[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2096 Placed on Calendar Senate (PCS)]

                                                       Calendar No. 427

103d CONGRESS

  2d Session

                                S. 2096

_______________________________________________________________________

                                 AN ACT

To improve private health insurance, to provide equitable tax treatment 
of health insurance, to reform Federal health care programs, to provide 
      health care cost reduction measures, and for other purposes.

_______________________________________________________________________

                              May 16, 1994

            Read the second time and placed on the calendar





                                                       Calendar No. 427
103d CONGRESS
  2d Session
                                S. 2096

To improve private health insurance, to provide equitable tax treatment 
of health insurance, to reform Federal health care programs, to provide 
      health care cost reduction measures, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                 May 10 (legislative day, May 2), 1994

 Mr. Domenici introduced the following bill; which was read the first 
                                  time

                              May 16, 1994

            Read the second time and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
To improve private health insurance, to provide equitable tax treatment 
of health insurance, to reform Federal health care programs, to provide 
      health care cost reduction measures, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS.

    (a) Short Title.--This Act may be cited as the ``Health Care Reform 
Act of 1994''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents; definitions.
              TITLE I--IMPROVING PRIVATE HEALTH INSURANCE

                  Subtitle A--Federal and State Roles

Sec. 101. Federal reform and State implementation.
Sec. 102. Applicable regulatory authority for health plans.
Sec. 103. State health reform program requirements.
                  Subtitle B--Health Plan Requirements

Sec. 111. Certified health plan requirements.
Sec. 112. Additional requirements for accountable health plans.
Sec. 113. Standard benefits.
               Subtitle C--Improved Health Plan Delivery

Sec. 121. Small group purchasing pools.
Sec. 122. Employer responsibility.
                TITLE II--TAX AND ENFORCEMENT PROVISIONS

Sec. 200. Amendment of 1986 Code.
                   Subtitle A--General Tax Provisions

Sec. 201. Certain employer health plan contributions included in 
                            income.
Sec. 202. Deductions for costs of health plans.
          TITLE III--FINANCING AND REFORMING FEDERAL PROGRAMS

                          Subtitle A--Medicare

Sec. 301. Medicare choice.
Sec. 302. Other medicare provisions.
Sec. 303. Income-tested medicare premiums.
Sec. 304. Medicare administrative simplification.
            Subtitle B--Health Discount and Medicaid Reform

                        Part I--Health Discount

Sec. 311. State health discount programs.
Sec. 312. Health discount program design.
Sec. 313. Financing health discounts.
Part II--Termination of Authority to Furnish Acute Care Services Under 
                          the Medicaid Program

Sec. 321. Termination of authority to furnish acute care services under 
                            the medicaid program.
            Subtitle C--Increase in Tax on Tobacco Products

Sec. 330. Amendment of 1986 Code.
Sec. 331. Increase in excise taxes on tobacco products.
Sec. 332. Modifications of certain tobacco tax provisions.
Sec. 333. Imposition of excise tax on manufacture or importation of 
                            roll-your-own tobacco.
               TITLE IV--IMPROVING ACCESS IN RURAL AREAS

Sec. 401. Community health centers.
Sec. 402. National health service corps.
Sec. 403. Tax incentives for practice in frontier, rural, and urban 
                            underserved areas.
Sec. 404. Incentives for primary care residents.
           TITLE V--OTHER HEALTH CARE COST REDUCTION MEASURES

                  Subtitle A--Medical Liability Reform

Sec. 501. Federal standards for State-based medical liability reform.
Sec. 502. Certification.
Sec. 503. Relation to other laws.
                    Subtitle B--Antitrust Provisions

Sec. 511. Publication of guidelines for accountable health plans.
Sec. 512. Issuance of health care certificates of public advantage.
                Subtitle C--Administrative Cost Savings

Sec. 521. Establishment of standards.
Sec. 522. Enforcement.
    (c) Definitions.--For purposes of this Act:
            (1) AHP.--The term ``AHP'' means an accountable health 
        plan.
            (2) Eligible employee.--The term ``eligible employee'' 
        means an individual employed by an employer, and includes the 
        spouse and any dependent of such employee. Such term also 
        includes an employee within the meaning of section 401(c)(1) of 
        the Internal Revenue Code of 1986.
            (3) Eligible individual.--The term ``eligible individual'' 
        means an individual who is otherwise not eligible for coverage 
        under--
                    (A) an employer-sponsored health plan, or
                    (B) the medicare program under title XVIII of the 
                Social Security Act.
        The term ``eligible individual'' includes the spouse and any 
        dependent of such individual unless such spouse or dependent is 
        not an eligible individual.
            (4) Eligible small employer.--The term ``eligible small 
        employer'' means, with respect to a calendar year, an employer 
        that normally employs more than 1 but less than 51 employees on 
        a typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual.
            (5) Health plan.--The term ``health plan'' (including self-
        insured plans) means any hospital or medical service policy or 
        certificate, hospital or medical service plan contract, or 
        health maintenance organization group contract and, in States 
        which have distinct licensure requirements, a multiple employer 
        welfare arrangement, but does not include any of the following 
        offered by an insurer--
                    (A) accident only, dental only, disability only 
                insurance, or long-term care only insurance;
                    (B) coverage issued as a supplement to liability 
                insurance or Medicare;
                    (C) workmen's compensation or similar insurance; or
                    (D) automobile medical-payment insurance.
            (6) Insurer.--The term ``insurer'' means any person that 
        offers a health plan to an eligible small employer or eligible 
        individual.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

              TITLE I--IMPROVING PRIVATE HEALTH INSURANCE

                  Subtitle A--Federal and State Roles

SEC. 101. FEDERAL REFORM AND STATE IMPLEMENTATION.

    (a) Certification of State Health Reform Programs.--
            (1) Certification.--The Secretary shall establish by 
        regulation a process by which each State shall submit a health 
        reform program to the Secretary, and the Secretary shall 
        determine and certify whether such State program is consistent 
        with the requirements of section 103.
            (2) Periodic review.--The Secretary may, from time-to-time, 
        review a State program after such program has been originally 
        certified to ensure continued compliance with section 103 and 
        may decertify such program based on such review.

SEC. 102. APPLICABLE REGULATORY AUTHORITY FOR HEALTH PLANS.

    (a) In General.--Except as provided in subsection (b), each State 
shall ensure that health plans offered to individuals residing in such 
State meet the requirements of this Act, including sections 111 and 
112, as applicable.
    (b) Exceptions.--
            (1) ERISA plans.--The Secretary of Labor shall ensure that 
        health plans established pursuant to the requirements of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 
        et seq.) meet the requirements under section 112 for AHPs.
            (2) Inadequate state plans.--The Secretary shall ensure 
        that health plans in a State meet the requirements of sections 
        111 and 112, as applicable, if the Secretary does not certify 
        the health reform program submitted by such State or if the 
        Secretary decertifies the State's program.
    (c) Effective Date.--The requirements of this title shall apply to 
health plans offered, issued, or renewed on or after the later of--
            (1) January 1, 1996; or
            (2) in the case of a State which the Secretary identifies 
        as requiring State legislation in order to implement this 
        title, the first day of the first calendar quarter beginning 
        after the close of the first regular legislative session of the 
        State legislature that begins after enactment of this Act, but 
        not before January 1, 1996.
For purposes of the previous sentence, in the case of a State that has 
a 2-year legislative session, each year of such session shall be deemed 
to be a regular legislative session of the State legislature.

SEC. 103. STATE HEALTH REFORM PROGRAM REQUIREMENTS.

    (a) In General.--To be certified by the Secretary as meeting the 
requirements of this section, a State health reform program must 
include the following requirements, in addition to any other 
requirements established by the Secretary by regulation for carrying 
out this Act:
            (1) Health plan market areas.--A State shall establish 
        health plan market areas, ensuring that--
                    (A) every resident resides within 1 such market 
                area based on place of residence;
                    (B) market areas do not overlap;
                    (C) a metropolitan statistical area is not included 
                in more than 1 such market area; and
                    (D) the maximum number of State residents have the 
                opportunity to select from competing health plans and 
                AHPs that are likely to be available in such market 
                areas.
            (2) Interstate coordination.--A State shall coordinate its 
        health reform program with the programs of bordering and nearby 
        States so that--
                    (A) 1 health plan market area covers a metropolitan 
                statistical area which crosses State borders; and
                    (B) residents of a State may have access to 
                providers of health care services of bordering or 
                nearby States.
            (3) Health plan regulation.--A State shall ensure that 
        certified health plans and AHPs offered to residents of the 
        State (other than those plans regulated by the Secretary of 
        Labor under section 102(b)(1)) meet the requirements of section 
        111 and 112, respectively.
            (4) No benefit mandates, antimanaged care requirements.--A 
        State shall ensure that AHPs are not--
                    (A) required to cover any service in the standard 
                benefits package not otherwise required by the 
                Secretary under section 113;
                    (B) prohibited or limited from including financial 
                incentives for enrollees to use the services of 
                participating providers;
                    (C) prohibited or limited from restricting coverage 
                of services to those--
                            (i) provided by a participating provider; 
                        or
                            (ii) authorized by a designated 
                        participating provider;
                    (D) restricted in the amount of payment made to 
                participating providers for services provided to 
                enrollees or restricted in the ability of such AHPs to 
                pay participating providers for services provided to 
                enrollees on a per-enrollee basis;
                    (E) prohibited or limited from restricting the 
                location, number, type, or professional qualifications 
                of participating providers;
                    (F) prohibited or limited from requiring that 
                services be authorized by a primary care physician 
                selected by the enrollee from a list of available 
                participating providers;
                    (G) prohibited or limited in the use of utilization 
                review procedures or criteria;
                    (H) required to make public utilization review 
                procedures or criteria;
                    (I) prohibited or limited from determining the 
                location or hours of operation of a utilization review, 
                provided that emergency services furnished during the 
                hours in which the utilization review program is not 
                open are not subject to utilization review;
                    (J) required to pay providers for the expenses 
                associated with responding to requests for information 
                needed to conduct utilization review;
                    (K) restricted in the amount of payment made for 
                the conduct of utilization review;
                    (L) restricted in the access to medical information 
                or personnel required to conduct utilization review;
                    (M) required to define utilization review as the 
                practice of medicine or another health care profession; 
                or
                    (N) required to ensure that utilization review be 
                conducted--
                            (i) by a resident of the State in which the 
                        treatment is to be offered or by an individual 
                        licensed in such State, or
                            (ii) by a physician in any particular 
                        specialty or with any board certified specialty 
                        of the same medical specialty as the provider 
                        whose services are being rendered.
            (5) Small business purchasing pool.--
                    (A) In general.--A State shall ensure that small 
                group purchasing pools meet the requirements of section 
                121.
                    (B) State-sponsored pools.--If, any market area 
                established by the State (or market area that is within 
                the borders of more than 1 State) does not have a small 
                group purchasing group in operation that meets the 
                requirements of section 121, the State shall sponsor 
                such a pool meeting the requirements of section 121.
            (6) Health discount program.--A State shall establish a 
        health discount program meeting the requirements of part I of 
        subtitle B of title III.
            (7) Medical liability reform.--A State shall ensure that 
        medical liability laws in the State meet the requirements of 
        subtitle A of title V.
    (b) State Flexibility.--
            (1) In general.--The Secretary shall ensure that State 
        health reform programs are consistent with--
                    (A) a nationwide private health insurance system;
                    (B) cost control based on cost-conscious consumers 
                and fair competition among competing health plans based 
                on the cost and quality of such plans; and
                    (C) freedom for residents to choose and pay for 
                health care providers and health insurance as such 
                residents wish.
            (2) Flexibility.--The Secretary may allow States to propose 
        alterations to the framework of this Act if such alterations 
        are consistent with paragraph (1), do not increase the Federal 
        budget deficit in any year, and--
                    (A) the State had enacted a State health reform 
                program prior to enactment of this Act that supercedes 
                provisions of this Act; or
                    (B) the State can demonstrate that provisions of 
                this Act do not provide sufficient access to health 
                care services for residents of a portion of the State 
                (particularly in underserved rural areas) and 
                alterations to the State health reform program will 
                improve access without jeopardizing the quality of 
                health care and without undue State regulation of 
                health care providers.
            (3) No single payer plans.--The Secretary may not certify 
        any State health reform program which proposes to create a 
        single payer health insurance plan in any portion of the State.
    (c) Enforcement.--If a State does not have a certified State health 
reform program, Federal spending for health discounts in the State 
under title III shall be limited to the level of Federal spending that 
would have occurred in such State under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) if this Act had not been enacted.

                  Subtitle B--Health Plan Requirements

SEC. 111. CERTIFIED HEALTH PLAN REQUIREMENTS.

    (a) In General.--To be certified as meeting the requirements of 
this section, a health plan shall meet the requirements of the 
following subsections.
    (b) Limitation in Preexisting Condition Clauses.--
            (1) In general.--To be certified as meeting the 
        requirements of this subsection, a health plan may, subject to 
        the succeeding provisions of this subsection, 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.
            (2)  Crediting of previous coverage.--
                    (A) In general.--A health plan shall provide that 
                if an individual under such plan is in a period of 
                continuous coverage (as defined in subparagraph (B)) 
                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) Period of continuous coverage.--For purposes of 
                this paragraph, the term ``period of continuous 
                coverage'' means, with respect to particular services, 
                the period beginning on the date an individual is 
                enrolled under a health plan, titles XVIII or XIX of 
                the Social Security Act, or other health benefits 
                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.
            (3) Preexisting condition.--For purposes of this 
        subsection, the term ``preexisting condition'' means, with 
        respect to coverage under a health plan issued, a condition 
        which has been diagnosed or treated during the 3-month period 
        ending on the day before the first date of such coverage 
        (without regard to any waiting period).
    (c) Small Group Market Reform.--To be certified as meeting the 
requirements of this subsection, a health plan shall meet the 
following:
            (1) Guaranteed eligibility.--
                    (A) In general.--No health plan may exclude from 
                coverage--
                            (i) any eligible individual who does not 
                        qualify for assistance under section 311, or
                            (ii) any eligible employee to whom coverage 
                        is made available by an eligible small 
                        employer.
                    (B) Waiting periods.--Subparagraph (A)(ii) shall 
                not apply to any period an eligible employee is 
                excluded from coverage under the health plan solely by 
                reason of a requirement applicable to all employees 
                that a minimum period of service with the eligible 
                small employer is required before the employee is 
                eligible for such coverage.
            (2) Guaranteed availability.--
                    (A) In general.--A health plan offered to any 
                eligible small employer or eligible individual in a 
                health plan market area shall be made available to all 
                eligible small employers and eligible individuals in 
                the health plan market area.
                    (B) State option.--To ensure availability, each 
                State may require all health plans offered to eligible 
                small employers or eligible individuals in a health 
                plan market area be made available through small group 
                purchasing pools, and that such pools be open to all 
                eligible small employers and eligible individuals.
            (3) Guaranteed renewability.--
                    (A) In general.--A health plan issued to an 
                eligible small employer or eligible individual shall be 
                renewed, at the option of the eligible small employer 
                or eligible individual, unless the plan is terminated 
                for a reason specified in subparagraph (B) or (C).
                    (B) Termination of small employer or individual 
                business.--An insurer is not required to renew a health 
                plan with respect to an eligible small employer or such 
                an eligible individual, as the case may be, if the 
                insurer--
                            (i) elects not to renew all of its health 
                        plans issued to eligible small employers or 
                        eligible individuals, as the case may be, in a 
                        health plan market area; and
                            (ii) provides notice to the applicable 
                        regulatory authority in the State and to each 
                        eligible small employer or eligible individual 
                        covered under a plan of such termination at 
                        least 180 days before the date of expiration of 
                        the plan.
                In the case of such a termination, the insurer may not 
                provide for issuance of any health insurance plan to an 
                eligible small employer or eligible individual, as the 
                case may be, in the State during the 5-year period 
                beginning on the date of termination of the last plan 
                not so renewed.
                    (C) Grounds for refusal to renew.--
                            (i) In general.--An insurer may refuse to 
                        renew, or may terminate, a health plan only 
                        for--
                                    (I) nonpayment of premiums,
                                    (II) fraud or misrepresentation, or
                                    (III) failure to maintain minimum 
                                participation rates (consistent with 
                                clause (ii).
                            (ii) Minimum participation rates.--An 
                        insurer may require, with respect to a health 
                        plan issued to an eligible small employer, that 
                        a minimum percentage of eligible employees who 
                        do not otherwise have health plan coverage are 
                        enrolled in such plan if such percentage is 
                        applied uniformly to all plans offered to 
                        employers of comparable size.
            (4) Premiums.--
                    (A) Limitation on premium variation.--
                            (i) In general.--The premium charged by an 
                        insurer for each type of benefits package 
                        offered as a certified health plan to any 
                        eligible employee or eligible individual in a 
                        health plan market area within a class of 
                        family enrollment and age band may not exceed 
                        the premium charged for the same benefits 
                        package offered to any other eligible employee 
                        or eligible individual by more than 20 percent.
                            (ii) Enrollment class.--For purposes of 
                        this subparagraph, the classes of family 
                        enrollment are--
                                    (I) individual;
                                    (II) couple;
                                    (III) individual with children; and
                                    (IV) couple with children.
                            (iii) Age bands.--The Secretary shall 
                        establish appropriate age bands with respect to 
                        principal enrollees for determining the 
                        compliance with this subparagraph.
                    (B) Risk adjustments.--
                            (i) In general.--Premiums paid to health 
                        plans offered in the small group market in a 
                        health plan market area shall be adjusted to 
                        reflect the relative risk of enrollees in such 
                        plan compared to all eligible employees and 
                        eligible individuals in the health plan market 
                        area.
                            (ii) Model programs.--The Secretary shall 
                        establish model risk adjustment programs that 
                        States may adopt to ensure compliance with 
                        clause (i).
    (d) Parity Coverage of Severe Mental Illnesses.--
            (1) In general.--To be certified as meeting the 
        requirements of this subsection, a health plan shall provide 
        parity coverage for all severe mental illnesses (as defined in 
        regulations by the Secretary), including parity cost-sharing 
        for services necessary to treat such illnesses.
            (2) Definition.--
                    (A) In general.--Except as provided in subparagraph 
                (B), for purposes of paragraph (1), the Secretary shall 
                define severe mental illness through diagnosis, 
                disability, and duration, and include in such 
                definition the following disorders with psychotic 
                symptoms:
                            (i) Schizophrenia.
                            (ii) Schizoaffective disorder.
                            (iii) Manic depressive disorder.
                            (iv) Autism.
                            (v) Severe forms of other disorders such as 
                        major depression, panic disorder, and obsessive 
                        compulsive disorder.
                    (B) Children.--For purposes of paragraph (1), the 
                Secretary shall define severe mental illness for 
                individuals under age 22 to also include--
                            (i) psychotic disorders;
                            (ii) attention deficit hyperactivity 
                        disorder;
                            (iii) autism and pervasive development 
                        disorder;
                            (iv) severe childhood eating disorders;
                            (v) Tourette's syndrome; and
                            (vi) any behavioral disorder that would 
                        result in conduct which may place the 
                        individual or another individual in danger of 
                        death or serious bodily injury.
            (3) Diagnosis.--For purposes of paragraph (1), services 
        necessary to properly diagnose an individual's mental health 
        disorder shall be considered services necessary to treat a 
        severe mental illness.

SEC. 112. ADDITIONAL REQUIREMENTS FOR ACCOUNTABLE HEALTH PLANS.

    (a) Certification.--To be certified as an AHP, a health plan must 
meet the requirements of the following subsections of this section in 
addition to the requirements of section 111.
    (b) General Requirements.--A health plan shall--
            (1) provide all medically necessary and effective health 
        benefits (as covered by the benefits package specified in an 
        AHP contract) for a fixed premium for each enrollee for a 
        specified period of time; and
            (2) collect and report to the plan's enrollees and the 
        general public objective measures of the quality of the plan's 
        health care, the impact of the plan's health care on the health 
        status of enrollees, and enrollee satisfaction with the plan's 
        cost, quality, and service.
    (c) Capacity Limits and Nondiscrimination.--
            (1) In general.--A health plan may apply to the applicable 
        regulatory authority to impose a limit on enrollment if 
        enrollment beyond the limit is--
                    (A) not discriminatory and is based on a ``first-
                come, first-served'' enrollment policy, and
                    (B) is necessary to ensure quality of care for 
                enrollees.
            (2) Prohibition of discrimination based on health status.--
        A health plan may not deny, limit, or condition the coverage 
        under (or benefits of) the plan based on the health status of 
        the individual, claims experience of an individual, receipt of 
        health care by an individual, receipt of public subsidies by an 
        individual, lack of evidence of insurability of an individual, 
        or any other characteristic of an individual that may relate to 
        the utilization of health care services.
            (3) Service areas.--A health plan may not discriminate in 
        the drawing of service area boundaries on the basis of race, 
        ethnicity, socio-economic status, age, or anticipated need for 
        health services.
    (d) Adjusted Community Rating in the Small Group Market.--
            (1) In general.--A health plan shall charge a standard 
        premium for each type of benefits package offered to eligible 
        employees of eligible small employers and eligible individuals 
        in a health plan market area, but may elect to adjust the 
        premium for the class of family enrollment and the age of the 
        principal enrollee.
            (2) Exemption for small group purchasing pools.--The 
        standard premium charged for a health plan offered to eligible 
        employees of eligible small employers and eligible individuals 
        through a small group purchasing pool may be lower than the 
        premium required pursuant to paragraph (1) if at least 30 
        percent of all health plan premiums paid in the small group 
        market in the health plan market area are made through such a 
        pool.
            (3) Enrollment class.--For purposes of this subsection, the 
        classes of family enrollment are--
                    (A) individual;
                    (B) couple;
                    (C) individual with children; and
                    (D) couple with children.
            (4) Age bands.--The Secretary may establish appropriate age 
        bands with respect to principal enrollees for determining the 
        compliance with this subsection.
    (e) Quality Assurance.--
            (1) Internal quality assurance and quality improvement 
        program.--A health plan offering covered services that must or 
        may be obtained from participating providers must administer an 
        internal quality assurance and quality improvement program 
        that--
                    (A) meets the following criteria:
                            (i) Is clearly identified and fully 
                        explained to all participants in the program.
                            (ii) Is coordinated with other medical 
                        management activities.
                            (iii) Communicates findings to providers 
                        and consumers with the primary goal of 
                        improving care outcomes.
                            (iv) Measures the impact of such findings 
                        on the care delivered by providers.
                            (v) Documents the monitoring and evaluation 
                        of the quality of care to identify areas for 
                        improvement.
                            (vi) Develops and implements explicit 
                        strategies to improve care.
                            (vii) Collects and analyzes data to 
                        facilitate evaluation of improvement 
                        strategies.
                            (viii) Measures the effect of such 
                        strategies on care outcomes and the quality of 
                        care.
                            (ix) Incorporates a credentialing process 
                        that encompasses initial credentialing, 
                        recredentialing, recertifying or reappointment 
                        of providers, or both.
                            (x) Is accountable directly to the 
                        governing body of the AHP or, in instances in 
                        which the governing body's participation in 
                        quality assurance is not direct, to a 
                        designated committee of senior management; or
                    (B) is accredited by an independent organization, 
                such as the National Committee for Quality Assurance, 
                that conducts objective quality reviews based upon 
                comparable criteria.
            (2) Measuring and comparing quality.--
                    (A) In general.--A health plan shall comply with a 
                process, established by the Secretary by regulation, by 
                which such plan shall provide to the appropriate 
                regulatory authority (in an electronic form) 
                standardized information necessary to--
                            (i) objectively measure and evaluate the 
                        performance of such plan;
                            (ii) fairly compare the performance of such 
                        plan with other AHPs; and
                            (iii) assess the health status of enrollees 
                        in such plan to allow fair risk adjustments 
                        among competing AHPs.
                    (B) Required data.--The Secretary shall establish 
                by regulation the necessary information such plan must 
                provide, including--
                            (i) quality measures, especially measures 
                        of health outcomes, including the clinical 
                        health, functional status, and well being of 
                        enrollees before and after treatments and other 
                        services provided by the plan;
                            (ii) measures of patient access and 
                        satisfaction;
                            (iii) membership and utilization 
                        information;
                            (iv) financial information;
                            (v) health plan management activities 
                        information; and
                            (vi) any other information determined to be 
                        necessary by the Secretary for ensuring fair 
                        competition among AHPs based on cost and 
                        quality.
                    (C) Use of data.--
                            (i) In general.--The Secretary shall 
                        establish by regulation a process by which such 
                        standardized information may be distributed by 
                        the appropriate regulatory authority in a 
                        manner that promotes accountability to AHP 
                        enrollees and fair competition among AHPs based 
                        on cost and quality.
                            (ii) Wide access.--The Secretary shall 
                        ensure that small business purchasing pools and 
                        State health discount programs have access to 
                        such information to ensure fair competition 
                        among AHPs in those such pools and health 
                        discount programs.
                            (iii) Patient confidentiality.--The 
                        Secretary shall ensure by regulation that the 
                        confidentiality of medical records of 
                        individual enrollees is protected.
    (f) Market Conduct Requirements.--
            (1) Required written materials.--A health plan shall 
        provide written descriptions of the plan's--
                    (A) covered benefits, services, and procedures that 
                clearly and fully describe any and all limitations of 
                coverage, use of participating providers and other 
                limits on enrollees' use of services; and
                    (B) out-of-pocket costs, including copayments, 
                deductibles, coinsurance, and established aggregate 
                maximums on out-of-pocket costs.
            (2) Advertising.--All health plan advertising, promotional 
        materials, and other communications with enrollees of the 
        public must be factually accurate and understandable to diverse 
        populations.
    (g) Enrollee Grievances.--A health plan shall maintain procedures 
for hearing and resolving grievances between the plan (and any entity 
or individual through which the plan provides health care services) and 
the enrollees.
    (h) Point of Service Plan.--A health plan offering covered services 
that must be obtained from participating providers shall make available 
an alternative insurance plan that provides for a point of service 
option under which an enrollee may select any licensed health care 
provider to obtain services and such a plan shall pay such provider not 
less than 50 percent of the cost of such provider's services. A health 
plan may charge a higher premium for such an alternative insurance 
plan.
    (i) Financial Solvency.--
            (1) In general.--A health plan shall be required to 
        demonstrate evidence of adequate capitalization and other 
        indicators of fiscal health, including--
                    (A) total assets greater than total unsubordinated 
                liabilities;
                    (B) sufficient cash flow and adequate liquidity to 
                meet obligations as such obligations become due;
                    (C) an insolvency protection plan; and
                    (D) insurance or other acceptable arrangements to 
                protect the health plan against liability and casualty 
                risks, including professional liability.
            (2) Insolvency.--
                    (A) Enrollees in the health plan shall be held 
                harmless from incurring liability for any fees that are 
                the legal obligation of an insolvent plan.
                    (B) A health plan offering coverage in a market 
                area in which an AHP has become insolvent shall be 
                required to accept enrollment of enrollees of such 
                insolvent AHP, subject to capacity limits.
    (j) Medical Liability Reform.--A health plan shall comply with 
requirements established pursuant to section 501(d).
    (k) Administrative Cost Reduction.--A health plan shall comply with 
the requirements established pursuant to subtitle C of title V.
    (l) Participation in Health Discount Programs.--Except for health 
plans established pursuant to the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1001 et seq.), a health plan shall comply with 
the requirements established by the State in accordance with subtitle B 
of title III for making AHPs available to individuals eligible for 
health discounts.

SEC. 113. STANDARD BENEFITS.

    (a) Standard Benefits Package.--The Secretary shall promulgate 
regulations establishing a standard benefits package meeting the 
following requirements:
            (1) Coverage.--The standard benefits package shall cover--
                    (A) inpatient and outpatient hospital services;
                    (B) physician services;
                    (C) diagnostic services and tests;
                    (D) outpatient prescription drugs;
                    (E) preventive services; and
                    (F) such other services as determined necessary and 
                appropriate by the Secretary.
            (2) Parity coverage of severe mental illnesses.--The 
        standard benefits package shall be consistent with the 
        requirement for parity coverage of severe mental illnesses, 
        pursuant to section 111(d).
            (3) Cost sharing.--The Secretary shall establish for the 
        standard benefits package--
                    (A) a cost-sharing arrangement consistent with 
                health care delivered by health maintenance 
                organizations, including an annual limit on an 
                enrollee's out-of-pocket expenses (excluding an 
                enrollee's expenses for services provided under an AHP 
                point of service option);
                    (B) a cost-sharing arrangement consistent with 
                health care covered by fee-for-service health insurance 
                which is actuarially equivalent to the arrangement 
                established under subparagraph (A); and
                    (C) any other actuarially equivalent cost-sharing 
                arrangements consistent with other health care delivery 
                systems.
    (b) Nominal Cost-Sharing Benefits Package.--For each cost-sharing 
arrangement established under subsection (a)(3), the Secretary shall 
also establish a nominal cost-sharing benefits package for purposes of 
determining health discounts for poor eligible individuals and poor 
eligible employees under part I of subtitle B of title III. Such 
benefits packages shall cover the same services as the standard 
benefits package but with cost-sharing requirements that are not 
excessive for such individuals and employees.
    (c) Alternative Benefits Package.--For each cost-sharing 
arrangement established under subsection (a)(3), the Secretary shall 
also establish an alternative benefits package that may be necessary 
for determining health discounts for low income eligible individuals 
and low income eligible employees under part I of subtitle B of title 
III. Such alternative benefits packages shall cover the same services 
as the standard benefits package but with cost-sharing requirements 
that are sufficient to decrease the average actuarial value of the 
standard benefits package by 50 percent.

               Subtitle C--Improved Health Plan Delivery

SEC. 121. SMALL GROUP PURCHASING POOLS.

    (a) In General.--Each small group purchasing pool in a health plan 
market area in a State shall provide a process for eligible employees 
of eligible small employers and eligible individuals who are not 
entitled to health discounts under part I of subtitle B of title III to 
have the opportunity to select annually from among competing AHPs 
offering the standard benefits package (and, for poor eligible 
employees, the nominal cost-sharing benefits package) at an adjusted 
community rate for the coverage period.
    (b) Requirements.--Each small group purchasing pool shall--
            (1) be established as a private, not-for-profit corporation 
        serving eligible small employers and eligible individuals in a 
        health plan market area;
            (2) contract with eligible small employers and eligible 
        individuals to provide services for a defined period for a 
        fixed administrative fee per coverage period;
            (3) be governed by a board of directors elected by members 
        of the pool;
            (4) contract only with AHPs capable of providing coverage 
        to the members of the pool throughout the health plan market 
        area;
            (5) require all AHPs to offer at least the standard 
        benefits package and any other package of benefits as specified 
        by the pool, and, if an AHP offers covered services that must 
        be obtained from participating providers, the alternative point 
        of service insurance plan for such AHP;
            (6) provide information to members concerning the cost and 
        quality of the competing AHPs offered through the pool; and
            (7) offer to provide administrative services to members for 
        the collection of premiums to be forwarded to AHPs.
    (c) Prohibitions.--Small group purchasing groups may not--
            (1) decline to contract with an AHP if the insurer seeks to 
        offer to members of the pool and the plan meets the 
        requirements of subsection (b);
            (2) decline membership to any eligible small employer or 
        eligible individual located in the health plan market area;
            (3) negotiate AHP premiums on behalf of members; or
            (4) negotiate payment rates for health care providers 
        contracting with AHPs offered through the pool.

SEC. 122. EMPLOYER RESPONSIBILITY.

    (a) AHP Availability.--
            (1) In general.--Each employer shall--
                    (A) offer to each eligible employee enrollment in 
                an AHP providing a standard benefits package that 
                serves the area in which the employee resides, both on 
                an individual basis, and, if applicable and at the 
                employee's option, on a family basis, and, if an AHP 
                offers covered services that must be obtained from 
                participating providers, the alternative point of 
                service insurance plan for such AHP;
                    (B) provide, at the option of the employee, for 
                deduction from wages or other compensation of amount of 
                any premiums due for such enrollment (taking into 
                account the amount of any employer contribution); and
                    (C) if such employer is an eligible small employer, 
                also make available an AHP providing the nominal cost-
                sharing benefits package.
        Nothing in this paragraph shall be construed as preventing an 
        employer from offering, or an employee from electing enrollment 
        in, an AHP that serves the area in which the employee is 
        employed, rather than the area in which the employee resides.
            (2) Small employers.--Each eligible small employer may 
        comply with the requirements of this subsection by 
        participating in a small group purchasing pool.
    (b) Enforcement.--
            (1) Civil money penalties for failure to offer coverage or 
        provide for wage deduction.--Failure to offer coverage or 
        provide for deduction from wages required under subsection 
        (a)(1) is subject to a civil monetary penalty (not to exceed 
        $500) for each day in which the violation continues.
            (2) Direct enforcement.--The obligation to offer coverage 
        under subsection (a) with respect to an eligible employee is 
        directly enforceable by civil action by the employee. In any 
        such action, if the employee substantially prevails, the 
        employee is entitled to reasonable attorneys' fees.

                TITLE II--TAX AND ENFORCEMENT PROVISIONS

SEC. 200. 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.

                   Subtitle A--General Tax Provisions

SEC. 201. CERTAIN EMPLOYER HEALTH PLAN CONTRIBUTIONS INCLUDED IN 
              INCOME.

    (a) Exclusion for Employer Health Plan Contributions Limited to 
Contributions to Accountable Health Plans or Certified Health Plans.--
            (1) In general.--Section 106 (relating to contributions by 
        employer to accident and health plans) is amended to read as 
        follows:

``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO HEALTH PLANS.

    ``Except as provided in section 91, gross income of an employee 
does not include employer-provided coverage under an accountable health 
plan (within the meaning of section 112 of the Health Care Reform Act 
of 1994) or employer-provided coverage under a certified health plan 
(within the meaning of section 111 of such Act)''.
            (2) Clerical amendment.--The table of sections of part III 
        of subchapter B of chapter 1 is amended by striking the item 
        relating to section 106 and inserting the following new item:

``Sec. 106. Contributions by employer to health plans.''.
    (b) Inclusion in Income.--
            (1) In general.--Part II of subchapter B of chapter 1 
        (relating to items specifically included in gross income) is 
        amended by adding at the end the following new section:

``SEC. 91. EXCESS EMPLOYER CONTRIBUTIONS TO HEALTH PLANS.

    ``(a) General Rule.--Notwithstanding section 106, if--
            ``(1) an employee is covered by an accountable health plan 
        or a certified health plan at any time during any month, and
            ``(2) there is an excess employer contribution with respect 
        to the employee to such plan for such month,
the gross income of such employee for the taxable year which includes 
such month shall include an amount equal to such excess employer 
contribution for such month.
    ``(b) Excess Employer Contribution Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `excess employer contribution' means, with respect to an 
        employee enrolled in an accountable health plan or a certified 
        health plan for any month, the excess of--
                    ``(A) the employer contribution to such plan for 
                such month, over
                    ``(B) the applicable percentage of the applicable 
                dollar limit for such employee for such month.
            ``(2) Applicable dollar limit.--
                    ``(A) In general.--For purposes of paragraph (1) 
                and except as provided in subparagraph (B), the 
                applicable dollar limit for an employee for any month 
                is equal to--
                            ``(i) in the case of individual coverage, 
                        $340,
                            ``(ii) in the case of couple coverage, 
                        $690,
                            ``(iii) in the case of individual with 
                        dependent child or children coverage, $670, and
                            ``(iv) in the case of couple with dependent 
                        child or children, $910.
                For any calendar year beginning after 2000, the dollar 
                amounts specified in this paragraph for such year shall 
                equal the dollar amounts under this paragraph for the 
                previous calendar year increased by the percentage 
                increase in the per capita Gross Domestic Product for 
                the previous calendar year.
                    ``(B) Reduction of applicable dollar limit.--
                            ``(i) In general.--Each dollar amount 
                        contained in clauses (i), (ii), (iii), and (iv) 
                        of subparagraph (A) for the calendar year shall 
                        be reduced (but not below 50 percent of such 
                        dollar amount) by the amount determined under 
                        clause (ii).
                            ``(ii) Amount of reduction.--The amount 
                        determined under this clause with respect to 
                        any dollar amount shall be the amount which 
                        bears the same ratio to 50 percent of such 
                        dollar amount as the excess of--
                                    ``(I) the taxpayer's adjusted gross 
                                income (determined without regard to 
                                this section) for the taxable year 
                                ending in the calendar year, over
                                    ``(II) the applicable income 
                                amount,
                        bears to $25,000.
                            ``(iii) Applicable income amount.--For 
                        purposes of clause (ii)(II), the term 
                        `applicable income amount' means $75,000 
                        ($50,000, in the case of a taxpayer described 
                        in section 1(c)).
            ``(3) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage for any taxable year--
                    ``(A) in the case of an accountable health plan, is 
                100 percent, and
                    ``(B) in the case of a certified health plan, is 
                100 percent reduced by 20 percentage points (but not 
                below zero percent) for each taxable year beginning 
                after December 31, 1996.
    ``(c) Special Rule for Multiemployer Health Plans.--In the case of 
employer contributions with respect to any employee made to a 
multiemployer health plan on a basis other than per employee per month, 
the Secretary may by regulations prescribe the method of determining 
that portion of such contributions that is not included in gross income 
of the employee.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Accountable or certified health plan.--The terms 
        `accountable health plan' and `certified health plan' have the 
        meanings given to such terms by section 106.
            ``(2) Employee includes former employee.--The term 
        `employee' includes a former employee.
            ``(3) Determination of employer contribution.--
                    ``(A) In general.--The employer contribution to any 
                accountable health plan or certified health plan for 
                any month shall be that portion of the cost of such 
                plan for such month which is incurred by the employer.
                    ``(B) Self-insured plan may use annual estimates.--
                An employer who maintains a self-insured health plan 
                may elect (in such manner and at such time as may be 
                provided in regulations) to determine the actual 
                employer contribution under subsection (b)(1)(A) for 
                any period of not more than 12 months on the basis of a 
                reasonable estimate of the cost of providing coverage 
                for such month. To the extent practicable, such 
                estimate shall be made on an actuarial basis, and in 
                the making of any such estimate, there shall be taken 
                into account such factors as may be required under 
                regulations.
                    ``(C) Employees only taken into account for periods 
                covered.--For purposes of determining the employer 
                contribution, amounts shall be taken into account with 
                respect to an employee only for periods during which 
                such employee is covered by the plan.
            ``(4) Coverage for only part of month.--If an employee is 
        covered under an accountable health plan or certified health 
        plan for only a portion of a month, the amount required to be 
        included under subsection (a) in the gross income of such 
        employee with respect to such month shall be an amount which 
        bears the same ratio to the excess employer contribution for 
        such month as such portion bears to the entire month.
            ``(5) Certain related employers treated as 1 employer.--
        Rules similar to the rules provided by subsections (b) and (c) 
        of section 414 shall apply.
            ``(6) Month.--The term `month' means a calendar month.
            ``(7) Multiemployer health plan.--The term `multiemployer 
        health plan' means an accountable health plan which is part of 
        an employee welfare benefit plan (within the meaning of section 
        3(1) of the Employee Retirement Income Security Act of 1974)--
                    ``(A) to which more than 1 employer is required to 
                contribute, and
                    ``(B) which is maintained pursuant to 1 or more 
                collective bargaining agreements between 1 or more 
                employee organizations and more than 1 employer.''.
            (2) Clerical amendment.--The table of sections for part II 
        of subchapter B of chapter 1 is amended by adding at the end 
        the following:

``Sec. 91. Excess employer contributions to health plans.''.
    (c) Employment Tax Amendments.--
            (1) General rule.--Chapter 25 (relating to general 
        provisions relating to employment taxes) is amended by adding 
        at the end the following new section:

``SEC. 3510. TREATMENT OF EXCESS EMPLOYER CONTRIBUTIONS.

    ``(a) In General.--For purposes of this subtitle and section 209 of 
the Social Security Act, any amount required to be included in the 
gross income of an employee under section 91(a) with respect to any 
month--
            ``(1) shall be treated as paid in cash to such employee at 
        the close of such month, and
            ``(2) shall not be treated as paid under a health or 
        similar plan of the employer.
For purposes of paragraph (1), an employer may elect to prorate any 
such amount to any payroll period (or portion thereof) covering such 
month rather than treat it as being paid at the close of such month.
    ``(b) Special Rules in the Case of Self-Insured Plans.--
            ``(1) Safe harbor for employees whose estimates are at 
        least 95 percent of actual employer contributions.--In the case 
        of an employer who maintains a self-insured health plan, if for 
        any calendar year the excess of--
                    ``(A) the actual employer contributions determined 
                under section 91 with respect to all employees for such 
                year, over
                    ``(B) the amount estimated by the employer under 
                section 91(d)(3)(B) as the employer contributions with 
                respect to all employees for such year,
        is not greater than 5 percent of the amount determined under 
        subparagraph (A) then, except as provided in paragraph (2), no 
        penalty shall be imposed under section 6672 on the employer for 
        failure to pay, or to deduct and withhold, any tax imposed by 
        this subtitle on such excess.
            ``(2) Employer must pay certain taxes on excess.--Paragraph 
        (1) shall not apply to any tax imposed, or required to be 
        deducted and withheld, under sections 3111, 3221, 3301, and 
        3402 on the excess described in paragraph (1) unless the 
        employer pays any such tax within the time prescribed by the 
        Secretary under regulations.
            ``(3) Special rules for employee's social security tax and 
        credit.--In the case of the excess described in paragraph (1)--
                    ``(A) no tax shall be imposed by section 3101, and
                    ``(B) the amount of such excess shall not be taken 
                into account for purposes of section 209 of the Social 
                Security Act.
    ``(c) Liability for Withholding and Payment of Tax.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        applicable payer shall withhold, and be liable for, payment of 
        any tax required to be withheld or paid under this subtitle on 
        any amount described in subsection (a).
            ``(2) Special rules for multiemployer health plans.--In the 
        case of any multiemployer health plan, the plan administrator 
        shall comply with such rules with respect to the withholding 
        of, and liability for, any tax required to be withheld or paid 
        under this subtitle as the Secretary may require by 
        regulations.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Applicable payer.--The term `applicable payer' means 
        the payer of remuneration for services which qualifies the 
        employee for coverage under a multiemployer health plan.
            ``(2) Employee.--The term `employee' does not include a 
        former employee.
            ``(3) Multiemployer health plan.--The term `multiemployer 
        health plan' has the meaning given such term by section 
        91(d)(7).''.
            (2) Clerical amendment.--The table of sections for chapter 
        25 is amended by adding at the end the following new item:

``Sec. 3510. Treatment of excess employer contributions.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (b) shall apply to taxable years beginning after December 31, 
        1995.
            (2) Employment tax.--The amendments made by subsection (c) 
        shall take effect on and after January 1, 1996.

SEC. 202. DEDUCTIONS FOR COSTS OF HEALTH PLANS.

    (a) Business Expense Deduction for Health Insurance.--Section 162 
(relating to trade or business expenses) is amended by redesignating 
subsection (m) as subsection (n) and by inserting after subsection (l) 
the following new subsection:
    ``(m) Group Health Plans.--The amount of expenses paid or incurred 
by an employer for a group health plan shall not be allowed as a 
deduction under this section--
            ``(1) unless the plan is an accountable health plan or 
        certified health plan (as defined in section 106),
            ``(2) unless such employer does not vary the amount 
        incurred among plans offered to each employee (other than with 
        respect to the benefits package and family class of enrollment 
        coverage), and
            ``(3) with respect to each employee, to the extent such 
        amount exceeds the applicable dollar limit for such employee 
        (within the meaning of section 91(b)(2) (without regard to 
        subparagraph (B) thereof) and determined on an annual 
        basis).''.
    (b) Permanent Extension and Increase in Health Insurance Tax 
Deduction for Self-Employed Individuals.--
            (1) Permanent extension of deduction.--
                    (A) 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).
                    (B) Effective date.--The amendment made by this 
                paragraph shall apply to taxable years beginning after 
                December 31, 1993.
            (2) Increase in amount of deduction; insurance purchased 
        must meet certain standards.--
                    (A) Increase in amount of deduction.--Paragraph (1) 
                of section 162(l) is amended--
                            (i) by striking ``25 percent of'' and 
                        inserting ``100 percent of'', and
                            (ii) by striking ``dependents.'' and 
                        inserting ``dependents, and only to the extent 
                        such amount does not exceed the applicable 
                        dollar limit for such taxpayer (within the 
                        meaning of section 91(b)(2) and determined on 
                        an annual basis).''
                    (B) Insurance purchased must meet certain 
                standards.--Paragraph (2) of section 162(l) is amended 
                by adding at the end the following new subparagraph:
                    ``(C) Insurance must meet certain standards.--
                Paragraph (1) shall apply only to insurance which is an 
                accountable health plan or certified health plan (as 
                defined in section 106).''.
                    (C) Treatment of multiemployer health plans.--
                Subsection (l) of section 162 is amended by adding at 
                the end the following new paragraph:
            ``(6) Treatment of multiemployer health plans.--For 
        purposes of this subsection, an amount paid into a 
        multiemployer health plan (as defined in section 91(d)(7) shall 
        be deemed to be an amount paid for insurance which constitutes 
        medical care.''.
    (c) Effective Date.--Except as provided in subsection (b)(1)(B), 
the amendments made by this section shall apply to taxable years 
beginning after December 31, 1995.

          TITLE III--FINANCING AND REFORMING FEDERAL PROGRAMS

                          Subtitle A--Medicare

SEC. 301. MEDICARE CHOICE.

    (a) In General.--Section 1876 of the Social Security Act (42 U.S.C. 
1395mm) is amended to read as follows:

                           ``medicare choice

    ``Sec. 1876. (a) Establishment of Medicare Market Areas.--The 
Secretary shall establish various medicare market areas within the 
United States in such manner as to--
            ``(1) ensure that each individual entitled to benefits 
        under part A and enrolled under part B, or enrolled under part 
        B only, resides in a medicare market area;
            ``(2) maintain all portions of each metropolitan 
        statistical area within one medicare market area; and
            ``(3) maximize the number of such individuals who will have 
        the opportunity for a meaningful choice among competing 
        medicare health plans under contract with the Secretary under 
        this section.
    ``(b) Medicare Health Plans.--
            ``(1) Contracts with medicare health plans.--The Secretary 
        shall enter into a contract with any medicare health plan 
        desiring to do business in a medicare market area and to 
        receive payment under this section, but only if the Secretary 
        certifies that such plan meets the requirements of paragraph 
        (2).
            ``(2) Certification requirements.--Each medicare health 
        plan must--
                    ``(A) be certified as an accountable health plan by 
                the appropriate regulatory authority pursuant to title 
                I of the Health Care Reform Act of 1994;
                    ``(B) except as provided in paragraph (3), provide 
                those services covered by this title (hereafter in this 
                section referred to as `medicare benefits') when 
                medically necessary for a uniform monthly premium for a 
                year;
                    ``(C) not discriminate against beneficiaries based 
                on their health status, claims experience, medical 
                history, or other factors that are generally related 
                with utilization of health care services;
                    ``(D) demonstrate the ability to provide medicare 
                benefits to all potential enrollees throughout the 
                medicare market area, unless the Secretary determines 
                it appropriate for such plan to provide services to a 
                subset of such market area;
                    ``(E) collect and provide such standard information 
                as the Secretary shall prescribe by regulation as 
                necessary to evaluate the performance and quality of 
                such plan, including enrollee satisfaction, to compare 
                such performance and quality with competing plans, and 
                to prepare comparative materials for distribution to 
                beneficiaries;
                    ``(F) demonstrate the ability to integrate 
                additional benefits into such plan for qualified 
                medicare beneficiaries as provided in section 321 of 
                the Health Care Reform Act of 1994; and
                    ``(G) offer the supplementary coverage plans 
                established by the Secretary under subsection 
                (g)(3)(B).
            ``(3) Cost sharing.--
                    ``(A) Actuarially equivalent medicare benefits.--
                Each medicare health plan must offer either--
                            ``(i) medicare benefits, including the 
                        cost-sharing requirements otherwise provided in 
                        this title; or
                            ``(ii) actuarially equivalent medicare 
                        benefits, as established by the Secretary in 
                        regulations, which are medicare benefits, but 
                        with cost-sharing requirements that are 
                        actuarially equivalent to the cost-sharing 
                        requirements otherwise provided in this title 
                        and consistent with common practices among 
                        health maintenance organizations and other 
                        managed care health plans.
                In establishing actuarially equivalent medicare 
                benefits, the Secretary shall not include in the 
                calculation any change in costs associated with 
                alternative forms of health care delivery, management, 
                or utilization control.
                    ``(B) Out-of-network cost sharing.--Each medicare 
                health plan may require enrollees to pay higher cost 
                sharing for services than is otherwise required by this 
                title (or required in the actuarially equivalent 
                alternative) if--
                            ``(i) the plan maintains a network of 
                        providers for all medicare benefits that would 
                        not require higher cost sharing; and
                            ``(ii) the plan provides enrollees with 
                        such information.
            ``(4) Capacity limits.--Each medicare health plan may apply 
        to have limits placed on the number of beneficiaries that may 
        enroll in the plan in an enrollment period if the plan can 
        demonstrate--
                    ``(A) that enrolling more than the limit would 
                impair the plan's ability to provide services to other 
                enrollees; and
                    ``(B) enrollment in the plan is on a first-come 
                first-served basis, except for individuals enrolled in 
                the prior year.
    ``(c) Employer-Sponsored Health Plans.--
            ``(1) Criteria for certification.--The Secretary shall 
        prescribe, by regulation, criteria for certifying medicare 
        health plans sponsored by employers which will be offered only 
        to current or former employees, including requirements that 
        such health plans--
                    ``(A) are certified as accountable health plans 
                pursuant to title I of the Health Care Reform Act of 
                1994;
                    ``(B) provide benefits that cover at least those 
                services covered by this title at a premium for the 
                enrollee that does not exceed the base beneficiary 
                premium (as defined pursuant to subsection (f)); and
                    ``(C) are available to all eligible current and 
                former employees in the medicare market area.
            ``(2) Secondary payer coverage.--To be certified under 
        paragraph (1), employer-sponsored health plans shall accept, at 
        the option of individuals eligible only for secondary coverage 
        under this title pursuant to section 1862(b), a fixed monthly 
        payment from the Secretary to provide such individuals coverage 
        at least actuarially equivalent to the secondary coverage 
        available to such individuals under this title.
    ``(d) Managing Medicare Choice.--
            ``(1) Medicare health plan total monthly premiums.--Before 
        the beginning of each calendar year, each medicare health plan 
        or employer-sponsored health plan under contract pursuant to 
        subsection (b) or (c) shall submit to the Secretary the total 
        monthly premium that such plan intends to charge in such year.
            ``(2) Annual open enrollment.--
                    ``(A) In general.--The Secretary shall provide for 
                an annual open enrollment period during which all 
                individuals entitled to benefits under part A and 
                enrolled under part B, or enrolled under part B only, 
                residing in a medicare market area--
                            ``(i) shall choose enrollment for the next 
                        calendar year in--
                                    ``(I) a medicare health plan in 
                                such area,
                                    ``(II) an employer-sponsored health 
                                plan, or
                                    ``(III) coverage otherwise provided 
                                under this title (hereafter in this 
                                section referred to as `medicare fee-
                                for-service'); and
                            ``(ii) may choose supplementary benefits 
                        offered by such health plan or a medicare 
                        supplemental policy (certified under section 
                        1882).
                    ``(B) Secondary payer.--Individuals who are 
                eligible for secondary coverage under this title 
                pursuant to section 1862(b), may not enroll in a 
                medicare health plan but may enroll in an employer-
                sponsored health plan, to which the Secretary shall 
                make a monthly payment, pursuant to subsection 
                (e)(2)(C).
                    ``(C) Period of enrollment.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii), (iii), and (iv), an individual 
                        may not choose another enrollment until the 
                        next annual period provided under subparagraph 
                        (A).
                            ``(ii) Enrollment upon eligibility.--The 
                        Secretary shall provide an enrollment period of 
                        30 days to any individual beginning 30 days 
                        before the date such individual first becomes 
                        entitled to benefits under part A or enrolled 
                        under part B only. Such enrollment shall be 
                        effective on the date of such entitlement.
                            ``(iii) Termination of plan.--If a contract 
                        for a medicare health plan under this section 
                        is terminated during any calendar year, the 
                        Secretary shall provide for an enrollment 
                        period of 30 days to any individual enrolled in 
                        such plan beginning on the date of such 
                        termination.
                            ``(iv) Individual no longer in area.--An 
                        individual terminating residence in a medicare 
                        market area may terminate enrollment with the 
                        medicare health plan of such area as of the 
                        beginning of the first calendar month following 
                        the date on which the request is made for such 
                        termination, and the Secretary shall provide 
                        for an open enrollment period of 30 days to 
                        such individual for enrollment in the new 
                        medicare market area in which such individual 
                        resides beginning on the date of such 
                        termination. In the case of an individual's 
                        termination of enrollment, the medicare health 
                        plan shall provide the individual with a copy 
                        of the written request for termination of 
                        enrollment and a written explanation of the 
                        period (ending on the effective date of the 
                        termination) during which the individual 
                        continues to be enrolled with the plan and may 
                        not receive medicare benefits other than 
                        through such plan.
                            ``(v) Effective date of new enrollment.--
                        Enrollment under clause (iii) or (iv) shall be 
                        effective 30 days after the end of the 
                        enrollment period, or, if the Secretary 
                        determines that such date is not feasible, such 
                        other date as the Secretary specifies.
                    ``(D) Default enrollment.--
                            ``(i) In general.--If an individual does 
                        not choose an enrollment option during an 
                        enrollment period under this paragraph, such 
                        individual shall be automatically enrolled in--
                                    ``(I) the same option into which 
                                such individual enrolled in the 
                                preceding enrollment period; or
                                    ``(II) if the individual was not 
                                enrolled in such preceding period, the 
                                medicare fee-for-service.
                            ``(ii) No medicare health plans in area.--
                        If there are no medicare health plans in the 
                        medicare market area in which the individual 
                        resides, such individual shall be automatically 
                        enrolled in the medicare fee-for-service.
            ``(3) Information regarding medicare options in market 
        area.--
                    ``(A) In general.--The Secretary shall provide each 
                individual making an enrollment decision during any 
                enrollment period described in paragraph (2) with the 
                following information, in comparative form, regarding 
                the medicare health plans and medicare fee-for-service 
                available in the medicare market area in which such 
                individual resides:
                            ``(i) The individual's premiums for 
                        medicare benefits.
                            ``(ii) The individual's premiums for any 
                        supplementary benefits.
                            ``(iii) Enrollee restrictions.
                            ``(iv) Quality information, including 
                        enrollee satisfaction and health outcomes.
                            ``(v) Any other necessary information as 
                        determined by the Secretary.
                    ``(B) Marketing requirements.--The Secretary shall 
                prescribe the procedures and conditions under which a 
                medicare health plan that has entered into a contract 
                with the Secretary under this section may inform 
                individuals eligible to enroll under this section with 
                the plan about the plan. No brochures, application 
                forms, or other promotional or informational material 
                may be distributed by such plan to (or for the use of) 
                individuals eligible to enroll with the plan under this 
                section unless--
                            ``(i) at least 45 days before its 
                        distribution, the plan has submitted the 
                        material to the Secretary for review;
                            ``(ii) the material is made available to 
                        all individuals eligible to enroll in the 
                        medicare health plan in the medicare market 
                        area; and
                            ``(iii) the Secretary has not disapproved 
                        the distribution of the material.
                The Secretary shall review all such material submitted 
                and shall disapprove such material if the Secretary 
                determines, in the Secretary's discretion, that the 
                material is materially inaccurate or misleading or 
                otherwise makes a material misrepresentation.
            ``(4) Risk adjustments.--
                    ``(A) In general.--The Secretary shall adjust the 
                payments made to medicare health plans and employer-
                sponsored health plans under this title to reflect the 
                relative health risks of classes of beneficiaries 
                enrolled in such plans in the medicare market area. The 
                Secretary may define appropriate classes of 
                beneficiaries, based on age, disability status, and 
                such other factors as the Secretary determines to be 
                appropriate, so as to ensure actuarial equivalence and 
                the efficient delivery of health care. The Secretary 
                may add to, modify, or substitute for such classes, if 
                such changes will improve the determination of 
                actuarial equivalence.
                    ``(B) Penalties for discrimination.--The Secretary 
                shall have the authority to impose financial penalties 
                on medicare health plans or employer-sponsored health 
                plans that knowingly violate the prohibition against 
                discrimination against potential enrollees based on 
                their health status, claims experience, medical 
                history, or other factors that are generally related 
                with utilization of health care services.
            ``(5) Payments to plans.--
                    ``(A) In general.--The Secretary shall forward to 
                each medicare health plan or employer-sponsored health 
                plan the medicare per capita rate for the medicare 
                market area, as determined under subsection (e), for 
                every beneficiary enrolled in such plan for that month, 
                excluding any beneficiary premium but reflecting any 
                adjustments required pursuant to paragraph (4)(A).
                    ``(B) Collection of beneficiary premiums and 
                rebates.--
                            ``(i) Premiums.--Each medicare health plan 
                        or employer-sponsored plan shall be responsible 
                        for collecting premiums owed by beneficiaries 
                        for enrolling in such plan, including premiums 
                        for medicare benefits and any supplementary 
                        benefits.
                            ``(ii) Rebates.--Any medicare health plan 
                        or employer-sponsored plan which charges a 
                        total monthly premium which is less than the 
                        medicare per capita rate for an enrollee shall 
                        be responsible for paying to such enrollee a 
                        rebate equal to the excess medicare per capita 
                        rate or may use such rebate to offset any 
                        premium owed by the enrollee for any 
                        supplementary benefits selected by the 
                        enrollee.
                    ``(C) Source of payment.--The amounts paid to 
                medicare health plans and employer-sponsored health 
                plans shall be made from the Federal Hospital Insurance 
                Trust Fund and the Supplementary Insurance Trust Fund 
                based on an allocation determined by the Secretary.
    ``(e) Medicare Per Capita Rate.--
            ``(1) Announcement.--With respect to each medicare market 
        area, the Secretary shall announce, not later than October 1 
        (beginning with 1995) the per capita rate that will apply to 
        such market area beginning with the enrollment year (which 
        coincides with the next calendar year).
            ``(2) Per capita rate.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), the per capita rate for a 
                medicare market area shall be equal to the lesser of 
                the maximum per capita rate or the sum of--
                            ``(i) the excess of--
                                    ``(I) the benchmark premium for 
                                such area, over
                                    ``(II) the base beneficiary premium 
                                for such area; and
                            ``(ii) the applicable percentage of the 
                        excess of--
                                    ``(I) the fee-for-service per 
                                capita costs (hereafter in this section 
                                referred to as `FFSPCC') for such area, 
                                over
                                    ``(II) such benchmark premium.
                For purposes of the preceding sentence, the applicable 
                percentage shall be determined by the following table:

                                                             Applicable
``Enrollment year:                                          percentage:
    1996..........................................                   90
    1997..........................................                   80
    1998..........................................                   70
    1999..........................................                   60
    2000 and thereafter...........................                  50.
                    ``(B) Secondary payer per capita rate.--For 
                individuals who are eligible for secondary coverage 
                under this title pursuant to section 1862(b) and elect 
                to enroll in an employer-sponsored health plan, the 
                Secretary shall determine a per capita rate for each 
                medicare market area equal to the costs of providing 
                secondary coverage to all individuals in such market 
                area divided by the number of individuals eligible for 
                such coverage in such market area.
                    ``(C) Rural enrollees.--
                            ``(i) Five-year bonus.--For enrollment 
                        periods beginning in 1996 through 2000, the per 
                        capita rate in each medicare market area 
                        (otherwise determined under this paragraph) 
                        shall be increased by 10 percent (without 
                        regard to the maximum established under 
                        paragraph (3)) with respect to each individual 
                        enrolling in a medicare health plan or 
                        employer-sponsored health plan who resides in 
                        an underserved rural area within such market 
                        area, as determined by the Secretary.
                            ``(ii) Improve access.--The bonus amount 
                        paid under this subparagraph shall be used by 
                        such health plans to improve access and 
                        coordinated service delivery in the underserved 
                        rural area in which the enrollee resides. The 
                        bonus amount shall not reduce the premiums owed 
                        by the enrollee for medicare benefits or any 
                        supplementary coverage.
                            ``(iii) Study and recommendations.--The 
                        Secretary shall report to the Congress at the 
                        end of the 5-year period described in clause 
                        (ii) on the status of health care access in 
                        underserved rural areas and shall make 
                        recommendations regarding continuation of bonus 
                        per capita payments.
            ``(3) Maximum per capita rate.--
                    ``(A) In general.--Except as provided in 
                subparagraph (E), the maximum per capita rate in any 
                medicare market area shall be the excess of--
                            ``(i) the product of--
                                    ``(I) FFSPCC in all medicare market 
                                areas, and
                                    ``(II) an adjustment factor for 
                                such market area; over
                            ``(ii) the fee-for-service beneficiary 
                        premium required pursuant to subsection 
                        (f)(2)(B)(ii).
                    ``(B) Adjustment factor.--For purposes of 
                subparagraph (A)(i)(II), and except as provided in 
                subparagraph (D):
                            ``(i) Ffspcc ratio less than .8.--For 
                        medicare market areas with a FFSPCC ratio less 
                        than or equal to .8, the adjustment factor 
                        shall be .8.
                            ``(ii) Ffspcc ratio between .8 and .95.--
                        For medicare market areas with a FFSPCC ratio 
                        less than .95 but greater than .8, the 
                        adjustment factor shall be the sum of .85, 
                        plus--
                                    ``(I) .1, multiplied by
                                    ``(II) the ratio of the excess of 
                                the FFSPCC ratio over .8, to .15.
                            ``(iii) Ffspcc ratio between .95 and 
                        1.05.--For medicare market areas with a FFSPCC 
                        ratio of at least .95 but less than 1.05, the 
                        adjustment factor shall be the FFSPCC ratio.
                            ``(iv) Ffspcc ratio between 1.05 and 1.2.--
                        For medicare market areas with a FFSPCC ratio 
                        of at least 1.05 but less than 1.2, the 
                        adjustment factor shall be the sum of 1.05, 
                        plus--
                                    ``(I) .1, multiplied by
                                    ``(II) the ratio of the excess of 
                                the FFSPCC ratio over 1.05, to .15.
                            ``(v) Ffspcc ratio greater than 1.2.--For 
                        medicare market areas with a FFSPCC ratio 
                        greater than or equal to 1.2, the adjustment 
                        factor shall be 1.2.
                    ``(C) Ffspcc ratio.--For purposes of subparagraph 
                (B), for each medicare market area, the Secretary shall 
                determine a FFSPCC ratio by dividing FFSPCC in such 
                market area by FFSPCC for all medicare market areas.
                    ``(D) Budget neutrality.--The Secretary shall 
                change the adjustment factors as necessary to ensure 
                that total spending under this title shall not exceed 
                the level of spending that would occur if the maximum 
                per capita rate in each medicare market area were equal 
                to the FFSPCC in each such market area.
                    ``(E) Alternative formula.--The Secretary may 
                substitute an alternative formula for determining the 
                maximum rate in each medicare market area. Such an 
                alternative formula shall generally conform to the 
                pattern of adjustment factors specified in subparagraph 
                (B), except that such formula shall maintain a 
                consistent mathematical relationship between the 
                adjustment factor and the FFSPCC ratio in each such 
                market area in a manner that achieves budget 
                neutrality.
            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Benchmark premium.--The benchmark premium for 
                a medicare market area shall be equal to the sum of--
                            ``(i) the lowest health plan total monthly 
                        premium submitted by a medicare health plan in 
                        such area for the enrollment year; and
                            ``(ii) the applicable percentage of the 
                        excess of--
                                    ``(I) the average of all medicare 
                                health plan total monthly premiums 
                                submitted in such area, over
                                    ``(II) the lowest health plan total 
                                monthly premium in such area.
                For purposes of the preceding sentence, the applicable 
                percentage shall be determined by the following table:

                                                             Applicable
``Enrollment year:                                          percentage:
    1996..........................................                   80
    1997..........................................                   60
    1998..........................................                   40
    1999 and thereafter...........................                  20.
                    ``(B) Fee-for-service per capita costs.--The 
                Secretary shall determine FFSPCC for a medicare market 
                area by dividing--
                            ``(i) the total spending for medicare 
                        benefits (not including beneficiary cost 
                        sharing) for individuals who reside in such 
                        area, who are not enrolled in a medicare health 
                        plan or employer-sponsored health plan, and who 
                        are not in secondary payer status; by
                            ``(ii) the number of such individuals.
                The Secretary shall make such other adjustments as may 
                be necessary to allow an accurate comparison of FFSPCC 
                for the medicare market area with total monthly 
                premiums charged by medicare health plans in such area.
    ``(f) Beneficiary Premiums.--For purposes of this section:
            ``(1) Base beneficiary premium.--The base beneficiary 
        premium for each medicare market area shall be equal to the 
        product of--
                    ``(A) the ratio of the monthly premium determined 
                under section 1839 to the national average cost per 
                beneficiary under this title in 1995, as determined by 
                the Secretary; and
                    ``(B) the benchmark premium for such area.
            ``(2) Monthly beneficiary premiums.--
                    ``(A) Health plan beneficiary premium.--To be 
                enrolled for coverage in a medicare health plan during 
                an enrollment year for medicare benefits, each 
                beneficiary shall pay a monthly premium equal to the 
                excess of--
                            ``(i) the premium charged by the plan 
                        selected by the beneficiary; over
                            ``(ii) the medicare per capita rate in the 
                        medicare market area in which the beneficiary 
                        resides.
                    ``(B) Fee-for-service beneficiary premium.--
                            ``(i) In general.--To be enrolled for 
                        coverage in a medicare fee-for-service in a 
                        medicare market area during an enrollment year 
                        for medicare benefits, each beneficiary shall 
                        pay a monthly premium equal to the estimated 
                        FFSPCC for the medicare market area, multiplied 
                        by the ratio determined under paragraph (1)(A).
    ``(g) Supplementary Coverage Plans.--
            ``(1) In general.--The Secretary shall ensure that all 
        supplementary coverage plans meet the requirements of this 
        subsection, in addition to any requirements that may be 
        applicable under section 1882.
            ``(2) Coordination with medicare choice.--Supplementary 
        coverage plans may only be offered to beneficiaries during the 
        same annual open enrollment period during which beneficiaries 
        select medicare coverage and must be offered to all 
        beneficiaries in the same medicare market area for the same, 
        uniform monthly premium during the enrollment period.
            ``(3) Standard benefits.--
                    ``(A) In general.--Medicare health plans may only 
                offer standardized supplementary coverage plans, as 
                established by the Secretary, after consultation with 
                the National Association of Insurance Commissioners.
                    ``(B) Required options.--Among the standardized 
                plans, the Secretary shall include a plan--
                            ``(i) covering only outpatient prescription 
                        drugs; and
                            ``(ii) which, together with medicare 
                        benefits, would resemble coverage typically 
                        offered by health maintenance organizations to 
                        employer groups, including an annual out-of-
                        pocket maximum beneficiary liability (covering 
                        coinsurance, copayments, and deductibles).
            ``(4) One sponsor.--A sponsor of supplementary coverage may 
        not offer such coverage to a beneficiary selecting a medicare 
        health plan from a different sponsor, except that sponsors of 
        supplementary coverage may offer such coverage to any 
        individual selecting medicare fee-for-service.
            ``(5) Surcharge on certain plans.--Notwithstanding any 
        other provision of this section, if an individual chooses to 
        purchase a medicare supplemental policy certified pursuant to 
        section 1882 and the coverage under such policy results in 
        increased costs to the program under this title, the monthly 
        beneficiary premium otherwise applicable under this section 
        shall be increased by a surcharge actuarially equivalent to 
        such increased costs.
            ``(6) Definitions.--The term `supplementary coverage plan' 
        means any health insurance coverage offered by a medicare 
        health plan or medicare supplemental policy (as defined in 
        section 1882) that covers health care costs not covered as 
        medicare benefits and for which the enrollee must pay a 
        premium.''.
    (b) Conforming Amendments.--
            (1) Section 1882(c) of the Social Security Act (42 U.S.C. 
        1395ss(c)) is amended--
                    (A) by striking ``with respect to paragraph (3)'' 
                and inserting ``with respect to paragraphs (3) and 
                (6)'',
                    (B) by striking ``and'' at the end of paragraph 
                (4),
                    (C) by striking the period at the end of paragraph 
                (5) and inserting ``; and'', and
                    (D) by adding at the end the following new 
                paragraph:
            ``(6) agrees--
                    ``(A) to offer such policy during the annual open 
                enrollment period specified in section 1876(c)(2) at a 
                uniform monthly premium to all beneficiaries in a 
                medicare market area established under section 1876(a); 
                and
                    ``(B) not to discriminate against beneficiaries 
                based on their health status, claims experience, 
                medical history, or other factors that are generally 
                related with utilization of health care services.''.
            (2) Section 1882(s) of such Act (42 U.S.C. 1395ss(s)) is 
        amended--
                    (A) by striking paragraph (2),
                    (B) by striking ``paragraphs (1) and (2)'' in 
                paragraph (3) and inserting ``paragraph (1)'', and
                    (C) by redesignating paragraph (3) as paragraph 
                (2).
            (3) Section 1839(e) of such Act (42 U.S.C. 1395r(e)) is 
        amended to read as follows:
    ``(e) Notwithstanding the provisions of subsection (a), the monthly 
premium for each individual enrolled under this part for each month--
            ``(1) in 1994 shall be $41.10;
            ``(2) in 1995 shall be $46.10; and
            ``(3) after December 1995 shall be an amount equal to 25 
        percent of the monthly actuarial rate for enrollees age 65 and 
        over, as determined under subsection (a)(1) and applicable to 
        such month.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contracts entered into with respect to calendar years 
beginning after December 31, 1995.

SEC. 302. OTHER MEDICARE PROVISIONS.

    (a) Application of Competitive Acquisition for Fee-for-Service 
Items and Services.--
            (1) General rule.--Part B of title XVIII of the Social 
        Security Act (42 U.S.C. 1395j et seq.) is amended by inserting 
        after section 1846 the following:

            ``competitive acquisition for items and services

    ``Sec. 1847. (a) Establishment of Bidding Areas.--
            ``(1) In general.--The Secretary shall, in each medicare 
        market area, award a contract or contracts for the furnishing 
        under this part of the items and services described in 
        subsection (c) on or after January 1, 1996.
            ``(2) Alternative areas.--The Secretary may establish areas 
        other than medicare market areas for competitive acquisition of 
        an item or service described in subsection (c), if the 
        establishment of such an area increases the availability and 
        accessibility of suppliers and the probability and amount of 
        savings to be realized by the use of such competitive 
        acquisition in such 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) Clinical diagnostic laboratory tests.
            ``(4) 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.''.
            (2) Items and services to be furnished only through 
        competitive acquisition.--Section 1862(a) of such Act (42 
        U.S.C. 1395y(a)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (15),
                    (B) by striking the period at the end of paragraph 
                (16) and inserting ``; or'', and
                    (C) by inserting after paragraph (16) the following 
                new paragraph:
            ``(17) 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.''.
            (3) 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 (42 U.S.C. 1395 et seq.), if the 
        establishment of competitive acquisition areas under section 
        1847 of such Act (as added by paragraph (1)) and the limitation 
        of coverage for items and services under part B of such title 
        (42 U.S.C. 1395j et seq.) 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 such 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.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to items and services furnished under part B of 
        title XVIII of the Social Security Act (42 U.S.C. 1395j et 
        seq.) on or after January 1, 1995.
    (b) Expansion of Centers of Excellence.--
            (1) In general.--The Secretary 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 for 
        individuals enrolled in medicare fee-for-service. Payment under 
        title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
        will be made for services subject to such contracts on the 
        basis of negotiated or all-inclusive rates as follows:
                    (A) The center shall cover services provided in a 
                medicare market area (established pursuant to section 
                1876(a) of the Social Security Act) for years beginning 
                with fiscal year 1996.
                    (B) The amount of payment made by the Secretary to 
                the center under title XVIII of the Social Security Act 
                (42 U.S.C. et seq.) 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.
                    (C) The Secretary shall make payments to the center 
                on such a basis for the following services furnished to 
                individuals enrolled in medicare fee-for-service and 
                entitled to benefits under such title:
                            (i) Facility, professional, and related 
                        services relating to cataract surgery.
                            (ii) Coronary artery by-pass surgery and 
                        related services.
                            (iii) Such other services as the Secretary 
                        and the center may agree to cover under the 
                        agreement.
            (2) Rebate of portion of savings.--In the case of any 
        services provided under a demonstration project conducted under 
        paragraph (1), 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--
                    (A) the amount of payment that would have been made 
                by the Secretary under title XVIII of the Social 
                Security Act (42 U.S.C. 1395 et seq.) to the center for 
                such services if the services had not been provided 
                under the project, exceeds
                    (B) the amount of payment made by the Secretary 
                under such title to the center for such services.
    (c) Medicare Secondary Payer Changes.--
            (1) Extension of data match.--
                    (A) Section 1862(b)(5)(C) of the Social Security 
                Act (42 U.S.C. 1395y(b)(5)(C)) is amended by striking 
                clause (iii).
                    (B) Section 6103(l)(12) of the Internal Revenue 
                Code of 1986 is amended by striking subparagraph (F).
            (2) Repeal of sunset on application to disabled employees 
        of employers with more than 100 employees.--Section 
        1862(b)(1)(B)(iii) of such Act (42 U.S.C. 1395y(b)(1)(B)(iii)), 
        as amended by section 13561(b) of the Omnibus Budget 
        Reconciliation Act of 1993, is amended--
                    (A) in the heading, by striking ``Sunset'' and 
                inserting ``Effective date'', and
                    (B) by striking ``, and before October 1, 1998''.
            (3) Extension of period for end stage renal disease 
        beneficiaries.--Section 1862(b)(1)(C) of such Act (42 U.S.C. 
        1395y(b)(1)(C)), as amended by section 13561(c) of the Omnibus 
        Budget Reconciliation Act of 1993, is amended in the second 
        sentence by striking ``and on or before October 1, 1998,''.
    (d) Reduction in Update for Inpatient Hospital Services.--Section 
1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1) of the Omnibus 
Budget Reconciliation Act of 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''.
    (e) Reduction in Adjustment for Indirect Medical Education.--
            (1) In general.--Section 1886(d)(5)(B)(ii) of the Social 
        Security Act (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.''.
            (2) No restandardization of payment amounts required.--
        Section 1886(d)(2)(C)(i) of such Act (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 302(e)(1) of the Health Care Reform Act of 
        1994''.
    (f) Elimination of Bad Debt Recognition for Hospital Services.--
            (1) In general.--Effective October 1, 1995, in making any 
        payment to hospitals under title XVIII of the Social Security 
        Act (42 U.S.C. 1395 et seq.), the Secretary shall discontinue 
        payments under title XVIII of such Act to providers of service 
        for reasonable costs relating to unrecovered costs associated 
        with unpaid deductible and coinsurance amounts incurred under 
        such title.
            (2) Conforming amendments.--
                    (A) In general.--(i) Subsection (c) of section 4008 
                of the Omnibus Budget Reconciliation Act of 1987 is 
                repealed.
                    (ii) Section 1833 of the Social Security Act (42 
                U.S.C. 1395l) is amended--
                            (I) in subsection (l)(5), by striking 
                        subparagraph (C), and
                            (II) in subsection (r), by striking 
                        paragraph (4).
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall take effect on October 1, 1995.
    (g) Extension of Freeze on Updates to Routine Service Costs of 
Skilled Nursing Facilities.--
            (1) Payments based on cost limits.--Section 1888(a) of the 
        Social Security Act (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)''.
            (2) Payments determined on prospective basis.--Section 
        1888(d)(2)(B) of such Act (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)''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply to cost reporting periods beginning on or 
        after October 1, 1995.
    (h) Establishment of Cumulative Expenditure Goals for Physician 
Services.--
            (1) Use of cumulative performance standard.--Section 
        1848(f)(2) of the Social Security Act (42 U.S.C. 1395w-4(f)(2)) 
        is amended--
                    (A) in subparagraph (A)--
                            (i) in the heading, by striking ``In 
                        general'' and inserting ``Fiscal years 1991 
                        through 1994.--'',
                            (ii) 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
                            (iii) in the matter following clause (iv), 
                        by striking ``subparagraph (B)'' and inserting 
                        ``subparagraph (C)'';
                    (B) in subparagraph (B), by striking ``subparagraph 
                (A)'' and inserting ``subparagraphs (A) and (B)'';
                    (C) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (C) and (D); and
                    (D) 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)).''.
            (2) Treatment of default update.--
                    (A) In general.--Section 1848(d)(3)(B) of such Act 
                (42 U.S.C. 1395w-4(d)(3)(B)) is amended--
                            (i) 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
                            (ii) 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.''.
                    (B) Conforming amendment.--Section 1848(d)(3)(A)(i) 
                of such Act (42 U.S.C. 1395w-4(d)(3)(A)(i)) is amended 
                by striking ``subparagraph (B)'' and inserting 
                ``subparagraphs (B) and (C)''.
    (i) Limitations on Payment for Physicians' Services Furnished by 
High-Cost Hospital Medical Staffs.--
            (1) In general.--
                    (A) Limitations described.--Part B of title XVIII 
                of the Social Security Act (42 U.S.C. 1395j et seq.), 
                as amended by section 302(a)(1), 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).''.
                    (B) Conforming amendments.--(i) Section 
                1833(a)(1)(N) of such Act (42 U.S.C. 1395l(a)(1)(N)) is 
                amended by inserting ``(subject to reduction under 
                section 1849)'' after ``1848(a)(1)''.
                    (ii) Section 1848(a)(1)(B) of such Act (42 U.S.C. 
                1395w-4(a)(1)(B)) is amended by striking ``this 
                subsection,'' and inserting ``this subsection and 
                section 1849,''.
            (2) Requiring physicians to identify hospital at which 
        service furnished.--Section 1848(g)(4)(A)(i) of such Act (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),''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to services furnished on or after January 1, 1998.
    (j) Imposition of Coinsurance on Laboratory Services.--
            (1) In general.--Paragraphs (1)(D) and (2)(D) of section 
        1833(a) of the Social Security Act (42 U.S.C. 1395l(a)) are 
        each amended--
                    (A) by striking ``(or 100 percent'' and all that 
                follows through ``the first opinion))'', and
                    (B) by striking ``100 percent of such negotiated 
                rate'' and inserting ``80 percent of such negotiated 
                rate''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to tests furnished on or after January 1, 1995.
    (k) Reduction in Routine Cost Limits for Home Health Services.--
            (1) Reduction in update to maintain freeze in 1996.--
        Section 1861(v)(1)(L)(i) of the Social Security Act (42 U.S.C. 
        1395x(v)(1)(L)(i)) is amended--
                    (A) in subclause (II), by striking ``or'' at the 
                end,
                    (B) in subclause (III), by striking ``112 
                percent,'' and inserting ``and before July 1, 1996, 112 
                percent, or'', and
                    (C) 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),''.
            (2) Basing limits in subsequent years on median of costs.--
                    (A) In general.--Section 1861(v)(1)(L)(i) of such 
                Act (U.S.C. 1395x(v)(1)(L)(i)), as amended by paragraph 
                (1), is amended in the matter following subclause (IV) 
                by striking ``the mean'' and inserting ``the median''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall apply to cost reporting periods 
                beginning on or after July 1, 1997.
    (l) Imposition of Copayment for Certain Home Health Visits.--
            (1) In general.--
                    (A) Part a.--Section 1813(a) of the Social Security 
                Act (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.''.
                    (B) Part b.--Section 1833(a)(2) of such Act (42 
                U.S.C. 1395l(a)(2)) is amended--
                            (i) in subparagraph (A), by striking ``to 
                        home health services,'' and by striking the 
                        comma after ``opinion)'',
                            (ii) in subparagraph (D), by striking 
                        ``and'' at the end,
                            (iii) in subparagraph (E), by striking the 
                        semicolon at the end and inserting ``; and'', 
                        and
                            (iv) 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;''.
                    (C) Provider charges.--Section 1866(a)(2)(A)(i) of 
                such Act (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended--
                            (i) by striking ``deduction or 
                        coinsurance'' and inserting ``deduction, 
                        coinsurance, or copayment'', and
                            (ii) by striking ``or (a)(4)'' and 
                        inserting ``(a)(4), or (a)(5)''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to home health services furnished on or after July 
        1, 1995.
    (m) Reduction in Hospital Outpatient Services Through Establishment 
of Prospective Payment System.--
            (1) In general.--Section 1833(a)(2)(B) of the Social 
        Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended by striking 
        ``section 1886)--'' and all that follows and inserting the 
        following: ``section 1886), an amount equal to a prospectively 
        determined payment rate established by the Secretary that 
        provides for payments for such items and services to be based 
        upon a national rate adjusted to take into account the relative 
        costs of furnishing such items and services in various 
        geographic areas, except that for items and services furnished 
        during cost reporting periods (or portions thereof) in years 
        beginning with 1995, such amount shall be equal to 90 percent 
        of the amount that would otherwise have been determined;''.
            (2) Establishment of prospective payment system.--Not later 
        than July 1, 1995, the Secretary shall establish the 
        prospective payment system for hospital outpatient services 
        necessary to carry out section 1833(a)(2)(B) of the Social 
        Security Act (as amended by paragraph (1)).
            (3) Effective date.--The amendment made by paragraph (1) 
        shall apply to items and services furnished on or after July 1, 
        1995.

SEC. 303. INCOME-TESTED MEDICARE PREMIUMS.

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

    ``PART VIII--CERTAIN MEDICARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

                              ``Sec. 59B. Recapture of certain medicare 
                                        subsidies.

``SEC. 59B. RECAPTURE OF CERTAIN MEDICARE 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 aggregate of the Medicare 
recapture amounts (if any) for months during such year that a premium 
is paid under section 1876 of the Social Security Act for the coverage 
of the individual under such title.
    ``(b) Medicare Recapture Amount for Month.--For purposes of this 
section, the Medicare recapture amount for any month is the amount 
equal to the excess of--
            ``(1) either--
                    ``(A) the total monthly premium charged by the 
                medicare health plan in which the individual was 
                enrolled (as determined under section 1876(d)(1) of the 
                Social Securty Act), or
                    ``(B) the fee-for-service per capita costs (as 
                defined in section 1876(e)(4)(B) of such Act) for 
                individuals enrolled in medicare fee-for-service during 
                the month in the medicare market area in which the 
                individual was residing, over
            ``(2) the sum of--
                    ``(A) the monthly beneficiary premium owed by the 
                individual (as determined by section 1876(f)(2) of such 
                Act), and
                    ``(B) 50 percent of the benchmark premium in the 
                medicare market area in which the individual was 
                residing (as determined under section 1876(e)(4)(A) of 
                such Act).
    ``(c) Phase In of Recapture Amount.--If the modified adjusted gross 
income of the taxpayer for any taxable year exceeds the threshold 
amount by less than $25,000, 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 
$25,000.
    ``(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, $75,000,
                    ``(B) $100,000 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 Medicare Trust Funds.--
            (1) In general.--There are hereby appropriated to the 
        Hospital Insurance and the Supplemental Medical Insurance Trust 
        Funds 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) 
        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), and shall be allocated 
        between the Hospital Insurance and the Supplemental Medical 
        Insurance Trust Funds according to a formula established by the 
        Secretary of Health and Human Services. 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) Paragraph (1) of section 6050F(a) of the Internal 
        Revenue Code of 1986 (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 section 1876 of the 
                Social Security Act for the coverage of such individual 
                under such part, and''.
            (2) Paragraph (2) of section 6050F(b) of such Code 
        (relating to statements to be furnished with respect to whom 
        information is required) is amended to read as follows:
            ``(2) the information required to be shown on such return 
        with respect to such individual.''.
            (3) Subparagraph (A) of section 6050F(c)(1) of such Code 
        (defining appropriate Federal official) is amended by inserting 
        before the comma ``and in the case of the information specified 
        in subsection (a)(1)(D)''.
            (4) The heading for section 6050F of such Code is amended 
        by inserting ``and medicare coverage'' before the period.
            (5) 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 coverage'' before the 
        period.
    (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 April 16, 1997, with respect to any underpayment to the extent 
that such underpayment resulted from section 59B(a) of the Internal 
Revenue Code of 1986, 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 medicare 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.

SEC. 304. MEDICARE ADMINISTRATIVE SIMPLIFICATION.

    (a) Consolidation of Parts A and B.--By not later than October 1, 
1995, the Secretary shall submit to the Congress a proposal to 
consolidate entitlement for part A of the title XVIII of the Social 
Security Act (42 U.S.C. 1395c et seq.) and enrollment in part B of such 
title (42 U.S.C. 1395j et seq.) into eligibility or enrollment into the 
entire medicare program under such title. In preparing such a proposal, 
the Secretary shall consider phasing in such a consolidation, and shall 
ensure that no beneficiary shall pay higher premiums for coverage under 
such program than under such program as of the date of the enactment of 
this Act.
    (b) Consolidation of Fee-For-Service Administration.--
            (1) In general.--The Secretary shall take such steps as may 
        be necessary to consolidate the administration (including 
        processing systems) of parts A and B of the medicare program 
        (under title XVIII of the Social Security Act), including 
        medicare supplemental policies, over a 5-year period.
            (2) Combination of intermediary and carrier functions.--In 
        taking such steps, the Secretary may 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. No 
        medicare market area (established under section 1876(a) of the 
        Social Security Act) may be subject to more than 1 entity.
            (3) Streamlined processing systems.--In carrying out this 
        subsection, the Secretary may ensure--
                    (A) a streamlined, standardized, and paperless 
                process for handling all fee-for-service claims, and
                    (B) that payments under title XVIII of the Social 
                Security Act (42 U.S.C. 1395 et seq.) are made first by 
                the medicare program and medicare supplemental policies 
                before providers can bill beneficiaries for services 
                using standardized forms.
            (4) Superseding conflicting requirements.--The provisions 
        of sections 1816 and 1842 of the Social Security Act (42 U.S.C. 
        1395h and 1395u) (including provider nominating provisions in 
        such section 1816) are superseded to the extent required to 
        carry out this subsection.

            Subtitle B--Health Discount and Medicaid Reform

                        PART I--HEALTH DISCOUNT

SEC. 311. STATE HEALTH DISCOUNT PROGRAMS.

    (a) In General.--To be certified by the Secretary as meeting the 
requirements of this Act, each State shall include within the State 
health reform plan a State administered program, consistent with this 
subtitle and such other requirements as determined necessary by the 
Secretary and issued in regulations, under which eligible persons shall 
receive premium assistance (hereafter in this part referred to as 
``health discounts'') for purchasing health care coverage from AHPs.
    (b) Categories of Eligibility.--Persons who otherwise meet the 
criteria for entitlement under this part shall be divided into the 
following categories of eligibility:
            (1) Eligible individuals, as defined in section 1(c)(3).
            (2) Eligible employees, as defined in section 1(c)(2).
    (c) Switching Categories of Eligibility.--Individuals and employees 
who are determined to be in 1 category of eligibility under subsection 
(b) but whose circumstances change and cause such individuals and 
employees to fall within the other such category shall remain in the 
category of eligibility in which such individuals and employees were 
originally placed until the next open enrollment period under section 
312(a)(2).

SEC. 312. HEALTH DISCOUNT PROGRAM DESIGN.

    (a) Eligible Individuals.--
            (1) In general.--A State health discount program shall 
        allow each eligible individual who otherwise meets the 
        requirements for entitlement under this part to select from 
        among competing AHPs in the market area in which such 
        individual resides based on the price and quality of the 
        competing AHPs and to use the discount to which such individual 
        is entitled only to offset the premium charged by the AHP for 
        the benefits package selected by the individual.
            (2) Annual open enrollment.--
                    (A) In general.--A State health discount program 
                shall provide for an annual open enrollment period 
                during which each eligible individual shall choose 
                enrollment in an AHP to which the health discount to 
                which such individual is entitled shall be paid.
                    (B) Enrollment upon eligibility.--Eligible 
                individuals shall have an open enrollment period upon 
                becoming eligible for a health discount.
                    (C) Period of enrollment.--After selecting an AHP 
                during an open enrollment period, an eligible 
                individual may not choose another AHP to which a health 
                discount may be paid until the next annual open 
                enrollment period, except that--
                            (i) an eligible individual moving to a new 
                        market area in the State shall be provided with 
                        a new open enrollment period, and
                            (ii) an eligible individual in an AHP that 
                        is terminated from the health discount program 
                        shall be provided with a new open enrollment 
                        period.
            (3) Comparative information on enrollment options.--During 
        an open enrollment period, a State health discount program 
        shall provide to the individual such information as may be 
        necessary to ensure such individual may compare the price and 
        quality of the AHPs available in the market area, including--
                    (A) premiums by type of benefits package of the 
                competing AHPs,
                    (B) any restrictions by AHPs on enrollees' 
                selection or use of health care providers and services,
                    (C) quality information, including enrollee 
                satisfaction and measures of health outcomes,
                    (D) appeal rights of enrollees, and
                    (E) any other necessary information, as determined 
                by the Secretary.
            (4) AHP benefits and premiums.--AHPs, other than AHPs 
        offered by employers as self-insured plans under the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1001 et 
        seq.), in order to be certified pursuant to section 112 of this 
        Act, shall--
                    (A) agree to participate in the State health 
                discount program and make available to eligible 
                individuals--
                            (i) the standard benefits package, as 
                        determined by the Secretary pursuant to section 
                        113(a),
                            (ii) the nominal cost-sharing benefits 
                        package, as determined by the Secretary 
                        pursuant to section 113(b), and
                            (iii) the alternative benefits package, as 
                        determined by the Secretary pursuant to section 
                        113(c), if required pursuant to section 313, 
                        and
                    (B) submit, for each benefits package for each 
                enrollment period, a uniform monthly premium for all 
                eligible individuals in the market area, allowing 
                adjustments in such premium only for those factors 
                provided in section 112(d).
            (5) Discounts.--Each eligible individual who otherwise 
        meets the criteria for entitlement under this part shall be 
        entitled to a health discount, as determined under subsection 
        (c).
            (6) Individual premiums.--To enroll in an AHP, an eligible 
        individual must pay a premium equal to the excess of--
                    (A) the premium charged by the AHP for the benefits 
                package selected by the individual, over
                    (B) the discount to which the individual is 
                entitled.
            (7) Payments to ahps.--
                    (A) In general.--A State health discount program 
                shall collect premiums from eligible individuals and 
                forward to AHPs such premiums and health discounts to 
                which such individuals are entitled.
                    (B) Risk adjustment.--
                            (i) In general.--A State health discount 
                        program shall adjust the health discounts paid 
                        to the AHPs to reflect the relative health 
                        risks of classes of eligible individuals 
                        choosing to enroll in such plans in a market 
                        area. The Secretary may define appropriate 
                        classes of eligible individuals, based on age, 
                        disability status, and such other factors as 
                        the Secretary determines to be appropriate.
                            (ii) Penalties for discrimination.--A State 
                        health discount program shall have the 
                        authority to impose financial penalties on AHPs 
                        that knowingly violate the prohibition against 
                        discrimination against potential enrollees 
                        based on their health status, claims 
                        experience, medical history, or other factors 
                        that are generally related with utilization of 
                        health care services.
    (b) Eligible Employees.--
            (1) In general.--An eligible employee who otherwise meets 
        the criteria for entitlement under this part and is enrolled in 
        an AHP in a market area in a State shall get a health discount 
        which may only be used to reduce the employee's premium for 
        enrolling in such AHP.
            (2) Discounts.--Each eligible employee who otherwise meets 
        the criteria for entitlement under this part shall be entitled 
        to a health discount, as determined under subsection (c).
            (3) Payments to ahps.--A State health discount program 
        shall forward to AHPs such health discounts to which such 
        eligible employees are entitled.
    (c) Determining Discounts.--
            (1) Benchmark.--
                    (A) In general.--Each calendar year, a State health 
                discount program shall determine benchmark monthly 
                premiums for the calendar year for each class of family 
                enrollment within each category of eligibility and 
                within each market area.
                    (B) AHP benefits and premiums.--For purposes of 
                determining discounts, AHP premiums shall be--
                            (i) for poor eligible individuals, those 
                        AHP premiums submitted pursuant to subsection 
                        (a)(4)(ii),
                            (ii) for low income eligible individuals, 
                        those AHP premiums submitted pursuant to 
                        subsection (a)(4)(i), or, if required by 
                        section 313, subsection (a)(4)(iii),
                            (iii) for poor eligible employees, those 
                        AHP premiums charged for the nominal cost-
                        sharing benefits package in the small group 
                        market pursuant to section 112(d), and
                            (iv) for low income eligible employees, 
                        those AHP premiums charged for the standard 
                        benefits package in the small group market 
                        pursuant to section 112(d), except that AHPs 
                        may be required to establish separate monthly 
                        premiums for the alternative benefits package 
                        pursuant to section 313.
                    (C) Calculation.--The benchmark monthly premium 
                shall equal the sum of the lowest premium charged by an 
                AHP for the applicable benefits package plus the 
                applicable percentage of the excess of--
                            (i) the average of all monthly premiums 
                        charged by AHPs, over
                            (ii) the lowest premium charged by an AHP.
                For purposes of the preceding sentence, the applicable 
                percentage shall be determined by following table:
                                                             Applicable
         Year:                                              percentage:
         1996...............................................         80
         1997...............................................         60
         1998...............................................         40
         1999 and thereafter................................         20
            (2) Poor eligible individuals and employees.--For poor 
        eligible individuals and poor eligible employees, the amount of 
        the discount shall be equal to the benchmark for each category 
        of eligibility.
            (3) Low income eligible individuals and employees.--For low 
        income eligible individuals and low income eligible employees, 
        the amount of the discount shall be equal to the benchmark for 
        each category of eligibility multiplied by--
                    (A) 100 percent, reduced by
                    (B) each percentage point by which the eligible 
                individual's or eligible employee's family adjusted 
                total income exceeds 100 percent of the Federal poverty 
                line.
            (4) Definitions.--For purposes of this part:
                    (A) Poor eligible individuals and employees.--The 
                terms ``poor eligible individual'' and ``poor eligible 
                employee'' mean an eligible individual or eligible 
                employee with family adjusted total income not in 
                excess of 100 percent of the Federal poverty line.
                    (B) Low income eligible individuals and 
                employees.--The terms ``low income eligible 
                individual'' and ``low income eligible employee'' mean 
                an eligible individual or eligible employee with family 
                adjusted total income exceeding 100 percent but not 200 
                percent of the Federal poverty line.
                    (C) Family adjusted total income.--
                            (i) In general.--The term ``family adjusted 
                        total income'' means, with respect to an 
                        eligible individual or eligible employee, the 
                        sum of the modified total income for the 
                        individual or employee and all the other 
                        eligible family members.
                            (ii) Modified family income.--The term 
                        ``modified family income'' means the sum of--
                                    (I) the adjusted gross income (as 
                                defined in section 62(a) of the 
                                Internal Revenue Code of 1986) of the 
                                taxpayer and family members for the 
                                taxable year determined without regard 
                                to sections 911, 931, and 933 of such 
                                Code, determined without the 
                                application of paragraphs (6) and (7) 
                                of section 62(a) of such Code and 
                                without the application of section 
                                162(l) of such Code, plus
                                    (II) the interest received or 
                                accrued by the taxpayer and family 
                                members during such taxable year which 
                                is exempt from income, plus
                                    (III) the amount of social security 
                                benefits (described in section 86(d) of 
                                such Code) which is not includable in 
                                gross income of the taxpayer and family 
                                members under section 86 of such Code.
                    (D) Federal poverty line.--The term ``Federal 
                poverty line'' means 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.
    (d) Applications for Health Discounts.--
            (1) In general.--Any individual who seeks assistance under 
        this part shall submit a written application to the State 
        health discount program.
            (2) Basis for determination.--Subject to annual enforcement 
        under subsection (e), health discounts under this part shall be 
        based on 4 times the family adjusted total income during the 3 
        months preceding the month in which the application is filed.
            (3) Form and contents.--An application for assistance under 
        this part shall be in a form and manner specified by the State 
        health discount program and shall require--
                    (A) the provision of information necessary to make 
                the determinations described in subsection (b), and
                    (B) with respect to eligible employees, the 
                provision of information with respect to the AHP in 
                which the employee is enrolled (or in the process of 
                enrolling).
            (4) Verification.--The State health discount program shall 
        provide for verification, on a sample or other basis, of the 
        information supplied in applications under this part.
            (5) Penalties for inaccurate information.--
                    (A) Understated income.--A State health discount 
                program shall require individuals who knowingly 
                understate income reported in an application to pay 
                interest on the excess health discounts paid on behalf 
                of such individual, in addition to repayment of the 
                health discount.
                    (B) Misrepresentation.--A State health discount 
                program shall require individuals who knowingly 
                misrepresent material information in an application for 
                health discounts under this part to pay $1000 or, if 
                greater, 3 times the excess health discounts paid based 
                on such material misrepresentations.
    (e) Annual Enforcement of Health Discount Entitlement.--
            (1) Annual income statement.--An individual receiving 
        health discounts under this part in any year shall file with 
        the State health discount program, by not later than April 15 
        of the following year, a statement verifying total adjusted 
        family income for the taxable year ending during the previous 
        year. Such a statement shall provide information necessary to 
        determine the family adjusted total income during the year and 
        the number of family members as of the last day of the year.
            (2) Use of income tax returns.--The State health discount 
        program shall provide a process under which the filing of a 
        Federal income tax return shall constitute the filing of an 
        income statement under paragraph (1).
            (3) Reconciliation based on actual annual income.--
                    (A) In general.--Based on the information reported 
                in the statement filed under paragraph (1), the State 
                health discount program shall compute the annual health 
                discount that should have been paid on behalf of the 
                eligible individual or employee.
                    (B) Reconciliation.--If the health discount 
                computed is--
                            (i) greater than the health discount paid, 
                        the program shall provide for payment to the 
                        individual or employee an amount equal to the 
                        amount of the underpayment, or
                            (ii) less than the health discount paid, 
                        the program shall require the individual or 
                        employee to repay the excess health discount.
            (4) Failure to file.--If an individual required to file an 
        income statement under this subsection fails to file such a 
        statement, the State health discount program shall disqualify 
        such individual for health discounts after May 1 of such year. 
        The program shall waive the application of this 
        disqualification if there is established, to the satisfaction 
        of the program, good cause for the failure to file the 
        statement on a timely basis.
            (5) Penalties.--Any individual providing false information 
        in a statement under paragraph (1) is subject to criminal 
        penalties to the same extent as such penalties may be imposed 
        under section 1128B(a) of the Social Security Act (42 U.S.C. 
        1320a-7b(a)) with respect to an individual described in clause 
        (ii) of such section.
            (6) Notice.--A State health discount program shall provide 
        for written notice each year of the requirement under paragraph 
        (1) to all individuals to whom the requirement applies.
            (7) Transmittal of information.--The Secretary of the 
        Treasury shall transmit annually to the State such information 
        relating to the adjusted total income of individuals for the 
        taxable year ending in the previous year as may be necessary to 
        verify the reconciliation of health discounts under this 
        subsection.
    (f) Small Group Purchasing Pools.--A State may contract with small 
group purchasing pools to administer portions of the health discount 
program, as appropriate.

SEC. 313. FINANCING HEALTH DISCOUNTS.

    (a) In General.--Health discounts shall be financed with--
            (1) available Federal spending,
            (2) required State Medicaid maintenance of effort spending 
        and State matching amounts, and
            (3) optional State supplementation.
    (b) Available Federal Spending.--
            (1) In general.--For purposes of subsection (a), Federal 
        spending for health discounts in a fiscal year shall be limited 
        to the excess of--
                    (A) the amount specified in paragraph (2), over
                    (B) the estimated Federal expenditures under titles 
                XVIII and XIX of the Social Security Act (42 U.S.C. 
                1395 et seq.) for such year.
            (2) Specified amount.--For purposes of paragraph (1), the 
        amount specified in this paragraph for fiscal year--
                    (A) 1996, is $282,800,000,000,
                    (B) 1997, is $311,000,000,000,
                    (C) 1998, is $343,100,000,000,
                    (D) 1999, is $378,800,000,000,
                    (E) 2000, is $416,300,000,000,
                    (F) 2001, is $449,600,000,000,
                    (G) 2002, is $481,100,000,000,
                    (H) 2003, is $510,000,000,000,
                    (I) 2004, is $540,600,000,000, and
                    (J) 2005 and any succeeding fiscal year, is the 
                specified amount under this paragraph for the previous 
                fiscal year increased by the percentage increase in the 
                Gross Domestic Product for the previous fiscal year.
            (3) Look back procedure.--The Secretary shall reduce (or 
        increase) the amount specified in paragraph (2) for any fiscal 
        year (beginning with 1997) by the amount by which actual 
        Federal expenditures for titles XVIII and XlX of the Social 
        Security Act (42 U.S.C. 1395 et seq.) and Federal spending for 
        health discounts for the preceding year are greater than (or 
        less than) the amounts specified in paragraph (2) for the 
        preceding fiscal year (determined after the application of this 
        paragraph).
    (c) State Spending.--For purposes of subsection (a)--
            (1) Maintenance of effort.--
                    (A) In general.--For each calendar quarter 
                beginning after December 31, 1995, a State shall make 
                available for the health discount program administered 
                by the State under this part an amount equal to one-
                quarter of the annual maintenance of effort amount for 
                the State for the fiscal year in which such quarter 
                occurs as determined under subparagraph (B).
                    (B) Annual state maintenance of effort amount.--
                            (i) In general.--Except as provided in 
                        subparagraph (C), the annual maintenance of 
                        effort amount for any fiscal year shall equal 
                        the base maintenance of effort amount 
                        determined pursuant to clause (ii), updated by 
                        the index in clause (iii) for such fiscal year.
                            (ii) Base amount.--For each State, the base 
                        maintenance of effort amount shall be the 
                        amount of total State expenditures during 
                        fiscal year 1994 under title XIX of the Social 
                        Security Act (42 U.S.C. 1396 et seq.) for acute 
                        care services.
                            (iii) Index.--
                                    (I) In general.--The Director of 
                                the Office of Management and Budget 
                                shall determine the index by which the 
                                base amounts shall be updated for each 
                                fiscal year after fiscal year 1994 by 
                                determining the projected change from 
                                the preceding fiscal year in medicaid 
                                acute care spending (Federal and State) 
                                projected in the baseline in effect at 
                                the time of enactment of this Act.
                                    (II) Out years.--For fiscal years 
                                after the last fiscal year in the 
                                baseline projections, the index shall 
                                reflect overall change from the 
                                preceding fiscal year in the Gross 
                                Domestic Product.
                            (iv) Acute care services.--For purposes of 
                        this subparagraph, the term ``acute care 
                        services'' means all of the care and services 
                        furnished under a State plan under title XIX of 
                        the Social Security Act (42 U.S.C. 1936 et 
                        seq.) except the following:
                                    (I) Nursing facility services (as 
                                defined in section 1905(f) of the 
                                Social Security Act (42 U.S.C. 
                                1396d(f))).
                                    (II) Intermediate care facility for 
                                the mentally retarded services (as 
                                defined in section 1905(d) of such Act 
                                (42 U.S.C. 1396d(d))).
                                    (III) Personal care services (as 
                                described in section 1905(a)(24) of 
                                such Act (42 U.S.C. 1396d(a)(24))).
                                    (IV) Private duty nursing services 
                                (as referred to in section 1905(a)(8) 
                                of such Act (42 U.S.C. 1396d(a)(8))).
                                    (V) Home or community-based 
                                services furnished under a waiver 
                                granted under subsection (c), (d), or 
                                (e) of section 1915 of such Act (42 
                                U.S.C. 1396n).
                                    (VI) Home and community care 
                                furnished to functionally disabled 
                                elderly individuals under section 1929 
                                of such Act (42 U.S.C. 1396t).
                                    (VII) Community supported living 
                                arrangements services under section 
                                1930 of such Act (42 U.S.C. 1396v).
                                    (VIII) Case-management services (as 
                                described in section 1915(g)(2) of such 
                                Act (42 U.S.C. 1396n(g)(2))).
                                    (IX) Home health care services (as 
                                referred to in section 1905(a)(7) of 
                                such Act (42 U.S.C. 1396d(a)(7))).
                                    (X) Hospice care (as defined in 
                                section 1905(o) of such Act (42 U.S.C. 
                                1396d(o))).
                    (C) Exception.--For fiscal years beginning in the 
                first calendar year in which the annual health discount 
                entitlement is the maximum allowable (pursuant to 
                subsection (d)), the State maintenance of effort amount 
                shall be the amount for the preceding fiscal year 
                increased by the estimated overall growth in spending 
                for health discounts in the State as determined by the 
                Secretary.
                    (D) Administrative expenses.--A State health 
                discount program shall allocate a sufficient portion of 
                State maintenance of effort spending to finance State 
                expenses for administering the program.
            (2) State matching amounts.--For each calendar quarter 
        after December 31, 1995, each State shall be required to pay 10 
        percent of the excess of--
                    (A) the total costs of health discounts in a State 
                in such quarter, over
                    (B) the amount equal to--
                            (i) the State maintenance of effort amount 
                        for such quarter, divided by
                            (ii) 1, minus the Federal medical 
                        assistance percentage for the State under title 
                        XIX of the Social Security Act (42 U.S.C. 1396 
                        et seq.) for such fiscal year.
            (3) Optional state supplementation.--A State, using State 
        funds, may provide health discounts in excess of the amount 
        that eligible individuals and eligible employees would 
        otherwise be entitled to pursuant to subsection (d) and to 
        eligible individuals and eligible employees who would not 
        otherwise be entitled to such discounts.
    (d) Determining Entitlement to Health Discounts.--
            (1) In general.--At the beginning of each fiscal year, the 
        Secretary shall establish the level of entitlement to health 
        discounts for the upcoming calendar year by setting--
                    (A) the maximum annual income allowed for each 
                category of eligibility under which eligible 
                individuals and eligible employees are entitled to 
                health discounts, and
                    (B) the alternative benefits package used, if 
                necessary, for calculating the benchmarks and health 
                discounts for low income eligible individuals and low 
                income eligible employees.
        The Secretary shall set the level of entitlement for a fiscal 
        year so that the estimated total Federal spending on health 
        discounts does not exceed the available Federal spending amount 
        for such fiscal year.
            (2) State spending.--In determining the annual level of 
        entitlement, the Secretary shall include in the determination 
        the State maintenance of effort spending and State matching 
        amounts but not optional State supplementation.
            (3) Order of entitlement.--
                    (A) Poor individuals and employees.--
                            (i) In general.--In any year, the Secretary 
                        shall first ensure that all poor eligible 
                        individuals and poor eligible employees are 
                        entitled to health discounts based on the 
                        nominal cost-sharing benefits package 
                        determined pursuant to section 113(b).
                            (ii) Excess spending.--If the Secretary 
                        determines that such a level of entitlement 
                        would cause Federal spending to exceed 
                        available amounts, the Secretary shall reduce 
                        the maximum family adjusted total income 
                        allowed for entitlement to health discounts to 
                        such a level so as to eliminate any estimated 
                        excess spending.
                    (B) Out-of-pocket maximum for low income 
                individuals and employees.--
                            (i) In general.--If, in any year, the 
                        Secretary determines that all poor eligible 
                        individuals and poor eligible employees may be 
                        entitled to health discounts based on the 
                        nominal cost-sharing benefits package, then the 
                        Secretary shall next ensure that all low income 
                        eligible individuals and low income eligible 
                        employees are entitled to health discounts 
                        based on the alternative benefits package 
                        determined pursuant to section 113(c).
                            (ii) Excess spending.--If the Secretary 
                        determines that providing entitlement to health 
                        discounts for low income eligible individuals 
                        and low income eligible employees based on the 
                        alternative benefits package would (together 
                        with spending on poor eligible individuals and 
                        poor eligible employees under subparagraph (B)) 
                        cause Federal spending to exceed available 
                        amounts, the Secretary may only set the maximum 
                        family adjusted total income allowed for 
                        entitlement to health discounts (based on the 
                        alternative benefits package) for such low 
                        income individuals and employees at such a 
                        level so as to eliminate any estimated excess 
                        spending.
                    (C) Standard benefits package for low income 
                individuals and employees.--
                            (i) In general.--If the Secretary 
                        determines that all eligible individuals and 
                        eligible employees described in subparagraphs 
                        (A)(i) and (B)(i) may be entitled to health 
                        discounts, then the Secretary shall ensure that 
                        low income eligible individuals and low income 
                        eligible employees are entitled to health 
                        discounts based on the standard benefits 
                        package determined pursuant to section 113(a).
                            (ii) Excess spending.--If the Secretary 
                        determines that providing such a level of 
                        entitlement would cause Federal spending to 
                        exceed available amounts, the Secretary shall 
                        increase the value of the alternative benefits 
                        package above the value provided under section 
                        113(c) but below the standard benefits package 
                        so as to eliminate any estimated excess 
                        spending.
            (4) Exception for medicaid-eligibles.--For fiscal years 
        1996 through 2000, any individual who--
                    (A) would have been eligible for medicaid acute 
                services based on eligibility standards on the date of 
                the enactment of this Act, and
                    (B) is otherwise an eligible individual or eligible 
                employee,
        shall be considered to be a poor eligible individual or poor 
        eligible employee for purposes of paragraph (3)(A) and shall be 
        entitled to health discounts based on the nominal cost-sharing 
        benefits package without regard to the limit in available 
        Federal spending and prior to the entitlement of other 
        individuals under such paragraph.

PART II--TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE SERVICES UNDER 
                          THE MEDICAID PROGRAM

SEC. 321. TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE SERVICES UNDER 
              THE MEDICAID PROGRAM.

    Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is 
amended by redesignating section 1931 as section 1932 and by inserting 
after section 1930 the following new section:

       ``termination of authority to furnish acute care services

    ``Sec. 1931. (a) In General.--Except as provided in subsection (b), 
the authority provided by this title to furnish acute care services to 
any individual eligible for medical assistance under this title shall 
terminate on December 31, 1994.
    ``(b) Exception for Qualified Medicare Beneficiaries.--
            ``(1) In general.--Individuals entitled to benefits under 
        section 1905(p) shall remain entitled to such benefits under 
        State plans.
            ``(2) Additional benefit.--Each state plan shall include as 
        a mandatory benefit under section 1905(p)(3) the payment of 
        premiums for qualified medicare beneficiaries to medicare 
        health plans as provided in section 1876.
    ``(c) Report on Conforming Changes.--By not later than 90 days 
after the date of the enactment of the Health Care Reform Act of 1994 
the Secretary shall submit to Congress a report on changes in laws that 
should be made in order to conform those laws to the termination of 
authority under this section.
    ``(d) Acute Care Services.--The term `acute care services' means 
all of the care and services furnished under a State plan under this 
title, except the following:
            ``(1) Nursing facility services (as defined in section 
        1905(f)).
            ``(2) Intermediate care facility for the mentally retarded 
        services (as defined in section 1905(d)).
            ``(3) Personal care services (as described in section 
        1905(a)(24)).
            ``(4) Private duty nursing services (as referred to in 
        section 1905(a)(8)).
            ``(5) Home or community-based services furnished under a 
        waiver granted under subsection (c), (d), or (e) of section 
        1915).
            ``(6) Home and community care furnished to functionally 
        disabled elderly individuals under section 1929.
            ``(7) Community supported living arrangements services 
        under section 1930.
            ``(8) Case-management services (as described in section 
        1915(g)(2)).
            ``(9) Home health care services (as referred to in section 
        1905(a)(7)).
            ``(10) Hospice care (as defined in section 1905(o)).''.

            Subtitle C--Increase in Tax on Tobacco Products

SEC. 330. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this subtitle 
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.

SEC. 331. 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 ``$30 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 ``$63 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 ``$19.125 cents per thousand'', and
            (2) by striking ``equal to'' and all that follows in 
        paragraph (2) and inserting ``equal to 31.875 percent of the 
        price for which sold but not more than $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 ``1.875 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 ``3.75 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 
        ``$6.36'', and
            (2) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' in paragraph (2) and inserting 
        ``$6.12''.
    (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 ``$6.675 cents''.
    (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, 1995.
    (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, 1995, 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, 1995, 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, 1995, 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, 1995.
            (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, 1995, 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.
            (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. 332. 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 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 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 of 
        such Code is amended by adding at the end 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), 5763(b) 
        and 5763(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) 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, 1995.

SEC. 333. 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 $6 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 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, 1995.
            (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, 1995, 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.

               TITLE IV--IMPROVING ACCESS IN RURAL AREAS

SEC. 401. COMMUNITY HEALTH CENTERS.

    Section 330(g)(1)(A) of the Public Health Service Act (42 U.S.C. 
254c(g)(1)(A)) is amended by striking ``and such sums'' and inserting 
``such sums'' and by inserting before the period the following: ``, 
$800,000,000 for fiscal year 1995, $960,000,000 for fiscal year 1996, 
$1,100,000,000 for fiscal year 1997, and $1,200,000,000 for fiscal year 
1998''.

SEC. 402. NATIONAL HEALTH SERVICE CORPS.

    Section 338H(b)(1) of the Public Health Act (42 U.S.C. 254q(b)(1)) 
is amended by striking ``and such sums'' and inserting ``such sums'' 
and by inserting before the period the following: ``, $96,000,000 for 
fiscal year 1995, $115,000,000 for fiscal year 1996, $138,000,000 for 
fiscal year 1997, and $160,000,000 for fiscal year 1998''.

SEC. 403. TAX INCENTIVES FOR PRACTICE IN FRONTIER, RURAL, AND URBAN 
              UNDERSERVED AREAS.

    (a) Refundable Credit for Certain Primary Health Services 
Providers.--
            (1) In general.--Subpart C of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 (relating to 
        refundable credits) is amended by inserting after section 34 
        the following new section:

``SEC. 34A. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--In the case of a qualified primary 
health services provider, there is allowed as a credit against the tax 
imposed by this subtitle for any taxable year in a mandatory service 
period an amount equal to the product of--
            ``(1) the lesser of--
                    ``(A) the number of months of such period occurring 
                in such taxable year, or
                    ``(B) 36 months, reduced by the number of months 
                taken into account under this paragraph with respect to 
                such provider for all preceding taxable years (whether 
                or not in the same mandatory service period), 
                multiplied by
            ``(2) $1,000 ($500 in the case of a qualified primary 
        health services provider who is a physician assistant or a 
        nurse practitioner).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section, the term `qualified primary health services provider' 
means any physician, physician assistant, or nurse practitioner who for 
any month during a mandatory service period is certified by the Bureau 
to be a primary health services provider who--
            ``(1) is providing primary health services--
                    ``(A) full-time, and
                    ``(B) to individuals at least 80 percent of whom 
                reside in a health professional shortage area (as 
                defined in subsection (d)(2)),
            ``(2) is not receiving during such year a scholarship under 
        the National Health Service Corps Scholarship Program or a loan 
        repayment under the National Health Service Corps Loan 
        Repayment Program,
            ``(3) is not fulfilling service obligations under such 
        Programs, and
            ``(4) has not defaulted on such obligations.
    ``(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.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of Health 
        Care Delivery and Assistance, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Health professional shortage area.--The term `health 
        professional shortage area' means--
                    ``(A) a geographic area in which there are 6 or 
                fewer individuals residing per square mile,
                    ``(B) a health professional shortage area (as 
                defined in section 332(a)(1)(A) of the Public Health 
                Service Act),
                    ``(C) an area which is determined by the Secretary 
                of Health and Human Services as equivalent to an area 
                described in subparagraph (A) and which is designated 
                by the Bureau of the Census as not urbanized, or
                    ``(D) a community that is certified as underserved 
                by the Secretary for purposes of participation in the 
                rural health clinic program under title XVIII of the 
                Social Security Act.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) or 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) Primary health services provider.--The term `primary 
        health services provider' means a provider of primary health 
        services (as defined in section 330(b)(1) of the Public Health 
        Service Act).
    ``(e) Recapture of Credit.--
            ``(1) In general.--If, during any taxable year, there is a 
        recapture event, then the tax of the taxpayer under this 
        chapter for such taxable year shall be increased by an amount 
        equal to the product of--
                    ``(A) the applicable percentage, and
                    ``(B) 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:

  
                                                         The applicable
                    ``If the recapture
                                                              recapture
                      event occurs during:
                                                         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 any mandatory service 
                period.
                    ``(B) Cessation of designation.--The cessation of 
                the designation of any area as a rural 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 may waive 
                any recapture event caused by extraordinary 
                circumstances.
            ``(4) No credits against 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.''.
            (2) Clerical amendment.--The table of sections for subpart 
        C of part IV of subchapter A of chapter 1 of such Code is 
        amended by inserting after the item relating to section 34 the 
        following new item:

                              ``Sec. 34A. Primary health services 
                                        providers.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (b) National Health Service Corps Loan Repayments Excluded From 
Gross Income.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to items 
        specifically excluded from gross income) is amended by 
        redesignating section 137 as section 138 and by inserting after 
        section 136 the following new section:

``SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.

    ``(a) General Rule.--Gross income shall not include any qualified 
loan repayment.
    ``(b) Qualified Loan Repayment.--For purposes of this section, the 
term `qualified loan repayment' means any payment made on behalf of the 
taxpayer by the National Health Service Corps Loan Repayment Program 
under section 338B(g) of the Public Health Service Act.''.
            (2) Conforming amendment.--Paragraph (3) of section 338B(g) 
        of the Public Health Service Act (42 U.S.C. 254l-1(g)) is 
        amended by striking ``Federal, State, or local'' and inserting 
        ``State or local''.
            (3) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 of the Internal Revenue Code of 
        1986 is amended by striking the item relating to section 136 
        and inserting the following:

                              ``Sec. 137. National Health Service Corps 
                                        loan repayments.
                              ``Sec. 138. Cross references to other 
                                        Acts.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to payments made under section 338B(g) of the 
        Public Health Service Act (42 U.S.C. 254l-1(g)) after the date 
        of the enactment of this Act.

SEC. 404. INCENTIVES FOR PRIMARY CARE RESIDENTS.

    (a) In General.--Section 1886(h) of the Social Security Act (42 
U.S.C. 1395 ww(h)) is amended--
            (1) by striking paragraph (2) and inserting the following 
        new paragraph:
            ``(2) Determination of approved fte resident amounts.--The 
        Secretary shall determine an approved FTE resident amount for 
        each cost reporting period beginning after October 1, 1994, as 
        follows:
                    ``(A) Determining national average salary per fte 
                resident in fiscal year 1992.--The Secretary shall 
                determine the national average salary for fiscal year 
                1992 for a full-time-equivalent resident in an approved 
                medical residency training program.
                    ``(B) Updating to a cost reporting period that 
                begins in fiscal year 1995.--The Secretary shall update 
                the amount determined under subparagraph (A) by the 
                estimated percentage change in the Consumer Price Index 
                from the midpoint of fiscal year 1992 to the midpoint 
                of each cost reporting period that begins in fiscal 
                year 1995.
                    ``(C) Updating to subsequent cost reporting 
                periods.--For each subsequent cost reporting period, 
                the Secretary shall update the amount determined under 
                subparagraph (B) or this subparagraph for an 
                immediately preceding cost reporting period by the 
                estimated percentage change in the Consumer Price Index 
                from the midpoint of that preceding period to the 
                midpoint of that subsequent period, with appropriate 
                adjustments to reflect previous under- or over-
                estimations in the estimated percentage change in that 
                index.'',
            (2) in paragraph (3)(B)(i), by striking ``hospital's'', and
            (3) in paragraph (4), by striking subparagraph (C) and 
        inserting the following new subparagraph:
                    ``(C) Weighting factor for certain residents.--
                Subject to subparagraph (D), such rules shall provide, 
                in calculating the number of full-time-equivalent 
                residents in an approved residency program--
                            ``(i) that the weighting factor for a 
                        primary care (as defined by the Secretary) 
                        resident, or for an intern, is 2.2;
                            ``(ii) that the weighting factor for a 
                        nonprimary care resident who is in the 
                        resident's initial residency period is 2.0; and
                            ``(iii) that the weighting factor for a 
                        nonprimary care resident who is not in the 
                        resident's initial residency period is 1.2.
                The Secretary shall make such adjustments as are 
                necessary to the weighting factors to maintain 
                aggregate payments under this section to all hospitals 
                at the same level that such payments would have been 
                made under this section prior to enactment of the 
                amendments made to this section by the Health Care 
                Reform Act of 1994.''.
    (b) Effective Dates.--
            (1) In general.--Except as otherwise provided by paragraph 
        (2), the amendments made by this section shall apply to cost 
        reporting periods beginning after October 1, 1994.
            (2) Special rule.--For a cost reporting period that falls 
        partly in fiscal year 1994 and partly in fiscal year 1995, the 
        provisions of section 1886(h), as in effect before the date of 
        enactment of this Act, shall apply proportionally to that part 
        of the cost reporting period that occurs before fiscal year 
        1995.

           TITLE V--OTHER HEALTH CARE COST REDUCTION MEASURES

                  Subtitle A--Medical Liability Reform

SEC. 501. FEDERAL STANDARDS FOR STATE-BASED MEDICAL LIABILITY REFORM.

    (a) In General.--The Secretary, in consultation with the Attorney 
General, shall develop and publish medical liability reform standards 
in accordance with this subtitle that States must meet in order to be 
certified under section 502.
    (b) Binding Alternative Dispute Resolution.--
            (1) Requirements.--The standards developed under subsection 
        (a) shall require that a State--
                    (A) require all claims of medical injury arising in 
                such State be resolved under binding dispute resolution 
                systems that--
                            (i) provide timely and impartial decisions 
                        of liability and damage awards,
                            (ii) make determinations of liability and 
                        damage awards based on the best scientific 
                        learning and judgment of objective experts,
                            (iii) provide data and standardized 
                        information regarding evidence of medical 
                        injuries and the causes of such injuries to 
                        Federal and State agencies responsible for 
                        monitoring or disciplining health care 
                        providers, and
                            (iv) do not employ lay juries or similarly 
                        constituted lay decisionmaking bodies to make 
                        such determinations;
                    (B) require that the decisions made through the 
                binding dispute resolution system be final and not 
                subject to further review by any court, except that a 
                party to a dispute may obtain review of such decision 
                in any court of competent jurisdiction in the State 
                wherein the decision was made if--
                            (i) the award under such decision was 
                        procured by corruption, fraud, or other undue 
                        means,
                            (ii) there was evident partiality or 
                        corruption on the part of the arbiter,
                            (iii) the arbiter was guilty of misconduct 
                        in refusing to postpone the hearing, upon 
                        sufficient cause shown, or in refusing to hear 
                        evidence pertinent and material to the 
                        controversy, or of any misbehavior by which the 
                        rights of any party were prejudiced, or
                            (iv) the arbiter exceeded its powers or so 
                        imperfectly executed them that a final and 
                        definite award upon the claim was not made; and
                    (C) require that where an arbiters award is vacated 
                pursuant to State provisions established under 
                subparagraph (B) that the court direct that the matter 
                be reheard by another arbiter under the procedures 
                prescribed by the State dispute resolution system.
            (2) Options.--The standards developed under subsection (a) 
        shall permit a State to--
                    (A) allow private entities to provide all or some 
                of the dispute resolution services required by the 
                State dispute resolution system, and
                    (B) allow alternative methods for determining 
                liability and compensation for personal injuries other 
                than provider negligence and assessments of damage 
                awards.
            (3) Binding arbitration.--In the standards developed under 
        subsection (a), the Secretary shall outline a standard 
        arbitration process that States could adopt to meet Federal 
        criteria (so long as other elements of the State system meet 
        the requirements of this section) and that includes the 
        following:
                    (A) Decisionmaking by a 3-person arbitration panel 
                with expertise in medical injury disputes chosen from a 
                roster of qualified and independent arbitrators.
                    (B) A period to permit the discovery of evidence.
                    (C) The right to a hearing.
                    (D) The right to a decision not later than 6 months 
                after the date on which the claim was filed.
                    (E) The right to a written decision.
    (c) Damages.--When a claim that is subject to resolution in 
accordance with State systems established under the standards developed 
under subsection (a) results in a finding of liability, States shall 
require that the damages awarded adhere to the following requirements:
            (1) Awards for noneconomic damages shall not exceed 
        $250,000.
            (2) Awards shall be reduced for any collateral source 
        payments to which the patient is entitled for the medical 
        injury for which the claim was filed.
            (3) In the case of an award in excess of $100,000, 
        claimants shall accept periodic payment of the amount of such 
        awards that are intended to compensate the claimant for damages 
        expected to be incurred in the future such as lost income and 
        medical expenses.
            (4) An award of punitive damages shall not be paid to the 
        claimant, but shall be paid to the State if the State has 
        submitted a plan to the Secretary, and the Secretary has 
        certified such a plan as part of certifying the State medical 
        liability reform in accordance with section 502, to use such 
        funds to improve the monitoring, disciplining, and educating of 
        health care providers in the State to ensure they meet 
        standards of competency.
    (d) Accountable Health Plans.--
            (1) In general.--To be approved by the applicable 
        regulatory authority as an AHP under section 112, a health plan 
        shall clearly identify for the purchasers of the plan the 
        individuals or entity that will be responsible for any findings 
        of liability for claims of medical injury.
            (2) Enforcement of contracts.--A State shall ensure that 
        provisions in AHP contracts that--
                    (A) cite medical practice guidelines, certified 
                pursuant to section 502, and which shall be followed in 
                rendering services, shall be deemed to supply the 
                standard of care to be employed in determining 
                liability under the State dispute resolution system, 
                and
                    (B) establish particular rules governing the 
                resolution of medical injury claims, consistent with 
                the State dispute resolution system, are required 
                elements for resolving any claims of medical injury for 
                care provided in accordance with the AHP.

SEC. 502. CERTIFICATION.

    (a) State Reforms.--Not later than 12 months after the date of 
enactment of this Act, the Secretary, in consultation with the Attorney 
General, shall promulgate regulations that establish the criteria and 
procedures by which the Secretary (or individuals to whom the Secretary 
has delegated such authority) will determine whether or not a State has 
met the standards established under section 501(a) and any other 
standards determined necessary by the Secretary.
    (b) Standards for Imposing Liability.--Not later than 12 months 
after the date of enactment of this Act, the Secretary shall promulgate 
regulations that establish the criteria to be used for the 
certification of medical practice guidelines by the Secretary (or 
individuals to whom the Secretary has delegated such authority), 
including criteria to ensure that such guidelines--
            (1) reflect up-to-date scientific learning and the judgment 
        of objective experts,
            (2) are supported by proper documentation, and
            (3) are accompanied by justifications for the standards 
        established.
    (c) Other Regulations.--Not later than 12 months after the date of 
enactment of this Act, the Secretary of Health and Human Services shall 
promulgate other regulations necessary to carry out this Act.

SEC. 503. RELATION TO OTHER LAWS.

    The procedures required under this Act for fairly and quickly 
resolving claims against health care providers for personal injury 
shall be exclusive, and no action seeking recovery for any personal 
injury covered by this Act shall be permitted in any Federal or State 
court except as expressly provided herein.

                    Subtitle B--Antitrust Provisions

SEC. 511. PUBLICATION OF GUIDELINES FOR ACCOUNTABLE HEALTH PLANS.

    (a) In General.--The President shall provide for the development 
and publication of explicit guidelines on the application of antitrust 
laws to AHPs. The guidelines shall be designed to facilitate AHP 
development and operation, consistent with the antitrust laws.
    (b) Review Process.--The Attorney General shall establish a review 
process under which an AHP (or organization that proposes to establish 
an AHP) may obtain a prompt opinion from the Department of Justice on 
the AHP's conformity with the antitrust laws. If the Department of 
Justice determines that an AHP conforms with the antitrust laws, the 
AHP shall not be liable under such laws regarding the development and 
operation of the AHP, as reviewed by the Department.
    (c) Antitrust Laws Defined.--In this section, the term ``antitrust 
laws'' has the meaning given such term in subsection (a) of the first 
section of the Clayton Act (15 U.S.C. 12(a)), except that such term 
includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) 
to the extent such section applies to unfair methods of competition.

SEC. 512. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) Issuance and Effect of Certificate.--The Attorney General, 
after consultation with the Secretary, shall issue in accordance with 
this section a certificate of public advantage to each eligible health 
care collaborative effort that complies with the requirements in effect 
under this section on or after the expiration of the 1-year period that 
begins on the date of the enactment of this Act (without regard to 
whether or not the Attorney General has promulgated regulations to 
carry out this section by such date). Such collaborative effort, and 
the parties to such effort, shall not be liable under any of the 
antitrust laws for conduct described in such certificate and engaged in 
by such effort if such conduct occurs while such certificate is in 
effect.
    (b) Requirements Applicable to Issuance of Certificates.--
            (1) Standards to be met.--The Attorney General shall issue 
        a certificate to an eligible health care collaborative effort 
        if the Attorney General finds that--
                    (A) the benefits that are likely to result from 
                carrying out the effort outweigh the reduction in 
                competition (if any) that is likely to result from the 
                effort, and
                    (B) such reduction in competition is reasonably 
                necessary to obtain such benefits.
            (2) Factors to be considered.--
                    (A) Weighing of benefits against reduction in 
                competition.--For purposes of making the finding 
                described in paragraph (1)(A), the Attorney General 
                shall consider whether the collaborative effort is 
                likely--
                            (i) to maintain or to increase the quality 
                        of health care,
                            (ii) to increase access to health care,
                            (iii) to achieve cost efficiencies that 
                        will be passed on to health care consumers, 
                        such as economies of scale, reduced transaction 
                        costs, and reduced administrative costs,
                            (iv) to preserve the operation of health 
                        care facilities located in underserved 
                        geographical areas,
                            (v) to improve utilization of health care 
                        resources, and
                            (vi) to reduce inefficient health care 
                        resource duplication.
                    (B) Necessity of reduction in competition.--For 
                purposes of making the finding described in paragraph 
                (1)(B), the Attorney General shall consider--
                            (i) the ability of the providers of health 
                        care services that are (or are likely to be) 
                        affected by the health care collaborative 
                        effort and the entities responsible for making 
                        payments to such providers to negotiate 
                        societally optimal payment and service 
                        arrangements,
                            (ii) the effects of the health care 
                        collaborative effort on premiums and other 
                        charges imposed by the entities described in 
                        clause (i), and
                            (iii) the availability of equally 
                        efficient, less restrictive alternatives to 
                        achieve the benefits that are intended to be 
                        achieved by carrying out the effort.
    (c) Establishment of Criteria and Procedures.--Subject to 
subsections (d) and (e), not later than 1 year after the date of the 
enactment of this Act, the Attorney General and the Secretary shall 
establish jointly by rule the criteria and procedures applicable to the 
issuance of certificates under subsection (a). The rules shall specify 
the form and content of the application to be submitted to the Attorney 
General to request a certificate, the information required to be 
submitted in support of such application, the procedures applicable to 
denying and to revoking a certificate, and the procedures applicable to 
the administrative appeal (if such appeal is authorized by rule) of the 
denial and the revocation of a certificate. Such information may 
include the terms of the health care collaborative effort (in the case 
of an effort in existence as of the time of the application) and 
implementation plan for the collaborative effort.
    (d) Eligible Health Care Collaborative Effort.--To be an eligible 
health care collaborative effort for purposes of this section, a health 
care collaborative effort shall submit to the Attorney General an 
application that complies with the rules in effect under subsection (c) 
and that includes--
            (1) an agreement by the parties to the effort that the 
        effort will not foreclose competition by entering into 
        contracts that prevent health care providers from providing 
        health care in competition with the effort,
            (2) an agreement that the effort will submit to the 
        Attorney General annually a report that describes the 
        operations of the effort and information regarding the impact 
        of the effort on health care and on competition in health care, 
        and
            (3) an agreement that the parties to the effort will notify 
        the Attorney General and the Secretary of the termination of 
        the effort not later than 30 days after such termination 
        occurs.
    (e) Review of Applications for Certificates.--Not later than 30 
days after an eligible health care collaborative effort submits to the 
Attorney General an application that complies with the rules in effect 
under subsection (c) and with subsection (d), the Attorney General 
shall issue or deny the issuance of such certificate. If, before the 
expiration of such 30-day period, the Attorney General fails to issue 
or deny the issuance of such certificate, the Attorney General shall be 
deemed to have issued such certificate.
    (f) Revocation of Certificate.--Whenever the Attorney General finds 
that a health care collaborative effort with respect to which a 
certificate is in effect does not meet the standards specified in 
subsection (b), the Attorney General shall revoke such certificate.
    (g) Written Reasons; Judicial Review.--
            (1) Denial and revocation of certificates.--If the Attorney 
        General denies an application for a certificate or revokes a 
        certificate, the Attorney General shall include in the notice 
        of denial or revocation a statement of the reasons relied upon 
        for the denial or revocation of such certificate.
            (2) Judicial review.--
                    (A) After administrative proceeding.--
                            (i) In general.--If the Attorney General 
                        denies an application submitted or revokes a 
                        certificate issued under this section after an 
                        opportunity for hearing on the record, then any 
                        party to the health care collaborative effort 
                        involved may commence a civil action, not later 
                        than 60 days after receiving notice of the 
                        denial or revocation, in an appropriate 
                        district court of the United States for review 
                        of the record of such denial or revocation.
                            (ii) Certified copy of record.--As part of 
                        the Attorney General's answer, the Attorney 
                        General shall file in such court a certified 
                        copy of the record on which such denial or 
                        revocation is based. The findings of fact of 
                        the Attorney General may be set aside only if 
                        found to be unsupported by substantial evidence 
                        in such record taken as a whole.
                    (B) Denial or revocation without administrative 
                proceeding.--If the Attorney General denies an 
                application submitted or revokes a certificate issued 
                under this section without an opportunity for hearing 
                on the record, then any party to the health care 
                collaborative effort involved may commence a civil 
                action, not later than 60 days after receiving notice 
                of the denial or revocation, in an appropriate district 
                court of the United States for de novo review of such 
                denial or revocation.
    (h) Exemption.--A person shall not be liable under any of the 
antitrust laws for conduct necessary--
            (1) to prepare, agree to prepare, or attempt to agree to 
        prepare an application to request a certificate under this 
        section, or
            (2) to attempt to enter into any health care collaborative 
        effort with respect to which such a certificate is in effect.
    (i) Definitions.--In this section:
            (1) The term ``antitrust laws''--
                    (A) has the meaning given such term in subsection 
                (a) of the first section of the Clayton Act (15 U.S.C. 
                12(a)), except that such term includes section 5 of the 
                Federal Trade Commission Act (15 U.S.C. 45) to the 
                extent such section applies to unfair methods of 
                competition, and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (2) The term ``certificate'' means a certificate of public 
        advantage authorized to be issued under subsection (a).
            (3) The term ``health care collaborative effort'' means an 
        agreement (whether existing or proposed) between 2 or more 
        providers of health care services that is entered into solely 
        for the purpose of sharing in the provision of health care 
        services and that involves substantial integration or financial 
        risk-sharing between the parties, but does not include the 
        exchanging of information, the entering into of any agreement, 
        or the engagement in any other conduct that is not reasonably 
        required to carry out such agreement.
            (4) The term ``health care services'' includes services 
        related to the delivery or administration of health care 
        services.
            (5) The term ``liable'' means liable for any civil or 
        criminal violation of the antitrust laws.
            (6) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.

                Subtitle C--Administrative Cost Savings

SEC. 521. ESTABLISHMENT OF STANDARDS.

    (a) In General.--The Secretary shall establish, after consultation 
with the American National Standards Institute, data and transaction 
standards, conventions, and requirements that permit the electronic 
interchange of any health care data the Secretary determines necessary 
for the efficient and effective administration of the health care 
system.
    (b) Timetable and Coverage.--The Secretary shall establish 
standards, conventions, and requirements for categories of health care 
data in the following order and at the appropriate time (as determined 
by the Secretary):
            (1) Financial and administrative transactions, including 
        enrollment, eligibility, claims, and claims status.
            (2) Quality measurement indicators, including such data 
        necessary to satisfy the requirements under section 521.
            (3) Patient care records.
    (c) Privacy and Confidentiality Standards.--In developing the 
standards, conventions, and requirements under subsection (a), the 
Secretary shall ensure the protection of privacy of participants in the 
health care system and ensure the confidentiality in the data 
interchange system.

SEC. 522. ENFORCEMENT.

    (a) AHPs.--An AHP may not be certified by the appropriate 
regulatory authority unless such AHP complies with the standards 
established by the Secretary under section 521.
    (b) Health Care Providers.--AHPs may only contract with or employ 
those health care providers that comply with the electronic standards 
established by the Secretary or submit standard paper forms with the 
same data elements to a clearinghouse which forwards the data 
electronically to AHPs.
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