under
            such chapter 52 to engage in such business.

                       PART 2--HEALTH RELATED ASSESSMENTS

    SEC. 7121. HEALTH RELATED ASSESSMENTS.

        (a) In General.--Subtitle C (relating to employment taxes) is
    amended by inserting after chapter 24 the following new chapter:

                   ``CHAPTER 24A--HEALTH RELATED ASSESSMENTS

                                  ``Subchapter A. Assessment on corporate
                                            alliance employers.
                                  ``Subchapter B. Temporary assessment on
                                            employers with retiree health
                                            benefit costs.
                                  ``Subchapter C. Definitions and
                                            administrative provisions.

           ``Subchapter A--Assessment on Corporate Alliance Employers

                                  ``Sec. 3461. Assessment on corporate
                                            alliance employers.

    ``SEC. 3461. ASSESSMENT ON CORPORATE ALLIANCE EMPLOYERS.

        ``(a) Imposition of Assessment.--Every corporate alliance employer
    shall pay (in addition to any other amount imposed by this subtitle)
    for each calendar year an assessment equal to 1 percent of the payroll
    of such employer.
        ``(b) Definitions.--For purposes of this section--
                ``(1) Corporate alliance employer.--The term `corporate
            alliance employer' means any employer if any individual, by
            reason of being an employee of such employer, is provided with
            health coverage through any corporate alliance described in
            section 1311 of the Health Security Act.
                ``(2) Payroll.--The term `payroll' means the sum of--
                        ``(A) the wages (as defined in section 3121(a)
                    without regard to paragraph (1) thereof) paid by the
                    employer during the calendar year, plus
                        ``(B)(i) in the case of a sole proprietorship, the
                    net earnings from self-employment of the proprietor
                    from such trade or business for the taxable year ending
                    with or within the calendar year,
                        ``(ii) in the case of a partnership, the aggregate
                    of the net earnings from self-employment of each
                    partner which is attributable to such partnership for
                    the taxable year of such partnership ending with or
                    within the calendar year, and
                        ``(iii) in the case of an S corporation, the
                    aggregate of the net earnings from self-employment of
                    each shareholder which is attributable to such
                    corporation for the taxable year of such corporation
                    ending with or within the calendar year.
                ``(3) Net earnings from self-employment.--The term `net
            earnings from self-employment' has the meaning given such term
            by section 1402; except that the amount thereof--
                        ``(A) may never be less than zero, and
                        ``(B) shall be determined without regard to any
                    deduction for an assessment under this section to the
                    extent attributable to payroll described in paragraph
                    (2)(B).
        ``(c) Special Rules.--For purposes of this section--
                ``(1) Treatment of certain employers in multiemployer
            corporate alliances.--An employer who is a corporate alliance
            employer solely by reason of employees who are provided with
            health coverage through a corporate alliance the eligible
            sponsor of which is a multiemployer plan described in section
            1311(b)(1)(B) of the Health Security Act is not subject to the
            assessment under this section. In the case of an employer who
            is a corporate alliance employer in part (but not solely) by
            reason of such employees, the payroll of such employer shall be
            determined without taking into account such employees.
                ``(2) Controlled group rules.--All persons treated as a
            single employer under section 1901 of the Health Security Act
            (relating to employer premiums for comprehensive health care)
            shall be treated as a single employer.
                ``(3) Application of assessment beginning in 1996.--
                        ``(A) In general.--Every employer eligible to elect
                    to be an eligible sponsor under section 1311 of the
                    Health Security Act shall be treated as a corporate
                    alliance employer as of January 1, 1996, unless the
                    employer waives such employer's rights ever to be
                    treated as such a sponsor. The waiver under this
                    subparagraph shall be irrevocable.
                        ``(B) Exception.--Subparagraph (A) shall not apply
                    to any employer referred to in the first sentence of
                    paragraph (1).

    ``SEC. 3462. TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH
                  BENEFIT COSTS.

        ``(a) Imposition of Assessment.--Every employer with base period
    retiree health costs shall pay (in addition to any other amount imposed
    by this subtitle) for each calendar year to which this section applies
    an assessment equal to the amount determined under subsection (b).
        ``(b) Amount of Assessment.--For purposes of subsection (a), the
    amount determined under this subsection with respect to any employer
    for any calendar year is 50 percent of the greater of--
                ``(1) the adjusted base period retiree health costs of such
            employer for such calendar year, or
                ``(2) the amount (determined in the manner prescribed by
            the Secretary) by which such employer's applicable retiree
            health costs for such calendar year were reduced by reason of
            the enactment of the Health Security Act.
        ``(c) Definitions.--For purposes of this section--
                ``(1) Base period retiree health costs.--The term `base
            period retiree health costs' means the average of the
            applicable retiree health costs of the employer for calendar
            years 1991, 1992, and 1993.
                ``(2) Adjusted base period retiree health costs.--
                        ``(A) In general.--The term `adjusted base period
                    retiree health costs' means, with respect to any
                    employer for any calendar year, the base period retiree
                    health costs of the employer adjusted in the manner
                    prescribed by the Secretary to reflect increases in the
                    medical care component of the Consumer Price Index
                    during the period after 1992 and before such calendar
                    year.
                        ``(B) Adjustments for acquisitions and
                    dispositions.--Rules similar to the rules of
                    subparagraphs (A) and (B) of section 41(f)(3) shall
                    apply to acquisitions and dispositions after December
                    31, 1993.
                ``(3) Applicable retiree health costs.--
                        ``(A) In general.--The term `applicable retiree
                    health costs' means, with respect to any employer for
                    any calendar year, the aggregate cost (including
                    administrative costs) of the health benefits or
                    coverage provided during such calendar year (whether
                    directly by the employer or through a plan described in
                    section 401(h) or a welfare benefit fund as defined in
                    section 419(e)) to individuals who are entitled to
                    receive such benefits or coverage by reason of being
                    retired employees of such employer (or by reason of
                    being a spouse or other beneficiary of such an
                    employee).
                        ``(B) Only benefits and coverage after age 55 and
                    before age 65 taken into account.--In applying
                    subparagraph (A), there shall be taken into account
                    only health benefits and coverage provided after the
                    date the retired employee attained age 55 and before
                    the date such employee attained (or, but for the death
                    of such employee, would have attained) age 65.
        ``(d) Years to Which Assessment Applies.--This section shall apply
    to calendar years 1998, 1999, and 2000.

           ``Subchapter C--Definitions and Administrative Provisions

    ``SEC. 3463. DEFINITIONS AND ADMINISTRATIVE PROVISIONS

        ``(a) Employer.--For purposes of this chapter--
                ``(1) In general.--The term `employer' means any person or
            governmental entity for whom an individual performs services,
            of whatever nature, as an employee (as defined in section
            3401(c)).
                ``(2) Special rules.--
                        ``(A) An individual who owns the entire interest in
                    an unincorporated trade or business shall be treated as
                    his own employer.
                        ``(B) A partnership shall be treated as the
                    employer of each partner who is an employee within the
                    meaning of section 401(c)(1).
                        ``(C) An S corporation shall be treated as the
                    employer of each shareholder who is an employee within
                    the meaning of section 401(c)(1).
        ``(b) Assessments to Apply to Governmental and Other Tax-Exempt
    Entities.--Notwithstanding any other provision of law or rule of law,
    none of the following shall be exempt from the assessments imposed by
    this chapter:
                ``(1) The United States, any State or political subdivision
            thereof, the District of Columbia, and any agency or
            instrumentality of any of the foregoing.
                ``(2) Any other entity otherwise exempt from tax under
            chapter 1.
        ``(c) Administrative Provisions.--
                ``(1) Payment.--
                        ``(A) Section 3461.--Any assessment under section
                    3461 shall be paid at the same time and in the same
                    manner as the tax imposed by chapter 21.
                        ``(B) Section 3462.--Any assessment under section
                    3462 for any calendar year shall be paid on or before
                    March 15 of the following calendar year; except that
                    the Secretary may require quarterly estimated payments
                    of such assessment in a manner similar to the
                    requirements of section 6655.
                ``(2) Collection, etc.--For purposes of subtitle F, any
            assessment under this subchapter shall be treated as if it were
            a tax imposed by this subtitle.''
        (b) Clerical Amendment.--The table of chapters for subtitle C is
    amended by inserting after the item relating to chapter 24 the
    following new item:

                                  ``Chapter 24A. Health-related
                                            assessments.''
        (c) Effective Date.--The amendments made by this section shall take
    effect on January 1, 1996.

               PART 3--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

    SEC. 7131. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-
                  INCOME INDIVIDUALS.

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

      ``PART VIII--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME
                                  INDIVIDUALS

                                  ``Sec. 59B. Recapture of certain health
                                            care subsidies.

    ``SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES.

        ``(a) Imposition of Recapture Amount.--In the case of an
    individual, if the modified adjusted gross income of the taxpayer for
    the taxable year exceeds the threshold amount, such taxpayer shall pay
    (in addition to any other amount imposed by this subtitle) a recapture
    amount for such taxable year equal to the sum of--
                ``(1) the aggregate of the Medicare part B recapture
            amounts (if any) for months during such year that a premium is
            paid under part B of title XVIII of the Social Security Act for
            the coverage of the individual under such part, and
                ``(2) the aggregate reductions (if any) in the individual's
            liability for periods after December 31, 1997, under section
            6111 of the Health Security Act (relating to repayment of
            alliance credit by certain families) pursuant to section 6114
            of such Act (relating to special treatment of certain retirees
            and qualified spouses and children) for months during such
            year.
        ``(b) Medicare Part B Premium Recapture Amount for Month.--For
    purposes of this section, the Medicare part B premium recapture amount
    for any month is the amount equal to the excess of--
                ``(1) 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
                ``(2) 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).
        ``(c) Phasein of Recapture Amount.--
                ``(1) In general.--If the modified adjusted gross income of
            the taxpayer for any taxable year exceeds the threshold amount
            by less than $15,000, the recapture amount imposed by this
            section for such taxable year shall be an amount which bears
            the same ratio to the recapture amount which would (but for
            this subsection) be imposed by this section for such taxable
            year as such excess bears to $15,000.
                ``(2) Joint returns.--If a recapture amount is determined
            separately for each spouse filing a joint return, paragraph (1)
            shall be applied by substituting `$30,000' for `$15,000' each
            place it appears.
        ``(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, $90,000,
                        ``(B) $115,000 in the case of a joint return, and
                        ``(C) zero in the case of a taxpayer who--
                                ``(i) is married (as determined under
                            section 7703) 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) Joint returns.--In the case of a joint return--
                        ``(A) the recapture amount under subsection (a)
                    shall be the sum of the recapture amounts determined
                    separately for each spouse, and
                        ``(B) subsections (a) and (c) shall be applied by
                    taking into account the combined modified adjusted
                    gross income of the spouses.
                ``(4) Coordination with other provisions.--
                        ``(A) Treated as tax for subtitle f.--For purposes
                    of subtitle F, the recapture amount imposed by this
                    section shall be treated as if it were a tax imposed by
                    section 1.
                        ``(B) Not treated as tax for certain purposes.--The
                    recapture amount imposed by this section shall not be
                    treated as a tax imposed by this chapter for purposes
                    of determining--
                                ``(i) the amount of any credit allowable
                            under this chapter, or
                                ``(ii) the amount of the minimum tax under
                            section 55.
                        ``(C) Treated as payment for medical insurance.--
                    The recapture amount imposed by this section shall be
                    treated as an amount paid for insurance covering
                    medical care, within the meaning of section 213(d).''
        (b) Transfers to Supplemental Medical Insurance Trust Fund.--
                (1) In general.--There are hereby appropriated to the
            Supplemental Medical Insurance Trust Fund amounts equivalent to
            the aggregate increase in liabilities under chapter 1 of the
            Internal Revenue Code of 1986 which is attributable to the
            application of section 59B(a)(1) of such Code, as added by this
            section.
                (2) Transfers.--The amounts appropriated by paragraph (1)
            to the Supplemental Medical Insurance Trust Fund shall be
            transferred from time to time (but not less frequently than
            quarterly) from the general fund of the Treasury on the basis
            of estimates made by the Secretary of the Treasury of the
            amounts referred to in paragraph (1). Any quarterly payment
            shall be made on the first day of such quarter and shall take
            into account the recapture amounts referred to in such section
            59B(a)(1) for such quarter. Proper adjustments shall be made in
            the amounts subsequently transferred to the extent prior
            estimates were in excess of or less than the amounts required
            to be transferred.
        (c) Reporting Requirements.--
                (1)(A) Paragraph (1) of section 6050F(a) (relating to
            returns relating to social security benefits) is amended by
            striking ``and'' at the end of subparagraph (B) and by
            inserting after subparagraph (C) the following new
            subparagraph:
                        ``(D) the number of months during the calendar year
                    for which a premium was paid under part B of title
                    XVIII of the Social Security Act for the coverage of
                    such individual under such part, and''.
                (B) Paragraph (2) of section 6050F(b) is amended to read as
            follows:
                ``(2) the information required to be shown on such return
            with respect to such individual.''
                (C) Subparagraph (A) of section 6050F(c)(1) is amended by
            inserting before the comma ``and in the case of the information
            specified in subsection (a)(1)(D)''.
                (D) The heading for section 6050F is amended by inserting
            ``and medicare part b coverage'' before the period.
                (E) The item relating to section 6050F in the table of
            sections for subpart B of part III of subchapter A of chapter
            61 is amended by inserting ``and Medicare part B coverage''
            before the period.
                (2)(A) Subpart B of part III of subchapter A of chapter 61
            (relating to information concerning transactions with other
            persons) is amended by adding at the end thereof the following
            new section:

    ``SEC. 6050Q. RETURNS RELATING TO CERTAIN RETIREE HEALTH CARE
                  SUBSIDIES.

        ``(a) In General.--Every alliance (as defined in section 1301 of
    the Health Security Act) that reduces an individual's liability under
    section 6111 of such Act (relating to repayment of alliance credit by
    certain families) pursuant to section 6114 of such Act (relating to
    special treatment of certain retirees and qualified spouses and
    children) shall make a return (according to the forms and regulations
    prescribed by the Secretary) setting forth--
                ``(1) the aggregate amount of such reductions by such
            alliance with respect to any individual during such calendar
            year, and
                ``(2) the name and address of such individual.
        ``(b) Statements To Be Furnished to Individuals With Respect to
    Whom Information Is Required To Be Reported.--Every alliance required
    to make a return under subsection (a) shall furnish to each individual
    whose name is required to be set forth in such return a written
    statement showing--
                ``(1) the name and address of such alliance, and
                ``(2) the information required to be shown on the return
            with respect to such individual.
        ``(c) Due Date for Returns and Statements.--The written return
    required under subsection (a) shall be made, and the statement required
    under subsection (b) shall be furnished to the individual, on or before
    January 31 of the second year following the calendar year for which the
    return under subsection (a) is required to be made.''
                (B) Subparagraph (B) of section 6724(d)(1) is amended by
            inserting after clause (viii) the following new clause (and by
            redesignating the following clauses accordingly):
                                ``(ix) section 6050Q(a) (relating to
                            returns relating to certain retiree health care
                            subsidies),''.
                (C) Paragraph (2) of section 6724(d) is amended by
            redesignating subparagraphs (Q) through (T) as subparagraphs
            (R) through (U), respectively, and by inserting after
            subparagraph (P) the following new subparagraph:
                        ``(Q) section 6050Q(b) (relating to statements
                    relating to certain retiree health care subsidies),''.
                (D) The table of sections for subpart B of part III of
            subchapter A of chapter 61 is amended by adding at the end
            thereof the following new item:

                                  ``Sec. 6050Q. Returns relating to certain
                                            retiree health care
                                            subsidies.''
        (d) Waiver of Certain Estimated Tax Penalties.--No addition to tax
    shall be imposed under section 6654 of the Internal Revenue Code of
    1986 (relating to failure to pay estimated income tax) for any period
    before--
                (1) April 16, 1997, with respect to any underpayment to the
            extent that such underpayment resulted from section 59B(a)(1)
            of the Internal Revenue Code of 1986, as added by this section,
            and
                (2) April 16, 1999, with respect to any underpayment to the
            extent that such underpayment resulted from section 59B(a)(2)
            of such Code, as added by this section.
        (e) Clerical Amendment.--The table of parts for subchapter A of
    chapter 1 is amended by adding at the end thereof the following new
    item:

                                  ``Part VIII. Certain health care
                                            subsidies received by high-
                                            income individuals.''
        (f) Effective Date.--The amendments made by this section shall
    apply to periods after December 31, 1995, in taxable years ending after
    such date.

                            PART 4--OTHER PROVISIONS

    SEC. 7141. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF CERTAIN S
                  CORPORATION SHAREHOLDERS AND PARTNERS.

        (a) Treatment of Certain S Corporation Shareholders.--
                (1) Amendment to internal revenue code.--Section 1402
            (relating to definitions) is amended by adding at the end
            thereof the following new subsection:
        ``(k) Treatment of Certain S Corporation Shareholders.--
                ``(1) In general.--In the case of any individual--
                        ``(A) who is a 2-percent shareholder (as defined in
                    section 1372(b)) of an S corporation for any taxable
                    year of such corporation, and
                        ``(B) who materially participates in the activities
                    of such S corporation during such taxable year,
            such shareholder's net earnings from self-employment for such
            shareholder's taxable year in which the taxable year of the S
            corporation ends shall include such shareholder's pro rata
            share (as determined under section 1366(a)) of the taxable
            income or loss of such corporation from service-related
            businesses carried on by such corporation.
                ``(2) Certain exceptions to apply.--In determining the
            amount to be taken into account under paragraph (1), the
            exceptions provided in subsection (a) shall apply, except that,
            in the case of the exceptions provided in subsection (a)(5),
            the rules of subparagraph (B) thereof shall apply to
            shareholders in S corporations.
                ``(3) Service-related business.--For purposes of this
            subsection, the term `service-related business' means any trade
            or business described in subparagraph (A) of section
            1202(e)(3).''
                (2) Amendment to social security act.--Section 211 of the
            Social Security Act is amended by adding at the end the
            following new subsection:

               ``Treatment of Certain S Corporation Shareholders

        ``(k)(1) In the case of any individual--
                ``(A) who is a 2-percent shareholder (as defined in section
            1372(b) of the Internal Revenue Code of 1986) of an S
            corporation for any taxable year of such corporation, and
                ``(B) who materially participates in the activities of such
            S corporation during such taxable year,
    such shareholder's net earnings from self-employment for such
    shareholder's taxable year in which the taxable year of the S
    corporation ends shall include such shareholder's pro rata share (as
    determined under section 1366(a) of such Code) of the taxable income or
    loss of such corporation from service-related businesses (as defined in
    section 1402(k)(3) of such Code) carried on by such corporation.
        ``(2) In determining the amount to be taken into account under
    paragraph (1), the exceptions provided in subsection (a) shall apply,
    except that, in the case of the exceptions provided in subsection
    (a)(5), the rules of subparagraph (B) thereof shall apply to
    shareholders in S corporations.''.
        (b) Treatment of Certain Limited Partners.--
                (1) Amendment of internal revenue code.--Paragraph (13) of
            section 1402(a) is amended by striking ``limited partner, as
            such'' and inserting ``limited partner who does not materially
            participate in the activities of the partnership''.
                (2) Amendment of social security act.--Paragraph (12) of
            section 211(a) of the Social Security Act is amended by
            striking ``limited partner, as such'' and inserting ``limited
            partner who does not materially participate in the activities
            of the partnership''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years of individuals beginning after December 31,
    1995, and to taxable years of S corporations and partnerships ending
    with or within such taxable years of individuals.

    SEC. 7142. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL
                  INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT
                  EMPLOYEES.

        (a) In General.--
                (1) Application of hospital insurance tax.--Section
            3121(u)(2) is amended by striking subparagraphs (C) and (D).
                (2) Coverage under medicare.--Section 210(p) of the Social
            Security Act (42 U.S.C. 410(p)) is amended by striking
            paragraphs (3) and (4).
                (3) Effective date.--The amendments made by this subsection
            shall apply to services performed after September 30, 1995.
        (b) Transition in Benefits for State and Local Government Employees
    and Former Employees.--
                (1) In general.--
                        (A) Employees newly subject to tax.--For purposes
                    of sections 226, 226A, and 1811 of the Social Security
                    Act, in the case of any individual who performs
                    services during the calendar quarter beginning October
                    1, 1995, the wages for which are subject to the tax
                    imposed by section 3101(b) of the Internal Revenue Code
                    of 1986 only because of the amendment made by
                    subsection (a), the individual's medicare qualified
                    State or local government employment (as defined in
                    subparagraph (B)) performed before October 1, 1995,
                    shall be considered to be ``employment'' (as defined
                    for purposes of title II of such Act), but only for
                    purposes of providing the individual (or another
                    person) with entitlement to hospital insurance benefits
                    under part A of title XVIII of such Act for months
                    beginning with October 1995.
                        (B) Medicare qualified state or local government
                    employment defined.--In this paragraph, the term
                    ``medicare qualified State or local government
                    employment'' means medicare qualified government
                    employment described in section 210(p)(1)(B) of the
                    Social Security Act (determined without regard to
                    section 210(p)(3) of such Act, as in effect before its
                    repeal under subsection (a)(2)).
                (2) Authorization of appropriations.--There are authorized
            to be appropriated to the Federal Hospital Insurance Trust Fund
            from time to time such sums as the Secretary of Health and
            Human Services deems necessary for any fiscal year on account
            of--
                        (A) payments made or to be made during such fiscal
                    year from such Trust Fund with respect to individuals
                    who are entitled to benefits under title XVIII of the
                    Social Security Act solely by reason of paragraph (1),
                        (B) the additional administrative expenses
                    resulting or expected to result therefrom, and
                        (C) any loss in interest to such Trust Fund
                    resulting from the payment of those amounts, in order
                    to place such Trust Fund in the same position at the
                    end of such fiscal year as it would have been in if
                    this subsection had not been enacted.
                (3) Information to individuals who are prospective medicare
            beneficiaries based on state and local government employment.--
            Section 226(g) of the Social Security Act (42 U.S.C. 426(g)) is
            amended--
                        (A) by redesignating paragraphs (1) through (3) as
                    subparagraphs (A) through (C), respectively,
                        (B) by inserting ``(1)'' after ``(g)'', and
                        (C) by adding at the end the following new
                    paragraph:
                ``(2) The Secretary, in consultation with State and local
            governments, shall provide procedures designed to assure that
            individuals who perform medicare qualified government
            employment by virtue of service described in section 210(a)(7)
            are fully informed with respect to (A) their eligibility or
            potential eligibility for hospital insurance benefits (based on
            such employment) under part A of title XVIII, (B) the
            requirements for, and conditions of, such eligibility, and (C)
            the necessity of timely application as a condition of becoming
            entitled under subsection (b)(2)(C), giving particular
            attention to individuals who apply for an annuity or retirement
            benefit and whose eligibility for such annuity or retirement
            benefit is based on a disability.''
        (c) Technical Amendments.--
                (1) Subparagraph (A) of section 3121(u)(2) is amended by
            striking ``subparagraphs (B) and (C),'' and inserting
            ``subparagraph (B),''.
                (2) Subparagraph (B) of section 210(p)(1) of the Social
            Security Act (42 U.S.C. 410(p)(1)) is amended by striking
            ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
                (3) Section 218 of the Social Security Act (42 U.S.C. 418)
            is amended by striking subsection (n).
                (4) The amendments made by this subsection shall apply
            after September 30, 1995.

           Subtitle B--Tax Treatment of Employer-Provided Health Care

    SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HEALTH
                  BENEFITS.

                                                      Title VII, Subtitle B

        (a) General Rule.--Section 106 (relating to contributions by
    employer to accident and health plans) is amended to read as follows:

    ``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

        ``(a) General Rule.--Except as otherwise provided in this section,
    gross income of an employee does not include employer-provided coverage
    under an accident or health plan.
        ``(b) Inclusion of Certain Benefits Not Part of Comprehensive
    Benefit Package.--
                ``(1) In general.--Effective on and after January 1, 2004,
            gross income of an employee shall include employer-provided
            coverage under any accident or health plan except to the extent
            that--
                        ``(A) such coverage consists of comprehensive
                    health coverage described in section 1101 of the Health
                    Security Act,
                        ``(B) such coverage consists of coverage of cost
                    sharing amounts under the comprehensive benefit package
                    described in such section (including such coverage
                    under a cost sharing policy under section 1421(b)(2) of
                    such Act), or
                        ``(C) such coverage consists of permitted coverage.
                ``(2) Permitted coverage.--For purposes of this subsection,
            the term `permitted coverage' means--
                        ``(A) any coverage providing wages or payments in
                    lieu of wages for any period during which the employee
                    is absent from work on account of sickness or injury,
                        ``(B) any coverage providing for payments referred
                    to in section 105(c),
                        ``(C) any coverage provided to an employee or
                    former employee after such employee has attained age
                    65, unless such coverage is provided by reason of the
                    current employment of the individual (within the
                    meaning of section 1862(b)(1)(A)(i)(I) of the Social
                    Security Act) with the employer providing the coverage,
                        ``(D) any coverage under a qualified long-term care
                    insurance policy (as defined in section 7702B),
                        ``(E) any coverage provided under Federal law to
                    any individual (or spouse or dependent thereof) by
                    reason of such individual being--
                                ``(i) a member of the Armed Forces of the
                            United States, or
                                ``(ii) a veteran, and
                        ``(F) any other coverage to the extent that the
                    Secretary determines that the continuation of an
                    exclusion for such coverage is not inconsistent with
                    the purposes of this subsection.
                ``(3) Special rules for flexible spending arrangements.--
                        ``(A) In general.--To the extent that any employer-
                    provided coverage is provided through a flexible
                    spending or similar arrangement, paragraph (1) shall be
                    applied by substituting `January 1, 1997,' for `January
                    1, 2004'.
                        ``(B) Flexible spending arrangement.--For purposes
                    of this paragraph, a flexible spending arrangement is a
                    benefit program which provides employees with coverage
                    under which--
                                ``(i) specified incurred expenses may be
                            reimbursed (subject to reimbursement maximums
                            and other reasonable conditions), and
                                ``(ii) the maximum amount of reimbursement
                            which is reasonably available to a participant
                            for such coverage is less than 200 percent of
                            the value of such coverage.
                    In the case of an insured plan, the maximum amount
                    reasonably available shall be determined on the basis
                    of the underlying coverage.
        ``(c) Special Rules for Determining Amount of Inclusion.--
                ``(1) In general.--For purposes of this section, the value
            of any coverage shall be determined on the basis of the average
            cost of providing such coverage to the beneficiaries receiving
            such coverage.
                ``(2) Special rule.--To the extent provided by the
            Secretary, cost determinations under paragraph (1) may be made
            on the basis of reasonable estimates.
        ``(d) Potential Cash Payment Not To Affect Exclusion.--No amount
    shall be included in the gross income of an employee solely because the
    employee may select coverage under an accident or health plan which
    results in a cash payment referred to in section 1607 of the Health
    Security Act.''
        (b) Employment Tax Treatment.--
                (1) Social security tax.--
                        (A) Subsection (a) of section 3121 is amended by
                    inserting after paragraph (21) the following new
                    sentence:
    ``Nothing in paragraph (2) shall exclude from the term `wages' any
    amount which is required to be included in gross income under section
    106(b).''
                        (B) Subsection (a) of section 209 of the Social
                    Security Act is amended by inserting after paragraph
                    (21) the following new sentence:
    ``Nothing in paragraph (2) shall exclude from the term `wages' any
    amount which is required to be included in gross income under section
    106(b) of the Internal Revenue Code of 1986.''
                (2) Railroad retirement tax.--Paragraph (1) of section
            3231(e) is amended by adding at the end thereof the following
            new sentence: ``Nothing in clause (i) of the second sentence of
            this paragraph shall exclude from the term `compensation' any
            amount which is required to be included in gross income under
            section 106(b).''
                (3) Unemployment tax.--Subsection (b) of section 3306 is
            amended by inserting after paragraph (16) the following new
            sentence:
    ``Nothing in paragraph (2) shall exclude from the term `wages' any
    amount which is required to be included in gross income under section
    106(b).''
                (4) Wage withholding.--Subsection (a) of section 3401 is
            amended by adding at the end thereof the following new
            sentence:
    ``Nothing in the preceding provisions of this subsection shall exclude
    from the term `wages' any amount which is required to be included in
    gross income under section 106(b).''
        (c) Effective Date.--The amendments made by this section shall take
    effect on January 1, 1997.

    SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER CAFETERIA PLANS.

        (a) General Rule.--Subsection (f) of section 125 (defining
    qualified benefits) is amended by adding at the end thereof the
    following new sentence: ``Such term shall not include any benefits or
    coverage (other than coverage described in section 106(b)(2)(A)) under
    an accident or health plan.''
        (b) Conforming Amendment.--Subsection (g) of section 125 is amended
    by striking paragraph (2) and redesignating paragraphs (3) and (4) as
    paragraphs (2) and (3), respectively.
        (c) Effective Date.--The amendments made by this section shall take
    effect on January 1, 1997.

    SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                  EMPLOYED INDIVIDUALS.

        (a) Provision Made Permanent.--
                (1) In general.--Subsection (l) of section 162 (relating to
            special rules for health insurance costs of self-employed
            individuals) is amended by striking paragraph (6).
                (2) Effective date.--The amendment made by paragraph (1)
            shall apply to taxable years beginning after December 31, 1993.
        (b) Deduction Limited to Basic Coverage Purchased From Health
    Alliance.--
                (1) In general.--Paragraphs (1) and (2) of section 162(l)
            are amended to read as follows:
                ``(1) In general.--In the case of an individual who is an
            employee within the meaning of section 401(c), there shall be
            allowed as a deduction under this section an amount equal to
            100 percent of the amount paid during the taxable year for
            insurance which constitutes medical care for the taxpayer, his
            spouse, and dependents; but only to the extent such insurance
            is comprehensive health coverage described in section 1101 of
            the Health Security Act purchased from a qualified alliance
            described in section 1311 of such Act.
                ``(2) Limitations.--
                        ``(A) Lower percentage in certain cases.--If--
                                ``(i) the taxpayer has 1 or more employees
                            in a trade or business with respect to which
                            such taxpayer is treated as an employee within
                            the meaning of section 401(c), and
                                ``(ii) the taxpayer does not pay at least
                            100 percent of the weighted average premium
                            applicable under the Health Security Act for
                            each of such employees,
                    paragraph (1) shall be applied by substituting for `100
                    percent' the lowest percentage of such weighted average
                    premium paid by the taxpayer for any of such employees.
                        ``(B) Deduction limited to earned income.--No
                    deduction shall be allowed under paragraph (1) to the
                    extent that the amount of such deduction exceeds the
                    taxpayer's earned income (within the meaning of section
                    401(c)).
                        ``(C) Other coverage.--Paragraph (1) shall not
                    apply to amounts paid for coverage for any individual
                    for any calendar month if such individual is employed
                    on a full-time basis (within the meaning of section
                    1901 of the Health Security Act) by an employer during
                    such month.''
                (2) Conforming amendment.--Subparagraph (A) of section
            162(l)(5) is amended by striking ``shall be treated as such
            individual's earned income'' and inserting ``shall be included
            in such individual's earned income''.
                (3) Effective date.--The amendments made by this subsection
            shall take effect on the earlier of--
                        (A) January 1, 1997, or
                        (B) the first day on which the taxpayer could
                    purchase comprehensive health coverage from a qualified
                    alliance.

    SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE PREMIUMS.

        (a) General Rule.--Subsection (d) of section 213 is amended by
    adding at the end thereof the following new paragraph:
                ``(10) Limitation on prepayments.--If the taxpayer pays a
            premium or other amount which constitutes medical care under
            paragraph (1), to the extent such premium or other amount is
            properly allocable to insurance coverage or care to be provided
            during periods more than 12 months after the month in which
            such payment is made, such premium shall be treated as paid
            ratably over the period during which such insurance coverage or
            care is to be provided. The preceding sentence shall not apply
            to any premium to which paragraph (7) applies nor to any
            premium paid under a qualified long-term care insurance
            policy.''
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to amounts paid after December 31, 1996.

                    Subtitle C--Employment Status Provisions

                                                      Title VII, Subtitle C

    SEC. 7301. ANTI-ABUSE REGULATIONS RELATING TO EMPLOYMENT STATUS.

        (a) General Rule.--In order to prevent misclassification of workers
    so as to minimize payments under this Act, chapter 25 (relating to
    general provisions applicable to employment taxes) is amended by adding
    at the end thereof the following new section:

    ``SEC. 3510. DEFINITION OF EMPLOYEE.

        ``(a) Regulations.--The Secretary shall prescribe regulations
    setting forth rules for determining whether an individual is an
    employee for purposes of--
                ``(1) the employment taxes imposed under this subtitle, and
                ``(2) to the extent provided in such regulations, subtitle
            A.
        ``(b) Scope of Regulations.--Such regulations may modify the rules
    otherwise applicable for the determinations referred to in paragraphs
    (1) and (2) of subsection (a); except that--
                ``(1) such regulations shall give significant weight to the
            common law applicable in determining the employer-employee
            relationship, and
                ``(2) nothing in such regulations shall modify the
            provisions of paragraph (1), (3), or (4) of section 3121(d),
            section 3506, section 3508, or section 3511.''
        (b) Clerical Amendment.--The table of sections for chapter 25 is
    amended by adding at the end thereof the following new item:

                                  ``Sec. 3510. Definition of employee.''
        (c) Effective Date.--The regulations described in section 3510 of
    the Internal Revenue Code of 1986 (as added by this section) shall be
    effective for periods beginning no earlier than the date which is 6
    months after the date such regulations are promulgated as final
    regulations.
        (d) Report to Congress.--Upon issuance of the regulations described
    in section 3510 of the Internal Revenue Code of 1986 (as added by this
    section) as final regulations, the Secretary of the Treasury shall
    submit a report to Congress relating to such regulations, including an
    explanation of their purposes and the issues they are designed to
    address.

    SEC. 7302. INCREASE IN SERVICES REPORTING PENALTIES.

        (a) Increase in Penalty.--Section 6721(a) (relating to imposition
    of penalty) is amended by adding at the end the following new
    paragraph:
                ``(3) Increased penalty for returns involving payments for
            services.--
                        ``(A) In general.--Subject to the overall
                    limitation of paragraph (1), the amount of the penalty
                    under paragraph (1) for any failure with respect to any
                    applicable return shall be equal to the greater of $50
                    or 5 percent of the amount required to be reported
                    correctly but not so reported.
                        ``(B) Exception where substantial compliance.--
                    Subparagraph (A) shall not apply to failures with
                    respect to applicable returns required to be filed by a
                    person during any calendar year if the aggregate amount
                    which is timely and correctly reported on applicable
                    returns filed by the person for the calendar year is at
                    least 97 percent of the aggregate amount which is
                    required to be reported on applicable returns by the
                    person for the calendar year.
                        ``(C) Applicable return.--For purposes of this
                    paragraph, the term `applicable return' means any
                    information return required to be filed under--
                                ``(i) section 6041(a) which relates to
                            payments to any person for services performed
                            by such person (other than as an employee), or
                                ``(ii) section 6041A(a).''
        (b) Conforming Amendment.--Section 6721(a)(1) is amended by
    striking ``In'' and inserting ``Except as provided in paragraph (3),
    in''.
        (c) Effective Date.--The amendments made by this section shall
    apply to returns the due date for which (without regard to extensions)
    is more than 30 days after the date of the enactment of this Act.

    SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES.

        (a) General Rule.--Chapter 25 (relating to general provisions
    applicable to employment taxes) is amended by adding at the end thereof
    the following new section:

    ``SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOYMENT TAX
                  RECLASSIFICATIONS.

        ``(a) General Rule.--If--
                ``(1) for purposes of employment taxes, the taxpayer treats
            an individual as not being an employee for any period,
                ``(2) for such period, the taxpayer meets--
                        ``(A) the consistency requirements of subsection
                    (b),
                        ``(B) the return filing requirements of subsection
                    (c), and
                        ``(C) the safe harbor requirement of subsection
                    (d), and
                ``(3) the Secretary has not notified the taxpayer in
            writing before the beginning of such period that the Secretary
            has determined that the taxpayer should treat such individual
            (or any individual holding a substantially similar position) as
            an employee,
    then, for purposes of applying this subtitle for such period, the
    individual shall be deemed not to be an employee of the taxpayer.
        ``(b) Consistency Requirements.--A taxpayer meets the consistency
    requirements of this subsection with respect to any individual for any
    period if the taxpayer treats such individual (and all other
    individuals holding substantially similar positions) as not being an
    employee for purposes of the employment taxes for such period and all
    prior periods.
        ``(c) Return Filing Requirements.--
                ``(1) In general.--The taxpayer meets the return filing
            requirements of this subsection with respect to any individual
            for any period if all Federal tax returns (including
            information returns) required to be filed by the taxpayer for
            such period with respect to such individual (and all other
            individuals holding substantially similar positions) are timely
            filed on a basis consistent with the taxpayer's treatment of
            such individuals as not being employees.
                ``(2) Special rules.--For purposes of paragraph (1)--
                        ``(A) any return filed for which the penalty under
                    section 6721(a) is reduced or waived pursuant to
                    subsection (b) or (c) of section 6721 shall be
                    considered timely filed, and
                        ``(B) a taxpayer shall not be considered as failing
                    to meet the requirements of paragraph (1) solely
                    because the taxpayer failed to timely file accurate
                    information returns in respect of payments to
                    individuals holding substantially similar positions if
                    the taxpayer satisfies the requirements of section
                    6721(a)(3)(B) for such period.
        ``(d) Safe Harbors.--
                ``(1) In general.--The taxpayer meets the safe harbor
            requirement of this subsection with respect to any individual
            for any period if the taxpayer's treatment of such individual
            as not being an employee for such period was--
                        ``(A) in reasonable reliance on a written
                    determination (as defined in section 6110(b)(1)) issued
                    to or in respect of the taxpayer that addressed the
                    employment status of the individual or an individual
                    holding a substantially similar position;
                        ``(B) in reasonable reliance on a concluded
                    Internal Revenue Service audit of the taxpayer--
                                ``(i) which was for a period in which the
                            rules for determining employment status were
                            the same as for the period in question, and
                                ``(ii) in which the employment status of
                            the individual or any individual holding a
                            substantially similar position was examined
                            without change to any such individual's status;
                        ``(C) in reasonable reliance on a longstanding
                    recognized practice of a significant segment of the
                    industry in which the individual is engaged; or
                        ``(D) supported by substantial authority.
            For purposes of subparagraph (D), the term `substantial
            authority' has the same meaning as when used in section
            6662(d)(2)(B)(i); except that such term shall not include any
            private letter ruling issued to a person other than the
            taxpayer.
                ``(2) Special rules.--
                        ``(A) Subsequent authority.--The taxpayer shall not
                    be considered to meet the safe harbor requirement of
                    paragraph (1)(B) with respect to any individual for any
                    period if the treatment of such individual as not being
                    an employee is inconsistent with any regulation,
                    Revenue Ruling, Revenue Procedure, or other authority
                    published by the Secretary before the beginning of such
                    period and after the conclusion of the audit referred
                    to in paragraph (1)(B).
                        ``(B) Termination of industry practice safe
                    harbor.--The taxpayer shall not be considered to meet
                    the safe harbor requirement of paragraph (1)(C) with
                    respect to any individual for--
                                ``(i) any period beginning after the date
                            on which the Secretary prescribes regulations
                            pursuant to section 3510, or
                                ``(ii) any period if the treatment of such
                            individual as not being an employee is
                            inconsistent with any regulation, Revenue
                            Ruling, Revenue Procedure, or other authority
                            published by the Secretary before the beginning
                            of such period.
        ``(e) Definitions and Special Rules.--For purposes of this
    section--
                ``(1) Employment tax.--The term `employment tax' means any
            tax imposed by this subtitle.
                ``(2) Taxpayer.--The term `taxpayer' includes any person or
            entity (including a governmental entity) which is (or would be
            but for this section) liable for any employment tax. Such term
            includes any predecessor or successor to the taxpayer.
        ``(f) Regulations.--The Secretary shall prescribe such regulations
    as may be appropriate to carry out the purposes of this section.''
        (b) Rules To Apply for Income Tax Purposes.--Part I of subchapter B
    of chapter 1 is amended by adding at the end thereof the following new
    section:

    ``SEC. 69. DETERMINATION OF EMPLOYMENT STATUS.

        ``For purposes of this subtitle, an individual shall be treated as
    a self-employed individual with respect to any services performed by
    such individual for another person if, under the rules of section 3511,
    such individual is treated as not being an employee of such other
    person with respect to such services.''
        (c) Conforming Amendment.--Section 530 of the Revenue Act of 1978
    is hereby repealed.
        (d) Clerical Amendments.--
                (1) The table of sections for chapter 25 is amended by
            adding at the end thereof the following new item:

                                  ``Sec. 3511. Protection against
                                            retroactive employment tax
                                            reclassifications.''
                (2) The table of sections for part I of subchapter B of
            chapter 1 is amended by adding at the end thereof the following
            new item:

                                  ``Sec. 69. Determination of employment
                                            status.''
        (e) Effective Date.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to all periods
            beginning after December 31, 1995.
                (2) Repeal of limitations on regulations and rulings.--The
            repeal made by subsection (c), insofar as it relates to section
            530(b) of the Revenue Act of 1978, shall take effect on the
            date of the enactment of this Act.

        Subtitle D--Tax Treatment of Funding of Retiree Health Benefits

    SEC. 7401. POST-RETIREMENT MEDICAL AND LIFE INSURANCE RESERVES.

                                                      Title VII, Subtitle D

        (a) Minimum Period for Working Lives.--Section 419A(c)(2) (relating
    to additional reserves for post-retirement medical and life insurance
    benefits) is amended by inserting ``(but not less than 10 years)''
    after ``working lives of the covered employees''.
        (b) Separate Accounting.--
                (1) Requirement.--Section 419A(c)(2) is amended by adding
            at the end the following new flush sentence:
    ``Such reserve shall be maintained as a separate account.''
                (2) Use of reserve for other purposes.--Paragraph (1) of
            section 4976(b) (defining disqualified benefit) is amended by
            striking ``and'' at the end of subparagraph (B), by striking
            the period at the end of subparagraph (C) and inserting ``,
            and'', and by adding after subparagraph (C) the following new
            subparagraph:
                        ``(D) any payment to which subparagraph (C) does
                    not apply which is out of an account described in
                    section 419A(c)(2) and which is not used to provide a
                    post-retirement medical benefit or life insurance
                    benefit.''
        (c) Special Limitations.--Section 419A(e) (relating to special
    limitations on reserves) is amended by adding at the end the following
    new paragraph:
                ``(3) Benefits must be excludable.--Post-retirement medical
            benefits and life insurance benefits shall not be taken into
            account under subsection (c)(2) to the extent it may be
            reasonably anticipated that such benefits will be required to
            be included in gross income when provided.''
        (d) Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to contributions
            paid or accrued after December 31, 1994, in taxable years
            ending after such date.
                (2) Separate accounting.--The amendments made by subsection
            (b) shall apply to contributions paid or accrued after the date
            of the enactment of this Act, in taxable years ending after
            such date.

    SEC. 7402. HEALTH BENEFITS ACCOUNTS MAINTAINED BY PENSION PLANS.

        (a) Termination of Accounts.--
                (1) In general.--Section 401(h) (relating to medical, etc.,
            benefits for retired employees and their spouses and
            dependents) is amended by adding at the end the following new
            paragraph:
                ``(2) Termination.--
                        ``(A) In general.--In the case of a pension or
                    annuity plan to which paragraph (1) applies--
                                ``(i) no contributions may be made to the
                            separate account described in paragraph (1)(C)
                            other than allowable contributions, and
                                ``(ii) such plan may pay benefits described
                            in paragraph (1) only from funds attributable
                            to allowable contributions and earnings
                            allocable to such contributions.
                        ``(B) Allowable contribution.--For purposes of
                    subparagraph (A), the term `allowable contribution'
                    means--
                                ``(i) any contribution made before January
                            1, 1995,
                                ``(ii) in the case of a plan maintained
                            pursuant to 1 or more collective bargaining
                            agreements between employee representatives and
                            1 or more employees ratified on or before
                            October 29, 1993, any contribution under such
                            plan made before the earlier of--
                                        ``(I) the date on which the last of
                                    such agreements terminates (determined
                                    without regard to any extension after
                                    October 29, 1993), or, if later,
                                    January 1, 1995, or
                                        ``(II) January 1, 1998, or
                                ``(iii) any qualified transfer under
                            section 420.''
                (2) Conforming amendments.--Section 401(h) is amended--
                        (A) by striking ``Under'' and inserting:
                ``(1) In general.--Under'',
                        (B) by redesignating paragraphs (1) through (6) as
                    subparagraphs (A) through (F), respectively,
                        (C) by striking ``paragraph (6)'' and inserting
                    ``subparagraph (F)'', and
                        (D) by striking ``paragraph (1)'' and inserting
                    ``subparagraph (A)''.
        (b) Minimum Cost Requirements of Employer.--Paragraph (3) of
    section 420(c) (relating to minimum cost requirements) is amended by
    adding at the end the following new subparagraph:
                        ``(E) Adjustment for cost savings under health
                    security act.--To the extent provided by the Secretary,
                    a plan shall not be treated as failing to meet the
                    requirements of this section to the extent such failure
                    is attributable to a reduction in qualified current
                    retiree health liabilities by reason of the enactment
                    of the Health Security Act.''

                                                      Title VII, Subtitle E

         Subtitle E--Coordination With COBRA Continuing Care Provisions

    SEC. 7501. COORDINATION WITH COBRA CONTINUING CARE PROVISIONS.

        (a) Period of Coverage.--Clause (iv) of section 4980B(f)(2)(B)
    (defining period of coverage) is amended--
                (1) by striking ``or'' at the end of subclause (I), by
            striking the period at the end of subclause (II) and inserting
            ``, or'', and by adding at the end the following new subclause:
                ``(III) eligible for comprehensive health coverage
            described in section 1101 of the Health Security Act.'', and
                (2) by striking ``or medicare entitlement'' in the heading
            and inserting ``, medicare entitlement, or health security act
            eligibility''.
        (b) Qualified Beneficiary.--Section 4980B(g)(1) (defining qualified
    beneficiary) is amended by adding at the end the following new
    subparagraph:
                        ``(E) Special rule for individuals covered by
                    health security act.--The term `qualified beneficiary'
                    shall not include any individual who, upon termination
                    of coverage under a group health plan, is eligible for
                    comprehensive health coverage described in section 1101
                    of the Health Security Act.''
        (c) Repeal Upon Implementation of Health Security Act.--
                (1) In general.--Section 4980B (relating to failure to
            satisfy continuation coverage requirements of group health care
            plans) is hereby repealed.
                (2) Conforming amendments.--
                        (A) Section 414(n)(3)(C) is amended by striking
                    ``505, and 4980B'' and inserting ``and 505''.
                        (B) Section 414(t)(2) is amended by striking ``505,
                    or 4980B'' and inserting ``or 505''.
                        (C) The table of sections for chapter 43 is amended
                    by striking the item relating to section 4980B.
                (3) Effective date.--The amendments made by this subsection
            shall take effect on the earlier of--
                        (A) January 1, 1998, or
                        (B) the first day of the first calendar year
                    following the calendar year in which all States have in
                    effect plans under which individuals are eligible for
                    comprehensive health coverage described in section 1101
                    of this Act.
            Such amendments shall not apply in determining the amount of
            any tax under section 4980B of the Internal Revenue Code of
            1986 with respect to any failure occurring before the date
            determined under the preceding sentence.

                                                      Title VII, Subtitle F

       Subtitle F--Tax Treatment of Organizations Providing Health Care
                       Services and Related Organizations

    SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE ORGANIZATIONS.

        (a) Treatment of Hospitals and Other Entities Providing Health Care
    Services.--Section 501 (relating to exemption from tax on corporations,
    certain trusts, etc.) is amended by redesignating subsection (n) as
    subsection (o) and by inserting after subsection (m) the following new
    subsection:
        ``(n) Qualification of Organizations Providing Health Care Services
    as Charitable Organizations.--For purposes of subsection (c)(3), the
    provision of health care services shall not be treated as an activity
    that accomplishes a charitable purpose unless the organization
    providing such services, on a periodic basis (no less frequently than
    annually), and with the participation of community representatives--
                ``(1) assesses the health care needs of its community, and
                ``(2) develops a plan to meet those needs.
    In the case of a health maintenance organization, the provision of
    health care services shall not be treated as an activity that
    accomplishes a charitable purpose for purposes of subsection (c)(3)
    unless, in addition to meeting the requirement of the preceding
    sentence, such services are provided as described in subsection
    (m)(6)(B)(i).''
        (b) Treatment of Health Maintenance Organizations.--Section 501(m)
    is amended by adding at the end thereof the following new paragraph:
                ``(6) Insurance provided by health maintenance
            organizations.--
                        ``(A) Certain insurance treated as commercial-type
                    insurance.--Health insurance provided by a health
                    maintenance organization shall be treated as
                    commercial-type insurance if such insurance relates to
                    care provided other than pursuant to a pre-existing
                    arrangement with such organization. In applying the
                    preceding sentence, care described in subparagraph
                    (B)(iv) shall not be taken into account.
                        ``(B) Certain insurance not treated as commercial-
                    type insurance.--Health insurance provided by a health
                    maintenance organization shall not be treated as
                    commercial-type insurance if it relates to--
                                ``(i) care provided by such organization to
                            its members at its own facilities through
                            health care professionals who do not provide
                            substantial health care services other than on
                            behalf of such organization,
                                ``(ii) primary care provided by a health
                            care professional to a member of such
                            organization on a basis under which the amount
                            paid to such professional does not vary with
                            the amount of care provided to such member,
                                ``(iii) services other than primary care
                            provided pursuant to a pre-existing arrangement
                            with such organization, or
                                ``(iv) emergency care provided to a member
                            of such organization at a location outside such
                            member's area of residence.''
        (c) Treatment of Parent Organizations of Health Care Providers.--
    Section 509(a) (defining private foundation) is amended by striking
    ``and'' at the end of paragraph (3), by redesignating paragraph (4) as
    paragraph (5), and by inserting after paragraph (3) the following new
    paragraph:
                ``(4) an organization which is organized and operated for
            the benefit of, and which directly or indirectly controls, an
            organization described in section 170(b)(1)(A)(iii), and''.
        (d) Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall take effect on January 1,
            1995.
                (2) Subsections (b) and (c).--The amendments made by
            subsections (b) and (c) shall take effect on the date of the
            enactment of this Act.

    SEC. 7602. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING HEALTH
                  INSURANCE AND OTHER PREPAID HEALTH CARE SERVICES.

        (a) General Rule.--Section 833 is amended to read as follows:

    ``SEC. 833. TREATMENT OF ORGANIZATIONS PROVIDING HEALTH INSURANCE AND
                  OTHER PREPAID HEALTH CARE SERVICES.

        ``(a) General Rule.--Any organization to which this section applies
    shall be taxable under this part in the same manner as if it were an
    insurance company other than a life insurance company.
        ``(b) Organizations To Which Section Applies.--This section shall
    apply to any organization--
                ``(1) which is not exempt from taxation under this
            subtitle,
                ``(2) which is not taxable as a life insurance company
            under part I of this subchapter, and
                ``(3) the primary and predominant business activity of
            which during the taxable year consists of 1 or more of the
            following:
                        ``(A) Issuing accident and health insurance
                    contracts or the reinsuring of risks undertaken by
                    other insurance companies under such contracts.
                        ``(B) Operating as a health maintenance
                    organization.
                        ``(C) Entering into arrangements under which--
                                ``(i) fixed payments or premiums are
                            received as consideration for the
                            organization's agreement to provide or arrange
                            for the provision of health care services,
                            regardless of how the health care services are
                            provided or arranged to be provided, and
                                ``(ii) such fixed payments or premiums do
                            not vary depending on the amount of health care
                            services provided.
    In the case of an organization which has as a material business
    activity the issuing of accident and health insurance contracts or the
    reinsuring of risks undertaken by other insurance companies under such
    contracts, the administering of accident and health insurance contracts
    by such organization shall be treated as part of such business activity
    for purposes of paragraph (3)(A).''
        (b) Conforming Amendments.--
                (1) Subsection (c) of section 56 is amended by striking
            paragraph (3).
                (2) The table of sections for part II of subchapter L of
            chapter 1 is amended by striking the item relating to section
            833 and inserting the following:

                                  ``Sec. 833. Treatment of organizations
                                            providing health insurance and
                                            other prepaid health care
                                            services.''
        (c) Effective Dates.--
                (1) In general.--Except as otherwise provided in this
            subsection, the amendments made by this section shall apply to
            taxable years beginning after December 31, 1996.
                (2) Transition rules for blue cross and blue shield
            organizations.--
                        (A) Prior fresh start preserved.--The adjusted
                    basis of any asset determined under section
                    1012(c)(3)(A)(ii) of the Tax Reform Act of 1986 shall
                    not be affected by the amendments made by this section
                    nor by reason of any failure to qualify in taxable
                    years beginning after December 31, 1996, as an existing
                    Blue Cross or Blue Shield organization (as defined in
                    section 833(c)(2) of the Internal Revenue Code of 1986,
                    as in effect on the day before the date of the
                    enactment of this Act).
                        (B) Recoupment of prior reserve benefit.--In the
                    case of any organization entitled to the benefits of
                    section 833(a)(3) of the Internal Revenue Code of 1986
                    (as in effect on the day before the date of the
                    enactment of this Act) for such organization's last
                    taxable year beginning before January 1, 1997, the
                    amount determined under paragraph (4) of section 832(b)
                    of such Code for each of such organization's first 6
                    taxable years beginning after December 31, 1996, shall
                    be increased by an amount equal to 3\1/3\ percent of
                    its unearned premiums on outstanding business as of the
                    close of such organization's last taxable year
                    beginning before January 1, 1997.
                        (C) Phase-out of special deduction for certain
                    organizations.--
                                (i) In general.--In the case of an
                            organization which meets the requirements of
                            clause (ii)--
                                        (I) such organization shall
                                    continue to be entitled to the
                                    deduction provided under section 833(b)
                                    of the Internal Revenue Code of 1986
                                    (as in effect on the day before the
                                    date of the enactment of this Act) for
                                    its first 2 taxable years beginning
                                    after December 31, 1996, except that
                                        (II) the amount of such deduction
                                    for such organization's taxable year
                                    beginning in 1997 shall be 67 percent
                                    of the amount which would have been
                                    determined under such section 833(b) as
                                    so in effect, and the amount of such
                                    deduction for organization's taxable
                                    year beginning in 1998 shall be 33
                                    percent of the amount which would have
                                    been so determined.
                            Notwithstanding the amendment made by
                            subsection (b)(1), any deduction under the
                            preceding sentence shall not be allowable in
                            computing alternative minimum taxable income.
                                (ii) Requirements.--An organization meets
                            the requirements of this clause if, for each of
                            its taxable years beginning in 1995 and 1996,
                            such organization--
                                        (I) was an organization to which
                                    section 833 of such Code (as so in
                                    effect) applied, and
                                        (II) met the requirements of
                                    subparagraph (A) of section 833(c)(3)
                                    of such Code (as so in effect).
                (3) Transitional rules for other companies.--
                        (A) Organizations to which paragraph applies.--This
                    paragraph shall apply to any organization to which
                    section 833 of the Internal Revenue Code of 1986 (as
                    amended by subsection (a)) applies for such
                    organization's first taxable year beginning after
                    December 31, 1996; except that this paragraph shall not
                    apply if such organization treated itself as an
                    insurance company taxable under part II of subchapter L
                    of chapter 1 of such Code on its original Federal
                    income tax return for its taxable year beginning in
                    1992 and for all of its taxable years thereafter
                    beginning before January 1, 1997.
                        (B) Treatment of currently taxable companies.--
                    Except as provided in subparagraph (C), in the case of
                    any organization to which this paragraph applies--
                                (i) the amendments made by this section
                            shall be treated as a change in the method of
                            accounting, and
                                (ii) all adjustments required to be taken
                            into account under section 481 of the Internal
                            Revenue Code of 1986, shall be taken into
                            account for such company's first taxable year
                            beginning after December 31, 1996.
                        (C) Treatment of currently tax exempt companies.--
                    In the case of any organization to which this paragraph
                    applies and which was exempt from tax under chapter 1
                    of the Internal Revenue Code of 1986 for such
                    organization's last taxable year beginning before
                    January 1, 1997--
                                (i) no adjustment shall be made under
                            section 481 (or any other provision) of such
                            Code on account of a change in its method of
                            accounting required by this section for its
                            first taxable year beginning after December 31,
                            1996, and
                                (ii) for purposes of determining gain or
                            loss, the adjusted basis of any asset held by
                            such organization on the first day of such
                            taxable year shall be treated as equal to its
                            fair market value as of such day.

    SEC. 7603. EXEMPTION FROM INCOME TAX FOR REGIONAL ALLIANCES.

        (a) In General.--Subsection (c) of section 501 (relating to
    exemption from tax on corporations, certain trusts, etc.) is amended by
    adding at the end thereof the following new paragraph:
                ``(26) Any regional alliance described in section 1301 of
            the Health Security Act. Such an alliance shall be treated as
            not described in any other paragraph of this subsection.''
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to taxable years beginning after the date of the enactment of
    this Act.

       Subtitle G--Tax Treatment of Long-term Care Insurance and Services

                                                      Title VII, Subtitle G

    SEC. 7701. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

        (a) General Rule.--Paragraph (1) of section 213(d) (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 subsection (g)), or''.
        (b) Qualified Long-Term Care Services Defined.--Section 213
    (relating to the deduction for medical, dental, etc., expenses) is
    amended by adding at the end thereof the following new subsection:
        ``(g) Qualified Long-Term Care Services.--For purposes of this
    section--
                ``(1) In general.--The term `qualified long-term care
            services' means necessary diagnostic, curing, mitigating,
            treating, preventive, therapeutic, and rehabilitative services,
            and maintenance and personal care services (whether performed
            in a residential or nonresidential setting) which--
                        ``(A) are required by an individual during any
                    period the individual is an incapacitated individual
                    (as defined in paragraph (2)),
                        ``(B) have as their primary purpose--
                                ``(i) the provision of needed assistance
                            with 1 or more activities of daily living (as
                            defined in paragraph (3)), or
                                ``(ii) protection from threats to health
                            and safety due to severe cognitive impairment,
                            and
                        ``(C) are provided pursuant to a continuing plan of
                    care prescribed by a licensed professional (as defined
                    in paragraph (4)).
                ``(2) Incapacitated individual.--The term `incapacitated
            individual' means any individual who--
                        ``(A) is unable to perform, without substantial
                    assistance from another individual (including
                    assistance involving cueing or substantial
                    supervision), at least 2 activities of daily living as
                    defined in paragraph (3), or
                        ``(B) has severe cognitive impairment as defined by
                    the Secretary in consultation with the Secretary of
                    Health and Human Services.
            Such term shall not include any individual otherwise meeting
            the requirements of the preceding sentence unless a licensed
            professional within the preceding 12-month period has certified
            that such individual meets such requirements.
                ``(3) Activities of daily living.--Each of the following is
            an activity of daily living:
                        ``(A) Eating.
                        ``(B) Toileting.
                        ``(C) Transferring.
                        ``(D) Bathing.
                        ``(E) Dressing.
                ``(4) Licensed professional.--The term `licensed
            professional' means--
                        ``(A) a physician or registered professional nurse,
                    or
                        ``(B) any other individual who meets such
                    requirements as may be prescribed by the Secretary
                    after consultation with the Secretary of Health and
                    Human Services.
                ``(5) Certain services not included.--The term `qualified
            long-term care services' shall not include any services
            provided to an individual--
                        ``(A) by a relative (directly or through a
                    partnership, corporation, or other entity) unless the
                    relative is a licensed professional with respect to
                    such services, or
                        ``(B) by a corporation or partnership which is
                    related (within the meaning of section 267(b) or
                    707(b)) to the individual.
            For purposes of this paragraph, the term `relative' means an
            individual bearing a relationship to the individual which is
            described in paragraphs (1) through (8) of section 152(a).''
        (c) Technical Amendments.--
                (1) Subparagraph (D) of section 213(d)(1) (as redesignated
            by subsection (a)) is amended to read as follows:
                        ``(D) for insurance (including amounts paid as
                    premiums under part B of title XVIII of the Social
                    Security Act, relating to supplementary medical
                    insurance for the aged) covering medical care referred
                    to in--
                                ``(i) subparagraphs (A) and (B), or
                                ``(ii) subparagraph (C), but only if such
                            insurance is provided under a qualified long-
                            term care insurance policy (as defined in
                            section 7702B(b)) and the amount paid for such
                            insurance is not disallowed under section
                            7702B(d)(4).''
                (2) Paragraph (6) of section 213(d) is amended--
                        (A) by striking ``subparagraphs (A) and (B)'' and
                    inserting ``subparagraph (A), (B), and (C)'', and
                        (B) by striking ``paragraph (1)(C)'' in
                    subparagraph (A) and inserting ``paragraph (1)(D)''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 1995.

    SEC. 7702. TREATMENT OF LONG-TERM CARE INSURANCE.

        (a) General Rule.--Chapter 79 (relating to definitions) is amended
    by inserting after section 7702A the following new section:

    ``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

        ``(a) In General.--For purposes of this title--
                ``(1) a qualified long-term care insurance policy (as
            defined in subsection (b)) shall be treated as an accident and
            health insurance contract,
                ``(2) amounts (other than policyholder dividends (as
            defined in section 808) or premium refunds) received under a
            qualified long-term care insurance policy shall be treated as
            amounts received for personal injuries and sickness and shall
            be treated as reimbursement for expenses actually incurred for
            medical care (as defined in section 213(d)),
                ``(3) any plan of an employer providing coverage under a
            qualified long-term care insurance policy shall be treated as
            an accident and health plan with respect to such coverage,
                ``(4) amounts paid for a qualified long-term care insurance
            policy providing the benefits described in subsection (b)(6)(B)
            shall be treated as payments made for insurance for purposes of
            section 213(d)(1)(D), and
                ``(5) a qualified long-term care insurance policy shall be
            treated as a guaranteed renewable contract subject to the rules
            of section 816(e).
        ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of
    this title--
                ``(1) In general.--The term `qualified long-term care
            insurance policy' means any long-term care insurance policy (as
            defined in section 2304 of the Health Security Act) that--
                        ``(A) satisfies the requirements of subpart B of
                    part 3 of subtitle B of title II of the Health Security
                    Act,
                        ``(B) limits benefits under such policy to
                    individuals who are certified by a licensed
                    professional (as defined in section 213(g)(4)) within
                    the preceding 12-month period as being unable to
                    perform, without substantial assistance from another
                    individual (including assistance involving cueing or
                    substantial supervision), 2 or more activities of daily
                    living (as defined in section 213(g)(3)), or who have a
                    severe cognitive impairment (as defined in section
                    213(g)(2)(B)), and
                        ``(C) satisfies the requirements of paragraphs (2),
                    (3), (4), (5), and (6).
                ``(2) Premium requirements.--The requirements of this
            paragraph are met with respect to a policy if such policy
            provides that premium payments may not be made earlier than the
            date such payments would have been made if the contract
            provided for level annual payments over the life expectancy of
            the insured or 20 years, whichever is shorter. A policy shall
            not be treated as failing to meet the requirements of the
            preceding sentence solely by reason of a provision in the
            policy providing for a waiver of premiums if the insured
            becomes an individual certified in accordance with paragraph
            (1)(B).
                ``(3) Prohibition of cash value.--The requirements of this
            paragraph are met if the policy does not provide for a cash
            value or other money that can be paid, assigned, pledged as
            collateral for a loan, or borrowed, other than as provided in
            paragraph (4).
                ``(4) Refunds of premiums and dividends.--The requirements
            of this paragraph are met with respect to a policy if such
            policy provides that--
                        ``(A) policyholder dividends are required to be
                    applied as a reduction in future premiums or, to the
                    extent permitted under paragraph (6), to increase
                    benefits described in subsection (a)(2), and
                        ``(B) refunds of premiums upon a partial surrender
                    or a partial cancellation are required to be applied as
                    a reduction in future premiums, and
                        ``(C) any refund on the death of the insured, or on
                    a complete surrender or cancellation of the policy,
                    cannot exceed the aggregate premiums paid under the
                    contract.
            Any refund on a complete surrender or cancellation of the
            policy shall be includible in gross income to the extent that
            any deduction or exclusion was allowable with respect to the
            premiums.
                ``(5) Coordination with other entitlements.--The
            requirements of this paragraph are met with respect to a policy
            if such policy does not cover expenses incurred to the extent
            that such expenses are also covered under title XVIII of the
            Social Security Act or are covered under comprehensive health
            coverage described in section 1101 of the Health Security Act.
                ``(6) Maximum benefit.--
                        ``(A) In general.--The requirements of this
                    paragraph are met if the benefits payable under the
                    policy for any period (whether on a periodic basis or
                    otherwise) shall not exceed the dollar amount in effect
                    for such period.
                        ``(B) Nonreimbursement payments permitted.--
                    Benefits shall include all payments described in
                    subsection (a)(2) to or on behalf of an insured
                    individual without regard to the expenses incurred
                    during the period to which the payments relate. For
                    purposes of section 213(a), such payments shall be
                    treated as compensation for expenses paid for medical
                    care.
                        ``(C) Dollar amount.--The dollar amount in effect
                    under this paragraph shall be $150 per day (or the
                    equivalent amount within the calendar year in the case
                    of payments on other than a per diem basis).
                        ``(D) Adjustments for increased costs.--
                                ``(i) In general.--In the case of any
                            calendar year after 1996, the dollar amount in
                            effect under subparagraph (C) for any period or
                            portion thereof occurring during such calendar
                            year shall be equal to the sum of--
                                        ``(I) the amount in effect under
                                    subparagraph (C) for the preceding
                                    calendar year (after application of
                                    this subparagraph), plus
                                        ``(II) the product of the amount
                                    referred to in subclause (I) multiplied
                                    by the cost-of-living adjustment for
                                    the calendar year of the amount under
                                    subclause (I).
                                ``(ii) Cost-of-living adjustment.--For
                            purposes of clause (i), the cost-of-living
                            adjustment for any calendar year is the
                            percentage (if any) by which the cost index
                            under clause (iii) for the preceding calendar
                            year exceeds such index for the second
                            preceding calendar year.
                                ``(iii) Cost index.--The Secretary, in
                            consultation with the Secretary of Health and
                            Human Services, shall before January 1, 1997,
                            establish a cost index to measure increases in
                            costs of nursing home and similar facilities.
                            The Secretary may from time to time revise such
                            index to the extent necessary to accurately
                            measure increases or decreases in such costs.
                                ``(iv) Special rule for calendar year
                            1997.--Notwithstanding clause (ii), for
                            purposes of clause (i), the cost-of-living
                            adjustment for calendar year 1997 is the sum of
                            1 \1/2\ percent plus the percentage by which
                            the CPI for calendar year 1996 (as defined in
                            section 1(f)(4)) exceeds the CPI for calendar
                            year 1995 (as so defined).
                        ``(E) Period.--For purposes of this paragraph, a
                    period begins on the date that an individual has a
                    condition which would qualify for certification under
                    subsection (b)(1)(B) and ends on the earlier of the
                    date upon which--
                                ``(i) such individual has not been so
                            certified within the preceding 12-months, or
                                ``(ii) the individual's condition ceases to
                            be such as to qualify for certification under
                            subsection (b)(1)(B).
                        ``(F) Aggregation rule.--For purposes of this
                    paragraph, all policies issued with respect to the same
                    insured shall be treated as one policy.
        ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes
    of this title, any amount received or coverage provided under a long-
    term care insurance policy that is not a qualified long-term care
    insurance policy shall not be treated as an amount received for
    personal injuries or sickness or provided under an accident and health
    plan and shall not be treated as excludible from gross income under any
    provision of this title.
        ``(d) Treatment of Coverage Provided as Part of a Life Insurance
    Contract.--Except as otherwise provided in regulations prescribed by
    the Secretary, in the case of any long-term care insurance coverage
    (whether or not qualified) provided by rider on a life insurance
    contract--
                ``(1) In general.--This section shall apply as if the
            portion of the contract providing such coverage is a separate
            contract or policy.
                ``(2) Premiums and charges for long-term care coverage.--
            Premium payments for coverage under a long-term care insurance
            policy and charges against the life insurance contract's cash
            surrender value (within the meaning of section 7702(f)(2)(A))
            for such coverage shall be treated as premiums for purposes of
            subsection (b)(2).
                ``(3) Application of 7702.--Section 7702(c)(2) (relating to
            the guideline premium limitation) shall be applied by
            increasing the guideline premium limitation with respect to a
            life insurance contract, as of any date--
                        ``(A) by the sum of any charges (but not premium
                    payments) described in paragraph (2) made to that date
                    under the contract, less
                        ``(B) any such charges the imposition of which
                    reduces the premiums paid for the contract (within the
                    meaning of section 7702(f)(1)).
                ``(4) Application of section 213.--No deduction shall be
            allowed under section 213(a) for charges against the life
            insurance contract's cash surrender value described in
            paragraph (2), unless such charges are includible in income as
            a result of the application of section 72(e)(10) and the
            coverage provided by the rider is a qualified long-term care
            insurance policy under subsection (b).
    For purposes of this subsection, the term `portion' means only the
    terms and benefits under a life insurance contract that are in addition
    to the terms and benefits under the contract without regard to the
    coverage under a long-term care insurance policy.
        ``(e) Prohibition of Discrimination.--
                ``(1) In general.--Notwithstanding subsection (a)(3), any
            plan of an employer providing coverage under a qualified long-
            term care insurance policy shall qualify as an accident and
            health plan with respect to such coverage only if--
                        ``(A) the plan allows all employees, except as
                    provided in paragraph (2), to participate, and
                        ``(B) the benefits provided under the plan are
                    identical for all employees that choose to participate.
                ``(2) Exclusion of certain employees.--For purposes of
            paragraph (1), there may be excluded from consideration--
                        ``(A) employees who have not completed 3 years of
                    service;
                        ``(B) employees who have not attained age 25;
                        ``(C) part-time or seasonal employees; and
                        ``(D) employees who are nonresident aliens and who
                    receive no earned income (within the meaning of section
                    911(d)(2)) from the employer which constitutes income
                    from sources within the United States (within the
                    meaning of section 861(a)(3)).
        ``(f) Regulations.--The Secretary shall prescribe such regulations
    as may be necessary to carry out the requirements of this section,
    including regulations to prevent the avoidance of this section by
    providing long-term care insurance coverage under a life insurance
    contract and to provide for the proper allocation of amounts between
    the long-term care and life insurance portions of a contract.''.
        (b) Clerical Amendment.--The table of sections for chapter 79 is
    amended by inserting after the item relating to section 7702A the
    following new item:

                                  ``Sec. 7702B. Treatment of long-term care
                                            insurance.''.
        (c) Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to policies issued after December 31, 1995. Solely for
            purposes of the preceding sentence, a policy issued prior to
            January 1, 1996, that satisfies the requirements of a qualified
            long-term care insurance policy as set forth in section
            7702B(b) shall, on and after January 1, 1996, be treated as
            being issued after December 31, 1995.
                (2) Transition rule.--If, after the date of enactment of
            this Act and before January 1, 1996, a policy providing for
            long-term care insurance coverage is exchanged solely for a
            qualified long-term care insurance policy (as defined in
            section 7702B(b)), no gain or loss shall be recognized on the
            exchange. If, in addition to a qualified long-term care
            insurance policy, money or other property is received in the
            exchange, then any gain shall be recognized to the extent of
            the sum of the money and the fair market value of the other
            property received. For purposes of this paragraph, the
            cancellation of a policy providing for long-term care insurance
            coverage and reinvestment of the cancellation proceeds in a
            qualified long-term care insurance policy within 60 days
            thereafter shall be treated as an exchange.
                (3) Issuance of certain riders permitted.--For purposes of
            determining whether section 7702 or 7702A of the Internal
            Revenue Code of 1986 applies to any contract, the issuance,
            whether before, on, or after December 31, 1995, of a rider on a
            life insurance contract providing long-term care insurance
            coverage shall not be treated as a modification or material
            change of such contract.

    SEC. 7703. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE
                  INSURANCE CONTRACTS.

        (a) General Rule.--Section 101 (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
            distributed to an individual under a life insurance contract on
            the life of an insured who is a terminally ill individual (as
            defined in paragraph (3)) shall be treated as an amount paid by
            reason of the death of such insured.
                ``(2) Necessary conditions.--
                        ``(A) Paragraph (1) shall not apply to any
                    distribution unless--
                                ``(i) the distribution is not less than the
                            present value (determined under subparagraph
                            (B)) of the reduction in the death benefit
                            otherwise payable in the event of the death of
                            the insured, and
                                ``(ii) the percentage derived from dividing
                            the cash surrender value of the contract, if
                            any, immediately after the distribution by the
                            cash surrender value of the contract
                            immediately before the distribution is equal to
                            or greater than the percentage derived by
                            dividing the death benefit immediately after
                            the distribution by the death benefit
                            immediately before the distribution.
                        ``(B) The present value of the reduction in the
                    death benefit occurring on the distribution must be
                    determined by--
                                ``(i) using as the discount rate a rate not
                            to exceed the highest rate set forth in
                            subparagraph (C), and
                                ``(ii) assuming that the death benefit (or
                            the portion thereof) would have been paid at
                            the end of a period that is no more than the
                            insured's life expectancy from the date of the
                            distribution or 12 months, whichever is
                            shorter.
                        ``(C) Rates.--The rates set forth in this
                    subparagraph are the following:
                                ``(i) the 90-day Treasury bill yield,
                                ``(ii) the rate described as Moody's
                            Corporate Bond Yield Average-Monthly Average
                            Corporates as published by Moody's Investors
                            Service, Inc., or any successor thereto for the
                            calendar month ending 2 months before the date
                            on which the rate is determined,
                                ``(iii) the rate used to compute the cash
                            surrender values under the contract during the
                            applicable period plus 1 percent per annum, and
                                ``(iv) the maximum permissible interest
                            rate applicable to policy loans under the
                            contract.
                ``(3) Terminally ill individual.--For purposes of this
            subsection, the term `terminally ill individual' means an
            individual who the insurer has determined, after receipt of an
            acceptable certification by a licensed physician, has an
            illness or physical condition which can reasonably be expected
            to result in death within 12 months of the date of
            certification.
                ``(4) Application of section 72(e)(10).--For purposes of
            section 72(e)(10) (relating to the treatment of modified
            endowment contracts), section 72(e)(4)(A)(i) shall not apply to
            distributions described in paragraph (1).''
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to taxable years beginning after December 31, 1993.

    SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED
                  DEATH BENEFIT RIDERS.

        (a) Qualified Accelerated Death Benefit Riders Treated as Life
    Insurance.--Section 818 (relating to other definitions and special
    rules) is amended by adding at the end thereof the following new
    subsection:
        ``(g) Qualified Accelerated Death Benefit Riders Treated as Life
    Insurance.--For purposes of this part--
                ``(1) In general.--Any reference to a life insurance
            contract shall be treated as including a reference to a
            qualified accelerated death benefit rider on such contract.
                ``(2) Qualified accelerated death benefit riders.--For
            purposes of this subsection, the term `qualified accelerated
            death benefit rider' means any rider on a life insurance
            contract which provides for a distribution to an individual
            upon the insured becoming a terminally ill individual (as
            defined in section 101(g)(3)).
        (b) Definitions of Life Insurance and Modified Endowment
    Contracts.--Paragraph (5)(A) of section 7702(f) is amended by striking
    ``or'' at the end of clause (iv), by redesignating clause (v) as clause
    (vi), and by inserting after clause (iv) the following new clause:
                                ``(v) any qualified accelerated death
                            benefit rider (as defined in section 818(g)),
                            or''.
        (c) Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to contracts issued after December 31, 1993.
                (2) Transitional rule.--For purposes of determining whether
            section 7702 or 7702A of the Internal Revenue Code of 1986
            applies to any contract, the issuance, whether before, on, or
            after December 31, 1993, of a rider on a life insurance
            contract permitting the acceleration of death benefits (as
            described in section 101(g) of such Code) shall not be treated
            as a modification or material change of such contract.

                                                      Title VII, Subtitle H

            Subtitle H--Tax Incentives for Health Services Providers

    SEC. 7801. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES
                  PROVIDERS.

        (a) In General.--Subpart A of part IV of subchapter A of chapter 1
    (relating to nonrefundable personal credits) is amended by inserting
    after section 22 the following new section:

    ``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

        ``(a) Allowance of Credit.--There shall be allowed as a credit
    against the tax imposed by this chapter for the taxable year an amount
    equal to the product of--
                ``(1) the number of months during such taxable year--
                        ``(A) during which the taxpayer is a qualified
                    primary health services provider, and
                        ``(B) which are within the taxpayer's mandatory
                    service period, and
                ``(2) $1,000 ($500 in the case of a qualified practitioner
            who is not a physician).
        ``(b) Qualified Primary Health Services Provider.--For purposes of
    this section, the term `qualified primary health services provider'
    means, with respect to any month, any qualified practitioner who--
                ``(1) has in effect a certification by the Bureau as a
            provider of primary health services and such certification is,
            when issued, for a health professional shortage area in which
            the qualified practitioner is commencing the providing of
            primary health services,
                ``(2) is providing primary health services full time in the
            health professional shortage area identified in such
            certification, and
                ``(3) has not received a scholarship under the National
            Health Service Corps Scholarship Program or any loan repayments
            under the National Health Service Corps Loan Repayment Program.
    For purposes of paragraph (2), a provider shall be treated as providing
    services in a health professional shortage area when such area ceases
    to be such an area if it was such an area when the provider commenced
    providing services in the area.
        ``(c) Mandatory Service Period.--For purposes of this section, the
    term `mandatory service period' means the period of 60 consecutive
    calendar months beginning with the first month the taxpayer is a
    qualified primary health services provider. A taxpayer shall not have
    more than 1 mandatory service period.
        ``(d) Definitions and Special Rules.--For purposes of this
    section--
                ``(1) Bureau.--The term `Bureau' means the Bureau of
            Primary Health Care, Health Resources and Services
            Administration of the United States Public Health Service.
                ``(2) Qualified practitioner.--The term `qualified
            practitioner' means a physician, a physician assistant, a nurse
            practitioner, or a certified nurse-midwife.
                ``(3) Physician.--The term `physician' has the meaning
            given to such term by section 1861(r) of the Social Security
            Act.
                ``(4) Physician assistant; nurse practitioner.--The terms
            `physician assistant' and `nurse practitioner' have the
            meanings given to such terms by section 1861(aa)(5) of the
            Social Security Act.
                ``(5) Certified nurse-midwife.--The term `certified nurse-
            midwife' has the meaning given to such term by section
            1861(gg)(2) of the Social Security Act.
                ``(6) Primary health services.--The term `primary health
            services' has the meaning given such term by section 330(b)(1)
            of the Public Health Service Act.
                ``(7) Health professional shortage area.--The term `health
            professional shortage area' has the meaning given such term by
            section 332(a)(1)(A) of the Public Health Service Act.
        ``(e) Recapture of Credit.--
                ``(1) In general.--If there is a recapture event during any
            taxable year, then--
                        ``(A) no credit shall be allowed under subsection
                    (a) for such taxable year and any succeeding taxable
                    year, and
                        ``(B) the tax of the taxpayer under this chapter
                    for such taxable year shall be increased by an amount
                    equal to the product of--
                                ``(i) the applicable percentage, and
                                ``(ii) the aggregate unrecaptured credits
                            allowed to such taxpayer under this section for
                            all prior taxable years.
                ``(2) Applicable recapture percentage.--
                        ``(A) In general.--For purposes of this subsection,
                    the applicable recapture percentage shall be determined
                    from the following table:

                        ``If the recapture
                                                      The applicable recap-
                          event occurs during:
                                                        ture percentage is:
                                Months 1-24..............           100
                                Months 25-36.............            75
                                Months 37-48.............            50
                                Months 49-60.............            25
                                Months 61 and thereafter.            0.
                        ``(B) Timing.--For purposes of subparagraph (A),
                    month 1 shall begin on the first day of the mandatory
                    service period.
                ``(3) Recapture event defined.--
                        ``(A) In general.--For purposes of this subsection,
                    the term `recapture event' means the failure of the
                    taxpayer to be a qualified primary health services
                    provider for any month during the taxpayer's mandatory
                    service period.
                        ``(B) Cessation of designation.--The cessation of
                    the designation of any area as a health professional
                    shortage area after the beginning of the mandatory
                    service period for any taxpayer shall not constitute a
                    recapture event.
                        ``(C) Secretarial waiver.--The Secretary, in
                    consultation with the Secretary of Health and Human
                    Services, may waive any recapture event caused by
                    extraordinary circumstances.
                ``(4) No credits against tax; minimum tax.--Any increase in
            tax under this subsection shall not be treated as a tax imposed
            by this chapter for purposes of determining the amount of any
            credit under subpart A, B, or D of this part or for purposes of
            section 55.''
        (b) Clerical Amendment.--The table of sections for subpart A of
    part IV of subchapter A of chapter 1 is amended by inserting after the
    item relating to section 22 the following new item:

                                  ``Sec. 23. Primary health services
                                            providers.''
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 1994.

    SEC. 7802. EXPENSING OF MEDICAL EQUIPMENT.

        (a) In General.--Paragraph (1) of section 179(b) (relating to
    dollar limitation on expensing of certain depreciable business assets)
    is amended to read as follows:
                ``(1) Dollar limitation.--
                        ``(A) General rule.--The aggregate cost which may
                    be taken into account under subsection (a) for any
                    taxable year shall not exceed $17,500.
                        ``(B) Health care property.--The aggregate cost
                    which may be taken into account under subsection (a)
                    shall be increased by the lesser of--
                                ``(i) the cost of section 179 property
                            which is health care property placed in service
                            during the taxable year, or
                                ``(ii) $10,000.''
        (b)  Definition.--Section 179(d) (relating to definitions) is
    amended by adding at the end the following new paragraph:
                ``(11) Health care property.--For purposes of this section,
            the term `health care property' means section 179 property--
                        ``(A) which is medical equipment used in the
                    screening, monitoring, observation, diagnosis, or
                    treatment of patients in a laboratory, medical, or
                    hospital environment,
                        ``(B) which is owned (directly or indirectly) and
                    used by a physician (as defined in section 1861(r) of
                    the Social Security Act) in the active conduct of such
                    physician's full-time trade or business of providing
                    primary health services (as defined in section
                    330(b)(1) of the Public Health Service Act) in a health
                    professional shortage area (as defined in section
                    332(a)(1)(A) of the Public Health Service Act), and
                        ``(C) substantially all the use of which is in such
                    area.''
        (c) Effective Date.--The amendments made by this section shall
    apply to property placed in service after December 31, 1994.

                                                      Title VII, Subtitle I

                      Subtitle I--Miscellaneous Provisions

    SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY
                  EMPLOYED INDIVIDUALS.

        (a) In General.--Subpart A of part IV of subchapter A of chapter 1
    (relating to nonrefundable personal credits) is amended by inserting
    after section 23 the following new section:

    ``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED
                  INDIVIDUALS.

        ``(a) Allowance of Credit.--
                ``(1) In general.--In the case of an eligible individual,
            there shall be allowed as a credit against the tax imposed by
            this chapter for the taxable year an amount equal to the
            applicable percentage of the personal assistance expenses paid
            or incurred by the taxpayer during such taxable year.
                ``(2) Applicable percentage.--For purposes of paragraph
            (1), the term `applicable percentage' means 50 percent reduced
            (but not below zero) by 10 percentage points for each $5,000 by
            which the modified adjusted gross income (as defined in section
            59B(d)(2)) of the taxpayer for the taxable year exceeds
            $45,000. In the case of a married individual filing a separate
            return, the preceding sentence shall be applied by substituting
            `$2,500' for `$5,000' and `$22,500' for `$45,000'.
        ``(b) Limitation.--The amount of personal assistance expenses
    incurred for the benefit of an individual which may be taken into
    account under subsection (a) for the taxable year shall not exceed the
    lesser of--
                ``(1) $15,000, or
                ``(2) such individual's earned income (as defined in
            section 32(c)(2)) for the taxable year.
    In the case of a joint return, the amount under the preceding sentence
    shall be determined separately for each spouse.
        ``(c) Eligible Individual.--For purposes of this section, the term
    `eligible individual' means any individual (other than a nonresident
    alien) who, by reason of any medically determinable physical impairment
    which can be expected to result in death or which has lasted or can be
    expected to last for a continuous period of not less than 12 months, is
    unable to engage in any substantial gainful activity without personal
    assistance services appropriate to carry out activities of daily
    living. An individual shall not be treated as an eligible individual
    unless such individual furnishes such proof thereof (in such form and
    manner, and at such times) as the Secretary may require.
        ``(d) Other Definitions.--For purposes of this section--
                ``(1) Personal assistance expenses.--The term `personal
            assistance expenses' means expenses for--
                        ``(A) personal assistance services appropriate to
                    carry out activities of daily living in or outside the
                    home,
                        ``(B) homemaker/chore services incidental to the
                    provision of such personal assistance services,
                        ``(C) in the case of an individual with a cognitive
                    impairment, assistance with life skills,
                        ``(D) communication services,
                        ``(E) work-related support services,
                        ``(F) coordination of services described in this
                    paragraph,
                        ``(G) assistive technology and devises, including
                    assessment of the need for particular technology and
                    devices and training of family members, and
                        ``(H) modifications to the principal place of abode
                    of the individual to the extent the expenses for such
                    modifications would (but for subsection (e)(2)) be
                    expenses for medical care (as defined by section 213)
                    of such individual.
                ``(2) Activities of daily living.--The term `activities of
            daily living' means the activities referred to in section
            213(g)(3).
        ``(e) Special Rules.--
                ``(1) Payments to related persons.--No credit shall be
            allowed under this section for any amount paid by the taxpayer
            to any person who is related (within the meaning of section 267
            or 707(b)) to the taxpayer.
                ``(2) Coordination with medical expense deduction.--Any
            amount taken into account in determining the credit under this
            section shall not be taken into account in determining the
            amount of the deduction under section 213.
                ``(3) Basis reduction.--For purposes of this subtitle, if a
            credit is allowed under this section for any expense with
            respect to any property, the increase in the basis of such
            property which would (but for this paragraph) result from such
            expense shall be reduced by the amount of the credit so
            allowed.
        ``(f) Cost-of-Living Adjustment.--In the case of any taxable year
    beginning after 1996, the $45,000 and $22,500 amounts in subsection
    (a)(2) and the $15,000 amount in subsection (b) shall be increased by
    an amount equal to--
                ``(1) such dollar amount, multiplied by
                ``(2) the cost-of-living adjustment determined under
            section 1(f)(3) for the calendar year in which the taxable year
            begins by substituting `calendar year 1995' for `calendar year
            1992' in subparagraph (B) thereof.
    If any increase determined under the preceding sentence is not a
    multiple of $1,000, such increase shall be rounded to the nearest
    multiple of $1,000.''
        (b) Technical Amendment.--Subsection (a) of section 1016 is amended
    by striking ``and'' at the end of paragraph (24), by striking the
    period at the end of paragraph (25) and inserting ``, and'', and by
    adding at the end thereof the following new paragraph:
                ``(26) in the case of any property with respect to which a
            credit has been allowed under section 23, to the extent
            provided in section 23(e)(3).''
        (c) Clerical Amendment.--The table of sections for subpart A of
    part IV of subchapter A of chapter 1 is amended by inserting after the
    item relating to section 22 the following new item:

                                  ``Sec. 23. Cost of personal assistance
                                            services required by employed
                                            individuals.''
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 1995.

    SEC. 7902. DENIAL OF TAX-EXEMPT STATUS FOR BORROWINGS OF HEALTH CARE-
                  RELATED ENTITIES.

        (a) In General.--Paragraph (6) of section 141(b) (relating to
    private business use) is amended by adding at the end thereof the
    following new subparagraph:
                        ``(C) Certain health care-related entities.--Use
                    by--
                                ``(i) any regional alliance described in
                            section 1301 of the Health Security Act,
                                ``(ii) any corporate alliance described in
                            section 1311 of such Act, and
                                ``(iii) any guaranty fund described in
                            section 1204 of such Act,
                    shall be treated as private business use by an
                    organization that is not a 501(c)(3) organization.''
        (b) Effective Date.--The amendment made by subsection (a) shall
    apply to obligations issued after the date of the enactment of this
    Act.

    SEC. 7903. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF
                  CERTAIN PROGRAMS UNDER THE HEALTH SECURITY ACT.

        (a) In General.--Subparagraph (D) of section 6103(l)(7) (relating
    to disclosure of return information to Federal, State, and local
    agencies administering certain programs) is amended by striking ``and''
    at the end of clause (viii), by striking the period at the end of
    clause (ix) and inserting ``; and'', and by inserting after clause (ix)
    the following new clause:
                                ``(x) assistance provided under the Health
                            Security Act.''
        (b) Information Not Available to Local Agencies.--Subparagraph (D)
    of section 6103(l)(7) is amended by adding at the end thereof the
    following new sentence: ``Subparagraphs (A) and (B) shall be applied
    without regard to any reference to any local agency with respect to the
    program referred to in clause (x).''

         TITLE VIII--HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL
                                   GOVERNMENT

                                                                 Title VIII

                           table of contents of title

                                                                       Page
                    Subtitle A--Military Health Care Reform

    Sec. 8001. Uniformed services health plans..................       1207
                   Subtitle B--Department of Veterans Affairs

    Sec. 8101. Benefits and eligibility through Department of          1218
                                Veterans Affairs Medical System.
    Sec. 8102. Organization of Department of Veterans Affairs          1227
                                facilities as health plans.
             Subtitle C--Federal Employees Health Benefits Program

    Sec. 8201. Definitions......................................       1233
    Sec. 8202. FEHBP termination................................       1234
    Sec. 8203. Treatment of Federal employees, annuitants, and         1235
                                other individuals (who would
                                otherwise have been eligible for
                                FEHBP) under health plans.
    Sec. 8204. Treatment of individuals residing abroad.........       1245
    Sec. 8205. Transition and savings provisions................       1246
    Sec. 8206. Regulations......................................       1248
    Sec. 8207. Technical and conforming amendments..............       1248
                       Subtitle D--Indian Health Service

    Sec. 8301. Definitions......................................       1249
    Sec. 8302. Eligibility and health service coverage of              1250
                                Indians.
    Sec. 8303. Supplemental Indian health care benefits.........       1252
    Sec. 8304. Health plan and health alliance requirements.....       1252
    Sec. 8305. Exemption of tribal governments and tribal              1253
                                organizations from employer
                                payments.
    Sec. 8306. Provision of health services to non-enrollees and       1253
                                non-Indians.
    Sec. 8307. Payment by other payers..........................       1258
    Sec. 8308. Contracting authority............................       1258
    Sec. 8309. Consultation.....................................       1258
    Sec. 8310. Infrastructure...................................       1259
    Sec. 8311. Financing........................................       1259
    Sec. 8312. Rule of construction.............................       1261
    Sec. 8313. Authorizations of appropriations.................       1261
    Sec. 8314. Payment of premium discount equivalent amounts          1261
                                for unemployed Indians.
     Subtitle E--Amendments to the Employee Retirement Income Security Act
                                    of 1974

    Sec. 8401. Group health plan defined........................       1262
    Sec. 8402. Limitation on coverage of group health plans            1263
                                under title I of ERISA.
    Sec. 8403. Amendments relating to continuation coverage.....       1269
    Sec. 8404. Additional amendments relating to group health          1271
                                plans.
    Sec. 8405. Plan claims procedures...........................       1272
    Sec. 8406. Effective dates..................................       1273
                    Subtitle F--Special Fund for WIC Program

    Sec. 8501. Additional funding for special supplemental food        1274
                                program for women, infants, and
                                children (WIC).

                    Subtitle A--Military Health Care Reform

    SEC. 8001. UNIFORMED SERVICES HEALTH PLANS.

                                                     Title VIII, Subtitle A

        (a) Establishment of Plans.--(1) Chapter 55 of title 10, United
    States Code, is amended by inserting after section 1073 the following
    new section:
    ``Sec. 1073a. Uniformed Services Health Plans: establishment and
                  coordination with national health care reform
        ``(a) Establishment Authorized.--(1) The Secretary of Defense, in
    consultation with the other administering Secretaries, may establish
    one or more Uniformed Services Health Plans pursuant to this section in
    order to provide health care services to members of the uniformed
    services on active duty for a period of more than 30 days and persons
    described in subsection (e)(2).
        ``(2) The establishment and operation of a Uniformed Services
    Health Plan shall be carried out in accordance with regulations
    prescribed by the Secretary of Defense, in consultation with the other
    administering Secretaries. The Secretary shall assure that such
    regulations conform, to the maximum extent practicable, to the
    requirements for health plans set forth in the Health Security Act.
        ``(b) Use of Uniformed Services Facilities and Other Health Care
    Providers.--(1) A Uniformed Services Health Plan may rely upon the use
    of facilities of the uniformed services for the provision of health
    care services to persons enrolled in the plan, supplemented by the use
    of civilian health care providers or health plans under agreements
    entered into by the Secretary of Defense.
        ``(2) An agreement with a civilian health care provider or a health
    plan under paragraph (1) may be entered into without regard to
    provisions of law requiring the use of competitive procedures. An
    agreement with a health plan may provide for the sharing of resources
    with the health plan that is a party to the agreement.
        ``(c) Health Care Services Under a Plan.--(1) Subject to paragraph
    (2), a Uniformed Services Health Plan shall provide to persons enrolled
    in the plan at least the items and services in the comprehensive
    benefit package under the Health Security Act.
        ``(2)(A) In addition, a Uniformed Services Health Plan shall
    guarantee to each person described in subparagraph (B) who is enrolled
    in the plan those health care services that the person would be
    entitled to receive under this chapter in the absence of this section.
    In the case of a person described in subparagraph (B) who is a covered
    beneficiary, such health care services shall consist of the types of
    health care services described in section 1079(a) of this title.
        ``(B) A person referred to in subparagraph (A) is a member of the
    uniformed services on active duty for a period of more than 30 days as
    of December 31, 1994, or any person who is a covered beneficiary as of
    that date, who is (or afterwards becomes) enrolled in a Uniformed
    Services Health Plan.
        ``(d) Preemption of Conflicting State Requirements.--In carrying
    out responsibilities under the Health Security Act, a State (or State-
    established entity)--
                ``(1) may not impose any standard or requirement on a
            Uniformed Services Health Plan that is inconsistent with this
            section or any regulation prescribed under this section or
            other Federal law regarding the operation of this section; and
                ``(2) may not deny certification of a Uniformed Services
            Health Plan as a health plan under the Health Security Act on
            the basis of a conflict between a rule of a State or health
            alliance and this section or any regulation prescribed under
            this section or other Federal law regarding the operation of
            this section.
        ``(e) Enrollment.--(1) Except as authorized by the administering
    Secretary concerned, each member of a uniformed service on active duty
    for a period of more than 30 days shall be required to enroll in a
    Uniformed Services Health Plan available to the member.
        ``(2) After enrolling members described in paragraph (1),
    opportunities for further enrollment in a Uniformed Services Health
    Plan shall be offered by the administering Secretaries to covered
    beneficiaries in the following order of priority:
                ``(A) Spouses and children of members of the uniformed
            services who are on active duty for a period of more than 30
            days.
                ``(B) Persons described in subsection (c) of section 1086
            of this title. The administering Secretary concerned may
            disregard the exclusion set forth in subsection (d)(1) of such
            section in the case of a person described in subsection (c) of
            such section who is enrolled in the supplementary medical
            insurance program under part B of title XVIII of the Social
            Security Act (42 U.S.C. 1395j et seq.).
        ``(3) With respect to a member described in paragraph (1) or a
    covered beneficiary described in paragraph (2) who enrolls in a
    Uniformed Services Health Plan, participation in such a plan shall be
    the exclusive source of health care services available to the member or
    person under this chapter.
        ``(f) Effect of Failure to Enroll.--(1) Except as provided in
    paragraph (2), if a person described in subsection (e)(2) declines the
    opportunity offered by the administering Secretaries to enroll in a
    Uniformed Services Health Plan, the person shall not be entitled or
    eligible for health care services in facilities of the uniformed
    services or pursuant to a contract entered into under this chapter.
    However, nothing in this paragraph shall be construed to effect the
    right of a person to a premium payment by the Secretary of Defense if
    the person is enrolled in another health plan under the Health Security
    Act and is otherwise entitled to such a payment under subsection (h).
        ``(2) A person described in subsection (e)(2) who is enrolled with
    a health plan that is not a Uniformed Services Health Plan may receive
    the items and services in the comprehensive benefit package in a
    facility of the uniformed services only if--
                ``(A) the Secretary of Defense authorizes the provision of
            a particular item or service in the package to the person;
                ``(B) the Secretary determines that the provision of the
            item or service involved will not interfere with the provision
            of health care services to members of the uniformed services or
            persons enrolled in a Uniformed Services Health Plan; and
                ``(C) the health plan in which the person is enrolled
            agrees to pay the actual and full cost of the items and
            services in the package actually provided to the person.
        ``(3) The administering Secretaries shall assure that all rights
    and entitlements under this chapter of any person described in
    subsection (e)(2) are fully preserved if the person--
                ``(A) is not offered the opportunity to enroll in a
            Uniformed Services Health Plan; and
                ``(B) is not otherwise enrolled in a health plan provided
            through a health alliance under the Health Security Act.
        ``(g) Special Rule for Other Payers.--(1)(A) In the case of a
    person who is enrolled in the supplementary medical insurance program
    under part B of title XVIII of the Social Security Act (42 U.S.C. 1395j
    et seq.) and who is also enrolled in a Uniformed Services Health Plan,
    Medicare shall be responsible for making a premium payment on behalf of
    the person. The payment responsibilities of Medicare under this
    paragraph shall be in the same amounts and under the same terms and
    conditions under which the Secretary of Health and Human Services makes
    payments to eligible organizations with a risk-sharing contract under
    section 1876 of the Social Security Act. A premium payment by Medicare
    under this paragraph shall be the person's exclusive benefit under
    Medicare.
        ``(B) In this paragraph, the term `Medicare' means any program
    administered under title XVIII of the Social Security Act (42 U.S.C.
    1395c et seq.).
        ``(2) Nothing in this section shall affect the payment of the
    retiree discount under the Health Security Act on behalf of a person
    who is enrolled in a Uniformed Services Health Plan if the person is
    otherwise eligible for the retiree discount.
        ``(h) Payment Responsibilities of the Secretary.--(1) In the case
    of a person described in subsection (e)(2) who is not enrolled in a
    Uniformed Services Health Plan, the Secretary may make a premium
    payment for the person's enrollment through a health alliance in
    another health plan. In determining the amount of the payment, the
    Secretary shall consider the amount of any retiree discount payable
    under the Health Security Act on behalf of the person and the amount of
    any premium credits attributable to employer payments with respect to
    employment of the person.
        ``(2) The Secretary shall not make a payment pursuant to this
    subsection in connection with any person enrolled in a health plan of
    the Department of Veterans Affairs or a health program of the Indian
    Health Service.
        ``(i) Payment Responsibilities of Persons Enrolled in a Uniformed
    Services Health Plan.--(1) In the case of an active duty member who is
    enrolled in a Uniformed Services Health Plan, the administering
    Secretaries may not impose or collect from the member a cost-share
    charge of any kind (whether a premium, copayment, deductible,
    coinsurance charge, or other charge) other than subsistence charges
    authorized under section 1075 of this title.
        ``(2) Subject to paragraph (3), persons described in subsection
    (e)(2) who are enrolled in a Uniformed Services Health Plan shall have
    such payment responsibilities as the Secretary establishes, but not to
    exceed payment of a family share under section 1343 of a premium and
    cost sharing. Payment obligations established under this paragraph may
    not exceed those obligations otherwise required under the national
    standards for health plans established pursuant to the Health Security
    Act.
        ``(3)(A) Persons described in subsection (e)(2) who enroll in a
    Uniformed Services Health Plan and who (in the absence of this section)
    would be covered beneficiaries under section 1079 or 1086 of this title
    continuously since December 31, 1994, shall have, as a group, out-of-
    pocket costs in 1995 no greater than the lesser of--
                ``(i) the out-of-pocket costs in effect for such
            beneficiaries under section 1075, 1078, 1079(b), or 1086(b) of
            this title (whichever applies) on December 31, 1994; and
                ``(ii) those obligations otherwise required under the
            national standards for health plans established pursuant to the
            Health Security Act.
        ``(B) Members of the uniformed services on active duty as of
    December 31, 1994, who afterward become covered beneficiaries under
    section 1079 or 1086 of this title (or would become covered
    beneficiaries in the absence of this section) without a break in
    eligibility for health care services under this chapter shall have, as
    a group, out-of-pocket costs as covered beneficiaries no higher than
    the out-of-pocket costs in effect for similarly situated covered
    beneficiaries described in subparagraph (A).
        ``(C) The limitation on out-of-pocket costs established pursuant to
    subparagraph (A) may be adjusted for years after 1995 by an appropriate
    economic index, as determined by the Secretary of Defense.
        ``(4) The Secretary of Defense shall establish the payment
    requirements under paragraph (2), and enforce the limitations on such
    requirements specified in paragraph (3), in regulations prescribed
    pursuant to subsection (a).
        ``(j) Financial Account.--There is hereby established in the
    Department of Defense a financial account to which shall be credited
    all premium payments and other receipts from other payers and
    beneficiaries made in connection with any person enrolled in a
    Uniformed Services Health Plan. The account shall be administered by
    the Secretary of Defense, and funds in the account may be used by the
    Secretary for any purpose directly related to the delivery and
    financing of health care services under this chapter, including
    operations, maintenance, personnel, procurement, contributions toward
    construction projects, and related costs. Funds in the account shall
    remain available until expended.''.
        (2) The table of sections at the beginning of such chapter is
    amended by inserting after the item relating to section 1073 the
    following new item:

    ``1073a. Uniformed Services Health Plans: establishment and
                                coordination with national health care
                                reform.''.
        (b) Definition.--Section 1072 of such title is amended by adding at
    the end the following new paragraph:
                ``(6) The term `Uniformed Services Health Plan' means a
            plan established by the Secretary of Defense under section
            1073a(a) of this title in order to provide health care services
            to members of the uniformed services on active duty and other
            covered beneficiaries under this chapter.''.
        (c) Report on Establishment.--If the Secretary of Defense
    determines to establish any Uniformed Services Health Plan under
    section 1073a of title 10, United States Code, as added by subsection
    (a), the Secretary shall submit to Congress a report describing the
    Plans proposed to be initially offered under such section. The report
    required by this subsection shall be submitted not later than 30 days
    before the date on which the Secretary first issues proposed rules
    under subsection (a) of such section to establish any such Plan.

                   Subtitle B--Department of Veterans Affairs

                                                     Title VIII, Subtitle B

    SEC. 8101. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF VETERANS
                  AFFAIRS MEDICAL SYSTEM.

        (a) DVA As a Participant in Health Care Reform.--
                (1) In general.--Title 38, United States Code, is amended
            by inserting after chapter 17 the following new chapter:

        ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER HEALTH SECURITY ACT

                            ``SUBCHAPTER I--GENERAL

    ``1801. Definitions.
                          ``SUBCHAPTER II--ENROLLMENT

    ``1811. Enrollment: veterans.
    ``1812. Enrollment: CHAMPVA eligibles.
    ``1813. Enrollment: family members.
                           ``SUBCHAPTER III--BENEFITS

    ``1821. Benefits for VA enrollees.
    ``1822. Chapter 17 benefits.
    ``1823. Supplemental benefits packages and policies.
    ``1824. Limitation regarding veterans enrolled with health plans
                                outside Department.
                       ``SUBCHAPTER IV--FINANCIAL MATTERS

    ``1831. Premiums, copayments, etc.
    ``1832. Medicare coverage and reimbursement.
    ``1833. Recovery of cost of certain care and services.
    ``1834. Health Plan Funds.

                            ``SUBCHAPTER I--GENERAL

    ``Sec. 1801. Definitions
        ``For purposes of this chapter:
                ``(1) The term `health plan' means an entity that has been
            certified under the Health Security Act as a health plan.
                ``(2) The term `VA health plan' means a health plan that is
            operated by the Secretary under section 7341 of this title.
                ``(3) The term `VA enrollee' means an individual enrolled
            under the Health Security Act in a VA health plan.

                          ``SUBCHAPTER II--ENROLLMENT

    ``Sec. 1811. Enrollment: veterans
        ``Each veteran who is an eligible individual within the meaning of
    section 1001 of the Health Security Act may enroll with a VA health
    plan. A veteran who wants to receive the comprehensive benefit package
    through the Department shall enroll with a VA health plan.
    ``Sec. 1812. Enrollment: CHAMPVA eligibles
        ``An individual who is eligible for benefits under section 1713 of
    this title and who is eligible to enroll in a health plan pursuant to
    section 1001 of the Health Security Act may enroll under that Act with
    a VA health plan in the same manner as a veteran.
    ``Sec. 1813. Enrollment: family members
        ``(a) The Secretary may authorize a VA health plan to enroll
    members of the family of an enrollee under section 1811 or 1812 of this
    title, subject to payment of premiums, deductibles, copayments, and
    coinsurance as required under the Health Security Act.
        ``(b) For purposes of subsection (a), an enrollee's family is those
    individuals (other than the enrollee) included within the term `family'
    as defined in section 1011(b) of the Health Security Act.

                           ``SUBCHAPTER III--BENEFITS

    ``Sec. 1821. Benefits for VA enrollees
        ``The Secretary shall ensure that each VA health plan provides to
    each individual enrolled with it the items and services in the
    comprehensive benefit package under the Health Security Act.
    ``Sec. 1822. Chapter 17 benefits
        ``The Secretary shall provide to veterans the care and services
    that are authorized to be provided under chapter 17 of this title in
    accordance with the terms and conditions applicable to that veteran and
    that care under such chapter, notwithstanding that such care and
    services are not included in the comprehensive benefit package.
    ``Sec. 1823. Supplemental benefits packages and policies
        ``A VA health plan may offer supplemental health benefits policies
    for health care services not provided under chapter 17 of this title
    and cost sharing policies consistent with the requirements of part 2 of
    subtitle E of title I of the Health Security Act.
    ``Sec. 1824. Limitation regarding veterans enrolled with health plans
                  outside Department
        ``A veteran who is residing in a regional alliance area in which
    the Department operates a health plan and who is enrolled in a health
    plan that is not operated by the Department may be provided the items
    and services in the comprehensive benefit package by a VA health plan
    only if the plan is reimbursed for the actual and full cost of the care
    provided.

                       ``SUBCHAPTER IV--FINANCIAL MATTERS

    ``Sec. 1831. Premiums, copayments, etc.
        ``(a) In the case of a veteran described in subsection (b) who is a
    VA enrollee, the Secretary may not impose or collect from the veteran a
    cost-share charge of any kind (whether a premium, copayment,
    deductible, coinsurance charge, or other charge). The Secretary shall
    make such arrangements as necessary with health alliances in order to
    carry out this subsection.
        ``(b) The veterans referred to in subsection (a) are the following:
                ``(1) Any veteran with a service-connected disability.
                ``(2) Any veteran whose discharge or release from the
            active military, naval or air service was for a disability
            incurred or aggravated in the line of duty.
                ``(3) Any veteran who is in receipt of, or who, but for a
            suspension pursuant to section 1151 of this title (or both such
            a suspension and the receipt of retired pay), would be entitled
            to disability compensation, but only to the extent that such a
            veteran's continuing eligibility for such care is provided for
            in the judgment or settlement provided for in such section.
                ``(4) Any veteran who is a former prisoner of war.
                ``(5) Any veteran of the Mexican border period or World War
            I.
                ``(6) Any veteran who is unable to defray the expenses of
            necessary care as determined under section 1722(a) of this
            title.
        ``(c) In the case of a VA enrollee who is not described in
    subsection (b), the Secretary shall charge premiums and establish
    copayments, deductibles, and coinsurance amounts. The premium rate, and
    the rates for deductibles and copayments, for each VA health plan shall
    be established by that health plan based on rules established by the
    health alliance under which it is operating.
        ``(d) In the case of a veteran with a service-connected disability
    who is enrolled in a VA health plan and who has net earnings from self-
    employment, the Secretary shall, under regulations prescribed by the
    Secretary, provide for a reduction in any premium payment (or alliance
    credit repayment) owed by the veteran under section 6126 or 6111 of the
    Health Security Act by virtue of the veteran's net earnings from self-
    employment.
    ``Sec. 1832. Medicare coverage and reimbursement
        ``(a) For purposes of any program administered by the Secretary of
    Health and Human Services under title XVIII of the Social Security Act,
    a Department facility shall be deemed to be a Medicare provider.
        ``(b)(1) A VA health plan shall be considered to be a Medicare HMO.
        ``(2) For purposes of this section, the term `Medicare HMO' means
    an eligible organization under section 1876 of the Social Security Act.
        ``(c) In the case of care provided to a veteran other than a
    veteran described in section 1831(b) of this title who is eligible for
    benefits under the Medicare program under title XVIII of the Social
    Security Act, the Secretary of Health and Human Services shall
    reimburse a VA health plan or Department health-care facility providing
    services as a Medicare provider or Medicare HMO in the same amounts and
    under the same terms and conditions as that Secretary reimburses other
    Medicare providers or Medicare HMOs, respectively. The Secretary of
    Health and Human Services shall include with each such reimbursement a
    Medicare explanation of benefits.
        ``(d) When the Secretary provides care to a veteran for which the
    Secretary receives reimbursement under this section, the Secretary
    shall require the veteran to pay to the Department any applicable
    deductible or copayment that is not covered by Medicare.
    ``Sec. 1833. Recovery of cost of certain care and services
        ``(a) In the case of an individual provided care or services
    through a VA health plan who has coverage under a supplemental health
    insurance policy pursuant to part 2 of subtitle E of title I of the
    Health Security Act or under any other provision of law, or who has
    coverage under a Medicare supplemental health insurance plan (as
    defined in the Health Security Act) or under any other provision of
    law, the Secretary has the right to recover or collect charges for care
    or services (as determined by the Secretary, but not including care or
    services for a service-connected disability) from the party providing
    that coverage to the extent that the individual (or the provider of the
    care or services) would be eligible to receive payment for such care or
    services from such party if the care or services had not been furnished
    by a department or agency of the United States.
        ``(b) The provisions of subsections (b) through (f) of section 1729
    of this title shall apply with respect to claims by the United States
    under subsection (a) in the same manner as they apply to claims under
    subsection (a) of that section.
    ``Sec. 1834. Health Plan Fund
        ``(a) There is hereby established in the Treasury a revolving fund
    to be known as the `Department of Veterans Affairs Health Plan Fund'.
        ``(b) Any amount received by the Department by reason of the
    furnishing of health care by a VA health plan or the enrollment of an
    individual with a VA health plan (including amounts received as
    premiums, premium discount payments, copayments or coinsurance, and
    deductibles, amounts received as third-party reimbursements, and
    amounts received as reimbursements from another health plan for care
    furnished to one of its enrollees) shall be credited to the revolving
    fund.
        ``(c) Notwithstanding subsection (b), the Department may not retain
    amounts received for care furnished to a VA enrollee in a case in which
    the costs of such care have been covered by appropriations. Such
    amounts shall be deposited in the General Fund of the Treasury.
        ``(d) Amounts in the revolving fund are hereby made available for
    the expenses of the delivery by a VA health plan of the items and
    services in the comprehensive benefit package and any supplemental
    benefits package or policy offered by that health plan.''.
                (2) The table of chapters at the beginning of part II of
            title 38, United States Code, is amended by inserting after the
            item relating to chapter 17 the following new item:

    ``18. Benefits and Eligibility Under Health Security Act....   1801.''.
        (b) Preservation of Existing Benefits for Facilities Not Operating
    as Health Plans.--(1) Chapter 17 of title 38, United States Code, is
    amended by inserting after section 1704 the following new section:
    ``Sec. 1705. Facilities not operating within health plans; veterans not
                  eligible to enroll in health plans
        ``The provisions of this chapter shall apply with respect to the
    furnishing of care and services--
                ``(1) by any facility of the Department that is not
            operating as or within a health plan certified as a health plan
            under the Health Security Act; and
                ``(2) by any facility of the Department (whether or not
            operating as or within a health plan certified as a health plan
            under the Health Security Act) in the case of a veteran who is
            not an eligible individual with the meaning of section 1001 of
            the Health Security Act.''.
        (2) The table of sections at the beginning of such chapter is
    amended by inserting after the item relating to section 1704 the
    following new item:

    ``1705. Facilities not operating within health plans; veterans not
                                eligible to enroll in health plans.''.

    SEC. 8102. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS FACILITIES AS
                  HEALTH PLANS.

        (a) In General.--Chapter 73 of title 38, United States Code, is
    amended--
                (1) by redesignating subchapter IV as subchapter V; and
                (2) by inserting after subchapter III the following new
            subchapter:

     ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

    ``Sec. 7341. Organization of health care facilities as health plans
        ``(a) The Secretary shall organize health plans and operate
    Department facilities as or within health plans under the Health
    Security Act. The Secretary shall prescribe regulations establishing
    standards for the operation of Department health care facilities as or
    within health plans under that Act. In prescribing those standards, the
    Secretary shall assure that they conform, to the maximum extent
    practicable, to the requirements for health plans generally set forth
    in part 1 of subtitle E of title I of the Health Security Act.
        ``(b) Within a geographic area or region, health care facilities of
    the Department located within that area or region may be organized to
    operate as a single health plan encompassing all Department facilities
    within that area or region or may be organized to operate as several
    health plans.
        ``(c) In carrying out responsibilities under the Health Security
    Act, a State (or a State-established entity)--
                ``(1) may not impose any standard or requirement on a VA
            health plan that is inconsistent with this section or any
            regulation prescribed under this section or other Federal laws
            regarding the operation of this section; and
                ``(2) may not deny certification of a VA health plan under
            the Health Security Act on the basis of a conflict between a
            rule of a State or health alliance and this section or
            regulations prescribed under this section or other Federal laws
            regarding the operation of this section.
    ``Sec. 7342. Contract authority for facilities operating as or within
                  health plans
        ``The Secretary may enter into a contract (without regard to
    provisions of law requiring the use of competitive procedures) for the
    provision of services by a VA health plan in any case in which the
    Secretary determines that such contracting is more cost-effective than
    providing such services directly through Department facilities or when
    such contracting is necessary because of geographic inaccessibility.
    ``Sec. 7343. Resource sharing authority: facilities operating as or
                  within health plans
        ``The Secretary may enter into agreements under section 8153 of
    this title with other health care plans, with health care providers,
    and with other health industry organizations, and with individuals, for
    the sharing of resources of the Department through facilities of the
    Department operating as or within health plans.
    ``Sec. 7344. Administrative and personnel flexibility
        ``(a) In order to carry out this subchapter, the Secretary may--
                ``(1) carry out administrative reorganizations of the
            Department without regard to those provisions of section 510 of
            this title following subsection (a) of that section; and
                ``(2) enter into contracts for the performance of services
            previously performed by employees of the Department without
            regard to section 8110(c) of this title.
        ``(b) The Secretary may establish alternative personnel systems or
    procedures for personnel at facilities operating as or with health
    plans under the Health Security Act whenever the Secretary considers
    such action necessary in order to carry out the terms of that Act,
    except that the Secretary shall provide for preference eligibles (as
    defined in section 2108 of title 5, United States Code) in a manner
    comparable to the preference for such eligibles under subchapter I of
    chapter 33, and subchapter I of chapter 35, of such title.
        ``(c) Subject to the provisions of section 1404 of the Health
    Security Act, the Secretary may carry out appropriate promotional,
    advertising, and marketing activities to inform individuals of the
    availability of facilities of the Department operating as or within
    health plans. Such activities may only be carried out using
    nonappropriated funds.
    ``Sec. 7345. Veterans Health Care Investment Fund
        ``(a) There is hereby authorized to be appropriated to the
    Department, in addition to amounts otherwise authorized to be
    appropriated to the Department for VA health plans, such amounts as are
    necessary for the Secretary of the Treasury to fulfill the requirement
    of subsection (b).
        ``(b) For each of fiscal years 1995, 1996, and 1997, the Secretary
    of the Treasury shall, subject to subsection (a), credit to a special
    fund (in this section referred to as the `Fund') of the Treasury an
    amount equal to--
                ``(1) $1,000,000,000 for fiscal year 1995;
                ``(2) $600,000,000 for fiscal year 1996; and
                ``(3) $1,700,000,000 for fiscal year 1997.
        ``(c)(1) Subject to paragraph (2), amounts in the Fund shall be
    available to the Secretary only for the VA health plans authorized
    under this chapter.
        ``(2) For fiscal year 1995, 1996, or 1997, the amount credited to
    the Fund for the fiscal year shall be available for use by the
    Secretary under paragraph (1) only if appropriations Acts for that
    fiscal year, without addition of amounts provided under subsection (a)
    for the Fund, provide new budget authority for the Department of
    Veterans Affairs Medical Care account, for that fiscal year, of no less
    than the amount for that account proposed in the budget of the
    President for that fiscal year under section 1105 of title 31.
        ``(d) The Secretary shall submit to Congress, no later than March
    1, 1997, a report concerning the operation of the Department of
    Veterans Affairs health care system in preparing for, and operating
    under, national health care reform under the Health Security Act during
    fiscal years 1995 and 1996. The report shall include a discussion of--
                ``(1) the adequacy of amounts in the Fund for the operation
            of VA health plans;
                ``(2) the quality of care provided by such plans;
                ``(3) the ability of such plans to attract patients; and
                ``(4) the need (if any) for additional funds for the Fund
            in fiscal years after fiscal year 1997.
    ``Sec. 7346. Funding provisions: grants and other sources of assistance
        ``The Secretary may apply for and accept, if awarded, any grant or
    other source of funding that is intended to meet the needs of special
    populations and that but for this section is unavailable to facilities
    of the Department or to health plans operated by the Government if
    funds obtained through the grant or other source of funding will be
    used through a facility of the Department operating as or within a
    health plan.''.
        (b) Clerical Amendment.--The table of sections at the beginning of
    chapter 73 is amended by striking out the item relating to the heading
    for subchapter IV and inserting in lieu thereof the following:

     ``Subchapter IV--Participation as Part of National Health Care Reform

    ``7341. Organization of health care facilities as health plans.
    ``7342. Contract authority for facilities operating as or within health
                                plans.
    ``7343. Resource sharing authority: facilities operating as or within
                                health plans.
    ``7344. Administrative and personnel flexibility.
    ``7345. Veterans Health Care Investment Fund.
    ``7346. Funding provisions: grants and other sources of assistance.
                    ``Subchapter V--Research Corporations''.

        (c) Transition Provision.--The limitation in the second sentence of
    section 7344(c) of title 38, United States Code, as added by subsection
    (a), shall not apply during fiscal year 1994.

                                                     Title VIII, Subtitle C

             Subtitle C--Federal Employees Health Benefits Program

    SEC. 8201. DEFINITIONS.

        Except as otherwise specifically provided, in this subtitle:
                (1) Abroad.--The term ``abroad'' means outside the United
            States.
                (2) Annuitant, etc.--The terms ``annuitant'', ``employee'',
            and ``Government'', have the same respective meanings as are
            given such terms by section 8901 of title 5, United States Code
            (as last in effect).
                (3) Employees health benefits fund.--The term ``Employees
            Health Benefits Fund'' means the fund under section 8909 of
            title 5, United States Code (as last in effect).
                (4) FEHBP.--The term ``FEHBP'' means the health insurance
            program under chapter 89 of title 5, United States Code (as
            last in effect).
                (5) FEHBP plan.--The term ``FEHBP plan'' has the same
            meaning as is given the term ``health benefits plan'' by
            section 8901(6) of title 5, United States Code (as last in
            effect).
                (6) FEHBP termination date.--The term ``FEHBP termination
            date'' means the date (specified in section 8202) after which
            FEHBP ceases to be in effect.
                (7) Retired employees health benefits fund.--The term
            ``Retired Employees Health Benefits Fund'' means the fund under
            section 8 of the Retired Federal Employees Health Benefits Act
            (Public Law 86-724; 74 Stat. 851), as last in effect.
                (8) RFEHBP.--The term ``RFEHBP'' means the health insurance
            program under the Retired Federal Employees Health Benefits
            Act.

    SEC. 8202. FEHBP TERMINATION.

        Chapter 89 of title 5, United States Code, is repealed effective as
    of December 31, 1997, and all contracts under such chapter shall
    terminate not later than such date.

    SEC. 8203. TREATMENT OF FEDERAL EMPLOYEES, ANNUITANTS, AND OTHER
                  INDIVIDUALS (WHO WOULD OTHERWISE HAVE BEEN ELIGIBLE FOR
                  FEHBP) UNDER HEALTH PLANS.

        (a) Applicability.--This section sets forth rules applicable, after
    the FEHBP termination date, with respect to individuals who--
                (1) are eligible individuals under section 1001; and
                (2) but for this subtitle, would be eligible to enroll in
            an FEHBP plan.
        (b) Federal Employees.--
                (1) Same treatment as non-federal employees.--A Federal
            employee shall be treated in the same way, for purposes of
            provisions of this Act outside of this subtitle, as if that
            individual were a non-Federal employee, including for purposes
            of any requirements relating to enrollment, family premium
            payments, and employer premium payments.
                (2) Employer premium payments.--Any employer premium
            payment required with respect to the employment of a Federal
            employee shall be payable from the appropriation or fund from
            which any Government contribution on behalf of such employee
            would have been payable under FEHBP.
                (3) Offer of fehbp supplemental plans.--The Federal
            Government shall offer to Federal employees one or more FEHBP
            supplemental plans developed under subsection (f)(1).
                (4) Definitions.--In this subsection:
                        (A) Federal employee.--The term ``Federal
                    employee'' means an ``employee'' as defined by section
                    8201.
                        (B) Non-federal employee.--The term ``non-Federal
                    employee'' means an ``employee'' as defined by section
                    1901.
        (c) Annuitants.--
                (1) Health plan.--
                        (A) Authority to make certain withholdings from
                    annuities.--
                                (i) In general.--The Office of Personnel
                            Management may, on the request of an annuitant
                            enrolled in a health plan, withhold from the
                            annuity of such annuitant any premiums required
                            for such enrollment. The Office shall forward
                            any amounts so withheld to the appropriate fund
                            or as otherwise indicated in the request. A
                            request under this subparagraph shall contain
                            such information, and otherwise be made in such
                            form and manner, as the Office shall by
                            regulation prescribe.
                                (ii) References.--Any reference in clause
                            (i) to the Office of Personnel Management
                            shall, for purposes of any annuity (including
                            monthly compensation under subchapter I of
                            chapter 81 of title 5, United States Code)
                            payable under provisions of law which are
                            administered by a Government entity other than
                            the Office, be considered to be a reference to
                            such other Government entity.
                        (B) Payment of alliance credit liability for
                    annuitants below age 55.--In the case of an annuitant
                    who does not satisfy the eligibility requirements under
                    section 6114, a Government contribution shall be made
                    equal to such amount as is necessary to reduce the
                    employee's liability under section 6111 to zero.
                (2) FEHBP supplemental plan.--
                        (A) Current annuitants.--
                                (i) In general.--Each current annuitant--
                                        (I) shall be eligible to enroll in
                                    FEHBP supplemental plans developed
                                    under subsection (f)(1); and
                                        (II) shall be eligible for the
                                    Government contribution amount
                                    described in clause (ii) toward the
                                    premium for such a plan.
                                (ii) Government contribution amount.--The
                            Office of Personnel Management shall specify a
                            level of Government contribution under this
                            subparagraph for an FEHBP supplemental plan.
                            Such level--
                                        (I) shall reasonably reflect the
                                    portion of the Government contributions
                                    (last provided under FEHBP)
                                    attributable to the portion of FEHBP
                                    benefits which the plan is designed to
                                    replace; and
                                        (II) shall be applied toward
                                    premiums for such a plan.
                        (B) Future annuitants.--In the case of a future
                    annuitant, the Federal Government shall offer to such
                    an annuitant one or more FEHBP supplemental plans
                    developed under subsection (f)(1).
                        (C) Definitions.--In this paragraph:
                                (i) Current annuitant.--The term ``current
                            annuitant'' means an individual who is residing
                            in a State on January 1, 1998, and, on the day
                            before such date, was--
                                        (I) enrolled in an FEHBP plan as an
                                    annuitant; or
                                        (II) covered under an FEHBP plan as
                                    a family member (but only if such
                                    individual would otherwise have been
                                    eligible to enroll in an FEHBP plan as
                                    an annuitant).
                                (ii) Future annuitant.--The term ``future
                            annuitant'' means an annuitant who is not a
                            current annuitant.
        (d) Individuals Who Would Not Be Eligible for a Government
    Contribution Under FEHBP.--
                (1) In general.--In the case of an individual described in
            paragraph (2)--
                        (A) the Federal Government may, but is not required
                    to, offer one or more FEHBP supplemental plans
                    developed under subsection (f)(1); and
                        (B) no Government contribution shall be payable
                    with respect to the premium for such a plan.
                (2) Applicability.--This subsection shall apply with
            respect to any individual who (but for this subtitle) would be
            eligible to enroll in an FEHBP plan, but would not be eligible
            for a Government contribution toward any such plan.
        (e) Medicare-Eligible Individuals.--
                (1) Current medicare-eligible individuals.--
                        (A) In general.--Each current medicare-eligible
                    individual--
                                (i) shall be eligible to enroll in medicare
                            supplemental plans developed under subsection
                            (f)(2); and
                                (ii) if such individual would (but for this
                            subtitle) have been eligible for a Government
                            contribution under FEHBP (assuming such
                            individual were then enrolled thereunder),
                            shall be eligible for the Government medicare
                            contribution amount described in subparagraph
                            (B) toward the premium for such a plan or
                            toward the premium for enrollment with an
                            eligible organization under a risk-sharing
                            contract under section 1876 of the Social
                            Security Act).
                        (B) Medicare contribution amount.--The Office of
                    Personnel Management shall specify a level of
                    Government contribution under this paragraph for an
                    FEHBP medicare supplemental plan. Such level--
                                (i) shall reasonably reflect the portion of
                            the Government contributions (last provided
                            under FEHBP) attributable to the portion of
                            FEHBP benefits which the plan is designed to
                            replace; and
                                (ii) except as otherwise provided in
                            paragraph (3), shall be applied toward premiums
                            for such a plan.
                (2) Future medicare-eligible individuals.--In the case of a
            future medicare-eligible individual, the Federal Government
            may, but is not required to--
                        (A) offer to such a medicare-eligible individual
                    one or more FEHBP medicare supplemental plans developed
                    under subsection (f)(2); and
                        (B) make a Government contribution with respect to
                    the premium for such a plan.
                (3) Application of contribution toward medicare hmo
            option.--
                        (A) Election.--A medicare-eligible individual may
                    elect to have the amount of the Government contribution
                    described in paragraph (1)(B) or referred to in
                    paragraph (2)(B) applied toward premiums for enrollment
                    with an eligible organization under a risk-sharing
                    contract under section 1876 of the Social Security Act.
                        (B) Level contribution rule.--The level of such
                    Government contribution on behalf of an individual
                    shall be determined without taking into account any
                    election under subparagraph (A).
                (4) Definitions.--In this subsection:
                        (A) Current medicare-eligible individual.--The term
                    ``current medicare-eligible individual'' means an
                    individual who is residing in a State on January 1,
                    1998, and, on the day before such date, was a medicare-
                    eligible individual.
                        (B) Future medicare-eligible individual.--The term
                    ``future medicare-eligible individual'' means a
                    medicare-eligible individual who is not a current
                    medicare-eligible individual.
                (5) Inapplicability.--Subsections (b) through (d) shall not
            apply with respect to a medicare-eligible individual.
        (f) Development of Supplemental Plans.--
                (1) FEHBP supplemental plans.--The Office of Personnel
            Management shall develop one or more FEHBP supplemental plans
            which are supplemental health benefit policies or cost sharing
            policies (as defined in section 1421(b)). Each such plan
            shall--
                        (A) be consistent with the applicable requirements
                    of part 2 of subtitle E of title I (including the
                    requirements under section 1423(f)); and
                        (B) reflect (taking into consideration the benefits
                    in the comprehensive benefit package) the overall level
                    of benefits last generally afforded under FEHBP.
                (2) FEHBP medicare supplemental plans.--The Office of
            Personnel Management shall develop one or more medicare
            supplemental plans. Each such plan shall--
                        (A) offer benefits which shall include the core
                    group of basic benefits identified under section
                    1882(p)(2) of the Social Security Act; and
                        (B) reflect (taking into consideration the benefits
                    provided under the medicare program) the overall level
                    of benefits last generally afforded under FEHBP.
        (g) Authorization of appropriations.--The Government contributions
    authorized by this section on behalf of an annuitant (including an
    annuitant who is a medicare-eligible individual) shall be paid from
    annual appropriations which are authorized to be made for that purpose
    and which may be made available until expended.
        (h) Fund.--
                (1) Establishment.--There shall be established in the
            Treasury of the United States a fund into which shall be paid
            all contributions relating to any--
                        (A) FEHBP supplemental plan developed under
                    subsection (f)(1);
                        (B) FEHBP medicare supplemental plan developed
                    under subsection (f)(2); or
                        (C) health insurance program established under
                    section 8204.
                (2) Administration and use.--The fund shall be administered
            by the Office of Personnel Management, and any monies in the
            fund shall be available for purposes of the plan or program
            (referred to in paragraph (1)) to which they are attributable.

    SEC. 8204. TREATMENT OF INDIVIDUALS RESIDING ABROAD.

        (a) In General.--After the FEHBP termination date, individuals
    residing abroad who (but for this subtitle) would be eligible to enroll
    in an FEHBP plan shall be eligible for health insurance under a program
    which the Office of Personnel Management shall by regulation establish.
        (b) Requirement.--To the extent practicable, coverage and benefits
    provided to individuals under such program shall be equal to the
    coverage and benefits which would be available to them if they were
    residing in the United States.
        (c) Government Contributions.--Any Government contribution payable
    under such program shall be made from the appropriation or fund from
    which any Government contribution would have been payable under FEHBP
    (if any) on behalf of the individual involved, except that, in the case
    of an annuitant, any such contribution shall be payable from amounts
    appropriated pursuant to section 8203(g).

    SEC. 8205. TRANSITION AND SAVINGS PROVISIONS.

        (a) Employees Health Benefits Fund.--
                (1) Temporary continued availability.--Notwithstanding
            section 8202, the Employees Health Benefits Fund shall be
            maintained, and amounts in such Fund shall remain available,
            after the FEHBP termination date, for such period of time as
            the Office of Personnel Management considers necessary in order
            to satisfy any outstanding claims.
                (2) Final disbursement.--After the end of the period
            referred to in paragraph (1), any amounts remaining in the Fund
            shall be disbursed (between the Government and former
            participants in FEHBP) in accordance with a plan which the
            Office shall prepare, consistent with the cost-sharing ratio
            between the Government and plan enrollees during the final
            contract term. The details of any such plan shall be submitted
            to the President and the Congress at least 1 year before the
            date of its proposed implementation.
        (b) Proceedings.--After the FEHBP termination date, chapter 89 of
    title 5, United States Code (as last in effect) shall be considered to
    have remained in effect for purposes of any suit, action, or other
    proceeding with respect to any liability incurred or violation which
    occurred on or before such date.
        (c) RFEHBA.--
                (1) Repeal.--The Retired Federal Employees Health Benefits
            Act (Public Law 86-724; 74 Stat. 849) is repealed effective as
            of the FEHBP termination date.
                (2) Related provisions.--After the FEHBP termination date--
                        (A) the Retired Employees Health Benefits Fund
                    shall temporarily remain available, and amounts in that
                    fund shall subsequently be disbursed, in a manner
                    comparable to that provided for under subsection (a);
                    and
                        (B) retired employees who (but for this subtitle)
                    would be eligible for coverage under the Retired
                    Federal Employees Health Benefits Act shall be treated,
                    for purposes of this subtitle, as if they were
                    annuitants (subject to any differences in the overall
                    level of coverage or benefits last generally afforded
                    to annuitants under FEHBP and to retired employees
                    under RFEHBP, respectively).
                (3) Regulations.--Regulations prescribed under section 8206
            to carry out this subsection shall include any necessary
            provisions relating to individuals residing abroad.

    SEC. 8206. REGULATIONS.

        The Office of Personnel Management shall prescribe any regulations
    which may be necessary to carry out this subtitle.

    SEC. 8207. TECHNICAL AND CONFORMING AMENDMENTS.

        (a) OPM's Annual Report on FEHBP.--Subsection (c) of section 1308
    of title 5, United States Code, is repealed.
        (b) Other References to FEHBP.--Any reference in any provision of
    law to the health insurance program under chapter 89 of title 5, United
    States Code (or any aspect of such program) shall be considered to be a
    reference to the health insurance program under this subtitle (or
    corresponding aspect), subject to such clarification as may be
    provided, or except as may otherwise be provided, in regulations
    prescribed by the agency or other authority responsible for the
    administration of such provision.
        (c) Omnibus Budget Reconciliation Act of 1993.--Effective as of the
    date of the enactment of this Act, section 11101(b)(3) of the Omnibus
    Budget Reconciliation Act of 1993 (Public Law 103-66; 107 Stat. 413) is
    amended by striking ``September 30, 1998'' and inserting ``December 31,
    1997''.
        (d) Effective Date.--Except as provided in subsection (c), this
    section and the amendments made by this section shall take effect on
    the day after the FEHBP termination date.

                                                     Title VIII, Subtitle D

                       Subtitle D--Indian Health Service

    SEC. 8301. DEFINITIONS.

        For the purposes of this subtitle--
                (1) the term ``health program of the Indian Health
            Service'' means a program which provides health services under
            this Act through a facility of the Indian Health Service, a
            tribal organization under the authority of the Indian Self-
            Determination Act or a self-governance compact, or an urban
            Indian program;
                (2) the term ``reservation'' means the reservation of any
            federally recognized Indian tribe, former Indian reservations
            in Oklahoma, and lands held by incorporated Native groups,
            regional corporations, and village corporations under the
            provisions of the Alaska Native Claims Settlement Act (43
            U.S.C. 1601 et seq.);
                (3) the term ``urban Indian program'' means any program
            operated pursuant to title V of the Indian Health Care
            Improvement Act; and
                (4) the terms ``Indian'', ``Indian tribe'', ``tribal
            organization'', ``urban Indian'', ``urban Indian
            organization'', and ``service unit'' have the same meaning as
            when used in the Indian Health Care Improvement Act (25 U.S.C.
            1601 et seq.).

    SEC. 8302. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF INDIANS.

        (a) Eligibility.--An eligible individual, as defined in section
    1001(c), is eligible to enroll in a health program of the Indian Health
    Service if the individual is--
                (1) an Indian, or a descendent of a member of an Indian
            tribe who belongs to and is regarded as an Indian by the Indian
            community in which the individual lives, who resides on or near
            an Indian reservation or in a geographical area designated by
            statute as meeting the requirements of being on or near an
            Indian reservation notwithstanding the lack of an Indian
            reservation;
                (2) an urban Indian; or
                (3) an Indian described in section 809(b) of the Indian
            Health Care Improvement Act (25 U.S.C. 1679(b)).
        (b) Election.--An individual described in subsection (a) may elect
    a health program of the Indian Health Service instead of a health plan.
        (c) Enrollment for Benefits.--An individual who elects a health
    program of the Indian Health Service under subsection (b) shall enroll
    in such program through a service unit, tribal organization, or urban
    Indian program. An individual who enrolls in such program is not
    subject to any charge for health insurance premiums, deductibles,
    copayments, coinsurance, or any other cost for health services provided
    under such program.
        (d) Payments by Individuals Who Do not Enroll.--If an individual
    described in subsection (a) does not enroll in a health program of the
    Indian Health Service, no payment shall be made by the Indian Health
    Service to the individual (or on behalf of the individual) with respect
    to premiums charged for enrollment in an applicable health plan or any
    other cost of health services under the applicable health plan which
    the individual is required to pay.

    SEC. 8303. SUPPLEMENTAL INDIAN HEALTH CARE BENEFITS.

        (a) In General.--All individuals described in sections 8302(a)
    remain eligible for such benefits under the laws administered by the
    Indian Health Service as supplement the comprehensive benefit package.
    The individual shall not be subject to any charge or any other cost for
    such benefits.
        (b) Authorization of Appropriations.--In addition to amounts
    otherwise authorized to be appropriated, there is authorized to be
    appropriated to carry out this section $180,000,000 for fiscal year
    1995, $200,000,000 for each of the fiscal years 1996 through 1999, and
    such sums as may be necessary for fiscal year 2000 and each fiscal year
    thereafter.

    SEC. 8304. HEALTH PLAN AND HEALTH ALLIANCE REQUIREMENTS.

        (a) Comprehensive Benefit Package.--The Secretary shall ensure that
    the comprehensive benefit package is provided by all health programs of
    the Indian Health Service effective January 1, 1999, notwithstanding
    section 1001(a).
        (b) Applicable Requirements of Health Plans.--In addition to
    subsection (a), the Secretary shall determine which other requirements
    relating to health plans apply to health programs of the Indian Health
    Service.
        (c) Certification.--Effective January 1, 1999, all health programs
    of the Indian Health Service must meet the certification requirements
    for health plans, as required by the Secretary under this section, as
    certified from time to time by the Secretary. Before January 1, 1999,
    all such health programs shall, to the extent practicable, meet such
    certification requirements.
        (d) Health Alliance Requirements.--The Secretary shall determine
    which requirements relating to health alliances apply to the Indian
    Health Service.

    SEC. 8305. EXEMPTION OF TRIBAL GOVERNMENTS AND TRIBAL ORGANIZATIONS
                  FROM EMPLOYER PAYMENTS.

        A tribal government and a tribal organization under the Indian
    Self-Determination and Educational Assistance Act or a self-governance
    compact shall be exempt from making employer premium payments as an
    employer under section 6121.

    SEC. 8306. PROVISION OF HEALTH SERVICES TO NON-ENROLLEES AND NON-
                  INDIANS.

        (a) Contracts With Health Plans.--
                (1) In general.--A health program of the Indian Health
            Service, a service unit, a tribal organization, or an urban
            Indian organization operating within a health program may enter
            into a contract with a health plan for the provision of health
            care services to individuals enrolled in such health plan if
            the program, unit, or organization determines that the
            provision of such health services will not result in a denial
            or diminution of health services to any individual described in
            section 8302(a) who is enrolled for health services provided by
            such program, unit, or organization.
                (2) Reimbursement.--Any contract entered into pursuant to
            paragraph (1) shall provide for reimbursement to such program,
            unit, or organization in accordance with the essential
            community provider provisions of section 1431(c), as determined
            by the Secretary.
        (b) Family Treatment.--
                (1) Determination to open enrollment.--A health program of
            the Indian Health Service may open enrollment to family members
            of individuals described in section 8302(a).
                (2) Election.--If a health program of the Indian Health
            Service opens enrollment to family members of individuals
            described in section 8302(a), an individual described in that
            section may elect family enrollment in the health program
            instead of in a health plan.
                (3) Enrollment.--
                        (A) In general.--An individual who elects family
                    enrollment under paragraph (2) in a health program of
                    the Indian Health Service shall enroll in such program.
                        (B) Applicable individual charges.--The individual
                    who enrolls in such program under subparagraph (A) is
                    not subject to any charge for health insurance
                    premiums, deductibles, copayments, coinsurance, or any
                    other cost for health services provided under such
                    program attributable to the individual, but the family
                    members who are not eligible for a health program of
                    the Indian Health Service under section 8302(a) are
                    subject to all such charges.
                        (C) Applicable employer charges.--Employers, other
                    than tribal governments and tribal organizations exempt
                    under section 8305, are liable for making employer
                    premium payments as an employer under section 6121 in
                    the case of any family member enrolled under this
                    subsection who is not eligible for a health program of
                    the Indian Health Service under section 8302(a).
                (4) Premium.--
                        (A) Establishment and collection.--The Secretary
                    shall establish premiums for all family members
                    enrolled in a health program of the Indian Health
                    Service under this paragraph who are not eligible for a
                    health program of the Indian Health Service under
                    section 8302(a). The Secretary shall collect each
                    premium payment owed under this paragraph.
                        (B) Reduction.--The Secretary shall provide for a
                    process for premium reduction which is the same as the
                    process, and uses the same standards, used by regional
                    alliances for the areas in which individuals described
                    in subparagraph (A) reside, except that in computing
                    the family share of the premiums the Secretary shall
                    use the lower of the premium quoted or the reduced
                    weighted average accepted bid for the reference
                    regional alliance.
                        (C) Payment by secretary.--The Secretary shall
                    provide for payment to each health program of the
                    Indian Health Service, in the same manner as payments
                    under section 6201, amounts equivalent to the amount of
                    payments that would have been made to a regional
                    alliance if the individuals described in subparagraph
                    (A) were enrolled in a regional alliance health plan
                    (with a final accepted bid equal to the reduced
                    weighted average accepted bid premium for the regional
                    alliance).
        (c) Essential Community Provider.--
                (1) Health services.--If a health program of the Indian
            Health Service, a service unit, a tribal organization, or an
            urban Indian organization operating within a health program
            elects to be an essential community provider under section
            1431, an individual described in paragraph (2) enrolled in a
            health plan other than a health program of the Indian Health
            Service may receive health services from that essential
            community provider.
                (2) Individual covered.--An individual referred to in
            paragraph (1) is an individual who--
                        (A) is described in section 8302(a); or
                        (B) is a family member described in subsection (b)
                    who does not enroll in a health program of the Indian
                    Health Service.

    SEC. 8307. PAYMENT BY OTHER PAYERS.

        (a) Payment for Services Provided by Indian Health Service
    Programs.--Nothing in this subtitle shall be construed as amending
    section 206, 401, or 402 of the Indian Health Care Improvement Act
    (relating to payments on behalf of Indians for health services from
    other Federal programs or from other third party payers).
        (b) Payment for Services Provided by Contractors.--Nothing in this
    subtitle shall be construed as affecting any other provision of law,
    regulation, or judicial or administrative interpretation of law or
    policy concerning the status of the Indian Health Service as the payer
    of last resort for Indians eligible for contract health services under
    a health program of the Indian Health Service.

    SEC. 8308. CONTRACTING AUTHORITY.

        Section 601(d)(1)(B) of the Indian Health Care Improvement Act (25
    U.S.C. 1661(d)(1)(B)) is amended by inserting ``(including personal
    services for the provision of direct health care services)'' after
    ``goods and services''.

    SEC. 8309. CONSULTATION.

        The Secretary shall consult with representatives of Indian tribes,
    tribal organizations, and urban Indian organizations annually
    concerning health care reform initiatives that affect Indian
    communities.

    SEC. 8310. INFRASTRUCTURE.

        (a) Facilities.--The Secretary, acting through the Indian Health
    Service, may expend amounts appropriated pursuant to section 8313 for
    the construction and renovation of hospitals, health centers, health
    stations, and other facilities for the purpose of improving and
    expanding such facilities to enable the delivery of the full array of
    items and services guaranteed in the comprehensive benefit package.
        (b) Capital Financing.--There is established in the Indian Health
    Service a revolving loan program. Under the program, the Secretary,
    acting through the Indian Health Service, shall provide guaranteed
    loans under such terms and conditions as the Secretary may prescribe to
    providers within the Indian Health Service system to improve and expand
    health care facilities to enable the delivery of the full array of
    items and services guaranteed in the comprehensive benefit package.

    SEC. 8311. FINANCING.

        (a) Establishment of Fund.--Each health program of the Indian
    Health Service shall establish a comprehensive benefit package fund
    (hereafter in this section referred to as the ``fund'').
        (b) Deposits.--There shall be deposited into the fund the
    following:
                (1) All amounts received as employer premium payments
            pursuant to section 1351(e)(3).
                (2) All amounts received as family premium payments and
            premium discount payments pursuant to section 8306(b)(4).
                (3) All amounts appropriated for the fund for the purpose
            of providing the comprehensive benefit package to individuals
            enrolled in a health program of the Indian Health Service.
                (4) Any other amount received with respect to health
            services for the comprehensive benefit package.
        (c) Administration and Expenditures.--
                (1) Management.--The fund shall be managed by the health
            program of the Indian Health Service.
                (2) Expenditures.--Expenditures may be made from the fund
            to provide for the delivery of the items and services of the
            comprehensive benefit package under the health program of the
            Indian Health Service.
                (3) Availability of funds.--Amounts in the fund established
            by a service unit of the Indian Health Service under this
            section shall be available without further appropriation and
            shall remain available until expended for payments for the
            delivery of the items and services in the comprehensive benefit
            package.

    SEC. 8312. RULE OF CONSTRUCTION.

        Unless otherwise provided by this Act, no part of this Act shall be
    construed to rescind or otherwise modify any obligations, findings, or
    purposes contained in the Indian Health Care Improvement Act (25 U.S.C.
    1601 et seq.) and in the Indian Self-Determination and Education
    Assistance Act.

    SEC. 8313. AUTHORIZATIONS OF APPROPRIATIONS.

        (a) Authorization of Appropriations.--For the purpose of carrying
    out this subtitle, there are authorized to be appropriated $40,000,000
    for fiscal year 1995, $180,000,000 for fiscal year 1996, and
    $200,000,000 for each of the fiscal years 1997 through 2000.
        (b) Relation to Other Funds.--The authorizations of appropriations
    established in subsection (a) are in addition to any other
    authorizations of appropriations that are available for the purposes of
    carrying out this subtitle.

    SEC. 8314. PAYMENT OF PREMIUM DISCOUNT EQUIVALENT AMOUNTS FOR
                  UNEMPLOYED INDIANS.

        (a) Determination.--The Secretary shall determine (and certify to
    the Secretary of the Treasury) for each fiscal year (beginning with
    fiscal year 1998) an amount equivalent to the aggregate amount of the
    premium discounts (established in section 6104) that would have been
    paid to individuals described in subsection (c) if such individuals had
    been enrolled in regional alliance health plans.
        (b) Payment.--For each fiscal year for which an amount is certified
    to the Secretary of the Treasury under subsection (a), from the funds
    available under section 9102, such Secretary shall pay the amount so
    certified to the Indian Health Service for the purpose of providing the
    comprehensive benefit package.
        (c) Individual Described.--For purposes of this section, an
    individual described in this subsection is an individual described in
    section 8302(a) who is not a qualifying employee or a family member of
    such an employee.

                                                     Title VIII, Subtitle E

     Subtitle E--Amendments to the Employee Retirement Income Security Act
                                    of 1974

    SEC. 8401. GROUP HEALTH PLAN 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:
        ``(42) The term `group health plan' means an employee welfare
    benefit plan which provides 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.''.

    SEC. 8402. LIMITATION ON COVERAGE OF GROUP HEALTH PLANS UNDER TITLE I
                  OF ERISA.

        (a) In General.--Section 4 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1003) is amended--
                (1) in subsection (a), by striking ``subsection (b)'' and
            inserting ``subsections (b) and (c)'';
                (2) in subsection (b), by striking ``The provisions'' and
            inserting ``Except as provided in subsection (c), the
            provisions''; and
                (3) by adding at the end the following new subsection:
        ``(c) Coverage of Group Health Plans.--
                ``(1) Limited inclusion.--This title shall apply to a group
            health plan only to the extent provided in this subsection.
                ``(2) Coverage under certain provisions with respect to
            certain plans.--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), parts 1, 4, and 6 of subtitle B shall
                    apply to--
                                ``(i) a group health plan which is
                            maintained by--
                                        ``(I) a corporate alliance (as
                                    defined in section 1311(a) of the
                                    Health Security Act), or
                                        ``(II) a member of a corporate
                                    alliance (as so defined) whose eligible
                                    sponsor is described in section
                                    1311(b)(1)(C) (relating to rural
                                    electric cooperatives and rural
                                    telephone cooperative associations),
                                    and
                                ``(ii) a group health plan not described in
                            clause (i) which provides benefits which are
                            permitted under paragraph (4) of section 1003
                            of the Health Security Act.
                        ``(B) Inapplicability with respect to state-
                    certified health plans.--Subparagraph (A) shall not
                    apply with respect to any plan or portion thereof which
                    consists of a State-certified health plan (as defined
                    in section 1400(c) of the Health Security Act). The
                    Secretary shall provide by regulation for treatment as
                    a separate group health plan of any arrangement which
                    would otherwise be treated under this title as part of
                    a group health plan to the extent necessary to carry
                    out the purposes of this title.
                ``(3) Civil actions by corporate alliance participants,
            beneficiaries, and fiduciaries and by the secretary.--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), in the case of a group health plan to
                    which parts 1, 4, and 6 of subtitle B apply under
                    paragraph (2), section 502 shall apply with respect to
                    a civil action described in such section brought--
                                ``(i) by a participant, beneficiary, or
                            fiduciary under such plan, or
                                ``(ii) by the Secretary.
                        ``(B) Exception where review is otherwise available
                    under health security act.--Subparagraph (A) shall not
                    apply with respect to any cause of action for which,
                    under section 5202(d) of the Health Security Act,
                    proceedings under sections 5203 and 5204 of such Act
                    pursuant to complaints filed under section 5202(b) of
                    such Act, and review under section 5205 of such Act of
                    determinations made under such section 5204, are the
                    exclusive means of review.
                ``(4) Definitions and enforcement provisions.--Sections 3,
            501, 502, 503, 504, 505, 506, 507, 508, 509, 510, and 511 and
            the preceding subsections of this section shall apply to a
            group health plan to the extent necessary to effectively carry
            out, and enforce the requirements under, the provisions of this
            title as they apply pursuant to this subsection.
                ``(5) Applicability of preemption rules.--Section 514 shall
            apply in the case of any group health plan to which parts 1, 4,
            and 6 of subtitle B apply under paragraph (2).''.
        (b) Reporting and Disclosure Requirements Applicable to Group
    Health Plans.--
                (1) In general.--Part 1 of subtitle B of title I of such
            Act is amended--
                        (A) in the heading for section 110 (29 U.S.C.
                    1030), by adding ``by pension plans'' at the end;
                        (B) by redesignating section 111 (29 U.S.C. 1031)
                    as section 112; and
                        (C) by inserting after section 110 the following
                    new section:

                     ``special rules for group health plans

        ``Sec. 111. (a) In General.--The Secretary may by regulation
    provide special rules for the application of this part to group health
    plans which are consistent with the purposes of this title and the
    Health Security Act and which take into account the special needs of
    participants, beneficiaries, and health care providers under such
    plans.
        ``(b) Expeditious Reporting and Disclosure.--Such special rules may
    include rules providing for--
                ``(1) reductions in the periods of time referred to in this
            part,
                ``(2) increases in the frequency of reports and disclosures
            required under this part, and
                ``(3) such other changes in the provisions of this part as
            may result in more expeditious reporting and disclosure of plan
            terms and changes in such terms to the Secretary and to plan
            participants and beneficiaries,
    to the extent that the Secretary determines that the rules described in
    this subsection are necessary to ensure timely reporting and disclosure
    of information consistent with the purposes of this part and the Health
    Security Act as they relate to group health plans.
        ``(c) Additional Requirements.--Such special rules may include
    rules providing for reporting and disclosure to the Secretary and to
    participants and beneficiaries of additional information or at
    additional times with respect to group health plans to which this part
    applies under section 4(c)(2), if such reporting and disclosure would
    be comparable to and consistent with similar requirements applicable
    under the Health Security Act with respect to plans maintained by
    regional alliances (as defined in such section 1301 of such Act) and
    applicable regulations of the Secretary of Health and Human Services
    prescribed thereunder.''.
                (2) Clerical amendment.--The table of contents in section 1
            of such Act is amended by striking the items relating to
            sections 110 and 111 and inserting the following new items:

    ``Sec. 110. Alternative methods of compliance by pension plans.
    ``Sec. 111. Special rules for group health plans.
    ``Sec. 112. Repeal and effective date.''.
        (d) Exclusion of Plans Maintained by Regional Alliances from
    Treatment as Multiple Employer Welfare Arrangements.--Section 3(40)(A)
    of such Act (29 U.S.C. 1002(40)(A)) is amended--
                (1) in clause (ii), by striking ``or'';
                (2) in clause (iii), by striking the period and inserting
            ``, or''; and
                (3) by adding after clause (iii) the following new clause:
                ``(iv) by a regional alliance (as defined in section 1301
            of the Health Security Act).''.

    SEC. 8403. AMENDMENTS RELATING TO CONTINUATION COVERAGE.

        (a) Period of Coverage.--Subparagraph (D) of section 602(2) of the
    Employee Retirement Income Security Act of 1974 (29 U.S.C. 1162(1)) is
    amended--
                (1) by striking ``or'' at the end of clause (i), by
            striking the period at the end of clause (ii) and inserting ``,
            or'', and by adding at the end the following new clause:
                                ``(iii) eligible for coverage under a
                            comprehensive benefit package described in
                            section 1101 of the Health Security Act.'', and
                (2) by striking ``or medicare entitlement'' in the heading
            and inserting ``, medicare entitlement, or health security act
            eligibility''.
        (b) Qualified Beneficiary.--Section 607(3) of such Act (29 U.S.C.
    1167(3)) is amended by adding at the end the following new
    subparagraph:
                        ``(D) Special rule for individuals covered by
                    health security act.--The term `qualified beneficiary'
                    shall not include any individual who, upon termination
                    of coverage under a group health plan, is eligible for
                    coverage under a comprehensive benefit package
                    described in section 1101 of the Health Security Act.''
        (c) Repeal Upon Implementation of Health Security Act.--
                (1) In general.--Part 6 of subtitle B of title I of such
            Act (29 U.S.C. 601 et seq.) is amended by striking sections 601
            through 608 and by redesignating section 609 as section 601.
                (2) Conforming amendments.--
                        (A) Section 502(a)(7) of such Act (29 U.S.C.
                    1132(a)(7)) is amended by striking ``609(a)(2)(A)'' and
                    inserting ``601(a)(2)(A)''.
                        (B) Section 502(c)(1) is amended by striking
                    ``paragraph (1) or (4) of section 606 or''.
                        (C) Section 514 of such Act (29 U.S.C. 1144) is
                    amended by striking ``609'' each place it appears in
                    subsections (b)(7) and (b)(8) and inserting ``601''.
                        (D) The table of contents in section 1 of such Act
                    is amended by striking the items relating to sections
                    601 through 609 and inserting the following new item:

    ``Sec. 601. Additional standards for group health plans.''
        (d) Effective Date.--
                (1) Subsections (a) and (b).--The amendments made by
            subsections (a) and (b) shall take effect on the date of the
            enactment of this Act.
                (2) Subsection (c).--The amendments made by subsection (c)
            shall take effect on the earlier of--
                        (A) January 1, 1998, or
                        (B) the first day of the first calendar year
                    following the calendar year in which all States have in
                    effect plans under which individuals are eligible for
                    coverage under a comprehensive benefit package
                    described in section 1101 of this Act.

    SEC. 8404. ADDITIONAL AMENDMENTS RELATING TO GROUP HEALTH PLANS.

        (a) Regulations of the National Health Board Regarding Cases of
    Adoption.--Section 601(c) of the Employee Retirement Income Security
    Act of 1974 (as redesignated by section 8403) is amended by adding at
    the end the following new paragraph:
                ``(4) Regulations by national health board.--The preceding
            provisions of this subsection shall apply except to the extent
            otherwise provided in regulations of the National Health Board
            under the Health Security Act.''.
        (b) Coverage of Pediatric Vaccines.--Section 601(d) of such Act (as
    redesignated by section 8403) is amended by adding at the end the
    following new sentence: ``The preceding sentence shall cease to apply
    to a group health plan upon becoming a corporate alliance health plan
    pursuant to an effective election of the plan sponsor to be a corporate
    alliance under section 1311 of the Health Security Act.''.
        (c) Technical Corrections.--Effective as if included in the
    enactment of the Omnibus Budget Reconciliation Act of 1993--
                (1) Subsection (a)(2)(B)(ii) of section 609 of the Employee
            Retirement Income Security Act of 1974 is amended by striking
            ``section 13822'' and inserting ``section 13623''.
                (2) Subsection (a)(4) of such section 609 is amended by
            striking ``section 13822'' and inserting ``section 13623''.
                (3) Subsection (d) of such section 609 is amended by
            striking ``section 13830'' and inserting ``section 13631''.

    SEC. 8405. PLAN CLAIMS PROCEDURES.

        Section 503 of the Employee Retirement Income Security Act of 1974
    (29 U.S.C. 1133) is amended--
                (1) by inserting ``(a) In General.--'' after ``Sec. 503.'';
            and
                (2) by adding at the end the following new subsection:
        ``(b) Group Health Plans.--In addition to the requirements of
    subsection (a), a group health plan to which parts 1 and 4 apply under
    section 4(c)(2) shall comply with the requirements of section 5201 of
    the Health Security Act (relating to health plan claims procedure).''.

    SEC. 8406. EFFECTIVE DATES.

        Except as otherwise provided in this subtitle, the amendments made
    by this subtitle shall take effect on the earlier of--
                (1) January 1, 1998, or
                (2) such date or dates as may be prescribed in regulations
            of the National Health Board in connection with plans whose
            participants or beneficiaries reside in any State which becomes
            a participating State under section 1200 of this Act before
            January 1, 1998.

                    Subtitle F--Special Fund for WIC Program

    SEC. 8501. ADDITIONAL FUNDING FOR SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR
                  WOMEN, INFANTS, AND CHILDREN (WIC).

                                                     Title VIII, Subtitle F

        (a) Authorization of Additional Appropriations.--There is hereby
    authorized to be appropriated for the special supplemental food program
    for women, infants, and children (WIC) under section 17 of the Child
    Nutrition Act of 1966, in addition to amounts otherwise authorized to
    be appropriated for such program, such amounts as are necessary for the
    Secretary of the Treasury to fulfill the requirements of subsection
    (b).
        (b) WIC Fund.--
                (1) Credit.--For each of fiscal years 1996 through 2000,
            the Secretary of the Treasury shall credit to a special fund of
            the Treasury an amount equal to--
                        (A) $254,000,000 for fiscal year 1996,
                        (B) $407,000,000 for fiscal year 1997,
                        (C) $384,000,000 for fiscal year 1998,
                        (D) $398,000,000 for fiscal year 1999, and
                        (E) $411,000,000 for fiscal year 2000.
                (2) Availability.--Subject to paragraph (3), amounts in
            such fund--
                        (A) shall be available only for the program
                    authorized under section 17 of the Child Nutrition Act
                    of 1966, exclusive of activities authorized under
                    section 17(m) of such Act, and
                        (B) shall be paid to the Secretary of Agriculture
                    for such purposes.
                (3) Limitation.--For a fiscal year specified in paragraph
            (1), the amount credited to such fund for the fiscal year shall
            be available for use in such program only if appropriations
            Acts for the fiscal year, without the addition of amounts
            provided under subsection (a) for the fund, provide new budget
            authority for the program of no less than--
                        (A) $3,660,000,000 for fiscal year 1996,
                        (B) $3,759,000,000 for fiscal year 1997,
                        (C) $3,861,000,000 for fiscal year 1998,
                        (D) $3,996,000,000 for fiscal year 1999, and
                        (E) $4,136,000,000 for fiscal year 2000.

                                                                   Title IX

                    TITLE IX--AGGREGATE GOVERNMENT PAYMENTS

                           table of contents of title

                                                                       Page
                    TITLE IX--AGGREGATE GOVERNMENT PAYMENTS

                      Subtitle A--Aggregate State Payments

                  Part 1--State Maintenance of Effort Payment

    Sec. 9001. State maintenance-of-effort payment relating to         1277
                                non-cash assistance recipients.
    Sec. 9002. Non-cash baseline amounts........................       1278
    Sec. 9003. Updating of baseline amounts.....................       1282
    Sec. 9004. Non-cash assistance child and adult defined......       1284
                         Part 2--State Premium Payments

    Sec. 9011. State premium payment relating to cash assistance       1285
                                recipients.
    Sec. 9012. Determination of AFDC per capita premium amount         1286
                                for regional alliances.
    Sec. 9013. Determination of SSI per capita premium amount          1291
                                for regional alliances.
    Sec. 9014. Determination of number of AFDC and SSI                 1292
                                recipients.
    Sec. 9015. Regional alliance adjustment factors.............       1293
                  Part 3--General and Miscellaneous Provisions

    Sec. 9021. Timing and manner of payments....................       1294
    Sec. 9022. Review of payment level..........................       1294
    Sec. 9023. Special rules for Puerto Rico and other                 1295
                                territories.
                Subtitle B--Aggregate Federal Alliance Payments

    Sec. 9101. Federal premium payments for cash assistance            1296
                                recipients.
    Sec. 9102. Capped Federal alliance payments.................       1298
         Subtitle C--Borrowing Authority to Cover Cash-Flow Shortfalls

    Sec. 9201. Borrowing authority to cover cash-flow shortfalls       1308

                      Subtitle A--Aggregate State Payments

                                                       Title IX, Subtitle A

                  PART 1--STATE MAINTENANCE OF EFFORT PAYMENT

    SEC. 9001. STATE MAINTENANCE-OF-EFFORT PAYMENT RELATING TO NON-CASH
                  ASSISTANCE RECIPIENTS.

        (a) Payment.--Each participating State shall provide for each year
    (beginning with State's first year) for payment to regional alliances
    in the State in the amounts specified in subsection (b).
        (b) Amount.--Subject to sections 6005, 9023, and 9201(c)(2), the
    total amount of such payment for a year shall be equal to the
    following:
                (1) First year.--In the case of the first year for a State,
            the sum of--
                        (A) the State non-cash, non-DSH baseline amount for
                    the State, determined under section 9002(a)(1) and
                    updated under section 9003(a)(1), and
                        (B) the State non-cash, DSH baseline amount for the
                    State, determined under section 9002(a)(2) and updated
                    under section 9003(a)(2).
                (2) Subsequent year.--In the case of any succeeding year,
            the sum computed under paragraph (1) for the first year updated
            to the year involved under section 9003(b) .
        (c) Division Among Regional Alliances.--In the case of a State with
    more than one regional alliance, the payment required to be made under
    this section shall be distributed among the regional alliances in an
    equitable manner (determined by the State) that takes into account, for
    each regional alliance, the proportion of the non-cash baseline amount
    (described in section 9002) that is attributable to individuals who
    resided in the alliance area of the regional alliance.

                                                       Title IX, Subtitle A

    SEC. 9002. NON-CASH BASELINE AMOUNTS.

        (a) Baseline Amounts.--
                (1) Non-dsh amount.--The Secretary shall determine for each
            State a non-cash, non-DSH baseline amount which is equal to the
            sum of the following:
                        (A) Expenditures for comprehensive benefit package
                    for non-cash assistance children.--The aggregate State
                    medicaid expenditures in fiscal year 1993 (as defined
                    in subsection (b)(1)) for the comprehensive benefit
                    package for non-cash assistance children (as defined in
                    section 9004(a)).
                        (B) Expenditures for comprehensive benefit package
                    for non-cash assistance adults.--The aggregate State
                    medicaid expenditures in fiscal year 1993 for the
                    comprehensive benefit package for non-cash assistance
                    adults (as defined in section 9004(b)).
                        (C) Expenditures for additional benefits for
                    certain children receiving afdc or ssi.--The aggregate
                    medicaid expenditures in fiscal year 1993 for all
                    medically necessary items and services described in
                    section 1905(a) of the Social Security Act (including
                    items and services described in section 1905(r) of such
                    Act but excluding long-term care services described in
                    section 1933(c) of such Act) for qualified children
                    described in section 1934(b)(1) of such Act who are
                    AFDC or SSI recipients.
                (2) DSH amount.--The Secretary shall determine for each
            State a non-cash, DSH baseline amount which is equal to the DSH
            expenditures in fiscal year 1993 (as defined in subsection
            (b)(2)).
        (b) State Medicaid Expenditures and DSH Expenditures Defined.--
                (1) Aggregate state medicaid expenditures.--
                        (A) In general.--In this section, the term
                    ``aggregate State medicaid expenditures'' means, with
                    respect to specified individuals and a State in fiscal
                    year 1993, the amount of payments under the State
                    medicaid plan with respect to medical assistance
                    furnished for such individuals for calendar quarters in
                    fiscal year 1993, less the amount of Federal financial
                    participation paid to the State with respect to such
                    assistance, and not including any DSH expenditures.
                        (B) Limited to payments for services.--In applying
                    subparagraph (A), payments under the State medicaid
                    plan shall not be included unless Federal financial
                    participation is provided with respect to such payments
                    under section 1903(a)(1) of the Social Security Act and
                    such payments shall not include payments for medicare
                    cost-sharing (as defined in section 1905(p)(3) of the
                    Social Security Act).
                (2) DSH expenditures.--In this section, the term ``DSH
            expenditures'' means, with respect to fiscal year 1993,
            payments made under section 1923 of the Social Security Act in
            fiscal year 1993 multiplied by proportion of payments for
            medical assistance for hospital services (including psychiatric
            hospital services) under the State medicaid plan in fiscal year
            1993 that is attributable to non-cash assistance adults and
            non-cash assistance children.
                (3) Adjustment authorized to take into account cash flow
            variations.--If the Secretary finds that a State took an action
            that had the effect of shifting the timing of medical
            assistance payments under the State medicaid plan between
            quarters or fiscal years in a manner so that the payments made
            in fiscal year 1993 do not accurately reflect the value of the
            medical assistance provided with respect to items and services
            furnished in that fiscal year, the Secretary may provide for
            such adjustment in the amounts computed under this subsection
            as may be necessary so that the non-cash baseline amounts
            determined under this section accurately reflects such value.
                (4) Treatment of disallowances.--The amounts determined
            under this subsection shall take into account amounts (or an
            estimate of amounts) disallowed.
        (c) Application to Particular Items and Services in Comprehensive
    Benefit Package.--For purposes of subsection (a)(1), in determining the
    aggregate State medicaid expenditures for a category of items and
    services (within the comprehensive benefit package) furnished in a
    State, there shall be counted only that proportion of such expenditures
    that were attributable to items and services included in the
    comprehensive benefit package (taking into account any limitation on
    amount, duration, or scope of items and services included in such
    package).

    SEC. 9003. UPDATING OF BASELINE AMOUNTS.

        (a) Initial Update Through the First Year.--
                (1) Non-cash, non-dsh baseline amount.--The Secretary shall
            update the non-cash, non-DSH baseline amount determined under
            section 9002(a)(1) for each State from fiscal year 1993 through
            the first year, by the following percentage:
                        (A) If such first year is 1996, the applicable
                    percentage is 56.6 percent.
                        (B) If such first year is 1997, the applicable
                    percentage is 78.1 percent.
                        (C) If such first year is 1998, the applicable
                    percentage is 102.2 percent.
                (2) Non-cash, dsh baseline amount.--The Secretary shall
            update the non-cash, DSH baseline amount determined under
            section 9002(a)(2) for each State from fiscal year 1993 through
            the first year, by the following percentage:
                        (A) If such first year is 1996, the applicable
                    percentage is 45.9 percent.
                        (B) If such first year is 1997, the applicable
                    percentage is 61.8 percent.
                        (C) If such first year is 1998, the applicable
                    percentage is 79.0 percent.
                (3) Adjustment authorized to take into account cash flow
            variations.--In determining the updates under paragraphs (1)
            and (2), the Secretary may provide for an adjustment in a
            manner similar to the adjustment permitted under section
            9002(b)(3).
        (b) Update For Subsequent Years.--For each State for each year
    after the first year, the Board shall update the non-cash baseline
    amount (as previously updated under this subsection) by the product
    of--
                (1) 1 plus the general health care inflation factor (as
            defined in section 6001(a)(3)) for the year, and
                (2) 1 plus the annual percentage increase in the population
            of the United States of individuals who are under 65 years of
            age (as estimated by the Board based on projections made by the
            Bureau of Labor Statistics of the Department of Labor) for the
            year.

    SEC. 9004. NON-CASH ASSISTANCE CHILD AND ADULT DEFINED.

        (a) Non-Cash Assistance Child.--In this part, the term ``non-cash
    assistance child'' means a child described in section 1934(b)(1) of the
    Social Security Act (as inserted by section 4222(a)) who is not a
    medicare-eligible individual.
        (b) Non-Cash Assistance Adult.--In this part, the term ``non-cash
    assistance adult'' means an individual who is--
                (1) over 21 years,
                (2) is a citizen or national of the United States or an
            alien who is lawfully admitted for permanent residence or
            otherwise permanently residing in the United States under color
            of law, and
                (3) is not an AFDC or SSI recipient or a medicare-eligible
            individual.

                         PART 2--STATE PREMIUM PAYMENTS

    SEC. 9011. STATE PREMIUM PAYMENT RELATING TO CASH ASSISTANCE
                  RECIPIENTS.

        (a) In General.--Subject to subsection (c), each participating
    State shall provide in each year (beginning with the State's first
    year) for payment to each regional alliance in the State of an amount
    equal to the State medical assistance percentage (as defined in
    subsection (b)) of 95 percent of the sum of the following products:
                (1) AFDC portion.--The product of--
                        (A) the AFDC per capita premium amount for the
                    regional alliance for the year (determined under
                    section 9012(a)), and
                        (B) the number of AFDC recipients residing in the
                    alliance area in the year (as determined under section
                    9014(b)(1)).
                (2) SSI portion.--The product of--
                        (A) the SSI per capita premium amount for the
                    regional alliance for the year (determined under
                    section 9013), and
                        (B) the number of SSI recipients residing in the
                    alliance area in the year (as determined under section
                    9014(b)(1)).
        (b) State Medical Assistance Percentage Defined.--In subsection
    (a), the term ``State medical assistance percentage'' means, for a
    State for a quarter in a fiscal year, 100 percent minus the Federal
    medical assistance percentage (as defined in section 1905(b) of the
    Social Security Act) for the State for the fiscal year.
        (c) Additional Amount.--The amount of payment under subsection (a)
    for a State for a year shall be increased by the State medical
    assistance percentage multiplied by the sum of the following:
                (1) Amount of special increase in premium discount.--The
            aggregate increase in the premium discounts under section 6104
            for AFDC and SSI families enrolled in regional alliance health
            plans in the State that is attributable to subsection (b)(2) of
            such section, and
                (2) Amount of basic cost sharing reduction.--The amount of
            any cost sharing reduction under section 1371(c)(1) for such
            families.

    SEC. 9012. DETERMINATION OF AFDC PER CAPITA PREMIUM AMOUNT FOR REGIONAL
                  ALLIANCES.

        (a) In General.--For each regional alliance in a State for each
    year, the Secretary shall determine an AFDC per capita premium amount
    in accordance with this section. Such amount is equal to--
                (1) the per capita State medicaid expenditures for the
            comprehensive benefit package for AFDC recipients for the State
            for the year (as determined under subsection (b)), multiplied
            by
                (2) the regional alliance adjustment factor (determined
            under section 9015) for the year for the regional alliance.
        (b) Per Capita State Medicaid Expenditures Defined.--The ``per
    capita State medicaid expenditures for the comprehensive benefit
    package for AFDC recipients'' for a State for a year is equal to the
    base per capita expenditures (described in subsection (c)), updated to
    the year involved under subsection (d)).
        (c) Base Per Capita Expenditures.--The ``base per capita
    expenditures'' described in this subsection, for a State for a year,
    is--
                (1) the baseline medicaid expenditures (as defined in
            subsection (e)) for the State, divided by
                (2) the number of AFDC recipients enrolled in the State
            medicaid plan in fiscal year 1993, as determined under section
            9014(a).
        (d) Updating.--
                (1) Initial update through year before first year.--
                        (A) In general.--The Secretary shall update the
                    base per capita expenditures described in subsection
                    (c) for each State from fiscal year 1993 through the
                    year before first year, by the applicable percentage
                    specified in subparagraph (B), or, if less, the
                    increase percentage specified in subparagraph (C).
                        (B) Applicable percentage.--For purposes of
                    subparagraph (A), the applicable percentage specified
                    in this subparagraph, in the case of a State in which
                    the first year is--
                                (i) 1996 is 32.2 percent,
                                (ii) 1997 is 46.6 percent, or
                                (iii) 1998 is 62.1 percent.
                        (C) Increase percentage.--
                                (i) In general.--The increase percentage
                            for a State specified in this subparagraph is
                            the Secretary's estimate of the percentage
                            increase in the per capita expenditures
                            specified in clause (ii) from fiscal year 1993
                            through the year before the first year,
                            adjusted so as to eliminate any change in
                            medicaid expenditures that is attributable to a
                            reduction in the scope of services, an
                            arbitrary reduction in payment rates, or a
                            reduction in access to high quality services
                            under the State medicaid plan.
                                (ii) Per capita expenditures.--The per
                            capita expenditures specified in this clause
                            for a year is the quotient of the baseline
                            medicaid expenditures for the State for the
                            year, divided by the number of AFDC recipients
                            enrolled in the State medicaid plan for the
                            year.
                        (D) Adjustment authorized to take into account cash
                    flow variations.--In determining the update under
                    paragraph (1), the Secretary may provide for an
                    adjustment in a manner similar to the adjustment
                    permitted under section 9002(b)(3).
                (2) Update for subsequent years.--For each State for the
            first year and for each year after the first year, the Board
            shall update the base per capita expenditures described in
            subsection (c) (as previously updated under this subsection) by
            a factor equal to 1 plus the general health care inflation
            factor (as defined in section 6001(a)(3)) for the year.
        (e) Determination of Baseline Medicaid Expenditures.--
                (1) In general.--For purposes of subsection (c)(1), the
            ``baseline medicaid expenditures'' for a State is the gross
            amount of payments under the State medicaid plan with respect
            to medical assistance furnished, for items and services
            included in the comprehensive benefit package, for AFDC
            recipients for calendar quarters in fiscal year 1993, but does
            not include such expenditures for which no Federal financial
            participation is provided under such plan.
                (2) Disproportionate share payments not included.--In
            applying paragraph (1), payments made under section 1923 of the
            Social Security Act shall not be counted in the gross amount of
            payments.
                (3) Treatment of disallowances.--The amount determined
            under this subsection shall take into account amounts (or an
            estimate of amounts) disallowed.
        (f) Application to Particular Items and Services in Comprehensive
    Benefit Package.--For purposes of this section, in determining the per
    capita State medicaid expenditures for a category of items and services
    (within the comprehensive benefit package) furnished in a State, there
    shall be counted only that proportion of such expenditures (determined
    only with respect to medical assistance furnished to AFDC recipients)
    that were attributable to items and services included in the
    comprehensive benefit package (taking into account any limitation on
    amount, duration, or scope of items and services included in such
    package).

    SEC. 9013. DETERMINATION OF SSI PER CAPITA PREMIUM AMOUNT FOR REGIONAL
                  ALLIANCES.

        For each regional alliance in a State for each year, the Secretary
    shall determine an SSI per capita premium amount in accordance with
    this section. Such amount shall be determined in the same manner as the
    AFDC per capita premium amount for the regional alliance is determined
    under section 9012 except that, for purposes of this section--
                (1) any reference in such section (or in sections referred
            to in such section) to an ``AFDC recipient'' is deemed a
            reference to an ``SSI recipient'', and
                (2) the following percents shall be substituted for the
            percents specified in section 9012(d)(1)(B):
                        (A) For 1996, 29.4 percent.
                        (B) For 1997, 43.7 percent.
                        (C) For 1998, 58.8 percent.

    SEC. 9014. DETERMINATION OF NUMBER OF AFDC AND SSI RECIPIENTS.

        (a) Baseline.--For purposes of section 9012 and section 9013, the
    number of AFDC recipients and SSI recipients for a State for fiscal
    year 1993 shall be determined based on actual reports submitted by the
    State to the Secretary. In the case of individuals who were not
    recipients for the entire fiscal year, the number shall take into
    account only the portion of the year in which they were such
    recipients. The Secretary may audit such reports.
        (b) Subsequent Years.--
                (1) Payments.--For purposes of section 9011(a), the number
            of AFDC and SSI recipients enrolled in regional alliance health
            plans for a regional alliance shall be determined on a monthly
            basis based on actual enrollment.
                (2) Computation of regional adjustment factors and blended
            plan payment rates.--For purposes of computing regional
            alliance adjustment factors under section 9015 and the AFDC and
            SSI proportions under section 6202, the number of AFDC and SSI
            recipients for a regional alliance in a State for a year
            (beginning with 1997) shall be determined by the State before
            the date the State is required to compute AFDC and SSI
            proportions under section 6202 based on the best available
            estimate of such proportion in the previous year.

    SEC. 9015. REGIONAL ALLIANCE ADJUSTMENT FACTORS.

        (a) In General.--If a State--
                (1) has more than one regional alliance operating in the
            State for a year, the State shall compute under this section a
            regional alliance adjustment factor for each such regional
            alliance for the year in accordance with subsection (b), or
                (2) has only one regional alliance for a year, the regional
            alliance adjustment factor under this section is 1.
        (b) Rules.--The adjustment factors under subsection (a)(1) for a
    year shall be computed in a manner so that--
                (1) such factors for the different regional alliances
            reflect--
                        (A) the variation in regional alliance per capita
                    premium targets (determined under section 6003), and
                        (B) the variation in base per capita expenditures
                    for medicaid across regional alliances; and
                (2) the weighted average of such factors is 1.
        (c) Use of Same Data.--The weighted average under subsection (b)(2)
    shall be determined based on the number of AFDC recipients or SSI
    recipients (as the case may be) enrolled in each regional alliance in a
    State (as determined for each regional alliance under section
    9014(b)(2)).
        (d) Clarification of Separate Computations.--Determinations of
    adjustment factors under this section shall be made separately for AFDC
    recipients and for SSI recipients.

                  PART 3--GENERAL AND MISCELLANEOUS PROVISIONS

    SEC. 9021. TIMING AND MANNER OF PAYMENTS.

        The provisions of paragraphs (1) and (2) of section 9101(b) apply
    to payments by a State under this subtitle in the same manner as they
    apply to payments by the Secretary under section 9101, and any
    reference in such provisions to the Secretary is deemed a reference to
    the State.

    SEC. 9022. REVIEW OF PAYMENT LEVEL.

        (a) In General.--The National Health Board shall review from time
    to time the appropriateness of the levels of payments required of
    States under this subtitle.
        (b) Report.--The Board may report to the Congress on such
    adjustments as should be made to assure an equitable distribution of
    State payments under this Act, taking into account the revenue base in
    each of the States.
        (c) Limit on Authority.--Nothing in this subtitle shall be
    construed as permitting the Board to change the amount of the payments
    required by States under the previous sections in this subtitle.

    SEC. 9023. SPECIAL RULES FOR PUERTO RICO AND OTHER TERRITORIES.

        (a) Waiver Authority.--Notwithstanding any other requirement of
    this title or title VI, the Secretary may waive or modify any
    requirement of this title or title VI (other than financial
    contribution and subsidy requirements) with respect to Puerto Rico, the
    Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands,
    consistent with this section, to accommodate their unique geographic
    and social conditions and features of their health care systems.
        (b) Territorial Maintenance of Effort and Division of Financial
    Responsibility.--
                (1) In general.--In the case of such a Commonwealth or
            territory, the Secretary shall determine the State payments
            under part 1 taking into account--
                        (A) payments that qualify for Federal financial
                    participation under the medicaid program,
                        (B) payments that would qualify for such
                    participation in the absence of section 1108(c) of the
                    Social Security Act, and
                        (C) other factors that the Secretary may consider.
                (2) Cash assistance recipients.--With respect to such
            Commonwealths and territories not covered under the
            supplementary security income program, in this Act, the term
            ``SSI recipient'' includes an individual receiving aid under a
            territorial program for the aged, blind, or disabled under the
            Social Security Act.

                                                       Title IX, Subtitle B

                Subtitle B--Aggregate Federal Alliance Payments

    SEC. 9101. FEDERAL PREMIUM PAYMENTS FOR CASH ASSISTANCE RECIPIENTS.

        (a) Amount.--
                (1) In general.--The Secretary shall provide each year
            (beginning with a State's first year) for payment to each
            regional alliance of an amount equal to the Federal medical
            assistance percentage (as defined in section 1905(b) of the
            Social Security Act) of (A) 95 percent of the sum of the
            products described in section 9011(a) for that State for that
            fiscal year, plus (B) the sum described in section 9011(c).
                (2) Special rules for single-payer States.--In determining
            the products referred to in paragraph (1) in the case of a
            single-payer State, the State is deemed to be a single regional
            alliance and the regional alliance adjustment factor (under
            section 9015) is deemed to be 1.
        (b) Timing and Manner of Payment.--
                (1) In general.--Amounts required to be paid under this
            section shall be paid on a periodic basis that reflects the
            cash flow requirements of regional alliances for payments under
            this section in order to meet obligations established under
            this Act and, in consultation with the Secretary of the
            Treasury, the cash management interests of the Federal
            Government.
                (2) Periodic provision of information.--Each regional
            alliance shall periodically transmit to the Secretary such
            information as the Secretary may require to make such payments.
                (3) Reconciliation.--
                        (A) Preliminary.--At such time after the end of
                    each year as the Secretary shall specify, the State
                    shall submit to the Secretary such information as the
                    Secretary may require to do a preliminary
                    reconciliation of the amounts paid under this section
                    and the amounts due.
                        (B) Final.--No later than June 30 of each year, the
                    Secretary shall provide for a final reconciliation for
                    such payments for quarters in the previous year.
                    Amounts subsequently payable are subject to adjustment
                    to reflect the results of such reconciliation.
                        (C) Audit.--Payments under this section are subject
                    to audits by the Secretary in accordance with rules
                    established by the Secretary.

    SEC. 9102. CAPPED FEDERAL ALLIANCE PAYMENTS.

        (a) Capped Entitlement.--
                (1) Payment.--The Secretary shall provide for each calendar
            quarter (beginning on or after January 1, 1996) for payment to
            each regional alliance of an amount equal to the capped Federal
            alliance payment amount (as defined in subsection (b)(1)) for
            the regional alliance for the quarter.
                (2) Entitlement.--This section constitutes budget authority
            in advance of appropriations Acts, and represents the
            obligation of the Federal Government to provide for the payment
            to regional alliances of the capped Federal alliance payment
            amount under this section.
        (b) Capped Federal Alliance Payment Amount.--
                (1) In general.--In this section, the term ``capped Federal
            alliance payment amount'' means, for a regional alliance for a
            calendar quarter in a year and subject to subsection (e), the
            amount by which--
                        (A) \1/4\ of the total payment obligation
                    (described in paragraph (2)) for the alliance for the
                    year, exceeds
                        (B) \1/4\ of the total amounts receivable
                    (described in paragraph (3)) by the alliance for the
                    year.
                (2) Total payment obligation.--The total payment obligation
            described in this paragraph for an alliance for a year is the
            total amount payable by the alliance for the following:
                        (A) Plan payments (and certain cost sharing
                    reductions).--Payments to regional alliance health
                    plans under section 1351 (including amounts
                    attributable to cost sharing reductions under section
                    1371, not including a reduction under subsection (c)(2)
                    thereof).
                        (B) Alliance administrative expenses.--Payments
                    retained by the regional alliance for administration
                    (in accordance with section 1352).
                (3) Total amounts receivable.--The total amounts receivable
            by a regional alliance for a year is the sum of the following:
                        (A) Premiums.--The amount payable to the regional
                    alliance for the family share of premiums, employer
                    premiums, and liabilities owed the alliance under
                    subtitle B of title VI, not taking into account any
                    failure to make or collect such payments.
                        (B) Other government payments.--The amounts payable
                    to the regional alliance under sections 9001, 9011, and
                    9101, and payable under section 1894 of the Social
                    Security Act (as added by section 4003) during the
                    year.
                (4) No payment for certain amounts.--
                        (A) Uncollected alliance premiums.--Each regional
                    alliance is responsible, under section 1345(a), for the
                    collection of all amounts owed the alliance (whether by
                    individuals, employers, or others and whether on the
                    basis of premiums owed, incorrect amounts of discounts
                    or premium, cost sharing, or other reductions made, or
                    otherwise), and no amounts are payable by the Federal
                    Goverment under this section with respect to the
                    failure to collect any such amounts.
                        (B) Administrative errors.--
                                (i) In general.--Each participating State
                            is responsible, under section 1202(g), for the
                            payment to regional alliances in the State of
                            amounts attributable to administrative errors
                            (described in clause (ii)).
                                (ii) Administrative errors described.--The
                            administrative errors described in this clause
                            include the following:
                                        (I) An eligibility error rate for
                                    premium discounts, liability
                                    reductions, and cost sharing reductions
                                    under sections 6104 and 6123, section
                                    6113, and section 1371, respectively,
                                    to the extent the applicable error rate
                                    exceeds the maximum permissible error
                                    rate, specified by the applicable
                                    Secretary under section 1361(b)(1)(C),
                                    with respect to the section involved.
                                        (II) Misappropriations or other
                                    regional alliance expenditures that the
                                    Secretary finds are attributable to
                                    malfeasance or misfeasance by the
                                    regional alliance or the State.
                (5) Special rules for single-payer states.--In applying
            this subsection in the case of a single-payer State, the
            Secretary shall develop and apply a methodology for computing
            an amount of payment (with respect to each calendar quarter)
            that is equivalent to the amount of payment that would have
            been made to all regional alliances in the State for the
            quarter if the State were not a single-payer State.
        (c) Determination of Capped Federal Alliance Payment Amounts.--
                (1) Reports.--At such time as the Secretary may require
            before the beginning of each fiscal year, each regional
            alliance shall submit to the Secretary such information as the
            Secretary may require to estimate the capped Federal alliance
            payment amount under this section for the succeeding calendar
            year (and the portion of such year that falls in such fiscal
            year).
                (2) Estimation.--Before the beginning of each year, the
            Secretary shall estimate for each regional alliance the capped
            Federal alliance payment amount for calendar quarters in such
            year. Such estimate shall be based on factors including prior
            financial experience in the alliance, future estimates of
            income, wages, and employment, and other characteristics of the
            area found relevant by the Secretary. The Secretary shall
            transmit to Congress, on a timely basis consistent with the
            timely appropriation of funds under this section, a report that
            specifies an estimate of the total capped Federal alliance
            payment amounts owed to regional alliances under this section
            for the fiscal and calendar year involved.
        (d) Payments to Regional Alliances.--Subject to subsection (e), the
    provisions of section 9101(b) apply to payments under this section in
    the same manner as they apply to payments under section 9101.
        (e) Cap on Payments.--
                (1) In general.--The total amount of the capped Federal
            alliance payments made under this section for quarters in a
            fiscal year may not exceed the cap specified under paragraph
            (2) for the fiscal year.
                (2) Cap.--Subject to paragraphs (3) and (6)--
                        (A) Fiscal years 1996 through 2000.--The cap under
                    this paragraph--
                                (i) for fiscal year 1996, is $10.3 billion,
                                (ii) for fiscal year 1997, is $28.3
                            billion,
                                (iii) for fiscal year 1998, is $75.6
                            billion,
                                (iv) for fiscal year 1999, is $78.9
                            billion, and
                                (v) for fiscal year 2000, is $81.0 billion.
                        (B) Subsequent fiscal year.--The cap under this
                    paragraph for a fiscal year after fiscal year 2000 is
                    the cap under this paragraph for the previous fiscal
                    year (not taking into account paragraph (3)) multiplied
                    by the product of the factors described in subparagraph
                    (C) for that fiscal year and for each previous year
                    after fiscal year 2000.
                        (C) Factor.--The factor described in this
                    subparagraph for a fiscal year is 1 plus the following:
                                (i) CPI.--The percentage change in the CPI
                            for the fiscal year, determined based upon the
                            percentage change in the average of the CPI for
                            the 12-month period ending with May 31 of the
                            previous fiscal year over such average for the
                            preceding 12-month period.
                                (ii) Population.--The average annual
                            percentage change in the population of the
                            United States during the 3-year period ending
                            in the preceding calendar year, determined by
                            the Board based on data supplied by the Bureau
                            of the Census.
                                (iii) Real gdp per capita.--The average
                            annual percentage change in the real, per
                            capita gross domestic product of the United
                            States during the 3-year period ending in the
                            preceding calendar year, determined by the
                            Board based on data supplied by the Department
                            of Commerce.
                (3) Carryforward.--If the total of the capped Federal
            alliance payment amounts for all regional alliances for all
            calendar quarters in a fiscal year is less than the cap
            specified in paragraph (2) for the fiscal year, then the amount
            of such surplus shall be accumulated and will be available in
            the case of a year in which the cap would otherwise be
            breached.
                (4) Notification.--
                        (A) In general.--If the Secretary anticipates that
                    the amount of the cap, plus any carryforward from a
                    previous year accumulated under paragraph (3), will not
                    be sufficient for a fiscal year, the Secretary shall
                    notify the President, the Congress, and each regional
                    alliance. Such notification shall include information
                    about the anticipated amount of the shortfall and the
                    anticipated time when the shortfall will first occur.
                        (B) Required action.--Within 30 days after
                    receiving such a notice, the President shall submit to
                    Congress a report containing specific legislative
                    recommendations for actions which would eliminate the
                    shortfall.
                (5) Congressional consideration.--
                        (A) Expedited consideration.--If a joint resolution
                    the substance of which approves the specific
                    recommendations submitted under paragraph (4)(B) is
                    introduced, subject to subparagraph (B), the provisions
                    of section 2908 (other than subsection (a)) of the
                    Defense Base Closure and Realignment Act of 1990 shall
                    apply to the consideration of the joint resolution in
                    the same manner as such provisions apply to a joint
                    resolution described in section 2908(a) of such Act.
                        (B) Special rules.--For purposes of applying
                    subparagraph (A) with respect to such provisions, any
                    reference to the Committee on Armed Services of the
                    House of Representatives shall be deemed a reference to
                    an appropriate Committee of the House of
                    Representatives (specified by the Speaker of the House
                    of Representatives at the time of submission of
                    recommendations under paragraph (4)) and any reference
                    to the Committee on Armed Services of the Senate shall
                    be deemed a reference to an appropriate Committee of
                    the Senate (specified by the Majority Leader of the
                    Senate at the time of submission of such
                    recommendations).
                (6) Method for adjusting the cap for changes in
            inflation.--If the inflation rate, as measured by the
            percentage increase in the CPI, is projected to be
            significantly different from the inflation rate projected by
            the Council of Economic Advisors to the President as of October
            1993, the Secretary may adjust the caps under paragraph (2) so
            as to reflect such deviation from the projection.

                                                       Title IX, Subtitle C

         Subtitle C--Borrowing Authority to Cover Cash-flow Shortfalls

    SEC. 9201. BORROWING AUTHORITY TO COVER CASH-FLOW SHORTFALLS.

        (a) In General.--The Secretary shall make available loans to
    regional alliances in order to cover any period of temporary cash-flow
    shortfall attributable to any of the following:
                (1) Any estimation discrepancy (including those described
            in subsection (e)(1)).
                (2) A period of temporary cash-flow shortfall attributable
            to an administrative error (described in subsection (e)(2)).
                (3) A period of temporary cash-flow shortfall relating to
            the relative timing during the year in which amounts are
            received and payments are required to be made.
        (b) Terms and Conditions.--
                (1) In general.--Loans shall be made under this section
            under terms and conditions, consistent with this subsection,
            specified by the Secretary, in consultation with the Secretary
            of the Treasury and taking into account Treasury cash
            management rules.
                (2) Period.--Loans under this section shall be repayable
            with interest over a period of not to exceed 2 years.
                (3) Interest rate.--The rate of interest on such loans
            shall be at a rate determined by the Secretary of the Treasury
            taking into consideration the current average rate on
            outstanding marketable obligations of the United States.
                (4) Appropriate payment adjustments.--As a condition of
            providing a loan under subsection (a)(1), the Secretary shall
            require the regional alliance to make such adjustments under
            the appropriate estimation adjustment provision (described in
            subsection (f)) in order to assure the repayment of the amount
            so borrowed.
                (5) Limitation on loan balance outstanding to a regional
            alliance.--The total balance of loans outstanding at any time
            to a regional alliance shall not exceed--
                        (A) for the first year, 25 percent of the estimated
                    total premiums for the alliance for such year, or
                        (B) for a subsequent year, 25 percent of the actual
                    total premiums for the alliance for the previous year.
        (c) Repayment.--
                (1) Estimation discrepancies and timing.--Loans made under
            paragraphs (1) and (3) of subsection (a) shall be repaid
            through a reduction in the payment amounts otherwise required
            to be made under section 9102 to the regional alliance.
                (2) Administrative error.--Loans made under subsection
            (a)(2) shall be repaid through a temporary increase in the
            amount of the State maintenance-of-effort payment required
            under section 9001.
        (d) Reports.--The Secretary shall annually report to Congress on
    the loans made (and loan amounts repaid) under this section.
        (e) Sources of Discrepancy Described.--
                (1) Estimation discrepancies.--The estimation discrepancies
            described in this paragraph are discrepancies in estimating the
            following:
                        (A) The average premium payments per family under
                    section 6122(b).
                        (B) The AFDC and SSI proportions under section
                    6202.
                        (C) The distribution of enrolled families in
                    different risk categories for purposes of section
                    1351(c).
                        (D) The distribution of enrollment in excess
                    premium plans (for purposes of calculating and applying
                    the reduced weighted average accepted bid under section
                    6105(c)(1)).
                        (E) The collection shortfalls (used in computing
                    the family collection shortfall add-on under section
                    6107).
                (2) Administrative errors.--The administrative errors
            described in this paragraph are errors described in section
            9201(b)(4)(B)(ii).
        (f) Estimation Adjustment Provisions Described.--The estimation
    adjustment provisions, referred to in subsection (b)(4)) are the
    following adjustments (corresponding to the respective estimation
    discrepancies specified in subsection (d)(1)):
                (1) Adjustments for average premium payments per family
            under section 6122(b)(4).
                (2) Adjustments in the AFDC and SSI proportions under
            section 6202(d).
                (3) Adjustments pursuant to the methodology described in
            section 1541(b)(8).
                (4) Adjustments in excess premium credit pursuant to
            section 6105(b)(2).
                (5) Adjustment in the collection shortfall add-on under
            section 6107(b)(2)(C)).
        (g) Advances; Limitations on Advances.--
                (1) In general.--Subject to paragraph (2), the Secretary of
            the Treasury is authorized to advance to the Secretary, under
            terms and conditions determined by the Secretary of the
            Treasury, amounts sufficient to cover the loans made to
            regional alliances by the Secretary under this section.
                (2) Limitation.--The total balance of Treasury advances
            outstanding at any time to the Secretary under paragraph (1)
            shall not exceed $3,500,000,000.

                                                                    Title X

     TITLE X--COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION AND
                              AUTOMOBILE INSURANCE

                           table of contents of title

                                                                       Page
                   Subtitle A--Workers Compensation Insurance

    Sec. 10000. Definitions.....................................       1314
       Part 1--Health Plan Requirements Relating to Workers Compensation

    Sec. 10001. Provision of workers compensation services......       1315
    Sec. 10002. Payment by workers compensation carrier.........       1319
                  Part 2--Requirements of Participating States

    Sec. 10011. Coordination of specialized workers compensation       1320
                                providers.
    Sec. 10012. Preemption of State laws restricting delivery of       1321
                                workers compensation medical
                                benefits.
    Sec. 10013. Development of supplemental schedule............       1322
    Sec. 10014. Construction....................................       1322
      Part 3--Application of Information Requirements; Report on Premium
                                   Reductions

    Sec. 10021. Application of information requirements.........       1323
    Sec. 10022. Report on reduction in workers compensation            1324
                                premiums.
                         Part 4--Demonstration Projects

    Sec. 10031. Authorization...................................       1325
    Sec. 10032. Development of work-related protocols...........       1325
    Sec. 10033. Development of capitation payment models........       1326
                        Subtitle B--Automobile Insurance

    Sec. 10100. Definitions.....................................       1326
       Part 1--Health Plan Requirements Relating to Automobile Insurance

    Sec. 10101. Provision of automobile insurance medical              1327
                                benefits through health plans.
    Sec. 10102. Payment by automobile insurance carrier.........       1328
                  Part 2--Requirement of Participating States

    Sec. 10111. Development of supplemental schedule............       1330
    Sec. 10112. Construction....................................       1330
                Part 3--Application of Information Requirements

    Sec. 10121. Application of information requirements.........       1330
            Subtitle C--Commission on Integration of Health Benefits

    Sec. 10201. Commission......................................       1331
                Subtitle D--Federal Employees' Compensation Act

    Sec. 10301. Application of policy...........................       1333
              Subtitle E--Davis-Bacon Act and Service Contract Act

    Sec. 10401. Coverage of benefits under Health Security Act..       1333
                          Subtitle F--Effective Dates

    Sec. 10501. Regional alliances..............................       1334
    Sec. 10502. Corporate alliances.............................       1334
    Sec. 10503. Federal requirements............................       1334

                                                        Title X, Subtitle A

                   Subtitle A--Workers Compensation Insurance

    SEC. 10000. DEFINITIONS.

        In this subtitle:
                (1) Injured worker.--The term ``injured worker'' means,
            with respect to a health plan, an individual enrolled under the
            plan who has a work-related injury or illness for which workers
            compensation medical benefits are available under State law.
                (2) Specialized workers compensation provider.--The term
            ``specialized workers compensation provider'' means a health
            care provider that specializes in the provision of treatment
            relating to work-related injuries or illness, and includes
            specialists in industrial medicine, specialists in occupational
            therapy, and centers of excellence in industrial medicine and
            occupational therapy.
                (3) Workers compensation medical benefits.--The term
            ``workers compensation medical benefits'' means, with respect
            to an enrollee who is an employee subject to the workers
            compensation laws of a State, the comprehensive medical
            benefits for work-related injuries and illnesses provided for
            under such laws with respect to such an employee.
                (4) Workers compensation carrier.--The term ``workers
            compensation carrier'' means an insurance company that
            underwrites workers compensation medical benefits with respect
            to one or more employers and includes an employer or fund that
            is financially at risk for the provision of workers
            compensation medical benefits.
                (5) Workers compensation services.--The term ``workers
            compensation services'' means items and services included in
            workers compensation medical benefits and includes items and
            services (including rehabilitation services and long-term care
            services) commonly used for treatment of work-related injuries
            and illnesses.

       PART 1--HEALTH PLAN REQUIREMENTS RELATING TO WORKERS COMPENSATION

    SEC. 10001. PROVISION OF WORKERS COMPENSATION SERVICES.

        (a) Provision of Benefits.--Subject to subsection (b)--
                (1) Requirement for certain health plans.--
                        (A) In general.--Each health plan that provides
                    services to enrollees through participating providers
                    shall enter into such contracts and arrangements as are
                    necessary (in accordance with subparagraph (B)) to
                    provide or arrange for the provision of workers
                    compensation services to such enrollees, in return for
                    payment from the workers compensation carrier under
                    section 10002.
                        (B) Provision of services.--For purposes of this
                    paragraph, a health plan provides (or arranges for the
                    provision of) workers compensation services with
                    respect to an enrollee if the services are provided
                    by--
                                (i) a participating provider in the plan,
                                (ii) any other provider with whom the plan
                            has entered into an agreement for the provision
                            of such services, or
                                (iii) a specialized workers compensation
                            provider (designated by the State under
                            10011(b)), whether or not the provider is a
                            provider described in clause (i) or (ii).
                (2) Individual requirement.--An individual entitled to
            workers compensation medical benefits and enrolled in a health
            plan (whether or not the plan is described in paragraph (1)(A))
            shall receive workers compensation services through the
            provision (or arrangement for the provision) of such services
            by the health plan.
                (3) Exceptions.--
                        (A) Emergency services.--Paragraphs (1) and (2)
                    shall not apply in the case of emergency services.
                        (B) Electing veterans, military personnel and
                    indians.--Paragraphs (1) and (2) shall not apply in the
                    case of an individual described in section 1004(b) and
                    making an election described in such section.
                (4) Use of specialized workers compensation providers.--If
            a participating State has designated under section 10011(b)
            specialized workers compensation providers with respect to one
            or more types of injuries or illnesses for a geographic area,
            either a health plan or an injured worker who has an injury or
            illness of such type may elect to provide or receive the
            benefits under this subsection through such a provider.
        (b) Alternative Permitted.--Subsection (a) shall not be construed
    as preventing an injured worker and a workers compensation carrier from
    agreeing that workers compensation services shall be provided other
    than by or through the health plan in which the worker is enrolled.
        (c) Coordination.--
                (1) Designation of case manager.--Each health plan shall
            employ or contract with one or more individuals, such as
            occupational nurses, with experience in the treatment of
            occupational illness and injury to provide case management
            services with respect to workers compensation services provided
            through the plan under this section.
                (2) Functions of case manager.--The health plan (through
            the case manager described in paragraph (1)) is responsible for
            ensuring that--
                        (A) there is plan of treatment (when appropriate)
                    for each enrollee who is an injured worker designed to
                    assure appropriate treatment and facilitate return to
                    work;
                        (B) the plan of treatment is coordinated with the
                    workers compensation carrier, the employer, or both;
                        (C) the health plan (and its providers) comply with
                    legal duties and requirements under State workers
                    compensation law; and
                        (D) if the health plan is unable to provide a
                    workers compensation service needed to treat a work-
                    related injury or illness, the injured worker is
                    referred (in consultation with the workers compensation
                    carrier) to an appropriate provider.
        (c) Administration.--The Secretary of Labor shall administer this
    part and, for such purposes, the Secretary is authorized to prescribe
    such rules and regulations as may be necessary and appropriate.

    SEC. 10002. PAYMENT BY WORKERS COMPENSATION CARRIER.

        (a) Payment.--
                (1) In general.--Each workers compensation carrier that is
            liable for payment for workers compensation services furnished
            by or through a health plan, regardless of whether or not the
            services are included in the comprehensive benefit package,
            shall make payment for such services.
                (2) Use of regional alliance fee schedule.--Except as
            provided in subsection (b), such payment shall be made in
            accordance with the applicable fee schedule established under
            section 1322(c) or section 10013.
        (b) Alternative Payment Methodologies.--Subsection (a)(2) shall not
    apply--
                (1) in the case of a regional alliance or participating
            State that establishes an alternative payment methodology (such
            as payment on a negotiated fee for each case) for payment for
            workers compensation services; or
                (2) in the case in which a workers compensation carrier and
            the health plan negotiate alternative payment arrangements.
        (c) Limitation of Liability of Injured Worker.--Nothing in this
    part shall be construed as requiring an injured worker to make any
    payment (including payment of any cost sharing or any amount in excess
    of the applicable fee schedule) to any health plan or health care
    provider for the receipt of workers compensation services.

                  PART 2--REQUIREMENTS OF PARTICIPATING STATES

    SEC. 10011. COORDINATION OF SPECIALIZED WORKERS COMPENSATION PROVIDERS.

        (a) In General.--Each participating State shall coordinate access
    to services provided by specialized workers compensation providers on
    behalf of health plans, providing coverage to individuals residing in
    the State, under part 1.
        (b) Optional Designation of Specialized Workers Compensation
    Providers.--A participating State may designate such specialized
    workers compensation providers, with respect to one or more types of
    illnesses or injuries in a geographic area as the State determines to
    be appropriate, to provide under part 1 workers compensation services
    that--
                (1) are not included in the comprehensive benefit package,
            or
                (2) are so included but are specialized services that are
            typically provided (as determined by the State) by specialists
            in occupational or rehabilitative medicine.
    Injured workers and health plans may elect to use such providers under
    section 10001(a)(4).

    SEC. 10012. PREEMPTION OF STATE LAWS RESTRICTING DELIVERY OF WORKERS
                  COMPENSATION MEDICAL BENEFITS.

        (a) In General.--Subject to section 10011(b), no State law shall
    have any effect that restricts the choice, or payment, of providers
    that may provide workers compensation services for individuals enrolled
    in a health plan.
        (b) Dispute Resolution.--A State law may provide for a method for
    resolving disputes among parties related to--
                (1) an individual's entitlement to workers compensation
            medical benefits under State law,
                (2) the necessity and appropriateness of workers
            compensation services provided to an injured worker, and
                (3) subject to section 10002, the reasonableness of charges
            or fees charged for workers compensation services.

    SEC. 10013. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE.

        Each participating State shall develop a fee schedule applicable to
    payment for workers compensation services for which a fee is not
    included in the applicable fee schedule established under section
    1322(c).

    SEC. 10014. CONSTRUCTION.

        (a) In General.--Nothing in this subtitle shall be construed as
    altering--
                (1) the effect of a State workers compensation law as the
            exclusive remedy for work-related injuries or illnesses,
                (2) the determination of whether or not a person is an
            injured worker and entitled to workers compensation medical
            benefits under State law,
                (3) the scope of items and services available to injured
            workers entitled to workers compensation medical benefits under
            State law, or
                (4) the eligibility of any individual or class of
            individuals for workers compensation medical benefits under
            State law.
        (b) Early Integration.--Nothing in this subtitle shall prevent a
    State from integrating or otherwise coordinating the payment for
    workers compensation medical benefits with payment for benefits under
    health insurance or health benefit plans before the date the Commission
    submits its report under section 10201(e).

      PART 3--APPLICATION OF INFORMATION REQUIREMENTS; REPORT ON PREMIUM
                                   REDUCTIONS

    SEC. 10021. APPLICATION OF INFORMATION REQUIREMENTS.

        (a) In General.--The provisions of--
                (1) part 3 of subtitle B of title V (relating to use of
            standard forms), and
                (2) section 5101(e)(9) (relating to provision of data on
            quality),
    apply to the provision of workers compensation services in the same
    manner as such provisions apply with respect to the provision of
    services included in the comprehensive benefit package.
        (b) Rules.--The Secretary of Labor shall promulgate rules to
    clarify the responsibilities of health plans and workers compensation
    carriers in carrying out the provisions referred to in subsection (a).

    SEC. 10022. REPORT ON REDUCTION IN WORKERS COMPENSATION PREMIUMS.

        (a) Study and Report.--
                (1) Study.--The Secretary of Labor shall provide for a
            study of the impact of the provisions of this subtitle on the
            premium rates charged to employers for workers compensation
            insurance. Such study shall use information supplied by States
            relating to workers compensation premiums and such other
            information as such Secretary finds appropriate.
                (2) Report.--Such Secretary shall submit to the Congress,
            by not later than 2 years after the date that this subtitle
            applies in all States, a report on the findings of the study.
        (b) Workers Compensation Carrier Filings.--
                (1) In general.--Within six months after the date this
            subtitle is effective in a participating State, each workers
            compensation carrier (other than a self-funded employer)
            providing workers compensation insurance in the State shall
            make a filing with an agency designated by the State. Such
            filing shall describe the manner in which such carrier has
            modified (or intends to modify) its premium rates for workers
            compensation insurance provided in the State to reflect the
            changes brought about by the provisions in this subtitle. The
            filing shall include such actuarial projections and assumptions
            as necessary to support the modifications of such rates.
                (2) Report to secretary.--Each participating State shall
            provide to the Secretary of Labor such information on filings
            made under paragraph (1) as such Secretary may specify.

                         PART 4--DEMONSTRATION PROJECTS

    SEC. 10031. AUTHORIZATION.

        The Secretary of Health and Human Services and the Secretary of
    Labor are authorized to conduct demonstration projects under this part
    in one or more States with respect to treatment of work-related
    injuries and illnesses.

    SEC. 10032. DEVELOPMENT OF WORK-RELATED PROTOCOLS.

        (a) In General.--Under this part, the Secretaries, in consultation
    with States and such experts on work-related injuries and illnesses as
    the Secretaries find appropriate, shall develop protocols for the
    appropriate treatment of work-related conditions.
        (b) Testing of Protocols.--The Secretaries shall enter into
    contracts with one or more health alliances to test the validity of the
    protocols developed under subsection (a).

    SEC. 10033. DEVELOPMENT OF CAPITATION PAYMENT MODELS.

        Under this part, the Secretaries shall develop, using protocols
    developed under section 10032 if possible, methods of providing for
    payment by workers compensation carriers to health plans on a per case,
    capitated payment for the treatment of specified work-related injuries
    and illnesses.

                                                        Title X, Subtitle B

                        Subtitle B--Automobile Insurance

    SEC. 10100. DEFINITIONS.

        In this subtitle:
                (1) Injured individual.--The term ``injured individual''
            means, with respect to a health plan, an individual enrolled
            under the plan who has an injury or illness sustained in an
            automobile accident for which automobile insurance medical
            benefits are available.
                (2) Automobile insurance medical benefits.--The term
            ``automobile insurance medical benefits'' means, with respect
            to an enrollee, the comprehensive medical benefits for injuries
            or illnesses sustained in automobile accidents.
                (3) Automobile insurance carrier.--The term ``automobile
            insurance carrier'' means an insurance company that underwrites
            automobile insurance medical benefits and includes an employer
            or fund that is financially at risk for the provision of
            automobile insurance medical benefits.
                (4) Automobile insurance medical services.--The term
            ``automobile insurance medical services'' means items and
            services included in automobile insurance medical benefits and
            includes items and services (such as rehabilitation services
            and long-term care services) commonly used for treatment of
            injuries and illnesses sustained in automobile accidents.

       PART 1--HEALTH PLAN REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE

    SEC. 10101. PROVISION OF AUTOMOBILE INSURANCE MEDICAL BENEFITS THROUGH
                  HEALTH PLANS.

        (a) In General.--An individual entitled to automobile insurance
    medical benefits and enrolled in a health plan shall receive automobile
    insurance medical services through the provision (or arrangement for
    the provision) of such services by the health plan.
        (b) Referral for Specialized Services.--Each health plan shall
    provide for such referral for automobile insurance medical services as
    may be necessary to assure appropriate treatment of injured
    individuals.
        (c) Exceptions.--Subsections (a) and (b) shall not apply in the
    case of an individual described in section 1004(b) and making an
    election described in such section.
        (d) Alternative Permitted.--Subsection (a) shall not be construed
    as preventing an injured individual and an automobile insurance carrier
    from agreeing that automobile insurance medical services shall be
    provided other than by or through the health plan in which the
    individual is enrolled.

    SEC. 10102. PAYMENT BY AUTOMOBILE INSURANCE CARRIER.

        (a) Payment.--
                (1) In general.--Except as provided in subsection (b), each
            automobile insurance carrier that is liable for payment for
            automobile insurance medical services furnished by or through a
            health plan, regardless of whether or not the services are
            included in the comprehensive benefit package, shall make
            payment for such services.
                (2) Use of regional alliance fee schedule.--Such payment
            shall be made in accordance with the applicable fee schedule
            established under section 1322(c) or section 10111.
        (b) Alternative Payment Methodologies.--Subsection (a) shall not
    apply--
                (1) in the case of a regional alliance or participating
            State that establishes an alternative payment methodology (such
            as payment on a negotiated fee for each case) for payment for
            automobile insurance medical services; or
                (2) in the case in which a automobile insurance carrier and
            the health plan negotiate alternative payment arrangements.
        (c) Limitation of Liability of Injured Individual.--Nothing in this
    part shall be construed as requiring an injured individual to make any
    payment (including payment of any cost sharing or any amount in excess
    of the applicable fee schedule) to any health plan or health care
    provider for the receipt of automobile insurance medical services.

                  PART 2--REQUIREMENT OF PARTICIPATING STATES

    SEC. 10111. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE.

        Each participating State shall develop a fee schedule applicable to
    payment for automobile insurance medical services for which a fee is
    not included in the applicable fee schedule established under section
    1322(c).

    SEC. 10112. CONSTRUCTION.

        Nothing in this subtitle shall be construed as altering--
                (1) the determination of whether or not a person is an
            injured individual and entitled to automobile insurance medical
            benefits under State law, or
                (2) the scope of items and services available to injured
            individuals entitled to automobile insurance medical benefits
            under State law.

                PART 3--APPLICATION OF INFORMATION REQUIREMENTS.

    SEC. 10121. APPLICATION OF INFORMATION REQUIREMENTS.

        (a) In General.--The provisions of--
                (1) part 3 of subtitle B of title V (relating to use of
            standard forms), and
                (2) section 5101(e)(9) (relating to provision of data on
            quality),
    apply to the provision of automobile insurance medical services in the
    same manner as such provisions apply with respect to the provision of
    services included in the comprehensive benefit package.
        (b) Rules.--The Secretary of Labor shall promulgate rules to
    clarify the responsibilities of health plans and automobile insurance
    carriers in carrying out the provisions referred to in subsection (a).

                                                        Title X, Subtitle C

            Subtitle C--COMMISSION ON INTEGRATION OF HEALTH BENEFITS

    SEC. 10201. COMMISSION.

        (a) Establishment.--There is hereby created a Commission on
    Integration of Health Benefits (in this section referred to as the
    ``Commission'').
        (b) Composition.--
                (1) In general.--The Commission shall consist of 15 members
            appointed jointly by the Secretary of Health and Human Services
            and the Secretary of Labor.
                (2) No compensation except travel expenses.--Members of the
            Commission shall serve without compensation, but the
            Secretaries shall provide that each member shall receive travel
            expenses, including per diem in lieu of subsistence, in
            accordance with sections 5702 and 5703 of title 5, United
            States Code.
        (c) Duties.--The Commission shall study the feasibility and
    appropriateness of transferring financial responsibility for all
    medical benefits (including those currently covered under workers
    compensation and automobile insurance) to health plans.
        (d) Staff Support.--The Secretaries shall provide staff support for
    the Commission.
        (e) Report.--The Commission shall submit a report on its work to
    the President by not later than July 1, 1995. If such report recommends
    the integration of financial responsibility for all medical benefits in
    health plans, such report shall provide for a detailed plan as to how
    (and when) such an integration should be effected under this Act.
        (f) Termination.--The Commission shall terminate 90 days after the
    date of submission of its report under subsection (e).
        (g) Authorization of Appropriations.--There are authorized to be
    appropriated such sums as may be necessary to carry out this section.

                Subtitle D--Federal Employees' Compensation Act

    SEC. 10301. APPLICATION OF POLICY.

                                                        Title X, Subtitle D

        (a) In General.--Chapter 81 of title 5, United States Code, known
    as the Federal Employees' Compensation Act shall be interpreted and
    administered consistent with the provisions of subtitle A.
        (b) Construction.--In applying subsection (a), subtitle A shall be
    applied as if the following modifications had been made in subtitle A:
                (1) Any reference in section 10000, section 10001(c)(2)(C),
            section 10012(b), or section 10014 to a State law is deemed to
            include a reference to chapter 81 of title 5, United States
            Code.
                (2) The term ``workers compensation carrier'' includes the
            Employees Compensation Fund (established under section 8147 of
            title 5, United States Code).

              Subtitle E--Davis-Bacon Act and Service Contract Act

    SEC. 10401. COVERAGE OF BENEFITS UNDER HEALTH SECURITY ACT.

                                                        Title X, Subtitle E

        (a) Davis-Bacon Act.--Subsection (b)(2) of the first section of the
    Davis Bacon Act (40 U.S.C. 276a(b)(2)) is amended in the matter
    following subparagraph (B) by inserting after ``local law'' the
    following: ``(other than benefits provided pursuant to the Health
    Security Act)''.
        (b) Service Contract Act of 1965.--The second sentence of section
    2(a)(2) of the Service Contract Act of 1965 (41 U.S.C. 351(a)(2)) is
    amended by inserting after ``local law'' the following: ``(other than
    benefits provided pursuant to the Health Security Act)''.

                          Subtitle F--Effective Dates

    SEC. 10501. REGIONAL ALLIANCES.

                                                        Title X, Subtitle F

        The provisions of subtitles A and B of this title apply to regional
    alliances, and regional alliance health plans, in a State 2 years after
    the State's first year (as defined in section 1902(17)).

    SEC. 10502. CORPORATE ALLIANCES.

        The provisions of subtitles A and B of this title apply to
    corporate alliances, and corporate alliance health plans, on the date
    under section 10501 that such subtitles apply to regional alliances,
    and regional alliance health plans, in the State.

    SEC. 10503. FEDERAL REQUIREMENTS.

        The provisions of subtitle D of this title shall take effect on
    January 1, 1998.

                    TITLE XI--TRANSITIONAL INSURANCE REFORM

                                                                   Title XI

                           table of contents of title

                                                                       Page
    Sec. 11001. Imposition of requirements......................       1335
    Sec. 11002. Enforcement.....................................       1337
    Sec. 11003. Requirements relating to preserving current            1338
                                coverage.
    Sec. 11004. Restrictions on premium increases during               1340
                                transition.
    Sec. 11005. Requirements relating to portability............       1350
    Sec. 11006. Requirements limiting reduction of benefits.....       1353
    Sec. 11007. National transitional health insurance risk pool       1354
    Sec. 11008. Definitions.....................................       1358
    Sec. 11009. Termination.....................................       1363

    SEC. 11001. IMPOSITION OF REQUIREMENTS.

        (a) In General.--The Secretary and the Secretary of Labor shall
    apply the provisions of this title to assure, to the extent possible,
    the maintenance of current health care coverage and benefits during the
    period between the enactment of this Act and the dates its provisions
    are implemented in the various States.
        (b) Enforcement.--
                (1) Health insurance plans.--The Secretary shall enforce
            the requirements of this title with respect to health insurance
            plans. The Secretary shall promulgate regulations to carry out
            the requirements under this title with respect to health
            insurance plans. The Secretary shall promulgate regulations
            with respect to section 11004 within 90 days after the date of
            the enactment of this Act.
                (2) Self-insured plans.--The Secretary of Labor shall
            enforce the requirements of this title with respect to self-
            insured plans. Such Secretary shall promulgate regulations to
            carry out the requirements under this title as they relate to
            self-funded plans.
                (3) Arrangements with states.--The Secretary and the
            Secretary of Labor may enter into arrangements with a State to
            enforce the requirements of this title with respect to health
            insurance plans and self-insured plans issued or sold, or
            established and maintained, in the State.
        (c) Preemption.--The requirements of this title do not preempt any
    State law unless State law directly conflicts with such requirements.
    The provision of additional protections under State law shall not be
    considered to directly conflict with such requirements. The Secretary
    (or, in the case of a self-insured plan, the Secretary of Labor) may
    issue letter determinations with respect to whether this Act preempts a
    provision of State law.
        (d) Interim Final Regulations.--Section 1911 shall apply to
    regulations issued to carry out this title. The Secretary may consult
    with States and the National Association of Insurance Commissioners in
    issuing regulations and guidelines under this title.
        (e) Construction.--The provisions of this title shall be construed
    in a manner that assures, to the greatest extent practicable,
    continuity of health benefits under health benefit plans in effect on
    the effective date of this Act.
        (f) Special Rules for Acquisitions and Transfers.--The Secretary
    may issue regulations regarding the application of this title in the
    case of health insurance plans (or groups of such plans) which are
    transferred from one insurer to another insurer through assumption,
    acquisition, or otherwise.

    SEC. 11002. ENFORCEMENT.

        (a) In General.--Any health insurer or health benefit plan sponsor
    that violates a requirement of this title shall be subject to a civil
    money penalty of not more than $25,000 for each such violation. The
    provisions of section 1128A of the Social Security Act (other than
    subsections (a) and (b)) shall apply to civil money penalties under
    this subsection in the same manner as they apply to a penalty or
    proceeding under section 1128A(a) of such Act.
        (b) Equitable Remedies.--
                (1) In general.--A civil action may be brought by the
            applicable Secretary--
                        (A) to enjoin any act or practice which violates
                    any provision of this title, or
                        (B) to obtain other appropriate equitable relief
                    (i) to redress such violations, or (ii) to enforce any
                    provision of this title, including, in the case of a
                    wrongful termination of (or refusal to renew) coverage,
                    reinstating coverage effective as of the date of the
                    violation.

    SEC. 11003. REQUIREMENTS RELATING TO PRESERVING CURRENT COVERAGE.

        (a) Prohibition of Termination.--
                (1) Group health insurance plans.--Each health insurer that
            provides a group health insurance plan may not terminate (or
            fail to renew) coverage for any covered employee if the
            employer of the employee continues the plan, except in the case
            of--
                        (A) nonpayment of required premiums,
                        (B) fraud, or
                        (C) misrepresentation of a material fact relating
                    to an application for coverage or claim for benefits.
                (2) Individual health insurance plans.--Each health insurer
            that provides coverage to a covered individual under an
            individual health insurance plan may not terminate (or fail to
            renew) coverage for such individual (or a covered dependent),
            except in the case of--
                        (A) nonpayment of required premiums,
                        (B) fraud, or
                        (C) misrepresentation of a material fact relating
                    to an application for coverage or claim for benefits.
                (2) Effective date of title.--
                        (A) In general.--This subsection shall take effect
                    on the effective date of this title and shall apply to
                    coverage on or after such date.
                        (B) Definition.--Except as otherwise provided, in
                    this title the term ``effective date of this title''
                    means the date of the enactment of this Act.
        (b) Acceptance of New Members in a Group Health Insurance Plan.--
                (1) In general.--In the case of a health insurer that
            provides a group health insurance plan that is in effect on the
            effective date of this title, the insurer is required--
                        (A) to accept all individuals, and their eligible
                    dependents, who become full-time employees (as defined
                    in section 1901(b)(2)(C)) of an employer covered after
                    such effective date;
                        (B) to establish and apply premium rates that are
                    consistent with section 11004(b); and
                        (C) to limit the application of pre-existing
                    condition restrictions in accordance with section
                    11005.
                (2) Consistent application of rules relating to dependents
            and waiting periods.--In this subsection, the term ``eligible
            dependent'', with respect to a group health insurance plan, has
            the meaning provided under the plan as of October 27, 1993, or,
            in the case of a plan not established as of such date, as of
            the date of establishment of the plan.

    SEC. 11004. RESTRICTIONS ON PREMIUM INCREASES DURING TRANSITION.

        (a) Division of Health Insurance Plans by Sector.--For purposes of
    this section, each health insurer shall divide its health insurance
    business into the following 3 sectors:
                (1) Health insurance for groups with at least 100 covered
            lives (in this section referred to as the ``large group
            sector'')
                (2) Health insurance for groups with fewer than 100 covered
            lives (in this section referred as the ``small group sector'').
                (3) Health insurance for individuals, and not for groups
            (in this section referred to as the ``individual sector'').
        (b) Premium Changes to Reflect Changes in Group or Individual
    Characteristics or Terms of Coverage.--
                (1) Application.--The provisions of this subsection shall
            apply to changes in premiums that reflect--
                        (A) changes in the number of individuals covered
                    under a plan;
                        (B) changes in the group or individual
                    characteristics (including age, gender, family
                    composition or geographic area but not including health
                    status, claims experience or duration of coverage under
                    the plan) of individuals covered under a plan;
                        (C) changes in the level of benefits (including
                    changes in cost-sharing) under the plan; and
                        (D) changes in any material terms and conditions of
                    the health insurance plan (other than factors related
                    to health status, claims experience, and duration of
                    coverage under the plan).
                (2) Specification of reference rate for each sector.--Each
            health insurer shall calculate a reference rate for each such
            sector. The reference rate for a sector shall be calculated so
            that, if it were applied using the rate factors specified under
            paragraph (3), the average premium rate for individuals and
            groups in that sector would approximate the average premium
            rate charged individuals and groups in the sector as of the
            effective date of this title.
                (3) Single set of rate factors within each sector.--
                        (A) In general.--Each health insurer shall develop
                    for each sector a single set of rate factors which will
                    be used to calculate any changes in premium that relate
                    to the reasons described in subparagraphs (B) through
                    (D) of paragraph (1).
                        (B) Standards.--Such rate factors--
                                (i) shall relate to reasonable and
                            objective differences in demographic
                            characteristics, in the design and in levels of
                            coverage, and in other terms and conditions of
                            a contract,
                                (ii) shall not relate to expected health
                            status, claims experience, or duration of
                            coverage of the one or more groups or
                            individuals, and
                                (iii) shall comply with regulations
                            established under subsection (f).
                (4) Computation of Premium Changes.--
                        (A) In general.--Changes in premium rates that
                    relate to the reasons described in paragraph (1) shall
                    be calculated using the rate factors developed pursuant
                    to paragraph (3).
                        (B) Application to changes in number of covered
                    individuals.--In the case of a change in premium rates
                    related to the reason described in paragraph (1)(A),
                    the change in premium rates shall be calculated to
                    reflect, with respect to the enrollees who enroll or
                    disenroll in a health insurance plan, the sum of the
                    products, for such individuals, of the reference rate
                    (determined under paragraph (2)) and the rate factors
                    (specified under paragraph (3)) applicable to such
                    enrollees.
                        (C) Application of other factors.--
                                (i) In general.--In the case of a change in
                            premium rates related to a reason described in
                            subparagraph (B), (C), or (D) of paragraph (1),
                            the change in premium rates with respect to
                            each health insurance plan in each sector shall
                            reflect the rate factors specified under
                            paragraph (3) applicable to the reason as
                            applied to the current premium charged for the
                            health insurance plan. Such rate factors shall
                            be applied in a manner so that the resulting
                            adjustment, to the extent possible, reflects
                            the premium that would have been charged under
                            the plan if the reason for the change in
                            premium had existed at the time that the
                            current premium rate was calculated.
                                (ii) No reflection of change in health
                            status.--In applying the rate factors under
                            this subparagraph, the adjustment shall not
                            reflect any change in the health status, claims
                            experience or duration of coverage with respect
                            to any employer or individual covered under the
                            plan.
                (5) Limitation on application.--This subsection shall only
            apply--
                        (A) to changes in premiums occurring on or after
                    the date of the enactment of this Act to groups and
                    individuals covered as of such date, and
                        (B) with respect to groups and individuals
                    subsequently covered, to changes in premiums subsequent
                    to such coverage.
                (6) Application to community-rated plans.--Nothing in this
            subsection shall require the application of rate factors
            related to individual or group characteristics with respect to
            community-rated plans.
        (c) Limitations on Changes in Premiums Related to Increases in
    Health Care Costs and Utilization.--
                (1) Application.--The provisions of this subsection shall
            apply to changes in premiums that reflect increases in health
            care costs and utilization.
                (2) Equal increase for all plans in all sectors.--
                        (A) In general.--Subject to subparagraph (B), the
                    annual percentage increase in premiums by a health
                    insurer for health insurance plans in the individual
                    sector, small group sector, and large group sector, to
                    the extent such increase reflect increases in health
                    care costs and utilization, shall be the same for all
                    such plans in those sectors.
                        (B) Special rule for large group sector.--The
                    annual percentage increase in premiums by a health
                    insurer for health insurance plans in the large group
                    sector may vary among such plans based on the claims
                    experience of an employer (to the extent the experience
                    is credible), so long as the weighted average of such
                    increases for all such plans in the sector complies
                    with the requirement of subparagraph (A).
                        (C) Geographic application.--Subparagraphs (A) and
                    (B)--
                                (i) may be applied on a national level, or
                                (ii) may vary based on geographic area, but
                            only if (I) such areas are sufficiently large
                            to provide credible data on which to calculate
                            the variation and (II) the variation is due to
                            reasonable factors related to the objective
                            differences among such areas in costs and
                            utilization of health services.
                        (D) Exceptions to accommodate state rate reform
                    efforts.--Subparagraphs (A) and (B) shall not apply, in
                    accordance with guidelines of the Secretary, to the
                    extent necessary to permit a State to narrow the
                    variations in premiums among health insurance plans
                    offered by health insurers to similarly situated groups
                    or individuals within a sector.
                        (E) Exception for rates subject to prior
                    approval.--Subparagraphs (A) and (B) shall not apply to
                    premiums that are subject to prior approval by a State
                    insurance commissioner (or similar official) and are
                    approved by such official.
                        (F) Other reasons specified by the secretary.--The
                    Secretary may specify through regulations such other
                    exceptions to the provisions of this subsection as the
                    Secretary determines are required to enhance stability
                    of the health insurance market and continued
                    availability of coverage.
                (3) Even application throughout a year.--In applying the
            provisions of this subsection to health insurance plans that
            are renewed in different months of a year, the annual
            percentage increase shall be applied in a consistent, even
            manner so that any variations in the rate of increase applied
            in consecutive months are even and continuous during the year.
                (4) Petition for exception.--A health insurer may petition
            the Secretary (or a State acting under a contract with the
            Secretary under section 11001(b)(3)) for an exception from the
            application of the provisions of this subsection. The Secretary
            may approve such an exception if--
                        (A) the health insurer demonstrates that the
                    application of this subsection would threaten the
                    financial viability of the insurer, and
                        (B) the health insurer offers an alternative method
                    for increasing premiums that is not substantially
                    discriminatory to any sector or to any group or
                    individual covered by a health insurance plan offered
                    by the insurer.
        (d) Prior Approval for Certain Rate Increases.--
                (1) In general.--If the percentage increase in the premium
            rate for the individual and small group sector exceeds a
            percentage specified by the Secretary under paragraph (2),
            annualized over any 12-month period, the increase shall not
            take effect unless the Secretary (or a State acting under a
            contract with the Secretary under section 11001(b)(3)) has
            approved the increase.
                (2) Percentage.--The Secretary shall specify, for each 12-
            month period beginning after the date of the enactment of this
            Act, a percentage that will apply under paragraph (1). Such
            percentage shall be determined taking into consideration the
            rate of increase in health care costs and utilization, previous
            trends in health insurance premiums, and the conditions in the
            health insurance market. Within 30 days after the date of the
            enactment of this Act, the Secretary shall first specify a
            percentage under this paragraph.
        (e) Documentation of Compliance.--
                (1) Period for conformance.--Effective 1 year after the
            date of the enactment of this Act, the premium for each health
            insurance plan shall be conformed in a manner that complies
            with the provisions of this section.
                (2) Methodology.--Each health insurer shall document the
            methodology used in applying subsections (b) and (c) with
            respect to each sector (and each applicable health plan). Such
            documentation shall be sufficient to permit the auditing of the
            application of such methodology to determine if such
            application was consistent with such subsections.
                (3) Certification.--For each 6-month period in which this
            section is effective, each health insurer shall file a
            certification with the Secretary (or with a State with which
            the Secretary has entered into an arrangement under section
            11001(b)(3)) that the insurer is in compliance with such
            requirements.
        (f) Regulations.--The Secretary shall establish regulations to
    carry out this section. Such regulations may include guidelines
    relating to the permissible variation that results from the use of
    demographic or other characteristics in the development of rate
    factors. Such guidelines may be based on the guidelines currently used
    by States in applying rate limitations under State insurance
    regulations.
        (g) Effective Period.--This section shall apply to premium
    increases occurring during the period beginning on the date of the
    enactment of this Act and ending, for a health insurance plan provided
    in a State, on the first day of the State's first year.

    SEC. 11005. REQUIREMENTS RELATING TO PORTABILITY.

        (a) Treatment of Preexisting Condition Exclusions.--
                (1) In general.--Subject to the succeeding provisions of
            this subsection, a group health benefit plan may exclude
            coverage with respect to services related to treatment of a
            preexisting condition, but the period of such exclusion may not
            exceed 6 months. The exclusion of coverage shall not apply to
            services furnished to newborns or in the case of a plan that
            did not apply such exclusions as of the effective date of this
            title.
                (2)  Crediting of previous coverage.--
                        (A) In general.--A group health benefit plan shall
                    provide that if an individual covered under such plan
                    is in a period of continuous coverage (as defined in
                    subparagraph (B)(i)) with respect to particular
                    services as of the date of initial coverage under such
                    plan, any period of exclusion of coverage with respect
                    to a preexisting condition for such services or type of
                    services shall be reduced by 1 month for each month in
                    the period of continuous coverage.
                        (B) Definitions.--As used in this paragraph:
                                (i) Period of continuous coverage.--The
                            term ``period of continuous coverage'' means,
                            with respect to particular services, the period
                            beginning on the date an individual is enrolled
                            under a group or individual health benefit
                            plan, self-insured plan, the medicare program,
                            a State medicaid plan, or other health benefit
                            arrangement which provides benefits with
                            respect to such services and ends on the date
                            the individual is not so enrolled for a
                            continuous period of more than 3 months.
                                (ii) Preexisting condition.--The term
                            ``preexisting condition'' means, with respect
                            to coverage under a health benefits plan, a
                            condition which has been diagnosed or treated
                            during the 6-month period ending on the day
                            before the first date of such coverage (without
                            regard to any waiting period).
        (b) Waiting Periods.--A self-insured plan, and an employer with
    respect to a group health insurance plan, may not discriminate among
    employees in the establishment of a waiting period before making health
    insurance coverage available based on the health status, claims
    experience, receipt of health care, medical history, or lack of
    evidence of insurability, of the employee or the employee's dependents.

    SEC. 11006. REQUIREMENTS LIMITING REDUCTION OF BENEFITS.

        (a) In General.--A self-insured sponsor may not make a modification
    of benefits described in subsection (b).
        (b) Modification of Benefits Described.--
                (1) In general.--A modification of benefits described in
            this subsection is any reduction or limitation in coverage,
            effected on or after the effective date of this title, with
            respect to any medical condition or course of treatment for
            which the anticipated cost is likely to exceed $5,000 in any
            12-month period.
                (2) Treatment of termination.--A modification of benefits
            includes the termination of a plan if the sponsor, within a
            period (specified by the Secretary of Labor) establishes a
            substitute plan that reflects the reduction or limitation
            described in paragraph (1).
        (c) Remedy.--Any modification made in violation of this section
    shall not be effective and the self-insured sponsor shall continue to
    provide benefits as though the modification (described in subsection
    (b)) had not occurred.

    SEC. 11007. NATIONAL TRANSITIONAL HEALTH INSURANCE RISK POOL.

        (a) Establishment.--In order to assure access to health insurance
    during the transition, the Secretary is authorized to establish a
    National Transitional Health Insurance Risk Pool (in this section
    referred to as the ``national risk pool'') in accordance with this
    section.
        (b) Administration.--
                (1) In general.--The Secretary may administer the national
            risk pool through contracts with--
                        (A) one or more existing State health insurance
                    risk pools,
                        (B) one or more private health insurers, or
                        (C) such other contracts as the Secretary deems
                    appropriate.
                (2) Coordination with state risk pools.--The Secretary may
            enter into such arrangements with existing State health
            insurance risk pools to coordinate the coverage under such
            pools with the coverage under the national risk pool. Such
            coordination may address eligibility and funding of coverage
            for individuals currently covered under State risk pools.
        (c) Eligibility for Coverage.--The national risk pool shall provide
    health insurance coverage to individuals who are unable to secure
    health insurance coverage from private health insurers because of their
    health status or condition (as determined in accordance with rules and
    procedures specified by the Secretary).
        (d) Benefits.--
                (1) In general.--Benefits and terms of coverage provided
            through the national risk pool shall include items and
            services, conditions of coverage, and cost sharing (subject to
            out-of-pocket limits on cost sharing) comparable to the
            benefits and terms of coverage available in State health
            insurance risk pools.
                (2) Payment rates.--Payments under the national risk pool
            for covered items and services shall be made at rates
            (specified by the Secretary) based on payment rates for
            comparable items and services under the medicare program.
            Providers who accept payment from the national risk pool shall
            accept such payment as payment in full for the service, other
            than for cost sharing provided under the national risk pool.
        (e) Premiums.--
                (1) In general.--Premiums for coverage in the national risk
            pool shall be set in a manner specified by the Secretary.
                (2) Variation.--Such premiums shall vary based upon age,
            place of residence, and other traditional underwriting factors
            other than on the basis of health status or claims experience.
                (3) Limitation.--The premiums charged individuals shall be
            set at a level that is no less than 150 percent of the premiums
            that the Secretary estimates would be charged to a population
            of average risk for the covered benefits.
        (f) Treatment of Shortfalls.--
                (1) Estimates.--The Secretary shall estimate each year the
            extent to which the total premiums collected under subsection
            (e) in the year are insufficient to cover the expenses of the
            national risk pool with respect to the year.
                (2) Temporary borrowing authority.--The Secretary of the
            Treasury is authorized to advance to the Secretary amounts
            sufficient to cover the amount estimated under paragraph (1)
            during the year before assessments are collected under
            paragraph (3), except that the total balance of such Treasury
            advances at any time shall not exceed $1,500,000,000. The
            Secretary shall repay such amounts, with interest at a rate
            specified by the Secretary of the Treasury, from the
            assessments under paragraph (3).
                (3) Assessments.--
                        (A) In general.--Each health benefit plan sponsor
                    shall be liable for an assessment in the amount
                    specified in subparagraph (C).
                        (B) Amount.--For each year for which amounts are
                    advanced under paragraph (2), the Secretary shall--
                                (i) estimate the total amount of premiums
                            (and premium equivalents) for health benefits
                            under health benefit plans for the succeeding
                            year, and
                                (ii) calculate a percentage equal to (I)
                            the total amounts repayable by the Secretary to
                            the Secretary of the Treasury under paragraph
                            (2) for the year, divided by the amount
                            determined under clause (i).
                        (C) Assessment amount.--The amount of an assessment
                    for a sponsor of a health benefit plan for a year shall
                    be equal to the percentage calculated under
                    subparagraph (B)(ii) (or, if less, \1/2\ of 1 percent)
                    of the total amount of premiums (and premium
                    equivalents) for health benefits under the plan for the
                    previous year.
                        (D) Self-insured plans.--The amount of premiums
                    (and premium equivalents) under this paragraph shall be
                    estimated--
                                (i) by the Secretary for health insurance
                            plans, and
                                (ii) by the Secretary of Labor for self-
                            insured plans.
                    Such estimates may be based on a methodology that
                    requires plans liable for assessment to file
                    information with the applicable Secretary.

    SEC. 11008. DEFINITIONS.

        In this title:
                (1) Applicable secretary.--The term ``applicable
            Secretary'' means--
                        (A) the Secretary with respect to health insurance
                    plans and insurers, or
                        (B) the Secretary of Labor with respect to self-
                    insured plans and self-insured plan sponsors.
                (2) Covered employee.--The term ``covered employee'' means
            an employee (or dependent of such an employee) covered under a
            group health benefits plan.
                (3) Covered individual.--The ``covered individual'' means,
            with respect to a health benefit plan, an individual insured,
            enrolled, eligible for benefits, or otherwise covered under the
            plan.
                (4) Group health benefits plan.--The term ``group health
            benefits plan'' means a group health insurance plan and a self-
            insured plan.
                (5) Group health insurance plan.--
                        (A) In general.--The term ``group health insurance
                    plan'' means a health insurance plan offered primarily
                    to employers for the purpose of providing health
                    insurance to the employees (and dependents) of the
                    employer.
                        (B) Inclusion of association plans and mewas.--Such
                    term includes--
                                (i) any arrangement in which coverage for
                            health benefits is offered to employers through
                            an association, trust, or other arrangement,
                            and
                                (ii) a multiple employer welfare
                            arrangement (as defined in section 3(40) of the
                            Employee Retirement Income Security Act of
                            1974), whether funded through insurance or
                            otherwise.
                (6) Health benefits plan.--The term ``health benefits
            plan'' means health insurance plan and a self-insured health
            benefit plan.
                (7) Health benefit plan sponsor.--The term ``health benefit
            plan sponsor'' means, with respect to a health insurance plan
            or self-insured plan, the insurer offering the plan or the
            self-insured sponsor for the plan, respectively.
                (8) Health insurance plan.--
                        (A) In general.--Except as provided in subparagraph
                    (B), the term ``health insurance plan'' means any
                    contract of health insurance, including any hospital or
                    medical service policy or certificate, any major
                    medical policy or certificate, any hospital or medical
                    service plan contract, or health maintenance
                    organization subscriber 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.
                        (C) Stop loss insurance not covered.--Such term
                    does not include any aggregate or specific stop-loss
                    insurance or similar coverage applicable to a self-
                    insured plan. The Secretary may develop rules
                    determining the applicability of this subparagraph with
                    respect to minimum premium plans or other partially
                    insured plans.
                (9) Health insurer.--The term ``health insurer'' means a
            licensed insurance company, a prepaid hospital or medical
            service plan, a health maintenance organization, or other
            entity providing a plan of health insurance or health benefits
            with respect to which the State insurance laws are not
            preempted under section 514 of the Employee Retirement Income
            Security Act of 1974.
                (10) Individual health insurance plan.--
                        (A) In general.--The term ``individual health
                    insurance plan'' means any health insurance plan
                    directly purchased by an individual or offered
                    primarily to individuals (including families) for the
                    purpose of permitting individuals (without regard to an
                    employer contribution) to purchase health insurance
                    coverage.
                        (B) Inclusion of association plans.--Such term
                    includes any arrangement in which coverage for health
                    benefits is offered to individuals through an
                    association, trust, list-billing arrangement, or other
                    arrangement in which the individual purchaser is
                    primarily responsible for the payment of any premium
                    associated with the contract.
                        (C) Treatment of certain association plans.--In the
                    case of a health insurance plan sponsored by an
                    association, trust, or other arrangement that provides
                    health insurance coverage both to employers and to
                    individuals, the plan shall be treated as--
                                (i) a group health insurance plan with
                            respect to such employers, and
                                (ii) an individual health insurance plan
                            with respect to such individuals.
                (11) Self-insured plan.--The term ``self-insured plan''
            means an employee welfare benefit plan or other arrangement
            insofar as the plan or arrangement provides benefits with
            respect to some or all of the items and services included in
            the comprehensive benefit package (as in effect as of January
            1, 1996) that is funded in a manner other than through the
            purchase of one or more health insurance plans. Such term shall
            not include a group health insurance plan described in
            paragraph (5)(B)(ii).
                (12) Self-insured sponsor.--The term ``self-insured
            sponsor'' includes, with respect to a self-insured plan, any
            entity which establishes or maintains the plan.
                (13) State commissioner of insurance.--The term ``State
            commissioner of insurance'' includes a State superintendent of
            insurance.

    SEC. 11009. TERMINATION.

        (a) Health Insurance Plans.--The provisions of this title shall not
    apply to a health insurance plan provided in a State on and after the
    first day of the first year for the State.
        (b) Self-Insured Plans.--The provisions of this title shall not
    apply to a self-insured plan that--
                (1) is sponsored by a sponsor that is an eligible sponsor
            of a corporate alliance (described in section 1311(b)(1)), as
            of the effective date of the election under section 1312(c);
            and
                (2) is sponsored by a sponsor that is not such an eligible
            sponsor, with respect to individuals or groups in a State on
            and after the first day of the first year for the State.

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    S 1757 PCS----79
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    S 1757 PCS----81
    S 1757 PCS----82
    S 1757 PCS----83
    S 1757 PCS----84
    S 1757 PCS----85
    S 1757 PCS----86
    S 1757 PCS----87
    S 1757 PCS----88
    S 1757 PCS----89